[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 131 Introduced in Senate (IS)]






109th CONGRESS
  1st Session
                                 S. 131

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 program, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 24, 2005

 Mr. Inhofe (for himself and Mr. Voinovich) introduced the following 
        bill; which was read twice and referred to the Committee on 
        Environment and Public WorksYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY

_______________________________________________________________________

                                 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 program, 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 
2005''.
    (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 for additional units.
        ``Sec. 408. Clean coal technology regulatory incentives.
        ``Sec. 409. Electricity reliability.
              ``Part ``subpart 1--acid rain programuctions
        ``Sec. 411. Definitions.
        ``Sec. 412. Allowance allocation.
        ``Sec. 413. Phase I sulfur dioxide requirements.
        ``Sec. 414. Phase II sulfur dioxide requirements.
        ``Sec. 415. Allowances for States with emissions rates at or 
                            below 0.80 lbs/mmBtu.
        ``Sec. 416. Election for additional sources.
        ``Sec. 417. Auctions, reserve.
        ``Sec. 418. Industrial sulfur dioxide emissions.
       ``subpart 2--clear skies sulfur dioxide allowance program
        ``Sec. 421. Definitions.
        ``Sec. 422. Applicability.
        ``Sec. 423. Limitations on total emissions.
        ``Sec. 424. Egu allocations.
        ``Sec. 425. Disposition of sulfur dioxide allowances allocated 
                            under subpart 1.
        ``Sec. 426. Incentives for sulfur dioxide emission control 
             ``subpart 3--western regional air partnership
        ``Sec. 431. Definitions.
        ``Sec. 432. Applicability.
        ``Sec. 433. Limitations on total emissions.
        ``Sec. 434. EGU allocations.
       ``Part C--Nitr``subpart 1--acid rain programon Reductions
        ``Sec. 441. Nitrogen oxides emission reduction program.
       ``subpart 2--clear skies nitrogen oxides allowance program
        ``Sec. 451. Definitions.
        ``Sec. 452. Applicability.
        ``Sec. 453. Limitations on total emissions.
        ``Sec. 454. EGU allocations.
        ``subpart 3--ozone season no<INF>X</INF> budget programits.
        ``Sec. 461. Definitions.
        ``Sec. 462. General provisions.
        ``Sec. 463. Applicable implementation plan.
        ``Sec. 464. Termination of Federal administration of NOx 
                            trading program for EGUs.
        ``Sec. 465. Carryforward of pre-2008 nitrogen oxides 
                            allowances.
        ``Sec. 466. Non-ozone season voluntary action credits.
                 ``Part D--Mercury Emissions Reductions

        ``Sec. 471. Definitions.
        ``Sec. 472. Applicability.
        ``Sec. 473. Limitations on total emissions.
        ``Sec. 474. EGU allocations.
        ``Sec. 475. Mercury early action reduction credits.
    ``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 requirements 
                            and best available retrofit control 
                            technology requirements; applicability to 
                            affected units.
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.

    ``In this title:
            ``(1) Affected egu.--The term `affected EGU' shall have the 
        meaning set forth in section 421, 430, 451, or 471, as 
        appropriate.
            ``(2) Affected facility.--The term `affected facility' or 
        `affected source' means a facility or source that includes one 
        or more affected units.
            ``(3) Affected unit.--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, if 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) Allowance.--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) Baseline heat input.--
                    ``(A) In general.--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 1998 through 2002.
            ``(B) Commencement of operation after january 1, 2001.--
        Notwithstanding subparagraph (A), if a unit commenced or 
        commences operation after January 1, 2001, then `baseline heat 
        input' means the manufacturer's design heat input capacity for 
        the unit multiplied by 80 percent for coal-fired units, 50 
        percent for boilers that are not coal-fired, 80 percent for 
        combustion turbine cogeneration units elected under section 
        407, 50 percent for combustion turbines other than simple cycle 
        turbines, and 5 percent for simple cycle combustion turbines.
            ``(C) Heat input determination.--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) Regulations.--Not later than three months after the 
        enactment of the Clear Skies Act of 2005, 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. Not later than nine months after the enactment of 
        the Clear Skies Act of 2005, 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) Coal.--The term `coal' means any solid fuel 
        classified as anthracite, bituminous, subbituminous, or 
        lignite.
            ``(7) Coal-derived fuel.--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.
            ``(8) Coal-fired.--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 amount of any 
        other fuel in any year.
            ``(9) Cogeneration unit.--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.
            ``(10) Combustion turbine.--
                    ``(A) In general.--The term `combustion turbine' 
                means any combustion turbine that is not self-
                propelled.
                    ``(B) Inclusion.--The term `combustion turbine' 
                includes 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.
                    ``(C) Exclusions.--The term `combustion turbine' 
                does not include a combined turbine in an integrated 
                gasification combined cycle plant.
            ``(11) Commence commercial operation.--The term `commence 
        commercial operation' with regard to a unit means the start up 
        of the unit's combustion chamber and the commencement of the 
        generation of electricity for sale.
            ``(12) Compliance plan.--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, where applicable, 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.
            ``(13) Continuous emission monitoring system.--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.
            ``(14) Designated representative.--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.
            ``(15) Duct burner.--The term `duct burner' means a 
        combustion device that uses the exhaust from a combustion 
        turbine to burn fuel for heat recovery.
            ``(16) Facility.--The term `facility' means all buildings, 
        structures, or installations located on 1 or more contiguous or 
        adjacent properties under common control of the same person or 
        persons.
            ``(17) Fossil fuel.--The term `fossil fuel' means natural 
        gas, petroleum, coal, or any form of solid, liquid, or gaseous 
        fuel derived from such material.
            ``(18) Fossil fuel-fired.--The term `fossil fuel-fired', 
        with regard to a unit, means the combustion of fuel that is 
        composed of at least 10 percent fossil fuel.
            ``(19) Fuel oil.--The term `fuel oil' means a petroleum-
        based fuel, including diesel fuel or petroleum derivatives.
            ``(20) Gas-fired.--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 least 90 percent, and fuel oil comprising no 
        more than 10 percent, of the unit's total heat input in any 
        year.
            ``(21) Gasify.--The term `gasify' means to convert carbon-
        containing material into a gas consisting primarily of carbon 
        monoxide and hydrogen.
            ``(22) Generator.--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.
            ``(23) Heat input.--
                    ``(A) In general.--The term `heat input', with 
                regard to a specific period of time, means the product 
                (in mmBtu/time) obtained by multiplying--
                            ``(i) the gross calorific value of the fuel 
                        (in mmBtu/lb); and
                            ``(ii) the fuel feed rate into a unit (in 
                        lb of fuel/time).
                    ``(B) Exclusions.--The term `heat input' does not 
                include the heat derived from preheated combustion air, 
                recirculated flue gases, or exhaust.
            ``(24) Integrated gasification combined cycle plant.--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.
            ``(25) Oil-fired.--The term `oil-fired', with regard to a 
        unit, means, except under sections 424 and 434, combusting fuel 
        oil for more than 10 percent the unit's total heat input, and 
        combusting no coal or coal-derived fuel, in any year.
            ``(26) Owner or operator.--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.
            ``(27) Permitting authority.--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.
            ``(28) Potential electrical output.--The term `potential 
        electrical output' with regard to a generator means the 
        nameplate capacity of the generator multiplied by 8,760 hours.
            ``(29) Simple cycle combustion turbine.--The term `simple 
        cycle combustion turbine' means a combustion turbine that does 
        not extract heat from the combustion turbine exhaust gases.
            ``(30) Stationary source.--The term `stationary source' 
        means any building, structure, facility, or installation 
        located on one or more contiguous or adjacent properties under 
        common control or ownership of the same person or persons which 
        emits or may emit any air pollutant subject to regulations 
        under the Clear Skies Act of 2005.
            ``(31) State.--The term `State' means--
                    ``(A) 1 of the 48 contiguous States, Alaska, 
                Hawaii, the District of Columbia, the Commonwealth of 
                Puerto Rico, the Virgin Islands, Guam, American Samoa, 
                or the Commonwealth of the Northern Mariana Islands; or
                    ``(B) under subpart 1 of part B and subpart 1 of 
                part C, 1 of the 48 contiguous States or the District 
                of Columbia.
            ``(32) Unit.--The term `unit' means--
                    ``(A) a fossil fuel-fired boiler, combustion 
                turbine, or integrated gasification combined cycle 
                plant;
                    ``(B) under subpart 1 of part B and subpart 1 of 
                part C, a fossil fuel-fired combustion device; and
                    ``(C) a stationary source that--
                            ``(i) emits nitrogen oxides, sulfur 
                        dioxide, mercury, or any combination of those 
                        substances; and
                            ``(ii) is elected under section 407.
            ``(33) Utility unit.--The term `utility unit' shall have 
        the meaning set forth in section 411.
            ``(34) Year.--The term `year' means a calendar year.

``SEC. 403. ALLOWANCE SYSTEM.

    ``(a) Allocations.--
            ``(1) In general.--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) No judicial review.--Notwithstanding any other 
        provision of law to the contrary, the calculation of the 
        allocation for any unit or facility, 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) Allocation without cost.--Allowances shall be 
        allocated by the Administrator without cost to the recipient, 
        in accordance with this title.
    ``(b) Allowance Transfer System.--Allowances allocated 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 (2002), 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 2005. 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 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. 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 twenty-four months 
prior to the compliance year, 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 (2002), 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 2005. All 
allowance allocations and transfers shall, upon recording 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 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 sold 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 of the Clean Air Act 
or section 404 of the Clear Skies Act of 2005 with respect to the unit 
for which such allowance was originally allocated and recorded.
    ``(e) Prohibitions.--
            ``(1) In general.--It shall be unlawful for any person to 
        hold, use, or transfer any allowance allocated or sold by the 
        Administrator under this title, except in accordance with 
        regulations promulgated by the Administrator.
            ``(2) Emissions.--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 designated 
        representative as provided in sections 412(c), 422, 432, 452, 
        and 472.
            ``(3) Purchase of allowances.--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 the 
        year in which the purchase is made or the prior year. Not later 
        than thirty-six months after the date of enactment of the Clear 
        Skies Act of 2005, 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 the year in 
                which the purchase is made or the prior year;
                    ``(B) each such sulfur dioxide allowance shall be 
                sold for $2,000, 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 2005 and annually thereafter;
                    ``(C) the proceeds from any sales of allowances 
                under subparagraph (B) shall be, in accordance with 
                paragraph (j), deposited in the Compliance Assistance 
                Account;
                    ``(D) except for allowances subject to (E), the 
                allowances directly purchased for use for the year 
                specified in subparagraph (A) shall be, on a pro rata 
                basis, 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 allocated under section 423, 453, or 473 
                starting for the second year after the specified year 
                and continuing for each subsequent year as necessary; 
                and
                    ``(E) if the designated representative does not use 
                any such allowance in accordance with paragraph (A) the 
                designated representative shall hold the allowance for 
                deduction by the Administrator. The Administrator shall 
                deduct the allowance without refund or other form of 
                recompense.
            ``(4) Use of allowances.--Allowances may not be used prior 
        to the calendar year for which they are allocated but may be 
        used in succeeding years. 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) In general.--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) Definition of antitrust laws.--In this section, the 
        term `antitrust laws' means those Acts set forth in section 1 
        of the Clayton Act (15 U.S.C. 12).
    ``(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 
and nitrogen oxides allowances for sulfur dioxide allowances.
    ``(j) Compliance Assistance Account.--An account shall be 
established by the Secretary of Energy in consultation with the 
Administrator:
            ``(1) Use of amounts.--Payments or monies deposited in this 
        account in accordance with this title shall be used for the 
        purpose of developing emission control technologies through 
        direct grants to affected units that demonstrate new control 
        technologies regulated under this title.
            ``(2) Regulations.--The Secretary of Energy in consultation 
        with the Administrator shall promulgate regulations with notice 
        and opportunity for comment to establish criteria for affected 
        units to qualify for this subsection.

``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) exceeding applicable emissions rates under section 
        441;
            ``(3) the use of any allowance prior to the year for which 
        it was allocated; 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.--
            ``(1) In general.--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.
            ``(2) Statements.--
                    ``(A) In general.--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.
                    ``(B) Other statements.--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) Recording of transfers.--Recording by the 
        Administrator of transfers of allowances shall amend 
        automatically, and will not reopen or require reopening of, any 
        or 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) In general.--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).
            ``(2) No termination of operations.--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.
    ``(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.
    ``(g) Multiple Owners.--
            ``(1) In general.--No permit shall be issued under this 
        section to an affected unit 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. Where there are 
        multiple holders of a legal or equitable title to, or a 
        leasehold interest in, such a 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 shall state--
                    ``(A) that allowances and the proceeds or 
                transactions involving allowance will be deemed to be 
                held or distributed in proportion to each holder's 
                legal, equitable, leasehold, or contractual reservation 
                or entitlement, or
                    ``(B) if such multiple holders have expressly 
                provided for a different distribution of allowances by 
                contract, that allowances and the proceeds of 
                transactions involving allowances will be deemed to be 
                held or distributed in accordance with the contract.
            ``(2) Passive lessor.--A passive lessor, of 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 purposes of holding or distributing allowances 
        as provided in this subsection, 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 received by the 
        unit are deemed to be held for that person.

