Congressional Record, Volume 148 Issue 105 (Monday, July 29, 2002)

[Congressional Record Volume 148, Number 105 (Monday, July 29, 2002)]
[Senate]
[Pages S7470-S7502]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. SMITH of New Hampshire (for himself, Mr. Crapo, and Mr.
Inhofe):
S. 2813. A bill to improve the financial and environmental
sustainability of the water programs of the United States; to the
Committee on Environment and Public Works.
Mr. SMITH of New Hampshire. Mr. President, I am pleased to be joining
my colleagues on the Environment and Public Works Committee to
introduce the Water Quality Investment Act of 2002. When I because
Chairman of the Committee in 1999, one of my top priorities was a
renewed commitment to our Nation's water systems and the Americans
served by them. Senator Crapo, as Chairman of the Fisheries, Wildlife
and Water Subcommittee shared my commitment and made this issue a focus
of his subcommittee.
Earlier this year, I joined with Chairmen Jeffords and Graham, as
well as Senator Crapo, to introduce S. 1961, the Water Investment Act.
This was a strong bipartisan bill that took compromise by all four
members to achieve. Unfortunately, the bill that was reported out of
Committee was a partisan proposal that added several provisions that
will prevent the bill from moving forward. Our majority colleagues
insisted on changing the principled funding formula included in S. 1961
for a politically driven one that has no hope of surviving the lengthy
legislative process while also compromising the needs of the country's
small States. Further, they added Davis Bacon, an onerous labor
provision that continues to divide the Senate and only serves to cloud
the future of an otherwise strong bill.
While I can no longer support S. 1961, clean water remains one of my
top priorities as the Ranking Republican on the EPW Committee.
Therefore, I join Senators Inhofe and Crapo today in introducing a
streamlined bill that is free of the controversies that now plague S.
1961.
I am a strong advocate of limited government and when it comes to
water infrastructure, I do not believe the primary responsibility of
financing local water needs lies with the Federal Government. I am
equally adamant, however, that the Federal Government should not place
unfunded mandates on our local communities. This bill strikes a
responsible balance between meeting Federal obligations and maintaining
local responsibility and state flexibility.
So much of our Nation's water infrastructure is aging and in
desperate need of replacement. Coupled with the aging problem is the
cost burden that local communities face in order to comply with ever
increasing State and Federal clean water mandates. This bill addresses
these problems and makes structural changes to ensure that we avoid a
national crisis now and in the future.
The legislation authorizes $35 billion over the next 5 years in
Federal contribution to the total water infrastructure need to help
defray the cost of the mandates placed on communities. This is a
substantial increase in Federal commitment, but not nearly as high as
some would have preferred.
This commitment does not come without additional responsibilities.
When the Clean Water Act was amended by Congress in 1987, a debate I
remember well, we set up a revolving fund so more Federal money would
not be required. The fund would continually revolve providing a
continual pool of money for water needs. Unfortunately, appropriations
have not kept pace with the Federal share and the funds have not been
able to revolve at levels necessary to meet the increasing need.
Further, as more Federal mandates have been imposed on local
communities, facilities have exhausted their useful life while local
officials have found raising water rates unpalatable. Thus, what was
not to be

[[Page S7471]]

Federal responsibility became a Federal necessity. Now we are faced
with a near crisis situation.

This bill makes certain that we do not go down that road again. The
Federal government will help to defray the costs of Federal mandates,
but with the new money comes a new requirement that all utilities do a
better job of managing their funds and plan for future costs. The bill
requires utilities to assess the condition of their facility and pipes
and develop a plan to pay for the long-term repair and replacement of
these assets. That plan will include Federal assistance, but it will be
limited assistance.
We also make additional structural changes to the law both to address
financial concerns and to help achieve improved management of these
water systems. One such change to the Clean Water Act is to incorporate
a Drinking Water Act provision that allows States, at their discretion,
to provide principal forgiveness on loans and to extend the repayment
period for loans to disadvantaged communities. This flexibility will
provide help to communities struggling with high combined sewer
overflow cost to secure additional financial help. This bill also
promotes other important cost saving measures that many communities are
already experimenting with throughout the country. It will also provide
much needed information and planning tools to communities across the
country who are experiencing a months-long drought.
Again, I am disappointed I could not maintain my support for S. 1961,
the Water Investment Act. However, the bill that passed the Committee
took several steps in the wrong direction by including not only a
formula but new mandates and regulatory requirements that will prevent
the bill from moving forward. Clean water should be a priority for
every member of the Senate. We need to come together around a bill that
can go forward. S. 1961 is no longer that bill.
I look forward to working with my colleagues to enact the Water
Quality Investment Act this year and commemorate the 30th Anniversary
of the Clean Water Act with a renewed commitment to the nation's
waterways and the people who depend on them.
Mr. CRAPO. Mr. President, I rise with my colleague, Senator Bob
Smith, to introduce the Water Quality Investment Act of 2002. We are
introducing this legislation to reinvigorate the debate on investing in
our Nation's water and wastewater infrastructure.
When I became Chairman of the Fisheries, Wildlife, and Water
Subcommittee, I began the long process of assessing the performance of
our water and wastewater infrastructure statutes and exploring needed
improvements to address outstanding problems. With the able partnership
of Senator Smith, over the past 3 years, I convened many hearings and
meeting with the stakeholders and agency officials to better understand
how to address the problems of communities with unmet water and
wastewater infrastructure needs.
Earlier this year, Senator Smith and I joined with Senator Bob Graham
and Senator Jim Jeffords to introduce S. 1961, the Water Investment
Act. As introduced, this measure represented a strong and principled
bipartisan measure. The major facets of the bill, heightened investment
levels in our infrastructure, increased flexibility to states, and
strong accountability by utilities, reflect the commonalities of need
and recommendations by stakeholders, experts, and communities. I
commend my colleagues for their hard work and the partnership we
established in putting together a model bill, which was closely
followed by our colleagues in the House of Representatives.
I am proud of the overwhelming support that bill generated. As
introduced, S. 1961 represented the collaboration and hard work of many
who recognize that the goal of assisting communities should be our
guiding principle. Too many communities are waiting for the assistance
this bill will provide to see the legislation brought down by
difficult, unnecessary proposals.
While by no means perfect, I hoped the committee process would not
turn this legislation into a vehicle for individual proposals and
controversial concepts. Against my hope, S. 1961 started to unravel as
some worked to undermine the compromise and the bipartisan nature of
the legislation. As you are well aware, the markup for S. 1961 was
contentious and divisive. It was unfortunate that S. 1961, which
started out as a bipartisan effort between the four principals, ended
up in partisan votes. Despite many warnings, some felt it necessary to
bring this legislation down simply to advance narrow agendas.
I have welcomed the opportunity to work again with committed
stakeholders and others to craft this carefully-balanced measure. This
new bill builds upon the foundations of S. 1961 as introduced and adds
important refinements brought forward by the affected communities and
stakeholders. It is a proposal that serves the critical needs of our
nation's water and wastewater infrastructure in a cost-effective and
responsible manner.
I look forward to the Senate's consideration of a sound, balanced,
and carefully-deliberated bill to address the water and wastewater
needs of the Nation. I believe all of us share that goal and we should
all rally around the Water Quality Investment Act as the means to
achieve that goal.
______

By Mr. DORGAN (for himself, Mr. Roberts, Mr. Conrad, Mr. Johnson,
and Mr. Brownback):
S. 2814. A bill to amend the Farm Security and Rural Investment Act
of 2002 to clarify the rates applicable to marketing assistance loans
and loan deficiency payments for other oilseeds; to the Committee on
Agriculture, Nutrition, and Forestry.
Mr. DORGAN. Mr. President, today, along with Senators Roberts,
Conrad, Johnson and Brownback, I am introducing legislation to clarify
Congressional intent regarding minor oilseed loan rates in the Farm
Security and Rural Investment Act, FSRIA, of 2002.
In early June, the United States Department of Agriculture
incorrectly interpreted the intent of the new farm bill when the Farm
Service Agency arbitrarily announced a wide range of minor oilseed loan
rates. For some crops, the loan rate increased substantially, while for
others, the rates plunged.
Not once during the farm bill debate was there ever discussion of
splitting apart minor oilseed loan rates. In fact, the minor oilseed
industry and farmers alike anticipated a county-level increase in loan
rates from $9.30 to $9.60/cwt. The announcement by the Farm Service
Agency caught virtually everyone in the agriculture community by
surprise.
This legislation is intended to correct this misinterpretation of the
new farm bill, and to prevent what will certainly be extreme acreage
shifts among these crops in the coming years should these rates be
allowed to stand. These acreage shifts will destroy segments of the
minor oilseed industry that have been painstakingly developed over a
number of years.
For instance, already, users of the oil derived from oil sunflowers
anticipate supply shortages next year and have indicated they may
remove sunflower oil from their product mix. Conversely, incentives
caused by the much higher confectionery sunflower loan rate could
deluge USDA with massive loan forfeitures of low quality confectionery
sunflowers if farmers simply grow for the loan rate rather than a
quality crop that has a market.
The legislation amends the new farm bill by simply--and redundantly--
listing each minor oilseed's loan rate separately. The legislation also
reinstates the crambe and sesame seed loan rates that were eliminated
by USDA.
This legislation should not be needed. USDA could easily repeal the
current announcement of minor oilseed loan rates in favor of rates
consistent with this legislation and the new farm bill, as I and my
colleagues have asked in recent letters on this issue.
I request unanimous consent that the text of the bill be printed in
the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 2814

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

SECTION 1. MARKETING ASSISTANCE LOANS AND LOAN DEFICIENCY
PAYMENTS FOR OTHER OILSEEDS.

(a) Definition of Other Oilseed.--Section 1001(9) of the
Farm Security and Rural Investment Act of 2002 (7 U.S.C.
7901(9)) is

[[Page S7472]]

amended by inserting ``crambe, sesame seed,'' after ``mustard
seed,''.
(b) Loan Rates for Nonrecourse Marketing Assistance
Loans.--Section 1202 of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 7932) is amended--
(1) in subsection (a), by striking paragraph (10) and
inserting the following:
``(10) In the case of other oilseeds:
``(A) In the case of oil sunflower seed, confectionery
sunflower seed, and other types of sunflower seed, $.0960 per
pound, except that the Secretary shall establish a single
sunflower loan rate in each county for all seed described in
this subparagraph.
``(B) In the case of rapeseed, $.0960 per pound.
``(C) In the case of canola, $.0960 per pound.
``(D) In the case of safflower, $.0960 per pound.
``(E) In the case of flaxseed, $.0960 per pound.
``(F) In the case of mustard seed, $.0960 per pound.
``(G) In the case of crambe, $.0960 per pound.
``(H) In the case of sesame seed, $.0960 per pound.
``(I) In the case of another oilseed designated by the
Secretary, $.0960 per pound.''; and
(2) in subsection (b), by striking paragraph (10) and
inserting the following:
``(10) In the case of other oilseeds:
``(A) In the case of oil sunflower seed, confectionery
sunflower seed, and other types of sunflower seed, $.0930 per
pound, except that the Secretary shall establish a single
sunflower loan rate in each county for all seed described in
this subparagraph.
``(B) In the case of rapeseed, $.0930 per pound.
``(C) In the case of canola, $.0930 per pound.
``(D) In the case of safflower, $.0930 per pound.
``(E) In the case of flaxseed, $.0930 per pound.
``(F) In the case of mustard seed, $.0930 per pound.
``(G) In the case of crambe, $.0930 per pound.
``(H) In the case of sesame seed, $.0930 per pound.
``(I) In the case of another oilseed designated by the
Secretary, $.0930 per pound.''.
(c) Repayment of Loans.--Section 1204 of the Farm Security
and Rural Investment Act of 2002 (7 U.S.C. 7934) is amended--
(1) in subsection (a), by striking ``and extra long staple
cotton'' and inserting ``extra long staple cotton, oil
sunflower seed, confectionery sunflower seed, or any other
type of sunflower seed'';
(2) by redesignating subsection (f) as subsection (g); and
(3) by inserting after subsection (e) the following:
``(f) Repayment Rates For Sunflower Seeds.--The Secretary
shall permit the producers on a farm to repay a marketing
assistance loan under section 1201 for oil sunflower seed,
confectionery sunflower seed, or any other type of sunflower
seed at a rate that is the lesser of--
``(1) the loan rate established for the commodity under
section 1202, plus interest (determined in accordance with
section 163 of the Federal Agriculture Improvement and Reform
Act of 1996 (7 U.S.C. 7283)); or
``(2) the repayment rate established (on the basis of the
prevailing market price) for oil sunflower seed.''.
______

By Mr. SMITH of New Hampshire (by request):
S. 2815. A bill to amend the Clean Air Act to reduce air pollution
through expansion of cap and trade programs, to provide an alternative
regulatory classification for units subject to the cap and trade
programs, and for other purposes; to the Committee on Environment and
Public Works.
Mr. SMITH of New Hampshire. Mr. President, today, at the request of
the President of the United States, I am introducing his proposal to
address power plant pollution in the Nation. Introduction of his bill
is an important step forward in the long progress of amending the Clean
Air to ensure that we are both improving air quality and building upon
the most successful environmental program in Federal law, the Acid Rain
Program.
One of the first goals that I announced when I became Chairman of the
Environment and Public Works Committee in 1999 was to craft a multi-
emissions bill for the utility sector. It was a new idea at the time,
and we have had to work hard since then to build support for the
concept. Recently the Environment and Public Works Committee held a
markup during which four separate legislative approaches to a multi-
pollutant system were considered, one of those was a complete
substitute that I presented to my colleagues.
Today the President offers us a fifth option for our consideration.
Each of these legislative drafts contain worthy and groundbreaking
ideas as to how we can move forward on the difficult area of reducing
air pollution without harming our economy. None is exactly like the
others, and there are some clear policy differences among them. I am
obviously partial to my own approach, but all five should be discussed.
I am confident that the Senate can, if we work together in a bipartisan
fashion, find a consensus approach that will be acceptable to a
majority of Senators.
I look forward to that process, and I welcome the President to that
debate.
I ask unanimous consent to print in the Record a summary of the
President's legislation that was provided by the Administration, and
that the text of the bill also be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Summary of Clear Skies Act of 2002

