[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 2815 Introduced in Senate (IS)]

  2d Session
                                S. 2815

To amend the Clean Air Act to reduce air pollution through expansion of 
     cap and trade programs, to provide an alternative regulatory 
classification for units subject to the cap and trade programs, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 29, 2002

 Mr. Smith of New Hampshire (by request) introduced the following bill; 
 which was read twice and referred to the Committee on Environment and 
                              Public Works

_______________________________________________________________________

                                 A BILL


 
To amend the Clean Air Act to reduce air pollution through expansion of 
     cap and trade programs, to provide an alternative regulatory 
classification for units subject to the cap and trade programs, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Clear Skies Act of 
2002''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title, table of contents.
Sec. 2. Emission Reduction Programs.
                ``TITLE IV--EMISSION REDUCTION PROGRAMS

                      ``Part A--General Provisions

        ``Sec. 401. (Reserved)
        ``Sec. 402. Definitions.
        ``Sec. 403. Allowance system.
        ``Sec. 404. Permits and compliance plans.
        ``Sec. 405. Monitoring, reporting, and recordkeeping 
                            requirements.
        ``Sec. 406. Excess emissions penalty; general compliance with 
                            other provisions; enforcement.
        ``Sec. 407. Election of additional units.
        ``Sec. 408. Clean coal technology regulatory incentives.
        ``Sec. 409. Auctions.
        ``Sec. 410. Evaluation of limitations on total sulfur dioxide, 
                            nitrogen oxides, and mercury emissions that 
                            start in 2018.
              ``Part B--Sulfur Dioxide Emission Reductions

                     ``Subpart 1--Acid Rain Program

        ``Sec. 411. Definitions.
        ``Sec. 412. Allowance allocations.
        ``Sec. 413. Phase I sulfur dioxide requirements.
        ``Sec. 414. Phase II sulfur dioxide requirements.
        ``Sec. 415. Allowances for states with emission rates at or 
                            below .8 lbs/mmbtu.
        ``Sec. 416. Election for additional sources.
        ``Sec. 417. Auctions, Reserve.
        ``Sec. 418. Industrial sulfur dioxide emissions.
        ``Sec. 419. Termination.
             ``Subpart 2--Sulfur Dioxide Allowance Program

        ``Sec. 421. Definitions.
        ``Sec. 422. Applicability.
        ``Sec. 423. Limitations on total emissions.
        ``Sec. 424. Allocations.
        ``Sec. 425. Disposition of sulfur dioxide allowances allocated 
                            under subpart 1.
        ``Sec. 426. Incentives for sulfur dioxide emission control 
                            technology.
             ``Subpart 3--Western Regional Air Partnership

        ``Sec. 431. Definitions.
        ``Sec. 432. Applicability.
        ``Sec. 433. Limitations on total emissions.
        ``Sec. 434. Allocations.
             ``Part C--Nitrogen Oxides Emissions Reductions

                     ``Subpart 1--Acid Rain Program

        ``Sec. 441. Nitrogen Oxides Emission Reduction Program.
        ``Sec. 442. Termination.
             ``Subpart 2--Nitrogen Oxides Allowance Program

        ``Sec. 451. Definitions.
        ``Sec. 452. Applicability.
        ``Sec. 453. Limitations on total emissions.
        ``Sec. 454. Allocations.
        ``Subpart 3--Ozone Season NO<INF>X</INF> Budget Program

        ``Sec. 461. Definitions.
        ``Sec. 462. General Provisions.
        ``Sec. 463. Applicable Implementation Plan.
        ``Sec. 464. Termination of Federal Administration of 
                            NO<INF>X</INF> Trading Program.
        ``Sec. 465. Carryforward of Pre-2008 Nitrogen Oxides 
                            Allowances.
                 ``Part D--Mercury Emission Reductions

        ``Sec. 471. Definitions.
        ``Sec. 472. Applicability.
        ``Sec. 473. Limitations on total emissions.
        ``Sec. 474. Allocations.
    ``Part E--National Emission Standards; Research; Environmental 
Accountability; Major Source Preconstruction Review and Best Available 
                Retrofit Control Technology Requirements

        ``Sec. 481. National emission standards for affected units.
        ``Sec. 482. Research, environmental monitoring, and assessment.
        ``Sec. 483. Major source preconstruction review and best 
                            availability retrofit control technology 
                            requirements.''
Sec. 3. Other amendments.

SEC. 2. EMISSION REDUCTION PROGRAMS.

    Title IV of the Clean Air Act (relating to acid deposition control) 
(42 U.S.C. 7651, et seq.) is amended to read as follows:

                ``TITLE IV--EMISSION REDUCTION PROGRAMS

                      ``PART A--GENERAL PROVISIONS

``SEC. 401. (RESERVED)

``SEC. 402. DEFINITIONS.

    ``As used in this title--
            ``(1) The term `affected EGU' shall have the meaning set 
        forth in section 421, 431, 451, or 471, as appropriate.
            ``(2) The term `affected facility' or `affected source' 
        means a facility or source that includes one or more affected 
        units.
            ``(3) The term `affected unit' means--
                    ``(A) under this part, a unit that is subject to 
                emission reduction requirements or limitations under 
                part B, C, or D or, it applicable, under a specified 
                part or subpart; or
                    ``(B) under subpart 1 of part B or subpart 1 of 
                part C, a unit that is subject to emission reduction 
                requirements or limitations under that subpart.
            ``(4) The term `allowance' means--
                    ``(A) an authorization, by the Administrator under 
                this title, to emit one ton of sulfur dioxide, one ton 
                of nitrogen oxides, or one ounce of mercury; or
                    ``(B) under subpart 1 of part B, an authorization 
                by the Administrator under this title, to emit one ton 
                of sulfur dioxide.
            ``(5)(A) The term `baseline heat input' means, except under 
        subpart 1 of part B and section 407, the average annual heat 
        input used by a unit during the three years in which the unit 
        had the highest heat input for the period 1997 through 2001.
            ``(B) Notwithstanding subparagraph (A)--
                    ``(i) if a unit commenced operation during 2000, 
                then `baseline heat input' means the average annual 
                heat input used by the unit during 2000-2001; and
                    ``(ii) if a unit commenced or commences operation 
                during 2001-2004, then `baseline heat input' means the 
                manufacturer's design heat input capacity for the unit 
                multiplied by eighty percent for coal-fired units, 
                fifty for combined cycle combustion turbines, and five 
                percent for simple cycle combustion turbines.
            ``(C) A unit's heat input for a year shall be the heat 
        input--
                    ``(i) required to be reported under section 405 for 
                the unit, if the unit was required to report heat input 
                during the year under that section;
                    ``(ii) reported to the Energy Information 
                Administration for the unit, if the unit was not 
                required to report heat input under section 405;
                    ``(iii) based on data for the unit reported to the 
                State where the unit is located as required by State 
                law, if the unit was not required to report heat input 
                during the year under section 405 and did not report to 
                the Energy Information Administration; or
                    ``(iv) based on fuel use and fuel heat content data 
                for the unit from fuel purchase or use records, if the 
                unit was not required to report heat input during the 
                year under section 405 and did not report to the Energy 
                Information Administration and the State.
            ``(D) By July 1, 2003, the Administrator shall promulgate 
        regulations, without notice and opportunity for comment, 
        specifying the format in which the information under 
        subparagraphs (B)(ii) and (C)(ii), (iii), or (iv) shall be 
        submitted. By January 1, 2004, the owner or operator of any 
        unit under subparagraph (B)(ii) or (C)(ii), (iii), or (iv) to 
        which allowances may be allocated under section 424, 434, 454, 
        or 474 shall submit to the Administrator such information. The 
        Administrator is not required to allocate allowances under such 
        sections to a unit for which the owner or operator fails to 
        submit information in accordance with the regulations 
        promulgated under this subparagraph.
            ``(6) The term `clearing price' means the price at which 
        allowances are sold at an auction conducted by the 
        Administrator or, if allowances are sold at an auction 
        conducted by the Administrator at more than one price, the 
        lowest price at which allowances are sold at the auction.
            ``(7) The term `coal' means any solid fuel classified as 
        anthracite, bituminous, subbituminous, or lignite.
            ``(8) The term `coal-derived fuel' means any fuel (whether 
        in a solid, liquid, or gaseous state) produced by the 
        mechanical, thermal, or chemical processing of coal.
            ``(9) The term `coal-fired' with regard to a unit means, 
        except under subpart 1 of part B, subpart 1 of part C, and 
        sections 424 and 434, combusting coal or any coal-derived fuel 
        alone or in combination with any mount of any other fuel in any 
        year.
            ``(10) The term `cogeneration unit' means, except under 
        subpart 1 of part B and subpart 1 of part C, a unit that 
        produces through the sequential use of energy:
                    ``(A) electricity; and
                    ``(B) useful thermal energy (such as heat or steam) 
                for industrial, commercial, heating, or cooling 
                purposes.
            ``(11) The term `combustion turbine' means any combustion 
        turbine that is not self-propelled. The term includes, but is 
        not limited to, a simple cycle combustion turbine, a combined 
        cycle combustion turbine and any duct burner or heat recovery 
        device used to extract heat from the combustion turbine 
        exhaust, and a regenerative combustion turbine. The term does 
        not include a combined turbine in an integrated gasification 
        combined cycle plant.
            ``(12) The term `commence operation' with regard to a unit 
        means start up the unit's combustion chamber.
            ``(13) The term `compliance plan' means either--
                    ``(A) a statement that the facility will comply 
                with all applicable requirements under this title, or
                    ``(B) under subpart 1 of part B or subpart 1 of 
                part C, a schedule and description of the method or 
                methods for compliance and certification by the owner 
                or operator that the facility is in compliance with the 
                requirements of that subpart.
            ``(14) The term `continuous emission monitoring system' 
        (CEMS) means the equipment as required by section 405, used to 
        sample, analyze, measure, and provide on a continuous basis a 
        permanent record of emissions and flow (expressed in pounds per 
        million British thermal units (lbs/mmBtu), pounds per hour 
        (lbs/hr) or such other form as the Administrator may prescribe 
        by regulations under section 405.
            ``(15) The term `designated representative' means a 
        responsible person or official authorized by the owner or 
        operator of a unit and the facility that includes the unit to 
        represent the owner or operator in matters pertaining to the 
        holding, transfer, or disposition of allowances, and 
the submission of and compliance with permits, permit applications, and 
compliance plans.
            ``(16) The term `duct burner' means a combustion device 
        that uses the exhaust from a combustion turbine to burn fuel 
        for heat recovery.
            ``(17) The term `facility' means all buildings, structures, 
        or installations located on one or more adjacent properties 
        under common control of the same person or persons.
            ``(18) The term `fossil fuel' means natural gas, petroleum, 
        coal, or any form of solid, liquid, or gaseous fuel derived 
        from such material.
            ``(19) The term `fossil fuel-fired' with regard to a unit 
        means combusting fossil fuel, alone or in combination with any 
        amount of other fuel or material.
            ``(20) The term `fuel oil' means a petroleum-based fuel, 
        including diesel fuel or petroleum derivatives.
            ``(21) The term `gas-fired' with regard to a unit means, 
        except under subpart 1 of part B and subpart 1 of part C, 
        combusting only natural gas or fuel oil, with natural gas 
        comprising at lease ninety percent, and fuel oil comprising no 
        more than ten percent, of the unit's total heat input in any 
        year.
            ``(22) The term `gasify' means to convert carbon-containing 
        material into a gas consisting primarily of carbon monoxide and 
        hydrogen.
            ``(23) The term `generator' means a device that produces 
        electricity and, under subpart 1 of part B and subpart 1 of 
        part C, that is reported as a generating unit pursuant to 
        Department of Energy Form 860.
            ``(24) The term `heat input' with regard to a specific 
        period of time means the product (in mmBtu/time) of the gross 
        calorific value of the fuel (in mmBtu/lb) and the fuel feed 
        rate into a unit (in lb of fuel/time) and does not include the 
        heat derived from preheated combustion air, recirculated flue 
        gases, or exhaust.
            ``(25) The term `integrated gasification combined cycle 
        plant' means any combination of equipment used to gasify fossil 
        fuels (with or without other material) and then burn the gas in 
        a combined cycle combustion turbine.
            ``(26) The term `oil-fired' with regard to a unit means, 
        except under section 424 and 434, combusting fuel oil for more 
        than ten percent of the unit's total heat input, and combusting 
        no coal or coal-derived fuel, in any year.
            ``(27) The term `owner or operator' with regard to a unit 
        or facility means, except for subpart 1 of part B and subpart 1 
        of part C, any person who owns, leases, operates, controls, or 
        supervises the unit or the facility.
            ``(28) The term `permitting authority' means the 
        Administrator, or the State or local air pollution control 
        agency, with an approved permitting program under title V of 
        the Act.
            ``(29) The term `potential electrical output' with regard 
        to a generator means the nameplate capacity of the generator 
        multiplied by 8,760 hours.
            ``(30) The term `source' means, except for sections 410, 
        481, and 482, all buildings, structures, or installations 
        located on one or more adjacent properties under common control 
        of the same person or persons.
            ``(31) The term `State' means--
                    ``(A) one of the 48 contiguous States, Alaska, 
                Hawaii, the District of Columbia, the Commonwealth of 
                Puerto Rico, the Virgin Islands, Guam, Amercian Samoa, 
                or the Commonwealth of the Northern Mariana Islands; or
                    ``(B) under subpart 1 of part B and subpart 1 of 
                part C, one of the 48 contiguous States or the District 
                of Columbia; or
                    ``(C) under subpart 3 of part B, Arizona, 
                California, Colorado, Idaho, Nevada, New Mexico, 
                Oregon, Utah, and Wyoming.
            ``(32) The term `unit' means--
                    ``(A) a fossil fuel-fired boiler, combustion 
                turbine, or integrated gasification combined cycle 
                plan; or
                    ``(B) under subpart 1 of part B and subpart 1 of 
                part C, a fossil fuel-fired combustion device.
            ``(33) The term `utility unit' shall have the meaning set 
        forth in section 411.
            ``(34) The term `year' means calendar year.

SEC. 403. ALLOWANCE SYSTEM.

    ``(a) Allocations in General.--
            ``(1) For the emission limitation programs under this 
        title, the Administrator shall allocate annual allowances for 
        an affected unit, to be held or distributed by the designated 
        representative of the owner or operator in accordance with this 
        title as follows--
                    ``(A) sulfur dioxide allowances in an amount equal 
                to the annual tonnage emission limitation calculated 
                under section 413, 414, 415, or 416 except as otherwise 
                specifically provided elsewhere in subpart 1 of part B, 
                or in an amount calculated under section 424 or 434,
                    ``(B) nitrogen oxides allowances in an amount 
                calculated under section 454, and
                    ``(C) mercury allowances in an amount calculated 
                under section 474.
            ``(2) Notwithstanding any other provision of law to the 
        contrary, the calculation of the allocation for any unit, and 
        the determination of any values used in such calculation, under 
        sections 424, 434, 454, and 474 shall not be subject to 
        judicial review.
            ``(3) Allowances shall be allocated by the Administrator 
        without cost to the recipient, and shall be auctioned or sold 
        by the Administrator, in accordance with this title.
    ``(b) Allowance Transfer System.--Allowances allocated, auctioned, 
or sold by the Administrator under this title may be transferred among 
designated representatives of the owners or operators of affected 
facilities under this title and any other person, as provided by the 
allowance system regulations promulgated by the Administrator. With 
regard to sulfur dioxide allowances, the Administrator shall implement 
this subsection under 40 CFR part 73 (2001), amended as appropriate by 
the Administrator. With regard to nitrogen oxides allowances and 
mercury allowances, the Administrator shall implement this subsection 
by promulgating regulations not later than twenty-four months after the 
date of enactment of the Clear Skies Act of 2002. The regulations under 
this subsection shall establish the allowance system prescribed under 
this section, including, but not limited to, requirements for the 
allocation, transfer, and use of allowances under this title. Such 
regulations shall prohibit the use of any allowance prior to the 
calendar year for which the allowance was allocated or auctioned and 
shall provide, consistent with the purposes of this title, for the 
identification of unused allowances, and for such unused allowances to 
be carried forward and added to allowances allocated in subsequent 
years, except as otherwise provided in section 425. Such regulations 
shall provide, or shall be amended to provide, that transfers of 
allowances shall not be effective until certification of the transfer, 
signed by a responsible official of the transferor, is received and 
recorded by the Administrator.
    ``(c) Allowance Tracking System.--The Administrator shall 
promulgate regulations establishing a system for issuing, recording, 
and tracking allowances, which shall specify all necessary procedures 
and requirements for an orderly and competitive functioning of the 
allowance system. Such system shall provide, by January 1, 2008, for 
one or more facility-wide accounts for holding sulfur dioxide 
allowances, nitrogen oxides allowances, and, if applicable, mercury 
allowances for all affected units at an affected facility. With regard 
to sulfur dioxide allowances, the Administrator shall implement this 
subsection under 40 CFR part 73 (2001), amended as appropriate by the 
Administrator. With regard to nitrogen oxides allowances and mercury 
allowances, the Administrator shall implement this subsection by 
promulgating regulations not later than twenty-four months after the 
date of enactment of the Clear Skies Act of 2002. All allowance 
allocations and transfers shall, upon recordation by the Administrator, 
be deemed a part of each unit's or facility's permit requirements 
pursuant to section 404, without any further permit review and 
revision.
    ``(d) Nature of Allowances.--A sulfur dioxide allowance, nitrogen 
oxides allowance, or mercury allowance allocated, auctioned, or sold by 
the Administrator under this title is a limited authorization to emit 
one ton of sulfur dioxide, one ton of nitrogen oxides, or one ounce of 
mercury, as the case may be, in accordance with the provisions of this 
title. Such allowance does not constitute a property right. Nothing in 
this title or in any other provision of law shall be construed to limit 
the authority of the United States to terminate or limit such 
authorization. Nothing in this section relating to allowances shall be 
construed as affecting the application of, or compliance with, any 
other provision of this Act to an affected unit or facility, including 
the provisions related to applicable National Ambient Air Quality 
Standards and State implementation plans. Nothing in this section shall 
be construed as requiring a change of any kind in any State law 
regulating electric utility rates and charges or affecting any State 
law regarding such State regulation or as limiting State regulation 
(including any prudency review) under such a State law. Nothing in this 
section shall be construed as modifying the Federal Power Act or as 
affecting the authority of the Federal Energy Regulatory Commission 
under that Act. Nothing in this title shall be construed to interfere 
with or impair any program for competitive bidding for power supply in 
a State in which such program is established. Allowances, once 
allocated or auctioned to a person by the Administrator, may be 
received, held, and temporarily or permanently transferred in 
accordance with this title and the regulations of the Administrator 
without regard to whether or not a permit is in effect under title V or 
section 404 with respect to the unit for which such allowance was 
originally allocated and recorded.
    ``(e) Prohibition.--
            ``(1) It shall be unlawful for any person to hold, use, or 
        transfer any allowance allocated, auctioned, or sold by the 
        Administrator under this title, except in accordance with 
        regulations promulgated by the Administrator.
            ``(2) It shall be unlawful for any affected unit or for the 
        affected units at a facility to emit sulfur dioxide, nitrogen 
        oxides, and mercury, as the case may be, during a year in 
        excess of the number of allowances held for that unit or 
        facility for that year by the owner or operator as provided in 
        sections 412(c), 422, 432, 452, and 472.
            ``(3) The owner or operator of a facility may purchase 
        allowances directly from the Administrator to be used only to 
        meet the requirements of sections 422, 432, 452, and 472, as 
        the case may be, for a specified year. Not later than thirty-
        six months after the date of enactment of the Clear Skies Act 
        of 2002, the Administrator shall promulgate regulations 
        providing for direct sales of sulfur dioxide allowances, 
        nitrogen oxides allowances, and mercury allowances to an owner 
        or operator of a facility. The regulations shall provide that--
                    ``(A) such allowances may be used only to meet the 
                requirements of section 422, 432, 452, and 472, as the 
                case may be, for such facility and for a year specified 
                by the Administrator,
                    ``(B) each such sulfur dioxide allowance shall be 
                sold for $4,000, each such nitrogen oxides allowance 
                shall be sold for $4,000, and each such mercury 
                allowance shall be sold for $2,187.50, with such prices 
                adjusted for inflation based on the Consumer Price 
                Index on the date of enactment of the Clear Skies Act 
                of 2002 and annually thereafter,
                    ``(C) the proceeds from any sales of allowances 
                under subparagraph (B) shall be deposited in the United 
                States Treasury,
                    ``(D) the allowances directly purchased for use for 
                a specified year shall be taken from, and reduce, the 
                amount of sulfur dioxide allowances, nitrogen oxides 
                allowances, or mercury allowances, as the case may be, 
                that would otherwise be auctioned under section 423, 
                453, or 473 starting for the year after the specified 
                year and continuing for each subsequent year as 
                necessary,
                    ``(E) if an owner or operator does not use any such 
                allowance in accordance with paragraph (A)--
                            ``(i) the owner or operator shall hold the 
                        allowance for deduction by the Administrator, 
                        and
                            ``(ii) the Administrator shall deduct the 
                        allowance, without refund or other form of 
                        recompense, and offer it for sale in the 
                        auction from which it was taken under 
                        subparagraph (D) or a subsequent relevant 
                        auction as necessary, and
                    ``(F) if the direct sales of allowances result in 
                the removal of all sulfur dioxide allowances, nitrogen 
                oxides allowances, or mercury allowances, as the case 
                may be, from auctions under section 423, 453, or 473 
                for three consecutive years, the Administrator shall 
                conduct a study to determine whether revisions to the 
                relevant allowance trading program are necessary and 
                shall report the results to the Congress.
            ``(4) Allowances may not be used prior to the calendar year 
        for which they are allocated or auctioned. Nothing in this 
        section or in the allowance system regulations shall relieve 
        the Administrator of the Administrator's permitting, monitoring 
        and enforcement obligations under this Act, nor relieve 
        affected facilities of their requirements and liabilities under 
        the Act.
    ``(f) Competitive Bidding for Power Supply.--Nothing in this title 
shall be construed to interfere with or impair any program for 
competitive bidding for power supply in a State in which such program 
is established.
    ``(g) Applicability of the Antitrust Laws.--
            ``(1) Nothing in this section affects--
                    ``(A) the applicability of the antitrust laws to 
                the transfer, use, or sale of allowances, or
                    ``(B) the authority of the Federal Energy 
                Regulatory Commission under any provision of law 
                respecting unfair methods of competition or 
                anticompetitive acts or practices.
            ``(2) As used in this section, `antitrust laws' means those 
        Acts set forth in section 1 of the Clayton Act (15 U.S.C. 12), 
        as amended.
    ``(h) Public Utility Holding Company Act.--The acquisition or 
disposition of allowances pursuant to this title including the issuance 
of securities or the undertaking of any other financing transaction in 
connection with such allowances shall not be subject to the provisions 
of the Public Utility Holding Company Act of 1935.
    ``(i) Interpollutant Trading.--Not later than July 1, 2009, the 
Administrator shall furnish to the Congress a study evaluating the 
environmental and economic consequences of amending this title to 
permit trading sulfur dioxide allowances for nitrogen oxides 
allowances.
    ``(j) International Trading.--Not later than 24 months after the 
date of enactment of the Clear Skies Act of 2002, the Administrator 
shall furnish to the Congress a study evaluating the feasibility of 
international trading of sulfur dioxide allowances, nitrogen oxides 
allowances, and mercury allowances.

``SEC. 404. PERMITS AND COMPLIANCE PLANS.

    ``(a) Permit Program.--The provisions of this title shall be 
implemented, subject to section 403, by permits issued to units and 
facilities subject to this title and enforced in accordance with the 
provisions of title V, as modified by this title. Any such permit 
issued by the Administrator, or by a State with an approved permit 
program, shall prohibit--
            ``(1) annual emissions of sulfur dioxide, nitrogen oxides, 
        and mercury in excess of the number of allowances required to 
        be held in accordance with sections 412(c), 422, 432, 452, and 
        472,
            ``(2) exceedances of applicable emissions rates under 
        section 441,
            ``(3) the use of any allowance prior to the year for which 
        it was allocated or auctioned, and
            ``(4) contravention of any other provision of the permit. 
        No permit shall be issued that is inconsistent with the 
        requirements of this title, and title V as applicable.
    ``(b) Compliance Plan.--Each initial permit application shall be 
accompanied by a compliance plan for the facility to comply with its 
requirements under this title. Where an affected facility consists of 
more than one affected unit, such plan shall cover all such units, and 
such facility shall be considered a `facility' under section 502(c). 
Nothing in this section regarding compliance plans or in title V shall 
be construed as affecting allowances.
            ``(1) Submission of a statement by the owner or operator, 
        or the designated representative of the owners and operators, 
        of a unit subject to the emissions limitation requirements of 
        sections 412(c), 413, 414, and 441, that the unit will meet the 
        applicable emissions limitation requirements of such sections 
        in a timely manner or that, in the case of the emissions 
        limitation requirements of sections 412(c), 413, and 414, the 
        owners and operators will hold sulfur dioxide allowances in the 
        amount required by section 412(c), shall be deemed to meet the 
        proposed and approved compliance planning requirements of this 
        section and title V, except that, for any unit that will meet 
        the requirements of this title by means of an alternative 
        method of compliance authorized under section 413 (b), (c), 
        (d), or (f), section 416, and section 441 (d) or (e), the 
        proposed and approved compliance plan, permit application and 
        permit shall include, pursuant to regulations promulgated by 
        the Administrator, for each alternative method of compliance a 
        comprehensive description of the schedule and means by which 
        the unit will rely on one or more alternative methods of 
        compliance in the manner and time authorized under subpart 1 of 
        part B or subpart 1 of part C.
            ``(2) Submission of a statement by the owner or operator, 
        or the designated representative, of a facility that includes a 
        unit subject to the emissions limitation requirements of 
        sections 422, 432, 452, and 472 that the owner or operator will 
        hold sulfur dioxide allowances, nitrogen oxide allowances, and 
        mercury allowances, as the case may be, in the amount required 
        by such sections shall be deemed to meet the proposed and 
        approved compliance planning requirements of this section and 
        title V with regard to subparts A through D.
            ``(3) Recordation by the Administrator of transfers of 
        allowances shall amend automatically all applicable proposed or 
        approved permit applications, compliance plans and permits.
    ``(c) Permits.--The owner or operator of each facility under this 
title that includes an affected unit subject to title V shall submit a 
permit application and compliance plan with regard to the applicable 
requirements under sections 412(c), 422, 432, 441, 452, and 472 for 
sulfur dioxide emissions, nitrogen oxide emissions, and mercury 
emissions from such unit to the permitting authority in accordance with 
the deadline for submission of permit applications and compliance plans 
under title V. The permitting authority shall issue a permit to such 
owner or operator, or the designated representative of such owner or 
operator, that satisfies the requirements of title V and this title.
    ``(d) Amendment of Application and Compliance Plan.--At any time 
after the submission of an application and compliance plan under this 
section, the applicant may submit a revised application and compliance 
plan, in accordance with the requirements of this section.
    ``(e) Prohibition.--
            ``(1) It shall be unlawful for an owner or operator, or 
        designated representative, required to submit a permit 
        application or compliance plan under this title to fail to 
        submit such application or plan in accordance with the 
        deadlines specified in this section or to otherwise fail to 
        comply with regulations implementing this section.
            ``(2) It shall be unlawful for any person to operate any 
        facility subject to this title except in compliance with the 
        terms and requirements of a permit application and compliance 
        plan (including amendments thereto) or permit issued by the 
        Administrator or a State with an approved permit program. For 
        purposes of this subsection, compliance, as provided in section 
        504(f), with a permit issued under title V which complies with 
        this title for facilities subject to this title shall be deemed 
        compliance with this subsection as well as section 502(a).
            ``(3) In order to ensure reliability of electric power, 
        nothing in this title or title V shall be construed as 
        requiring termination of operations of a unit serving a 
        generator for failure to have an approved permit or compliance 
        plan under this section, except that any such unit may be 
        subject to the applicable enforcement provisions of section 
        113.
    ``(f) Certificate of Representation.--No permit shall be issued 
under this section to an affected unit or facility until the designated 
representative of the owners or operators has filed a certificate of 
representation with regard to matters under this title, including the 
holding and distribution of allowances and the proceeds of transactions 
involving allowances.

``SEC. 405. MONITORING, REPORTING, AND RECORDKEEPING REQUIREMENTS.