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

    ``(a) Requirements.--
            ``(1) Applicability.--
                    ``(A) In general.--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) Specification of requirements.--The 
                Administrator shall, by regulation, 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 time lines 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) Installation and operation.--
                    ``(A) In general.--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 dioxide, 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) Alternative monitoring.--
                            ``(i) In general.--The Administrator may 
                        specify an alternative monitoring or compliance 
                        system for determining mercury emissions. In 
                        specifying such alternative monitoring or 
                        compliance systems, the lack of commercially 
                        available appropriate and reasonable vendor 
                        guarantees shall constitute a reasonable and 
                        permissible basis for specifying alternative 
                        monitoring or compliance systems for mercury.
                            ``(ii) Limitations.--The regulations under 
                        clause (iv) 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 to a reasonable extent the 
                        emissions reductions contemplated by this 
                        title.
                            ``(iii) No separate monitoring system.--The 
                        regulations under clause (iv) shall not require 
                        a separate CEMS or other monitoring system 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.
                            ``(iv) Specification of requirements.--The 
                        Administrator shall, by regulation, specify the 
                        requirements for CEMS under subparagraph (A), 
                        for any alternative monitoring or compliance 
                        system that is demonstrated as providing 
                        information which is reasonably of the same 
                        precision, reliability, accessibility, and 
                        timeliness 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 
                        to a reasonable extent the emissions reductions 
                        contemplated by this title. Where two 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.
    ``(b) Deadlines.--
            ``(1) New utility units.--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) Deadline for affected units under subpart 2 of part b 
        for installation and operation of cems.--By the later of the 
        date that is 1 year before the commencement date of the sulfur 
        dioxide allowance requirement of section 422, 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) Deadline for affected units under subpart 3 of part b 
        for installation and operation of cems.--By the later of the 
        date that is 1 year before the first covered year, or the date 
        on which the unit commences commercial 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) Deadline for affected units under subpart 2 of part c 
        for installation and operation of cems.--By the later of the 
        date that is 1 year before the commencement date of the 
        nitrogen oxides allowance requirement under section 452, 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.
            ``(5) Deadline for affected units under part d for 
        installation and operation of cems.--By the later of the date 
        that is 1 year before the commencement date of the mercury 
        allowance requirement of section 472 applies to such unit and 
        commences commercial operation, 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.--
            ``(1) Sulfur dioxide and nitrogen oxides.--With respect to 
        sulfur dioxide and nitrogen oxides, 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, reasonably satisfactory to the 
        Administrator, on emissions during that period, the 
        Administrator, in coordination with the owner, shall calculate 
        emissions for that period pursuant to regulations promulgated 
        for such purpose. 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.
            ``(2) Mercury.--With respect to mercury, 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, reasonably satisfactory to 
        the Administrator, on emissions during that period, the 
        Administrator in coordination with the owner, shall calculate 
        emissions for that period pursuant to regulations promulgated 
        for such purpose. 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) Implementation.--With regard to sulfur dioxide, nitrogen 
oxides, opacity, and volumetric flow, the Administrator shall implement 
subsections (a) and (c) under 40 CFR part 75 (2002), amended, as 
appropriate by the Administrator. With regard to mercury, the 
Administrator shall implement subsections (a) and (c) by issuing 
proposed regulations not later than 36 months before the commencement 
date of the mercury allowance requirement under section 472 and final 
regulations not later than 24 months before that commencement date.
    ``(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) Amount for oxides of nitrogen.--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 
        emissions 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) Amount for sulfur dioxide before 2008.--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) or (g). That penalty shall be calculated as follows:
                    ``(A) The product of the unit's excess emissions 
                (in tons) multiplied by $2,000, if within 30 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 payment required under this 
                        subparagraph.
                    ``(B) If the requirements of clause (A)(i) or 
                (A)(ii) are not met, the product of the unit's excess 
                emissions (in tons) multiplied by $3,000.
            ``(3) Amount for sulfur dioxide after 2007.--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) Units subject to sections 422, 432, 452, or 472.--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 or 
        units 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 equal to--
                    ``(A) the quantity of the units' excess emissions 
                in tons (or, for mercury emissions, in ounces) 
                multiplied by $2,000 (in the case of sulfur dioxide), 
                $4,000 (in the case of nitrogen oxides), or $2187.50 
                (in the case of mercury) if, on or before the date that 
                is 30 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 
                        (2) or (3) of subsection (b), as applicable; 
                        and
                            ``(ii) the Administrator receives the 
                        penalty required under this subparagraph; or
                    ``(B) if a requirement under subparagraph (A) is 
                not met, the quantity of the units' excess emissions in 
                tons (or, for mercury emissions, in ounces) multiplied 
                by the product obtained by multiplying--
                            ``(i) 1.5; and
                            ``(ii) the respective amount for sulfur 
                        dioxide, nitrogen oxides, or mercury specified 
                        in subparagraph (A).
            ``(5) Payment.--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 
        part 77 (2002), 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 24 months after the date of enactment 
        of the Clear Skies Act of 2005. Any such payment shall be 
        deposited in the Compliance Assistance Account.
    ``(b) Excess Emissions Offset.--
            ``(1) In general.--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) Excess emissions of sulfur dioxide.--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) Excess emissions of sulfur dioxide, nitrogen oxides, 
        or mercury.--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) and (a)(2) 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) Other Requirements.--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 this Act, no State or political subdivision thereof 
shall restrict or interfere with the transfer, sale, or purchase of 
allowances under this title.
    ``(g) Violations.--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.--
            ``(1) In general.--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 the unit as an affected unit under subpart 2 of part 
        B and subpart 2 of part C.
            ``(2) Effect of designation.--If the owner or operator 
        elects to designate a unit that is solid fuel-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. If an elected unit fires only gaseous fuels, the 
        unit may be designated under subpart 2 of part C only.
    ``(b) Application.--An owner or operator making an election under 
subsection (a) shall submit an application for the election to the 
Administrator for approval.
    ``(c) Approval.--Subject to subsections (d) through (m), if the 
Administrator determines that 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.
    ``(d) Establishment of Baseline.--
            ``(1) In general.--After approval of a designation under 
        subsection (c), an owner or operator shall install and operate 
        monitoring on the designated unit required under paragraph (5), 
        except that, in a case in which 2 or more units use a single 
        stack, separate monitoring shall be required for each unit 
        unless all units using the same stack are designated as 
        affected units.
            ``(2) Baselines.--
                    ``(A) In general.--Units shall have baselines 
                established using heat input unless the unit qualifies 
                for a product output baseline under paragraph (4).
                    ``(B) Heat input or product output.--The baselines 
                for heat input or product output and sulfur dioxide and 
                nitrogen oxides emission rates, as the case may be, for 
                the unit shall be the unit's heat input or product 
                output and the emission rates of sulfur dioxide and 
                nitrogen oxides in accordance with paragraphs (3) and 
                (4).
                    ``(C) Regulations.--The Administrator shall 
                promulgate regulations requiring the unit's baselines 
                for heat input or product output and for sulfur dioxide 
                and nitrogen oxides emission rates to be based on the 
                same year and specifying minimum data requirements 
                consistent with paragraph (5) for baseline 
                determination.
            ``(3) Heat input and emissions baselines.--For the purposes 
        of this subsection, heat input and emissions baselines shall be 
        calculated, at the election of the owner or operator of the 
        relevant unit, as--
                    ``(A)(i) for heat input, the average of the unit's 
                highest heat input for 3 of the 5 years before the year 
                for which the Administrator is determining the 
                allocations; and
                    ``(ii) for emissions baselines, the average of the 
                relevant emissions during those same 3 years; or
                    ``(B)(i) for heat input, the average of any period 
                of 24 consecutive months during the 10-year period 
                immediately prior to the date of submission of an 
                application under subsection (b), on the condition that 
                the heat input does not exceed 1.2 times the average of 
                the 10-year period; and
                    ``(ii) for emissions baselines, the average of the 
                relevant emissions for the 4-year period prior to the 
                date of enactment of the Clear Skies Act of 2005 (for 
                units that submit an application on or before January 
                1, 2009), or the average of the relevant emissions for 
                the 4 years before the date of submission of the 
                application under that Act (for units that submit an 
                application after January 1, 2009).
            ``(4) Designation for product output basis.--
                    ``(A) In general.--The owner or operator of a unit 
                that is subject to new source performance standards or 
                other measures imposed by this Act on a product output 
                basis rather than a heat input basis may elect to 
                designate the unit as an affected unit under subpart 2 
                of part B and subpart 2 of part C.
                    ``(B) Baseline product output and emissions 
                baselines.--For the purposes of this paragraph, for 
                those units using a product output basis, the baseline 
                product output and emissions baselines in this 
                subparagraph shall be calculated, at the election of 
                the owner or operator of the relevant unit, as--
                            ``(i)(I) for product input, the average of 
                        the unit's highest product output for 3 of the 
                        5 years preceding the year for which the 
                        Administrator is determining the allocations; 
                        and
                            ``(II) for emissions baselines, the average 
                        of the relevant emissions for the same years 
                        used to determine product output; or
                    ``(B)(i) for product input, the average of any 
                period of 24 consecutive months during the 10-year 
                period immediately prior to the date of submission of 
                an application under subsection (b), on the condition 
                that the product input does not exceed 1.2 times the 
                average of the 10-year period; and
                    ``(ii) for emissions baselines, the average of the 
                relevant emissions for the 4-year period prior to the 
                date of enactment of the Clear Skies Act of 2005 (for 
                units that submit an application on or before January 
                1, 2009), or the average of the relevant emissions for 
                the 4 years before the date of submission of the 
                application under that Act (for units that submit an 
                application after January 1, 2009).
            ``(5) Baseline determinations.--
                    ``(A) In general.--In making baseline 
                determinations under this section, the Administrator 
                may accept any reliable data on emissions of sulfur 
                dioxide and nitrogen oxides in addition to, and other 
                than, data collected from CEMS.
                    ``(B) Types of data.--Reliable data described in 
                subparagraph (A) includes--
                            ``(i) alternative data that has been used 
                        to determine compliance with a regulatory or 
                        monitoring requirement under this Act or a 
                        comparable State law, if the data establishes a 
                        reliable measure of heat input or product 
                        output and sulfur dioxide and nitrogen oxides 
                        emissions over a simultaneous period of time; 
                        or
                            ``(ii) if that data is not available, such 
                        other alternative reliable data as the 
                        Administrator may prescribe.
                    ``(C) Use of cems for compliance monitoring.--The 
                Administrator--
                            ``(i) shall not require the use of CEMS for 
                        compliance monitoring by units of less than 250 
                        mmBtu heat input or equivalent product output 
                        capacity subject to this section unless the 
                        Administrator concludes that a CEMS requirement 
                        is necessary to generate reliable data for 
                        compliance determinations;
                            ``(ii) shall require the use of CEMS for 
                        compliance monitoring by units of between 250 
                        mmBtu and 750 mmBtu heat input or equivalent 
                        product output capacity unless the 
                        Administrator determines that a CEMS 
                        requirement is not necessary to generate 
                        reliable data for compliance determinations; 
                        and
                            ``(iii) shall require the use of CEMS for 
                        compliance monitoring for all units greater 
                        than 750 mmBtu heat input or equivalent product 
                        output capacity.
            ``(D) Reliability.--In determining the reliability of data 
        for purposes of this subsection, the Administrator shall 
        consider the cost of generating more reliable data compared to 
        the quantitative importance of the resulting gain in 
        quantifying emissions.
    ``(e) Emission Limitations.--After approval of the designation of 
the unit under subsection (c), the unit shall become--
            ``(1) an affected unit under subpart 2 of part B, and shall 
        be allocated sulfur dioxide allowances under subsection (f), 
        beginning on the later of January 1, 2010, or January 1 of the 
        year after approval of the designation;
            ``(2) an affected unit under subpart 2 of part C, and shall 
        be allocated nitrogen oxides allowances under subsection (f), 
        beginning on the later of January 1, 2010, or January 1 of the 
        year after approval of the designation; and
            ``(3) if applicable, an affected unit under part D, and 
        shall be allocated mercury allowances, beginning on the later 
        of January l, 2010, or January 1 of the year after approval of 
        designation.
    ``(f) Allocations.--
            ``(1) Sulfur dioxide and nitrogen oxides.--
                    ``(A) In general.--The Administrator shall 
                promulgate regulations determining the allocations of 
                sulfur dioxide allowances and nitrogen oxides 
                allowances for each year during which a unit is an 
                affected unit under subsection (e).
                    ``(B) Allocations.--The regulations shall provide 
                for allocations equal to 70 percent (beginning January 
                1, 2010) and 50 percent (beginning January 1, 2018) of 
                the unit's baseline heat input or product output under 
                subsection (d) multiplied by the lesser of--
                            ``(i) the unit's baseline sulfur dioxide 
                        emission rate or nitrogen oxides emission rate, 
                        as the case may be; or
                            ``(ii) the unit's most stringent Federal or 
                        State emission limitation for sulfur dioxide or 
                        nitrogen oxides applicable to the year on which 
                        the unit's baseline heat input or product 
                        output is based under subsection (d).
            ``(2) Mercury.--
                    ``(A) In general.--The Administrator shall 
                promulgate regulations providing for the allocation of 
                mercury allowances to solid fuel-fired units designated 
                under this section for each year after January 1, 2010, 
                during which a unit is a designated unit under this 
                section.
                    ``(B) Allocations.--The regulations shall provide 
                for allocations equal to the lesser of--
                            ``(i) the product obtained by multiplying--
                                    ``(I) the unit's allowable 
                                emissions rate for mercury under the 
                                national emissions standards for 
                                hazardous air pollutants for boilers 
                                and process heaters, industrial 
                                furnaces, kilns, or other stationary 
                                source; by
                                    ``(II) the unit's baseline heat 
                                input or product output; and
                            ``(i) the product obtained by multiplying--
                                    ``(I) the unit's most stringent 
                                Federal or State emission limitation 
                                for mercury emissions rate; by
                                    ``(II) the unit's baseline heat 
                                input or product output.
            ``(3) Limitation.--Allowances allocated to electing units 
        under paragraphs (1) and (2) shall comprise a separate 
        limitation on emissions from sections 423, 433, 453, 473, and 
        other provisions of this Act. These allowances for sulfur 
        dioxide, nitrogen oxides, or mercury, as the case may be, shall 
        be tradable with allowances allocated under sections 414, 424, 
        454, 474, as applicable, on the conditions that--
                    ``(A) electing units may only trade nitrogen oxides 
                within the respective zones established under section 
                452 within which the electing unit is located; and
                    ``(B) affected units within the WRAP States may 
                only purchase sulfur dioxide allowances allocated or 
                otherwise distributed by the Administrator to electing 
                units within the WRAP States, and will not be counted 
                for purposes of the affected unit's emissions within 
                the meaning of the WRAP Annex.
            ``(4) Incentives for early reductions.--
                    ``(A) In general.--Not later than 180 months after 
                the date of enactment of this section, the 
                Administrator shall promulgate regulations authorizing 
                the allocation of sulfur dioxide, nitrogen oxides, and 
                mercury allowances to units designated under this 
                section that install or modify pollution control 
                equipment or combustion technology improvements 
                identified in such regulations after the date of 
                enactment of this section and prior to January 1, 2010.
                    ``(B) Prohibition on certain allocations.--No 
                allowances shall be allocated under this paragraph for 
                emissions reductions attributable to--
                            ``(i) pollution control equipment or 
                        combustion technology improvements that were 
                        operational or under construction at any time 
                        prior to the date of enactment of this section;
                            ``(ii) fuel switching; or
                            ``(iii) compliance with any Federal 
                        regulation.
                    ``(C) Allowances.--The allowances allocated to any 
                unit under this paragraph shall--
                            ``(i) be in addition to the allowances 
                        allocated under paragraphs (1) and (2) and 
                        sections 414, 424, 434, 454, and 474; and
                            ``(ii) be allocated in an amount equal to 1 
                        allowance of sulfur dioxide and nitrogen oxides 
                        for each 1.05 tons of reduction in emissions of 
                        sulfur dioxide and nitrogen oxides, 
                        respectively, and 1.05 ounces of reduction in 
                        the emissions of mercury, achieved by the 
                        pollution control equipment or combustion 
                        technology improvements starting with the year 
                        in which the equipment or improvement is 
                        implemented.
    ``(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 or subpart 
2 of part C, or part D after the approval of the designation of the 
unit under subsection (c).
    ``(h) Regulations.--Not later than 18 months after the date of 
enactment of the Clear Skies Act of 2005, the Administrator shall 
promulgate regulations implementing this section.
    ``(i) Application Period.--
            ``(1) In general.--Applications for designation of units 
        under this section shall be accepted by the Administrator 
        beginning not later than 180 days after the date of enactment 
        of this section.
            ``(2) Approval and disapproval.--Except as provided in 
        paragraph (30, not later than 270 days after accepting an 
        application under paragraph (1), the Administrator shall 
        approve or disapprove the application.
            ``(3) Determination of completion.--
                    ``(A) In general.--Not later than 90 days after 
                accepting an application under paragraph (1), the 
                Administrator shall determine whether the application 
                is complete.
                    ``(B) Determination of completion.--Unless an 
                application accepted under paragraph (1) is determined 
                to be incomplete under subparagraph (A), the 
                application shall be subject to paragraph (2).
            ``(4) Stay of deadlines.--During the period beginning on 
        the date of acceptance by the Administrator of an application 
        under paragraph (1) and ending on the date on which the 
        Administrator acts on the petition, the applicable compliance 
        deadlines for NESHAPs under subsection (j) shall not apply to 
        the applicable unit that is the subject of the application.
    ``(j) NESHAP Applicability.--
            ``(1) Applicability.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a unit that is designated as an 
                affected unit under this section shall not be subject 
                to the national emissions standards for hazardous air 
                pollutants (NESHAP) promulgated under section 112(d) 
                for--
                            ``(i) Industrial, Commercial, and 
                        Institutional Boilers and Process Heaters (Fed. 
                        Reg. 69-55217);
                            ``(ii) Plywood and Composite Wood Panel 
                        (Fed. Reg. 69-45943);
                            ``(iii) Reciprocating Internal Combustion 
                        Engines (Fed. Reg. 69-33473); or
                            ``(iv) Stationary Combustion Turbines (Fed. 
                        Reg. 69-10511).
                    ``(B) Exception.--Units that are boilers or process 
                heaters, industrial furnaces, kilns, or other 
                stationary sources shall be subject on and after 
                January 1, 2010, to the emissions limitation for 
                mercury or the equivalent mercury allocation under 
                subsection (f)(2), along with associated monitoring and 
                compliance requirements, that would be applicable to 
                such units under the NESHAP for those sources 
                promulgated pursuant to section 112(d).
            ``(2) Reports.--
                    ``(A) Preliminary report.--Not later than 18 months 
                after the date of enactment of this section, the 
                Administrator shall publish and make available for 
                public comment a peer reviewed preliminary report 
                characterizing the emissions and public health effects 
                that may reasonably be anticipated to occur from the 
                implementation of subsection (j)(1) and subsection (f).
                    ``(B) Final report.--Not later than 30 months after 
                the date on which the preliminary report is published 
                under subparagraph (A), in accordance with section 
                112(n)(1)(A), the Administrator shall publish a final 
                report, including responses to the comments received.
                    ``(C) Requirements.--The requirements of section 
                112(n)(1)(A), for purposes of this paragraph, shall be 
                considered to be modified to ensure that the final 
                report under subparagraph (B) includes--
                            ``(i) an estimate of the numbers and types 
                        of sources that are expected to be designated 
                        under this section;
                            ``(ii) an estimate of any increase or 
                        decrease in the annual emissions of criteria 
                        pollutants and of those hazardous air 
                        pollutants subject to emission limitations 
                        under the NESHAPs identified in subsection 
                        (j)(1) from such sources that may reasonably be 
                        expected to occur for each year from 2010 
                        through 2018;
                            ``(iii) an estimate of any increase or 
                        decrease in the annual emissions of criteria 
                        pollutants and of those hazardous air 
                        pollutants subject to emission limitations 
                        under the NESHAPs identified in subsection 
                        (j)(1) from such sources that might reasonably 
                        be expected to occur for each year from 2010 
                        through 2018, if such sources estimated in 
                        clause (i) are not designated under this 
                        section; and
                            ``(iv) a description of the public health 
                        and environmental impacts associated with the 
                        emissions increases and decreases described in 
                        clauses (ii) and (iii).
                    ``(D) Additional authority.--
                            ``(i) In general.--Notwithstanding 
                        subsection (j)(1), the Administrator may 
                        regulate emissions of hazardous air pollutants 
                        listed under section 112(b), other than mercury 
                        compounds, from sources designated under this 
                        section in accordance with section 112(f)(2).
                            ``(ii) Determination.--Not later than 2 
                        years after the date on which the final report 
                        under subparagraph (B) is published, the 
                        Administrator shall make a determination based 
                        on the study and other information satisfying 
                        the criteria of the Data Quality Act whether to 
                        establish emissions limitations under section 
                        112(f) for sources designated under this 
                        section.
                            ``(iii) Treatment of determination.--The 
                        determination shall be a final agency action 
                        subject to judicial review under section 307 
                        and the Administrative Procedures Act.
    ``(k) Exemption From Major Source Preconstruction Review 
Requirements and Best Available Retrofit Control Technology 
Requirements.--
            ``(1) Major source exemption.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                unit designated as an affected unit under this section 
                shall not be considered to be a major source, or a part 
                of a major emitting facility or major stationary source 
                for purposes of compliance with the requirements of 
                parts C and D of title I, for the 20-year period 
                beginning on the date of enactment of the Clear Skies 
                Act of 2005.
                    ``(B) Applicability.--Subparagraph (A) applies only 
                if, beginning on the date that is 8 years after the 
                date of enactment of this section or designation of a 
                unit as an affected unit--
                            ``(i)(I) the designated unit either 
                        achieves in fact, or is subject to a regulatory 
                        requirement to achieve, a limit on the 
                        emissions of particulate matter from the 
                        affected unit to the level not greater than the 
                        level applicable to the unit either pursuant to 
                        subpart D of part 60 of title 40, Code of 
                        Federal Regulations, or the national emissions 
                        standards for hazardous air pollutants for 
                        industrial boilers and process heaters issued 
                        pursuant to section 112; or
                            ``(II) the owner or operator of the 
                        affected unit properly operates, maintains, and 
                        repairs pollution control equipment to limit 
                        emissions of particulate matter; and
                            ``(ii) the owner or operator of the 
                        designated unit uses good combustion practices 
                        to minimize emissions of carbon monoxide.
            ``(2) Class i area protections.--Notwithstanding the 
        exemption in paragraph (1), an affected unit located within 50 
        kilometers of a Class I area on which construction commences 
        after the date of enactment of this section is subject to those 
        provisions under part C of title I to the review of a new or 
        modified major stationary source's impact on a Class I area.
    ``(l) Limitation.--
            ``(1) In general.--No unit designated under this section 
        shall 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--
                    ``(A) reduced utilization or shutdown results from 
                the replacement of the unit designated under this 
                section, with any other unit or units subject to the 
                requirements of this subpart; and
                    ``(B) the designated unit's allowances are 
                transferred or carried forward for use at such other 
                replacement unit or units.
            ``(2) No greater allocation.--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.
            ``(3) No violation.--No allowances allocated under this Act 
        shall authorize operation of a unit in violation of any other 
        requirements of this Act.
    ``(m) Definition of Product Output.--In this section, the term 
`product output' means the output of a stationary source that produces 
a commercial product other than electricity, heat, or steam which may 
be used to determine a baseline for units for which heat input is not 
an appropriate baseline.''.