The Clear Skies Act of 2002 (Clear Skies Act) amends Title
IV of the Clean Air Act to establish new cap-and-trade
programs requiring reductions of sulfur dioxide, nitrogen
oxides, and mercury emissions from electric generating
facilities and amends Title I of the Clean Air Act to provide
an alternative regulatory classification for units subject to
the cap and trade programs.
Common Provisions: The Clear Skies Act establishes a new
Part A, which contains the program elements shared by the
sulfur dioxide, nitrogen oxides, and mercury programs. A cap-
and-trade program will be implemented for each pollutant.
Common definitions, allowance system procedures, monitoring,
permitting and compliance requirements, penalties for non-
compliance, and auction procedures apply to the new trading
programs and are modeled largely after the existing Acid Rain
Program.
Under Section 403, the Administrator must establish an
allowance system for sulfur dioxide, nitrogen oxide, and
mercury that is essentially the same as in the existing Acid
Rain Program but that provides for safety valve, i.e., a
direct sale of allowances by the Administrator at a fixed
price for use in meeting the requirement to hold allowances
at least equal to annual emissions.
Under Section 404, the new trading programs must be
reflected in Title V permits. This is similar to the
permitting provisions of the existing Acid Rain Program.
Under Section 405, affected units must meet essentially the
same type of continuous emission monitoring and reporting
requirements under the new trading programs as under the Acid
Rain Program.
Under Section 406, a graduated, automatic excess emissions
penalty replaces the existing single, automatic penalty under
the Acid Rain Program.
Under Section 407, fossil-fuel fired boilers, turbines, and
integrated gasification combined cycle plants that are not
otherwise subject to the new sulfur dioxide, nitrogen oxides,
and mercury trading programs may opt into these program if
certain requirements are met. Once a unit opts into the new
trading programs, it cannot withdraw.
Section 409 requires the Administrator to promulgate
regulations for auctions of allowances under the new sulfur
dioxide, nitrogen oxides, and mercury trading programs. All
auction proceeds will go to the general Treasury.
Section 410 establishes criteria and the process by which
the Administrator may recommend to Congress adjustment of the
total amounts of allowances available (whether through
allocation or auction) starting in 2018 under the new sulfur
dioxide, nitrogen oxides, and mercury trading programs.
Sulfur Dioxide Emissions Reductions: The Clear Skies Act
establishes Part B, which retains in Sections 411-419, with
few changes, the relevant requirements of the existing Acid
Rain Program through December 31, 2009 and contains in
Sections 421-434 the new, lower annual caps on total sulfur
dioxide emissions and new allocation procedures starting
January 1, 2010.
Under Section 421, the new sulfur dioxide trading program
covers units in the U.S. and its territories. The program
includes existing fossil fuel-fired electricity generating
boilers and turbines and integrated gasification combined
cycle plants with generators having a nameplate capacity of
greater than 25 MW with certain exceptions for cogeneration
units. The program also includes new fossil fuel-fired
electricity generating boilers and turbines and integrated
gasification combined cycle plants regardless of size, except
for gas-fired units serving one or more generators with
total nameplate capacity of 25 MW of less and certain new
cogeneration units. In addition, solid waste incineration
units and units for treatment, storage, or disposal of
hazardous waste are exempted.
Under Section 422, compliance with the requirement to hold
allowances covering sulfur dioxide emissions in the new
trading program will be determined on a facility-wide basis.
The owner or operator must hold allowances for all the
affected units at a facility at least equal to the total
sulfur dioxide emissions for those units during the year.
Under Section 423, annual sulfur dioxide emissions for
affected units are capped at 4.5 million tons starting in
2010 and 3.0 million tons starting in 2018. During the first
year of the program, 99 percent of the allowances will be
allocated to affected units with an auction for the remaining
1 percent. Each subsequent year, an additional 1 percent of
the allowances for twenty years, and then an additional 2.5
percent thereafter, will be auctioned until eventually all
the allowances are auctioned.

[[Page S7473]]

Under Section 424, allowances are allocated to affected
units previously receiving allowances under the Acid Rain
Program based on their proportion of the total post-2009 Acid
Rain sulfur dioxide allowances currently recorded in their
Acid Rain Program allowance accounts. Units that received no
allocations under the Acid Rain Program are allocated
allowances based on the product of their baseline heat input
and a standard emission rate reflective of fuel type. If the
Administrator does not promulgate final allocations on a
timely basis a default provision takes effect that allocates
allowances to Acid Rain Program units based on heat input
data collected under that program and auctions other
allowances.
Under Section 425, once the Administrator places sulfur
dioxide allowances under the new trading program into
accounts in the Allowance Tracking System, all year 2010 and
later allowances allocated under the Acid Rain Program will
be removed from the accounts. All pre-2010 allowances under
the Acid Rain Program that have not been used will remain in
accounts and may be used to meet the requirement to hold
allowances in the new trading program.
Under Section 426, a reserve of 250,000 allowances is
established for affected units that combusted bituminous and
that, before 2008, install and operate sulfur dioxide control
technology and continue to combust such coal. The procedure
established for submission of applications by owners and
operators and approval of applications and award of
allowances by the Administrator is designed to ensure that
approval of those projects will result in the largest amount
of sulfur dioxide emission reductions achieved per allowance
awarded.
Under Sections 431-434, a separate emission limitation and
cap-and-trade program are provided for the States in the
Western Regional Air Partnership (WRAP). The cap-and-trade
program for the WRAP States goes into effect the third year
after the year 2018 or later when sulfur dioxide emissions
for these units exceed 271,000 tons. This cap-and-trade
program is analogous to the new nation-wide sulfur dioxide
trading program but establishes a second sulfur dioxide
emission limitation only for these WRAP units, which will be
subject to both the regional and the nationwide programs.
Nitrogen Oxides Emissions Reductions: The Clear Skies Act
establishes Part C, which retains in Sections 431-432 the
requirements of the existing Acid Rain Program for nitrogen
oxides and in Sections 461-465 the requirements of the
existing NOX State Implementation (SIP) call under
Section 110 of the Clean Air Act through December 31, 2007;
and contains in Sections 451-454 the new, annual caps on
total allowances and new, allocation procedures starting
January 1, 2008.
Under Section 451, the new nitrogen oxides trading program
covers the same units in the U.S. and its territories as the
new sulfur dioxide trading program, but separate cap-and-
trade systems are established for Zone 1 (largely the
eastern and part of the central portions of the U.S.) and
Zone 2 (the remainder of the U.S. and territories).
Under Section 452, compliance with the requirement to hold
allowances covering nitrogen oxides emissions will be
determined on a facility-wide basis, analogous to the way
compliance is determined under the new sulfur dioxide trading
programs. Only allowances issued for the zone in which the
facility is located can be used for compliance for that
facility.
Under Section 453, annual NOX emissions for
affected units in Zone 1 are capped at 1.562 million tons
starting in 2008 and 1.162 million tons starting in 2010.
Zone 2 annual emissions are capped at 538,000 tons. Each
year, the percentages of allowances allocated and auctioned
each year are the same as under the new sulfur trading
program.
Under Section 454, allowances are allocated to affected
units based on the proportionate share of their baseline heat
input to total heat input of the units in their respective
zone. If the Administrator does not promulgate final
allocations on a timely basis, a default provision, like that
under the new sulfur dioxide trading program, takes effect.
Sections 461-456 contains provisions that codify the
emission reduction requirements of the NOX SIP
Call that covers the eastern U.S. The SIPs are required to be
consistent with the NOX emission budgets
established under the NOX SIP Call. SIPs must be
submitted for certain full States and for certain portions of
some States as determined proposed by the Administrator in
the rulemaking that commenced February 22, 2002.
Mercury Emission Reductions: The Clear Skies Act
establishes Part D, which contains the new, annual caps on
total mercury allowances and new, allocation procedures
starting January 1, 2010.
Under Section 471, the new mercury trading program covers
coal-fired units that are covered by the new sulfur dioxide
and nitrogen oxides trading programs.
Under Section 472, compliance with the requirement to hold
allowances covering mercury emissions will be determined on a
facility-wide basis, analogous to the way compliance is
determined under the new sulfur dioxide and nitrogen oxides
trading programs.
Under Section 473, annual mercury emission are capped at 26
tons starting in 2010 and 15 tons starting in 2018. Each
year, the percentages of allowances allocated and auctioned
each year are the same as under the new sulfur and nitrogen
oxides trading programs.
Under Section 474, allowances are allocated to affected
units based on the proportionate share of their baseline heat
input to total heat input of all affected units. For purposes
of allocating the allowances, each unit's baseline heat input
is adjusted to reflect the types of coal combusted by the
unit during the baseline period. If the Administrator does
not promulgate final allocations on a timely basis, a default
provision, like that under the new sulfur dioxide and
nitrogen oxides trading programs, takes effect.
Performance Standards for New Sources: To ensure that all
new affected units have appropriate controls, Part E
establishes, in section 481, performance standards for all
new boilers, combustion turbines, and integrated gasification
combined cycle plants (IGCCs) covered under the Act.
``New'' units are those that commence construction or
reconstruction after the date of enactment. The standards
also apply to ``modified'' units that opt to meet the
applicable performance standard in lieu of case-specific
BACT.
These statutory performance standards include emission
limits for four pollutants: nitrogen oxides (NOX);
sulfur dioxide (SO2); mercury (Hg); and
particulate matter (PM). The Hg emission limit applies only
to coal. In addition, a PM emission limit is established for
existing oil-fired boilers to ensure reductions of nickel
from such units. All units subject to a performance standard
must monitor emissions using CEMS and use averaging times
similar to current NSPS.
Boilers and IGCCs are subject to a SO2 emission
limit of 2.0 lb/MWh; a NOX emission limit of 1.0
lb/MWh; and a PM emission limit of 0.20 lb/MWh. Coal-fired
boilers and IGCCs are subject to a Hg emission limit of 0.015
lb/GWh; however, alternative standards would apply in some
circumstances. Coal-fired combustion turbines are subject to
the same NOX, SO2, PM, and Hg emission
limits as boilers and IGCCs. Oil-fired combustion turbines
are subject to NOX emission limits ranging from
0.289 lb/MWh to 1.01 lb/MWh, an SO2 emission limit
of 2.0 lb/MWh, and a PM emission limit of 0.20 lb/MWh. Gas-
fired combustion turbines are subject to NOX
emission limits ranging from 0.084 lb/MWh to 0.56 lb/MWh.
Existing oil-fired boilers are subject to a PM emission limit
of 0.30 lb/MWh.
Research, Environmental Monitoring, and Assessment: Section
482 contains provisions for evaluating and reporting the
efficacy of the new sulfur dioxide, nitrogen oxides, and
mercury trading programs; and providing information
concerning whether the total amounts of allowances under
these programs starting in 2018 should be adjusted under
Section 410.
Exemption from Major Source Reconstruction Review
Requirements and Best Available Retrofit Control Technology
Requirements: Section 483 exempts units from the requirements
of New Source Review (NSR). The section also exempts these
sources from the requirement to install best available
retrofit technology (BART). These exemptions are created by
excluding affected sources from being ``major stationary
sources'' for purposes of Part C and D of the Clean Air Act.
Affected units constructed after enactment of the Clear
Skies Act must meet the performance standards for
NOX, SO2, PM, and CO specified in
Section 481, but a case-by-case review of the appropriate
control technology such as BACT or LAER is no longer
required. Similarly, modifications at existing affected units
must either comply with the performance standards for
NOX, SO2, PM, and CO established in
section 481 or comply with BACT. However, to qualify for this
exemption from NSR, an existing sources must either commit
within three years to meet the existing NSPS limit for PM of
0.03 lb/MMbtu in the future, or have begun to properly
operate any existing control technology to reduce PM
emissions or otherwise minimize PM emissions according to
best operational practices. To qualify for the exemption, an
existing source must also use good combustion practices to
minimize emissions of carbon monoxide. Permits issued in the
past to comply with the requirements of Parts C and D,
however, will remain in effect.
To ensure that national parks and other Class I areas are
protected, affected units located within 50 km of such an
area will remain subject to the requirements in Part C for
the protection of such areas.
States must ensure that the construction of new or modified
affected units will not cause or contribute to a violation of
the NAAQS or interfere with the programs to assure that the
NAAQS are met. States also must provide the public with an
opportunity to comment on the impact of the affected unit on
the NAAQS, or on any Class I areas within 50 km of the
facility.
For affected units, the definition of modification is
defined to mean changes that increases the hourly emissions
of any air pollutant.

S. 2815

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Clear
Skies Act of 2002''.
(b) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title, table of contents.
Sec. 2. Emission Reduction Programs.

``TITLE IV--EMISSION REDUCTION PROGRAMS

``Part A--General Provisions

``Sec. 401. (Reserved)

[[Page S7474]]

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

``Part B--Sulfur Dioxide Emission Reductions

``Subpart 1--Acid Rain Program

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

``Subpart 2--Sulfur Dioxide Allowance Program

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

``Subpart 3--Western Regional Air Partnership

``Sec. 431. Definitions.
``Sec. 432. Applicability.
``Sec. 433. Limitations on total emissions.
``Sec. 434. Allocations.

``Part C--Nitrogen Oxides Emissions Reductions

``Subpart 1--Acid Rain Program

``Sec. 441. Nitrogen Oxides Emission Reduction Program.
``Sec. 442. Termination.

``Subpart 2--Nitrogen Oxides Allowance Program

``Sec. 451. Definitions.
``Sec. 452. Applicability.
``Sec. 453. Limitations on total emissions.
``Sec. 454. Allocations.

``Subpart 3--Ozone Season NOX Budget Program

``Sec. 461. Definitions.
``Sec. 462. General Provisions.
``Sec. 463. Applicable Implementation Plan.
``Sec. 464. Termination of Federal Administration of NOX
Trading Program.
``Sec. 465. Carryforward of Pre-2008 Nitrogen Oxides Allowances.

``Part D--Mercury Emission Reductions

``Sec. 471. Definitions.
``Sec. 472. Applicability.
``Sec. 473. Limitations on total emissions.
``Sec. 474. Allocations.

``Part E--National Emission Standards; Research; Environmental
Accountability; Major Source Preconstruction Review and Best Available
Retrofit Control Technology Requirements

``Sec. 481. National emission standards for affected units.
``Sec. 482. Research, environmental monitoring, and assessment.
``Sec. 483. Major source preconstruction review and best availability
retrofit control technology requirements.''
Sec. 3. Other amendments.
Sec. 2. Emission Reduction Programs.
Title IV of the Clean Air Act (relating to acid deposition
control) (42 U.S.C. 7651, et seq.) is amended to read as
follows:
``TITLE IV--EMISSION REDUCTION PROGRAMS

Part A. General Provisions

SEC. 401. (RESERVED)

SEC. 402. DEFINITIONS.