    ``(a) Applicability.--
            ``(1)(A) The owner and operator of any facility subject to 
        this title shall be required to install and operate CEMS on 
        each affected unit subject to subpart 1 of part B or subpart 1 
        of part C at the facility, and to quality assure the data, for 
sulfur dioxide, nitrogen oxides, opacity, and volumetric flow at each 
such unit.
            ``(B) The Administrator shall, by regulations, specify the 
        requirements for CEMS under subparagraph (A), for any 
        alternative monitoring system that is demonstrated as providing 
        information with the same precision, reliability, 
        accessibility, and timelines as that provided by CEMS, and for 
        recordkeeping and reporting of information from such systems. 
        Such regulations may include limitations on the use of 
        alternative compliance methods by units equipped with an 
        alternative monitoring system as may be necessary to preserve 
        the orderly functioning of the allowance system, and which will 
        ensure the emissions reductions contemplated by this title. 
        Where 2 or more units utilize a single stack, a separate CEMS 
        shall not be required for each unit, and for such units the 
        regulations shall require that the owner or operator collect 
        sufficient information to permit reliable compliance 
        determinations for each such unit.
            ``(2)(A) The owner and operator of any facility subject to 
        this title shall be required to install and operate CEMS to 
        monitor the emissions from each affected unit at the facility, 
        and to quality assure the data for--
                    ``(i) sulfur doxide, opacity, and volumetric flow 
                for all affected units subject to subpart 2 of part B 
                at the facility,
                    ``(ii) nitrogen oxides for all affected units 
                subject to subpart 2 of part C at the facility, and
                    ``(iii) mercury for all affected units subject to 
                part D at the facility.
            ``(B)(i) The Administrator shall, by regulations, specify 
        the requirements for CEMS under subparagraph (A), for any 
        alternative monitoring system that is demonstrated as providing 
        information with the same precision, reliability, 
        accessibility, and timeliness as that provided by CEMS, for 
        recordkeeping and reporting of information from such systems, 
        and if necessary under section 474, for monitoring, 
        recordkeeping, and reporting of the mercury content of fuel.
            ``(ii) Notwithstanding the requirements of clause (i), the 
        regulations under clause (i) may specify an alternative 
        monitoring system for determining mercury emissions to the 
        extent that the Administrator determines that CEMS for mercury 
        with appropriate vendor guarantees are not commercially 
        available.
            ``(iii) The regulations under clause (i) may include 
        limitation on the use of alternative compliance methods by 
        units equipped with an alternative monitoring system as may be 
        necessary to preserve the orderly functioning of the allowance 
        system, and which will ensure the emissions reductions 
        contemplated by this title.
            ``(iv) Except as provided in clausse (v), the regulations 
        under clause (i) shall not require a separate CEMS for each 
        unit where two or more units utilize a single stack and shall 
        require that the owner or operator collect sufficient 
        information to permit reliable compliance determinations for 
        such units.
            ``(v) The regulations under clause (i) may require a 
        separate CEMS for each unit where two or more units utilize a 
        single stack and another provision of the Act requires data 
        under subparagraph (A) for an individual unit.
    ``(b) Deadlines.--
            ``(1) Upon commencement of commercial operation of each new 
        utility unit under subpart I of part B, the unit shall comply 
        with the requirements of subsection (a)(1).
            ``(2) By the later of January 1, 2009, or the date on which 
        the unit commences operation, the owner or operator of each 
        affected unit under subpart 2 of part B shall install and 
        operate CEMS, quality assure the data, and keep records and 
        reports in accordance with the regulations issued under 
        paragraph (a)(2) with regard to sulfur dioxide, opacity, and 
        volumetric flow.
            ``(3) By the later of January 1 of the year before the 
        first covered year or the date on which the unit commences 
        operation, the owner or operator of each affected unit under 
        subpart 3 of part B shall install and operate CEMS, quality 
        assure the data, and keep records and reports in accordance 
        with the regulations issued under paragraph (a)(2) with regard 
        to sulfur dioxide and volumetric flow.
            ``(4) By the later of January 1, 2007 or the date on which 
        the unit commences operation, the owner or operator of each 
        affected unit under subpart 2 of part C shall install and 
        operate CEMS, quality assure the data, and keep records and 
        reports in accordance with the regulations issued under 
        paragraph (a)(2) with regard to nitrogen oxides, and
            ``(5) By the later of January 1, 2009 or the date on which 
        the unit commences operation, the owner or operator of each 
        affected unit under part D shall install and operate CEMS, 
        quality assure the data, and keep records and reports in 
        accordance with the regulations issued under paragraph (a)(2) 
        with regard to mercury.
    ``(c) Unavailability of Emissions Data.--If CEMS data or data from 
an alternative monitoring system approved by the Administrator under 
subsection (a) is not available for any affected unit during any period 
of a calendar year in which such data is required under this title, and 
the owner or operator cannot provide information, satisfactory to the 
Administrator, on emissions during that period, the Administrator shall 
deem the unit to be operating in an uncontrolled manner during the 
entire period for which the data was not available and shall, by 
regulation, prescribe means to calculate emissions for that period. The 
owner or operator shall be liable for excess emissions fees and offsets 
under section 406 in accordance with such regulations. Any fee due and 
payable under this subsection shall not diminish the liability of the 
unit's owner or operator for any fine, penalty, fee or assessment 
against the unit for the same violation under any other section of this 
Act.
    ``(d) With regard to sulfur dioxide, nitrogen oxides, opacity, and 
volumetric flow, the Administrator shall implement subsections (a) and 
(c) under 40 CFR part 75 (2001), amended as appropriate by the 
Administrator. With regard to mercury, the Administrator shall 
implement subsections (a) and (c) by issuing regulations not later than 
January 1, 2008.
    ``(e) Prohibition.--It shall be unlawful for the owner or operator 
of any facility subject to this title to operate a facility without 
complying with the requirements of this section, and any regulations 
implementing this section.

``SEC. 406. EXCESS EMISSIONS PENALTY; GENERAL COMPLIANCE WITH OTHER 
              PROVISIONS; ENFORCEMENT.

    ``(a) Excess Emissions Penalty.--
            ``(1) The owner or operator of any unit subject to the 
        requirements of section 441 that emits nitrogen oxides for any 
        calendar year in excess of the unit's emissions limitation 
        requirement shall be liable for the payment of an excess 
        emissions penalty, except where such emission were authorized 
        pursuant to section 110(f). That penalty shall be calculated on 
        the basis of the number of tons emitted in excess of the unit's 
        emissions limitation requirement multiplied by $2,000.
            ``(2) The owner or operator of any unit subject to the 
        requirements of section 412(c) that emits sulfur dioxide for 
        any calendar year before 2008 in excess of the sulfur dioxide 
        allowances the owner or operator holds for use for the unit for 
that calendar year shall be liable for the payment of an excess 
emissions penalty, except where such emissions were authorized pursuant 
to section 110(f). That penalty shall be calculated as follows:
                    ``(A) the product of the unit's excess emissions 
                (in tons) multiplied by the clearing price of sulfur 
                dioxide allowances sold at the most recent auction 
                under section 417, if within thirty days after the date 
                on which the owner or operator was required to hold 
                sulfur dioxide allowances--
                            ``(i) the owner or operator offsets the 
                        excess emissions in accordance with paragraph 
                        (b)(1); and
                            ``(ii) the Administrator receives the 
                        penalty required under this subparagraph.
                    ``(B) if the requirements of clause (A)(i) or 
                (A)(ii) are not met, three hundred percent of the 
                product of the unit's excess emissions (in tons) 
                multiplied by the clearing price of sulfur dioxide 
                allowances sold at the most recent auction under 
                section 417.
            ``(3) If the units at a facility that are subject to the 
        requirements of section 412(c) emit sulfur dioxide for any 
        calendar year after 2007 in excess of the sulfur dioxide 
        allowances that the owner or operator of the facility holds for 
        use for the facility for that calendar year, the owner or 
        operator shall be liable for the payment of an excess emissions 
        penalty, except where such emissions were authorized pursuant 
        to section 110(f). That penalty shall be calculated under 
        paragraph (4)(A) or (4)(B).
            ``(4) If the units at a facility that are subject to the 
        requirements of section 422, 432, 452, or 472 emit sulfur 
        dioxide, nitrogen oxides, or mercury for any calendar year in 
        excess of the sulfur dioxide allowances, nitrogen oxides 
        allowances, or mercury allowances, as the case may be, that the 
        owner or operator of the facility holds for use for the 
        facility for that calendar year, the owner or operator shall be 
        liable for the payment of an excess emissions penalty, except 
        where such emissions were authorized pursuant to section 
        110(f). That penalty shall be calculated as follows:
                    ``(A) the product of the units' excess emissions 
                (in tons or, for mercury emissions, in ounces) 
                multiplied by the clearing price of sulfur dioxide 
                allowances, nitrogen oxides allowances, or mercury 
                allowances, as the case may be, sold at the most recent 
                auction under section 423, 453, or 473, if within 
                thirty days after the date on which the owner or 
                operator was required to hold sulfur dioxide, nitrogen 
                oxides allowance, or mercury allowances as the case may 
                be--
                            ``(i) the owner or operator offsets the 
                        excess emissions in accordance with paragraph 
                        (b)(1); and
                            ``(ii) the Administrator receives the 
                        penalty required under this subparagraph.
                    ``(B) if the requirements of clause (A)(i) or 
                (A)(ii) are not met, three hundred percent of the 
                product of the units' excess emissions (in tons or, for 
                mercury emissions, in ounces) multiplied by the 
                clearing price of sulfur dioxide allowances, nitrogen 
                oxides allowances, or mercury allowances, as the case 
                may be, sold at the most recent auction under section 
                423, 453, or 473.
            ``(5) Any penalty under paragraph 1, 2, 3, or 4 shall be 
        due and payable without demand to the Administrator as provided 
        in regulations issued by the Administrator. With regard to the 
        penalty under paragraph 1, the Administrator shall implement 
        this paragraph under 40 CFR 77 (2001), amended as appropriate 
        by the administrator. With regard to the penalty under 
        paragraphs 2, 3, and 4, the Administrator shall implement this 
        paragraph by issuing regulations no later than twenty-four 
        months after the date of enactment of the Clear Skies Act of 
        2002. Any such payment shall be deposited in the United States 
        Treasury. Any penalty due and payable under this section shall 
        not diminish the liability of the unit's owner or operator for 
        any fine, penalty or assessment against the unit for the same 
        violation under any other section of this Act.
    ``(b) Excess Emissions Offset.--
            ``(1) The owner or operator of any unit subject to the 
        requirements of section 412(c) that emits sulfur dioxide during 
        any calendar year before 2008 in excess of the sulfur dioxide 
        allowances held for the unit for the calendar year shall be 
        liable to offset the excess emissions by an equal tonnage 
        amount in the following calendar year, or such longer period as 
        the Administrator may prescribe. The Administrator shall deduct 
        sulfur dioxide allowances equal to the excess tonnage from 
        those held for the facility for the calendar year, or 
        succeeding years during which offsets are required, following 
        the year in which the excess emissions occurred.
            ``(2) If the units at a facility that are subject to the 
        requirements of section 412(c) emit sulfur dioxide for a year 
        after 2007 in excess of the sulfur dioxide allowances that the 
        owner or operator of the facility holds for use for the 
        facility for that calendar year, the owner or operator shall be 
        liable to offset the excess emissions by an equal amount of 
        tons in the following calendar year, or such longer period as 
        the Administrator may prescribe. The Administrator shall deduct 
        sulfur dioxide allowances equal to the excess emissions in tons 
        from those held for the facility for the year, or succeeding 
        years during which offsets are required, following the year in 
        which the excess emissions occurred.
            ``(3) If the units at a facility that are subject to the 
        requirements of section 422, 432, 452, or 472 emit sulfur 
        dioxide, nitrogen oxides, or mercury for any calendar year in 
        excess of the sulfur dioxide allowances, nitrogen oxides 
        allowances, or mercury allowances, as the case may be, that the 
        owner or operator of the facility holds for use for the 
        facility for that calendar year, the owner or operator shall be 
        liable to offset the excess emissions by an equal amount of 
        tons or, for mercury, ounces in the following calendar year, or 
        such longer period as the Administrator may prescribe. The 
        Administrator shall deduct sulfur dioxide allowances, nitrogen 
        oxide allowances, or mercury allowances, as the case may be, 
        equal to the excess emissions in tons or, for mercury, ounces 
        from those held for the facility for the year, or succeeding 
        years during which offsets are required, following the year in 
        which the excess emissions occurred.
    ``(c) Penalty Adjustment.--The Administrator shall, by regulation, 
adjust the penalty specified in subsection (a)(1) for inflation, based 
on the Consumer Price Index, on November 15, 1990, and annually 
thereafter.
    ``(d) Prohibition.--It shall be unlawful for the owner or operator 
of any unit or facility liable for a penalty and offset under this 
section to fail--
            ``(1) to pay the penalty under subsection (a); or
            ``(2) to offset excess emissions as required by subsection 
        (b).
    ``(e) Savings Provision.--Nothing in this title shall limit or 
otherwise affect the application of section 113, 114, 120, or 304 
except as otherwise explicitly provided in this title.
    ``(f) Except as expressly provided, compliance with the 
requirements of this title shall not exempt or exclude the owner or 
operator of any facility subject to this title from compliance with any 
other applicable requirements of this Act. Notwithstanding any other 
provision of the Act, no State or political subdivision thereof shall 
restrict or interfere with the transfer, sale, or purchase of 
allowances under this title.
    ``(g) Violation by any person subject to this title of any 
prohibition of, requirement of, or regulation promulgated pursuant to 
this title shall be a violation of this Act. In addition to the other 
requirements and prohibitions provided for in this title, the operation 
of any affected unit or the affected units at a facility to emit sulfur 
dioxide, nitrogen oxides, or mercury in violation of section 412(c), 
422, 432, 452, and 472, as the case may be, shall be deemed a 
violation, with each ton or, in the case of mercury, each ounce emitted 
in excess of allowances held constituting a separate violation.

``SEC. 407. ELECTION FOR ADDITIONAL UNITS.

    ``(a) Applicability.--The owner or operator of any unit that is not 
an affected EGU under subpart 2 of part B and subpart 2 of part C and 
whose emissions of sulfur dioxide and nitrogen oxides are vented only 
through a stack or duct may elect to designate such unit as an affected 
unit under subpart 2 of part B and subpart 2 of part C. If the owner or 
operator elects to designate a unit that is coal-fired and emits 
mercury vented only through a stack or duct, the owner or operator 
shall also designate the unit as an affected unit under part D.
    ``(b) Application.--The owner or operator making an election under 
subsection (a) shall submit an application for the election to the 
Administrator for approval.
    ``(c) Approval.--If an application for an election under subsection 
(b) meets the requirements of subsection (a), the Administrator shall 
approve the designation as an affected unit under subpart 2 of part B 
and subpart 2 of part C and, if applicable, under part D, subject to 
the requirements in subsections (d) through (g).
    ``(d) Establishment of Baseline.--
            ``(1) After approval of the designation under subsection 
        (c), the owner or operator shall install and operate CEMS on 
        the unit, and shall quality assure the data, in accordance with 
        the requirements of paragraph (a)(2) and subsections (c) 
        through (e) of section 405, except that, where two or more 
        units utilize a single stack, separate monitoring shall be 
        required for each unit.
            ``(2) The baselines for heat input and sulfur dioxide, 
        nitrogen oxides, and mercury emission rates, as the case may 
        be, for the unit shall be the unit's heat input and the 
        emission rates of sulfur dioxide, nitrogen oxides, and mercury 
        for a year starting after approval of the designation under 
        subsection (c). The Administrator shall issue regulations 
        requiring all the unit's baselines to be based on the same year 
        and specifying minimum requirements concerning the percentage 
        of the unit's operating hours for which quality assured CEMS 
        data must be available during such year.
    ``(e) Emission Limitations.--After approval of the designation of 
the unit under paragraph (c), the unit shall become:
            ``(1) an affected unit under subpart 2 of part B, and shall 
        be allocated sulfur dioxide allowances under paragraph (f), 
        starting the later of January 1, 2010, or January 1 of the year 
        after the year on which the unit's baselines are based under 
        subsection (d);
            ``(2) an affected unit under subpart 2 of part C, and shall 
        be allocated nitrogen oxides allowances under paragraph (f), 
        starting the later of January 1, 2008, or January 1 of the year 
        after the year on which the unit's baselines are based under 
        subsection (d); and
            ``(3) if applicable, an affected unit under part D, and 
        shall be allocated mercury allowances, starting the later of 
        January 1, 2010, or January 1 of the year after the year on 
        which the unit's baselines are based under subsection (d).
    ``(f) Allocations and Auction Amounts.--
            ``(1) The Administrator shall promulgate regulations 
        determining the allocations of sulfur dioxide allowances, 
        nitrogen oxides allowances, and, if applicable, mercury 
        allowances for each year during which a unit is an affected 
        unit under subsection (e). The regulations shall provide for 
        allocations equal to fifty percent of the following amounts, as 
        adjusted under paragraph (2)--
                    ``(A) the lesser of the unit's baseline heat input 
                under subsection (d) or the unit's heat input for the 
                year before the year for which the Administrator is 
                determining the allocations; multiplied by
                    ``(B) the lesser of--
                            ``(i) the unit's baseline sulfur dioxide 
                        emission rate, nitrogen oxides emission rate, 
                        or mercury emission rate, as the case may be;
                            ``(ii) the unit's sulfur dioxide emission 
                        rate, nitrogen oxides emission rate, or mercury 
                        emission rate, as the case may be, during 2002, 
                        as determined by the Administrator based, to 
                        the extent available, on information reported 
                        to the State where the unit is located; or
                            ``(iii) the unit's most stringent State or 
                        federal emission limitation for sulfur dioxide, 
                        nitrogen oxides, or mercury applicable to the 
                        year on which the unit's baseline heat input is 
                        based under subsection (d).
            ``(2) The Administrator shall reduce the allocations under 
        paragraph (1) by 1.0 percent in the first year for which the 
        Administrator is allocating allowances to the unit, by an 
        additional 1.0 percent of the allocations under paragraph (1) 
        each year starting in the second year through the twentieth 
        year, and by an additional 2.5 percent of the allocations under 
        paragraph (1) each year starting in the twenty-first year and 
        each year thereafter. The Administrator shall make 
        corresponding increases in the amounts of allowances auctioned 
        under sections 423, 453, and 473.
    ``(g) Withdrawal.--The Administrator shall promulgate regulations 
withdrawing from the approved designation under subsection (c) any unit 
that qualifies as an affected EGU under subpart 2 of part B, subpart 2 
of part C, or part D after the approval of the designation of the unit 
under subsection (c).
    ``(h) The Administrator shall promulgate regulations implementing 
this section within 24 months of the date of enactment of the Clear 
Skies Act of 2003.

``SEC. 408. CLEAN COAL TECHNOLOGY REGULATORY INCENTIVES.

    ``(a) Definition.--For purposes of this section, `clean coal 
technology' means any technology, including technologies applied at the 
precombustion, combustion, or post combustion stage, at a new or 
existing facility which will achieve significant reductions in air 
emissions of sulfur dioxide or oxides of nitrogen associated with the 
utilization of coal in the generation of electricity, process steam, or 
industrial products, which is not in widespread use as of the date of 
enactment of this title.
    ``(b) Revised Regulations for Clean Coal Technology 
Demonstrations.--
            ``(1) Applicability.--This subsection applies to physical 
        or operational changes to existing facilities for the sole 
        purpose of installation, operation, cessation, or removal of a 
        temporary or permanent clean coal technology demonstration 
        project. For the purposes of this section, a clean coal 
        technology demonstration project shall mean a project using 
        funds appropriated under the heading `Department of Energy--
        Clean Coal Technology', up to a total amount of $2,500,000,000 
        for commercial demonstration of clean coal technology, or 
        similar projects funded through appropriations for the 
Environmental Protection Agency. the Federal contribution for 
qualifying project shall be at least 20 percent of the total cost of 
the demonstration project.
            ``(2) Temporary projects.--Installation, operation, 
        cessation, or removal of a temporary clean coal technology 
        demonstration project that is operated for a period of five 
        years or less, and which complies with the State implementation 
        plans for the State in which the project is located and other 
        requirements necessary to attain and maintain the national 
        ambient air quality standards during and after the project is 
        terminated, shall not subject such facility to the requirements 
        of section 111 or part C or D of title I.
            ``(3) Permanent projects.--For permanent clean coal 
        technology demonstration projects that constitute repowering as 
        defined in section 411, any qualifying project shall not be 
        subject to standards of performance under section 111 or to the 
        review and permitting requirements of part C for any pollutant 
        the potential emissions of which will not increase as a result 
        of the demonstration project.
            ``(4) EPA regulations.--Not later than 12 months after 
        November 15, 1990, the Administrator shall promulgate 
        regulations or interpretive rulings to revise requirements 
        under section 111 and parts C and D, as appropriate, to 
        facilitate projects consistent in this subsection. With respect 
        to parts C and D, such regulations or rulings shall apply to 
        all areas in which EPA is the permitting authority. In those 
        instances in which the State is the permitting authority under 
        part C or D, any State may adopt and submit to the 
        Administrator for approval revisions to its implementation plan 
        to apply the regulations or rulings promulgated under this 
        subsection.
    ``(c) Exemption for Reactivation of Very Clean Units.--Physical 
changes or changes in the method of operation associated with the 
commencement of commercial operations by a coal-fired utility unit 
after a period of discontinued operation shall not subject the unit to 
the requirements of section 111 or part C of the Act where the unit--
            ``(1) has not been in operation for the two-year period 
        prior to November 15, 1990, and the emissions from such unit 
        continue to be carried in the permitting authority's emissions 
        inventory on November 15, 1990,
            ``(2) was equipped prior to shut-down with a continuous 
        system of emissions control that achieves a removal efficiency 
        for sulfur dioxide of no less than 85 percent and a removal 
        efficiency for particulates of no less than 98 percent,
            ``(3) is equipped with low-NO<INF>X</INF> burners prior to 
        the time of commencement, and
            ``(4) is otherwise in compliance with the requirements of 
        this Act.

``SEC. 409. AUCTIONS.

    ``(a) Commencing in 2005 and in each year thereafter, the 
Administrator shall conduct auctions, as required under sections 423, 
424, 426, 453, 454, 473, and 474, at which allowances shall be offered 
for sale in accordance with regulations promulgated by the 
Administrator no later than twenty-four months after the date of 
enactment of the Clear Skies Act of 2002. Such regulations may provide 
allowances to be offered for sale before or during the year for which 
such allowances may be used to meet the requirement to hold allowances 
under section 422, 452, and 472. Such regulations shall specify the 
frequency and timing of auctions and may provide for more than one 
auction of sulfur dioxide allowances, nitrogen oxides allowances, or 
mercury allowances during a year. Each auction shall be open to any 
person. A person wishing to bid for allowances in the auction shall 
submit to the Administrator (by a date set, and on a bid schedule 
provided, by the Administrator) offers to purchase specified numbers of 
allowances at specified prices. Allowances purchased at the auction may 
be used for any purpose and at any time after the auction, subject to 
the provisions of this title.
    ``(b) Default Auction Procedures.--If the Administrator is required 
to conduct an auction of allowances under subsection (a) before 
regulations have been promulgated under that subsection, such auction 
shall be conducted as follows:
            ``(1) The auction shall be held on the first business day 
        in October of the year in which the auction is required or, in 
        the absence of such a requirement, of the year before the first 
        year for which the allowances may be used to meet the 
        requirements of section 403(e)(2).
            ``(2) The auction shall be open to any person.
            ``(3) In order to bid for allowances included in the 
        auction, a person shall submit, and the Administrator must 
        receive by the date three business days before the auction, one 
        or more offers to purchase a specified amount of such 
        allowances at a specified price on a sealed bid schedule to be 
        provided by the Administrator. The bidder shall state in the 
        bid schedule that the bidder is willing to purchase at the 
        specified price fewer allowances than the specified amount and 
        shall identify the account in the Allowance Tracking System 
        under section 403(c) in which the allowances purchased are to 
        be placed. Each bid must include a certified check or, using a 
        form to be provided by the Administrator, a letter of credit 
        for the specified amount of allowances multiplied by the bid 
        price payable to the U.S. EPA. The bid schedule, and check or 
        letter of credit, shall be sent to the address specified on the 
        bid schedule.
            ``(4) The Administrator shall auction the allowances by--
                    ``(A) determining whether each bid meets the 
                requirements of paragraph (3);
                    ``(B) listing the bids (including the specified 
                amounts of allowances and the specified bid prices) 
                meeting the requirements of paragraph (3) in order, 
                from highest to lowest bid price;
                    ``(C) for each bid price, summing the amounts of 
                allowances specified in the bids listed under 
                subparagraph (B) with the same or a higher bid price;
                    ``(D) identifying the bid price with the highest 
                sum of allowances under subparagraph (C) that does not 
                exceed the total amount of allowances available for 
                auction;
                    ``(E) setting as the sales price in the auction--
                            ``(i) the bid price identified under 
                        subparagraph (D) if that bid price has a sum of 
                        allowances under subparagraph (C) equal to the 
                        total amount of allowances available for 
                        auction; or
                            ``(ii) the next lowest bid price after the 
                        bid price identified under subparagraph (D), if 
                        the bid price identified under subparagraph (D) 
                        has a sum of allowances under subparagraph (C) 
                        less than the total amount of allowances 
                        available for auction; and
                    ``(F) starting with the first bid listed under 
                subparagraph (B) and ending with the bid listed 
                immediately before the bid with a bid price equal to 
                the sales price, selling the amounts of allowances 
                specified in each bid to the person who submitted the 
                bid.
                            ``(i) If the amount of remaining allowances 
                        available for auction equals or is less than 
                        the amount of allowances specified in the bid 
                        with a bid price equal to the sales price, the 
Administrator shall sell the amount of remaining allowances to the 
person who submitted that bid.
                            ``(ii) If there is more than one bid with a 
                        bid price equal to the sales price and the 
                        amount of remaining allowances available for 
                        auction is less than the total of the amounts 
                        of allowances specified in such bids, the 
                        Administrator shall sell the amount of the 
                        remaining allowances to the persons who 
                        submitted those bids on a pro rata basis.
            ``(5) After the auction, the Administrator will publish the 
        names of winning and losing bidders, their bids, and the sales 
        price. The Administrator will provide the successful bidders 
        notice of the allowances that they have purchased within thirty 
        days after payment is collected by the Administrator. After the 
        conclusion of the auction, the Administrator will return 
        payment to unsuccessful bidders and the appropriate portion of 
        payment to successful bidders who offered to purchase a larger 
        amount of allowances than the amount that they are sold or to 
        pay a bid price exceeding the sales price and will add any 
        unsold allowances to the next relevant auction.
    ``(c) The Administrator may by delegation or contract provide for 
the conduct of auctions under the Administrator's supervision by other 
departments or agencies of the United States Government or by 
nongovernmental agencies, groups, or organizations.
    ``(d) The proceeds from any auction conducted under this title 
shall be deposited in the United States Treasury.

``SEC. 410. EVALUATION OF LIMITATIONS ON TOTAL SULFUR DIOXIDE, NITROGEN 
              OXIDES, AND MERCURY EMISSIONS THAT START IN 2018.

    ``(a) Evaluation.--
            ``(1) The Administrator, in consultation with the Secretary 
        of Energy, shall study whether the limitations on the total 
        annual amounts of allowances available starting in 2018 for 
        sulfur dioxide under section 423, nitrogen oxides under section 
        453, and mercury under section 473 should be adjusted.
            ``(2) As part of the study, the Administrator shall address 
        the following factors concerning the pollutants under paragraph 
        (a)(1)--
                    ``(A) the need for further emission reductions from 
                affected EGUs under subpart 2 of part B, subpart 2 of 
                part C, or part D and other sources to attain or 
                maintain the national ambient air quality standards;
                    ``(B) whether the benefits of the limitations on 
                the total annual amounts of allowances available 
                starting in 2018 justify the costs and whether 
                adjusting any of the limitations would provide 
                additional benefits which justify the costs of such 
                adjustment, taking into account both quantifiable and 
                non-quantifiable factors;
                    ``(C) the marginal cost effectiveness of reducing 
                emissions for each pollutant;
                    ``(D) the relative marginal cost effectiveness of 
                reducing sulfur dioxide and nitrogen oxide emissions 
                from affected EGUs under subpart 2 of part B and 
                subpart 2 of part C, as compared to the marginal cost 
                effectiveness of controls on other sources of sulfur 
                dioxide, nitrogen oxides and other pollutants that can 
                be controlled to attain or maintain national ambient 
                air quality standards;
                    ``(E) the feasibility of attaining the limitations 
                on the total annual amounts of allowances available 
                starting in 2018 given the available control 
                technologies and the ability to install control 
                technologies by 2018, and the feasibility of attaining 
                alternative limitations on the total annual amounts of 
                allowances available starting in 2018 under paragraph 
                (a)(1) for each pollutant, including the ability to 
                achieve alternative limitations given the available 
                control technologies, and the feasibility of installing 
                the control technologies needed to meet the alternative 
                limitation by 2018;
                    ``(F) the results of the most current research and 
                development regarding technologies and strategies to 
                reduce the emissions of one or more of these pollutants 
                from affected EGUs under subpart 2 of part B, subpart 2 
                of part C, or part D, as applicable and the results of 
                the most current research and development regarding 
                technologies for other sources of the same pollutants;
                    ``(G) the projected impact of the limitations on 
                the total annual amounts of allowances available 
                starting in 2018 and the projected impact of adjusting 
                any of the limitations on the total annual amounts of 
                allowances available starting in 2018 under paragraph 
                (a)(1) on the safety and reliability of affected EGUs 
                under subpart 2 of part B, subpart 2 of part C, or part 
                D and on fuel diversity within the power generation 
                section;
                    ``(H) the most current scientific information 
                relating to emissions, transformation and deposition of 
                these pollutants, including studies evaluating--
                            ``(i) the role of emissions of affected 
                        EGUs under subpart 2 of part B, subpart 2 of 
                        part C, or part D in the atmospheric formation 
                        of pollutants for which national ambient air 
                        quality standards exist;
                            ``(ii) the transformation, transport, and 
                        fate of these pollutants in the atmosphere, 
                        other media, and biota;
                            ``(iii) the extent to which effective 
                        control programs in other countries would 
                        prevent air pollution generated in those 
                        countries from contributing to nonattainment, 
                        or interfering with the maintenance of any 
                        national ambient air quality standards;
                            ``(iv) whether the limitations starting in 
                        2010 or 2018 will result in an increase in the 
                        level of any other pollutant and the level of 
                        any such increase; and
                            ``(v) speciated monitoring data for 
                        particulate matter and the effect of various 
                        elements of fine particulate matter on public 
                        health;
                    ``(I) the most current scientific information 
                relating to emissions, transformation and deposition of 
                mercury, including studies evaluating--
                            ``(i) known and potential human health and 
                        environmental effects of mercury;
                            ``(ii) whether emissions of mercury from 
                        affected EGUs under part D contribute 
                        significantly to elevated levels of mercury in 
                        fish;
                            ``(iii) human population exposure to 
                        mercury; and
                            ``(iv) the relative marginal cost 
                        effectiveness of reducing mercury emissions 
                        from affected EGUs under part D, as compared to 
                        the marginal cost effectiveness of controls on 
                        other sources of mercury;
                    ``(J) a comparison of the extent to which sources 
                of mercury not located in the United States contributed 
                to adverse affects on terrestrial or aquatic systems as 
                opposed to the contribution from affected EGUs under 
part D, and the extent to which effective mercury control programs in 
other countries could minimize such impairment; and
                    ``(K) an analysis of the effectiveness and 
                efficiency of the sulfur dioxide allowance program 
                under subpart 2 of part B, the nitrogen oxides 
                allowance program under subpart 2 of part C, and the 
                mercury allowance program under part D.
            ``(3) As part of the study, the Administrator shall take 
        into account the most current information available pursuant to 
        the review of the air quality criteria for particulate matter 
        under section 108.
    ``(b) Peer Review Procedures.--The draft results of the study under 
subsection (a) and related technical documents shall be subject to an 
independent and external peer review in accordance with this section. 
Any documents that are to be considered by the Administrator in the 
study must be independently peer reviewed no later than July 1, 2008. 
The peer review required under this section shall not be subject to the 
Federal Advisory Committee Act (5 U.S.C. App.). The Administrator 
shall--
            ``(1) conduct the peer review in an open manner. Such peer 
        review shall--
                    ``(A) be conducted through a formal panel that is 
                broadly representative and involves qualified 
                specialists who--
                            ``(i) are selected primarily on the basis 
                        of their technical expertise relevant to the 
                        analyses required under this section and to the 
                        decision whether or not to adjust the total 
                        annual amounts of allowances available starting 
                        in 2018 under paragraph (a)(1);
                            ``(ii) are independent of the agency;
                            ``(iii) disclose to the agency prior 
                        technical or policy positions they have taken 
                        on the issues under consideration; and
                            ``(iv) disclose to the agency their sources 
                        of personal and institutional funding from the 
                        private or pubic sectors;
                    ``(B) contain a balanced presentation of all 
                considerations, including minority reports;
                    ``(C) provide adequate protections for confidential 
                business information and trade secrets, including 
                requiring panel members or participants to enter into 
                confidentiality agreements;
                    ``(D) afford an opportunity for public comment; and
                    ``(E) be complete by no later than January 1, 2009.
            ``(2) respond, in writing, to all significant peer review 
        and public comments; and
            ``(3) certify that--
                    ``(A) each peer review participant has the 
                expertise an independence required under this section; 
                and
                    ``(B) the agency has adequately responded to the 
                peer review comments as requires under this section.
    ``(c) Recommendaiton to Congress.--The Administrator, in 
consultation with the Secretary of Energy, should submit to Congress no 
later than July 1, 2009, a recommendation whether to revise the 
limitations on the total annual amounts of allowances available 
starting in 2018 under paragraph (a)(1). The recommendation shall 
include the final results of the study under subsections (a) and (b) 
and shall address the factors described in paragraph (a)(2). The 
Administrator may submit separate recommendations addressing sulfur 
dioxide, nitrogen oxides, or mercury at any time after the study has 
been completed under paragraph (a)(2) and the peer review process has 
been completed under subsection (b).