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

    ``(a) Definition.--For purposes of this section, the term `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 November 15, 
1990.
    ``(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 twenty 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 5 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 twelve 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. ELECTRICITY RELIABILITY.

    ``(a) Reliability.--
            ``(1) Applicability.--At any time prior the applicability 
        of this Act under sections 422, 432, 452, and 472, in order to 
        ensure the reliability of an electric utility company or 
        system, including a system cooperatively or municipally owned, 
        for a specified geographic area or service territory, as 
        determined by the Department of Energy in consultation with the 
        Administrator, during the installation of sulfur dioxide 
        pollution control technology or scrubbers, nitrogen oxides, 
        mercury or particulate matter control technology, or any 
        combination thereof, the owner or operator of an affected unit 
        may meet the requirements of sections 422, 432, 452, and 472 by 
        means of the compliance procedures of this subsection (a).
            ``(2) Petition.--The owner or operator of an affected unit 
        that believes it may experience an adverse impact on the 
        reliability of the company or system as a result, in 
        substantial part, of the need to construct sulfur dioxide 
        pollution control equipment or scrubbers, nitrogen oxides, 
        mercury or particulate matter control technology, or any 
        combination thereof, may petition the Secretary of Energy, in 
        consultation with the Administrator, for a determination that, 
        to a reasonable degree of certainty, reliability will likely be 
        threatened. Upon such a determination, the owner or operator 
        may elect to adopt a compliance method meeting the requirements 
        of this subsection, as follows:
                    ``(A) Regulations.--Within 12 months of enactment 
                the Secretary of Energy shall promulgate regulations 
                describing the requirements for a petition and the 
                petition process, which will include notice and public 
                comment. The Secretary of Energy, in consultation with 
                the Administrator, shall make a final determination on 
                a petition within 180 days of the submittal of a 
                reasonably complete petition. Failure to act within the 
                180-day period will extend the applicability by 12 
                months for all units subject to the petition.
                    ``(B) Contents of petition.--The petition must 
                contain--
                            ``(i) a description of each affected unit, 
                        the estimated outage time and a construction 
                        schedule;
                            ``(ii) an estimate of demand from date of 
                        applicability until 2018;
                            ``(iii) the impacts on reliability 
                        associated with constructing all of the 
                        pollution control projects, including those for 
                        sulfur dioxide, nitrogen oxides, mercury, or 
                        particulate matter, by the respective 
                        deadlines; and
                            ``(iv) how the proposed compliance schedule 
                        would alleviate detrimental impacts.
                    ``(C) Failure to promulgate regulations.--If the 
                Secretary of Energy fails to promulgate final 
                regulations or such regulations are not effective for 
                any reason, within the prescribed time, petitions 
                containing reasonably sufficient information for a 
                final determination may be submitted to the Secretary 
                of Energy and will be deemed complete.
            ``(3) Final determination.--In making a final determination 
        the Secretary of Energy, in consultation with the 
        Administrator, shall consider the following factors, provided 
        that not all factors need be present to make a determination 
        that, to a reasonable degree, reliability will be threatened:
                    ``(A) Supply.--The ability of vendors to supply 
                scrubbers; scrubber system equipment, materials and 
                scrubber affected balance of plant equipment including 
                fans, pumps, electric motors, motor drives, dampers, 
                electrical power supply equipment; at fair prices with 
                meaningful guarantees or warranties as to availability, 
                delivery dates and meeting contracted pollution control 
                reduction requirements or emissions limitations; with 
                similar considerations for nitrogen oxides, mercury or 
                particulate matter control technology, or any 
                combination thereof.
                    ``(B) Design and construction resources.--The 
                availability and limitations of key sulfur dioxide, 
                nitrogen oxides or mercury controls design resources 
                and North American construction resources. The design 
                resources shall include Architect Engineering companies 
                experienced in the design of sulfur dioxide, nitrogen 
                oxides, mercury or particulate matter control 
                technology. The construction resources shall include 
                construction companies with experience in the 
                construction of sulfur dioxide, nitrogen oxides, 
                mercury, or particulate matter control technology and 
                trained and experienced labor resources including but 
                not limited to boilermakers, iron workers, 
                electricians, mechanics;
                    ``(C) Feasibility of construction.--The feasibility 
                to complete the construction of all pollution control 
                technology projects by the relevant applicability 
                compliance deadline;
                    ``(D) Impact.--The impact in terms of unit outages 
                and construction schedules on a company or systems 
                reliability and whether such impact is unreasonable, 
                which term shall be presumed to be--
                            ``(i) an increase in the price of purchase 
                        power of (10) percent over the estimated cost 
                        in cents per kilowatt for the company, system 
                        or State, utilized in the latest submissions to 
                        a relevant State or Federal agency;
                            ``(ii) a projected reduction in available 
                        generating capacity such that adequate reserve 
                        margins for a company, system or State do not 
                        exist, as determined by the Secretary of Energy 
                        in coordination with the relevant Federal or 
                        State utility agency or reliability council; or
                            ``(iii) a supply shortage of coal needed to 
                        meet emissions control expectations for any 
                        proposed emissions control device.
                    ``(E) Positive determination.--A company or system 
                which submits a petition to install sulfur dioxide, 
                nitrogen oxides, mercury, or particulate matter control 
                technology, or any combination thereof, on affected 
                units equaling 25 percent or more of its coal-fired 
                capacity shall be presumed to meet the requirements of 
                a positive determination from the Secretary of Energy.
            ``(4) Compliance.--Upon a positive determination by the 
        Secretary of Energy in accordance with paragraph (3)(E), such 
        affected units will be granted a 1-year extension from the 
        relevant applicability date under this title.
    ``(b) Submission of Petition.--During any year covered by this 
title, an affected unit may submit a petition in accordance with 
paragraph (a)(2) to allow use of sulfur dioxide allowances, nitrogen 
oxides allowances, and mercury allowances, as the case may be, 
allocated for the immediate next year to meet the applicable 
requirement to hold such allowances equal to the petitioned year's 
emissions.
    ``(c) Presidential Waiver.--Notwithstanding subsection (a) or any 
other provision of this Act, The President of the United States shall 
have authority to temporarily grant waivers from emission limitations 
under sections 412, 422, 432, 452, and 472, as the case may be, if the 
President determines that the reliability of any portion of national 
electricity supply or national security is imperiled.