As used in this title--
(1) The term ``affected EGU'' shall have the meaning set
forth in section 421, 431, 451, or 471, as appropriate.
(2) The term ``affected facility'' or ``affected source''
means a facility or source that includes one or more affected
units.
(3) The term ``affected unit'' means--
(A) Under this part, a unit that is subject to emission
reduction requirements or limitations under part B, C, or D
or, it applicable, under a specified part or subpart or
(B) Under subpart 1 of part B or subpart 1 of part C, a
unit that is subject to emission reduction requirements or
limitations under that subpart.
(4) The term ``allowance'' means--
(A) an authorization, by the Administrator under this
title, to emit one ton of sulfur dioxide, one ton of nitrogen
oxides, or one ounce of mercury; or
(B) under subpart 1 of part B, an authorization by the
Administrator under this title, to emit one ton of sulfur
dioxide.
(5)(A) The term ``baseline heat input'' means, except under
subpart 1 of part B and section 407, the average annual heat
input used by a unit during the three years in which the unit
had the highest heat input for the period 1997 through 2001.
(B) Notwithstanding subparagraph (A),
(i) if a unit commenced operation during 2000, then
``baseline heat input'' means the average annual heat input
used by the unit during 2000-2001; and
(ii) if a unit commenced or commences operation during
2001-2004, then ``baseline heat input'' means the
manufacturer's design heat input capacity for the unit
multiplied by eighty percent for coal-fired units, fifty for
combined cycle combustion turbines, and five percent for
simple cycle combustion turbines.
(C) A unit's heat input for a year shall be the heat
input--
(i) required to be reported under section 405 for the unit,
if the unit was required to report heat input during the year
under that section;
(ii) reported to the Energy Information Administration for
the unit, if the unit was not required to report heat input
under section 405;
(iii) based on data for the unit reported to the State
where the unit is located as required by State law, if the
unit was not required to report heat input during the year
under section 405 and did not report to the Energy
Information Administration; or
(iv) based on fuel use and fuel heat content data for the
unit from fuel purchase or use records, if the unit was not
required to report heat input during the year under section
405 and did not report to the Energy Information
Administration and the State.
(D) By July 1, 2003, the Administrator shall promulgate
regulations, without notice and opportunity for comment,
specifying the format in which the information under
subparagraphs (B)(ii) and (C)(ii), (iii), or (iv) shall be
submitted. By January 1, 2004, the owner or operator of any
unit under subparagraph (B)(ii) or (C)(ii), (iii), or (iv)
to which allowances may be allocated under section 424,
434, 454, or 474 shall submit to the Administrator such
information. The Administrator is not required to allocate
allowances under such sections to a unit for which the
owner or operator fails to submit information in
accordance with the regulations promulgated under this
subparagraph.
(6) The term ``clearing price'' means the price at which
allowances are sold at an auction conducted by the
Administrator or, if allowances are sold at an auction
conducted by the Administrator at more than one price, the
lowest price at which allowances are sold at the auction.
(7) The term ``coal'' means any solid fuel classified as
anthracite, bituminous, subbituminous, or lignite.
(8) The term ``coal-derived fuel'' means any fuel (whether
in a solid, liquid, or gaseous state) produced by the
mechanical, thermal, or chemical processing of coal.
(9) The term ``coal-fired'' with regard to a unit means,
except under subpart 1 of part B, subpart 1 of part C, and
sections 424 and 434, combusting coal or any coal-derived
fuel alone or in combination with any mount of any other fuel
in any year.
(10) The term ``cogeneration unit'' means, except under
subpart 1 of part B and subpart 1 of part C, a unit that
produces through the sequential use of energy:
(A) electricity; and
(B) useful thermal energy (such as heat or steam) for
industrial, commercial, heating, or cooling purposes.
(11) The term ``combustion turbine'' means any combustion
turbine that is not self-propelled. The term includes, but is
not limited to, a simple cycle combustion turbine, a combined
cycle combustion turbine and any duct burner or heat recovery
device used to extract heat from the combustion turbine
exhaust, and a regenerative combustion turbine. The term does
not include a combined turbine in an integrated gasification
combined cycle plant.
(12) The term ``commence operation'' with regard to a unit
means start up the unit's combustion chamber.
(13) The term ``compliance plan means either--
(A) a statement that the facility will comply with all
applicable requirements under this title, or
(B) under subpart 1 of part B or subpart 1 of part C, a
schedule and description of the method or methods for
compliance and certification by the owner or operator that
the facility is in compliance with the requirements of that
subpart.
(14) The term ``continuous emission monitoring system''
(CEMS) means the equipment as required by section 405, used
to sample, analyze, measure, and provide on a continuous
basis a permanent record of emissions and flow (expressed in
pounds per million British thermal units (lbs/mmBtu), pounds
per hour (lbs/hr) or such other form as the Administrator may
prescribe by regulations under section 405.
(15) The term ``designated representative'' means a
responsible person or official authorized by the owner or
operator of a unit and the facility that includes the unit to
represent the owner or operator in matters pertaining to the
holding, transfer, or disposition of allowances, and
the submission of and compliance with permits, permit
applications, and compliance plans.
(16) The term ``duct burner'' means a combustion device
that uses the exhaust from a combustion turbine to burn fuel
for heat recovery.
(17) The term ``facility'' means all buildings, structures,
or installations located on

[[Page S7475]]

one or more adjacent properties under common control of the
same person or persons.
(18) The term ``fossil fuel'' means natural gas, petroleum,
coal, or any form of solid, liquid, or gaseous fuel derived
from such material.
(19) The term ``fossil fuel-fired'' with regard to a unit
means combusting fossil fuel, alone or in combination with
any amount of other fuel or material.
(20) The term ``fuel oil'' means a petroleum-based fuel,
including diesel fuel or petroleum derivatives.
(21) The term ``gas-fired'' with regard to a unit means,
except under subpart 1 of part B and subpart 1 of part C,
combusting only natural gas or fuel oil, with natural gas
comprising at lease ninety percent, and fuel oil comprising
no more than ten percent, of the unit's total heat input in
any year.
(22) The term ``gasify'' means to convert carbon-containing
material into a gas consisting primarily of carbon monoxide
and hydrogen.
(23) The term ``generator'' means a device that produces
electricity and, under subpart 1 of part B and subpart 1 of
part C, that is reported as a generating unit pursuant to
Department of Energy Form 860.
(24) The term ``heat input'' with regard to a specific
period of time means the product (in mmBtu/time) of the gross
calorific value of the fuel (in mmBtu/lb) and the fuel feed
rate into a unit (in lb of fuel/time) and does not include
the heat derived from preheated combustion air, recirculated
flue gases, or exhaust.
(25) The term ``integrated gasification combined cycle
plant'' means any combination of equipment used to gasify
fossil fuels (with or without other material) and then burn
the gas in a combined cycle combustion turbine.
(26) The term ``oil-fired'' with regard to a unit means,
except under section 424 and 434, combusting fuel oil for
more than ten percent of the unit's total heat input, and
combusting no coal or coal-derived fuel, in any year.
(27) The term ``owner or operator'' with regard to a unit
or facility means, except for subpart 1 of part B and subpart
1 of part C, any person who owns, leases, operates, controls,
or supervises the unit or the facility.
(28) The term ``permitting authority'' means the
Administrator, or the State or local air pollution control
agency, with an approved permitting program under title V of
the Act.
(29) The term ``potential electrical output'' with regard
to a generator means the nameplate capacity of the generator
multiplied by 8,760 hours.
(30) The term ``source'' means, except for sections 410,
481, and 482, all buildings, structures, or installations
located on one or more adjacent properties under common
control of the same person or persons.
(31) The term ``State'' means--
(A) one of the 48 contiguous States, Alaska, Hawaii, the
District of Columbia, the Commonwealth of Puerto Rico, the
Virgin Islands, Guam, Amercian Samoa, or the Commonwealth of
the Northern Mariana Islands; or
(B) under subpart 1 of part B and subpart 1 of part C, one
of the 48 contiguous States or the District of Columbia; or
(C) under subpart 3 of part B, Arizona, California,
Colorado, Idaho, Nevada, New Mexico, Oregon, Utah, and
Wyoming.
(32) The term ``unit'' means--
(A) a fossil fuel-fired boiler, combustion turbine, or
integrated gasification combined cycle plan; or
(B) under subpart 1 of part B and subpart 1 of part C, a
fossil fuel-fired combustion device.
(33) The term ``utility unit'' shall have the meaning set
forth in section 411.
(34) The term ``year'' means calendar year.

SEC. 403. ALLOWANCE SYSTEM.

(a) Allocation in General.--(1) For the emission limitation
programs under this title, the Administrator shall allocate
annual allowances for an affected unit, to be held or
distributed by the designated representative of the owner or
operator in accordance with this title as follows--
(A) sulfur dioxide allowances in an amount equal to the
annual tonnage emission limitation calculated under section
413, 414, 415, or 416 except as otherwise specifically
provided elsewhere in subpart 1 of part B, or in an amount
calculated under section 424 or 434.
(B) nitrogen oxides allowances in an amount calculated
under section 454, and
(C) mercury allowances in an amount calculated under
section 474.
(2) Notwithstanding any other provision of law to the
contrary, the calculation of the allocation for any unit, and
the determination of any values used in such calculation,
under sections 424, 434, 454, and 474 shall not be subject to
judicial review.
(3) Allowances shall be allocated by the Administrator
without cost to the recipient, and shall be auctioned or sold
by the Administrator, in accordance with this title.
(b) Allowance Transfer System.--Allowances allocated,
auctioned, or sold by the Administrator under this title may
be transferred among designated representatives of the owners
or operators of affected facilities under this title and any
other person, as provided by the allowance system regulations
promulgated by the Administrator. With regard to sulfur
dioxide allowances, the Administrator shall implement this
subsection under 40 CFR part 73 (2001), amended as
appropriate by the Administrator. With regard to nitrogen
oxides allowances and mercury allowances, the Administrator
shall implement this subsection by promulgating regulations
not later than twenty-four months after the date of enactment
of the Clear Skies Act of 2002. The regulations under this
subsection shall establish the allowance system prescribed
under this section, including, but not limited to,
requirements for the allocation, transfer, and use of
allowances under this title. Such regulations shall prohibit
the use of any allowance prior to the calendar year for which
the allowance was allocated or auctioned and shall provide,
consistent with the purposes of this title, for the
identification of unused allowances, and for such unused
allowances to be carried forward and added to allowances
allocated in subsequent years, except as otherwise
provided in section 425. Such regulations shall provide,
or shall be amended to provide, that transfers of
allowances shall not be effective until certification of
the transfer, signed by a responsible official of the
transferor, is received and recorded by the Administrator.
(c) Allowance Tracking System.--The Administrator shall
promulgate regulations establishing a system for issuing,
recording, and tracking allowances, which shall specify all
necessary procedures and requirements for an orderly and
competitive functioning of the allowance system. Such system
shall provide, by January 1, 2008, for one or more facility-
wide accounts for holding sulfur dioxide allowances, nitrogen
oxides allowances, and, if applicable, mercury allowances for
all affected units at an affected facility. With regard to
sulfur dioxide allowances, the Administrator shall implement
this subsection under 40 CFR part 73 (2001), amended as
appropriate by the Administrator. With regard to nitrogen
oxides allowances and mercury allowances, the Administrator
shall implement this subsection by promulgating regulations
not later than twenty-four months after the date of enactment
of the Clear Skies Act of 2002. All allowance allocations and
transfers shall, upon recordation by the Administrator, be
deemed a part of each unit's or facility's permit
requirements pursuant to section 404, without any further
permit review and revision.
(d) Nature of Allowances.--A sulfur dioxide allowance,
nitrogen oxides allowance, or mercury allowance allocated,
auctioned, or sold by the Administrator under this title is a
limited authorization to emit one ton of sulfur dioxide, one
ton of nitrogen oxides, or one ounce of mercury, as the case
may be, in accordance with the provisions of this title. Such
allowance does not constitute a property right. Nothing in
this title or in any other provision of law shall be
construed to limit the authority of the United States to
terminate or limit such authorization. Nothing in this
section relating to allowances shall be construed as
affecting the application of, or compliance with, any other
provision of this Act to an affected unit or facility,
including the provisions related to applicable National
Ambient Air Quality Standards and State implementation plans.
Nothing in this section shall be construed as requiring a
change of any kind in any State law regulating electric
utility rates and charges or affecting any State law
regarding such State regulation or as limiting State
regulation (including any prudency review) under such a State
law. Nothing in this section shall be construed as modifying
the Federal Power Act or as affecting the authority of the
Federal Energy Regulatory Commission under that Act. Nothing
in this title shall be construed to interfere with or impair
any program for competitive bidding for power supply in a
State in which such program is established. Allowances, once
allocated or auctioned to a person by the Administrator, may
be received, held, and temporarily or permanently transferred
in accordance with this title and the regulations of the
Administrator without regard to whether or not a permit is in
effect under title V or section 404 with respect to the unit
for which such allowance was originally allocated and
recorded.
(e) Prohibition.--(1) It shall be unlawful for any person
to hold, use, or transfer any allowance allocated, auctioned,
or sold by the Administrator under this title, except in
accordance with regulations promulgated by the Administrator.
(2) It shall be unlawful for any affected unit or for the
affected units at a facility to emit sulfur dioxide, nitrogen
oxides, and mercury, as the case may be, during a year in
excess of the number of allowances held for that unit or
facility for that year by the owner or operator as provided
in sections 412(c), 422, 432, 452, and 472.
(3) The owner or operator of a facility may purchase
allowances directly from the Administrator to be used only to
meet the requirements of sections 422, 432, 452, and 472, as
the case may be, for a specified year. Not later than thirty-
six months after the date of enactment of the Clear Skies Act
of 2002, the Administrator shall promulgate regulations
providing for direct sales of sulfur dioxide allowances,
nitrogen oxides allowances, and mercury allowances to an
owner or operator of a facility. The regulations shall
provide that--
(A) such allowances may be used only to meet the
requirements of section 422, 432, 452, and 472, as the case
may be, for such facility and for a year specified by the
Administrator,
(B) each such sulfur dioxide allowance shall be sold for
$4,000, each such nitrogen oxides allowance shall be sold for
$4,000, and each such mercury allowance shall be sold

[[Page S7476]]

for $2,187.50, with such prices adjusted for inflation based
on the Consumer Price Index on the date of enactment of the
Clear Skies Act of 2002 and annually thereafter,
(C) the proceeds from any sales of allowances under
subparagraph (B) shall be deposited in the United States
Treasury.
(D) the allowances directly purchased for use for a
specified year shall be taken from, and reduce, the amount of
sulfur dioxide allowances, nitrogen oxides allowances, or
mercury allowances, as the case may be, that would otherwise
be auctioned under section 423, 453, or 473 starting for the
year after the specified year and continuing for each
subsequent year as necessary.
(E) if an owner or operator does not use any such allowance
in accordance with paragraph (A),
(i) the owner or operator shall hold the allowance for
deduction by the Administrator and
(ii) the Administrator shall deduct the allowance, without
refund or other form of recompense, and offer it for sale in
the auction from which it was taken under subparagraph (D) or
a subsequent relevant auction as necessary.
(F) if the direct sales of allowances result in the removal
of all sulfur dioxide allowances, nitrogen oxides allowances,
or mercury allowances, as the case may be, from auctions
under section 423, 453, or 473 for three consecutive years,
the Administrator shall conduct a study to determine whether
revisions to the relevant allowance trading program are
necessary and shall report the results to the Congress.
(4) Allowances may not be used prior to the calendar year
for which they are allocated or auctioned. Nothing in this
section or in the allowance system regulations shall relieve
the Administrator of the Administrator's permitting,
monitoring and enforcement obligations under this Act, nor
relieve affected facilities of their requirements and
liabilities under the Act.
(f) Competitive Bidding for Power Supply.--Nothing in this
title shall be construed to interfere with or impair any
program for competitive bidding for power supply in a State
in which such program is established.
(g) Applicability of the Antitrust Laws.--
(1) Nothing in this section affects--
(A) the applicability of the antitrust laws to the
transfer, use, or sale of allowances, or
(B) the authority of the Federal Energy Regulatory
Commission under any provision of law respecting unfair
methods of competition or anticompetitive acts or practices.
(2) As used in this section, ``antitrust laws'' means those
Acts set forth in section 1 of the Clayton Act (15 U.S.C.
12), as amended.
(h) Public Utility Holding Company Act.--The acquisition or
disposition of allowances pursuant to this title including
the issuance of securities or the undertaking of any other
financing transaction in connection with such allowances
shall not be subject to the provisions of the Public Utility
Holding Company Act of 1935.
(i) Interpollutant Trading.--Not later than July 1, 2009,
the Administrator shall furnish to the Congress a study
evaluating the environmental and economic consequences of
amending this title to permit trading sulfur dioxide
allowances for nitrogen oxides allowances.
(j) International Trading.--Not later than 24 months after
the date of enactment of the Clear Skies Act of 2002, the
Administrator shall furnish to the Congress a study
evaluating the feasibility of international trading of sulfur
dioxide allowances, nitrogen oxides allowances, and mercury
allowances.