              ``PART B--SULFUR DIOXIDE EMISSION REDUCTIONS

                     ``Subpart 1--Acid Rain Program

``SEC. 411. DEFINITIONS.

    ``For purposes of this subpart:
            ``(1) The term `actual 1985 emission rate', for electric 
        utility units means the annual sulfur dioxide or nitrogen 
        oxides emission rate in pounds per million Btu as reported in 
        the NAPAP Emissions Inventory, Version, 2 National Utility 
        reference File. For nonutility units, the term `actual 1985 
        emission rate' means the annual sulfur dioxide or nitrogen 
        oxides emission rate in pounds per million Btu as reported in 
        the NAPAP Emission Inventory, Version 2.
            ``(2) The term `allowable 1985 emissions rate' means a 
        federally enforceable emissions limitation for sulfur dioxide 
        or oxides of nitrogen, applicable to the unit in 1985 or the 
        limitation applicable in such other subsequent year as 
        determined by the Administrator if such a limitation for 1985 
        does not exist. Where the emissions limitation for a unit is 
        not expressed in pounds of emissions per million Btu, or the 
        averaging period of that emissions limitation is not expressed 
        on an annual basis, the Administrator shall calculate the 
        annual equivalent of that emissions
            ``(3) The term `alternative method of compliance' means a 
        method of compliance in accordance with one or more of the 
        following authorities--
                    ``(A) a substitution plan submitted and approved in 
                accordance with subsections 413(b) and (c); or
                    ``(B) a Phase I extension plan approved by the 
                Administrator under section 413(d), using qualifying 
                phase I technology as determined by the Administrator 
                in accordance with that section.
            ``(4) The term `baseline' means the annual quantity of 
        fossil fuel consumed by an affected unit, measured in millions 
        of British Thermal Units (`mmBtu's'), calculated as follows:
                    ``(A) For each utility unit that was in commercial 
                operation prior to January 1, 1985, the baseline shall 
                be the annual average quantity of mmBtu's consumed in 
                fuel during calendar years 1985, 1986, and 1987, as 
                recorded by the Department of Energy pursuant to Form 
                767. For any utility unit for which such form was not 
                filed, the baseline shall be the level specified for 
                such unit in the 1985 National Acid Precipitation 
                Assessment Program (NAPAP) Emissions Inventory, Version 
                2, National Utility Reference File (NURF) or in a 
                corrected data base as established by the Administrator 
                pursuant to paragraph (3). For non-utility units, the 
                baseline in the NAPAP Emissions Inventory, Version 2. 
                The Administrator, in the Administrator's sole 
                discretion, may exclude periods during which a unit is 
                shutdown for a continuous period of four calendar 
                months or longer, and make appropriate adjustments 
                under this paragraph. Upon petition of the owner or 
                operator of any unit, the Administrator may 
make appropriate baseline adjustments for accidents that caused 
prolonged outages.
                    ``(B) For any other nonutility unit that is not 
                included in the NAPAP Emissions Inventory, Version 2, 
                or a corrected data base as established by the 
                Administrator pursuant to paragraph (3), the baseline 
                shall be the annual average quantity, in mmBtu consumed 
                in fuel by that unit, as calculated pursuant to a 
                method which the Administrator shall prescribe by 
                regulation to be promulgated not later than eighteen 
                months after November 15, 1990.
                    ``(C) The Administrator shall, upon application or 
                on his own motion, by December 31, 1991, supplement 
                data needed in support of this subpart and correct any 
                factual errors in data from which affected Phase II 
                units' baselines or actual 1985 emission rates have 
                been calculated. Corrected data shall be used for 
                purposes of issuing allowances under this subpart. Such 
                corrections shall not be subject to judicial review, 
                nor shall the failure of the Administrator to correct 
                an alleged factual error in such reports be subject to 
                judicial review.
            ``(5) The term `basic Phase II allowance allocations' 
        means:
                    ``(A) For calendar years 2000 through 2009 
                inclusive, allocations of allowances made by the 
                Administrator pursuant to section 412 and subsections 
                (b)(1), (3), and (4); (c)(1), (2), (3), and (5); 
                (d)(1), (2), (4), and (5); (e); (f); (g) (1), (2), (3), 
                (4), and (5); (h)(1); (i) and (j) of section 414.
                    ``(B) For each calendar year beginning in 2010, 
                allocations of allowances made by the Administrator 
                pursuant to section 412 and subsections (b)(1), (3), 
                and (4); (c)(1), (2), (3), and (5); (d)(1), (2), (4) 
                and (5); (e); (f); (g)(1), (2), (3), (4), and (5); 
                (h)(1) and (3); (i) and (j) of section 414.
            ``(6) The term `capacity factor' means the ratio between 
        the actual electric output from a unit and the potential 
        electric output from that unit.
            ``(7) The term `commenced' as applied to construction of 
        any new electric utility unit means that an owner or operator 
        has undertaken a continuous program of construction or that an 
        owner or operator has entered into a contractual obligation to 
        undertake and complete, within a reasonable time, a continuous 
        program of construction.
            ``(8) The term `commenced commercial operation' means to 
        have begun to generate electricity for sale.
            ``(9) The term `construction' means fabrication, erection, 
        or installation of an affected unit.
            ``(10) The term `existing unit' means a unit (including 
        units subject to section 111) that commenced commercial 
        operation before November 15, 1990. Any unit that commenced 
        commercial operation before November 15, 1990 which is 
        modified, reconstructed, or repowered after November 15, 1990 
        shall continue to be an existing unit for the purposes of this 
        subpart. For the purposes of this subpart, existing units shall 
        not include simple combustion turbines, or units which serve a 
        generator with a nameplate capacity of 25 MWe or less.
            ``(11) The term `independent power producer' means any 
        person who owns or operates, in whole or in part, one or more 
        new independent power production facilities.
            ``(12) The term `new independent power production facility' 
        means a facility that--
                    ``(A) is used for the generation of electric 
                energy, 80 percent or more of which is sold at 
                wholesale;
                    ``(B) in nonrecourse project-financed (as such term 
                is defined by the Secretary of Energy within 3 months 
                of the date of the enactment of the Clean Air Act 
                Amendments of 1990); and
                    ``(C) is a new unit required to hold allowances 
                under this subpart.
            ``(13) The term `industrial source' means a unit that does 
        not serve a generator that produces electricity, a `non-utility 
        unit' as defined in this section, or a process source.
            ``(14) The term `life-of-the-unit, firm power contractual 
        arrangement' means a unit participation power sales agreement 
        under which a utility or industrial customer reserves, or is 
        entitled to receive, a specified amount or percentage of 
        capacity and associated energy generated by a specified 
        generating unit (or units) and pays its proportional amount of 
        such unit's total costs, pursuant to a contract either--
                    ``(A) for the life of the unit;
                    ``(B) for a cumulative term of no less than 30 
                years, including contracts that permit an election for 
                early termination; or
                    ``(C) for a period equal to or greater than 25 
                years or 70 percent of the economic useful life of the 
                unit determined as of the time the unit was built, with 
                option rights to purchase or release some portion of 
                the capacity and associated energy generated by the 
                unit (or units) at the end of the period.
            ``(15) The term `new unit' means a unit that commences 
        commercial operation on or after November 15, 1990.
            ``(16) The term `nonutility unit' means a unit other than a 
        utility unit.
            ``(17) The term `Phase II bonus allowance allocations' 
        means, for calendar year 2000 through 2009, inclusive, and only 
        for such years, allocations made by the Administrator pursuant 
        to section 412, subsections (a)(2), (b)(2), (c)(4), (d)(3) 
        (except as otherwise provided therein), and (h)(2) of section 
        414, and section 415.
            ``(18) The term `qualifying phase I technology' means a 
        technological system of continuous emission reduction which 
        achieves a 90 percent reduction in emissions of sulfur dioxide 
        from the emissions that would have resulted from the use of 
        fuels which were not subject to treatment prior to combustion.
            ``(19) The term `repowering' means replacement of an 
        existing coal-fired boiler with one of the following clean coal 
        technologies: atmospheric or pressurized fluidized bed 
        combustion, integrated gasification combined cycle, magneto-
        hydrodynamics, direct and indirect coal-fired turbines, 
        integrated gasification fuel cells, or as determined by the 
        Administrator, in consultation with the Secretary of Energy, a 
        derivative of one or more of these technologies, and any other 
        technology capable of controlling multiple combustion emissions 
        simultaneously with improved boiler or generation efficiency 
        and with significantly greater waste reduction relative to the 
        performance of technology in widespread commercial use as of 
        November 15, 1990.
            ``(20) The term `reserve' means any bank of allowances 
        established by the Administrator under this subpart.
            ``(21)(A) The term `utility unit' means--
                            ``(i) a unit that serves a generator in any 
                        State that produces electricity for sale, or
                            ``(ii) a unit that, during 1985, served a 
                        generator in any State that produced 
                        electricity for sale.
                    ``(B) Notwithstanding subparagraph (A), a unit 
                described in subparagraph (A) that--
                            ``(i) was in commercial operations during 
                        1985, but
                            ``(ii) did not during 1985, serve a 
                        generator in any State that produced 
                        electricity for sale shall not be a utility 
                        unit for purposes of this subpart.
                    ``(C) A unit that congenerates steam and 
                electricity is not a `utility unit' for purposes of 
                this subpart unless the unit is constructed for the 
                purpose of supplying, or commences construction after 
                November 15, 1990 and supplies more than one-third of 
                its potential electric output capacity of more than 25 
                megawatts electrical output to any utility power 
                distribution system for sale.

``SEC. 412. ALLOWANCE ALLOCATION.

    ``(a) Except as provided in sections 414(a)(2), 415(a)(3), and 416, 
beginning January 1, 2000, the Administrator shall not allocate annual 
missions of sulfur dioxide from utility units in excess of 8.90 million 
tons except that the Administrator shall not to take into account 
unused allowances carried forward by owners and operators of affected 
units or by other persons holding such allowances, following the year 
for which they were allocated. If necessary to meeting he restrictions 
imposed in the preceding sentence, he Administrator shall reduce, pro 
rata, the basic Phase II allowance allocations for each unit subject to 
the requirements of section 414. Subject to the provisions of section 
417, the Administrator shall allocate allowances for each affected 
until at an affected source annually, as provided in paragraphs (2) 
and(3) and section 404. Except as provided in sections 416, the removal 
of an existing affected unit or source from commercial operation at any 
time after November 15, 1990 (whether before or after January 1, 1995, 
or January 1, 2000), shall not terminate or otherwise affect the 
allocation of allowances pursuant to section 413 or 414 to which the 
unit is entitled. Prior to June 1, 1998, the Administrator shall 
publish a revised final statement of allowance allocations, subject to 
the provisions of section 414(a)(2).
    ``(b) New Utility Units.--
            ``(1) After January 1, 2000 and through December 31, 2007, 
        it shall be unlawful for a new utility unit to emit an annual 
        tonnage of sulfur dioxide in excess of the number of allowances 
        to emit held for the unit by the unit's owner or operator.
            ``(2) Starting January 1, 2008, a new utility unit shall be 
        subject to the prohibition in subsection (c)(3).
            ``(3) New utility units shall not be eligible for an 
        allocation of sulfur dioxide allowances under subsection 
        (a)(1), unless the unit is subject to the provisions of 
        subsection (g)(2) or (3) of section 414. New utility units may 
        obtain allowances from any person, in accordance with this 
        title. The owner or operator of any new utility unit in 
        violation of subsection (b)(1) or subsection(c)(3) shall be 
        liable for fulfilling the obligations specified in section 406.
    ``(c) Prohibitions.--
            ``(1) It shall be unlawful for any person to hold, use, or 
        transfer any allowance allocated under this subpart, except in 
        accordance with regulations promulgated by the Administrator.
            ``(2) For any year 1995 through 2007, it shall be unlawful 
        for any affected unit to emit sulfur dioxide in excess of the 
        number of allowances held for that unit for that year by the 
        owner or operator of the unit.
            ``(3) Starting January 1, 2008, it shall be unlawful for 
        the affected units at a source to emit a total amount of sulfur 
        dioxide during the year in excess of the number of allowances 
        held for the source for that year by the owner or operator of 
        the source.
            ``(4) Upon the allocation of allowances under this subpart, 
        the prohibition in paragraphs (2) and (3) shall supersede any 
        other emission limitation applicable under this subpart to the 
        units for which such allowances are allocated.
    ``(d) In order to insure electric reliability, regulations 
establishing a system for issuing, recording, and tracking allowances 
under section 403(b) and this subpart shall not prohibit or affect 
temporary increases and decreases in emissions within utility systems, 
power pools, or utilities entering into allowance pool agreements, that 
result from their operations, including emergencies and central 
dispatch, and such temporary emissions increases and decreases shall 
not require transfer of allowances among units nor shall it require 
recordation. The owners or operators of such units shall act through a 
designated representative. Notwithstanding the preceding sentence, the 
total tonnage of emissions in any calendar year (calculated at the end 
thereof) from all units in such a utility system, power pool, or 
allowance pool agreements shall not exceed the total allowances for 
such units for the calendar year concerned, including for calendar 
years after 2007, allowances held for such units by the owner or 
operator of the sources where the units are located.
    ``(e) Where there are multiple holders of a legal or equitable 
title to, or a leasehold interest in, an affected unit, or where a 
utility or industrial customer purchases power from an affected unit 
(or units) under life-of-the-unit, firm power contractual arrangements, 
the certificate of representation required under section 404(f) shall 
state--
            ``(1) that allowances under this subpart and the proceeds 
        of transactions involving such allowances will be deemed to be 
        held or distributed in proportion to each holder's legal, 
        equitable, leasehold, or contractual reservation or 
        entitlement, or
            ``(2) if such multiple holders have expressly provided for 
        a different distribution of allowances by contract, that 
        allowances under this subpart and the proceeds of transactions 
        involving such allowances will be deemed to be held or 
        distributed in accordance with the contract.
A passive lessor, or a person who has an equitable interest through 
such lessor, whose rental payments are not based, either directly or 
indirectly, upon the revenues or income from the affected unit shall 
not be deemed to be a holder of a legal, equitable, leasehold, or 
contractual interest for the purpose of holding or distributing 
allowances as provided in this subsection, during either the term of 
such leasehold or thereafter, unless expressly provided for in the 
leasehold agreement. Except as otherwise provided in this subsection, 
where all legal or equitable title to or interest in an affected unit 
is held by a single person, the certification shall state that all 
allowances under this subpart received by the unit are deemed to be 
held for that person.

``SEC. 413. PHASE I SULFUR DIOXIDE REQUIREMENTS.

    ``(a) Emission Limitations.--
            ``(1) After January 1, 1995, each source that includes one 
        or more affected units listed in table A is an affected source 
        under this section. After January 1, 1995, it shall be unlawful 
        for any affected unit (other than an eligible phase I unit 
        under section 413(d)(2)) to emit sulfur dioxide in excess of 
        the tonnage limitation stated as a total number of allowances 
        in table A for phase I, unless--
                    ``(A) the emissions reduction requirements 
                applicable to such unit have been achieved pursuant to 
                subsection (b) or (d), or
                    ``(B) the owner or operator of such unit holds 
                allowances to emit not less than the unit's total 
                annual emissions, except that, after January 1, 2000, 
                the emissions limitations established in this section 
                shall be superseded by those established in section 
                414. The owner or operator of any unit in violation of 
                this section be fully liable for such violation 
                including, but not limited to, liability for fulfilling 
                the obligations specified in section 406.
            ``(2) Not later than December 31, 1991, the Administrator 
        shall determine the total tonnage of reductions in the 
        emissions of sulfur dioxide from all utility units in calendar 
        year 1995 that will occur as a result of compliance with the 
        emissions limitation requirements of this section, and shall 
        establish a reserve of allowances equal in amount to the number 
        of tons determined thereby not to exceed a total of 3.50 
        million tons. In making such a determination, the Administrator 
        shall compute for each unit subject to the emissions limitation 
        requirements of this section the difference between--
                    ``(A) the product of its baseline multiplied by the 
                lesser of each unit's allowable 1985 emissions rate and 
                its actual 1985 emissions rate, divided by 2,000, and
                    ``(B) the product of each unit's baseline 
                multiplied by 2.50 lbs/mmBtu divided by 2,000, and sum 
                the computations. The Administrator shall adjust the 
                foregoing calculation to reflect projected calendar 
                year 1995 utilization of the units subject to the 
                emissions limitations of this subpart that the 
                Administrator finds would have occurred in the absence 
                of the imposition of such requirements. Pursuant to 
                subsection (d), the Administrator shall allocate 
                allowances from the reserve established hereinunder 
                until the earlier of such time as all such allowances 
                in the reserve are allocated or December 31, 1999.
            ``(3) In addition to allowances allocated pursuant to 
        paragraph (1), in each calendar year beginning in 1995 and 
        ending in 1999, inclusive, the Administrator shall allocate for 
        each unit on Table A that is located in the States of Illinois, 
        Indiana, or Ohio (other than units at Kyger Creek, Clifty Creek 
        and Joppa Steam), allowances in an amount equal to 200,000 
        multiplied by the unit's pro rata share of the total number of 
        allowances allocated for all units on Table A in the 3 States 
        (other than units at Kyger Creek, Clifty Creek, and Joppa 
        Steam) pursuant to paragraph (1). Such allowances shall be 
        excluded from the calculation of the reserve under paragraph 
        (2).
        ``(b) Substitutions.--The owner or operator of an affected unit 
under subsection (a) may include in its section 404 permit application 
and proposed compliance plan a proposal to reassign, in whole or in 
part, the affected unit's sulfur dioxide reduction requirements to any 
other unit(s) under the control of such owner or operator. Such 
proposal shall specify--
            ``(1) the designation of the substitute unit or units to 
        which any part of the reduction obligations of subsection (a) 
        shall be required, in addition to, or in lieu of, any original 
        affected units designated under such subsection;
            ``(2) the original affected unit's baseline, the actual and 
        allowable 1985 emissions rate for sulfur dioxide, and the 
        authorized annual allowance allocation stated in table A;
            ``(3) calculation of the annual average tonnage for 
        calendar years 1985, 1986, and 1987, emitted by the substitute 
        unit or units, based on the baseline for each unit, as defined 
        in section 411(4), multiplied by the lesser of the unit's 
        actual or allowable 1985 emissions rate;
            ``(4) the emissions rates and tonnage limitations that 
        would be applicable to the original and substitute affected 
        units under the substitution proposal;
            ``(5) documentation, to the satisfaction of the 
        Administrator, that the reassigned tonnage limits will, in 
        total, achieve the same or greater emissions reduction than 
        would have been achieved by the original affected unit and the 
        substitute unit or units without such substitution; and
            ``(6) such other information as the Administrator may 
        require.
    ``(c) Administrator's Action on Substitution Proposals.--
            ``(1) The Administrator shall take final action on such 
        substitution proposal in accordance with section 404(c) if the 
        substitution proposal fulfills the requirements of this 
        subsection. The Administrator may approve a substitution 
        proposal in whole or in part and with such modifications or 
        conditions as may be consistent with the orderly functioning of 
        the allowance system and which will ensure the emissions 
        reductions contemplated by this title. If a proposal does not 
        meet the requirements of subsection (b), the Administrator 
        shall disapprove it. The owner or operator of a unit listed in 
        table A shall not substitute another unit or units without the 
        prior approval of the Administrator.
            ``(2) Upon approval of a substitution proposal, each 
        substitute unit, and each source with such unit, shall be 
        deemed affected under this title, and the Administrator shall 
        issue a permit to the original and substitute affected source 
        and unit in accordance with the approved substitution plan and 
        section 404. The Administrator shall allocate allowances for 
        the original and substitute affected units in accordance with 
        the approved substitution proposal pursuant to section 412. It 
        shall be unlawful for any source or unit that is allocated 
        allowances pursuant to this section to emit sulfur dioxide in 
        excess of the emissions limitation provided for in the approved 
        substitution permit and plan unless the owner or operator of 
        each unit governed by the permit and approved substitution plan 
        holds allowances to emit not less than the unit's total annual 
        emissions. The owner or operator of any original or substitute 
        affected unit operated in violation of this subsection shall be 
        fully liable for such violation, including liability for 
        fulfilling the obligations specified in section 406. If a 
        substitution proposal is disapproved, the Administrator shall 
        allocate allowances to the original affected unit or units in 
        accordance with subsection (a).
    ``(d) Eligible Phase I Extension Units.--
            ``(1) The owner or operator of any affected unit subject to 
        an emissions limitation requirement under this section may 
        petition the Administrator in its permit application under 
        section 404 for an extension of 2 years of the deadline for 
        meeting such requirement, provided that the owner or operator 
        of any such unit holds allowances to emit not less than the 
        unit's total annual emissions for each of the 2 years of the 
        period of extension. To qualify for such an extension, the 
        affected unit must either employ a qualifying phase I 
        technology, or transfer its phase I emissions reduction 
        obligation to a unit employing a qualifying phase I technology. 
        Such transfer shall be accomplished in accordance with a 
        compliance plan, submitted and approved under section 404, that 
        shall govern operations at all units included in the transfer, 
        and that specifies the emissions reduction requirements imposed 
        pursuant to this title.
            ``(2) Such extension proposal shall--
                    ``(A) specify the unit or units proposed for 
                designation as an eligible phase I extension unit;
                    ``(B) provide a copy of an executed contract, which 
                may be contingent upon the Administrator approving the 
                proposal, for the design engineering, and construction 
                of the qualifying phase I technology for the extension 
                unit, or for the unit or units to which the extension 
unit's emission reduction obligation is to be transferred;
                    ``(C) specify the unit's or units' baseline, actual 
                1985 emissions rate, allowable 1985 emissions rate, and 
                projected utilization for calendar years 1995 through 
                1999;
                    ``(D) require CEMS on both the eligible phase I 
                extension unit or units and the transfer unit or units 
                beginning no later than January 1, 1995; and
                    ``(E) specify the emission limitation and number of 
                allowances expected to be necessary for annual 
                operation after the qualifying phase I technology has 
                been installed.
            ``(3) The Administrator shall review and take final action 
        on each extension proposal in order of receipt, consistent with 
        section 404, and for an approved proposal shall designate the 
        unit or units as an eligible phase I extension unit. The 
        Administrator may approve an extension proposal in whole or in 
        part, and with such modifications or conditions as may be 
        necessary, consistent with the orderly functioning of the 
        allowance system, and to ensure the emissions reductions 
        contemplated by the subpart.
            ``(4) In order to determine the number of proposals 
        eligible for allocations from the reserve under subsection 
        (a)(2) and the number of the allowances remaining available 
        after each proposal is acted upon, the Administrator shall 
        reduce the total number of allowances remaining available in 
        the reserve by the number of allowances calculated according to 
        subparagraph (A), (B) and (C) until either no allowances remain 
        available in the reserve for further allocation or all approved 
        proposals have been acted upon. If no allowances remain 
        available in the reserve for further allocation before all 
        proposals have been acted upon by the Administrator, any 
        pending proposals shall be disapproved. The Administrator shall 
        calculate allowances equal to--
                    ``(A) the difference between the lesser of the 
                average annual emissions in calendar years 1988 and 
                1989 or the projected emissions tonnage for calendar 
                year 1995 of each eligible phase I extension unit, as 
                designated under paragraph (3), and the product of the 
                unit's baseline miltipled by an emission rate of 2.50 
                lbs/mmBtu, divided by 2,000;
                    ``(B) the difference between the lesser of the 
                average annual emissions in calendar years 1988 and 
                1989 or the projected emissions tonnage for calendar 
                year 1996 of each eligible phase I extension unit, as 
                designated under paragraph (3), and the product of the 
                unit's baseline multiplied by an emission rate of 2.50 
                lbs/mmBtu, divided by 2,000; and
                    ``(C) the amount by which (i) the product of each 
                unit's baseline multiplied by an emission rate of 1.20 
                lbs/mmBtu, divided by 2,000, exceeds (ii) the tonnage 
                level specified under subparagraph (E) of paragraph (2) 
                of this subsection multiplied by a factor of 3.
            ``(5) Each eligible Phase I extension unit shall receive 
        allowances determined under subsection (a)(1) or (c) of this 
        section. In addition, for calendar year 1995, the Administrator 
        shall allocate to each eligible Phase I extension unit, from 
        the allowance reserve created pursuant to subsection (a)(2), 
        allowances equal to the difference between the lesser of the 
        average annual emissions in calendar years 1988 and 1989 or its 
        projected emission tonnage for calendar year 1995 and the 
        product of the unit's baseline multiplied by an emission rate 
        of 2.50 lbs/mmBtu, divided by 2,000. In calendar year 1996, the 
        Administrator shall allocate for each eligible unit, from the 
        allowance reserve created pursuant to subsection (a)(2), 
        allowances equal to the difference between the lesser of the 
        average annual emissions in calendar years 1988 and 1989 or its 
        projected emissions tonnage for calendar year 1996 and the 
        product of the unit's baseline multiplied by an emission rate 
        of 2.50 lbs/mmBtu, divided by 2,000. It shall be unlawful for 
        any source or unit subject to an approved extension plan under 
        this subsection to emit sulfur dioxide in excess of the 
        emissions limitations provided for in the permit and approved 
        extension plan, unless the owner or operator of each unit 
        governed by the permit and approved plan holds allowances to 
        emit not less than the unit's total annual emissions.
            ``(6) In addition to allowances specified in paragraph (4), 
        the Administrator shall allocate for each eligible Phase I 
        extension unit employing qualifying Phase I technology, for 
        calendar years 1997, 1998, and 1999, additional allowances, 
        from any remaining allowances in the reserve created pursuant 
        to subsection (a)(2), following the reduction in the reserve 
        provided for in paragraph (4), not to exceed the amount by 
        which (A) the product of each eligible unit's baseline times an 
        emission rate of 1.20 lbs/mmBtu, divided by 2,000 exceeds (B) 
        the tonnage level specified under subparagraph (E) of paragraph 
        (2) of this subsection.
            ``(7) After January 1, 1997, in addition to any liability 
        under this Act, including under section 406, if any eligible 
        phase I extension unit employing qualifying phase I technology 
        or any transfer unit under this subsection emits sulfur dioxide 
        in excess of the annual tonnage limitation specified in the 
        extension plan, as approved in paragraph (2) of this 
        subsection, the Administrator shall, in the calendar year 
        following such excess, deduct allowances equal to the amount of 
        such excess from such unit's annual allowance allocation.
    ``(e)(1) In the case of a unit that receives authorization from the 
Governor of the State in which such unit is located to make reductions 
in the emissions of sulfur dioxide prior to calendar year 1995 and that 
is part of a utility system that meets the following requirements--
            ``(A) the total coal-fired generation within the utility 
        system as a percentage of total system generation decreased by 
        more than 20 percent between January 1, 1980, and December 31, 
        1985; and
            ``(B) the weighted capacity factor of all coal-fired units 
        within the utility system averaged over the period from January 
        1, 1985, through December 31, 1987, was below 50 percent, the 
        Administrator shall allocate allowances under this paragraph 
        for the unit pursuant to this subsection. The Administrator 
        shall allocate allowances for a unit that is an affected unit 
        pursuant to section 414 (but is not also an affected unit under 
        this section) and part of a utility system that includes 1 or 
        more affected units under section 414 for reductions in the 
        emissions of sulfur dioxide made during the period 1995-1999 if 
        the unit meets the requirements of this subsection and the 
        requirements of the preceding sentence, except that for the 
        purposes of applying this subsection to any such unit, the 
        prior year concerned as specified below, shall be any year 
        after January 1, 1995 but prior to January 1, 2000.
    ``(2) In the case of an affected unit under this section described 
in subparagraph (A), the allowances allocated under this subsection for 
early reductions in any prior year may not exceed the amount which (A) 
the product of the unit's baseline multiplied by the unit's 1985 actual 
sulfur dioxide emission rate (in lbs. per mmBtu), divided by 2,000 
exceeds (B) the allowances specified for such unit in Table A. In the 
case of an affected unit under section 414 described in subparagraph 
(A), the allowances awarded under this subsection for early reductions 
in any prior year may not exceed the amount by which (i) the product of 
the quality of fossil fuel consumed by the unit (in mmBtu) in the prior 
year multiplied by the lesser of 2.50 or the most stringent emission 
rate (in lbs. per mmBtu) applicable to the unit under the applicable 
implementation plan, divided by 2,000 exceeds (ii) the unit's actual 
tonnage of sulfur dioxide emission for the prior year concerned. 
Allowances allocated under this subsection for units referred to in 
subparagraph (A) may be allocated only for emission reductions achieved 
as a result of physical changes or changes in the method of operation 
made after November 15, 1990, including changes in the type or quality 
of fossil fuel consumed.
    ``(3) In no event shall the provisions of this paragraph be 
interpreted as an event of force majeure or a commercial impractibility 
or in any other way as a basis for excused nonperformance by a utility 
system under a coal sales contract in effect before November 15, 1990.