              ``PART B--SULFUR DIOXIDE EMISSION REDUCTIONS

                     ``Subpart 1--Acid Rain Program

``SEC. 411. DEFINITIONS.

    ``For purposes of this subpart and subpart 1 of part B:
            ``(1) Actual 1985 emission rate.--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 1985 National Acid Precipitation 
        Assessment Program (NAPAP) Emissions Inventory, Version 2, 
        National Utility Reference File (NURF). 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) Allowable 1985 emissions rate.--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 limitation.
            ``(3) Alternative method of compliance.--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) Baseline.--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 (NAPAP) Emissions Inventory, 
                Version 2 (NURF), or in a corrected data base as 
                established by the Administrator pursuant to paragraph 
                (3). For nonutility 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 4 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, strikes, disruptions of fuel supplies, 
                failure of equipment, other causes beyond the 
                reasonable control of the owner or operator of the unit 
                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 18 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) Basic phase ii allowance allocations.--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) Capacity factor.--The term `capacity factor' means 
        the ratio between the actual electric output from a unit and 
        the potential electric output from that unit.
            ``(7) Commenced.--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) Commenced commercial operation.--The term `commenced 
        commercial operation' with regard to a unit means the start up 
        of the unit's combustion chamber and commencement of the 
        generation of electricity for sale.
            ``(9) Construction.--The term `construction' means 
        fabrication, erection, or installation of an affected unit.
            ``(10) Existing unit.--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) Independent power producer.--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) New independent power production facility.--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) Industrial source.--The term `industrial source' 
        means a unit that does not serve a generator that produces 
        electricity, a `nonutility unit' as defined in this section, or 
        a process source.
            ``(14) Life-of-the-unit, firm power contractual 
        arrangement.--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) New unit.--The term `new unit' means a unit that 
        commences commercial operation on or after November 15, 1990.
            ``(16) Nonutility unit.--The term `nonutility unit' means a 
        unit other than a utility unit.
            ``(17) Phase ii bonus allowance allocations.--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) Qualifying phase i technology.--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) Repowering.--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) Reserve.--The term `reserve' means any bank of 
        allowances established by the Administrator under this subpart.
            ``(21) Utility unit.--
                    ``(A) In general.--The term `utility unit' means--
                            ``(i) a unit that serves a generator 
                        located in any State and that produces 
                        electricity for sale; or
                            ``(ii) a unit that, during 1985, served a 
                        generator located in any State and that 
                        produced electricity for sale.
                    ``(B) Exclusions.--
                            ``(i) In general.--Notwithstanding 
                        subparagraph (A), a unit described in 
                        subparagraph (A) that--
                                    ``(I) was in commercial operation 
                                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.
                            ``(i) Units that cogenerate steam and 
                        electricity.--A unit that cogenerates 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) In General.--Except as provided in sections 414(a)(2), 
415(a)(3), and 416, beginning January 1, 2000, the Administrator shall 
not allocate annual emission allowances for sulfur dioxide from utility 
units in excess of 8.90 million tons except that the Administrator 
shall not 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 the restrictions imposed in the preceding 
sentence, the 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) Prohibition of exceeding unit allowances.--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) Prohibition of exceeding source allowances.--Starting 
        January 1, 2008, a new utility unit shall be subject to the 
        prohibition in subsection (c)(3).
            ``(3) Eligibility for allocation of sulfur dioxide 
        allowances.--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) In general.--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) Prohibition of exceeding unit allowances.--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) Prohibition of exceeding source allowances.--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) Effect on other emission limitations.--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) Limitation on Regulations.--In order to ensure electricity 
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 recording. 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) Interest in Affected Units.--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) Allocation.--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 1; 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) Determination.--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 hereunder until 
                the earlier of such time as all such allowances in the 
                reserve are allocated or December 31, 1999.
            ``(3) Additional allocations.--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) In general.--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) Issuance of permits.--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) In general.--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) Requirements for extension proposals.--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' baselines, 
                actual 1985 emissions rates, allowable 1985 emissions 
                rates, and projected utilizations 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) Approval or disapproval.--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) Determining the availability of allocations.--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 multiplied 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) Allocation of initial allowances.--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) Allocation of additional allowances.--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) Deduction from annual allowance allocations.--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) Early Reductions.--
            ``(1) In general.--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 one 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) Limitations.--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, the 
        allowances awarded under this subsection for early reductions 
        in any prior year may not exceed the amount by which--
                    ``(A) the product of--
                            ``(i) the quantity of fossil fuel consumed 
                        by the unit (in mmBtu) in the prior year 
                        multiplied by--
                            ``(ii) the lesser of--
                                    ``(I) 2.50, or
                                    ``(II) the most stringent emission 
                                rate (in lbs per mmBtu) applicable to 
                                the unit under the applicable 
                                implementation plan--
                        divided by 2,000 exceeds
                    ``(B) the unit's actual tonnage of sulfur dioxide 
                emission for the prior year concerned.
        Allowances allocated under this subsection for units 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 
        quantity of fossil fuel consumed.
            ``(3) No basis for excused nonperformance.--In no event 
        shall the provisions of this paragraph be interpreted as an 
        event of force majeure or a commercial impracticability 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 
                        or participating in the qualified energy 
                        conservation measures or qualified renewable 
                        energy.
                            ``(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) In the case of electric utilities 
                        subject to the jurisdiction of a State 
                        regulatory authority such plan shall have been 
                        approved by such authority. For electric 
                        utilities not subject to the jurisdiction of a 
                        State regulatory authority such plan shall have 
                        been approved by the Administrator.
                            ``(iv) In the case of qualified energy 
                        conservation measures undertaken by a State 
                        regulated electric utility, the Secretary of 
                        Energy has certified 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.
                            ``(ii) Approval.--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 the product so 
                        derived 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 the product so 
                        derived 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 (2002), 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 and make available to 
        the public 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. Notwithstanding the prior sentence, if 
allowances remain in the reserve on January 1, 2010, 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) Basic phase ii allowance allocations.--After January 
        l, 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.
            ``(2) Basic phase ii bonus allowance allocations.--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) Additional allowance allocations for certain affected 
        sources and units.--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) Basic phase ii allowance allocations.--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) Reserve allowances.--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) Prohibition.--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) Annual allowance allocations.--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) Steam-electric capacity equal to or greater than 250 
        mwe.--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 for a year after 2007, or 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) Steam-electric capacity less than 250 mwe.--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, for a 
        year after 2007, or 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) Steam-electric capacity between 250 and 450 mwe.--
        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 for a year 
        after 2007, or 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) Reserve allowances.--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) Certain electric utility systems.--After January 1, 
        2000, it 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, 1.20 lbs/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 units 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, for a 
                year after 2007, or 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 1.20 lbs/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 for a year after 
                2007, or 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) Rate less than 0.60 lbs/mmbtu.--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 for a year after 2007, or 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) Rate between 0.60 and 1.20 lbs/mmbtu.--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 for a year after 2007, or 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) Reserve allowance.--
                    ``(A) In general.--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) Units subject to certain limitations.--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) Election by operating company.--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) Alternative allocation.--Notwithstanding any other 
        provision of this section, at the election of the owner or 
        operator, after January l, 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) Clean coal technology demonstration grant.--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 for a year after 2007, or 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) In general.--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, for a year after 2007, or 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) Additional allocation.--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 Commercial Operation Between 1986 and 
December 31, 1995.--
            ``(1) In general.--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 for a year after 2007, or 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) Unit allowances.--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) Units that commenced commercial operation between 
        october 1, 1990, and december 31, 1992.--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) Units that commenced commercial operation between 
        january 1, 1993, and december 31, 1995.--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) Units that converted to coal fired operation between 
        january 1, 1985, and december 31, 1987.--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 for 
        a year after 2007, or 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) Applicability to qualifying small power production 
        facilities, qualifying cogeneration facilities, and new 
        independent power production facilities.--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) In general.--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 for a year after 2007, or 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) Reserve allowances.--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) Additional allowances.--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) Annual allocations.--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--
                            ``(i) 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
                            ``(ii) 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) Additional allocations.--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 statewide 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 11 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) Elections submitted before january 1, 2002.--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) Elections submitted after january 1, 2002.--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 (2002), 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 11 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 allowances at 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
                 Year of sale                     auction      Advance
                                                (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..........................................      125,000            0
2004-2009.....................................      125,000            0
------------------------------------------------------------------------

            ``(3) Proceeds.--
                    ``(A) Transfer.--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) Return.--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 2005, 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.--Not later than the commencement 
date of the sulfur dioxide allowance requirement under section 422, the 
Administrator shall terminate the withholding of allowances and the 
auction sales under this section. Pursuant to regulations under this 
section, the Administrator may by 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) Applicable Law.--The Administrator shall implement this 
section under 40 CFR part 73 (2002), amended as appropriate by the 
Administrator.

``SEC. 418. INDUSTRIAL SULFUR DIOXIDE 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 l, 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--Clear Skies Sulfur Dioxide Allowance Program

``SEC. 421. DEFINITIONS.

    ``For purposes of this subpart--
            ``(1) Affected EGU.--The term `affected EGU' means--
                    ``(A) for a unit serving a generator before the 
                date of enactment of the Clear Skies Act of 2005, a 
                unit in a State serving a generator with a nameplate 
                capacity of greater than twenty-five megawatts that 
                produced or produces electricity for sale during 2002 
                or any year thereafter, except for a cogeneration unit 
                that meets the criteria for qualifying cogeneration 
                facilities codified in section 292.205 of title 18 of 
                the Code of Federal Regulations as issued on April 1, 
                2002 during 2002 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 2005, 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 unit serving one or more 
                generators with total nameplate capacity of twenty-five 
                megawatts or less, or a cogeneration unit that meets 
                the criteria for qualifying cogeneration facilities 
                codified in section 292.205 of title 18 of the Code of 
                Federal Regulations as issued on April 1, 2002, 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) Coal-fired.--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 1998 through 2002 or, for a 
        unit that commenced operation on or after January 1, 2003, a 
        unit designed to combust coal or any coal derived fuel alone or 
        in combination with any other fuel.
            ``(3) Eastern bituminous.--The term `Eastern bituminous' 
        means bituminous that is from a mine located in a State east of 
        the Mississippi River.
            ``(4) General account.--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 
        part 73.31(c) (2002), amended as appropriate by the 
        Administrator.
            ``(5) Oil-fired.--The term `oil-fired' with regard to a 
        unit means, for purposes of section 424, combusting fuel oil 
        for more than 10 percent of the unit's total heat input, and 
        combusting no coal or coal-derived fuel, in any year during 
        1998 through 2002 or, for a unit that commenced operation on or 
        after January 1, 2003, a unit designed to combust oil for more 
        than 10 percent of the unit's total heat input and not to 
        combust any coal or coal-derived fuel.
            ``(6) Unit account.--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 
        section 73.31 (a) and (b) (2002), amended as appropriate by the 
        Administrator.