SEC. 404. PERMITS AND COMPLIANCE PLANS.

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

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

(a) Applicability.--(1)(A) The owner and operator of any
facility subject to this title shall be required to install
and operate CEMS on each affected unit subject to subpart 1
of part B or subpart 1 of part C at the facility, and to
quality assure the data, for sulfur dioxide, nitrogen
oxides, opacity, and volumetric flow at each such unit.
(B) The Administrator shall, by regulations, specify the
requirements for CEMS under subparagraph (A), for any
alternative monitoring system that is demonstrated as
providing information with the same precision, reliability,
accessibility, and timelines as that provided by CEMS, and
for recordkeeping and reporting of information from such
systems. Such regulations may include limitations on the use
of alternative compliance methods by units equipped with an
alternative monitoring system as may be necessary to preserve
the orderly functioning of the allowance system, and which
will ensure the emissions reductions contemplated by this
title. Where 2 or more units utilize a single stack, a
separate CEMS shall not be required for each unit, and for
such units the regulations shall require that the owner or
operator collect sufficient information to permit reliable
compliance determinations for each such unit.
(2)(A) The owner and operator of any facility subject to
this title shall be required to

[[Page S7477]]

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

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

(a) Excess Emissions Penalty.--(1) The owner or operator of
any unit subject to the requirements of section 441 that
emits nitrogen oxides for any calendar year in excess of the
unit's emissions limitation requirement shall be liable for
the payment of an excess emissions penalty, except where such
emission were authorized pursuant to section 110(f). That
penalty shall be calculated on the basis of the number of
tons emitted in excess of the unit's emissions limitation
requirement multiplied by $2,000.
(2) The owner or operator of any unit subject to the
requirements of section 412(c) that emits sulfur dioxide for
any calendar year before 2008 in excess of the sulfur dioxide
allowances the owner or operator holds for use for the unit
for that calendar year shall be liable for the payment of
an excess emissions penalty, except where such emissions
were authorized pursuant to section 110(f). That penalty
shall be calculated as follows:
(A) the product of the unit's excess emissions (in tons)
multiplied by the clearing price of sulfur dioxide allowances
sold at the most recent auction under section 417, if within
thirty days after the date on which the owner or operator was
required to hold sulfur dioxide allowances--
(i) the owner or operator offsets the excess emissions in
accordance with paragraph (b)(1); and
(ii) the Administrator receives the penalty required under
this subparagraph.
(B) if the requirements of clause (A)(i) or (A)(ii) are not
met, three hundred percent of the product of the unit's
excess emissions (in tons) multiplied by the clearing price
of sulfur dioxide allowances sold at the most recent auction
under section 417.
(3) If the units at a facility that are subject to the
requirements of section 412(c) emit sulfur dioxide for any
calendar year after 2007 in excess of the sulfur dioxide
allowances that the owner or operator of the facility holds
for use for the facility for that calendar year, the owner or
operator shall be liable for the payment of an excess
emissions penalty, except where such emissions were
authorized pursuant to section 110(f). That penalty shall be
calculated under paragraph (4)(A) or (4)(B).
(4) If the units at a facility that are subject to the
requirements of section 422, 432, 452, or 472 emit sulfur
dioxide, nitrogen oxides, or mercury for any calendar year in
excess of the sulfur dioxide allowances, nitrogen oxides
allowances, or mercury allowances, as the case may be, that
the owner or operator of the facility holds for use for the
facility for that calendar year, the owner or operator shall
be liable for the payment of an excess emissions penalty,
except where such emissions were authorized pursuant to
section 110(f). That penalty shall be calculated as follows:
(A) the product of the units' excess emissions (in tons or,
for mercury emissions, in ounces) multiplied by the clearing
price of sulfur dioxide allowances, nitrogen oxides
allowances, or mercury allowances, as the case may be, sold
at the most recent auction under section 423, 453, or 473, if
within thirty days after the date on which the owner or
operator was required to hold sulfur dioxide, nitrogen oxides
allowance, or mercury allowances as the case may be--
(i) the owner or operator offsets the excess emissions in
accordance with paragraph (b)(1); and
(ii) the Administrator receives the penalty required under
this subparagraph.
(B) if the requirements of clause (A)(i) or (A)(ii) are not
met, three hundred percent of the product of the units'
excess emissions (in tons or, for mercury emissions, in
ounces) multiplied by the clearing price of sulfur dioxide
allowances, nitrogen oxides allowances, or mercury
allowances, as the case may be, sold at the most recent
auction under section 423, 453, or 473.
(5) Any penalty under paragraph 1, 2, 3, or 4 shall be due
and payable without demand to the Administrator as provided
in regulations issued by the Administrator. With regard to
the penalty under paragraph 1, the Administrator shall
implement this paragraph under 40 CFR 77 (2001), amended as
appropriate by the administrator. With regard to the penalty
under paragraphs 2, 3, and 4, the Administrator shall
implement this paragraph by issuing regulations no later
than twenty-four months after the date of enactment of the
Clear Skies Act of 2002. Any such payment shall be
deposited in the United States Treasury. Any penalty due
and payable under this section shall not diminish the
liability of the unit's owner or operator for any fine,
penalty or assessment against the unit for the same
violation under any other section of this Act.
(b) Excess Emissions Offset.--(1) The owner or operator of
any unit subject to the requirements of section 412(c) that
emits sulfur dioxide during any calendar year before 2008 in
excess of the sulfur dioxide allowances held for the unit for
the calendar year shall be liable to offset the excess
emissions by an equal tonnage amount in the following
calendar year, or such longer period as the Administrator may
prescribe. The Administrator shall deduct sulfur dioxide
allowances equal to the excess tonnage from those held for
the facility for the calendar year, or succeeding years
during which offsets are required, following the year in
which the excess emissions occurred.
(2) If the units at a facility that are subject to the
requirements of section 412(c) emit sulfur dioxide for a year
after 2007 in excess of the sulfur dioxide allowances that
the owner or operator of the facility holds for

[[Page S7478]]

use for the facility for that calendar year, the owner or
operator shall be liable to offset the excess emissions by an
equal amount of tons in the following calendar year, or such
longer period as the Administrator may prescribe. The
Administrator shall deduct sulfur dioxide allowances equal to
the excess emissions in tons from those held for the facility
for the year, or succeeding years during which offsets are
required, following the year in which the excess emissions
occurred.
(3) If the units at a facility that are subject to the
requirements of section 422, 432, 452, or 472 emit sulfur
dioxide, nitrogen oxides, or mercury for any calendar year in
excess of the sulfur dioxide allowances, nitrogen oxides
allowances, or mercury allowances, as the case may be, that
the owner or operator of the facility holds for use for the
facility for that calendar year, the owner or operator shall
be liable to offset the excess emissions by an equal amount
of tons or, for mercury, ounces in the following calendar
year, or such longer period as the Administrator may
prescribe. The Administrator shall deduct sulfur dioxide
allowances, nitrogen oxide allowances, or mercury allowances,
as the case may be, equal to the excess emissions in tons or,
for mercury, ounces from those held for the facility for the
year, or succeeding years during which offsets are required,
following the year in which the excess emissions occurred.
(c) Penalty Adjustment.--The Administrator shall, by
regulation, adjust the penalty specified in subsection (a)(1)
for inflation, based on the Consumer Price Index, on November
15, 1990 and annually thereafter.
(d) Prohibition.--It shall be unlawful for the owner or
operator of any unit or facility liable for a penalty and
offset under this section to fail--
(1) to pay the penalty under subsection (a) or
(2) to offset excess emissions as required by subsection
(b).
(e) Savings Provision.--Nothing in this title shall limit
or otherwise affect the application of section 113, 114, 120,
or 304 except as otherwise explicitly provided in this title.
(f) Except as expressly provided, compliance with the
requirements of this title shall not exempt or exclude the
owner or operator of any facility subject to this title from
compliance with any other applicable requirements of this
Act. Notwithstanding any other provision of the Act, no State
or political subdivision thereof shall restrict or interfere
with the transfer, sale, or purchase of allowances under this
title.
(g) Violation by any person subject to this title of any
prohibition of, requirement of, or regulation promulgated
pursuant to this title shall be a violation of this Act. In
addition to the other requirements and prohibitions provided
for in this title, the operation of any affected unit or the
affected units at a facility to emit sulfur dioxide, nitrogen
oxides, or mercury in violation of section 412(c), 422, 432,
452, and 472, as the case may be, shall be deemed a
violation, with each ton or, in the case of mercury, each
ounce emitted in excess of allowances held constituting a
separate violation.

SEC. 407. ELECTION FOR ADDITIONAL UNITS.

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

SEC. 408. CLEAN COAL TECHNOLOGY REGULATORY INCENTIVES.

(a) Definition.--For purposes of this section, ``clean coal
technology'' means any technology, including technologies
applied at the precombustion, combustion, or post combustion
stage, at a new or existing facility which will achieve
significant reductions in air emissions of sulfur dioxide or
oxides of nitrogen associated with the utilization of coal in
the generation of electricity, process steam, or industrial
products, which is not in widespread use as of the date of
enactment of this title.
(b) Revised Regulations for Clean Coal Technology
Demonstrations.--
(1) Applicability.--This subsection applies to physical or
operational changes to existing facilities for the sole
purpose of installation, operation, cessation, or removal of
a temporary or permanent clean coal technology demonstration
project. For the purposes of this section, a clean coal
technology demonstration project shall mean a project using
funds appropriated under the heading ``Department of Energy--
Clean Coal Technology'', up to a total amount of
$2,500,000,000 for commercial demonstration of clean coal
technology, or similar projects funded through appropriations
for the Environmental Protection Agency. the Federal
contribution for qualifying project shall be at least 20
percent of the total cost of the demonstration project.
(2) Temporary projects.--Installation, operation,
cessation, or removal of a temporary clean coal technology
demonstration project that is operated for a period of five
years or less, and which complies with the State
implementation plans for the State in which the project is
located and other requirements necessary to attain and
maintain the national ambient air quality standards during
and after the project is terminated, shall not subject such
facility to the requirements of section 111 or part C or D of
title I.
(3) Permanent projects.--For permanent clean coal
technology demonstration projects that constitute repowering
as defined in section 411, any qualifying project shall not
be subject to standards of performance under section 111 or
to the review and permitting requirements of part C for any
pollutant the potential emissions of which will not increase
as a result of the demonstration project.
(4) EPA regulations.--Not later than 12 months after
November 15, 1990, the Administrator shall promulgate
regulations or interpretive rulings to revise requirements
under section 111 and parts C and D, as appropriate, to
facilitate projects consistent in this subsection. With
respect to parts C and D, such regulations or rulings shall
apply to

[[Page S7479]]

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-NOx burners prior
to the time of commencement, and (4) is otherwise in
compliance with the requirements of this Act.

SEC. 409 AUCTIONS.

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

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

(a) Evaluation.--(1) The Administrator, in consultation
with the Secretary of Energy, shall study whether the
limitations on the total annual amounts of allowances
available starting in 2018 for sulfur dioxide under section
423, nitrogen oxides under section 453, and mercury under
section 473 should be adjusted.
(2) As part of the study, the Administrator shall address
the following factors concerning the pollutants under
paragraph (a)(1):
(A) the need for further emission reductions from affected
EGUs under subpart 2 of part B, subpart 2 of part C, or part
D and other sources to attain or maintain the national
ambient air quality standards;
(B) whether the benefits of the limitations on the total
annual amounts of allowances available starting in 2018
justify the costs and whether adjusting any of the
limitations would provide additional benefits which justify
the costs of such adjustment, taking into account both
quantifiable and non-quantifiable factors;
(C) the marginal cost effectiveness of reducing emissions
for each pollutant;
(D) the relative marginal cost effectiveness of reducing
sulfur dioxide and nitrogen oxide emissions from affected
EGUs under subpart 2 of part B and subpart 2 of part C, as
compared to the marginal cost effectiveness of controls on
other sources of sulfur dioxide, nitrogen oxides and other
pollutants that can be controlled to attain or maintain
national ambient air quality standards;
(E) the feasibility of attaining the limitations on the
total annual amounts of allowances available starting in 2018
given the available control technologies and the ability
to install control technologies by 2018, and the
feasibility of attaining alternative limitations on the
total annual amounts of allowances available starting in
2018 under paragraph (a)(1) for each pollutant, including
the ability to achieve alternative limitations given the
available control technologies, and the feasibility of
installing the control technologies needed to meet the
alternative limitation by 2018;
(F) the results of the most current research and
development regarding technologies and strategies to reduce
the emissions of one or more of these pollutants from
affected EGUs under subpart 2 of part B, subpart 2 of part C,
or part D, as applicable and the results of the most current
research and development regarding technologies for other
sources of the same pollutants;
(G) the projected impact of the limitations on the total
annual amounts of allowances available starting in 2018 and
the projected impact of adjusting any of the limitations on
the total annual amounts of allowances available starting in
2018 under paragraph (a)(1) on the safety and reliability of
affected EGUs under subpart 2 of part B, subpart 2 of part C,
or part D and on fuel diversity within the power generation
section;
(H) the most current scientific information relating to
emissions, transformation and deposition of these pollutants,
including studies evaluating:
(i) the role of emissions of affected EGUs under subpart 2
of part B, subpart 2 of part C, or part D in the atmospheric
formation of pollutants for which national ambient air
quality standards exist;
(ii) the transformation, transport, and fate of these
pollutants in the atmosphere, other media, and biota;
(iii) the extent to which effective control programs in
other countries would prevent air pollution generated in
those countries

[[Page S7480]]

from contributing to nonattainment, or interfering with the
maintenance of any national ambient air quality standards;
(iv) whether the limitations starting in 2010 or 2018 will
result in an increase in the level of any other pollutant and
the level of any such increase; and
(v) speciated monitoring data for particulate matter and
the effect of various elements of fine particulate matter on
public health;
(I) the most current scientific information relating to
emissions, transformation and deposition of mercury,
including studies evaluating:
(i) known and potential human health and environmental
effects of mercury;
(ii) whether emissions of mercury from affected EGUs under
part D contribute significantly to elevated levels of mercury
in fish;
(iii) human population exposure to mercury;
(iv) the relative marginal cost effectiveness of reducing
mercury emissions from affected EGUs under part D, as
compared to the marginal cost effectiveness of controls on
other sources of mercury.
(J) a comparison of the extent to which sources of mercury
not located in the United States contributed to adverse
affects on terrestrial or aquatic systems as opposed to
the contribution from affected EGUs under part D, and the
extent to which effective mercury control programs in
other countries could minimize such impairment; and
(K) an analysis of the effectiveness and efficiency of the
sulfur dioxide allowance program under subpart 2 of part B,
the nitrogen oxides allowance program under subpart 2 of part
C, and the mercury allowance program under part D.
(3) As part of the study, the Administrator shall take into
account the most current information available pursuant to
the review of the air quality criteria for particulate matter
under section 108.
(b) Peer Review Procedures.--The draft results of the study
under subsection (a) and related technical documents shall be
subject to an independent and external peer review in
accordance with this section. Any documents that are to be
considered by the Administrator in the study must be
independently peer reviewed no later than July 1, 2008. The
peer review required under this section shall not be subject
to the Federal Advisory Committee Act (5 U.S.C. App.). The
Administrator shall:
(1) conduct the peer review in an open manner. Such peer
review shall
(A) be conducted through a formal panel that is broadly
representative and involves qualified specialists who
(i) are selected primarily on the basis of their technical
expertise relevant to the analyses required under this
section and to the decision whether or not to adjust the
total annual amounts of allowances available starting in 2018
under paragraph (a)(1);
(ii) are independent of the agency;
(iii) disclose to the agency prior technical or policy
positions they have taken on the issues under consideration;
and
(iv) disclose to the agency their sources of personal and
institutional funding from the private or pubic sectors;
(B) contain a balanced presentation of all considerations,
including minority reports;
(C) provide adequate protections for confidential business
information and trade secrets, including requiring panel
members or participants to enter into confidentiality
agreements;
(D) afford an opportunity for public comment; and
(E) be complete by no later than January 1, 2009.
(2) respond, in writing, to all significant peer review and
public comments; and
(3) certify that
(A) each peer review participant has the expertise an
independence required under this section; and
(B) the agency has adequately responded to the peer review
comments as requires under this section.
(c) Recommendaiton to Congress.--The Administrator, in
consultation with the Secretary of Energy, should submit to
Congress no later than July 1, 2009, a recommendation whether
to revise the limitations on the total annual amounts of
allowances available starting in 2018 under paragraph (a)(1).
The recommendation shall include the final results of the
study under subsections (a) and (b) and shall address the
factors described in paragraph (a)(2). The Administrator may
submit separate recommendations addressing sulfur dioxide,
nitrogen oxides, or mercury at any time after the study
has been completed under paragraph (a)(2) and the peer
review process has been completed under subsection (b).