          ``TABLE A.--AFFECTED SOURCES AND UNITS IN PHASE I AND THEIR SULFUR DIOXIDE ALLOWANCES (TONS)
----------------------------------------------------------------------------------------------------------------
                                                                                                       Phase I
                     State                                    Plant name                 Generator    allowances
----------------------------------------------------------------------------------------------------------------
Alabama.......................................  Colbert...............................            1       13,570
                                                                                                  2       15,310
                                                                                                  3       15,400
                                                                                                  4       15,410
                                                                                                  5       37,180
                                                E.C. Gaston...........................            1       18,100
                                                                                                  2       18,540
                                                                                                  3       18,310
                                                                                                  4       19,280
                                                                                                  5       59,840
Florida.......................................  Big Bend..............................            1       28,410
                                                                                                  2       27,100
                                                                                                  3       26,740
                                                Crist.................................            6       19,200
                                                                                                  7       31,680
Georgia.......................................  Bowen.................................            1       56,320
                                                                                                  2       54,770
                                                                                                  3       71,750
                                                                                                  4       71,740
                                                Hammond...............................            1        8,780
                                                                                                  2        9,220
                                                                                                  3        8,910
                                                                                                  4       37,640
                                                J. McDonough..........................            1       19,910
                                                                                                  2       20,600
                                                Wansley...............................            1       70,770
                                                                                                  2       65,430
                                                Yates.................................            1        7,210
                                                                                                  2        7,040
                                                                                                  3        6,950
                                                                                                  4        8,910
                                                                                                  5        9,410
                                                                                                  6       24,760
                                                                                                  7       21,480
Illinois......................................  Baldwin...............................            1       42,010
                                                                                                  2       44,420
                                                                                                  3       42,550
                                                Coffeen...............................            1       11,790
                                                                                                  2       35,670
                                                Grand Tower...........................            4        5,910
                                                Hennepin..............................            2       18,410
                                                Joppa Steam...........................            1       12,590
                                                                                                  2       10,770
                                                                                                  3       12,270
                                                                                                  4       11,360
                                                                                                  5       11,420
                                                                                                  6       10,620
                                                Kincaid...............................            1       31,530
                                                                                                  2       33,810
                                                Meredosia.............................            3       13,890
                                                Vermilion.............................            2        8,880
Indiana.......................................  Bailly................................            7       11,180
                                                                                                  8       15,630
                                                Breed.................................            1       18,500
                                                Cayuga................................            1       33,370
                                                                                                  2       34,130
                                                Clifty Creek..........................            1       20,150
                                                                                                  2       19,810
                                                                                                  3       20,410
                                                                                                  4       20,080
                                                                                                  5       19,360
                                                                                                  6       20,380
                                                E. W. Stout...........................            5        3,880
                                                                                                  6        4,770
                                                                                                  7       23,610
                                                F. B. Culley..........................            2        4,290
                                                                                                  3       16,970
                                                F. E. Ratts...........................            1        8,330
                                                                                                  2        8,480
                                                Gibson................................            1       40,400
                                                                                                  2       41,010
                                                                                                  3       41,080
                                                                                                  4       40,320
                                                H.T. Pritchard........................            6        5,770
                                                Michigan City.........................           12       23,310
                                                Petersburg............................            1       16,430
                                                                                                  2       32,380
                                                R. Gallagher..........................            1        6,490
                                                                                                  2        7,280
                                                                                                  3        6,530
                                                                                                  4        7,650
                                                Tanners Creek.........................            4       24,820
                                                Wabash River..........................            1        4,000
                                                                                                  2        2,860
                                                                                                  3        3,750
                                                                                                  5        3,670
                                                                                                  6       12,280
                                                Warrick...............................            4       26,980
Iowa..........................................  Burlington............................            1       10,710
                                                Des Moines............................            7        2,320
                                                George Neal...........................            1        1,290
                                                M.L. Kapp.............................            2       13,800
                                                Prairie Creek.........................            4        8,180
                                                Riverside.............................            5        3,990
Kansas........................................  Quindaro..............................            2        4,220
Kentucky......................................  Coleman...............................            1       11,250
                                                                                                  2       12,840
                                                                                                  3       12,340
                                                Cooper................................            1        7,450
                                                                                                  2       15,320
                                                E.W. Brown............................            1        7,110
                                                                                                  2       10,910
                                                                                                  3       26,100
                                                Elmer Smith...........................            1        6,520
                                                                                                  2       14,410
                                                Ghent.................................            1       28,410
                                                Green River...........................            4        7,820
                                                H.L. Spurlock.........................            1       22,780
                                                Henderson II..........................            1       13,340
                                                                                                  2       12,310
                                                Paradise..............................            3       59,170
                                                Shawnee...............................           10       10,170
Maryland......................................  Chalk Point...........................            1       21,910
                                                                                                  2       24,330
                                                C.P. Crane............................            1       10,330
                                                                                                  2        9,230
                                                Morgantown............................            1       35,260
                                                                                                  2       38,480
Michigan......................................  J.H. Campbell.........................            1       19,280
                                                                                                  2       23,060
Minnesota.....................................  High Bridge...........................            6        4,270
Mississippi...................................  Jack Watson...........................            4       17,910
                                                                                                  5       36,700
Missouri......................................  Asbury................................            1       16,190
                                                James River...........................            5        4,850
                                                Labadie...............................            1       40,110
                                                                                                  2       37,710
                                                                                                  3       40,310
                                                                                                  4       35,940
                                                Montrose..............................            1        7,390
                                                                                                  2        8,200
                                                                                                  3       10,090
                                                New Madrid............................            1       28,240
                                                                                                  2       32,480
                                                Sibley................................            3       15,580
                                                Sioux.................................            1       22,570
                                                                                                  2       23,690
                                                Thomas Hill...........................            1       10,250
                                                                                                  2       19,390
New Hampshire.................................  Merrimack.............................            1       10,190
                                                                                                  2       22,000
New Jersey....................................  B.L. England..........................            1        9,060
                                                                                                  2       11,720
New York......................................  Dunkirk...............................            3       12,600
                                                                                                  4       14,060
                                                Greenidge.............................            4        7,540
                                                Milliken..............................            1       11,170
                                                                                                  2       12,410
                                                Northport.............................            1       19,810
                                                                                                  2       24,110
                                                                                                  3       26,480
                                                Port Jefferson........................            3       10,470
                                                                                                  4       12,330
Ohio..........................................  Ashtabula.............................            5       16,740
                                                Avon Lake.............................            8       11,650
                                                                                                  9       30,480
                                                Cardinal..............................            1       34,270
                                                                                                  2       38,320
                                                Conesville............................            1        4,210
                                                                                                  2        4,890
                                                                                                  3        5,500
                                                                                                  4       48,770
                                                Eastlake..............................            1        7,800
                                                                                                  2        8,640
                                                                                                  3       10,020
                                                                                                  4       14,510
                                                                                                  5       34,070
                                                Edgewater.............................            4        5.050
                                                Gen. J.M. Gavin.......................            1       79,080
                                                                                                  2       80,560
                                                Kyger Creek...........................            1       19,280
                                                                                                  2       18,560
                                                                                                  3       17,910
                                                                                                  4       18,710
                                                                                                  5       18,740
                                                Miami Fort............................            5          760
                                                                                                  6       11,380
                                                                                                  7       38,510
                                                Muskingum River.......................            1       14,880
                                                                                                  2       14,170
                                                                                                  3       13,950
                                                                                                  4       11,780
                                                                                                  5       40,470
                                                Niles.................................            1        6,940
                                                                                                  2        9,100
                                                Picway................................            5        4,930
                                                R.E. Burger...........................            3        6,150
                                                                                                  4       10,780
                                                                                                  5       12,430
                                                W.H. Sammis...........................            5       24,170
                                                                                                  6       39,930
                                                                                                  7       43,220
                                                W.C. Beckjord.........................            5        8,950
                                                                                                  6       23,020
Pennsylvania..................................  Armstrong.............................            1       14,410
                                                                                                  2       15,430
                                                Brunner Island........................            1       27,760
                                                                                                  2       31,100
                                                                                                  3       53,820
                                                Cheswick..............................            1       39,170
                                                Conemaugh.............................            1       59,790
                                                                                                  2       66,450
                                                Hatfield's Ferry......................            1       37,830
                                                                                                  2       37,320
                                                                                                  3       40,270
                                                Martins Creek.........................            1       12,660
                                                                                                  2       12,820
                                                Portland..............................            1        5,940
                                                                                                  2       10,230
                                                Shawville.............................            1       10,320
                                                                                                  2       10,320
                                                                                                  3       14,220
                                                                                                  4       14,070
                                                Sunbury...............................            3        8,760
                                                                                                  4       11,450
Tennessee.....................................  Allen.................................            1       15,320
                                                                                                  2       16,770
                                                                                                  3       15,670
                                                Cumberland............................            1       86,700
                                                                                                  2       94,840
                                                Gallatin..............................            1       17,870
                                                                                                  2       17,310
                                                                                                  3       20,020
                                                                                                  4       21,260
                                                Johnsonville..........................            1        7,790
                                                                                                  2        8,040
                                                                                                  3        8,410
                                                                                                  4        7,990
                                                                                                  5        8,240
                                                                                                  6        7,890
                                                                                                  7        8,980
                                                                                                  8        8,700
                                                                                                  9        7,080
                                                                                                 10        7,550
West Virginia.................................  Albright..............................            3       12,000
                                                Fort Martin...........................            1       41,590
                                                                                                  2       41,200
                                                Harrison..............................            1       48,620
                                                                                                  2       46,150
                                                                                                  3       41,500
                                                Kammer................................            1       18,740
                                                                                                  2       19,460
                                                                                                  3       17,390
                                                Mitchell..............................            1       43,980
                                                                                                  2       45,510
                                                Mount Storm...........................            1       43,720
                                                                                                  2       35,580
                                                                                                  3       42,430
Wisconsin.....................................  Edgewater.............................            4       24,750
                                                La Crosse/Genoa.......................            3       22,700
                                                Nelson Dewey..........................            1        6,010
                                                                                                  2        6,680
                                                N. Oak Creek..........................            1        5,220
                                                                                                  2        5,140
                                                                                                  3        5,370
                                                                                                  4        6,320
                                                Pulliam...............................            8        7,510
                                                S. Oak Creek..........................            5        9.670
                                                                                                  6       12,040
                                                                                                  7       16,180
                                                                                                  8       15,790
----------------------------------------------------------------------------------------------------------------

    ``(f) Energy Conservation and Renewable Energy.--
            ``(1) Definitions.--As used in this subsection:
                    ``(A) Qualified energy conservation measure.--The 
                term `qualified energy conservation measure' means a 
                cost effective measure, as identified by the 
                Administrator in consultation with the Secretary of 
                Energy, that increases the efficiency of the use of 
                electricity provided by an electric utility to its 
                customers.
                    ``(B) Qualified renewable energy.--The term 
                `qualified renewable energy' means energy derived from 
                biomass, solar, geothermal, or wind as identified by 
                the Administrator in consultation with the Secretary of 
                Energy.
                    ``(C) Electric utility.--The term `electric 
                utility' means any person, State agency, or Federal 
                agency, which sells electric energy.
            ``(2) Allowances for emissions avoided through energy 
        conservation and renewable energy.--
                    ``(A) In general.--The regulations under paragraph 
                (4) of this subsection shall provide that for each ton 
                of sulfur dioxide emissions avoided by an electric 
                utility, during the applicable period, through the use 
                of qualified energy conservation measures or qualified 
                renewable energy, the Administrator shall allocate a 
                single allowance to such electric utility, on a first-
                come-first-served basis from the Conservation and 
                Renewable Energy Reserve established under subsection 
(g), up to a total of 300,000 allowances for allocation from such 
Reserve.
                    ``(B) Requirements for issuance.--The Administrator 
                shall allocate allowances to an electric utility under 
                this subsection only if all of the following 
                requirements are met:
                            ``(i) Such electric utility is paying for 
                        the qualified energy conservation measures or 
                        qualified renewable energy directly or through 
                        purchase from another person.
                            ``(ii) The emissions of sulfur dioxide 
                        avoided through the use of qualified energy 
                        conservation measures or qualified renewable 
                        energy are quantified in accordance with 
                        regulations promulgated by the Administrator 
                        under this subsection.
                            ``(iii)(I) Such electric utility has 
                        adopted and is implementing a least cost energy 
                        conservation and electric power plan which 
                        evaluates a range of resources, including new 
                        power supplies, energy conservation, and 
                        renewable energy resources, in order to meet 
                        expected future demand at the lowest system 
                        cost.
                            ``(II) The qualified energy conservation 
                        measures or qualified renewable energy, or 
                        both, are consistent with that plan.
                            ``(III) Electric utilities subject to the 
                        jurisdiction of a State regulatory authority 
                        must have such plan approved by such authority. 
                        For electric utilities not subject to the 
                        jurisdiction of a State regulatory authority 
                        such plan shall be approved by the entity with 
                        rate-making authority for such utility.
                            ``(iv) In the case of qualified energy 
                        conservation measures undertaken by a State 
                        regulated electric utility, the Secretary of 
                        Energy certifies that the State regulatory 
                        authority with jurisdiction over the electric 
                        rates of such electric utility has established 
                        rates and charges which ensure that the net 
                        income of such electric utility after 
                        implementation of specific cost effective 
                        energy conservation measures is at least as 
                        high as such net income would have been if the 
                        energy conservation measures had not been 
                        implemented. Upon the date of any such 
                        certification by the Secretary of Energy, all 
                        allowances which, but for this paragraph, would 
                        have been allocated under subparagraph (B) 
                        before such date, shall be allocated to the 
                        electric utility. This clause is not a 
                        requirement for qualified renewable energy.
                            ``(v) Such utility or any subsidiary of the 
                        utility's holding company owns or operates at 
                        least one affected unit.
                    ``(C) Period of applicability.--Allowances under 
                this subsection shall be allocated only with respect to 
                kilowatt hours of electric energy saved by qualified 
                energy conservation measures or generated by qualified 
                renewable energy after January 1, 1992, and before the 
                earlier of (i) December 31, 2000, or (ii) the date on 
                which any electric utility steam generating unit owned 
                or operated by the electric utility to which the 
                allowances are allocated becomes subject to this 
                subpart (including those sources that elect to become 
                affected by this title, pursuant to section 417).
                    ``(D) Determination of avoided emissions.--
                            ``(i) Application.--In order to receive 
                        allowances under this subsection, an electric 
                        utility shall make an application which--
                                    ``(I) designates the qualified 
                                energy conservation measures 
                                implemented and the qualified renewable 
                                energy sources used for purposes of 
                                avoiding emissions;
                                    ``(II) calculates, in accordance 
                                with subparagraphs (F) and (G), the 
                                number of tons of emissions avoided by 
                                reason of the implementation of such 
                                measures or the use of such renewable 
                                energy sources; and
                                    ``(III) demonstrates that the 
                                requirements of subparagraph (B) have 
                                been met. Such application for 
                                allowances by a State-regulated 
                                electric utility shall require approval 
                                by the State regulatory authority with 
                                jurisdiction over such electric 
                                utility. The authority shall review the 
                                application for accuracy and compliance 
                                with this subsection and the rules 
                                under this subsection. Electric 
                                utilities whose retail rates are not 
                                subject to the jurisdiction of a State 
                                regulatory authority shall apply 
                                directly to the Administrator for such 
                                approval.
                    ``(E) Avoided emissions from qualified energy 
                conservation measures.--For the purposes of this 
                subsection, the emission tonnage deemed avoided by 
                reason of the implementation of qualified energy 
                conservation measures for any calendar year shall be a 
                tonnage equal to the product of multiplying--
                            ``(i) the kilowatt hours that would 
                        otherwise have been supplied by the utility 
                        during such year in the absence of such 
                        qualified energy conservation measures, by
                            ``(ii) 0.004, and dividing by 2,000.
                    ``(F) Avoided emissions from the use of qualified 
                renewable energy.--The emissions tonnage deemed avoided 
                by reason of the use of qualified renewable energy by 
                an electric utility for any calendar year shall be a 
                tonnage equal to the product of multiplying--(i) the 
                actual kilowatt hours generated by, or purchased from, 
                qualified renewable energy, by (ii) 0.004, and dividing 
                by 2,000.
                    ``(G) Prohibitions.--
                            ``(i) No allowances shall be allocated 
                        under this subsection for the implementation of 
                        programs that are exclusively informational or 
                        educational in nature.
                            ``(ii) No allowances shall be allocated for 
                        energy conservation measures or renewable 
                        energy that were operational before January 1, 
                        1992.
                    ``(3) Savings provision.--Nothing in this 
                subsection precludes a State or State regulatory 
                authority from providing additional incentives to 
                utilities to encourage investment in demand-side 
                resources.
                    ``(4) Regulations.--The Administrator shall 
                implement this subsection under 40 CFR part 73 (2001), 
                amended as appropriate by the Administrator. Such 
                regulations shall list energy conservation measures and 
renewable energy sources which may be treated as qualified energy 
conservation measures and qualified renewable energy for purposes of 
this subsection. Allowances shall only be allocated if all requirements 
of this subsection and the rules promulgated to implement this 
subsection are complied with. The Administrator shall review the 
determinations of each State regulatory authority under this subsection 
to encourage consistency from electric utility and from State to State 
in accordance with the Administrator's rules. The Administrator shall 
publish the findings of this review no less than annually.
    ``(g) Conservation and Renewable Energy Reserve.--The Administrator 
shall establish a Conservation and Renewable Energy Reserve under this 
subsection. Beginning on January 1, 1995, the Administrator may 
allocate from the Conservation and Renewable Energy Reserve an amount 
equal to a total of 300,000 allowances for emissions of sulfur dioxide 
pursuant to section 411. In order to provide 300,000 allowances for 
such reserve, in each year beginning in calendar year 2000 and until 
calendar year 2009, inclusive, the Administrator shall reduce each 
unit's basic Phase II allowance allocation on the basis of its pro rata 
share of 30,000 allowances. Nothwithstanding the prior sentence, if 
allowances remain in the reserve one year after the date of enactment 
of the Clear Skies Act of 2002, the Administrator shall allocate such 
allowances for affected units under section 414 on a pro rata basis. 
For purposes of this subsection, for any unit subject to the emissions 
limitation requirements of section 414, the term `pro rata basis' 
refers to the ratio which the reductions made in such unit's allowances 
in order to establish the reserve under this subsection bears to the 
total of such reductions for all such units.
    ``(h) Alternative Allowance Allocation for Units in Certain Utility 
Systems With Optional Baseline.--
            ``(1) Optional baseline for units in certain systems.--In 
        the case of a unit subject to the emissions limitation 
        requirements of this section which (as of November 15, 1990)--
                    ``(A) has an emission rate below 1.0 lbs/mmBtu,
                    ``(B) has decreased its sulfur dioxide emissions 
                rate by 60 percent or greater since 1980, and
                    ``(C) is part of a utility system which has a 
                weighted average sulfur dioxide emissions rate for all 
                fossil fueled-fired units below 1.0 lbs/mmBtu, at the 
                election to the owner or operator of such unit, the 
                unit's baseline may be calculated
                            ``(i) as provided under section 411, or
                            ``(ii) by utilizing the unit's average 
                        annual fuel consumption at a 60 percent 
                        capacity factor. Such election shall be made no 
                        later than March 1, 1991.
            ``(2) Allowance allocation.--Whenever a unit referred to in 
        paragraph (1) elects to calculate its baseline as provided in 
        clause (ii) of paragraph (1), the Administrator shall allocate 
        allowances for the unit pursuant to section 412(a), this 
        section, and section 414 (as Basic Phase II allowance 
        allocations) in an amount equal to the baseline selected 
        multiplied by the lower of the average annual emission rate for 
        such unit in 1989, or 1.0 lbs./mmBtu. Such allowance allocation 
        shall be in lieu of any allocation of allowances under this 
        section and section 414.

``SEC. 414. PHASE II SULFUR DIOXIDE REQUIREMENTS.

    ``(a) Applicability.--
            ``(1) After January 1, 2000, each existing utility unit as 
        provided below is subject to the limitations or requirements of 
        this section. Each utility unit subject to an annual sulfur 
        dioxide tonnage emission limitation under this section is an 
        affected unit under this subpart. Each source that includes one 
        or more affected units is an affected source. In the case of an 
        existing unit that was not in operation during calendar year 
        1985, the emission rate for a calendar year after 1985, as 
        determined by the Administrator, shall be used in lieu of the 
        1985 rate. The owner or operator of any unit operated in 
        violation of this section shall be fully liable under this Act 
        for fulfilling the obligations specified in section 406.
            ``(2) In addition to basic Phase II allowance allocations, 
        in each year beginning in calendar year 2000 and ending in 
        calendar year 2009, inclusive, the Administrator shall allocate 
        up to 530,000 Phase II bonus allowances pursuant to subsections 
        (b)(2),(c)(4), (d)(3)(A) and (B), and (h)(2) of this section 
        and section 415.
            ``(3) In addition to basic Phase II allowances allocations 
        and Phase II bonus allowance allocations, beginning January 1, 
        2000, the Administrator shall allocate for each unit listed on 
        Table A in section 413 (other than units at Kyger Creek, Clifty 
        Creek, and Joppa Stream) and located in the States of Illinois, 
        Indiana, Ohio, Georgia, Alabama, Missouri, Pennsylvania, West 
        Virginia, Kentucky , or Tennessee allowances in an amount equal 
        to 50,000 multiplied by the unit's pro rata share of the total 
        number of basic allowances allocated for all units listed on 
        Table A (other than units at Kyger Creek, Clifty Creek, and 
        Joppa Stream). Allowances allocated pursuant to this paragraph 
        shall not be subject to the 8,900,000 ton limitation in section 
        412(a).
    ``(b) Units Equal to, or Above, 75 MWe and 1.20 lbs/mmBtu.--
            ``(1) Except as otherwise provided in paragraph (3), after 
        January 1, 2000, it shall be unlawful for any existing utility 
        unit that serves a generator with nameplate capacity equal to, 
        or greater, than 75 MWe and an actual 1985 emission rate equal 
        to or greater than 1.20 lbs/mmBtu to exceed an annual sulfur 
        dioxide tonnage emission limitation equal to the product of the 
        unit's baseline multiplied by an emission rate equal to 1.20 
        lbs/mmBtu, divided by 2,000, unless the owner or operator of 
        such unit holds allowances to emit not less than the unit's 
        total annual emissions or, for a year after 2007, unless the 
        owner or operator of the source that includes such unit holds 
        allowances to emit not less than the total annual emissions of 
        all affected units at the source.
            ``(2) In addition to allowances allocated pursuant to 
        paragraph (1) and section 412(a) as basic Phase II allowance 
        allocations, beginning January 1, 2000, and for each calendar 
        year thereafter until and including 2009, the Administrator 
        shall allocate annually for each unit subject to the emissions 
        limitation requirements of paragraph (1) with an actual 1985 
        emissions rate greater than 1.20 lbs/mmBtu and less than 2.50 
        lbs/mmBtu and a baseline capacity factor of less than 60 
        percent, allowances from the reserve created pursuant to 
        subsection (a)(2) in an amount equal to 1.20 lbs/mmBtu 
        multiplied by 50 percent of the difference, on a Btu basis, 
        between the unit's baseline and the unit's fuel consumption at 
        a 60 percent capacity factor.
            ``(3) After January 1, 2000, it shall be unlawful for any 
        existing utility unit with an actual 1985 emissions rate equal 
        to or greater than 1.20 lbs/mmBtu whose annual average fuel 
        consumption during 1985, 1986, and 1987 on a Btu basis exceeded 
        90 percent in the form of lignite coal which is located in a 
        State in which, as of July 1, 1989, no county or portion of a 
        county was designated nonattainment under section 107 of this 
        Act for any pollutant subject to the requirements of section 
        109 of this Act to exceed an annual sulfur dioxide tonnage 
        limitation equal to the product of the unit's baseline 
        multiplied by the lesser of the unit's actual 1985 emissions 
        rate or its allowable 1985 emissions rate, divided by 2,000, 
unless the owner or operator of such unit holds allowances to emit not 
less than the unit's total annual emissions or, for a year after 2007, 
unless the owner or operator of the source that includes such unit 
holds allowances to emit not less than the total annual emissions of 
all affected units at the source.
            ``(4) After January 1, 2000, the Administrator shall 
        allocate annually for each unit, subject to the emissions 
        limitation requirements of paragraph (1), which is located in a 
        State with an installed electrical generating capacity of more 
        than 30,000,000 kw in 1988 and for which was issued a 
        prohibition order or a proposed prohibition order (from burning 
        oil), which unit subsequently converted to coal between January 
        1, 1980 and December 31, 1985, allowances equal to the 
        difference between (A) the product of the unit's annual fuel 
        consumption, on a Btu basis, at a 65 percent capacity factor 
        multiplied by the lesser of its actual or allowable emissions 
        rate during the first full calendar year after conversion, 
        divided by 2,000, and (B) the number of allowances allocated 
        for the unit pursuant to paragraph (1): Provided, That the 
        number of allowances allocated pursuant to this paragraph shall 
        not exceed an annual total of five thousand. If necessary to 
        meeting the restriction imposed in the preceding sentence the 
        Administrator shall reduce, pro rata, the annual allowances 
        allocated for each unit under this paragraph.
    ``(c) Coal or Oil-Fired Units Below 75 MWe and Above 1.20 lbs/
mmBtu.--
            ``(1) Except as otherwise provided in paragraph (3), after 
        January 1, 2000, it shall be unlawful for a coal or oil-fired 
        existing utility unit that serves a generator with nameplate 
        capacity of less than 75 MWe and an actual 1985 emission rate 
        equal to, or greater than, 1.20 lbs/mmBtu and which is a unit 
        owned by a utility operating company whose aggregate nameplate 
        fossil fuel steam-electric capacity is, as of December 31, 
        1989, equal to, or greater than, 250 MWe to exceed an annual 
        sulfur dioxide emissions limitation equal to the product of the 
        unit's baseline multiplied by an emission rate equal to 1.20 
        lbs/mmBtu, divided by 2,000 unless the owner or operator of 
        such unit holds allowances to emit not less than the unit's 
        total annual emissions or, for a year after 2007, unless the 
        owner or operator of the source that includes such unit holds 
        allowances to emit not less than the total annual emissions of 
        all affected units at the source.
            ``(2) After January 1, 2000, it shall be unlawful for a 
        coal or oil-fired existing utility unit that serves a generator 
        with nameplate capacity of less than 75 MWe and an actual 1985 
        emission rate equal to, or greater than, 1.20 lbs/mmBtu 
        (excluding units subject to section 111 of the Act or to a 
        federally enforceable emissions limitation for sulfur dioxide 
        equivalent to an annual rate of less than 1.20 lbs/mmBtu) and 
        which is a unit owned by a utility operating company whose 
        aggregate nameplate fossil fuel steam-electric capacity is, as 
        of December 31, 1989, less than 250 MWe, to exceed an annual 
        sulfur dioxide tonnage emissions limitation equal to the 
        product of the unit's baseline multiplied by the lesser of its 
        actual 1985 emissions rate or its allowable 1985 emissions 
        rate, divided by 2,000, unless the owner or operator of such 
        unit holds allowances to emit not less than the unit's total 
        annual emissions or, for a year after 2007, unless the owner or 
        operator of the source that includes such unit holds allowances 
        to emit not less than the total annual emissions of all 
        affected units at the source.
            ``(3) After January 1, 2000 it shall be unlawful for any 
        existing utility unit with a nameplate capacity below 75 MWe 
        and an actual 1985 emissions rate equal to, or greater than, 
        1.20 lbs/mmBtu which became operational on or before December 
        31, 1965, which is owned by a utility operating company with, 
        as of December 31, 1989, a total fossil fuel steam-electric 
        generating capacity greater than 250 MWe, and less than 450 MWe 
        which serves fewer than 78,000 electrical customers as of 
        November 15, 1990, to exceed an annual sulfur dioxide emissions 
        tonnage limitation equal to the product of its baseline 
multiplied by the lesser of its actual or allowable 1985 emission rate, 
divided by 2,000, unless the owner or operator holds allowances to emit 
not less than the units total annual emissions or, for a year after 
2007, unless the owner or operator of the source that includes such 
unit holds allowances to emit not less than the total annual emissions 
of all affected units at the source. After January 1, 2010, it shall be 
unlawful for each unit subject to the emissions limitation requirements 
of this paragraph to exceed an annual emissions tonnage limitation 
equal to the product of its baseline multiplied by an emissions rate of 
1.20 lbs/mmBtu, divided by 2,000, unless the owner or operator holds 
allowances to emit not less than the unit's total annual emissions or, 
for a year after 2007, unless the owner or operator of the source that 
includes such unit holds allowances to emit not less than the total 
annual emissions of all affected units at the source.
            ``(4) In addition to allowances allocated pursuant to 
        paragraph (1) and section 412(a) as basic Phase II allowance 
        allocations, beginning January 1, 2000, and for each calendar 
        year thereafter until and including 2009, inclusive, the 
        Administrator shall allocate annually for each unit subject to 
        the emissions limitation requirements of paragraph (1) with an 
        actual 1985 emissions rate equal to, or greater than, 1.20 lbs/
        mmBtu and less than 2.50 lbs/mmBtu and a baseline capacity 
        factor of less than 60 percent, allowances from the reserve 
        created pursuant to subsection (a)(2) in an amount equal to 
        1.20 lbs/mmBtu multiplied by 50 percent of the difference, on a 
        Btu basis, between the unit's baseline and the unit's fuel 
        consumption at a 60 percent capacity factor.
            ``(5) After January 1, 2000, is shall be unlawful for any 
        existing unit with a nameplate capacity below 75 MWe and an 
        actual 1985 emissions rate equal to, or greater than, 1.20lbs/
        mmBtu which is part of an electric utility system which, as of 
        November 15, 1990--
                    ``(A) has at least 20 percent of its fossil-fuel 
                capacity controlled by flue gas desulfurization 
                devices,
                    ``(B) has more than 10 percent of its fossil-fuel 
                capacity consisting of coal-fired unites of less than 
                75 MWe, and
                    ``(C) has large units (greater than 400 MWe) all of 
                which have difficult or very difficult FGD Retrofit 
                Cost Factors (according to the Emissions and the FGD 
                Retrofit Feasibility at the 200 Top Emitting Generating 
                Stations, prepared for the United States Environmental 
                Protection Agency on January 10, 1986) to exceed an 
                annual sulfur dioxide emissions tonnage limitation 
                equal to the product of its baseline multiplied by an 
                emissions rate of 2.5 lbs/mmBtu, divided by 2,000, 
                unless the owner or operator holds allowances to emit 
                not less than the unit's total annual emissions or, for 
                a year after 2007, unless the owner or operator of the 
                source that includes such unit holds allowances to emit 
                not less than the total annual emissions of all 
                affected units at the source. After January 1, 2010, it 
                shall be unlawful for each unit subject to the 
                emissions limitation requirements of this paragraph to 
                exceed an annual emissions tonnage limitation equal to 
                the project of its baseline multiplied by an emissions 
                rate of 1.20lbs/mmBtu, divided by 2,000, unless the 
                owner or operator holds for use allowances to emit not 
                less than the unit's total annual emissions or, for a 
                year after 2007, unless the owner or operator of the 
                source that includes such unit holds allowances to emit 
                not less than the total annual emissions of all 
                affected units at the source.
    ``(d) Coal-Fired Units Below 1.20 lbs/mmBtu.--
            ``(1) After January 1, 2000, it shall be unlawful for any 
        existing coal-fired utility unit the lesser of whose actual or 
        allowable 1985 sulfur dioxide emissions rate is less than 0.60 
        lbs/mmBtu to exceed an annual sulfur dioxide tonnage emission 
        limitation equal to the product of the unit's baseline 
        multiplied by--
                    ``(A) the lesser of 0.60 lbs/mmBtu or the unit's 
                allowable 1985 emissions rate, and
                    ``(B) a numerical factor of 120 percent, divided by 
                2,000, unless the owner or operator of such unit holds 
                allowances to emit not less than the unit's total 
                annual emissions or, for a year after 2007, unless the 
                owner or operator of the source that includes such unit 
                holds allowances to emit not less than the total annual 
                emissions of all affected units at the source.
            ``(2) After January 1, 2000, it shall be unlawful for any 
        existing coal-fired utility unit the lesser of whose actual or 
        allowable 1985 sulfur dioxide emissions rate is equal to, or 
        greater than, 0.60 lbs/mmBtu and less than 1.20 lbs/mmBtu to 
        exceed an annual sulfur dioxide tonnage emissions limitation 
        equal to the product of the unit's baseline multiplied by (A) 
        the lesser of its actual 1985 emissions rate or its allowable 
        1985 emissions rate, and (B) a numerical factor of 120 percent, 
        divided by 2,000, unless the owner or operator of such unit 
        holds allowances to emit not less than the unit's total annual 
        emissions or, for a year after 2007, unless the owner or 
        operator of the source that includes such unit holds allowances 
        to emit not less than the total annual emissions of all 
        affected units at the source.
            ``(3)(A) In addition to allowances allocated pursuant to 
        paragraph (1) and section 412(a) as basic Phase II allowance 
        allocations, at the election of the designated representative 
        of the operating company, beginning January 1, 2000, and for 
        each calendar year thereafter until and including 2009, the 
        Administrator shall allocate annually for each unit subject to 
        the emissions limitation requirements of paragraph (1) 
        allowances from the reserve created pursuant to subsection 
        (a)(2) in an amount equal to the amount by which--
                    ``(i) the product of the lesser of 0.60 lbs.mmBtu 
                or the unit's allowable 1985 emissions rate multiplied 
                by the unit's baseline adjusted to reflect operation at 
                a 60 percent capacity factor, divided by 2,000, exceeds
                    ``(ii) the number of allowances allocated for the 
                unit pursuant to paragraph (1) and section 403(a)(1) as 
                basic Phase II allowance allocations.
            ``(B) In addition to allowances allocated pursuant to 
        paragraph (2) and section 412(a) as basic Phase II allowance 
        allocations, at the election of the designated representative 
        of the operating company, beginning January 1, 2000, and for 
        each calendar year thereafter until and including 2009, the 
        Administrator shall allocate annually for each unit subject to 
        the emissions limitation requirements of paragraph (2) 
        allowances from the reserve created pursuant to subsection 
        (a)(2) in an amount equal to the amount by which--
                    ``(i) the product of the lesser of the unit's 
                actual 1985 emissions rate or its allowable 1985 
                emissions rate multiplied by the unit's baseline 
                adjusted to reflect operation at a 60 percent capacity 
                factor, divided by 2,000, exceeds
                    ``(ii) the number of allowances allocated for the 
                unit pursuant to paragraph (2) and section 412(a) as 
                basic Phase II allowance allocations.
            ``(C) An operating company with units subject to the 
        emissions limitation requirements of this subsection may elect 
        the allocation of allowances as provided under subparagraphs 
        (A) and (B). Such election shall apply to the annual allowance 
        allocation for each and every unit in the operating company 
        subject to the emissions limitation requirements of this 
        subsection. The Administrator shall allocate allowances 
        pursuant to subparagraphs (A) and (B) only in accordance with 
        this subparagraph.
            ``(4) Notwithstanding any other provision of this section, 
        at the election of the owner or operator, after January 1, 
        2000, the Administrator shall allocate in lieu of allocation, 
        pursuant to paragraph (1), (2), (3), (5), or (6), allowances 
        for a unit subject to the emissions limitation requirements of 
        this subsection which commenced commercial operation on or 
        after January 1, 1981 and before December 31, 1985, which was 
        subject to, and in compliance with, section 111 of the Act in 
        an amount equal to the unit's annual fuel consumption, on a Btu 
        basis, at a 65 percent capacity factor multiplied by the unit's 
        allowable 1985 emissions rate, divided by 2,000.
            ``(5) For the purposes of this section, in the case of an 
        oil- and gas-fired unit which has been awarded a clean coal 
        technology demonstration grant as of January 1, 1991, by the 
        United States Department of Energy, beginning January 1, 2002, 
        the Administrator shall allocate for the unit allowances in an 
        amount equal to the unit's baseline multiplied by 1.20 lbs/
        mmBtu, divided by 2,000.
    ``(e) Oil and Gas-Fired Units Equal to or Greater Than 0.60 lbs/
mmBtu and Less Than 1.20 lbs/mmBtu.--After January 1, 2000, it shall be 
unlawful for any existing oil and gas-fired utility unit the lesser of 
whose actual or allowable 1985 sulfur dioxide emission rate is equal 
to, or greater than, 0.60 lbs/mmBtu, but less than 1.20 lbs/mmBtu to 
exceed an annual sulfur dioxide tonnage limitation equal to the product 
of the unit's baseline multiplied by (A) the lesser of the unit's 
allowable 1985 emissions rate or its actual 1985 emissions rate and (B) 
a numerical factor of 120 percent divided by 2,000, unless the owner or 
operator of such unit holds allowances to emit not less than the unit's 
total annual emissions or, for a year after 2007, unless the owner or 
operator of the source that includes such unit holds allowances to emit 
not less than the total annual emissions of all affected units at the 
source.
    ``(f) Oil and Gas-Fired Units Less Than 0.60 lbs/mmBtu.--
            ``(1) After January 1, 2000, it shall be unlawful for any 
        oil and gas-fired existing utility unit the lesser of whose 
        actual or allowance 1985 emission rate is less than 0.60 lbs/
        mmBtu and whose average annual fuel consumption during the 
        period 1980 through 1989 on a Btu basis was 90 percent or less 
        in the form of natural gas to exceed an annual sulfur dioxide 
        tonnage emissions limitation equal to the product of the unit's 
        baseline multiplied by--
                    ``(A) the lesser of 0.60 lbs/mmBtu or the unit's 
                allowance 1985 emissions, and
                    ``(B) a numerical factor of 120 percent, divided by 
                2,000, unless the owner or operator of such unit holds 
                allowances to emit not less than the unit's total 
                annual emissions or, for a year after 2007,
        unless the owner or operator of the source that includes such 
        unit holds allowances to emit not less than the total annual 
        emissions of all affected units at the source.
            ``(2) In addition to allowances allocated pursuant to 
        paragraph (1) as basic Phase II allowance allocations and 
        section 412(a), beginning January 1, 2000, the Administrator 
        shall, in the case of any unit operated by a utility that 
        furnishes electricity, electric energy, steam, and natural gas 
        within an area consisting of a city and 1 contiguous county, 
        and in the case of any unit owned by a State authority, the 
        output of which unit is furnished within that same area 
        consisting of a city and 1 contiguous county, the Administrator 
        shall allocate for each unit in the utility its pro rata share 
        of 7,000 allowances and for each unit in the State authority 
        its pro rata share of 2,000 allowances.
    ``(g) Units That Commence Operation Between 1986 and December 31, 
1995.--
            ``(1) After January 1, 2000, it shall be unlawful for any 
        utility unit that has commenced commercial operation on or 
        after January 1, 1986, but not later than September 30, 1990 to 
        exceed an annual tonnage emission limitation equal to the 
        product of the unit's annual fuel consumption, on a Btu basis, 
        at a 65 percent capacity factor multiplied by the unit's 
        allowance 1985 sulfur dioxide emission rate (converted, if 
        necessary, to pounds per mmBtu), divided by 2,000 unless the 
        owner or operator of such unit holds allowances to emit not 
        less than the unit's total annual emissions or, for a year 
        after 2007, unless the owner or operator of the source that 
        includes such unit holds allowances to emit not less than the 
        total annual emissions of all affected units at the source.
            ``(2) After January 1, 2000, the Administrator shall 
        allocate allowances pursuant to section 411 to each unit which 
        is listed in table B of this paragraph in an annual amount 
        equal to the amount specified in table B.