``SEC. 422. APPLICABILITY.

    ``(a) Prohibition.--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.
    ``(b) Allowances Held.--Only sulfur dioxide allowances under 
section 423 shall be held in order to meet the requirements of 
subsection (a).

``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.

     ``TABLE A--TOTAL SO<INF>2</INF> ALLOWANCES ALLOCATED FOR EGUs

Year                                SO<INF>2</INF> allowances allocated
        2010...............................................  4,416,666 
        2011-2012..........................................  4,416,667 
        2013-2017..........................................  4,500,000 
        2018 and thereafter................................  3,000,000.

``SEC. 424. EGU ALLOCATIONS.

    ``(a) In General.--Not later than 3 years before the commencement 
date of the sulfur dioxide allowance requirement of section 422, the 
Administrator shall promulgate regulations determining allocations of 
sulfur dioxide allowances for affected EGUs for each year during 2010 
and thereafter. The regulations shall provide that:
            ``(1) 93 percent of the total amount of sulfur dioxide 
        allowances shall be allocated to fossil-fuel-fired affected 
        EGUs under section 424 shall be allocated by the Administrator 
        to individual EGUs as follows:
                    ``(A) For each unit account and each general 
                account in the Allowance Tracking System, the 
                Administrator shall determine the total amount of 
                sulfur dioxide allowances allocated under subpart 1 for 
                2010 and thereafter that are recorded, as of 12:00 
                noon, Eastern Standard time, on the date 180 days after 
                enactment of the Clear Skies Act of 2005. The 
                Administrator shall determine this amount in accordance 
                with 40 CFR part 73 (2002), amended as appropriate by 
                the Administrator, except that the Administrator shall 
                apply a discount rate of 7 percent for each year after 
                2010 to the amounts of sulfur dioxide allowances 
                allocated for 2011 or later.
                    ``(B) For each unit account and each general 
                account in the Allowance Tracking System, the 
                Administrator shall determine 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).
                    ``(C) 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 shall allocate 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) 7 percent of the total amount of sulfur dioxide 
        allowances allocated each year under section 423 shall be 
        allocated for units at a facility that are affected EGUs, but 
        did not receive sulfur dioxide allocations under subpart 1 of 
        this title.
            ``(B) The Administrator shall allocate each year for the 
        units under subparagraph (A) that commenced operation before 
        January 1, 2001, 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).
            ``(C) The Administrator shall allocate each year for units 
        under subparagraph (A) that commence commercial operation on or 
        after January l, 2001 and before January 1, 2005, 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 input of such units and converting 
                to tons.
                    ``(ii) For all such other units at the facility 
                that are not covered by clause (i), multiplying .005 
                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 paragraph (1) and this paragraph 
                on a pro rata basis (based on the allocations under 
                those paragraphs) any allowances not allocated under 
                this paragraph.
            ``(D) The Administrator shall allocate each year for units 
        under subparagraph (A) that commence commercial operation on or 
        after January 1, 2005, an amount of sulfur dioxide allowances 
        determined for each such unit at the facility by multiplying 
        the applicable National Emissions Standard under section 481 by 
        the applicable ``baseline heat input,'' considering fuel and 
        combustion type, as defined in section 402(5)(B) and converting 
        to tons.
            ``(E) In the event that allocation demand exceeds supply, 
        the Administrator shall allocate allowances under subparagraph 
        (A) giving first priority to units qualifying under 
        subparagraph (B), second priority to units qualifying under 
        subparagraph (C), and third priority to units qualifying under 
        subparagraph (D). Allowances allocated under subparagraph (D) 
        shall be allocated to units on a first come basis determined by 
        date of unit commencement of construction, provided that such 
        unit actually commences operation. As such, allocations to 
        units under sub-paragraph (D) will not be reduced as a result 
        of new units commencing commercial operation.
    ``(b) Failure To Promulgate.--
            ``(1) Annual notice.--For each year 2010 and thereafter, if 
        the Administrator has not promulgated regulations, determining 
        allocations under subsection (a), each affected EGU shall 
        comply with section 422 by providing annual notice to the 
        permitting authority. Such notice shall indicate the amount of 
        allowances the affected EGU believes it has for the relevant 
        year and the amount of sulfur dioxide emissions for such year. 
        The amount of sulfur dioxide emissions shall be determined 
        using reasonable industry accepted methods unless the 
        Administrator has promulgated applicable monitoring and 
        alternative monitoring requirements.
    ``(2) Reconciliation.--Upon promulgation of regulations under 
subsection (a) determining the allocations for 2010 and thereafter, and 
promulgating regulations under section 403(b) providing for the 
transfer of sulfur dioxides and section 403(c) establishing an 
Allowance Transfer System for sulfur dioxide allowances, each unit's 
emissions shall be compared to and reconciled to its actual allocations 
under the promulgated regulations. Each unit will have nine (9) months 
to purchase any allowance shortfall through allowances purchased from 
other allowance holders or through direct sale.

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

    ``(a) Removal From Accounts.--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) Regulations.--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. No part of this Act shall be construed 
to prevent use of unused pre-2010 allowances to meet the requirements 
of section 422.

``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.--Not later than 18 months after the enactment of 
the Clear Skies Act of 2005, 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 each of the following:
            ``(1) A statement that the owner or operator will install 
        and commence commercial 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 control 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 the Administrator 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.--By order 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 operate a CEMS for 
monitoring sulfur dioxide and to quality assure the data. 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 
stack, and one or more units are not subject to such standards, 
separate monitoring shall be required for each unit.
    ``(e) Allocations.--Not later than 6 months after the commencement 
date of the sulfur dioxide allowance requirement of section 422, for 
the units for which applications are approved under subsection (c), the 
Administrator shall allocate sulfur dioxide allowances as follows:
            ``(1) For each unit, the Administrator shall multiply the 
        allowance-to-emission-reduction ratio of the last application 
        that the Administrator 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 allocate to the facilities under section 
        424 paragraphs (1) and (2) on a pro rata basis (based on the 
        allocations under those paragraphs) any unallocated allowances 
        under this paragraph.

             ``Subpart 3--Western Regional Air Partnership

``SEC. 431. DEFINITIONS.

    ``For purposes of this subpart--
            ``(1) Adjusted baseline heat input.--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 WRAP 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 WRAP State.
            ``(2) Affected egu.--The term `affected EGU' means an 
        affected EGU under subpart 2 that is in a WRAP 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) Coal-fired.--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) Covered year.--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 WRAP 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 WRAP 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 WRAP States submit to the 
                Administrator a petition requesting that the 
                Administrator issue such determination and make all 
                affected EGUs in the WRAP States subject to the 
                requirements of sections 432 through 434; and
                    ``(B) each year after the `covered year' under 
                subparagraph (A).
            ``(5) Oil-fired.--The term `oil-fired' with regard to a 
        unit means, for purposes of section 434, a unit combusting fuel 
        oil for more than 10 percent of the unit's total heat input, 
        and combusting no coal or coal-derived fuel, and any year 
        during the period from the eighth through the fourth year 
        before the first covered year.
            ``(6) WRAP state.--The term `WRAP State' means Arizona, 
        California, Colorado, Idaho, Nevada, New Mexico, Oregon, Utah, 
        and Wyoming.

``SEC. 432. APPLICABILITY.

    ``(a) Prohibition.--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.
    ``(b) Allowances Held.--Only sulfur dioxide allowances under 
section 433 shall be held in order to meet the requirements of 
subsection (a).

``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) In General.--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 by 0.95 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); 
        and
            ``(5)(A) 5 percent of the total amount of sulfur dioxide 
        allowances allocated each year under section 433 shall be 
        allocated for units at a facility that are affected EGUs, but 
        did not receive sulfur dioxide allocations under paragraph (4). 
        These units shall be allocated allowances in accordance with 
        paragraphs (1), (2), and (3).
            ``(B) Allowances allocated under subparagraph (A) shall be 
        allocated to units on a first come basis determined by date of 
        unit commencement of construction, provided that such unit 
        actually commences operation. As such, allocations to units 
        under paragraph (A) will not be reduced as a result of new 
        units commencing commercial operation.
            ``(C) Allowances not allocated under subparagraph (B) shall 
        be allocated to units in paragraphs (A) and (B) on a pro rata 
        basis.
    ``(b) Failure To Promulgate.--
            ``(1) In general.--For each year 2010 and thereafter, if 
        the Administrator has not promulgated regulations, determining 
        allocations under paragraph (a), each affected EGU shall comply 
        with section 422 by provided annual notice to the permitting 
        authority. Such notice shall indicate the amount of allowances 
        the affected EGU believes it has for the relevant year and the 
        amount of sulfur dioxide emissions for such year. The amount of 
        sulfur dioxide emissions shall be determined using reasonable 
        industry accepted methods unless the Administrator has 
        promulgated applicable monitoring and alternative monitoring 
        requirements.
            ``(2) Reconciliation.--Upon promulgation of regulations 
        under subsection (a) determining the allocations for 2010 and 
        thereafter, and promulgating regulations under section 403(b) 
        providing for the transfer of sulfur dioxides and section 
        403(c) establishing an Allowance Transfer System for sulfur 
        dioxide allowances, each unit's emissions shall be compared to 
        and reconciled to its actual allocations under the promulgated 
        regulations. Each unit will have nine (9) months to purchase 
        any allowance shortfall through allowances purchased from other 
        allowance holders or through direct sale.

       ``PART C--NITROGEN OXIDES CLEAR SKIES 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 
NO<INF>X</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) In general.--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 part 76.5 (2002). 
        The maximum allowable emission rates are as follows:
                    ``(A) for tangentially fired boilers, 0.45 lb/
                mmBtu; and
                    ``(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) Utility boilers.--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; and
                    ``(D) all other types of utility boilers.
            ``(3) Basis of rates.--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 
        parts 76.6 and 76.7 (2002).
    ``(c) Alternative Emission Limitations.--(1) 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--
            ``(A) a unit subject to subsection (b)(1) cannot meet the 
        applicable limitation using low NO<INF>X</INF> burner 
        technology; or
            ``(B) a unit subject to subsection (b)(2) cannot meet the 
        applicable rate using the technology on which the Administrator 
        based the applicable emission limitation.
    ``(2) Eligibility for alternative emission limitations.--The 
permitting authority shall base such determination upon a reasonable 
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 
        15 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 (B), 
                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 subparagraphs 
                (B) and (C).
    ``(3) Additional control technology.--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 (2002), amended as appropriate by the 
Administrator.
    ``(d) Emissions Averaging.--
            ``(1) Alernative contemporaneous emission limitations.--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--
                    ``(A) 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
                    ``(B) the 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).
            ``(2) Operating permits.--If the permitting authority 
        determines, in accordance with regulations issued by the 
        Administrator that the conditions in paragraph (1) 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 (2002), amended 
        as appropriate by the Administrator.

``SEC. 442. TERMINATION.

    ``Starting January 1, 2008, the 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--Clear Skies Nitrogen Oxides Allowance Program

``SEC. 451. DEFINITIONS.

    ``For purposes of this subpart:
            ``(1) Affected egu.--The term `affected EGU' means--
                    ``(A) for a unit serving a generator before the 
                date of enactment of the Clear Skies Act of 2005, 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 2002 or any year 
                thereafter, except for a cogeneration unit that meets 
                the criteria for qualifying for a cogeneration 
                facilities codified in section 292.205 of title 18 of 
                the Code of Federal Regulations as issued on April 1, 
                2002 during 2002 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 2005, 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 meets 
                the criteria for qualifying for a cogeneration 
                facilities codified in section 292.205 of title 18 of 
                the Code of Federal Regulations as issued on April 1, 
                2002, during each year starting with the unit commences 
                service of a generator.
                    ``(C) Exclusion.--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) Adjusted baseline heat input.--The term `adjusted 
        baseline heat input' with regard to a unit means, for purposes 
        of allocating nitrogen oxides allowances in a particular year 
        under this subpart, the units baseline multiplied by--
                    ``(A) 1.0 for affected coal-fired units for 2008 
                and each year thereafter;
                    ``(B) 0.55 for affected oil- and gas-fired units 
                located in a Zone 1 State for years 2008 through 2017 
                inclusive;
                    ``(C) 0.8 for affected oil- and gas-fired units 
                located in a Zone 1 State for 2018 and each year 
                thereafter; and
                    ``(D) 0.4 for affected oil- and gas-fired units 
                located in a Zone 2 State for 2008 and each year 
                thereafter.
            ``(3) Allowable nitrogen oxides emissions rate.--The term 
        `allowable nitrogen oxides emissions rate' means the most 
        stringent Federal or State emissions limitation for nitrogen 
        oxides that applies to the unit as of date of enactment of this 
        subpart. If 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 limitation to establish the 
        allowable rate. Such limitation shall not include any 
        requirement to hold nitrogen oxides allowances under the 
        Federal NO<INF>X</INF> Budget Trading Program as codified at 40 
        CFR part 97 (2002), or any State program adopted to meet the 
        requirements of the NO<INF>X</INF> SIP Call as codified at 40 
        CFR 51.121 (2002).
            ``(4) Zone 1 state.--The term `Zone 1 State' means Alabama, 
        Arkansas, Connecticut, Delaware, the District of Columbia, 
        Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, 
        Maine, Maryland, Massachusetts, Michigan, Mississippi, the fine 
        grid portion (as defined in section 51.121 of title 40, Code of 
        Federal Regulations (as in effect for 2002)) of Missouri, New 
        Hampshire, New Jersey, New York, North Carolina, Ohio, 
        Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas 
        east of Interstate 35, Vermont, Virginia, West Virginia, and 
        Wisconsin.
            ``(5) Zone 2 state.--The term `Zone 2 State' means Alaska, 
        American Samoa, Arizona, California, Colorado, the Commonwealth 
        of the Northern Mariana Islands, the Commonwealth of Puerto 
        Rico, Guam, Hawaii, Idaho, Kansas, Minnesota, the coarse grid 
        portion (as defined in section 51.121 of title 40, Code of 
        Federal Regulations (as in effect for 2002)) of Missouri, 
        Montana, Nebraska, North Dakota, New Mexico, Nevada, Oklahoma, 
        Oregon, South Dakota, Texas west of Interstate 35, Utah, the 
        Virgin Islands, Washington, and Wyoming.