Part B. Sulfur Dioxide Emission Reductions

Subpart 1. Acid Rain Program.

SEC. 411. DEFINITIONS.

For purposes of this subpart--
(1) the term ``actual 1985 emission rate'', for electric
utility units means the annual sulfur dioxide or nitrogen
oxides emission rate in pounds per million Btu as reported in
the NAPAP Emissions Inventory, Version, 2 National Utility
reference File. For nonutility units, the term ``actual 1985
emission rate'' means the annual sulfur dioxide or nitrogen
oxides emission rate in pounds per million Btu as reported in
the NAPAP Emission Inventory, Version 2.
(2) The term ``allowable 1985 emissions rate'' means a
federally enforceable emissions limitation for sulfur dioxide
or oxides of nitrogen, applicable to the unit in 1985 or the
limitation applicable in such other subsequent year as
determined by the Administrator if such a limitation for 1985
does not exist. Where the emissions limitation for a unit is
not expressed in pounds of emissions per million Btu, or the
averaging period of that emissions limitation is not
expressed on an annual basis, the Administrator shall
calculate the annual equivalent of that emissions
(3) The term ``alternative method of compliance'' means a
method of compliance in accordance with one or more of the
following authorities:
(A) a substitution plan submitted and approved in
accordance with subsections 413(b) and (c); or
(B) a Phase I extension plan approved by the Administrator
under section 413(d), using qualifying phase I technology as
determined by the Administrator in accordance with that
section.
(4) The term ``baseline'' means the annual quantity of
fossil fuel consumed by an affected unit, measured in
millions of British Thermal Units (``mmBtu's''), calculated
as follows:
(A) For each utility unit that was in commercial operation
prior to January 1, 1985, the baseline shall be the annual
average quantity of mmBtu's consumed in fuel during calendar
years 1985, 1986, and 1987, as recorded by the Department of
Energy pursuant to Form 767. For any utility unit for which
such form was not filed, the baseline shall be the level
specified for such unit in the 1985 National Acid
Precipitation Assessment Program (NAPAP) Emissions Inventory,
Version 2, National Utility Reference File (NURF) or in a
corrected data base as established by the Administrator
pursuant to paragraph (3). For non-utility units, the
baseline in the NAPAP Emissions Inventory, Version 2. The
Administrator, in the Administrator's sole discretion, may
exclude periods during which a unit is shutdown for a
continuous period of four calendar months or longer, and make
appropriate adjustments under this paragraph. Upon petition
of the owner or operator of any unit, the Administrator may
make appropriate baseline adjustments for accidents that
caused prolonged outages.
(B) For any other nonutility unit that is not included in
the NAPAP Emissions Inventory, Version 2, or a corrected data
base as established by the Administrator pursuant to
paragraph (3), the baseline shall be the annual average
quantity, in mmBtu consumed in fuel by that unit, as
calculated pursuant to a method which the Administrator shall
prescribe by regulation to be promulgated not later than
eighteen months after November 15, 1990.
(C) The Administrator shall, upon application or on his own
motion, by December 31, 1991, supplement data needed in
support of this subpart and correct any factual errors in
data from which affected Phase II units' baselines or actual
1985 emission rates have been calculated. Corrected data
shall be used for purposes of issuing allowances under this
subpart. Such corrections shall not be subject to judicial
review, nor shall the failure of the Administrator to correct
an alleged factual error in such reports be subject to
judicial review.
(5) The term ``basic Phase II allowance allocations''
means:
(A) For calendar years 2000 through 2009 inclusive,
allocations of allowances made by the Administrator pursuant
to section 412 and subsections (b)(1), (3), and (4); (c)(1),
(2), (3), and (5); (d)(1), (2), (4), and (5); (e); (f); (g)
(1), (2), (3), (4), and (5); (h)(1); (i) and (j) of section
414.
(B) For each calendar year beginning in 2010, allocations
of allowances made by the Administrator pursuant to section
412 and subsections (b)(1), (3), and (4); (c)(1), (2), (3),
and (5); (d)(1), (2), (4) and (5); (e); (f); (g)(1), (2),
(3), (4), and (5); (h)(1) and (3); (i) and (j) of section
414.
(6) The term ``capacity factor'' means the ratio between
the actual electric output from a unit and the potential
electric output from that unit.
(7) The term ``commenced'' as applied to construction of
any new electric utility unit means that an owner or operator
has undertaken a continuous program of construction or that
an owner or operator has entered into a contractual
obligation to undertake and complete, within a reasonable
time, a continuous program of construction.
(8) The term ``commenced commercial operation'' means to
have begun to generate electricity for sale.
(9) The term ``construction'' means fabrication, erection,
or installation of an affected unit.
(10) The term ``existing unit'' means a unit (including
units subject to section 111) that commenced commercial
operation before November 15, 1990. Any unit that commenced
commercial operation before November 15, 1990 which is
modified, reconstructed, or repowered after November 15, 1990
shall continue to be an existing unit for the purposes of
this subpart. For the purposes of this subpart, existing
units shall not include simple combustion turbines, or units
which serve a generator with a nameplate capacity of 25 MWe
or less.
(11) The term ``independent power producer'' means any
person who owns or operates, in whole or in part, one or more
new independent power production facilities.
(12) The term ``new'' independent power production
facility'' means a facility that--
(A) is used for the generation of electric energy, 80
percent or more of which is sold at wholesale;

[[Page S7481]]

(B) in nonrecourse project-financed (as such term is
defined by the Secretary of Energy within 3 months of the
date of the enactment of the Clean Air Act Amendments of
1990); and
(C) is a new unit required to hold allowances under this
subpart.
(13) The term ``industrial source'' means a unit that does
not serve a generator that produces electricity, a ``non-
utility unit'' as defined in this section, or a process
source.
(14) The term ``life-of-the-unit, firm power contractual
arrangement'' means a unit participation power sales
agreement under which a utility or industrial customer
reserves, or is entitled to receive, a specified amount or
percentage of capacity and associated energy generated by a
specified generating unit (or units) and pays its
proportional amount of such unit's total costs, pursuant to a
contract either--
(A) for the life of the unit;
(B) for a cumulative term of no less than 30 years,
including contracts that permit an election for early
termination; or
(C) for a period equal to or greater than 25 years or 70
percent of the economic useful life of the unit determined as
of the time the unit was built, with option rights to
purchase or release some portion of the capacity and
associated energy generated by the unit (or units) at the end
of the period.
(15) The term ``new unit'' means a unit that commences
commercial operation on or after November 15, 1990.
(16) The term ``nonutility unit'' means a unit other than a
utility unit.
(17) The term ``Phase II bonus allowance allocations''
means, for calendar year 2000 through 2009, inclusive, and
only for such years, allocations made by the Administrator
pursuant to section 412, subsections (a)(2), (b)(2), (c)(4),
(d)(3) (except as otherwise provided therein), and (h)(2) of
section 414, and section 415.
(18) The term ``qualifying phase I technology'' means a
technological system of continuous emission reduction which
achieves a 90 percent reduction in emissions of sulfur
dioxide from the emissions that would have resulted from the
use of fuels which were not subject to treatment prior to
combustion.
(19) The term ``repowering'' means replacement of an
existing coal-fired boiler with one of the following clean
coal technologies: atmospheric or pressurized fluidized bed
combustion, integrated gasification combined cycle, magneto-
hydrodynamics, direct and indirect coal-fired turbines,
integrated gasification fuel cells, or as determined by the
Administrator, in consultation with the Secretary of Energy,
a derivative of one or more of these technologies, and any
other technology capable of controlling multiple combustion
emissions simultaneously with improved boiler or generation
efficiency and with significantly greater waste reduction
relative to the performance of technology in widespread
commercial use as of November 15, 1990.
(2)) The term ``reserve'' means any bank of allowances
established by the Administrator under this subpart.
(21)(A) The term ``utility unit'' means--
(i) a unit that serves a generator in any State that
produces electricity for sale, or
(ii) a unit that, during 1985, served a generator in any
State that produced electricity for sale.
(B) Notwithstanding subparagraph (A), a unit described in
subparagraph (A) that--
(i) was in commercial operations during 1985, but
(ii) did not during 1985, serve a generator in any State
that produced electricity for sale shall not be a utility
unit for purposes of this subpart.
(C) A unit that congenerates steam and electricity is not a
``utility unit'' for purposes of this subpart unless the unit
is constructed for the purpose of supplying, or commences
construction after November 15, 1990 and supplies more than
one-third of its potential electric output capacity of more
than 25 megawatts electrical output to any utility power
distribution system for sale.

SEC. 412. ALLOWANCE ALLOCATION.

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

SEC. 413. PHASE I SULFUR DIOXIDE REQUIREMENTS.

(a) Emission Limitations.--(1) After January 1, 1995, each
source that includes one or more affected units listed in
table A is an affected source under this section. After
January 1, 1995, it shall be unlawful for any affected unit
(other than an eligible phase I unit under section 413(d)(2))
to emit sulfur dioxide in excess of the tonnage limitation
stated as a total number of allowances in table A for phase
I, unless (A) the emissions reduction requirements applicable
to such unit have been achieved pursuant to subsection (b)
or (d), or (B) the owner or operator of such unit holds
allowances to emit not less than the unit's total annual
emissions, except that, after January 1, 2000, the
emissions limitations established in this section shall be
superseded by those established in section 414. The owner
or operator of any unit in violation of this section be
fully liable for such violation including, but not limited
to, liability for fulfilling the obligations specified in
section 406.
(2) Not later than December 31, 1991, the Administrator
shall determine the total tonnage of reductions in the
emissions of sulfur dioxide from all utility units in
calendar

[[Page S7482]]