                               ``TABLE B

Unit                                                         Allowances
        Brandon Shores.........................................   8,907
        Miller 4...............................................   9,197
        TNP One 2..............................................   4,000
        Zimmer 1...............................................  18,458
        Spruce 1...............................................   7,647
        Clover 1...............................................   2,796
        Clover 2...............................................   2,796
        Twin Oak 2.............................................   1,760
        Twin Oak 1.............................................   9,158
        Cross 1................................................   6,401
        Malakoff 1.............................................   1,759
        Notwithstanding any other paragraph of this subsection, for 
        units subject to this paragraph, the Administrator shall not 
        allocate allowances pursuant to any other paragraph of this 
        subsection, provided that the owner or operator of a unit 
        listed on Table B may elect an allocation of allowances under 
        another paragraph of this subsection in lieu of an allocation 
        under this paragraph.
            ``(3) Beginning January 1, 2000, the Administrator shall 
        allocate to the owner or operator of any utility unit that 
        commences commercial operation, or has commenced commercial 
        operation, on or after October 1, 1990, but not later than 
        December 31, 1992 allowances in an amount equal to the product 
        of the unit's annual fuel consumption, on a Btu basis, at a 65 
        percent capacity factor multiplied by the lesser of 0.30 lbs/
        mmBtu or the unit's allowable sulfur dioxide emission rate 
        (converted, if necessary, to pounds per mmBtu), divided by 
        2,000.
            ``(4) Beginning January 1, 2000, the Administrator shall 
        allocate to the owner or operator of any utility unit that has 
        commenced construction before December 31, 1990 and that 
        commences commercial operation between January 1, 1993 and 
        December 31, 1995, allowances in an amount equal to the product 
        of the unit's annual fuel consumption, on a Btu basis, at a 65 
        percent capacity factor multiplied by the lesser of 0.30 lbs/
        mmBtu or the unit's allowable sulfur dioxide emission rate 
        (converted, if necessary, to pounds per mmBtu), divided by 
        2,000.
            ``(5) After January 1, 2000, it shall be unlawful for any 
        existing utility unit that has completed conversion from 
        predominantly gas fired existing operation to coal fired 
        operation between January 1, 1985 and December 31, 1987, for 
        which there has been allocated a proposed or final prohibition 
        order pursuant to section 301(b) of the Powerplant and 
        Industrial Fuel Use Act of 1978 (42 U.S.C. 8301 et seq, 
        repealed 1987) to exceed an annual sulfur dioxide tonnage 
        emissions limitation equal to the product of the unit's annual 
        fuel consumption, on a Btu basis, at a 65 percent capacity 
        factor multiplied by the lesser of 1.20 lbs/mmBtu or the unit's 
        allowable 1987 sulfur dioxide emissions rate, divided by 2,000, 
        unless the owner or operator of such unit has obtained 
        allowances equal to its actual emissions or, for a year after 
2007, unless the owner or operator of the source that includes such 
unit holds allowances to emit not less than the total annual emissions 
of all affected units at the source.
            ``(6) Unless the Administrator has approved a designation 
        of such facility under section 417, the provisions of this 
        subpart shall not apply to a `qualifying small power production 
        facility' or `qualifying cogeneration facility' (within the 
        meaning of section 3(17)(C) or 3(18)(B) of the Federal Power 
        Act) or to a `new independent power production facility' if, as 
        of November 15, 1990--
                    ``(A) an applicable power sales agreement has been 
                executed;
                    ``(B) the facility is the subject of a State 
                regulatory authority order requiring an electric 
                utility to enter into a power sales agreement with, 
                purchase capacity from, or (for purposes of 
                establishing terms and conditions of the electric 
                utility's purchase of power) enter into arbitration 
                concerning, the facility;
                    ``(C) an electric utility has issued a letter of 
                intent or similar instrument committing to purchase 
                power from the facility at a previously offered or 
                lower price and a power sales agreement is executed 
                within a reasonable period of time; or
                    ``(D) the facility has been selected as a winning 
                bidder in a utility competitive bid solicitation.
    ``(h) Oil and Gas-Fired Units Less Than 10 Percent Oil Consumed.--
            ``(1) After January 1, 2000, it shall be unlawful for any 
        oil- and gas-fired utility unit whose average annual fuel 
        consumption during the period 1980 through 1989 on a Btu basis 
        exceeded 90 percent in the form of natural gas to exceed an 
        annual sulfur dioxide tonnage limitation equal to the product 
        of the unit's baseline multiplied by the unit's actual 1985 
        emissions rate divided by 2,000 unless the owner or operator of 
        such unit holds allowances to emit not less than the unit's 
        total annual emissions or, for a year after 2007, unless the 
        owner or operator of the source that includes such unit holds 
        allowances to emit not less than the total annual emissions of 
        all affected units at the source.
            ``(2) In addition to allowances allocated pursuant to 
        paragraph (1) and section 412(a) as basic Phase II allowance 
        allocations, beginning January 1, 2000, and for each calendar 
        year thereafter until and including 2009, the Administrator 
        shall allocate annually for each unit subject to the emissions 
        limitation requirements of paragraph (1) allowances from the 
        reserve created pursuant to subsection (a)(2) in an amount 
        equal to the unit's baseline multiplied by 0.050 lbs/mmBtu, 
        divided by 2,000.
            ``(3) In addition to allowances allocated pursuant to 
        paragraph (1) and section 412(a), beginning January 1, 2010, 
        the Administrator shall allocate annually for each unit subject 
        to the emissions limitation requirements of paragraph (1) 
        allowances in an amount equal to the unit's baseline multiplied 
        by 0.050 lbs/mmBtu, divided by 2,000.
    ``(i) Units in High Growth States.--
            ``(1) In addition to allowances allocated pursuant to this 
        section and section 412(a) as basic Phase II allowance 
        allocations, beginning January 1, 2000, the Administrator shall 
        allocate annually allowances for each unit, subject to an 
        emissions limitation requirement under this section, and 
        located in a State that--
                    ``(A) has experienced a growth in population in 
                excess of 25 percent between 1980 and 1988 according to 
                State Population and Household Estimates, With Age, 
                Sex, and Components of Change: 1981-1988 allocated by 
                the United States Department of Commerce, and
                    ``(B) had an installed electrical generating 
                capacity of more than 30,000,000 kw in 1988, in an 
                amount equal to the difference between (A) the number 
                of allowances that would be allocated for the unit 
pursuant to the emissions limitation requirements of this section 
applicable to the unit adjusted to reflect the unit's annual average 
fuel consumption on a Btu basis of any three consecutive calendar years 
between 1980 and 1989 (inclusive) as elected by the owner or operator 
and (B) the number of allowances allocated for the unit pursuant to the 
emissions limitation requirements of this section: Provided, That the 
number of allowances allocated pursuant to this subsection shall not 
exceed an annual total of 40,000. If necessary to meeting the 40,000 
allowance restriction imposed under this subsection the Administrator 
shall reduce, pro rata, the additional annual allowances allocated to 
each unit under this subsection.
            ``(2) Beginning January 1, 2000, in addition to allowances 
        allocated pursuant to this section and section 403(a)(1) as 
        basic Phase II allowance allocations, the Administrator shall 
        allocate annually for each unit subject to the emissions 
        limitation requirements of subsection (b)(1)--
                    ``(A) the lesser of whose actual or allowable 1980 
                emissions rate has declined by 50 percent or more as of 
                November 15, 1990,
                    ``(B) whose actual emissions rate is less than 1.2 
                lbs/mmBtu as of January 1, 2000,
                    ``(C) which commenced operation after January 1, 
                1970,
                    ``(D) which is owned by a utility company whose 
                combined commercial and industrial kilowatt-hour sales 
                have increased by more than 20 percent between calendar 
                year 1980 and November 15, 1990, and
                    ``(E) whose company-wide fossil-fuel sulfur dioxide 
                emissions rate has declined 40 percent or more from 
                1980 to 1988, allowances in an amount equal to the 
                difference between--
                            ``(i) the number of allowances that would 
                        be allocated for the unit pursuant to the 
                        emissions limitation requirements of subsection 
                        (b)(1) adjusted to reflect the unit's annual 
                        average fuel consumption on a Btu basis for any 
                        three consecutive years between 1980 and 1989 
                        (inclusive) as elected by the owner or 
                        operator, and
                            ``(ii) the number of allowances allocated 
                        for the unit pursuant to the emissions 
                        limitation requirements of subsection (b)(1): 
                        Provided, That the number of allowances 
                        allocated pursuant to this paragraph shall not 
                        exceed an annual total of 5,000. If necessary 
                        to meeting the 5,000 allowance restriction 
                        imposed in the last clause of the preceding 
                        sentence the Administrator shall reduce, pro 
                        rata, the additional allowances allocated to 
                        each unit pursuant to this paragraph.
    ``(j) Certain Municipally Owned Power Plants.--Beginning January 1, 
2000, in addition to allowances allocated pursuant to this section and 
section 412(a) as basic Phase II allowance allocations, the 
Administrator shall allocate annually for each existing municipally 
owned oil and gas-fired utility unit with nameplate capacity equal to, 
or less than, 40 MWe, the lesser of whose actual or allowable 1985 
sulfur dioxide emission rate is less than 1.20 lbs/mmBtu, allowances in 
an amount equal to the product of the unit's annual fuel consumption on 
a Btu basis at a 60 percent capacity factor multiplied by the lesser of 
its allowable 1985 emission rate or its actual 1985 emission rate, 
divided by 2,000.

``SEC. 415. ALLOWANCES FOR STATES WITH EMISSIONS RATES AT OR BELOW 0.80 
              LBS/MMBTU.

    ``(a) Election of Governor.--In addition to basic Phase II 
allowance allocations, upon the election of the Governor of any State, 
with a 1985 state-wide annual sulfur dioxide emissions rate equal to or 
less than, 0.80 lbs/mmBtu, averaged over all fossil fuel-fired utility 
steam generating units, beginning January 1, 2000, and for each 
calendar year thereafter until and including 2009, the Administrator 
shall allocate, in lieu of other Phase II bonus allowance allocations, 
allowances from the reserve created pursuant to section 414(a)(2) to 
all such units in the State in an amount equal to 125,000 multiplied by 
the unit's pro rata share of electricity generated in calendar year 
1985 at fossil fuel-fired utility steam units in all States eligible 
for the election.
    ``(b) Notification of Administrator.--Pursuant to section 412(a), 
each Governor of a State eligible to make an election under paragraph 
(a) shall notify the Administrator of such election. In the event that 
the Governor of any such state fails to notify the Administrator of the 
Governor's elections, the Administrator shall allocate allowances 
pursuant to section 414.
    ``(c) Allowances After January 1, 2010.--After January 1, 2010, the 
Administrator shall allocate allowances to units subject to the 
provisions of this section pursuant to section 414.

``SEC. 416. ELECTION FOR ADDITIONAL SOURCES.

    ``(a) Applicability.--The owner or operator of any unit that is 
not, nor will become, an affected unit under section 412(b), 413, or 
414, that emits sulfur dioxide, may elect to designate that unit or 
source to become an affected unit and to receive allowances under this 
subpart. An election shall be submitted to the Administrator for 
approval, along with a permit application and proposed compliance plan 
in accordance with section 404. The Administrator shall approve a 
designation that meets the requirements of this section, and such 
designated unit shall be allocated allowances, and be an affected unit 
for purposes of this subpart.
    ``(b) Establishment of Baseline.--The baseline for a unit 
designated under this section shall be established by the Administrator 
by regulation, based on fuel consumption and operating data for the 
unit for calendar years 1985, 1986, and 1987, or if such data is not 
available, the Administrator may prescribe a baseline based on 
alternative representative data.
    ``(c) Emission Limitations.--
            ``(1) For a unit for which an election, along with a permit 
        application and compliance plan, is submitted to the 
        Administrator under paragraph (a) before January 1, 2002, 
        annual emissions limitations for sulfur dioxide shall be equal 
        to the product of the baseline multiplied by the lesser of the 
        unit's 1985 actual or allowable emission rate in lbs/mmBtu, or 
        if the unit did not operate in 1985, by the lesser of the 
        unit's actual or allowable emission rate for a calendar year 
        after 1985 (as determined by the Administrator), divided by 
        2,000.
            ``(2) For a unit for which an election, along with a permit 
        application and compliance plan, is submitted to the 
        Administrator under paragraph (a) on or after January 1, 2002, 
        annual emissions limitations for sulfur dioxide shall be equal 
        to the product of the baseline multiplied by the lesser of the 
        unit's 1985 actual or allowable emission rate in lbs/mmBtu, or, 
        if the unit did not operate in 1985, by the lesser of the 
        unit's actual or allowable emission rate for a calendar year 
        after 1985 (as determined by the Administrator), divided by 
        4,000.
    ``(d) Allowances and Permits.--The Administrator shall issue 
allowances to an affected unit under this section in an amount equal to 
the emissions limitation calculated under subsection (c), in accordance 
with section 412. Such allowance may be used in accordance with, and 
shall be subject to, the provisions of section 412. Affected sources 
under this section shall be subject to the requirements of sections 
404, 405, 406, and 412.
    ``(e) Limitation.--Any unit designated under this section shall not 
transfer or bank allowances produced as a result of reduced utilization 
or shutdown, except that, such allowances may be transferred or carried 
forward for use in subsequent years to the extent that the reduced 
utilization or shutdown results from the replacement of thermal energy 
from the unit designated under this section, with thermal energy 
generated by any other unit or units subject to the requirements of 
this subpart, and the designated unit's allowances are transferred or 
carried forward for use at such other replacement unit or units. In no 
case may the Administrator allocate to a source designated under this 
section allowances in an amount greater than the emissions resulting 
from operation of the source in full compliance with the requirements 
of this Act. No such allowances shall authorize operation of a unit in 
violation of any other requirements of this Act.
    ``(f) Implementation.--The Administrator shall implement this 
section under 40 CFR part 74 (2001), amended as appropriate by the 
Administrator.

``SEC. 417. AUCTIONS, RESERVE.

    ``(a) Special Reserve of Allowances.--For purposes of establishing 
the Special Allowance Reserve, the Administrator shall withhold--
            ``(1) 2.8 percent of the allocation of allowances for each 
        year from 1995 through 1999 inclusive; and
            ``(2) 2.8 percent of the basic Phase II allowance 
        allocation of allowances for each year beginning in the year 
        2000
which would (but for this subsection) be issued for each affected unit 
at an affected source. The Administrator shall record such withholding 
for purposes of transferring the proceeds of the allowance sales under 
this subsection. The allowances so withheld shall be deposited in the 
Reserve under this section.
    ``(b) Auction Sales.--
            ``(1) Subaccount for auctions.--The Administrator shall 
        establish an Auction Subaccount in the Special Reserve 
        established under this section. The Auction Subaccount shall 
        contain allowances to be sold at auction under this section in 
        the amount of 150,000 tons per year for each year from 1995 
        through 1999, inclusive and 250,000 tons per year for each year 
        from 2000 through 2009, inclusive.
            ``(2) Annual auctions.--Commencing in 1993 and in each year 
        thereafter until 2010, the Administrator shall conduct auctions 
        at which the allowances referred to in paragraph (1) shall be 
        offered for sale in accordance with regulations promulgated by 
        the Administrator. The allowances referred to in paragraph (1) 
        shall be offered for sale at auction in the amounts specified 
        in table C. The auction shall be open to any person. A person 
        wishing to bid for such allowances shall submit (by a date set 
        by the Administrator) to the Administrator (on a sealed bid 
        schedule provided by the Administrator) offers to purchase 
        specified numbers of allowance sat specified prices. Such 
        regulations shall specify that the auctioned allowances shall 
        be allocated and sold on the basis of bid price, starting with 
        the highest-priced bid and continuing until all allowances for 
        sale at such auction have been allocated. The regulations shall 
        not permit that a minimum price be set for the purchase of 
        withheld allowances. Allowances purchased at the auction may be 
        used for any purpose and at any time after the auction, subject 
        to the provisions of this subpart and subpart 2.

         ``TABLE C.--NUMBER OF ALLOWANCES AVAILABLE FOR AUCTION
------------------------------------------------------------------------
                                           Spot auction       Advance
              Year of sale                  (same year)       auction
------------------------------------------------------------------------
1993....................................          50,000         100,000
1994....................................          50,000         100,000
1995....................................          50,000         100,000
1996....................................         150,000         100,000
1997....................................         150,000         100,000
1998....................................         150,000         100,000
1999....................................         150,000         100,000
2000....................................         125,000         125,000
2001....................................         125,000         125,000
2002....................................         125,000         125,000
2003-2009...............................         125,000               0
------------------------------------------------------------------------

            ``(3) Proceeds.--
                    ``(A) Notwithstanding section 3302 of title 31 of 
                the United States Code or any other provision of law, 
                within 90 days of receipt, the Administrator shall 
                transfer the proceeds from the auction under this 
                section, on a pro rata basis, to the owners or 
                operators of the affected units at an affected source 
                from whom allowances were withheld under subsection 
                (b). No funds transferred from a purchaser to a seller 
                of allowances under this paragraph shall be held by any 
                officer or employee of the United States or treated for 
                any purpose as revenue to the United States or the 
                Administrator.
                    ``(B) At the end of each year, any allowances 
                offered for sale but not sold at the auction shall be 
                returned without charge, on a pro rata basis, to the 
                owner or operator of the affected units from whose 
                allocation the allowances were withheld. With 170 days 
                after the date of enactment of the Clear Skies Act of 
                2002, any allowance withheld under paragraph (a)(2) but 
                not offered for sale at an auction shall be returned 
                without charge, on a pro rata basis, to the owner or 
                operator of the affected units from whose allocation 
                the allowances were withheld.
            ``(4) Recording by epa.--The Administrator shall record and 
        publicly report the nature, prices and results of each auction 
        under this subsection, including the prices of successful bids, 
        and shall record the transfers of allowances as a result of 
        each auction in accordance with the requirements of this 
        section. The transfer of allowances at such auction shall be 
        recorded in accordance with the regulations promulgated by the 
        Administrator under this subpart.
    ``(c) Changes in Auctions and Withholding.--Pursuant to rulemaking 
after public notice and comment the Administrator may at any time after 
the year 1998 (in the case of advance auctions) and 2005 (in the case 
of spot auctions) decrease the number of allowances withheld and sold 
under this section.
    ``(d) Termination of Auctions.--The Administrator shall terminate 
the withholding of allowances and the auction sales under this section 
on December 31, 2009. Pursuant to regulations under this section, the 
Administrator may be delegation or contract provide for the conduct of 
sales or auctions under the Administrator's supervision by other 
departments or agencies of the United States Government or by 
nongovernmental agencies, groups, or organizations.
    ``(e) The Administrator shall implement this section under 40 CFR 
part 73 (2001), amended as appropriate by the Administrator.

``SEC. 418. INDUSTRIAL SO<INF>2 EMISSIONS.

    ``(a) Report.--Not later than January 1, 1995 and every 5 years 
thereafter, the Administrator shall transmit to the Congress a report 
containing an inventory of national annual sulfur dioxide emissions 
from industrial sources (as defined in section 411(11)), including 
units subject to section 414(g)(2), for all years for which data are 
available, as well as the likely trend in such emission over the 
following twenty-year period. The reports shall also contain estimates 
of the actual emission reduction in each year resulting from 
promulgation of the diesel fuel desulfurization regulations under 
section 214.
    ``(b) 5.60 Million Ton Cap.--Whenever the inventory required by 
this section indicates that sulfur dioxide emissions from industrial 
sources, including units subject to section 414(g)(2), and may 
reasonably be expected to reach levels greater than 5.60 million tons 
per year, the Administrator shall take such actions under the Act as 
may be appropriate to ensure that such emissions do not exceed 5.60 
million tons per year. Such actions may include the promulgation of new 
and revised standards of performance for new sources, including units 
subject to section 414(g)(2), under section 111(b), as well as 
promulgation of standards of performance for existing sources, 
including units subject to section 414(g)(2), under authority of this 
section. For an existing source regulated under this section, `standard 
of performance' means a standard which the Administrator determines is 
applicable to that source and which reflects the degree of emission 
reduction achievable through the application of the best system of 
continuous emission reduction which (taking into consideration the cost 
of achieving such emission reduction, and any nonair quality health and 
environmental impact and energy requirements) the Administrator 
determines has been adequately demonstrated for that category of 
sources.
    ``(c) Election.--Regulations promulgated under section 414(b) shall 
not prohibit a source from electing to become an affected unit under 
section 417.

``SEC. 419. TERMINATION.

    ``Starting January 1, 2010, the owners or operators of affected 
units and affected facilities under sections 412(b) and (c) and 416 and 
shall no longer be subject to the requirements of sections 412 through 
417.

             ``Subpart 2--Sulfur Dioxide Allowance Program

``SEC. 421. DEFINITIONS.