``SEC. 452. APPLICABILITY.

    ``(a) Zone 1 Prohibition.--
            (1) In general.--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) Limitation.--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) Zone 2 Prohibition.--
            (1) In general.--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) Limitation.--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) Zone 1 Allocations.--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) as specified in table 
A.

``TABLE A--TOTAL NO<INF>X</INF> ALLOWANCES ALLOCATED FOR EGUS IN ZONE 1

Year                                NO<INF>X</INF> allowances allocated
        2008-2017..........................................   1,473,603
        2018 and thereafter................................   1,073,603
    ``(b) Zone 2 Allocations.--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) as specified in table 
B.

``TABLE B--TOTAL NO<INF>X</INF> ALLOWANCES ALLOCATED FOR EGUS IN ZONE 2

Year                                 NO<INF>X</INF> allowance allocated
        2008 and thereafter................................     714,794

``SEC. 454. EGU ALLOCATIONS.

    ``(a) EGU Allocations in the Zone 1 States.--
            ``(1) EPA regulations.--Not later than 18 months before the 
        date on which the nitrogen oxides allowance requirement under 
        section 452 takes effect, the Administrator shall promulgate 
        regulations determining the allocation of nitrogen oxide 
        allowances for 2008 and each subsequent year for units at a 
        facility in a Zone 1 State that are affected EGUs as of the 
        date of enactment of this section.
            ``(2) Formula for allocation.--
                    ``(A) In general.--Subject to subparagraph (B) and 
                paragraph (3), the regulations shall specify that the 
                allocation of nitrogen oxide allowances for each unit 
                referred to in paragraph (1) for each year shall be the 
                product obtained by multiplying--
                            ``(i) the product of 0.95 and the 
                        allocation amount under section 453(a); and
                            ``(ii) the ratio that--
                                    ``(I) the total quantity of the 
                                adjusted baseline heat input of the 
                                units at the facility; bears to
                                    ``(II) the total quantity of 
                                adjusted baseline heat input to all 
                                affected EGUs in the Zone 1 States; and
                    ``(B) Maximum allocation.--Notwithstanding 
                subparagraph (A) and paragraph (3), no unit shall 
                receive an allocation in excess of the product obtained 
                by multiplying--
                            ``(i) the baseline heat input of the unit; 
                        and
                            ``(ii) the quotient obtained by dividing 
                        the allowable nitrogen oxides emissions rate of 
                        the unit by 2000.
            ``(3) Distribution of remaining allowances.--
                    ``(A) In general.--Subject to paragraph (2)(B), any 
                nitrogen oxide allowances remaining after the 
                allocation of allowances under paragraph (2) shall be 
                distributed on a pro rata basis among the units that 
                received nitrogen oxide allowances under that 
                paragraph.
                    ``(B) Additional remaining allowances.--Allowances 
                remaining after each iteration of the calculation under 
                subparagraph (A) as a result of the limitation under 
                paragraph (2)(B) shall be allocated in accordance with 
                subparagraph (A).
            ``(4) Set-aside for new units.--
                    ``(A) In general.--5 percent of the total amount of 
                nitrogen oxide allowances allocated each year under 
                section 453 shall be allocated for units at a facility 
                that are affected EGUs, but did not receive nitrogen 
                oxide allocations under paragraph (2).
                    ``(B) Formula for allocation.--
                            ``(i) In general.--Subject to clause (ii) 
                        and subparagraph (E), the regulations 
                        promulgated under paragraph (1) shall specify 
                        that the allocation of nitrogen oxide 
                        allowances for each unit referred to in 
                        subparagraph (A) for each year shall be the 
                        product obtained by multiplying--
                                    ``(I) the product of 0.05 and the 
                                allocation amount under section 453(a); 
                                and
                                    ``(II) the ratio that--
                                            ``(aa) the total quantity 
                                        of the adjusted baseline heat 
                                        input of the units at the 
                                        facility; bears to
                                            ``(bb) the total quantity 
                                        of adjusted baseline heat input 
                                        to all affected EGUs in the 
                                        Zone 1 States, including those 
                                        affected EGUs that receive 
                                        allowances under paragraph (2).
                            ``(ii) Additional allowances.--
                        Notwithstanding clause (i) and subparagraph 
                        (E), no unit shall receive an allocation under 
                        this paragraph in excess of the product 
                        obtained by multiplying--
                                    ``(I) the baseline heat input of 
                                the unit; and
                                    ``(II) the quotient obtained by 
                                dividing the allowable nitrogen oxides 
                                emissions rate of the unit by 2000.
                    ``(C) Method of allocation.--Allowances allocated 
                under this paragraph shall be allocated to each unit on 
                a first-come basis determined by the date on which the 
                unit commences operation.
                    ``(D) No reduction in allocations.--Allocations to 
                units under this paragraph shall not be reduced as a 
                result of new units commencing commercial operation.
                    ``(E) Distribution of remaining allowances.--Any 
                nitrogen oxide allowances remaining after the 
                allocation of allowances under subparagraph (B) shall 
                be distributed on a pro rata basis among the units that 
                received nitrogen oxide allowances under that 
                subparagraph and paragraphs (2) and (3).
            ``(5) Failure to promulgate regulations.--For calendar year 
        2008 and each calendar year thereafter, if the Administrator 
        has not promulgated the regulations determining the allocations 
        under this subsection--
                    ``(A) each affected unit shall comply with section 
                452 by providing an annual notice to the permitting 
                authority that indicates the amount of allowances the 
                affected unit believes the affected unit has for the 
                relevant year (including the quantity of nitrogen oxide 
                emissions of the affected unit for that year);
                    ``(B) the amount of nitrogen oxide emissions of an 
                affected unit described in subparagraph (A) shall be 
                determined using reasonable industry accepted methods 
                unless the Administrator has promulgated applicable 
                monitoring and alternative monitoring requirements; and
                    ``(C) upon promulgation of regulations under this 
                subsection for Zone 1 determining the allocations for 
                2008 and each year thereafter, and promulgation of 
                regulations under section 403(b) providing for the 
                transfer of nitrogen oxides and regulations under 
                section 403(c) establishing an Allowance Transfer 
                System for nitrogen oxide allowances--
                            ``(i) the emissions of each unit shall be 
                        compared to and reconciled with actual 
                        allocations to the unit under the regulations; 
                        and
                            ``(ii) each unit shall have not more than 
                        270 days to submit allowances to the 
                        Administrator, without recompense, for any 
                        allowance shortfall (including submitted 
                        allowances obtained and held by any mechanism 
                        consistent with this Act, including direct 
                        sale).
    ``(b) EGU Allocations in the Zone 2 States.--
            ``(1) EPA regulations.--Not later than 18 months before the 
        date on which the nitrogen oxides allowance requirement under 
        section 452 takes effect, the Administrator shall promulgate 
        regulations determining the allocation of nitrogen oxide 
        allowances for 2008 and each subsequent year for units at a 
        facility in a Zone 2 State that are affected EGUs as of the 
        date of enactment of this section.
            ``(2) Formula for allocation.--
                    ``(A) In general.--Subject to subparagraph (B) and 
                paragraph (3), the regulations shall specify that the 
                allocation of nitrogen oxide allowances for each unit 
                referred to in paragraph (1) for each year shall be the 
                product obtained by multiplying--
                            ``(i) the product of 0.95 and the 
                        allocation amount under section 453(b); and
                            ``(ii) the ratio that--
                                    ``(I) the total quantity of the 
                                adjusted baseline heat input of the 
                                units at the facility; bears to
                                    ``(II) the total quantity of 
                                adjusted baseline heat input to all 
                                affected EGUs in the Zone 2 States.
                    ``(B) Maximum allocation.--Notwithstanding 
                subparagraph (A) and paragraph (3), no unit shall 
                receive an allocation in excess of the product obtained 
                by multiplying--
                            ``(i) the baseline heat input of the unit; 
                        and
                            ``(ii) the quotient obtained by dividing 
                        the allowable nitrogen oxides emissions rate of 
                        the unit by 2000.
            ``(3) Distribution of remaining allowances.--
                    ``(A) In general.--Subject to paragraph (2)(B), any 
                nitrogen oxide allowances remaining after the 
                allocation of allowances under paragraph (2) shall be 
                distributed on a pro rata basis among the units that 
                received nitrogen oxide allowances under that 
                paragraph.
                    ``(B) Additional remaining allowances.--Allowances 
                remaining after each iteration of the calculation under 
                subparagraph (A) as a result of the limitation under 
                paragraph (2)(B) shall be allocated in accordance with 
                subparagraph (A).
            ``(4) Set-aside for new units.--
                    ``(A) In general.--5 percent of the total amount of 
                nitrogen oxide allowances allocated each year under 
                section 453 shall be allocated for units at a facility 
                that are affected EGUs, but did not receive nitrogen 
                oxide allocations under paragraph (2).
                    ``(B) Formula for allocation.--
                            ``(i) In general.--Subject to clause (ii) 
                        and subparagraph (E), the regulations 
                        promulgated under paragraph (1) shall specify 
                        that the allocation of nitrogen oxide 
                        allowances for each unit referred to in 
                        subparagraph (A) for each year shall be the 
                        product obtained by multiplying--
                                    ``(I) the product of 0.05 and the 
                                allocation amount under section 453(a); 
                                and
                                    ``(II) the ratio that--
                                            ``(aa) the total quantity 
                                        of the adjusted baseline heat 
                                        input of the units at the 
                                        facility; bears to
                                            ``(bb) the total quantity 
                                        of adjusted baseline heat input 
                                        to all affected EGUs in the 
                                        Zone 2 States, including those 
                                        affected EGUs that receive 
                                        allowances under paragraph (2).
                            ``(ii) Additional allowances.--
                        Notwithstanding clause (i) and subparagraph 
                        (E), no unit shall receive an allocation under 
                        this paragraph in excess of the product 
                        obtained by multiplying--
                                    ``(I) the baseline heat input of 
                                the unit; and
                                    ``(II) the quotient obtained by 
                                dividing the allowable nitrogen oxides 
                                emissions rate of the unit by 2000.
                    ``(C) Method of allocation.--Allowances allocated 
                under this paragraph shall be allocated to each unit on 
                a first-come basis determined by the date on which the 
                unit commences operation.
                    ``(D) No reduction in allocations.--Allocations to 
                units under this paragraph shall not be reduced as a 
                result of new units commencing commercial operation.
                    ``(E) Distribution of remaining allowances.--Any 
                nitrogen oxide allowances remaining after the 
                allocation of allowances under subparagraph (B) shall 
                be distributed on a pro rata basis among the units that 
                received nitrogen oxide allowances under that 
                subparagraph and paragraphs (2) and (3).
            ``(5) Failure to promulgate regulations.--For calendar year 
        2008 and each calendar year thereafter, if the Administrator 
        has not promulgated the regulations determining the allocations 
        under this subsection--
                    ``(A) each affected unit shall comply with section 
                452 by providing an annual notice to the permitting 
                authority that indicates the amount of allowances the 
                affected unit believes the affected unit has for the 
                relevant year (including the quantity of nitrogen oxide 
                emissions of the affected unit for that year);
                    ``(B) the amount of nitrogen oxide emissions of an 
                affected unit described in subparagraph (A) shall be 
                determined using reasonable industry accepted methods 
                unless the Administrator has promulgated applicable 
                monitoring and alternative monitoring requirements; and
                    ``(C) upon promulgation of regulations under this 
                subsection for Zone 2 determining the allocations for 
                2008 and each year thereafter, and promulgation of 
                regulations under section 403(b) providing for the 
                transfer of nitrogen oxides and regulations under 
                section 403(c) establishing an Allowance Transfer 
                System for nitrogen oxide allowances--
                            ``(i) the emissions of each unit shall be 
                        compared to and reconciled with actual 
                        allocations to the unit under the regulations; 
                        and
                            ``(ii) each unit shall have not more than 
                        270 days to submit allowances to the 
                        Administrator, without recompense, for any 
                        allowance shortfall (including submitted 
                        allowances obtained and held by any mechanism 
                        consistent with this Act, including direct 
                        sale).

``SEC. 455 NITROGEN OXIDES EARLY ACTION REDUCTION CREDITS.