year 1995 that will occur as a result of compliance with the
emissions limitation requirements of this section, and shall
establish a reserve of allowances equal in amount to the
number of tons determined thereby not to exceed a total of
3.50 million tons. In making such a determination, the
Administrator shall compute for each unit subject to the
emissions limitation requirements of this section the
difference between:
(A) the product of its baseline multiplied by the lesser of
each unit's allowable 1985 emissions rate and its actual 1985
emissions rate, divided by 2,000, and
(B) the product of each unit's baseline multiplied by 2.50
lbs/mmBtu divided by 2,000, and sum the computations. The
Administrator shall adjust the foregoing calculation to
reflect projected calendar year 1995 utilization of the units
subject to the emissions limitations of this subpart that the
Administrator finds would have occurred in the absence of the
imposition of such requirements. Pursuant to subsection (d),
the Administrator shall allocate allowances from the reserve
established hereinunder until the earlier of such time as all
such allowances in the reserve are allocated or December 31,
1999.
(3) In addition to allowances allocated pursuant to
paragraph (1), in each calendar year beginning in 1995 and
ending in 1999, inclusive, the Administrator shall allocate
for each unit on Table A that is located in the States of
Illinois, Indiana, or Ohio (other than units at Kyger Creek,
Clifty Creek and Joppa Steam), allowances in an amount equal
to 200,000 multiplied by the unit's pro rata share of the
total number of allowances allocated for all units on Table A
in the 3 States (other than units at Kyger Creek, Clifty
Creek, and Joppa Steam) pursuant to paragraph (1). Such
allowances shall be excluded from the calculation of the
reserve under paragraph (2).
(b) Substitutions.--The owner or operator of an affected
unit under subsection (a) may include in its section 404
permit application and proposed compliance plan a proposal to
reassign, in whole or in part, the affected unit's sulfur
dioxide reduction requirements to any other unit(s) under the
control of such owner or operator. Such proposal shall
specify--
(1) the designation of the substitute unit or units to
which any part of the reduction obligations of subsection (a)
shall be required, in addition to, or in lieu of, any
original affected units designated under such subsection;
(2) the original affected unit's baseline, the actual and
allowable 1985 emissions rate for sulfur dioxide, and the
authorized annual allowance allocation stated in table A;
(3) calculation of the annual average tonnage for calendar
years 1985, 1986, and 1987, emitted by the substitute unit or
units, based on the baseline for each unit, as defined in
section 411(4), multiplied by the lesser of the unit's actual
or allowable 1985 emissions rate;
(4) the emissions rates and tonnage limitations that would
be applicable to the original and substitute affected units
under the substitution proposal;
(5) documentation, to the satisfaction of the
Administrator, that the reassigned tonnage limits will, in
total, achieve the same or greater emissions reduction than
would have been achieved by the original affected unit and
the substitute unit or units without such substitution; and
(6) such other information as the Administrator may
require.
(c) Administrator's Action on Substitution Proposals.--(1)
The Administrator shall take final action on such
substitution proposal in accordance with section 404(c) if
the substitution proposal fulfills the requirements of this
subsection. The Administrator may approve a substitution
proposal in whole or in part and with such modifications or
conditions as may be consistent with the orderly functioning
of the allowance system and which will ensure the emissions
reductions contemplated by this title. If a proposal does not
meet the requirements of subsection (b), the Administrator
shall disapprove it. The owner or operator of a unit listed
in table A shall not substitute another unit or units without
the prior approval of the Administrator.
(2) Upon approval of a substitution proposal, each
substitute unit, and each source with such unit, shall be
deemed affected under this title, and the Administrator shall
issue a permit to the original and substitute affected source
and unit in accordance with the approved substitution plan
and section 404. The Administrator shall allocate allowances
for the original and substitute affected units in accordance
with the approved substitution proposal pursuant to section
412. It shall be unlawful for any source or unit that is
allocated allowances pursuant to this section to emit sulfur
dioxide in excess of the emissions limitation provided for in
the approved substitution permit and plan unless the owner or
operator of each unit governed by the permit and approved
substitution plan holds allowances to emit not less than the
unit's total annual emissions. The owner or operator of any
original or substitute affected unit operated in violation of
this subsection shall be fully liable for such violation,
including liability for fulfilling the obligations specified
in section 406. If a substitution proposal is disapproved,
the Administrator shall allocate allowances to the original
affected unit or units in accordance with subsection (a).
(d) Eligible Phase I Extension Units.--(1) The owner or
operator of any affected unit subject to an emissions
limitation requirement under this section may petition the
Administrator in its permit application under section 404 for
an extension of 2 years of the deadline for meeting such
requirement, provided that the owner or operator of any such
unit holds allowances to emit not less than the unit's total
annual emissions for each of the 2 years of the period of
extension. To qualify for such an extension, the affected
unit must either employ a qualifying phase I technology, or
transfer its phase I emissions reduction obligation to a unit
employing a qualifying phase I technology. Such transfer
shall be accomplished in accordance with a compliance plan,
submitted and approved under section 404, that shall govern
operations at all units included in the transfer, and that
specifies the emissions reduction requirements imposed
pursuant to this title.
(2) Such extension proposal shall--
(A) specify the unit or units proposed for designation as
an eligible phase I extension unit;
(B) provide a copy of an executed contract, which may be
contingent upon the Administrator approving the proposal, for
the design engineering, and construction of the qualifying
phase I technology for the extension unit, or for the unit or
units to which the extension unit's emission reduction
obligation is to be transferred;
(C) specify the unit's or units' baseline, actual 1985
emissions rate, allowable 1985 emissions rate, and projected
utilization for calendar years 1995 through 1999;
(D) require CEMS on both the eligible phase I extension
unit or units and the transfer unit or units beginning no
later than January 1, 1995; and
(E) specify the emission limitation and number of
allowances expected to be necessary for annual operation
after the qualifying phase I technology has been installed.
(3) The Administrator shall review and take final action on
each extension proposal in order of receipt, consistent with
section 404, and for an approved proposal shall designate the
unit or units as an eligible phase I extension unit. The
Administrator may approve an extension proposal in whole or
in part, and with such modifications or conditions as may be
necessary, consistent with the orderly functioning of the
allowance system, and to ensure the emissions reductions
contemplated by the subpart.
(4) In order to determine the number of proposals eligible
for allocations from the reserve under subsection (a)(2) and
the number of the allowances remaining available after each
proposal is acted upon, the Administrator shall reduce the
total number of allowances remaining available in the reserve
by the number of allowances calculated according to
subparagraph (A), (B) and (C) until either no allowances
remain available in the reserve for further allocation or all
approved proposals have been acted upon. If no allowances
remain available in the reserve for further allocation before
all proposals have been acted upon by the Administrator, any
pending proposals shall be disapproved. The Administrator
shall calculate allowances equal to.
(A) the difference between the lesser of the average annual
emissions in calendar years 1988 and 1989 or the projected
emissions tonnage for calendar year 1995 of each eligible
phase I extension unit, as designated under paragraph (3),
and the product of the unit's baseline miltipled by an
emission rate of 2.50 lbs/mmBtu, divided by 2,000;
(B) the difference between the lesser of the average annual
emissions in calendar years 1988 and 1989 or the projected
emissions tonnage for calendar year 1996 of each eligible
phase I extension unit, as designated under paragraph (3),
and the product of the unit's baseline multiplied by an
emission rate of 2.50 lbs/mmBtu, divided by 2,000; and
(C) the amount by which (i) the product of each unit's
baseline multiplied by an emission rate of 1.20 lbs/mmBtu,
divided by 2,000, exceeds (ii) the tonnage level specified
under subparagraph (E) of paragraph (2) of this subsection
multiplied by a factor of 3.
(5) Each eligible Phase I extension unit shall receive
allowances determined under subsection (a)(1) or (c) of this
section. In addition, for calendar year 1995, the
Administrator shall allocate to each eligible Phase I
extension unit, from the allowance reserve created pursuant
to subsection (a)(2), allowances equal to the difference
between the lesser of the average annual emissions in
calendar years 1988 and 1989 or its projected emission
tonnage for calendar year 1995 and the product of the unit's
baseline multiplied by an emission rate of 2.50 lbs/mmBtu,
divided by 2,000. In calendar year 1996, the Administrator
shall allocate for each eligible unit, from the allowance
reserve created pursuant to subsection (a)(2), allowances
equal to the difference between the lesser of the average
annual emissions in calendar years 1988 and 1989 or its
projected emissions tonnage for calendar year 1996 and the
product of the unit's baseline multiplied by an emission
rate of 2.50 lbs/mmBtu, divided by 2,000. It shall be
unlawful for any source or unit subject to an approved
extension plan under this subsection to emit sulfur
dioxide in excess of the emissions limitations provided
for in the permit and approved extension plan, unless the
owner or operator of each unit governed by the permit and
approved plan holds allowances to emit not less than the
unit's total annual emissions.
(6) In addition to allowances specified in paragraph (4),
the Administrator shall allocate for each eligible Phase I
extension unit

[[Page S7483]]

employing qualifying Phase I technology, for calendar years
1997, 1998, and 1999, additional allowances, from any
remaining allowances in the reserve created pursuant to
subsection (a)(2), following the reduction in the reserve
provided for in paragraph (4), not to exceed the amount by
which (A) the product of each eligible unit's baseline times
an emission rate of 1.20 lbs/mmBtu, divided by 2,000 exceeds
(B) the tonnage level specified under subparagraph (E) of
paragraph (2) of this subsection.
(7) After January 1, 1997, in addition to any liability
under this Act, including under section 406, if any eligible
phase I extension unit employing qualifying phase I
technology or any transfer unit under this subsection emits
sulfur dioxide in excess of the annual tonnage limitation
specified in the extension plan, as approved in paragraph (2)
of this subsection, the Administrator shall, in the calendar
year following such excess, deduct allowances equal to the
amount of such excess from such unit's annual allowance
allocation.
(e)(1) In the case of a unit that receives authorization
from the Governor of the State in which such unit is located
to make reductions in the emissions of sulfur dioxide prior
to calendar year 1995 and that is part of a utility system
that meets the following requirements:
(A) the total coal-fired generation within the utility
system as a percentage of total system generation decreased
by more than 20 percent between January 1, 1980, and December
31, 1985; and (B) the weighted capacity factor of all coal-
fired units within the utility system averaged over the
period from January 1, 1985, through December 31, 1987, was
below 50 percent, the Administrator shall allocate allowances
under this paragraph for the unit pursuant to this
subsection. The Administrator shall allocate allowances for a
unit that is an affected unit pursuant to section 414 (but is
not also an affected unit under this section) and part of a
utility system that includes 1 or more affected units under
section 414 for reductions in the emissions of sulfur dioxide
made during the period 1995-1999 if the unit meets the
requirements of this subsection and the requirements of the
preceding sentence, except that for the purposes of applying
this subsection to any such unit, the prior year concerned as
specified below, shall be any year after January 1, 1995 but
prior to January 1, 2000.
(2) In the case of an affected unit under this section
described in subparagraph (A), the allowances allocated under
this subsection for early reductions in any prior year may
not exceed the amount which (A) the product of the unit's
baseline multiplied by the unit's 1985 actual sulfur dioxide
emission rate (in lbs. per mmBtu), divided by 2,000 exceeds
(B) the allowances specified for such unit in Table A. In the
case of an affected unit under section 414 described in
subparagraph (A), the allowances awarded under this
subsection for early reductions in any prior year may not
exceed the amount by which (i) the product of the quality of
fossil fuel consumed by the unit (in mmBtu) in the prior year
multiplied by the lesser of 2.50 or the most stringent
emission rate (in lbs. per mmBtu) applicable to the unit
under the applicable implementation plan, divided by 2,000
exceeds (ii) the unit's actual tonnage of sulfur dioxide
emission for the prior year concerned. Allowances
allocated under this subsection for units referred to in
subparagraph (A) may be allocated only for emission
reductions achieved as a result of physical changes or
changes in the method of operation made after November 15,
1990, including changes in the type or quality of fossil
fuel consumed.
(3) In no event shall the provisions of this paragraph be
interpreted as an event of force majeure or a commercial
impractibility or in any other way as a basis for excused
nonperformance by a utility system under a coal sales
contract in effect before November 15, 1990.

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

[[Page S7484]]

Martins Creek.......... 1 12,660
2 12,820
Portland............... 1 5,940
2 10,230
Shawville.............. 1 10,320
2 10,320
3 14,220
4 14,070
Sunbury................ 3 8,760
4 11,450
Tennessee............... Allen.................. 1 15,320
2 16,770
3 15,670
Cumberland............. 1 86,700
2 94,840
Gallatin............... 1 17,870
2 17,310
3 20,020
4 21,260
Johnsonville........... 1 7,790
2 8,040
3 8,410
4 7,990
5 8,240
6 7,890
7 8,980
8 8,700
9 7,080
10 7,550
West Virginia........... Albright............... 3 12,000
Fort Martin............ 1 41,590
2 41,200
Harrison............... 1 48,620
2 46,150
3 41,500
Kammer................. 1 18,740
2 19,460
3 17,390
Mitchell............... 1 43,980
2 45,510
Mount Storm............ 1 43,720
2 35,580
3 42,430
Wisconsin............... Edgewater.............. 4 24,750
La Crosse/Genoa........ 3 22,700
Nelson Dewey........... 1 6,010
2 6,680
N. Oak Creek........... 1 5,220
2 5,140
3 5,370
4 6,320
Pulliam................ 8 7,510
S. Oak Creek........... 5 9.670
6 12,040
7 16,180
8 15,790
------------------------------------------------------------------------

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

[[Page S7485]]

to establish the reserve under this subsection bears to the
total of such reductions for all such units.
(h) Alternative Allowance Allocation for United in Certain
Utility Systems With Optional Baseline.--
(1) Optional baseline for units in certain systems.--In the
case of a unit subject to the emissions limitation
requirements of this section which (as of November 15,
1990)--
(A) has an emission rate below 1.0 lbs/mmBtu,
(B) has decreased its sulfur dioxide emissions rate by 60
percent or greater since 1980, and
(C) is part of a utility system which has a weighted
average sulfur dioxide emissions rate for all fossil fueled-
fired units below 1.0 lbs/mmBtu, at the election to the owner
or operator of such unit, the unit's baseline may be
calculated
(i) as provided under section 411, or
(ii) by utilizing the unit's average annual fuel
consumption at a 60 percent capacity factor. Such election
shall be made no later than March 1, 1991.
(2) Allowance allocation.--Whenever a unit referred to in
paragraph (1) elects to calculate its baseline as provided in
clause (ii) of paragraph (1), the Administrator shall
allocate allowances for the unit pursuant to section 412(a),
this section, and section 414 (as Basic Phase II allowance
allocations) in an amount equal to the baseline selected
multiplied by the lower of the average annual emission rate
for such unit in 1989, or 1.0 lbs./mmBtu. Such allowance
allocation shall be in lieu of any allocation of allowances
under this section and section 414.

SEC. 414. PHASE II SULFUR DIOXIDE REQUIREMENTS.

(a) Applicability.--(1) After January 1, 2000, each
existing utility unit as provided below is subject to the
limitations or requirements of this section. Each utility
unit subject to an annual sulfur dioxide tonnage emission
limitation under this section is an affected unit under this
subpart. Each source that includes one or more affected units
is an affected source. In the case of an existing unit that
was not in operation during calendar year 1985, the emission
rate for a calendar year after 1985, as determined by the
Administrator, shall be used in lieu of the 1985 rate. The
owner or operator of any unit operated in violation of this
section shall be fully liable under this Act for fulfilling
the obligations specified in section 406.
(2) In addition to basic Phase II allowance allocations, in
each year beginning in calendar year 2000 and ending in
calendar year 2009, inclusive, the Administrator shall
allocate up to 530,000 Phase II bonus allowances pursuant to
subsections (b)(2),(c)(4), (d)(3)(A) and (B), and (h)(2) of
this section and section 415.
(3) In addition to basic Phase II allowances allocations
and Phase II bonus allowance allocations, beginning January
1, 2000, the Administrator shall allocate for each unit
listed on Table A in section 413 (other than units at Kyger
Creek, Clifty Creek, and Joppa Stream) and located in the
States of Illinois, Indiana, Ohio, Georgia, Alabama,
Missouri, Pennsylvania, West Virginia, Kentucky , or
Tennessee allowances in an amount equal to 50,000 multiplied
by the unit's pro rata share of the total number of basic
allowances allocated for all units listed on Table A (other
than units at Kyger Creek, Clifty Creek, and Joppa Stream).
Allowances allocated pursuant to this paragraph shall not be
subject to the 8,900,000 ton limitation in section 412(a).
(b) Units Equal to, or Above, 75 MWe and 1.20 lbs/mmBtu.--
(1) Except as otherwise provided in paragraph (3), after
January 1, 2000, it shall be unlawful for any existing
utility unit that serves a generator with nameplate capacity
equal to, or greater, than 75 MWe and an actual 1985 emission
rate equal to or greater than 1.20 lbs/mmBtu to exceed an
annual sulfur dioxide tonnage emission limitation equal to
the product of the unit's baseline multiplied by an emission
rate equal to 1.20 lbs/mmBtu, divided by 2,000, unless the
owner or operator of such unit holds allowances to emit not
less than the unit's total annual emissions or, for a year
after 2007, unless the owner or operator of the source that
includes such unit holds allowances to emit not less than the
total annual emissions of all affected units at the source.
(2) In addition to allowances allocated pursuant to
paragraph (1) and section 412(a) as basic Phase II allowance
allocations, beginning January 1, 2000, and for each calendar
year thereafter until and including 2009, the Administrator
shall allocate annually for each unit subject to the
emissions limitation requirements of paragraph (1) with an
actual 1985 emissions rate greater than 1.20 lbs/mmBtu and
less than 2.50 lbs/mmBtu and a baseline capacity factor of
less than 60 percent, allowances from the reserve created
pursuant to subsection (a)(2) in an amount equal to 1.20 lbs/
mmBtu multiplied by 50 percent of the difference, on a Btu
basis, between the unit's baseline and the unit's fuel
consumption at a 60 percent capacity factor.
(3) After January 1, 2000, it shall be unlawful for any
existing utility unit with an actual 1985 emissions rate
equal to or greater than 1.20 lbs/mmBtu whose annual average
fuel consumption during 1985, 1986, and 1987 on a Btu basis
exceeded 90 percent in the form of lignite coal which is
located in a State in which, as of July 1, 1989, no county or
portion of a county was designated nonattainment under
section 107 of this Act for any pollutant subject to the
requirements of section 109 of this Act to exceed an annual
sulfur dioxide tonnage limitation equal to the product of the
unit's baseline multiplied by the lesser of the unit's actual
1985 emissions rate or its allowable 1985 emissions rate,
divided by 2,000, unless the owner or operator of such unit
holds allowances to emit not less than the unit's total
annual emissions or, for a year after 2007, unless the
owner or operator of the source that includes such unit
holds allowances to emit not less than the total annual
emissions of all affected units at the source.
(4) After January 1, 2000, the Administrator shall allocate
annually for each unit, subject to the emissions limitation
requirements of paragraph (1), which is located in a State
with an installed electrical generating capacity of more than
30,000,000 kw in 1988 and for which was issued a prohibition
order or a proposed prohibition order (from burning oil),
which unit subsequently converted to coal between January 1,
1980 and December 31, 1985, allowances equal to the
difference between (A) the product of the unit's annual fuel
consumption, on a Btu basis, at a 65 percent capacity factor
multiplied by the lesser of its actual or allowable emissions
rate during the first full calendar year after conversion,
divided by 2,000, and (B) the number of allowances allocated
for the unit pursuant to paragraph (1): Provided, That the
number of allowances allocated pursuant to this paragraph
shall not exceed an annual total of five thousand. If
necessary to meeting the restriction imposed in the preceding
sentence the Administrator shall reduce, pro rata, the annual
allowances allocated for each unit under this paragraph.
(c) Coal or Oil-fired Units Below 75 MWe and Above 1.20
lbs/mmBtu.--(1) Except as otherwise provided in paragraph
(3), after January 1, 2000, it shall be unlawful for a coal
or oil-fired existing utility unit that serves a generator
with nameplate capacity of less than 75 MWe and an actual
1985 emission rate equal to, or greater than, 1.20 lbs/mmBtu
and which is a unit owned by a utility operating company
whose aggregate nameplate fossil fuel steam-electric capacity
is, as of December 31, 1989, equal to, or greater than, 250
MWe to exceed an annual sulfur dioxide emissions limitation
equal to the product of the unit's baseline multiplied by an
emission rate equal to 1.20 lbs/mmBtu, divided by 2,000
unless the owner or operator of such unit holds allowances to
emit not less than the unit's total annual emissions or, for
a year after 2007, unless the owner or operator of the source
that includes such unit holds allowances to emit not less
than the total annual emissions of all affected units at the
source.
(2) After January 1, 2000, it shall be unlawful for a cola
or oil-fired existing utility unit that serves a generator
with nameplate capacity of less than 75 MWe and an actual
1985 emission rate equal to, or greater than, 1.20 lbs/mmBtu
(excluding units subject to section 111 of the Act or to a
federally enforceable emissions limitation for sulfur dioxide
equivalent to an annual rate of less than 1.20 lbs/mmBtu) and
which is a unit owned by a utility operating company whose
aggregate nameplate fossil fuel steam-electric capacity is,
as of December 31, 1989, less than 250 MWe, to exceed an
annual sulfur dioxide tonnage emissions limitation equal to
the product of the unit's baseline multiplied by the lesser
of its actual 1985 emissions rate or its allowable 1985
emissions rate, divided by 2,000, unless the owner or
operator of such unit holds allowances to emit not less than
the unit's total annual emissions or, for a year after 2007,
unless the owner or operator of the source that includes such
unit holds allowances to emit not less than the total annual
emissions of all affected units at the source.
(3) After January 1, 2000 it shall be unlawful for any
existing utility unit with a nameplate capacity below 75 MWe
and an actual 1985 emissions rate equal to, or greater than,
1.20 lbs/mmBtu which became operational on or before December
31, 1965, which is owned by a utility operating company with,
as of December 31, 1989, a total fossil fuel steam-electric
generating capacity greater than 250 MWe, and less than 450
MWe which serves fewer than 78,000 electrical customers as of
November 15, 1990 to exceed an annual sulfur dioxide
emissions tonnage limitation equal to the product of its
baseline multiplied by the lesser of its actual or
allowable 1985 emission rate, divided by 2,000, unless the
owner or operator holds allowances to emit not less than
the units total annual emissions or, for a year after
2007, unless the owner or operator of the source that
includes such unit holds allowances to emit not less than
the total annual emissions of all affected units at the
source. After January 1, 2010, it shall be unlawful for
each unit subject to the emissions limitation requirements
of this paragraph to exceed an annual emissions tonnage
limitation equal to the product of its baseline multiplied
by an emissions rate of 1.20 lbs/mmBtu, divided by 2,000,
unless the owner or operator holds allowances to emit not
less than the unit's total annual emissions or, for a year
after 2007, unless the owner or operator of the source
that includes such unit holds allowances to emit not less
than the total annual emissions of all affected units at
the source.
(4) In addition to allowances allocated pursuant to
paragraph (1) and section 412(a) as basic Phase II allowance
allocations, beginning January 1, 2000, and for each calendar
year thereafter until and including 2009, inclusive, the
Administrator shall allocate annually for each unit subject
to the emissions limitation requirements of paragraph (1)
with an actual 1985 emissions rate equal to, or greater than,
1.20 lbs/mmBtu and less than