    ``For purposes of this subpart--
            ``(1) The term `affected EGU' means--
                    ``(A) for a unit serving a generator before the 
                date of enactment of the Clear Skies Act of 2002, a 
                unit in a State serving a generator with a nameplate 
                capacity of greater than 25 megawatts that produced or 
                produces electricity for sale during 2001 or any year 
                thereafter, except for a cogeneration unit that 
                produced or produces electricity for sale equal to less 
                than one-third of the potential electrical output of 
                the generator that it served or serves during 2001 and 
                each year thereafter; and
                    ``(B) for a unit commencing service of a generator 
                on or after the date of enactment of the Clear Skies 
                Act of 2002, a unit in a State serving a generator that 
                produces electricity for sale during any year starting 
                with the year the unit commences service of 
a generator, except for a gas-fired unit serving one or more generators 
with total nameplate capacity of 25 megawatts or less, or a 
cogeneration unit that produces electricity for sale equal to less than 
one-third of the potential electrical output of the generator that it 
serves, during each year starting with the year the unit commences 
services of a generator.
        Notwithstanding paragraphs (A) and (B), the term `affected EGU' 
        does not include a solid waste incineration unit subject to 
        section 129 or a unit for the treatment, storage, or disposal 
        of hazardous waste subject to section 3005 of the Solid Waste 
        Disposal Act.
            ``(2) The term `coal-fired' with regard to a unit means, 
        for purposes of section 424, combusting coal or any coal-
        derived fuel alone or in combination with any amount of any 
        other fuel in any year during 1997 through 2001 or, for a unit 
        that commenced operation during 2001-2004, a unit designed to 
        combust coal or any coal-derived fuel alone or in combination 
        with any other fuel.
            ``(3) The term `Eastern bituminous' means bituminous that 
        is from a mine located in a State east of the Mississippi 
        River.
            ``(4) The term `general account' means an account in the 
        Allowance Tracking System under section 403(c) established by 
        the Administrator for any person under 40 CFR Sec. 73.31(c) 
        (2001), amended as appropriate by the Administrator.
            ``(5) The term `oil-fired' with regard to a unit means, for 
        purposes of section 424, combusting fuel oil for more than ten 
        percent of the unit's total heat input, and combusting no coal 
        or coal-derived fuel, in any year during 1997 through 2001 or, 
        for a unit that commenced operation during 2001-2004, a unit 
        designed to combust oil for more than ten percent of the unit's 
        total heat input and not to combust any coal or coal-derived 
        fuel coal.
            ``(6) The term `unit account' means an account in the 
        Allowance Tracking System under section 403(c) established by 
        the Administrator for any unit under 40 CFR Sec. 73.31(a) and 
        (b) (2001), amended as appropriate by the Administrator.

``SEC. 422. APPLICABILITY.

    ``Starting January 1, 2010, it shall be unlawful for the affected 
EGUs at a facility to emit a total amount of sulfur dioxide during the 
year in excess of the number of sulfur dioxide allowances held for such 
facility for that year by the owner or operator of the facility.

``SEC. 423. LIMITATIONS ON TOTAL EMISSIONS.

    ``For affected EGUs for 2010 and each year thereafter, the 
Administrator shall allocate sulfur dioxide allowances under section 
424, and shall conduct auctions of sulfur dioxide allowances under 
section 409, in the amounts in Table A.

    ``TABLE A.--TOTAL SO<INF>2</INF> ALLOWANCES ALLOCATED OR AUCTIONED FOR EGU'S
------------------------------------------------------------------------
                                          SO<INF>2</INF> allowances  SO<INF>2</INF> allowances
                  Year                       allocated       auctioned
------------------------------------------------------------------------
2010....................................       4,371,666          45,000
2011....................................       4,326,667          90,000
2012....................................       4,281,667         135,000
2013....................................       4,320,000         180,000
2014....................................       4,275,000         225,000
2015....................................       4,230,000         270,000
2016....................................       4,185,000         315,000
2017....................................       4,140,000         360,000
2018....................................       2,730,000         270,000
2019....................................       2,700,000         300,000
2020....................................       2,670,000         330,000
2021....................................       2,640,000         360,000
2022....................................       2,610,000         390,000
2023....................................       2,580,000         420,000
2024....................................       2,550,000         450,000
2025....................................       2,520,000         480,000
2026....................................       2,490,000         510,000
2027....................................       2,460,000         540,000
2028....................................       2,430,000         570,000
2029....................................       2,400,000         600,000
2030....................................       2,325,000         675,000
2031....................................       2,250,000         750,000
2032....................................       2,175,000         825,000
2033....................................       2,100,000         900,000
2034....................................       2,025,000         975,000
2035....................................       1,950,000       1,050,000
2036....................................       1,875,000       1,125,000
2037....................................       1,800,000       1,200,000
2038....................................       1,725,000       1,275,000
2039....................................       1,650,000       1,350,000
2040....................................       1,575,000       1,425,000
2041....................................       1,500,000       1,500,000
2042....................................       1,425,000       1,575,000
2043....................................       1,350,000       1,650,000
2044....................................       1,275,000       1,725,000
2045....................................       1,200,000       1,800,000
2046....................................       1,125,000       1,875,000
2047....................................       1,050,000       1,950,000
2048....................................         975,000       2,025,000
2049....................................         900,000       2,100,000
2050....................................         825,000       2,175,000
2051....................................         750,000       2,250,000
2052....................................         675,000       2,325,000
2053....................................         600,000       2,400,000
2054....................................         525,000       2,475,000
2055....................................         450,000       2,550,000
2056....................................         375,000       2,625,000
2057....................................         300,000       2,700,000
2058....................................         225,000       2,775,000
2059....................................         150,000       2,850,000
2060....................................          75,000       2,925,000
2061....................................               0       3,000,000
------------------------------------------------------------------------

``SEC. 424. EGU ALLOCATIONS.

    ``(a) By January 1, 2007, the Administrator shall promulgate 
regulations determining allocations of sulfur dioxide allowances for 
affected EGUs for each year during 2010 through 2060. The regulations 
shall provide that:
            ``(1)(A) Ninety-five percent of the total amount of sulfur 
        dioxide allowances allocated each year to affected EGUs under 
        section 423 shall be allocated based on the sulfur dioxide 
        allowances that were allocated under subpart 1 for 2010 or 
thereafter and are held in unit accounts and general accounts in the 
Allowance Tracking System under section 403(c).
            ``(B) The Administrator shall allocate sulfur dioxide 
        allowances to each facility's account and each general account 
        in the Allowance Tracking System under section 403(c) as 
        follows:
                    ``(i) The Administrator shall determine the amount 
                of sulfur dioxide allowances allocated under subpart 1 
                for 2010, and each subsequent year, that are recorded 
                in each unit account and each general account in the 
                Allowance Tracking System as of 12:00 noon, Eastern 
                Standard time, on the date 180 days after enactment of 
                the Clear Skies Act of 2002. The Administrator shall 
                determine this amount in accordance with 40 CFR part 73 
                (2001), amended as appropriate by the Administrator, 
                except that the Administrator shall discount all sulfur 
                dioxide allowances allocated for 2011 or later at a 
                rate of 7 percent per year.
                    ``(ii) The Administrator shall determine for each 
                unit account and each general account in the Allowance 
                Tracking System an amount of sulfur dioxide allowances 
                equal to the allocation amount under subparagraph (A) 
                multiplied by the ratio of the amount of sulfur dioxide 
                allowances determined to be recorded in that account 
                under clause (i) to the total amount of sulfur dioxide 
                allowances determined to be recorded in all unit 
                accounts and general accounts in the Allowance Tracking 
                System under clause (i).
                    ``(iii) The Administrator shall allocate to each 
                facility's account in the Allowance Tracking System an 
                amount of sulfur dioxide allowances equal to the total 
                amount of sulfur dioxide allowances determined under 
                clause (ii) for the unit accounts of the units at the 
                facility and to each general account in the Allowance 
                Tracking System the amount of sulfur dioxide allowances 
                determined under clause (ii) for that general account.
            ``(2)(A) Three and one-half percent of the total amount of 
        sulfur dioxide allowances allocated each year for affected EGUs 
        under section 423 shall be allocated for units at a facility 
        that are affected EGUs as of December 31, 2004, that commenced 
        operation before January 1, 2001, and that are not allocated 
        any sulfur dioxide allowances under subpart 1.
            ``(B) The Administrator shall allocate each year for the 
        units under subparagraph (A) an amount of sulfur dioxide 
        allowances determined by:
                    ``(i) For such units at the facility that are coal-
                fired, multiplying 0.40 lb/mmBtu by the total baseline 
                heat input of such units and converting to tons.
                    ``(ii) For such units at the facility that are oil-
                fired, multiplying 0.20 lb/mmBtu by the total baseline 
                heat input of such units and converting to tons.
                    ``(iii) For all such other units at the facility 
                that are not covered by clause (i) or (ii), multiplying 
                0.05 lb/mmBtu by the total baseline heat input of such 
                units and converting to tons.
                    ``(iv) If the total of the amounts for all 
                facilities under clauses (i), (ii), and (iii) exceeds 
                the allocation amount under subparagraph (A), 
                multiplying the allocation amount under subparagraph 
                (A) by the ratio of the total of the amounts for the 
                facility under clauses (i), (ii), and (iii) to the 
                total of the amounts for all facilities under clause 
                (i), (ii), and (iii).
                    ``(v) Allocating to each facility the lesser of the 
                total of the amounts for the facility under clauses 
(i), (ii), and (iii) or, if the total of the amounts for all facilities 
under clauses (i), (ii), and (iii) exceeds the allocation amount under 
subparagraph (A), the amount under clause (iv). The Administrator shall 
add to the amount of sulfur dioxide allowances allocated under 
paragraph (3) any unallocated allowances under this paragraph.
            ``(3)(A) One and one-half percent of the total amount of 
        sulfur dioxide allowances allocated each year for affected EGUs 
        under section 423 shall be allocated for units that are 
        affected EGUs as of December 31, 2004, that commence operation 
        on or after January 1, 2001 and before January 1, 2005, and 
        that are not allocated any sulfur dioxide allowances under 
        subpart 1.
            ``(B) The Administrator shall allocate each year for the 
        units under subparagraph (A) an amount of sulfur dioxide 
        allowances determined by:
                    ``(i) For such units at the facility that are coal-
                fired or oil-fired, multiplying 0.19 lb/mmBtu by the 
                total baseline heat imput of such units and converting 
                to tons.
                    ``(ii) For all such other units at the facility 
                that are not covered by clause (i), multiplying 0.02 
                lb/mmBtu by the total baseline heat input of such units 
                and converting to tons.
                    ``(iii) If the total of the amounts for all 
                facilities under clauses (i) and (ii) exceeds the 
                allocation amount under subparagraph (A), multiplying 
                the allocation amount under subparagraph (A) by the 
                ratio of the total of the amounts for the facility 
                under clauses (i) and (ii) to the total of the amounts 
                for all facilities under clauses (i) and (ii).
                    ``(iv) Allocating to each facility the lesser of 
                the total of the amounts for the facility under clauses 
                (i) and (ii) or, if the total of the amounts for all 
                facilities under clauses (i) and (ii) exceeds the 
                allocation amount under subparagraph (A), the amount 
                under clause (iv). The Administrator shall allocate to 
                the facilities under paragraphs (1) and (2) on a pro 
                rata basis (based on the allocations under those 
                paragraphs) any unallocated allowances under this 
                paragraph.
    ``(b) For each year 2010 through 2060, if the Administrator has not 
promulgated the regulations determining allocations under paragraph (a) 
by July 1 that is eighteen months before January 1 of such year, then:
            ``(1) The Administrator shall--
                    ``(A) allocate, for such year, to each unit with 
                coal as its primary or secondary fuel or residual oil 
                as its primary fuel listed in the Administrator's 
                Emissions Scorecard 2000, Appendix B, Table B1 an 
                amount of sulfur dioxide allowances determined by 
                multiplying eighty percent of the allocation amount 
                under section 423 by the ratio of such unit's heat 
                input in the Emissions Scorecard 2000, Appendix B, 
                Table B1 to the total of the heat input in the 
                Emissions Scorecard 2000, Appendix B, Table B1 for all 
                units with coal as their primary or secondary fuel or 
                residual oil as their primary fuel;
                    ``(B) record in each facility's account in the 
                Allowance Tracking System under section 403(c) for such 
                year the total of the amounts of sulfur dioxide 
                allowances for the units at such facility determined 
                under subparagraph (A); and
                    ``(C) auction an amount of sulfur dioxide 
                allowances equal to five percent of the allocation 
                amount under section 423 and conduct the auction on the 
                first business day in October following the respective 
                promulgation deadline under subsection (b) and in 
                accordance with section 400.
            ``(2) Notwithstanding any other provision of law to the 
        contrary, the determination of the amount of sulfur dioxide 
        allowances under subparagraph (1)(A) and the recording of 
        sulfur dioxide allowances under subparagraph (1)(B) shall not 
        be subject to judicial review.
            ``(3) Notwithstanding the provisions to the contrary in 
        section 423, the Administrator shall not allocate or record 
        fifteen percent of the allocation amount under section 423 for 
        such year.

``SEC. 425. DISPOSITION OF SULFUR DIOXIDE ALLOWANCES ALLOCATED UNDER 
              SUBPART 1.

    ``(a) After allocating allowances under section 424(a)(1), the 
Administrator shall remove from the unit accounts and general accounts 
in the Allowance Tracking System under section 403(c) and from the 
Special Allowances Reserve under section 418 all sulfur dioxide 
allowances allocated or deposited under subpart 1 for 2010 or later.
    ``(b) The Administrator shall promulgate regulations as necessary 
to assure that the requirement to hold allowances under section 422 may 
be met using sulfur dioxide allowances allocated under subpart 1 for 
1995 through 2009.

``SEC. 426. INCENTIVES FOR SULFUR DIOXIDE EMISSION CONTROL TECHNOLOGY.

    ``(a) Reserve.--The Administrator shall establish a reserve of 
250,000 sulfur dioxide allowances comprising 83,334 sulfur dioxide 
allowances for 2010, 83,333 sulfur dioxide allowances for 2011, and 
83,333 sulfur dioxide allowances for 2012.
    ``(b) Application.--By July 1, 2004 an owner or operator of an 
affected EGU that commenced operation before 2001 and that during 2001 
combusted Eastern bituminous may submit an application to the 
Administrator for sulfur dioxide allowances from the reserve under 
subsection (a). The application shall include:
            ``(1) A statement that the owner or operator will install 
        and commence operation of specified sulfur dioxide control 
        technology at the unit within 24 months after approval of the 
        application under subsection (c) if the unit is allocated the 
        sulfur dioxide allowances requested under paragraph (4). The 
        owner or operator shall provide description of the control 
        technology.
            ``(2) A statement that, during the period starting with the 
        commencement of operation of sulfur dioxide technology under 
        paragraph (1) through 2009, the unit will combust Eastern 
        bituminous at a percentage of the unit's total heat input equal 
        to or exceeding the percentage of total heat input combusted by 
        the unit in 2001 if the unit is allocated the sulfur dioxide 
        allowances requested under paragraph (4).
            ``(3) A demonstration that the unit will achieve, while 
        combusting fuel in accordance with paragraph (2) and operating 
        the sulfur dioxide control technology specified in paragraph 
        (1), a specified tonnage of sulfur dioxide emission reductions 
        during the period starting with the commencement of operation 
        of sulfur dioxide technology under subparagraph (1) through 
        2009. The tonnage of emission reductions shall be the 
        difference between emissions monitored at a location at the 
        unit upstream of the control technology described in paragraph 
        (1) and emissions monitored at a location at the unit 
        downstream of such control technology, while the unit is 
        combusting fuel in accordance with paragraph (2).
            ``(4) A request that EPA allocate for the unit a specified 
        number of sulfur dioxide allowances from the reserve under 
        subsection (a) for the period starting with the commencement of 
        operation of the sulfur dioxide technology under paragraph (1) 
        through 2009.
            ``(5) A statement of the ratio of the number of sulfur 
        dioxide allowances requested under paragraph (4) to the tonnage 
        of sulfur dioxide emissions reductions under paragraph (3).
    ``(c) Approval or Disapproval.--Through adjudicative determinations 
subject to notice and opportunity for comment, the Administrator 
shall--
            ``(1) determine whether each application meets the 
        requirements of subsection (b);
            ``(2) list the applications meeting the requirements of 
        subsection (b) and their respective allowance-to-emission-
        reduction ratios under paragraph (b)(5) in order, from lowest 
        to highest, of such ratios;
            ``(3) for each application listed under paragraph (2), 
        multiply the amount of sulfur dioxide emission reductions 
        requested by each allowance-to-emission-reduction ratio on the 
        list that equals or is less than the ratio for the application;
            ``(4) sum, for each allowance-to-emission-reduction ratio 
        in the list under paragraph (2), the amounts of sulfur dioxide 
        allowances determined under paragraph (3);
            ``(5) based on the calculations in paragraph (4), determine 
        which allowance-to-emission-reduction ratio on the list under 
        paragraph (2) results in the highest total amount of allowances 
        that does not exceed 250,000 allowances; and
            ``(6) approve each application listed under paragraph (2) 
        with a ratio equal to or less than the allowance-to-emission-
        reduction ratio determined under paragraph (5) and disapprove 
        all the other applications.
    ``(d) Monitoring.--An owner or operator whose application is 
approved under subsection (c) shall install, and quality assure data 
from, a CEMS for sulfur dioxide located upstream of the sulfur dioxide 
control technology under paragraph (b)(1) at the unit and a CEMS for 
sulfur dioxide located downstream of such control technology at the 
unit during the period starting with the commencement of operation of 
such control technology through 2009. The installation of the CEMS and 
the quality assurance of data shall be in accordance with subparagraph 
(a)(2)(B) and subsections (c) through (e) of section 405, except that, 
where two or more units utilize a single stock, separate monitoring 
shall be required for each unit.
        ``(e) Allocations.--By July 1, 2010, for the units for which 
applications are approved under paragraph (c), the Administrator shall 
allocate sulfur dioxides allowances as follows:
            ``(1) For each unit, the Administrator shall multiply the 
        allowance-to-emission-reduction ratio of the last application 
        that EPA approved under subsection (c) by the lesser of--
                    ``(A) the total tonnage of sulfur dioxide emissions 
                reductions achieved by the unit, during the period 
                starting with the commencement of operation of the 
                sulfur dioxide control technology under subparagraph 
                (b)(1) through 2009, through use of such control 
                technology; or
                    ``(B) the tonnage of sulfur dioxide emission 
                reductions under paragraph (b)(3).
            ``(2) If the total amount of sulfur dioxide allowances 
        determined for all units under paragraph (1) exceeds 250,000 
        sulfur dioxide allowances, the Administrator shall multiply 
        250,000 sulfur dioxide allowances by the ratio of the amount of 
        sulfur dioxide allowances determined for each unit 
under paragraph (1) to the total amount of sulfur dioxide allowances 
determined for all units under paragraph (1).
            ``(3) The Administrator shall allocate to each unit the 
        lesser of the amount determined for that unit under paragraph 
        (1) or, if the total amount of sulfur dioxide allowances 
        determined for all units under paragraph (1) exceeds 250,000 
        sulfur dioxide allowances, under paragraph (2). The 
        Administrator shall auction any unallocated allowances from the 
        reserve under this section and conduct the auction by the first 
        business day in October 2010 and in accordance with section 
        409.

             ``Subpart 3--Western Regional Air Partnership

``SEC. 431. DEFINITIONS.

    ``For purposes of this subpart--
            ``(1) The term `adjusted baseline heat input' means the 
        average annual heat input used by a unit during the three years 
        in which the unit had the highest heat input for the period 
        from the eighth through the fourth year before the first 
        covered year.
                    ``(A) Notwithstanding paragraph (1), if a unit 
                commences operation during such period and--
                            ``(i) on or after January 1 of the fifth 
                        year before the first covered year, then 
                        `adjusted baseline heat input' shall mean the 
                        average annual heat input used by the unit 
                        during the fifth and fourth years before the 
                        first covered year; and
                            ``(ii) on or after January 1 of the fourth 
                        year before the first covered year, then 
                        `adjusted baseline heat input' shall mean the 
                        annual heat input used by the unit during the 
                        fourth year before the first covered year.
                    ``(B) A unit's heat input for a year shall be the 
                heat input--
                            ``(i) required to be reported under section 
                        405 for the unit, if the unit was required to 
                        report heat input during the year under that 
                        section;
                            ``(ii) reported to the Energy Information 
                        Administrator for the unit, if the unit was not 
                        required to report heat input under section 
                        405;
                            ``(iii) based on data for the unit reported 
                        to the State where the unit is located as 
                        required by State law, if the unit was not 
                        required to report heat input during the year 
                        under section 405 and did not report to the 
                        Energy Information Administration; or
                            ``(iv) based on fuel use and fuel heat 
                        content data for the unit from fuel purchase or 
                        use records, if the unit was not required to 
                        report heat input during the year under section 
                        405 and did not report to the Energy 
                        Information Administration and the State.
            ``(2) The term `affected EGU' means an affected EGU under 
        subpart 2 that is in a State and that--
                    ``(A) in 2000, emitted 100 tons or more of sulfur 
                dioxide and was used to produce electricity for sale; 
                or
                    ``(B) in any year after 2000, emits 100 tons or 
                more of sulfur dioxide and is used to produce 
                electricity for sale.
            ``(3) The term `coal-fired' with regard to a unit means, 
        for purposes of section 434, a unit combusting coal or any 
        coal-derived fuel alone or in combination with any amount of 
        any other fuel in any year during the period from the eighth 
        through the fourth year before the first covered year.
            ``(4) The term `covered year' means--
                    ``(A)(i) the third year after the year 2018 or 
                later when the total annual sulfur dioxide emissions of 
                all affected EGUs in the States first exceed 271,000 
                tons; or
                    ``(ii) the third year after the year 2013 or later 
                when the Administrator determines by regulation that 
                the total annual sulfur dioxide emissions of all 
                affected EGUs in the States are reasonably projected to 
                exceed 271,000 tons in 2018 or any year thereafter. The 
                Administrator may make such determination only if all 
                the States submit to the Administrator a petition 
                requesting that the Administrator issue such 
                determination and make all affected EGUs in the States 
                subject to the requirements of sections 432 through 
                434; and
                    ``(B) each year after the `covered year' under 
                subparagraph (A).
            ``(5) The term `oil-fired' with regard to a unit means, for 
        purposes of section 434, a unit combusting fuel oil for more 
        than ten percent of the unit's total heat input, and combusting 
        no coal or coal-derived fuel, an any year during the period 
        from the eight through the fourth year before the first covered 
        year.

``SEC. 432. APPLICABILITY.

    ``Starting January 1 of the first covered year, it shall be 
unlawful for the affected EGUs at a facility to emit a total amount of 
sulfur dioxide during the year in excess of the number of sulfur 
dioxide allowances held for such facility for that year by the owner or 
operator of the facility.

``SEC. 433. LIMITATIONS ON TOTAL EMISSIONS.

    ``For affected EGUs, the total amount of sulfur dioxide allowances 
that the Administrator shall allocate for each covered year under 
section 434 shall equal 271,000 tons.

``SEC. 434. EGU ALLOCATIONS.

    ``(a) By January 1 of the year before the first covered year, the 
Administrator shall promulgate regulations determining, for each 
covered year, the allocations of sulfur dioxide allowances for the 
units at a facility that are affected EGUs as of December 31 of the 
fourth year before the covered year by--
            ``(1) for such units at the facility that are coal-fired, 
        multiplying 0.40 lb/mmBtu by the total adjusted baseline heat 
        input of such units and converting to tons;
            ``(2) for such units at the facility that are oil-fired, 
        multiplying 0.20 lb/mmBtu by the total adjusted baseline heat 
        input of such units and converting to tons;
            ``(3) for all such other units at the facility that are not 
        covered by paragraph (1) or (2) multiplying 0.05 lb/mmBtu by 
        the total adjusted baseline heat input of such units and 
        converting to tons; and
            ``(4) multiplying the allocation amount under section 433 
        by the ratio of the total of the amounts for the facility under 
        paragraphs (1), (2), and (3) to the total of the amounts for 
        all facilities under paragraphs (1), (2), and (3).
    ``(b) For each covered year, if the Administrator has not 
promulgated the regulations determining allocations under paragraph (a) 
by July 1 that is eighteen months before January 1 of such year, then:
            ``(1) The Administrator shall--
                    ``(A) allocate, for such year, to each affected EGU 
                with coal as its primary or secondary fuel or residual 
                oil as its primary fuel listed in the Administrator's 
                Emissions Scorecard 2000, Appendix B, Table B1 an 
                amount of sulfur dioxide allowances determined by 
                multiplying eighty percent of the allocation amount 
                under section 433 by the ratio of such unit's heat 
                input in the Emissions Scorecard 2000, Appendix B, 
                Table B1 to the total of the heat input in the 
                Emissions Scorecard 2000, Appendix B, Table B1 for all 
                affected EGUs with coal as their primary or secondary 
                fuel or residual oil as their primary fuel;
                    ``(B) record in each facility's account in the 
                Allowance Tracking System under section 403(c) for such 
                year the sum of the amounts of sulfur dioxide 
                allowances for the units at such facility determined 
                under subparagraph (A); and
                    ``(C) auction an amount of sulfur dioxide 
                allowances equal to five percent of the allocation 
                amount under section 433 and conduct the auction on the 
                first business day in October following the respective 
                promulgation deadline under subsection (b) and in 
                accordance with section 409.
            ``(2) Notwithstanding any other provision of law to the 
        contrary, the determination of the amount of sulfur dioxide 
        allowances under subparagraph (1)(A) and the recording of 
        sulfur dioxide allowances under subparagraph (1)(B) shall not 
        be subject to judicial review.
            ``(3) Notwithstanding the provisions to the contrary in 
        section 433, the Administrator shall not allocate or record 
        fifteen percent of the allocation amount under section 433 for 
        such year.

             ``PART C--NITROGEN OXIDES EMISSION REDUCTIONS

                     ``Subpart 1--Acid Rain Program

``SEC. 441. NITROGEN OXIDES EMISSION REDUCTION PROGRAM.

    ``(a) Applicability.--On the date that a coal-fired utility unit 
becomes an affected unit pursuant to sections 413 or 414, or on the 
date a unit subject to the provisions of section 413(d), must meet the 
SO<INF>2</INF> reduction requirements, each such unit shall become an 
affected unit for purposes of this section and shall be subject to the 
emission limitations for nitrogen oxides set forth herein.
    ``(b) Emission Limitations.--
            ``(1) The Administrator shall by regulation establish 
        annual allowable emission limitations for nitrogen oxides for 
        the types of utility boilers listed below, which limitations 
        shall not exceed the rates listed below: Provided, That the 
        Administrator may set a rate higher than that listed for any 
        type of utility boiler if the Administrator finds that the 
        maximum listed rate for that boiler type cannot be achieved 
        using low NO<INF>X</INF> burner technology. The Administrator 
        shall implement this paragraph under 40 CFR Sec. 76.5 (2001). 
        The maximum allowable emission rates are as follows:
                    ``(A) for tangentially fired boilers, 0.45 lb/
                mmBtu;
                    ``(B) for dry bottom wall-fired boilers (other than 
                units applying cell burner technology), 0.50 lb/mmBtu. 
                After January 1, 1995, it shall be unlawful for any 
                unit that is an affected unit on that date and is of 
                the type listed in this paragraph to emit nitrogen 
                oxides in excess of the emission rates set by the 
                Administrator pursuant to this paragraph.
            ``(2) The Administrator shall, by regulation, establish 
        allowable emission limitations on a lb/mmBtu, annual average 
        basis, for nitrogen oxides for the following types of utility 
        boilers:
                    ``(A) wet bottom wall-fired boilers;
                    ``(B) cyclones;
                    ``(C) units applying cell burner technology;
                    ``(D) all other types of utility boilers.
        The Administrator shall base such rates on the degree of 
        reduction achievable through the retrofit application of the 
        best system of continuous emission reduction, taking into 
        account available technology, costs and energy and 
        environmental impacts; and which is comparable to the costs of 
        nitrogen oxides controls set pursuant to subsection (b)(1). The 
        Administrator may revise the applicable emission limitations 
        for tangentially fired and dry bottom, wall-fired boilers 
        (other than cell burners) to be more stringent if the 
        Administrator determines that more effective low NO<INF>X</INF> 
        burned technology is available: Provided, That no unit that is 
        an affected unit pursuant to section 413 and that is subject to 
        the requirements of subsection (b)(1), shall be subject to the 
        revised emission limitations, if any. The Administrator shall 
        implement that paragraph under 40 CFR Sec. Sec. 76.6 and 76.7 
        (2001).
    ``(c) Alternative Emission Limitations.--The permitting authority 
shall, upon request of an owner or operator of a unit subject to this 
section, authorize an emission limitation less stringent than the 
applicable limitation established under subsection (b)(1) or (b)(2) 
upon a determination that--
            ``(1) a unit subject to subsection (b)(1) cannot meet the 
        applicable limitation using low NO<INF>X</INF> burner 
        technology; or
            ``(2) a unit subject to subsection (b)(2) canot meet the 
        applicable rate using the technology on which the Administrator 
        based the applicable emission limitation.
The permitting authority shall base such determination upon a showing 
satisfactory to the permitting authority, in accordance with 
regulations established by the Administrator, that the owner or 
operator--
            ``(A) has properly installed appropriate control equipment 
        designed to meet the applicable emission rate;
            ``(B) has properly operated such equipment for a period of 
        fifteen months (or such other period of time as the 
        Administrator determines through the regulations), and provides 
        operating and monitoring data for such period demonstrating 
        that the unit cannot meet the applicable emission rate; and
            ``(C) has specified an emission rate that such unit can 
        meet on an annual average basis. The permitting authority shall 
        issue an operating permit for the unit in question, in 
        accordance with section 404 and title V--
                    ``(i) that permits the unit during the 
                demonstration period referred to in subparagraph (2) 
                above, to emit at a rate in excess of the applicable 
                emission rate;
                    ``(ii) at the conclusion of the demonstration 
                period to revise the operating permit to reflect the 
                alternative emission rate demonstrated in paragraphs 
                (2) and (3) above.
Units subject to subsection (b)(1) for which an alternative emission 
limitation is established shall not be required to install any 
additional control technology beyond low NO<INF>X</INF> burners. 
Nothing in this section shall preclude an owner or operator from 
installing and operating an alternative NO<INF>X</INF> control 
technology capable of achieving the applicable emission limitation. The 
Administrator shall implement this subsection under 40 CFR part 76 
(2001), amended as appropriate by the Administrator.
    ``(d) Emissions Averaging.--In lieu of complying with the 
applicable emission limitations under subsection (b)(1), (2), or (c), 
the owner or operator of two or more units subject to one or more of 
the applicable emission limitations set pursuant to these sections, may 
petition the permitting authority for alternative contemporaneous 
annual emission limitations for such units that ensure that (1) the 
actual annual emission rate in pounds of nitrogen oxides per million 
Btu averaged over the units in question is a rate that is less than or 
equal to (2) Btu-weighted average annual emission rate for the same 
units if they had been operated, during the same period of time, in 
compliance with limitations set in accordance with the applicable 
emission rates set pursuant to subsections (b)(1) and (2). If the 
permitting authority determines, in accordance with regulations issued 
by the Administrator that the conditions in the paragraph above can be 
met, the permitting authority shall issue operating permits for such 
units, in accordance with section 404 and title V, that allow 
alternative contemporaneous annual emission limitations. Such emission 
limitations shall only remain in effect while both units continue 
operation under the conditions specified in their respective operating 
permits. The Administrator shall implement this subsection under 40 CFR 
part 76 (2001), amended as appropriate by the Administrator.