    ``(a) Credits.--Except as provided in subsection (e), the 
Administrator shall promulgate regulations within 18 months authorizing 
the allocation of nitrogen oxides allowances to units designated under 
this section that install or modify pollution control equipment or 
combustion technology improvements identified in such regulations after 
the date of enactment of this section and prior to January 1, 2008.
    ``(b) Emissions Reductions.--No allowances shall be allocated under 
this section for emissions reductions that are--
            ``(1) attributable to pollution control equipment or 
        combustion technology improvements that were operational at any 
        time prior to the date of enactment of this section;
            ``(2) attributable to fuel switching;
            ``(3) required under any Federal or State regulation for 
        the applicable year; or
            ``(4) made by a unit, subject to--
                    ``(A) subpart 1 of part C, that are necessary for 
                compliance with the limitation on the Btu-weighted 
                average annual emission rate of the unit and 1 or more 
                other units under section 441(d); or
                    ``(B) the requirements in the applicable 
                implementation plan of a NO<INF>X</INF> SIP Call State 
                (as defined in section 461(3)) that meet the 
                requirements under sections 51.121 and 51.122 of title 
                40, Code of Federal Regulations (as in effect for 
                calendar year 2004) during the period beginning on May 
                1 and ending on September 30.
    ``(c) Allocation.--The allowances allocated to any unit under this 
section shall be in addition to the allowances allocated under section 
454 and shall be allocated in an amount equal to one allowance of 
nitrogen oxides for each 1.05 tons of reduction in emissions of 
nitrogen oxides achieved by the pollution control equipment or 
combustion technology improvements starting with the year in which the 
equipment or improvement is implemented. The early compliance reduction 
allowances available under this section shall be used and tradable in 
the same manner as allowances under section 454.
    ``(d) Early Compliance Allowance Credit.--The Administrator shall 
promulgate regulations as necessary to ensure affected units receive 
early compliance allowance credit. Early compliance allowances shall be 
allocated at the end of an early compliance year. Should the 
Administrator fail to promulgate allocation regulations by the end of a 
given year, early compliance allowances for each year shall be 
allocated at the earliest possible time after allocation regulations 
are promulgated.
    ``(e) Exception.--This section shall not apply to reductions that 
are--
            ``(1) made during the period beginning on May 1 and ending 
        on September 30 of a year by units that are subject to an 
        applicable implementation plan for a NO<INF>X</INF> SIP Call 
        State (as defined in section 461(3)) required under section 
        51.121 of title 40, Code of Federal Regulations (as in effect 
        for calendar year 2004); or
            ``(2) necessary to comply with subpart 1 of part C for the 
        applicable year.

        ``Subpart 3--Ozone Season NO<INF>X</INF> Budget Program

``SEC. 461. DEFINITIONS.

    ``For purposes of this subpart:
            ``(1) Ozone season.--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 1 through September 30, for each year starting in 
                2004 and thereafter.
            ``(2) Non-ozone season.--The term `non-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 October 1 through April 30; and
                    ``(B) with regard to all other States, the period 
                October 1, 2003, through May 29, 2004 and the period 
                October 1 through April 30 beginning in the year 2004 
                and for each year thereafter.
            ``(3) NO<INF>X </INF>sip call state.--The term 
        `NO<INF>X</INF> SIP Call State' means Connecticut, Delaware, 
        the District of Columbia, Illinois, Indiana, Kentucky, 
        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.
            ``(4) Fine grid portions of alabama, georgia, michigan, and 
        missouri.--The term `fine grid portions of Alabama, Georgia, 
        Michigan, and Missouri' means the areas in Alabama, Georgia, 
        Michigan, and Missouri subject to 40 CFR part 51.121 (2001).

``SEC. 462. GENERAL PROVISIONS.

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

``SEC. 463. APPLICABLE IMPLEMENTATION PLAN.

    ``(a) SIPS.--Except as provided in subsection (b), the applicable 
implementation plan for each NO<INF>X</INF> SIP Call State shall be 
consistent with the requirements, including the NO<INF>X</INF> SIP Call 
State's nitrogen oxides budget and compliance supplement pool, in 
sections 51.121 and 51.122 of title 40, Code of Federal Regulations (as 
in effect for calendar year 2004).
    ``(b) Requirements.--Notwithstanding any provision to the contrary 
in section 51.121 or 51.122 of title 40, Code of Federal Regulations 
(as in effect for calendar year 2004):
            ``(1) Implementation plan.--The applicable implementation 
        plan for each NO<INF>X</INF> SIP Call State shall require full 
        implementation of the required emission control measures 
        starting no later than the first ozone season.
            ``(2) Exemption.--Starting January 1, 2008--
                    ``(A) the owners and operators of a boiler, 
                combustion turbine, or integrated gasification combined 
                cycle plant subject to emission reduction requirements 
                or limitations under part B, C, or D shall no longer be 
                subject to the requirements in a NO<INF>X</INF> SIP 
                Call State's applicable implementation plan that meet 
                the requirements of subsection (a) and paragraph (1); 
                and
                    ``(B) notwithstanding subparagraph (A), if the 
                Administrator determines, by December 31, 2007, that a 
                NO<INF>X</INF> SIP Call State's applicable 
                implementation plan meets the requirements of 
                subsection (a) and paragraph (1), such applicable 
                implementation plan shall be deemed to continue to meet 
                such requirements.
    ``(c) Savings Provision.--Nothing in this section or section 464 
shall preclude or deny the right of any State or political subdivision 
thereof to adopt or enforce any regulation, requirement, limitation, or 
standard, relating to a boiler, combustion turbine, or integrated 
gasification combined cycle plant subject to emission reduction 
requirements or limitations under part B, C, or D, that is more 
stringent than a regulation, requirement, limitation, or standard in 
effect under this section or under any other provision of this Act.

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

    ``Starting January 1, 2008, with regard to any boiler, combustion 
turbine, or integrated gasification combined cycle plant subject to 
emission reduction requirements or limitations under part B, C, or D, 
the Administrator shall not administer any nitrogen oxides trading 
program included in any NO<INF>X</INF> SIP Call State's applicable 
implementation plan and meeting the requirements of section 463(a) and 
(b)(1).

``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, is included in a NO<INF>X</INF> SIP Call 
State's applicable implementation plan, and meets the requirements of 
section 463 (a) and (b)(1).

``SEC. 466. NON-OZONE SEASON VOLUNTARY ACTION CREDITS.

    ``An affected facility that voluntarily elects to operate selective 
catalytic reduction (SCR) units, installed prior to enactment of this 
title, during the non-ozone season under section 461(2) shall be 
credited 0.5 allowances per ton of NO<INF>X</INF> emissions avoided as 
a result of operating these controls. The amount avoided will equal 
every ton of nitrogen oxides reduction below the allowable emission 
rate. The Administrator shall determine if any other existing 
NO<INF>X</INF> emission control devices are generally uneconomic to 
operate unless EGUs are provided incentives to control NO<INF>X</INF> 
emissions during the non-ozone season. If the Administrator finds that 
incentives using different control equipment are necessary to make the 
operation of these devices economic, the Administrator shall specify 
these types of control devices and, for an affected facility with these 
specified devices, installed prior to enactment of this title, that 
voluntarily elects to operate these devices during the nonozone season 
under section 461(2) shall be credited 0.5 allowances per ton of 
emissions avoided as a result of operating these controls. The 
Administrator shall promulgate regulations as necessary to establish 
this NO<INF>X</INF> allowance credit program. Failure of the 
Administrator to promulgate implementing regulations prior to voluntary 
reductions being undertaken by affected facilities shall not in any 
manner reduce the number of allowances an otherwise qualifying facility 
shall be credited upon promulgation of the regulations.

                 ``PART D--MERCURY EMISSIONS REDUCTIONS

``SEC. 471. DEFINITIONS.

    ``For purposes of this part:
            ``(1) Adjusted baseline heat input.--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) Affected egu.--The term `affected EGU' means--
                    ``(A) for a unit serving a generator before the 
                date of enactment of the Clear Skies Act of 2005, 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 2002 
                or any year thereafter, except for a cogeneration unit 
                meets the criteria for qualifying for a cogeneration 
                facilities codified in section 292.205 of title 18 of 
                the Code of Federal Regulations as issued on April 1, 
                2002, during 2002 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 2005, 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 
                meets the criteria for qualifying for a cogeneration 
                facilities codified in section 292.205 of title 18 of 
                the Code of Federal Regulations as issued on April 1, 
                2002, during each year starting with the year the unit 
                commences service of a generator.
                    ``(C) Exclusion.--Notwithstanding paragraphs (A) 
                and (B), the term `affected EGU' does not include--
                            ``(i) a solid waste incineration unit 
                        subject to section 129;
                            ``(ii) a unit for the treatment, storage, 
                        or disposal of hazardous waste subject to 
                        section 3005 of the Solid Waste Disposal Act; 
                        or
                            ``(iii) a unit with de minimis emissions 
                        equal to or less than 50 pounds on an average 
                        annual basis, as calculated by the 
                        Administrator for a 3-year period using--
                                    ``(I) for calendar year 2010, the 
                                emissions data for a facility for 
                                calendar years 2006 through 2009; and
                                    ``(II) for calendar year 2011 and 
                                subsequent calendar years, the 3 most 
                                recent calendar years for which 
                                emissions data are available.

``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 pursuant to section 
474.

          TABLE A.--TOTAL MERCURY ALLOWANCES ALLOCATED FOR EGUS
------------------------------------------------------------------------
                                                               Mercury
                            Year                              allowances
                                                              allocated
------------------------------------------------------------------------
2010-2017..................................................    1,088,000
2018 and thereafter........................................      480,000
------------------------------------------------------------------------

``SEC. 474. EGU ALLOCATIONS.

    ``(a) In General.--Not later than 24 months before the commencement 
date of the mercury allowance requirement of section 472, the 
Administrator shall promulgate regulations determining allocations of 
mercury allowances for 2010 and thereafter for units at a facility that 
commence commercial operation by and are affected EGUs as of date of 
enactment. The regulations shall provide that the Administrator shall 
allocate each year for such units an amount determined by multiplying 
by 0.95 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) New Facilities.--5 percent of the total amount of nitrogen 
oxides allowances allocated each year under section 473 shall be 
allocated for units at a facility that commence commercial operation 
and are affected EGUs after the date of enactment. These units shall be 
allocated allowances for each year by multiplying the allocation amount 
under 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 to all affected EGUs, including those 
covered in subsection (a). However, the regulations shall not allocate 
allowances to any affected unit in excess of the product of the unit's 
baseline heat input multiplied by the unit's allowable mercury 
emissions rate, divided by 2000.
    ``(c) Allocation.--Allowances allocated under subsection (b) shall 
be allocated to units on a first come basis determined by date of unit 
commencement of construction, provided that such unit actually 
commences commercial operation. As such, allocations to units under 
subsection (b) will not be reduced as a result of new units commencing 
commercial operation.
    ``(d) Unallocated Allowances.--Allowances not allocated under 
paragraph (2) shall be allocated to units in subsections (a) and (b) on 
a pro rata basis.
    ``(e) Amount of Allowances.--For each year 2010 and thereafter, if 
the Administrator has not promulgated the regulations determining 
allocation under subsection (a)--
            ``(1) each affected unit shall comply with section 472 by 
        providing annual notice to the permitting authority. Such 
        notice shall indicate the amount of allowances the affected 
        unit believes it has for the relevant year and the amount of 
        mercury emissions for such year. The amount of mercury 
        emissions shall be determined using reasonable industry 
        accepted methods unless the Administrator has promulgated 
        applicable monitoring and alternative monitoring requirements; 
        and
            ``(2) upon promulgation of regulations under subsection (a) 
        determining the allocations for 2010 and thereafter, and 
        promulgating regulations under section 403(b) providing for the 
        transfer of mercury allowances and section 403(c) establishing 
        an Allowance Transfer System for mercury allowances, each 
        unit's emissions shall be compared to and reconcile with its 
        actual allocations under the promulgated regulation. Each unit 
        will have nine (9) months to submit allowances to the 
        Administrator, without recompense, for any allowances 
        shortfall. The submitted allowances may have been obtained and 
        held by any mechanism consistent with the Act including, but 
        not limited to, direct sale.

``SEC. 475. MERCURY EARLY ACTION REDUCTION CREDITS.

    ``(a) In General.--The Administrator shall promulgate regulations 
within 18 months authorizing the allocation of mercury allowances to 
units designated under this section that install or modify pollution 
control equipment or combustion technology improvements identified in 
such regulations after the date of enactment of this section and prior 
to January 1, 2010.
    ``(b) Nonallocation of Allowances.--No allowances shall be 
allocated under this paragraph for emissions reductions: attributable 
to pollution control equipment or combustion technology improvements 
that were operational or under construction at any time prior to the 
date of enactment of this section; attributable to fuel switching; or 
required under any Federal regulation.
    ``(c) Amount of Allowances.--The allowances allocated to any unit 
under this paragraph shall be in addition to the allowances allocated 
under section 474 and shall be allocated in an amount equal to 1 
allowance of mercury for each 1.05 ounces of reduction in emissions of 
mercury achieved by the pollution control equipment or combustion 
technology improvements starting with the year in which the equipment 
or improvement is implemented. The early compliance reduction 
allowances available under this section shall be used and tradable in 
the same manner as allowances under section 474.
    ``(d) Early Compliance Allowance Credit.--The Administrator shall 
promulgate regulations as necessary to ensure affected units receive 
early compliance allowance credit. Early compliance allowances shall be 
allocated at the end of an early compliance year. Should the 
Administrator fail to promulgate allocation regulations by the end of a 
given year, early compliance allowances for each year shall be 
allocated at the earliest possible time after allocation regulations 
are promulgated.