[[Page S7486]]

2.50 lbs/mmBtu and a baseline capacity factor of less than 60
percent, allowances from the reserve created pursuant to
subsection (a)(2) in an amount equal to 1.20 lbs/mmBtu
multiplied by 50 percent of the difference, on a Btu basis,
between the unit's baseline and the unit's fuel consumption
at a 60 percent capacity factor.
(5) After January 1, 2000, is shall be unlawful for any
existing unit with a nameplate capacity below 75 MWe and an
actual 1985 emissions rate equal to, or greater than,
1.20lbs/mmBtu which is part of an electric utility system
which, as of November 15, 1990, (A) has at least 20 percent
of its fossil-fuel capacity controlled by flue gas
desulfurization devices, (B) has more than 10 percent of its
fossil-fuel capacity consisting of coal-fired unites of less
than 75 MWe, and (C) has large units (greater than 400 MWe)
all of which have difficult or very difficult FGD Retrofit
Cost Factors (according to the Emissions and the FGD Retrofit
Feasibility at the 200 Top Emitting Generating Stations,
prepared for the United States Environmental Protection
Agency on January 10, 1986) to exceed an annual sulfur
dioxide emissions tonnage limitation equal to the product of
its baseline multiplied by an emissions rate of 2.5 lbs/
mmBtu, divided by 2,000, unless the owner or operator holds
allowances to emit not less than the unit's total annual
emissions or, for a year after 2007, unless the owner or
operator of the source that includes such unit holds
allowances to emit not less than the total annual emissions
of all affected units at the source. After January 1, 2010,
it shall be unlawful for each unit subject to the emissions
limitation requirements of this paragraph to exceed an annual
emissions tonnage limitation equal to the project of its
baseline multiplied by an emissions rate of 1.20lbs/mmBtu,
divided by 2,000, unless the owner or operator holds for use
allowances to emit not less than the unit's total annual
emissions or, for a year after 2007, unless the owner or
operator of the source that includes such unit holds
allowances to emit not less than the total annual emissions
of all affected units at the source.
(d) Coal-fired Units Below 1.20 lbs/mmBtu.--(1) After
January 1, 2000, it shall be unlawful for any existing coal-
fired utility unit the lesser of whose actual or allowable
1985 sulfur dioxide emissions rate is less than 0.60 lbs/
mmBtu to exceed an annual sulfur dioxide tonnage emission
limitation equal to the product of the unit's baseline
multiplied by (A) the lesser of 0.60 lbs/mmBtu or the unit's
allowable 1985 emissions rate, and (B) a numerical factor of
120 percent, divided by 2,000, unless the owner or
operator of such unit holds allowances to emit not less
than the unit's total annual emissions or, for a year
after 2007, unless the owner or operator of the source
that includes such unit holds allowances to emit not less
than the total annual emissions of all affected units at
the source.
(2) After January 1, 2000, it shall be unlawful for any
existing coal-fired utility unit the lesser of whose actual
or allowable 1985 sulfur dioxide emissions rate is equal to,
or greater than, 0.60 lbs/mmBtu and less than 1.20 lbs/mmBtu
to exceed an annual sulfur dioxide tonnage emissions
limitation equal to the product of the unit's baseline
multiplied by (A) the lesser of its actual 1985 emissions
rate or its allowable 1985 emissions rate, and (B) a
numerical factor of 120 percent, divided by 2,000, unless the
owner or operator of such unit holds allowances to emit not
less than the unit's total annual emissions or, for a year
after 2007, unless the owner or operator of the source that
includes such unit holds allowances to emit not less than the
total annual emissions of all affected units at the source.
(3)(A) In addition to allowances allocated pursuant to
paragraph (1) and section 412(a) as basic Phase II allowance
allocations, at the election of the designated representative
of the operating company, beginning January 1, 2000, and for
each calendar year thereafter until and including 2009, the
Administrator shall allocate annually for each unit subject
to the emissions limitation requirements of paragraph (1)
allowances from the reserve created pursuant to subsection
(a)(2) in an amount equal to the amount by which (i) the
product of the lesser of 0.60 lbs.mmBtu or the unit's
allowable 1985 emissions rate multiplied by the unit's
baseline adjusted to reflect operation at a 60 percent
capacity factor, divided by 2,000, exceeds (ii) the number of
allowances allocated for the unit pursuant to paragraph (1)
and section 403(a)(1) as basic Phase II allowance
allocations.
(B) In addition to allowances allocated pursuant to
paragraph (2) and section 412(a) as basic Phase II allowance
allocations, at the election of the designated representative
of the operating company, beginning January 1, 2000, and for
each calendar year thereafter until and including 2009, the
Administrator shall allocate annually for each unit subject
to the emissions limitation requirements of paragraph (2)
allowances from the reserve created pursuant to subsection
(a)(2) in an amount equal to the amount by which (i) the
product of the lesser of the unit's actual 1985 emissions
rate or its allowable 1985 emissions rate multiplied by the
unit's baseline adjusted to reflect operation at a 60 percent
capacity factor, divided by 2,000, exceeds (ii) the number of
allowances allocated for the unit pursuant to paragraph (2)
and section 412(a) as basic Phase II allowance allocations.
(C) An operating company with units subject to the
emissions limitation requirements of this subsection may
elect the allocation of allowances as provided under
subparagraphs (A) and (B). Such election shall apply to the
annual allowance allocation for each and every unit in the
operating company subject to the emissions limitation
requirements of this subsection. The Administrator shall
allocate allowances pursuant to subparagraphs (A) and (B)
only in accordance with this subparagraph.
(4) Notwithstanding any other provision of this section, at
the election of the owner or operator, after January 1, 2000,
the Administrator shall allocate in lieu of allocation,
pursuant to paragraph (1), (2), (3), (5), or (6), allowances
for a unit subject to the emissions limitation requirements
of this subsection which commenced commercial operation on or
after January 1, 1981 and before December 31, 1985, which was
subject to, and in compliance with, section 111 of the Act in
an amount equal to the unit's annual fuel consumption, on a
Btu basis, at a 65 percent capacity factor multiplied by the
unit's allowable 1985 emissions rate, divided by 2,000.
(5) For the purposes of this section, in the case of an
oil-and gas-fired unit which has been awarded a clean coal
technology demonstration grant as of January 1, 1991, by the
United States Department of Energy, beginning January 1,
2002, the Administrator shall allocate for the unit
allowances in an amount equal to the unit's baseline
multiplied by 1.20 lbs/mmBtu, divided by 2,000.
(e) Oil and Gas-fired Units Equal to or Greater Than 0.60
lbs/mmBtu and Less Than 1.20 lbs/mmBtu.--After January 1,
2000, it shall be unlawful for any existing oil and gas-fired
utility unit the lesser of whose actual or allowable 1985
sulfur dioxide emission rate is equal to, or greater than,
0.60 lbs/mmBtu, but less than 1.20 lbs/mmBtu to exceed an
annual sulfur dioxide tonnage limitation equal to the product
of the unit's baseline multiplied by (A) the lesser of the
unit's allowable 1985 emissions rate or its actual 1985
emissions rate and (B) a numerical factor of 120 percent
divided by 2,000, unless the owner or operator of such unit
holds allowances to emit not less than the unit's total
annual emissions or, for a year after 2007, unless the owner
or operator of the source that includes such unit holds
allowances to emit not less than the total annual emissions
of all affected units at the source.
(f) Oil and Gas-fired Units Less Than 0.60 lbs/mmBtu.--
After January 1, 2000, it shall be unlawful for any oil and
gas-fired existing utility unit the lesser of whose actual or
allowance 1985 emission rate is less than 0.60 lbs/mmBtu and
whose average annual fuel consumption during the period 1980
through 1989 on a Btu basis was 90 percent or less in the
form of natural gas to exceed an annual sulfur dioxide
tonnage emissions limitation equal to the product of the
unit's baseline multiplied by (A) the lesser of 0.60 lbs/
mmBtu or the unit's allowance 1985 emissions, and (b) a
numerical factor of 120 percent, divided by 2,000, unless the
owner or operator of such unit holds allowances to emit not
less than the unit's total annual emissions or, for a year
after 2007, unless the owner or operator of the source that
includes such unit holds allowances to emit not less than the
total annual emissions of all affected units at the source.
(2) In addition to allowances allocated pursuant to
paragraph (1) as basic Phase II allowance allocations and
section 412(a), beginning January 1, 2000, the Administrator
shall, in the case of any unit operated by a utility that
furnishes electricity, electric energy, steam, and natural
gas within an area consisting of a city and 1 contiguous
county, and in the case of any unit owned by a State
authority, the output of which unit is furnished within that
same area consisting of a city and 1 contiguous county, the
Administrator shall allocate for each unit in the utility its
pro rata share of 7,000 allowances and for each unit in the
State authority its pro rata share of 2,000 allowances.
(g) Units That Commence Operation Between 1986 and December
31, 1995.--(1) After January 1, 2000, it shall be unlawful
for any utility unit that has commenced commercial operation
on or after January 1, 1986, but not later than September 30,
1990 to exceed an annual tonnage emission limitation equal to
the product of the unit's annual fuel consumption, on a Btu
basis, at a 65 percent capacity factor multiplied by the
unit's allowance 1985 sulfur dioxide emission rate
(converted, if necessary, to pounds per mmBtu), divided by
2,000 unless the owner or operator of such unit holds
allowances to emit not less than the unit's total annual
emissions or, for a year after 2007, unless the owner or
operator of the source that includes such unit holds
allowances to emit not less than the total annual emissions
of all affected units at the source.
(2) After January 1, 2000, the Administrator shall allocate
allowances pursuant to section 411 to each unit which is
listed in table B of this paragraph in an annual amount equal
to the amount specified in table B.

Table B

Unit Allowances
Brandon Shores..................................................8,907
Miller 4........................................................9,197
TNP One 2.......................................................4,000
Zimmer 1.......................................................18,458
Spruce 1........................................................7,647
Clover 1........................................................2,796
Clover 2........................................................2,796
Twin Oak 2......................................................1,760
Twin Oak 1......................................................9,158
Cross 1.........................................................6,401
Malakoff 1......................................................1,759

[[Page S7487]]

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

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

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

SEC. 416. ELECTION FOR ADDITIONAL SOURCES.

(a) Applicability.--The owner or operator of any unit that
is not, nor will become, an affected unit under section
412(b), 413, or 414, that emits sulfur dioxide, may elect to
designate that unit or source to become an affected unit and
to receive allowances under this subpart. An election shall
be submitted to the Administrator for approval, along with a
permit application and proposed compliance plan in accordance
with section 404.