``SEC. 442. TERMINATION.

    ``Starting January 1, 2008, owner or operator of affected units and 
affected facilities under section 441 shall no longer be subject to the 
requirements of that section.

             ``Subpart 2--Nitrogen Oxides Allowance Program

``SEC. 451. DEFINITIONS.

    ``For purposes of this subpart:
            ``(1) The term `affected EGU' means--
                    ``(A) for a unit serving a generator before the 
                date of enactment of the Clear Skies Act of 2002, a 
                unit in a State serving a generator with a nameplate 
                capacity of greater than 25 megawatts that produced or 
                produces electricity for sale during 2001 or any year 
                thereafter, except for a cogeneration unit that 
                produced or produces electricity for sale equal to less 
                than one-third of the potential electrical output of 
                the generator that it served or serves during 2001 and 
                each year thereafter; and
                    ``(B) for a unit commencing service of a generator 
                on or after the date of enactment of the Clear Skies 
                Act of 2002, a unit in a State serving a generator that 
                produces electricity for sale during any year starting 
                with the year the unit commences service of a 
                generator, except for a gas-fired unit serving one or 
                more generators with total nameplate capacity of 25 
megawatts or less, or a cogeneration unit that produces electricity for 
sale equal to less than one-third of the potential electrical output of 
the generator that it serves, during each year starting with the unit 
commences service of a generator.
                    ``(C) Notwithstanding paragraphs (A) and (B), the 
                term `affected EGU' does not include a solid waste 
                incineration unit subject to section 129 or a unit for 
                the treatment, storage, or disposal of hazardous waste 
                subject to section 3005 of the Solid Waste Disposal 
                Act.
            ``(2) The term `Zone 1 State' means Alabama, Arkansas, 
        Connecticut, Delaware, the District of Columbia, Florida, 
        Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, 
        Maine, Maryland, Massachusetts, Michigan, Minnesota, 
        Mississippi, Missouri, New Hampshire, New Jersey, New York, 
        North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, 
        South Carolina, Tennessee, Texas east of Interstate 35, 
        Vermont, Virginia, West Virginia, and Wisconsin.
            ``(3) The term `Zone 2 State' means Alaska, American Samoa, 
        Arizona, California, Colorado, the Commonwealth of Northern 
        Mariana Islands, the Commonwealth of Puerto Rico, Guam, Hawaii, 
        Idaho, Montana, Nebraska, North Dakota, New Mexico, Nevada, 
        Oregon, South Dakota, Texas west of Interstate 35, Utah, the 
        Virgin Islands, Washington, and Wyoming.

``SEC. 452. APPLICABILITY.

    ``(a)(1) Starting January 1, 2008, it shall be unlawful for the 
affected EGUs at a facility in a Zone 1 State to emit a total amount of 
nitrogen oxides during a year in excess of the number of nitrogen 
oxides allowances held for such facility for that year by the owner or 
operator of the facility.
    ``(2) Only nitrogen oxides allowances under section 453(a) shall be 
held in order to meet the requirements of paragraph (1), except as 
provided under section 465.
    ``(b)(1) Starting January 1, 2008, it shall be unlawful for the 
affected EGUs at a facility in a Zone 2 State to emit a total amount of 
nitrogen oxides during a year in excess of the number of nitrogen 
oxides allowances held for such facility for that year by the owner or 
operator of the facility.
    ``(2) Only nitrogen oxides allowances under section 453(b) shall be 
held in order to meet the requirements of paragraph (1).

``SEC. 453. LIMITATIONS ON TOTAL EMISSIONS.

    ``(a) For affected EGUs in the Zone 1 States for 2008 and each year 
thereafter, the Administrator shall allocate nitrogen oxides allowances 
under section 454(a), and conduct auctions of nitrogen oxides 
allowances under section 409, in the amounts in Table A.

``TABLE A.--TOTAL NO<INF>X</INF> ALLOWANCE ALLOCATED OR AUCTIONED FOR EGU'S IN ZONE
                                    1
------------------------------------------------------------------------
                                          NO<INF>X</INF> allowances  NO<INF>X</INF> allowances
                  Year                       allocated       auctioned
------------------------------------------------------------------------
2008....................................       1,546,380          15,620
2009....................................       1,530,760          31,240
2010....................................       1,515,140          46,860
2011....................................       1,499,520          62,480
2012....................................       1,483,900          78,100
2013....................................       1,468,280          93,720
2014....................................       1,452,660         109,340
2015....................................       1,437,040         124,960
2016....................................       1,421,420         140,580
2017....................................       1,405,800         156,200
2018....................................       1,034,180         127,820
2019....................................       1,022,560         139,440
2020....................................       1,010,940         151,060
2021....................................         999,320         162,680
2022....................................         987,700         174,300
2023....................................         976,080         185,920
2024....................................         964,460         197,540
2025....................................         952,840         209,160
2026....................................         941,220         220,780
2027....................................         929,600         232,400
2028....................................         900,550         261,450
2029....................................         871,500         290,500
2030....................................         842,450         319,550
2031....................................         813,400         348,600
2032....................................         784,350         377,650
2033....................................         755,300         406,700
2034....................................         726,250         435,750
2035....................................         697,200         464,800
2036....................................         668,150         493,850
2037....................................         639,100         522,900
2038....................................         610,050         551,950
2039....................................         581,000         581,000
2040....................................         551,950         610,050
2041....................................         522,900         639,100
2042....................................         493,850         668,150
2043....................................         464,800         697,200
2044....................................         435,750         726,250
2045....................................         406,700         755,300
2046....................................         377,650         784,350
2047....................................         348,600         813,400
2048....................................         319,550         842,450
2049....................................         290,500         871,500
2050....................................         261,450         300,550
2051....................................         232,400         929,550
2052....................................         203,350         958,650
2053....................................         174,300         987,700
2054....................................         145,250       1,016,750
2055....................................         116,200       1,045,800
2056....................................          87,150       1,074,850
2057....................................          58,100       1,103,900
2058....................................          29,050       1,132,950
2059....................................               0       1,162,000
------------------------------------------------------------------------

    ``(b) For affected EGUs in the Zone 2 States for 2008 and each year 
thereafter, the Administrator shall allocate nitrogen oxides allowances 
under section 454(b), and conduct auctions of nitrogen oxides 
allowances under section 409, in the amounts in Table B.

     ``TABLE B.--TOTAL NO<INF>X</INF> ALLOWANCES ALLOCATED FOR EGU'S IN ZONE 2
------------------------------------------------------------------------
                                           NO<INF>X</INF> allowance   NO<INF>X</INF> allowance
                  Year                       allocated       auctioned
------------------------------------------------------------------------
2008....................................         532,620           5,380
2009....................................         527,240          10,760
2010....................................         521,860          16,140
2011....................................         516,480          21,520
2012....................................         511,100          26,900
2013....................................         505,720          32,280
2014....................................         500,340          37,660
2015....................................         494,960          43,040
2016....................................         489,580          48,420
2017....................................         484,200          53,800
2018....................................         478,820          59,180
2019....................................         473,440          64,560
2020....................................         468,060          69,940
2021....................................         462,680          75,320
2022....................................         457,300          80,700
2023....................................         451,920          86,080
2024....................................         446,540          91,460
2025....................................         441,160          96,840
2026....................................         435,780         102,220
2027....................................         430,400         107,600
2028....................................         416,950         121,050
2029....................................         403,500         134,500
2030....................................         390,050         147,950
2031....................................         376,600         161,400
2032....................................         363,150         174,850
2033....................................         349,700         188,300
2034....................................         336,250         201,750
2035....................................         322,800         215,200
2036....................................         309,350         228,650
2037....................................         295,900         242,100
2038....................................         282,450         255,550
2039....................................         269,000         269,000
2040....................................         255,550         282,450
2041....................................         242,100         295,900
2042....................................         228,650         309,350
2043....................................         215,200         322,800
2044....................................         201,750         336,250
2045....................................         188,300         349,700
2046....................................         174,850         363,150
2047....................................         161,400         376,600
2048....................................         147,950         390,050
2049....................................         134,500         403,500
2050....................................         121,050         416,950
2051....................................         107,600         430,400
2052....................................          94,150         443,850
2053....................................          80,700         457,300
2054....................................          67,250         470,750
2055....................................          53,800         484,200
2056....................................          40,350         497,650
2057....................................          26,900         511,100
2058....................................          13,450         524,550
2059....................................               0         538,000
------------------------------------------------------------------------

``SEC. 454. EGU ALLOCATIONS.

    ``(a) EGU Allocations in the Zone 1 States.--
            ``(1) By January 1, 2006, the Administrator shall 
        promulgate regulations determining the allocation of nitrogen 
        oxides allowances for each year during 2008 through 2058 for 
        units at a facility in a Zone 1 State that are affected EGUs as 
        of December 31, 2004. The regulations shall determine the 
        allocation for such units for each year by multiplying the 
        allocation amount under section 453(a) by the ratio of the 
        total amount of baseline heat input of such units at the 
        facility to the total amount of baseline heat input of all 
        affected EGUs in the Zone 1 States.
            ``(2)(A) For each year 2008 through 2058, if the 
        Administrator has not promulgated the regulations determining 
        allocation under paragraph (a)(1), but has promulgated the 
        regulations under section 403(b) providing for the transfer of 
        nitrogen oxides allowances and section 403(c) establishing the 
        Allowance Tracking system for nitrogen oxides allowances, by 
        July 1 that is eighteen months before January 1 of such year, 
        then:
                    ``(i) The Administrator shall--
                            ``(I) allocate, for such year, to each unit 
                        in the Zone 1 States listed in the 
                        Administrator's Emissions Scorecard 2000, 
                        Appendix B, Table B1 an amount of nitrogen 
                        oxides allowances determined by multiplying 
                        eighty percent of the allocation amount under 
                        section 453(a) by the ratio of such unit's heat 
                        input in the Emissions Scorecard 2000, Appendix 
                        B, Table B1 to the total of the heat input in 
                        the Emissions Scorecard 2000, Appendix B, Table 
                        B1 for all units in the Zone 1 States;
                            ``(II) record in each facility's account in 
                        the Allowance Tracking System under section 
                        403(c) for such year the total of the amounts 
                        of nitrogen oxides allowances for the units at 
                        such facility determined under subclause (I); 
                        and
                            ``(III) auction an amount of nitrogen 
                        oxides allowances equal to five percent of the 
                        allocation amount under section 453(a) and 
                        conduct the auction on the first business day 
                        in October following the respective 
                        promulgation deadline under subparagraph (A) 
                        and in accordance with section 409.
                    ``(ii) Notwithstanding any other provision of law 
                to the contrary, the determination of the amount of 
                nitrogen oxides allowances under subclause (i)(I) and 
                the recording of nitrogen oxides allowances under 
                subclause (i)(II) shall not be subject to judicial 
                review.
                    ``(iii) Notwithstanding the provisions to the 
                contrary in section 453, the Administrator shall not 
                allocate or record fifteen percent of the allocation 
                amount under section 453(a) for such year.
            ``(B) For each year 2008 through 2058, if the Administrator 
        has not promulgated the regulations determining allocations 
        under paragraph (a)(1), and has not promulgated the regulations 
        under section 403(b) providing for the transfer of nitrogen 
        oxides allowances and section 403(c) establishing the Allowance 
        Tracking System for nitrogen oxides allowances, by July 1 that 
        is eighteen months before January 1 of such year, then it shall 
        be unlawful for an affected EGU in the Zone 1 States to emit 
        nitrogen oxides during such year in excess of 0.14 lb/mmBtu.
    ``(b) EGU Allocations in the Zone 2 States.--
            ``(1) By January 1, 2006, the Administrator shall 
        promulgate regulations determining the allocation of nitrogen 
        oxides allowances for each year during 2008 through 2058 for 
        units at a facility in a Zone 2 State that are affected EGUs as 
        of December 31, 2004. The regulations shall determine the 
        allocation for such units for each year by multiplying the 
        allocation amount under section 453(b) by the ratio of the 
        total amount of baseline heat input of such units at the 
        facility to the total amount of baseline heat input of all 
        affected EGUs in the Zone 2 States.
            ``(2)(A) For each year 2008 through 2058, if the 
        Administrator has not promulgated the regulations determining 
        allocations under paragraph (b)(1), but has promulgated the 
        regulations under section 403(b) providing for the transfer of 
        nitrogen oxides allowances and section 403(c) establishing the 
        Allowance Tracking System for nitrogen oxides allowances, by 
        July 1 that is eighteen months before January 1 of such years, 
        then:
                    ``(i) The Administrator shall--
                            ``(I) allocate, for such year, to each unit 
                        in the Zone 2 States listed in the 
                        Administrator's Emissions Scorecard 2000, 
                        Appendix B, Table B1 an amount of nitrogen 
                        oxides allowances determined by mutiplying 
                        eighty percent of the allocation amount under 
                        section 453(b) by the ratio of such unit's heat 
                        input in the Emissions Scorecard 2000, Appendix 
                        B, Table B1 to the total of the heat input in 
                        the Emissions Scorecard 2000, Appendix B, Table 
                        B1 for all units in the Zone 2 States;
                            ``(II) record in each facility's account in 
                        the Allowance Tracking System under section 
                        403(c) for such year the total of the amounts 
                        of nitrogen oxides allowances for the units at 
                        such facility determined under subclause (I); 
                        and
                            ``(III) auction an amount of nitrogen 
                        oxides allowances equal to five percent of the 
                        allocation amount under section 453(b) and 
                        conduct the auction on the first business day 
                        in October following the respective 
                        promulgation deadline under subparagraph (A) 
                        and in accordance with section 409.
                    ``(ii) Notwithstanding any other provision of law 
                to the contrary, the determination of the amount of 
                nitrogen oxides allowances under subclause (i)(I) and 
                the recording of nitrogen oxides allowances under 
                subclause (i)(II) shall not be subject to judicial 
                review.
                    ``(iii) Notwithstanding the provisions to the 
                contrary in section 453, the Administrator shall not 
                allocate or record fifteen percent of the allocation 
                amount under section 453(b) for such year.
            ``(B) For each year 2008 through 2058, if the Administrator 
        has not promulgated the regulations determining allocations 
        under paragraph (b)(1), and has not promulgated the regulations 
        under section 403(b) providing for the transfer of nitrogen 
        oxides allowances and section 403(c) establishing the Allowance 
        Tracking System for nitrogen oxides allowances, by July 1 that 
        is eighteen months before January 1 of such year, then it shall 
        be unlawful for any affected EGU in the Zone 2 States to emit 
        nitrogen oxides during such year in excess of 0.25 lb/mmBtu.

        ``Subpart 3--Ozone Season No<INF>x</INF> Budget Program

``SEC. 461. DEFINITIONS.

    ``For purposes of this subpart:
            ``(1) The term `ozone season' means--
                    ``(A) with regard to Connecticut, Delaware, the 
                District of Columbia, Maryland, Massachusetts, New 
                Jersey, New York, Pennsylvania, and Rhode Island, the 
                period May 1 through September 30 for each year 
                starting in 2003; and
                    ``(B) with regard to all other States, the period 
                May 30, 2004 through September 30, 2004 and the period 
                May 1 through September 30 for each year thereafter.
            ``(2) The term `State' means Connecticut, Delaware, the 
        District of Columbia, Illinois, Indiana, Kennedy, Maryland, 
Massachusetts, New Jersey, New York, North Carolina, Ohio, 
Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, and 
West Virginia and the fine grid portions of Alabama, Georgia, Michigan, 
and Missouri.
            ``(3) The term `fine grid portions of Alabama, Georgia, 
        Michigan, and Missouri' means the areas in Alabama, Georgia, 
        Michigan, and Missouri subject to 40 CFR Sec. 51.121 (2001), as 
        it would be amended in the notice of proposed rulemaking at 67 
        Federal Register 8396 (February 22, 2002).

``SEC. 462. GENERAL PROVISIONS.

    ``The provisions of sections 402 through 406 and section 409 shall 
not apply to this subpart.

``SEC. 463. APPLICABLE IMPLEMENTATION PLAN.

    ``(a) Except as provided in subsection (b), the applicable 
implementation plan for each State shall be consistent with the 
requirements, including the State's nitrogen oxides budget and 
compliance supplement pool, in 40 CFR Sec. Sec. 51.121 and 51.122 
(2001), as it would be amended in the notice of proposed rulemaking at 
67 Federal Register 8396 (February 22, 2002).
    ``(b) Notwithstanding any provision to the contrary in 40 CFR 
Sec. 51.121 (2001), the applicable implementation plan for each State 
shall require full implementation of the required emission control 
measures starting no later than the first ozone season.

``SEC. 464. TERMINATION OF FEDERAL ADMINISTRATION OF NO<INF>X</INF> 
              TRADING PROGRAM.

    ``(a) Starting January 1, 2008, the Administrator shall not 
administer any nitrogen oxides trading program in any State's 
applicable implementation plan under section 463.
    ``(b) Nothing in subsection (a) shall preclude a State from 
administering any nitrogen oxides trading program in the State's 
applicable implementation plan under section 463.

``SEC. 465. CARRYFORWARD OF PRE-2008 NITROGEN OXIDES ALLOWANCES.

    ``The Administrator shall promulgate regulations as necessary to 
assure that the requirement to hold allowances under section 452(a)(1) 
may be met using nitrogen oxides allowances allocated for an ozone 
season before 2008 under a nitrogen oxides trading program that the 
Administrator administers in a State's applicable implementation plan 
under section 463.

                 ``PART D--MERCURY EMISSIONS REDUCTIONS

``SEC. 471. DEFINITIONS.

        ``For purposes of this subpart:
            ``(1) The term `adjusted baseline heat input' with regard 
        to a unit means the unit's baseline heat input multiplied by--
                    ``(A) 1.0, for the portion of the baseline heat 
                input that is the unit's average annual combustion of 
                bituminous during the years on which the unit's 
                baseline heat input is based;
                    ``(B) 3.0, for the portion of the baseline heat 
                input that is the unit's average annual combustion of 
                lignite during the years on which the unit's baseline 
                heat input is based;
                    ``(C) 1.25, for the portion of the baseline heat 
                input that is the unit's average annual combustion of 
                subbituminous during the years on which the unit's 
                baseline heat input is based; and
                    ``(D) 1.0, for the portion of the baseline heat 
                input that is not covered by subparagraph (A), (B), or 
                (C) or for the entire baseline heat input if such 
                baseline heat input is not based on the unit's heat 
                input in specified years.
            ``(2) The term `affected EGU' means--
                    ``(A) for a unit serving a generator before the 
                date of enactment of the Clear Skies Act of 2002, a 
                coal-fired unit in a State serving a generator with a 
                nameplate capacity of greater than 25 megawatts that 
                produced or produces electricity for sale during 2001 
                or any year thereafter, except for a cogeneration unit 
                that produced or produces electricity for sale equal to 
                less than one-third of the potential electrical output 
                of the generator that it served or serves during 2001 
                and each year thereafter; and
                    ``(B) for a unit commencing service of a generator 
                on or after the date of enactment of the Clear Skies 
                Act of 2002, a coal-fired unit in a State serving a 
                generator that produces electricity for sale during any 
                year starting with the year the unit commences service 
                of a generator, except for a cogeneration unit that 
                produces electricity for sale equal to less than one-
                third of the potential electrical output of the 
                generator that it serves, during each year starting 
                with the year the unit commences service of a 
                generator.
                    ``(C) Notwithstanding paragraphs (A) and (B), the 
                term `affected EGU' does not include a solid waste 
                incineration unit subject to section 129 or a unit for 
                the treatment, storage, or disposal of hazardous waste 
                subject to section 3005 of the Solid Waste Disposal 
                Act.

``SEC. 472. APPLICABILITY.

    ``Starting January 1, 2010, it shall be unlawful for the affected 
EGUs at a facility in a State to emit a total amount of mercury during 
the year in excess of the number of mercury allowances held for such 
facility for that year by the owner or operator of the facility.

``SEC. 473. LIMITATIONS ON TOTAL EMISSIONS.

    ``For affected EGUs for 2010 and each year thereafter, the 
Administrator shall allocate mercury allowances under section 474, and 
conduct auctions of mercury allowances under section 409, in the 
amounts in table A.

  ``TABLE A.--TOTAL MERCURY ALLOWANCES ALLOCATED OR AUCTIONED FOR EGU'S
------------------------------------------------------------------------
                                              Mercury         Mercury
                  Year                      allowances      allowances
                                             allocated       auctioned
------------------------------------------------------------------------
2010....................................         823,680           8,320
2011....................................         815,360          16,640
2012....................................         807,040          24,960
2013....................................         798,720          33,280
2014....................................         790,400          41,600
2015....................................         782,080          49,920
2016....................................         773,760          58,240
2017....................................         765,440          66,560
2018....................................         436,800          43,200
2019....................................         432,000          48,000
2020....................................         427,200          52,800
2021....................................         422,400          57,600
2022....................................         417,600          62,400
2023....................................         412,800          67,200
2024....................................         408,000          72,000
2025....................................         403,200          76,800
2026....................................         398,400          81,600
2027....................................         393,600          86,400
2028....................................         388,800          91,200
2029....................................         384,000          96,000
2030....................................         372,000         108,000
2031....................................         360,000         120,000
2032....................................         348,000         132,000
2033....................................         336,000         144,000
2034....................................         324,000         156,000
2035....................................         312,000         168,000
2036....................................         300,000         180,000
2037....................................         288,000         192,000
2038....................................         276,000         204,000
2039....................................         264,000         216,000
2040....................................         252,000         228,000
2041....................................         240,000         240,000
2042....................................         228,000         252,000
2043....................................         216,000         264,000
2044....................................         204,000         276,000
2045....................................         192,000         288,000
2046....................................         180,000         300,000
2047....................................         168,000         312,000
2048....................................         156,000         324,000
2049....................................         144,000         336,000
2050....................................         132,000         348,000
2051....................................         120,000         360,000
2052....................................         108,000         372,000
2053....................................          96,000         384,000
2054....................................          84,000         396,000
2055....................................          72,000         408,000
2056....................................          60,000         420,000
2057....................................          48,000         432,000
2058....................................          36,000         444,000
2059....................................          24,000         456,000
2060....................................          12,000         468,000
2061....................................               0         480,000
------------------------------------------------------------------------

``SEC. 474. EGU ALLOCATIONS.

    ``(a) By January 1, 2007, the Administrator shall promulgate 
regulations determining allocations of mercury allowances for each year 
during 2010 through 2060 for units at a facility that are affected EGUs 
as of December 31, 2004. The regulations shall provide that the 
Administrator shall allocate each year for such units an amount 
determined by multiplying the allocation amount in section 473 by the 
ratio of the total amount of the adjusted baseline heat input of such 
units at the facility to the total amount of adjusted baseline heat 
input of all affected EGUs.
    ``(b)(1) For each year 2010 through 2060, if the Administrator has 
not promulgated the regulations determining allocations under paragraph 
(a), but has promulgated the regulations under section 403(b) providing 
for the transfer of mercury allowances and section 403(c) establishing 
the Allowance Tracking System for mercury allowances, by July 1 that is 
eighteen months before January 1 of such year, then:
            ``(A) The Administrator shall--
                    ``(i) allocate, for such year, to each unit with 
                coal as its primary or secondary fuel listed in the 
                Administrator's Emissions Scorecard 2000, Appendix B, 
                Table B1 an amount of mercury allowances determined by 
                multiplying eighty percent of the allocation amount 
                under section 473 by the ratio of such unit's heat 
                input in the Emissions Scorecard 2000, Appendix B, 
                Table B1 to the total of the heat input in the 
                Emissions Scorecard 2000, Appendix B, Table B1 for all 
                units with coal as their primary or secondary fuel;
                    ``(ii) record in each facility's account in the 
                Allowance Tracking System under section 403(c) for such 
                year the total of the amounts of mercury allowances for 
                the units at such facility determined under clause (i); 
                and
                    ``(iii) auction an amount of mercury allowances 
                equal to five percent of the allocation amount under 
                section 473 and conduct the auction on the first 
                business day in October following the respective 
                promulgation deadline under paragraph (1) and in 
                accordance with section 409.
            ``(B) Notwithstanding any other provision of law to the 
        contrary, the determination of the amount of mercury allowances 
        under subparagraph (1)(A) and the recording of mercury 
        allowances under subparagraph (1)(B) shall not be subject to 
        judicial review.
            ``(C) Notwithstanding the provisions to the contrary in 
        section 473, the Administrator shall not allocate or record 
        fifteen percent of the allocation amount under section 473 for 
        such year.
    ``(2) For each year 2010 through 2060, if the Administrator has not 
promulgated the regulations determining allocations under paragraph 
(a), and has not promulgated the regulations under section 403(b) 
providing for the transfer of mercury allowances and section 403(c) 
establishing the Allowance Tracking System for mercury allowances, by 
July 1 that is eighteen months before January 1 of such year, then it 
shall be unlawful for any affected EGU to emit mercury during such year 
in excess of 30 percent of the mercury content (in ounces per mmBtu) of 
the coal and coal-derived fuel combusted by the unit.

                 ``PART E--NATIONAL EMISSION STANDARDS;
 RESEARCH; ENVIRONMENTAL ACCOUNTABILITY; MAJOR SOURCE PRECONSTRUCTION 
   REVIEW AND BEST AVAILABLE RETROFIT CONTROL TECHNOLOGY REQUIREMENTS

``SEC. 481. NATIONAL EMISSION STANDARDS FOR AFFECTED UNITS.