    ``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) Commenced.--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) Construction.--The term `construction' means 
        fabrication, erection, or installation of an affected unit.
            ``(3) Affected unit.--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) Existing affected unit.--The term `existing affected 
        unit' means any affected unit that is not a new affected unit.
            ``(5) New affected unit.--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 2005, 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 publication of regulations (or, if 
        earlier, proposed regulations) prescribing a standard under 
        this section that will apply to such unit.
            ``(6) Reconstruction.--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.
    ``(b) Emission Standards.--
            ``(1) In general.--No later than 12 months after the date 
        of enactment of the Clear Skies Act of 2005, 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) In general.--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) Requirements.--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 coal fired or gas-fired combustion 
        turbines 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 oil-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) In general.--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, 
                        determined assuming no use of on-site or off-
                        site pre-combustion treatment of coal and no 
                        use of technology that captures mercury, are 
                        reduced by 80 percent;
                            ``(ii) flue gas desulfurization (FGD) and 
                        selective catalytic reduction (SCR) are applied 
                        to the unit; or
                            ``(iii) a technology is applied to the unit 
                        and the permitting authority determines that 
                        the technology is equivalent in terms of 
                        mercury capture to the application of FGD and 
                        SCR.
            ``(2) Exemption.--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) Discharges.--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) Gas-fired combustion turbines.--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; or
                    ``(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) Coal-fired combustion turbines.--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) Combustion turbines that are not gas-fired or coal-
        fired.--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 2.0 lb/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; and
                            ``(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) In general.--The Administrator shall, at least every 
        eight years following the promulgation of standards under 
        subsection (b), review and, if appropriate, revise such 
        standards to reflect the degree of emission limitation 
        demonstrated by substantial evidence to be 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). 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) Exception.--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.--The standard promulgated pursuant to this 
section shall become effective upon promulgation.
    ``(g) Delegation.--
            ``(1) In general.--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) Enforcement.--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, established by this section applicable to such unit.
    ``(i) Coordination With Other Authorities.--For purposes of 
sections III(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 regulation, requirement, limitation, or standard 
relating to affected units, or other EGUs, 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, 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 for 
purposes of reporting to Congress under (e)(2). 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;
            ``(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 United States 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 
        scrubbers 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) Environmental Accountability.--
            ``(1) Monitoring and assessment.--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 January 1, 
        2008, and not later than every 4 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.
                    ``(A) The report under this subparagraph 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--
                            ``(i) actual and projected emissions of 
                        sulfur dioxide, nitrogen oxides, and mercury;
                            ``(ii) average ambient concentrations of 
                        sulfur dioxide and nitrogen oxides 
                        transformation products, related air quality 
                        parameters, and indicators of reductions in 
                        human exposure;
                            ``(iii) status and trends in total 
                        atmospheric deposition of sulfur, nitrogen, and 
                        mercury, including regional estimates of total 
                        atmospheric deposition;
                            ``(iv) status and trends in visibility;
                            ``(v) status of terrestrial and aquatic 
                        ecosystems (including forests and forested 
                        watersheds, streams, lakes, rivers, estuaries, 
                        and nearcoastal waters);
                            ``(vi) status of mercury and its 
                        transformation products in fish;
                            ``(vii) causes and effects of atmospheric 
                        deposition, including changes in surface water 
                        quality, forest and soil conditions;
                            ``(viii) occurrence and effects of coastal 
                        eutrophication and episodic acidification, 
                        particularly with respect to high elevation 
                        watersheds; and
                            ``(ix) reduction in atmospheric deposition 
                        rates that should be achieved to prevent or 
                        reduce adverse ecological effects.
                    ``(B) The report under this subparagraph shall 
                address the relative contribution of the United States 
                to world-wide emissions as well as a comparison of the 
                stringency of fossil fuel-fired requirements under the 
                Act to other countries.

``SEC. 483. MAJOR SOURCE PRECONSTRUCTION REVIEW REQUIREMENTS AND BEST 
              AVAILABLE RETROFIT CONTROL TECHNOLOGY REQUIREMENTS; 
              APPLICABILITY TO AFFECTED UNITS.

    ``(a) Major Source Exemption.--An affected unit shall be considered 
neither a major emitting facility or major stationary source nor a part 
of a major emitting facility or major stationary source, for purposes 
of compliance with the requirements of parts C and part D of title I, 
and shall not otherwise be subject to the requirements of section 169A 
or 169B, for a period of 20 years after the date of enactment of this 
section. This applicability provision only applies to affected units 
that are either subject to the performance standards of section 481 or 
meet the following requirements within 3 years after the date of 
enactment of the Clear Skies Act of 2005:
            ``(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 particulate matter from the affected unit to 0.03 
        lb/mmBtu within eight years after the date of enactment of the 
        Clear Skies Act of 2005, and
            ``(2) The owner or operator of the affected unit uses good 
        combustion practices to minimize emissions of carbon monoxide. 
        Good combustion practices may be accomplished through control 
        technology, combustion technology improvements, or workplace 
        practices.
    ``(b) Class I Area Protections.--Notwithstanding the provisions of 
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 2005 is subject to those provisions under part C of 
title I pertaining to the review of a new or reconstructed major 
stationary source's impact on a Class I area.
    ``(c) Preconstruction Requirements.--Each State shall include in 
its plan under section 110, as 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 provided that interference 
        with any program will be deemed not to occur, with respect to 
        each nonattainment area located wholly or partially within the 
        State, if on the date of submission of a complete permit 
        application and throughout a continuous period of three years 
        immediately preceding such date, the nonattainment area was in 
        full compliance with all requirements of this Act, including 
        but not limited to requirements for State Implementation Plans;
            ``(3) for a reconstructed unit, prior to beginning 
        operation, the unit must comply 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) Affected unit.--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) Construction.--The term `construction' includes the 
        construction of a new affected unit and the modification of any 
        affected unit.
            ``(3) Modification.--The term `modification' means any 
        physical change in, or change in the method of operation of, an 
        affected unit that increases the maximum hourly emissions of 
        any pollutant regulated under this Act above the maximum hourly 
        emissions achievable at that unit during the five years prior 
        to the change or that results in the emission of any pollutant 
        regulated under this Act and not previously emitted.
    ``(e) Savings Clause.--Nothing in this section shall preclude or 
deny the right of any State or political subdivision thereof to adopt 
to enforce any regulation, 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.''.

SEC. 3. OTHER AMENDMENTS.

    (a) Title I.--Title I of the Clean Air Act is amended as follows:
            (1) In section 103 by repealing subparagraphs (E) and (F).
            (2) In section 107(d)(1)(A)--
                            (i) by striking ``or'' at the end of clause 
                        (ii);
                            (ii) by striking the period at the end of 
                        clause (iii) and inserting ``, or''; and
                            (iii) by adding at the end the following:
                            ``(iv) notwithstanding clauses (i) through 
                        (iii) and subsection (d)(3), if requested by a 
                        State, an area may be redesignated as 
                        transitional for the PM 2.5 national primary or 
                        secondary ambient air quality standards or the 
                        8-hour ozone national primary or secondary 
                        ambient air quality standard if--
                                    ``(I) 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 the applicable 
                                standard or standards not later than 
                                December 31, 2015;
                                    ``(II) such modeling demonstration 
                                and all necessary local controls have 
                                been approved into the State 
                                implementation plan not later than 1 
                                year after the date of enactment of the 
                                Clear Skies Act of 2005; and
                                    ``(III) the redesignation is made 
                                not later than 180 days after the date 
                                of that approval.''
            (3) In section 110 as follows:
                    (A) By amending clause (i) of subsection (a)(2)(D) 
                by inserting ``except as provided in subsection (q),'' 
                before the word ``prohibiting''.
                    (B) By adding the following new subsections at the 
                end thereof:
    ``(q) Review of Certain Plans.--
            ``(1) In general.--The Administrator shall, in reviewing, 
        under subsection (a)(2)(D)(i), any plan with respect to 
        affected units, within the meaning of section 126(d)(l)--
                    ``(A) consider, among other relevant factors, 
                emissions reductions required to occur by the 
                attainment date or dates of any relevant nonattainment 
                areas in the other State or States;
                    ``(B) not require submission of plan provisions 
                mandating emissions reductions from such affected 
                units, unless the Administrator determines that--
                            ``(i) emissions from such units may be 
                        reduced at least as cost-effectively as 
                        emissions reductions in the State or each other 
                        State from each other principal category of 
                        sources of the relevant pollutant, pollutants, 
                        or pre-cursors thereof, 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 other State's or 
                        States' nonattainment areas at least as cost-
                        effectively as reductions in emissions in the 
                        State or each other State from each other 
                        principal category of sources of the relevant 
                        pollutant, pollutants, or pre-cursors thereof, 
                        to the maximum extent that a methodology is 
                        reasonably available to make such a 
                        determination;
                    ``(C) develop an appropriate peer reviewed 
                methodology for making determinations under 
                subparagraph (B) by December 31, 2006; and
                    ``(D) not require submission of plan provisions 
                subjecting affected units, within the meaning of 
                section 126(d)(1), to requirements with an effective 
                date prior to December 31, 2014.
            ``(2) Proximity.--In making the determination under clause 
        (ii) of subparagraph (B) of paragraph (1), the Administrator 
        will use the best available peer-reviewed models and 
        methodology that consider the proximity of the source or 
        sources to the other State or States and incorporate other 
        source characteristics.
            ``(3) Effect on regulations.--Nothing in paragraph (1) 
        shall be interpreted to require revisions to the provisions of 
        40 CFR parts 51.121 and 51.122 (2001).
    ``(r) Transitional Areas.--
            ``(1) Maintenance.--
                    ``(A) Submission of inventory and analysis.--By 
                December 31, 2011, 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, 2014.
                    ``(B) Review.--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, 2014, the Administrator 
                shall consult with the State and determine what action, 
                if any, is necessary to assure that attainment will be 
                achieved by December 31, 2014.
            ``(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 title.
            ``(3) Consequences of failure to attain by 2015.--No later 
        than June 30, 2016, the Administrator shall determine whether 
        each area designated as transitional for the 8-hour ozone 
        standard or for the PM 2.5 standard has attained that standard. 
        If the Administrator determines that a transitional area has 
        not attained the standard, the area shall be redesignated as 
        nonattainment within one year of the determination and the 
        State shall be required to submit a State implementation plan 
        revision satisfying the provisions of section 172 within three 
        years of redesignation as nonattainment.''.
            (4) In section 111(b)(1) by adding the following new 
        subparagraph (C) after subparagraph (B):
                    ``(C) No standards of performance promulgated under 
                this section shall apply to units subject to 
                regulations promulgated pursuant to section 481.''.
            (5) In section 112:
                    (A) By amending paragraph (1) of subsection (c) to 
                read as follows:
            ``(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 eight 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). Electric utility steam 
        generating units not subject to section 3005 of the Solid Waste 
        Disposal Act 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, provided 
        that any determination shall be based on public health concerns 
        and, on an individual source basis shall: consider the effects 
        of emissions controls installed or anticipated to be installed 
        in order to meet other emission reduction requirements under 
        this Act by 2018; and, be based on a peer reviewed study with 
        notice and opportunity to comment, to be completed not before 
        January 2015. Any such regulations shall be promulgated within, 
        and shall not take effect before, the date eight years after 
        the commencement date of the requirements set forth in section 
        472. 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) By amending subparagraph (A) of subsection 
                (n)(1) to read as follows:
                    ``(A) Study.--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 
                three years after November 15, 1990.''
            (6) Section 126 is amended as follows:
                    (A) By replacing ``section 110(a)(2)(D)(ii) or this 
                section'' in subsection (b) with ``section 
                110(a)(2)(D)(i)''.
                    (B) In the language at end of subsection (c) by 
                striking ``section 110(a)(2)(D)(ii)'' and inserting 
                ``section 110(a)(2)(D)(i)'' and deleting the last 
                sentence.
                    (D) By adding at the end the following:
    ``(d) Definition of Affected Unit.--
            ``(1) In general.--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, or is a designated unit under section 407.
    ``(2) Finding for affected units.--To the extent that any petition 
submitted under subsection (b) after the date of enactment of the Clear 
Skies Act of 2005 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 or areas 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 the determination under clause (ii), the 
        Administrator shall 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 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 
        December 1, 2011. For any petition submitted prior to January 
        1, 2010, the Administrator shall make a finding or deny the 
        petition by the December 31, 2011.
            ``(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, 2014.''.
    (b) Title III.--Section 307(d)(1)(G) of title III of the Clean Air 
Act is amended to read as follows:
                    ``(G) the promulgation or revision of any 
                regulation under title IV,''.
    (c) Noise Pollution.--Title IV of the Clean Air Act (relating to 
noise pollution) (42 U.S.C. 7641 et seq.) is redesignated as title VII 
and amended by renumbering sections 401 through 403 as sections 701 
through 703, respectively, and conforming all cross-references thereto 
accordingly.
    (d) Section 406.--Title IV of the Clean Air Act Amendments of 1990 
(relating to acid deposition control) is amended by repealing section 
406 (industrial sulfur dioxide emissions).
    (e) Monitoring.--Section 821 (a) of title VIII of the Clean Air Act 
Amendments of 1990 (miscellaneous provisions) is amended to read as 
follows:
    ``(a) Monitoring.--The Administrator shall promulgate regulations 
within eighteen 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 as of December 31, 2009, 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 (2002), amended as 
appropriate by the Administrator.''.
                                 <all>