    ``(a) Definitions.--For purposes of this section:
            ``(1) The term `commenced,' with regard to construction, 
        means that an owner or operator has either undertaken a 
        continuous program of construction or has entered into a 
        contractual obligation to undertake and complete, within a 
        reasonable time, a continuous program of construction. For 
        boilers and integrated gasification combined cycle plants, this 
        term does not include undertaking such a program or entering 
        into such an obligation more than 36 months prior to the date 
        on which the unit begins operation. For combustion turbines, 
this term does not include undertaking such a program or entering into 
such an obligation more than 18 months prior to the date on which the 
unit begins operation.
            ``(2) The term `construction' means fabrication, erection, 
        or installation of an affected unit.
            ``(3) The term `affected unit' means any unit that is 
        subject to emission limitations under subpart 2 of part B, 
        subpart 2 of part C, or part D.
            ``(4) The term `existing affected unit' means any affected 
        unit that is not a new affected unit.
            ``(5) The term `new affected unit' means any affected unit, 
        the construction or reconstruction of which is commenced after 
        the date of enactment of the Clear Skies Act of 2002, except 
        that for the purpose of any revision of a standard pursuant to 
        subsection (e), `new affected unit' means any affected unit, 
        the construction or reconstruction of which is commenced after 
        the public of regulations (or, if earlier, proposed 
        regulations) prescribing a standard under this section that 
        will apply to such unit.
            ``(6) The term `reconstruction' means the replacement of 
        components of a unit to such an extent that:
                    ``(A) the fixed capital cost of the new components 
                exceeds 50 percent of the fixed capital cost that would 
                be required to construct a comparable entirely new 
                unit; and
                    ``(B) it is technologically and economically 
                feasible to meet the applicable standards set forth in 
                this section.
            ``(7) The term `simple cycle combustion turbine' means a 
        stationary combustion turbine that does not extract heat from 
        the combustion turbine exhaust gases.
    ``(b) Emission Standards.--
            ``(1) In general.--No later than twelve months after the 
        date of enactment of the Clear Skies Act of 2002, the 
        Administrator shall promulgate regulations prescribing the 
        standards in subsections (c) through (d) for the specified 
        affected units and establishing requirements to ensure 
        compliance with these standards, including monitoring, 
        recordkeeping, and reporting requirements.
            ``(2) Monitoring.--
                    ``(A) The owner or operator of any affected unit 
                subject to the standards for sulfur dioxide, nitrogen 
                oxides, or mercury under this section shall meet the 
                requirements of section 405, except that, where two or 
                more units utilize a single stack, separate monitoring 
                shall be required for each affected unit for the 
                pollutants for which the unit is subject to such 
                standards.
                    ``(B) The Administrator shall, by regulation, 
                require--
                            ``(i) the owner or operator of any affected 
                        unit subject to the standards for sulfur 
                        dioxide, nitrogen oxides, or mercury under this 
                        section to--
                                    ``(I) install and operate CEMS for 
                                monitoring output, including 
                                electricity and useful thermal energy, 
                                on the affected unit and to quality 
                                assure the data; and
                                    ``(II) comply with recordkeeping 
                                and reporting requirements, including 
                                provisions for reporting output data in 
                                megawatt hours.
                            ``(ii) the owner or operator of any 
                        affected unit subject to the standards for 
                        particulate matter under this section to--
                                    ``(I) install and operate CEMS for 
                                monitoring particulate matter on the 
                                affected unit and to quality assure the 
                                data;
                                    ``(II) comply with recordkeeping 
                                and reporting requirements; and
                                    ``(III) comply with alternative 
                                monitoring, quality assurance, 
                                recordkeeping, and reporting 
                                requirements for any period of time for 
                                which the Administrator determines that 
                                CEMS with appropriate vendor guarantees 
                                are not commercially available for 
                                particulate matter.
            ``(3) Compliance.--For boilers, integrated gasification 
        combined cycle plants, and combustion turbines that are gas-
        fired or coal fired, the Administrator shall require that the 
        owner or operator demonstrate compliance with the standards 
        daily, using a 30-day rolling average, except that in the case 
        of mercury, the compliance period shall be the calendar year. 
        For combustion turbines that are not gas-fired or coal-fired, 
        the Administrator shall require that the owner or operator 
        demonstrate compliance with the standards hourly, using a 4-
        hour rolling average.
    ``(c) Boilers and Integrated Gasification Combined Cycle Plants.--
            ``(1) After the effective date of standards promulgated 
        under subsection (b), no owner or operator shall cause any 
        boiler or integrated gasification combined cycle plant that is 
        a new affected unit to discharge into the atmosphere any gases 
        which contain--
                    ``(A) sulfur dioxide in excess of 2.0 lb/MWh;
                    ``(B) nitrogen oxides in excess of 1.0 lb/MWh;
                    ``(C) particulate matter in excess of 0.20 lb/MWh; 
                or
                    ``(D) if the unit is coal-fired, mercury in excess 
                of 0.015 lb/GWh, unless--
                            ``(i) mercury emissions from the unit are 
                        reduced by 80 percent;
                            ``(ii) flue gas desulfurization (FGD) and 
                        selective catalytic reduction (SCR) are applied 
                        to the unit and are operated so as to optimize 
                        capture of mercury; or
                            ``(iii) a technology is applied to the unit 
                        and operated so as to optimize capture of 
                        mercury, and the permitting authority 
                        determines that the technology is equivalent in 
                        terms of mercury capture to the application of 
                        FGD and SCR.
            ``(2) Notwithstanding subparagraph (1)(D), integrated 
        gasification combined cycle plants with a combined capacity of 
        less than 5 GW are exempt from the mercury requirement under 
        subparagraph (1)(D) if they are constructed as part of a 
        demonstration project under the Secretary of Energy that will 
        include a demonstration of removal of significant amounts of 
        mercury as determined by the Secretary of Energy in conjunction 
        with the Administrator as part of the solicitation process.
            ``(3) After the effective date of standards promulgated 
        under subsection (b), no owner or operator shall cause any oil-
        fired boiler that is an existing affected unit to discharge 
        into the atmosphere any gases which contain particulate matter 
        in excess of 0.30 lb/MWh.
    ``(d) Combustion Turbines.--
            ``(1) After the effective date of standards promulgated 
        under subsection (b), no owner or operator shall cause any gas-
        fired combustion turbine that is a new affected unit to 
        discharge into the atmosphere any gases which contain nitrogen 
        oxides in excess of--
                    ``(A) 0.56 lb/MWh (15 ppm at 15 percent oxygen), if 
                the unit is a simple cycle combustion turbine;
                    ``(B) 0.084 lb/MWh (3.5 ppm at 15 percent oxygen), 
                if the unit is not a simple cycle combustion turbine 
                and either uses add-on controls or is located within 50 
                km of a class I area;
                    ``(C) 0.21 lb/MWh (9 ppm at 15 percent oxygen), if 
                the unit is not a simple cycle turbine and neither uses 
                add-on controls nor is located within 50 km of a class 
                I area.
            ``(2) After the effective date of standards promulgated 
        under subsection (b), no owner or operator shall cause any 
        coal-fired combustion turbine that is a new affected unit to 
        discharge into the atmosphere any gases which contain sulfur 
        dioxide, nitrogen oxides, particulate matter, or mercury in 
        excess of the emission limits under subparagraphs (c)(1) (A) 
        through (D).
            ``(3) After the effective date of standards promulgated 
        under subsection (b), no owner or operator shall cause any 
        combustion turbine that is not gas-fired or coal-fired and that 
        is a new affected unit to discharge into the atmosphere any 
        gases which contain--
                    ``(A) sulfur dioxide in excess of 2.0lb/MWh;
                    ``(B) nitrogen oxides in excess of--
                            ``(i) 0.289 lb/MWh (12 ppm at 15 percent 
                        oxygen), if the unit is not a simple cycle 
                        combustion turbine, is dual-fuel capable, and 
                        uses add-on controls; or is not a simple cycle 
                        combustion turbine and is located within 50 km 
                        of a class I area;
                            ``(ii) 1.01 lb/MWh (42 ppm at 15 percent 
                        oxygen), if the unit is a simple cycle 
                        combustion turbine; is not a simple cycle 
                        combustion turbine and is not dual-fuel 
                        capable; or is not a simple cycle combustion 
                        turbine, is dual-fuel capable, and does not use 
                        add-on controls.
                    ``(C) particulate matter in excess of 0.20 lb/MWh.
    ``(e) Periodic Review and Revision.--
            ``(1) The Administrator shall, at least every 8 years 
        following the promulgation of standards under subsection (b), 
        review and, if appropriate, revise such standards to reflect 
        the degree of emission limitation achievable through the 
        application of the best system of emission reduction which 
        (taking into account the cost of achieving such reduction and 
        any nonair quality health and environmental impacts and energy 
        requirements) the Administrator determines has been adequately 
        demonstrated. When implementation and enforcement of any 
        requirement of this Act indicate that emission limitations and 
        percent reductions beyond those required by the standards 
        promulgated under this section are achieved in practice, the 
        Administrator shall, when revising standards promulgated under 
        this section, consider the emission limitations and percent 
        reductions achieved in practice.
            ``(2) Notwithstanding the requirements of paragraph (1) the 
        Administrator need not review any standard promulgated under 
        subsection (b) if the Administrator determines that such review 
        is not appropriate in light of readily available information on 
        the efficacy of such standard.
    ``(f) Effective Date.--Standard promulgated pursuant to this 
section shall become effective upon promulgation.
    ``(g) Delegation.--
            ``(1) Each State may develop and submit to the 
        Administration a procedure for implementing and enforcing 
        standards promulgated under this section for affected units 
        located in such State. If the Administrator finds the State 
        procedure is adequate, the Administrator shall delegate to such 
        State any authority the Administrator has under this Act to 
        implement and enforce such standards.
            ``(2) Nothing in this subsection shall prohibit the 
        Administrator from enforcing any applicable standard under this 
        section.
    ``(h) Violations.--After the effective date of standards 
promulgated under this section, it shall be unlawful for any owner or 
operator of any affected unit to operate such unit in violation of any 
standard applicable to such unit.
    ``(i) Coordination With Other Authorities.--For purposes of 
sections 111(e), 113, 114, 116, 120, 303, 304,307 and other provisions 
for the enforcement of this Act, each standard established pursuant to 
this section shall be treated in the same manner as a standard of 
performance under section 111, and each affected unit subject to 
standards under this section shall be treated in the same manner as a 
stationary source under section 111.
    ``(j) State Authority.--Nothing in this section shall preclude or 
deny the right of any State or political subdivision thereof to adopt 
or enforce any regulations, requirement, limitation, or standard 
relating to affected units that is more stringent than a regulation, 
requirement, limitation or standard in effect under this section or 
under any other provision of this Act.
    ``(k) Other Authority Under This Act.--Nothing in this section 
shall diminish the authority of the Administrator or a State to 
establish any other requirements applicable to affected units under any 
other authority of law, including the authority to establish for any 
air pollutant a national ambient air quality standard, except that no 
new affected unit subject to standards under this section shall be 
subject to standards under section 111 of this Act.

``SEC. 482. RESEARCH, ENVIRONMENTAL MONITORING, AND ASSESSMENT.

    ``(a) Purposes.--The Administrator, in collaboration with the 
Secretary of Energy and the Secretary of the Interior, shall conduct a 
comprehensive program of research and environmental monitoring and 
assessment to enhance scientific understanding of the human health and 
environmental effects of particulate matter and mercury and to 
demonstrate the efficacy of emission reductions under this title. The 
purposes of such a program are to--
            ``(1) expand current research and knowledge of the 
        contribution of emissions from electricity generation to 
        exposure and health effects associated with particulate matter 
        and mercury;
            ``(2) enhance current research and development of promising 
        multi-pollutant control strategies and CEMS for mercury;
            ``(3) produce peer-reviewed scientific and technology 
        information to inform the review of emissions levels under 
        section 410;
            ``(4) improve environmental monitoring and assessment of 
        sulfur dioxide, nitrogen oxides and mercury, and their 
        transformation products, to track changes in human health and 
        the environment attributable to emission reductions under this 
        title; and
            ``(5) periodically provide peer-reviewed reports on the 
        costs, benefits, and effectiveness of emission reductions 
        achieved under this title.
    ``(b) Research.--The Administrator shall enhance planned and 
ongoing laboratory and field research and modeling analyses, and 
conduct new research and analyses to produce peer-reviewed information 
concerning the human health and environmental effects of mercury and 
particulate matter and the contribution of U.S. electrical generating 
units to those effects. Such information shall be included in the 
report under subsection (d). In addition, such research and analyses 
shall--
            ``(1) improve understanding of the rates and processes 
        governing chemical and physical transformations of mercury in 
        the atmosphere, including speciation of emissions from 
        electricity generation and the transport of these species;
            ``(2) improve understanding of the contribution of mercury 
        emissions from electricity generation to mercury in fish and 
        other biota, including--
                    ``(A) the response of and contribution to mercury 
                in the biota owing to atmospheric deposition of mercury 
                from U.S. electricity generation on both local and 
                regional scales;
                    ``(B) long-term contributions of mercury from U.S. 
                electricity generation on mercury accumulations in 
                ecosystems, and the effects of mercury reductions in 
                that sector on the environment and public health;
                    ``(C) the role and contribution of mercury, from 
                U.S. electricity generating facilities and 
                anthropogenic and natural sources to fish contamination 
                and to human exposure, particularly with respect to 
                sensitive populations;
                    ``(D) the contribution of U.S. electricity 
                generation to population exposure to mercury in 
                freshwater fish and seafood and quantification of 
                linkages between U.S. mercury emissions and domestic 
                mercury exposure and its health effects; and
                    ``(E) the contribution of mercury from U.S. 
                electricity generation in the context of other domestic 
                and international sources of mercury, including 
                transport of global anthropogenic and natural 
                background levels;
            ``(3) improve understanding of the health effects of fine 
        particulate matter components related to electricity generation 
        emissions (as distinct from other fine particle fractions and 
        indoor air exposures) and the contribution of U.S. electrical 
        generating units to those effects including--
                    ``(A) the chronic effects of fine particulate 
                matter from electricity generation in sensitive 
                population groups; and
                    ``(B) personal exposure to fine particulate matter 
                from electricity generation; and
            ``(4) improve understanding, by way of a review of the 
        literature, of methods for valuing human health and 
        environmental benefits associated with fine particulate matter 
        and mercury.
    ``(c) Innovative Control Technologies.--The Administrator shall 
collaborate with the Secretary of Energy to enhance research and 
development, and conduct new research that facilitates research into 
and development of innovative technologies to control sulfur dioxide, 
nitrogen oxides, mercury, and particulate matter at a lower cost than 
existing technologies. Such research and development shall provide 
updated information on the cost and feasibility of technologies. Such 
information shall be included in the report under subsection (d). In 
addition, the research and development shall--
            ``(1) upgrade cost and performance models to include 
        results from ongoing and future electricity generation and 
        pollution control demonstrations by the Administrator and the 
        Secretary of Energy;
            ``(2) evaluate the overall environmental implications of 
        the various technologies tested including the impact on the 
        characteristics of coal combustion residues;
            ``(3) evaluate the impact of the use of selective catalytic 
        reduction on mercury emissions from the combustion of all coal 
        types;
            ``(4) evaluate the potential of integrated gasification 
        combined cycle to adequately control mercury;
            ``(5) expand current programs by the Administrator to 
        conduct research and promote, lower cost CEMS capable of 
        providing real-time measurements of both speciated and total 
        mercury and integrated compact CEMS that provide cost-effective 
        real-time measurements of sulfur dioxide, nitrogen oxides, and 
        mercury;
            ``(6) expand lab- and pilot-scale mercury and multi-
        pollutant control programs by the Secretary of Energy and the 
        Administrator, including development of enhanced sorbents and 
        srubbers for use on all coal types;
            ``(7) characterize mercury emissions from low-rank coals, 
        for a range of traditional control technologies, like scrubbers 
and selective catalytic reduction; and
            ``(8) improve low cost combustion modifications and 
        controls for dry-bottom boilers.
    ``(d) Emissions Levels Evaluation Report.--Not later than January 
1, 2008, the Administrator, in consultation with the Secretary of 
Energy, shall prepare a peer reviewed report to inform review of the 
emissions levels under section 410. The report shall be based on the 
best available peer-reviewed scientific and technology information. It 
shall address cost, feasibility, human health and ecological effects, 
and net benefits associated with emissions levels under this title.
    ``(e) Environmental Accountability.--
            ``(1) The Administrator shall conduct a program of 
        environmental monitoring and assessment to track on a 
        continuing basis, changes in human health and the environment 
        attributable to the emission reductions required under this 
        title. Such a program shall--
                    ``(A) develop and employ methods to routinely 
                monitor, collect, and compile data on the status and 
                trends of mercury and its transformation products in 
                emissions from affected facilities, atmospheric 
                deposition, surface water quality, and biological 
                systems. Emphasis shall be placed on those methods 
                that--
                            ``(i) improve the ability to routinely 
                        measure mercury in dry deposition processes;
                            ``(ii) improve understanding of the spatial 
                        and temporal distribution of mercury deposition 
                        in order to determine source-receptor 
                        relationships and patterns of long-range, 
                        regional, and local deposition;
                            ``(iii) improve understanding of aggregate 
                        exposures and additive effects of methylmercury 
                        and other pollutants; and
                            ``(iv) improve understanding of the 
                        effectiveness and cost of mercury emissions 
                        controls;
                    ``(B) modernize and enhance the national air 
                quality and atmospheric deposition monitoring networks 
                in order to cost-effectively expand and integrate, 
                where appropriate, monitoring capabilities for sulfur, 
                nitrogen, and mercury to meet the assessment and 
                reporting requirements of this section;
                    ``(C) perform and enhance long-term monitoring of 
                sulfur, nitrogen, and mercury, and parameters related 
                to acidification, nutrient enrichment, and mercury 
                bioaccumulation in freshwater and marine biota;
                    ``(D) maintain and upgrade models that describe the 
                interactions of emissions with the atmosphere and 
                resulting air quality implications and models that 
                describe the response of ecosystems to atmospheric 
                deposition; and
                    ``(E) assess indicators of ecosystems health 
                related to sulfur, nitrogen, and mercury, including 
                characterization of the causes and effects of episodic 
                exposure to air pollutants and evaluation of recovery.
            ``(2) Reporting Requirements.--Not later than twenty-four 
        months after the date of enactment of the Clear Skies Act of 
        2002, and not later than every four years thereafter, the 
        Administrator shall provide a peer reviewed report to the 
        Congress on the costs, benefits, and effectiveness of emission 
        reduction programs under this title. The report shall address 
        the relative contribution of emission reductions from U.S. 
        electricity generation under this title compared to the 
        emission reductions achieved under other titles of the Clean 
        Air Act with respect to--
                    ``(A) actual and projected emissions of sulfur 
                dioxide, nitrogen oxides, and mercury;
                    ``(B) average ambient concentrations of sulfur 
                dioxide and nitrogen oxides transformation products, 
                related air quality parameters, and indicators of 
                reductions in human exposure;
                    ``(C) status and trends in total atmospheric 
                deposition of sulfur, nitrogen, and mercury, including 
                regional estimates of total atmospheric deposition;
                    ``(D) status and trends in visibility;
                    ``(E) status of terrestrial and aquatic ecosystems 
                (including forests and forested watersheds, streams, 
                lakes, rivers, estuaries, and near-coastal waters);
                    ``(F) status of mercury and its transformation 
                products in fish;
                    ``(G) causes and effects of atmospheric deposition, 
                including changes in surface water quality, forest and 
                soil conditions;
                    ``(H) occurrence and effects of coastal 
                eutrophication and episodic acidification, particularly 
                with respect to high elevation watersheds; and
                    ``(I) reduction in atmospheric deposition rates 
                that should be achieved to prevent or reduce adverse 
                ecological effects.

``SEC. 483. EXEMPTION FROM MAJOR SOURCE RECONSTRUCTION REVIEW 
              REQUIREMENTS AND BEST AVAILABLE RETROFIT CONTROL 
              TECHNOLOGY REQUIREMENTS.

    ``(a) Major Source Exemption.--An affected unit may not be 
considered a major emitting facility or major stationary source, or a 
part of a major emitting facility or major stationary source for 
purposes of compliance with the requirements of part C and part D of 
title I. This exemption only applies to units that are either subject 
to the performance standards of section 481 or meet the following 
requirements within three years after the date of enactment of the 
Clear Skies Act of 2002:
            ``(1) The owner or operator of the affected unit properly 
        operates, maintains and repairs pollution control equipment to 
        limit emissions of particulate matter, or the owner or operator 
        of the affected unit is subject to an enforceable permit issued 
        pursuant to title V or a permit program approved or promulgated 
        as part of an applicable implementation plan to limit the 
        emissions of particular matter from the affected unit to 0.03 
        lb/mmBtu within eight years after the date of enactment of the 
        Clear Skies Act of 2002, and
            ``(2) The owner or operator of the affected unit uses good 
        combustion practices to minimize emissions of carbon monoxide.
    ``(b) Class I Area Protections.--Notwithstanding the exemption in 
subsection (a), an affected unit located within 50 km of a Class I area 
on which construction commences after the date of enactment of the 
Clear Skies Act of 2002 is subject to those provisions under part C of 
title I pertaining to the review of a new or modified major stationary 
source's impact on a Class I area.
    ``(c) Preconstruction Requirements.--Each State shall include in 
its plan under section 110, a program to provide for the regulation of 
the construction of an affected unit that ensures that the following 
requirements are met prior to the commencement of construction of an 
affected unit--
            ``(1) in an area designated as attainment or unclassifiable 
        under section 107(d), the owner or operator of the affected 
        unit must demonstrate to the State that the emissions increase 
        from the construction or operation of such unit will not cause, 
        or contribute to, air pollution in excess of any national 
        ambient air quality standard;
            ``(2) in an area designated as nonattainment under section 
        107(d), the State must determine that the emissions increase 
        from the construction or operation of such unit will not 
        interfere with any program to assure that the national ambient 
        air quality standards are achieved;
            ``(3) for a modified unit, the unit must comply prior to 
        beginning operation with either the performance standards of 
        section 481 or best available control technology as defined in 
        part C of title I for the pollutants whose hourly emissions 
        will increase at the unit's maximum capacity; and
            ``(4) the State must provide for an opportunity for 
        interested persons to comment on the Class I area protections 
        and preconstruction requirements as set forth in this section.
    ``(d) Definitions.--For purposes of this section:
            ``(1) The term `affected unit' means any unit that is 
        subject to emission limitations under subpart 2 of part B, 
        subpart 2 of part C, or part D.
            ``(2) The term `construction' includes the construction of 
        a new affected unit and the modification of any affected unit.
            ``(3) The term `modification' means any physical change in, 
        or change in the method of operation of, an affected unit which 
        increases the hourly emissions of any air pollutant at the 
        unit's maximum capacity.''.

SEC. 3. OTHER AMENDMENTS.

    (a) Title I of the Clean Air Act is amended by--
            (1) removing from section 103 subparagraphs (j)(3)(E) and 
        (j)(3)(F); and
            (2) modifying section 107 by amending--
                    (A) subparagraph (D)(1)(A) by--
                            (i) deleting the `or' at the end of clause 
                        (ii);
                            (ii) replacing the period with `, or' at 
                        the end of clause (iii);
                            (iii) adding clause (iv) to read as 
                        follows:
                            ``(iv) notwithstanding clauses (i)-(iii), 
                        an area may be designated transitional for the 
                        fine particles national primary ambient air 
                        quality standard or the 8-hour ozone national 
                        primary ambient air quality standard if the 
                        Administrator has performed air quality 
                        modeling and, in the case of an area that needs 
                        additional local control measures, the State 
                        has performed supplemental air quality 
                        modeling, demonstrating that the area will 
                        attain that standard no later than December 31, 
                        2015, and such modeling demonstration and all 
                        necessary local controls have been approved 
                        into the state implementation plan no later 
                        than December 31, 2004.''; and
                            (iv) adding to the flush language at the 
                        end a sentence to read as follows: ``However, 
                        for purposes of the fine particles national 
                        primary ambient air quality standard and the 8-
                        hour ozone national primary ambient air quality 
                        standard, the time period for the State to 
                        submit the designations shall be extended to no 
                        later than November 30, 2003.'';
                    (B) clause (d)(1)(B)(i) by adding at the end a 
                sentence to read as follows: ``Provided, however, That 
                the Administrator shall not be required to designate 
                areas for the revised fine particles national primary 
                ambient air quality standard and 8-hour ozone fine 
                particles national primary ambient air quality standard 
                prior to 6-months after the States are required to 
                submit recommendations under section 107(d)(1)(A), but 
                in no event shall the period for designating such areas 
be extended beyond November 30, 2004.'';
        (3) modifying section 110 by--
                    (A) amending clause (a)(2)(D)(i) to read as 
                follows:
                ``(D) contain adequate provisions--
                            ``(i)(I) except as provided in subclause 
                        (II), prohibiting, consistent with the 
                        provisions of this title, any source or other 
                        type of emissions activity within the State 
                        from emitting any air pollutant in amounts 
                        which will--
                                    ``(aa) contribute significantly to 
                                nonattainment in, or interfere with 
                                maintenance by, any other State with 
                                respect to any such national primary or 
                                secondary ambient air quality standard, 
                                or
                                    ``(bb) interfere with measures 
                                required to be included in the 
                                applicable implementation plan for any 
                                other State under part C to prevent 
                                significant deterioration of air 
                                quality or to protect visibility,
                            ``(II) The Administrator, in reviewing, 
                        under subclause (I), any plan with respect to 
                        which emissions from affected units, within the 
                        meaning of section 126(d)(1), are substantial--
                                    ``(aa) shall consider, among other 
                                relevant factors, emissions reductions 
                                required to occur by the attainment 
                                date or dates of any relevant non-
                                attainment areas in the other State or 
                                States; and
                                    ``(bb) may not require submission 
                                of plan provisions--
                                            ``(i) subjecting affected 
                                        units, within the meaning of 
                                        section 126(d)(1), to 
                                        requirements with an effective 
                                        date prior to January 1, 2012; 
                                        or
                                            ``(ii) mandating an amount 
                                        of emissions reductions based 
                                        on the Administrator's 
                                        determination that emissions 
                                        reductions are available from 
                                        such affected units, unless the 
                                        Administrator determines that 
                                        emissions from such units may 
                                        be reduced at least as cost-
                                        effectively as emissions from 
                                        each other principal category 
                                        of sources of sulfur dioxide or 
                                        nitrogen oxides, including 
                                        industrial boilers, on-road 
                                        mobile sources, and off-road 
                                        mobile sources, and any other 
                                        category of sources that the 
                                        Administrator may identify, and 
                                        that reductions in such 
                                        emissions will improve air 
                                        quality in the petitioning 
                                        State's nonattainment area(s) 
                                        at least as cost-effectively as 
                                        reductions in emissions from 
                                        each other principal category 
                                        of sources of sulfur dioxide or 
                                        nitrogen oxides, to the maximum 
                                        extent that a methodology is 
                                        reasonably available to make 
                                        such a determination.
                        The Administrator shall develop an appropriate 
                        peer reviewed methodology for making such 
                        determinations by December 31, 2006. In making 
this determination, the Administrator will use the best available peer 
reviewed models and methodology that consider the proximity of the 
source or sources to the petitioning State or political subdivision and 
incorporate other source characteristics.
                            ``(III) Nothing in subclause (II) shall be 
                        interpreted to require revisions to the 
                        provisions of 40 CFR 51.121 and 51.122 (2001), 
                        as would be amended in the notice of proposed 
                        rulemaking at 67 Federal Register 8396 
                        (February 22, 2002).''.
                    (B) adding a new subsection (q) to read as follows:
    ``(q) Transitional Areas.--
            ``(1) Maintenance.--
                    ``(A) By December 31, 2010, each area designated as 
                transitional pursuant to section 107(d)(1) shall submit 
                an updated emission inventory and an analysis of 
                whether growth in emissions, including growth in 
                vehicle miles traveled, will interfere with attainment 
                by December 31, 2015.
                    ``(B) No later than December 31, 2011, the 
                Administrator shall review each transitional area's 
                maintenance analysis, and, if the Administrator 
                determines that growth in emissions will interfere with 
                attainment by December 31, 2015, the Administrator will 
                consult with the State and determine what action, if 
                any, is necessary to assure that attainment will be 
                achieved by 2015.
            ``(2) Prevention of significant deterioration.--Each area 
        designated as transitional pursuant to section 107(d)(1) shall 
        be treated as an attainment or unclassifiable area for purposes 
        of the prevention of significant deterioration provisions of 
        part C of this subchapter.
            ``(3) Consequences of failure to attain by 2015.--No later 
        than June 30, 2016, EPA shall determine whether each area 
        designated as transitional for the 8-hour ozone standard or for 
        the fine particles standard has attained that standard. If EPA 
        determines that a transitional area has not attained the 
        standard, the area shall be redesignated as nonattainment 
        within 1 year of the determination and the State shall be 
        required to submit a state implementation plan revision 
        satisfying the provisions of section 172 within 3 years of 
        redesignation as nonattainment.'';
            (4) adding to section 111 a new subparagraph (b)(1)(C) to 
        read as follows:
                    ``(C) No standards of performance promulgated under 
                this section shall apply to units subject to 
                regulations promulgated pursuant to section 481.'';
            (5) modifying section 112 by amending--
                    (A) paragraph (c)(1) to read as follows:
    ``(c) List of Source Categories.--
            ``(1) In general.--Not later than 12 months after November 
15, 1990, the Administrator shall publish, and shall from time to time, 
but not less often than every 8 years, revise, if appropriate, in 
response to public comment or new information, a list of all categories 
and subcategories of major sources and area sources (listed under 
paragraph (3)) of the air pollutants listed pursuant to subsection (b): 
Provided, however, That electric utility steam generating units not 
subject to Resource Conservation and Recovery Act section 3005 shall 
not be included in any category or subcategory listed under this 
subsection. The Administrator shall have the authority to regulate the 
emission of hazardous air pollutants listed under section 112(b), other 
than mercury compounds, by electric utility steam generating units in 
accordance with the regime set forth in section 112(f)(2) through (4). 
The section 112(f)(2) determination shall be based on actual emissions 
by electric utility steam generating units in 2010. Any such 
regulations shall be promulgated within 8 years of 2010. To the extent 
practicable, the categories and subcategories listed under this 
subsection shall be consistent with the list of source categories 
established pursuant to section 111 and part C. Nothing in the 
preceding sentence limits the Administrator's authority to establish 
subcategories under this section, as appropriate.'';
                    (B) subparagraph (n)(1)(A) to read as follows:
    ``(n) Other Provisions.--
            ``(1) Electric utility steam generating units.--
                    ``(A) The Administrator shall perform a study of 
                the hazards to public health reasonably anticipated to 
                occur as a result of emissions by electric utility 
                steam generating units of pollutants listed under 
                subsection (b) after imposition of the requirements of 
                this Act. The Administrator shall report the results of 
                this study to the Congress within 3 years after 
                November 15, 1990.'';
            (6) modifying section 126 by:
                    (A) revising subsection (b) by replacing `section 
                110(a)(2)(D)(ii) or this section'' with `section 
                110(a)(2)(D)(i)';
                    (B) revising subsection (c)(1) by replacing `this 
                section and the prohibition of section 
                110(a)(2)(D)(ii)' with `the prohibition of section 
                110(a)(2)(D)(i)';
                    (C) revising subsection (c), flush language at end, 
                by replacing `section 110(a)(2)(D)(ii)' with `section 
                110(a)(2)(D)(i)' and deleting the last sentence; and
                    (D) adding subsection (d) to read as follows:
    ``(d)(1) For purposes of this subsection, the term `affected unit' 
means any unit that is subject to emission limitations under subpart 2 
of part B, subpart 2 of part C, or part D.
    ``(2) To the extent that any petition submitted under subsection 
(b) after the date of enactment of the Clear Skies Act of 2002 seeks a 
finding for any affected unit, then, notwithstanding any provision in 
subsections (a) through (c) to the contrary--
            ``(A) In determining whether to make a finding under 
        subsection (b) for any affected unit, the Administrator shall 
        consider, among other relevant factors, emissions reductions 
        required to occur by the attainment date or dates of any 
        relevant nonattainment areas in the petitioning State or 
        political subdivision.
            ``(B) The Administrator may not determine that affected 
        units emit or would emit any air pollutant in violation of the 
        prohibition of section 110(a)(2)(D)(i) unless that 
        Administrator determines that--
                    ``(i) such emissions may be reduced at least as 
                cost-effectively as emissions from each other principal 
                category of sources of sulfur dioxide or nitrogen 
                oxides, including industrial boilers, on-road mobile 
                sources, and off-road mobile sources, and any other 
                category of sources that the Administrator may 
                identify; and
                    ``(ii) reductions in such emissions will improve 
                air quality in the petitioning state's nonattainment 
                area(s) at least as cost-effectively as reductions in 
                emissions from each other principal category of sources 
                of sulfur dioxide or nitrogen oxides to the maximum 
                extent that a methodology is reasonably available to 
                make such a determination. In making this 
                determination, the Administrator will use the best 
                available peer reviewed models and methodology that 
                consider the proximity of the source or sources to the 
                petitioning State or political subsidision and 
                incorporate other sources characteristics.
            ``(C) The Administrator shall develop an appropriate peer 
        reviewed methodology for making determinations under 
        subparagraph (B) by December 31, 2006.
            ``(D) The Administrator shall not make any findings with 
        respect to an affected unit under this section prior to January 
        1, 2009. For any petition submitted prior to January 1, 2007, 
        the Administrator shall make a finding or deny the petition by 
        January 31, 2009.
            ``(E) The Administrator, by rulemaking, shall extend the 
        compliance and implementation deadlines in subsection (c) to 
        the extent necessary to assure that no affected unit shall be 
        subject to any such deadline prior to January 1, 2012.''.
    (b) Title III of the Clean Air Act is amended by modifying section 
307(d)(1(G) to read as follows:
                    ``(G) the promulgation or revision of any 
                regulation under title IV,''.
    (c) Title IV of the Clean Air Act (relating to noise pollution) (42 
U.S.C. 7641 et seq.) is--
            (1) amended by renumbering sections 401 through 403 as 
        sections 701 through 703, respectively; and
            (2) renumbered as title VII.
    (d) Title VIII of the Clean Air Act Amendments of 1990 
(miscellaneous provisions) is amended by modifying section 821(a) to 
read as follows:
    ``(a) Monitoring.--The Administrator of the Environmental 
Protection Agency shall promulgate regulations within 18 months after 
November 15, 1990 to require that all affected sources subject to 
subpart 1 of part B of title IV of the Clean Air Act shall also monitor 
carbon dioxide emissions according to the same timetable as in section 
405(b). The regulations shall require that such data be reported to the 
Administrator. The provisions of section 405(e) of title IV of the 
Clean Air Act shall apply for purposes of this section in the same 
manner and to the same extent as such provision applies to the 
monitoring and data referred to in section 405. The Administrator shall 
implement this subsection under 40 CFR part 75 (2001), amended as 
appropriate by the Administrator.''.
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