[[Page S7488]]

The Administrator shall approve a designation that meets the
requirements of this section, and such designated unit shall
be allocated allowances, and be an affected unit for purposes
of this subpart.
(b) Establishment of Baseline.--The baseline for a unit
designated under this section shall be established by the
Administrator by regulation, based on fuel consumption and
operating data for the unit for calendar years 1985, 1986,
and 1987, or if such data is not available, the Administrator
may prescribe a baseline based on alternative representative
data.
(c) Emission Limitations.--(1) For a unit for which an
election, along with a permit application and compliance
plan, is submitted to the Administrator under paragraph (a)
before January 1, 2002, annual emissions limitations for
sulfur dioxide shall be equal to the product of the baseline
multiplied by the lesser of the unit's 1985 actual or
allowable emission rate in lbs/mmBtu, or if the unit did not
operate in 1985, by the lesser of the unit's actual or
allowable emission rate for a calendar year after 1985 (as
determined by the Administrator), divided by 2,000.
(2) For a unit for which an election, along with a permit
application and compliance plan, is submitted to the
Administrator under paragraph (a) on or after January 1,
2002, annual emissions limitations for sulfur dioxide shall
be equal to the product of the baseline multiplied by the
lesser of the unit's 1985 actual or allowable emission rate
in lbs/mmBtu, or, if the unit did not operate in 1985, by the
lesser of the unit's actual or allowable emission rate for a
calendar year after 1985 (as determined by the
Administrator), divided by 4,000.
(d) Allowances and Permits.--The Administrator shall issue
allowances to an affected unit under this section in an
amount equal to the emissions limitation calculated under
subsection (c), in accordance with section 412. Such
allowance may be used in accordance with, and shall be
subject to, the provisions of section 412. Affected sources
under this section shall be subject to the requirements of
sections 404, 405, 406, and 412.
(e) Limitations.--Any unit designated under this section
shall not transfer or bank allowances produced as a result of
reduced utilization or shutdown, except that, such allowances
may be transferred or carried forward for use in subsequent
years to the extent that the reduced utilization or shutdown
results from the replacement of thermal energy from the unit
designated under this section, with thermal energy
generated by any other unit or units subject to the
requirements of this subpart, and the designated unit's
allowances are transferred or carried forward for use at
such other replacement unit or units. In no case may the
Administrator allocate to a source designated under this
section allowances in an amount greater than the emissions
resulting from operation of the source in full compliance
with the requirements of this Act. No such allowances
shall authorize operation of a unit in violation of any
other requirements of this Act.
(f) Implementation.--The Administrator shall implement this
section under 40 CFR part 74 (2001), amended as appropriate
by the Administrator.

SEC. 417 AUCTIONS, RESERVE.

(a) Special Reserve of Allowances.--For purposes of
establishing the Special Allowance Reserve, the Administrator
shall withhold--
(1) 2.8 percent of the allocation of allowances for each
year from 1995 through 1999 inclusive; and
(2) 2.8 percent of the basic Phase II allowance allocation
of allowances for each year beginning in the year 2000

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

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

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

SEC. 418. INDUSTRIAL SO2 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

[[Page S7489]]

actions under the Act as may be appropriate to ensure that
such emissions do not exceed 5.60 million tons per year. Such
actions may include the promulgation of new and revised
standards of performance for new sources, including units
subject to section 414(g)(2), under section 111(b), as well
as promulgation of standards of performance for existing
sources, including units subject to section 414(g)(2), under
authority of this section. For an existing source regulated
under this section, ``standard of performance'' means a
standard which the Administrator determines is applicable to
that source and which reflects the degree of emission
reduction achievable through the application of the best
system of continuous emission reduction which (taking into
consideration the cost of achieving such emission reduction,
and any nonair quality health and environmental impact and
energy requirements) the Administrator determines has been
adequately demonstrated for that category of sources.
(c) Election.--Regulations promulgated under section 414(b)
shall not prohibit a source from electing to become an
affected unit under section 417.

SEC. 419. TERMINATION.

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

Subpart 2. Sulfur Dioxide Allowance Program

SEC. 421 DEFINITIONS.

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

SEC. 422. APPLICABILITY.

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

SEC. 423. LIMITATIONS ON TOTAL EMISSIONS.

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

TABLE A.--TOTAL SO2 ALLOWANCES ALLOCATED OR AUCTIONED FOR EGUS
------------------------------------------------------------------------
SO2 SO2
Year allowances allowances
allocated auctioned
------------------------------------------------------------------------
2010............................................ 4,371,666 45,000
2011............................................ 4,326,667 90,000
2012............................................ 4,281,667 135,000
2013............................................ 4,320,000 180,000
2014............................................ 4,275,000 225,000
2015............................................ 4,230,000 270,000
2016............................................ 4,185,000 315,000
2017............................................ 4,140,000 360,000
2018............................................ 2,730,000 270,000
2019............................................ 2,700,000 300,000
2020............................................ 2,670,000 330,000
2021............................................ 2,640,000 360,000
2022............................................ 2,610,000 390,000
2023............................................ 2,580,000 420,000
2024............................................ 2,550,000 450,000
2025............................................ 2,520,000 480,000
2026............................................ 2,490,000 510,000
2027............................................ 2,460,000 540,000
2028............................................ 2,430,000 570,000
2029............................................ 2,400,000 600,000
2030............................................ 2,325,000 675,000
2031............................................ 2,250,000 750,000
2032............................................ 2,175,000 825,000
2033............................................ 2,100,000 900,000
2034............................................ 2,025,000 975,000
2035............................................ 1,950,000 1,050,000
2036............................................ 1,875,000 1,125,000
2037............................................ 1,800,000 1,200,000
2038............................................ 1,725,000 1,275,000
2039............................................ 1,650,000 1,350,000
2040............................................ 1,575,000 1,425,000
2041............................................ 1,500,000 1,500,000
2042............................................ 1,425,000 1,575,000
2043............................................ 1,350,000 1,650,000
2044............................................ 1,275,000 1,725,000
2045............................................ 1,200,000 1,800,000
2046............................................ 1,125,000 1,875,000
2047............................................ 1,050,000 1,950,000
2048............................................ 975,000 2,025,000
2049............................................ 900,000 2,100,000
2050............................................ 825,000 2,175,000
2051............................................ 750,000 2,250,000
2052............................................ 675,000 2,325,000
2053............................................ 600,000 2,400,000
2054............................................ 525,000 2,475,000
2055............................................ 450,000 2,550,000
2056............................................ 375,000 2,625,000
2057............................................ 300,000 2,700,000
2058............................................ 225,000 2,775,000
2059............................................ 150,000 2,850,000
2060............................................ 75,000 2,925,000
2061............................................ 0 3,000,000
------------------------------------------------------------------------

SEC. 424. EGU ALLOCATIONS.

(a) By January 1, 2007, the Administrator shall promulgate
regulations determining allocations of sulfur dioxide
allowances for affected EGUs for each year during 2010
through 2060. The regulations shall provide that--
(1)(A) Ninety-five percent of the total amount of sulfur
dioxide allowances allocated each year to affected EGUs under
section 423 shall be allocated based on the sulfur dioxide
allowances that were allocated under subpart 1 for 2010 or
thereafter and are held in unit accounts and general
accounts in the Allowance Tracking System under section
403(c).
(B) The Administrator shall allocate sulfur dioxide
allowances to each facility's account and each general
account in the Allowance Tracking System under section 403(c)
as follows:
(i) The Administrator shall determine the amount of sulfur
dioxide allowances allocated under subpart 1 for 2010, and
each subsequent year, that are recorded in each unit account
and each general account in the Allowance Tracking System as
of 12:00 noon, Eastern Standard time, on the date 180 days
after enactment of the Clear Skies Act of 2002. The
Administrator shall determine this amount in accordance with
40 CFR part 73 (2001), amended as appropriate by the
Administrator, except that the Administrator shall discount
all sulfur dioxide allowances allocated for 2011 or later at
a rate of 7% per year.
(ii) The Administrator shall determine for each unit
account and each general account in the Allowance Tracking
System an amount of sulfur dioxide allowances equal to the
allocation amount under subparagraph (A) multiplied by the
ratio of the amount of sulfur dioxide allowances determined
to be recorded in that account under clause (i) to the total
amount of sulfur dioxide allowances determined to be recorded
in all unit accounts and general accounts in the Allowance
Tracking System under clause (i).
(iii) The Administrator shall allocate to each facility's
account in the Allowance Tracking System an amount of sulfur
dioxide allowances equal to the total amount of sulfur
dioxide allowances determined under clause (ii) for the unit
accounts of the units at the facility and to each general
account in the Allowance Tracking System the amount of sulfur
dioxide allowances determined under clause (ii) for that
general account.
(2)(A) Three and one-half percent of the total amount of
sulfur dioxide allowances allocated each year for affected
EGUs under section 423 shall be allocated for units at a
facility that are affected EGUs as of December 31, 2004, that
commenced operation before January 1, 2001, and that are not
allocated any sulfur dioxide allowances under subpart 1.
(B) The Administrator shall allocate each year for the
units under subparagraph (A) an amount of sulfur dioxide
allowances determined by--
(i) For such units at the facility that are coal-fired,
multiplying 0.40 lb/mmBtu by the total baseline heat input of
such units and converting to tons;
(ii) For such units at the facility that are oil-fired,
multiplying 0.20 lb/mmBtu by the total baseline heat input of
such units and converting to tons;
(iii) For all such other units at the facility that are not
covered by clause (i) or (ii), multiplying 0.05 lb/mmBtu by
the total baseline heat input of such units and converting to
tons;
(iv) If the total of the amounts for all facilities under
clauses (i), (ii), and (iii) exceeds the allocation amount
under subparagraph (A), multiplying the allocation amount
under subparagraph (A) by the ratio of the total of the
amounts for the facility under clauses (i), (ii), and (iii)
to the total of the amounts for all facilities under clause
(i), (ii), and (iii); and

[[Page S7490]]

(v) Allocating to each facility the lesser of the total of
the amounts for the facility under clauses (i), (ii), and
(iii) or, if the total of the amounts for all facilities
under clauses (i), (ii), and (iii) exceeds the allocation
amount under subparagraph (A), the amount under clause
(iv). The Administrator shall add to the amount of sulfur
dioxide allowances allocated under paragraph (3) any
unallocated allowances under this paragraph.
(3)(A) One and one-half percent of the total amount of
sulfur dioxide allowances allocated each year for affected
EGUs under section 423 shall be allocated for units that are
affected EGUs as of December 31, 2004, that commence
operation on or after January 1, 2001 and before January 1,
2005, and that are not allocated any sulfur dioxide
allowances under subpart 1.
(B) The Administrator shall allocate each year for the
units under subparagraph (A) an amount of sulfur dioxide
allowances determined by--
(i) For such units at the facility that are coal-fired or
oil-fired, multiplying 0.19 lb/mmBtu by the total baseline
heat imput of such units and converting to tons;
(ii) For all such other units at the facility that are not
covered by clause (i), multiplying 0.02 lb/mmBtu by the total
baseline heat input of such units and converting to tons;
(iv) 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); and
(v) Allocating to each facility the lesser of the total of
the amounts for the facility under clauses (i) and (ii) or,
if the total of the amounts for all facilities under clauses
(i) and (ii) exceeds the allocation amount under subparagraph
(A), the amount under clause (iv). The Administrator shall
allocate to the facilities under paragraphs (1) and (2) on a
pro rata basis (based on the allocations under those
paragraphs) any unallocated allowances under this paragraph.
(b) For each year 2010 through 2060, if the Administrator
has not promulgated the regulations determining allocations
under paragraph (a) by July 1 that is eighteen months before
January 1 of such year, then--
(1) The Administrator shall:
(A) allocate, for such year, to each unit with coal as its
primary or secondary fuel or residual oil as its primary fuel
listed in the Administrator's Emissions Scorecard 2000,
Appendix B, Table B1 an amount of sulfur dioxide allowances
determined by multiplying eighty percent of the allocation
amount under section 423 by the ratio of such unit's heat
input in the Emissions Scorecard 2000, Appendix B, Table B1
to the total of the heat input in the Emissions Scorecard
2000, Appendix B, Table B1 for all units with coal as their
primary or secondary fuel or residual oil as their primary
fuel;
(B) record in each facility's account in the Allowance
Tracking System under section 403(c) for such year the total
of the amounts of sulfur dioxide allowances for the units at
such facility determined under subparagraph (A); and
(C) auction an amount of sulfur dioxide allowances equal to
five percent of the allocation amount under section 423 and
conduct the auction on the first business day in October
following the respective promulgation deadline under
subsection (b) and in accordance with section 400.
(2) Notwithstanding any other provision of law to the
contrary, the determination of the amount of sulfur dioxide
allowances under subparagraph (1)(A) and the recording of
sulfur dioxide allowances under subparagraph (1)(B) shall not
be subject to judicial review.
(3) Notwithstanding the provisions to the contrary in
section 423, the Administrator shall not allocate or record
fifteen percent of the allocation amount under section 423
for such year.

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

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

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

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

[[Page S7491]]

day in October 2010 and in accordance with section 409.

Subpart 3. Western Regional Air Partnership.

SEC. 431. DEFINITIONS.

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

SEC. 432. APPLICABILITY.

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

SEC. 433. LIMITATIONS ON TOTAL EMISSIONS.

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

SEC. 434. EGU ALLOCATIONS.

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

Part C--Nitrogen Oxides Emission Reductions

Subpart 1--Acid Rain Program

SEC. 441. NITROGEN OXIDES EMISSION REDUCTION PROGRAM.

(a) Applicability.--On the date that a coal-fired utility
unit becomes an affected unit pursuant to sections 413 or
414, or on the date a unit subject to the provisions of
section 413(d), must meet the SO2 reduction
requirements, each such unit shall become an affected unit
for purposes of this section and shall be subject to the
emission limitations for nitrogen oxides set forth herein.
(b) Emission Limitations.--
(1) The Administrator shall by regulation establish annual
allowable emission limitations for nitrogen oxides for the
types of utility boilers listed below, which limitations
shall not exceed the rates listed below: Provided, That the
Administrator may set a rate higher than that listed for any
type of utility boiler if the Administrator finds that the
maximum listed rate for that boiler type cannot be achieved
using low NOX burner technology. The Administrator
shall implement this paragraph under 40 CFR Sec. 76.5 (2001).
The maximum allowable emission rates are as follows:
(A) for tangentially fired boilers, 0.45 lb/mmBtu;
(B) for dry bottom wall-fired boilers (other than units
applying cell burner technology), 0.50 lb/mmBtu. After
January 1, 1995, it shall be unlawful for any unit that is an
affected unit on that date and is of the type listed in this
paragraph to emit nitrogen oxides in excess of the emission
rates set by the Administrator pursuant to this paragraph.
(2) The Administrator shall, by regulation, establish
allowable emission limitations on a lb/mmBtu, annual average
basis, for nitrogen oxides for the following types of utility
boilers:
(A) wet bottom wall-fired boilers;
(B) cyclones;
(C) units applying cell burner technology;
(D) all other types of utility boilers.
The Administrator shall base such rates on the degree of
reduction achievable through the retrofit application of the
best system of continuous emission reduction, taking into
account available technology, costs and energy and
environmental impacts; and which is comparable to the costs
of nitrogen oxides controls set pursuant to subsection
(b)(1). The Administrator may revise the applicable emission
limitations for tangentially fired and dry bottom, wall-fired
boilers (other than cell burners) to be more stringent if the
Administrator determines that more effective low
NOx burned technology is available: Provided,
That, no unit that is an affected unit pursuant to section
413 and that is subject to the requirements of subsection
(b)(1), shall be subject to the revised emission limitations,
if any. The Administrator shall implement that paragraph
under 40 CFR Sec. Sec. 76.6 and 76.7 (2001).
(c) Alternative Emission Limitations.--The permitting
authority shall, upon request of an owner or operator of a
unit subject to this section, authorize an emission
limitation less stringent than the applicable limitation
established under subsection (b)(1) or (b)(2) upon a
determination that--
(1) a unit subject to subsection (b)(1) cannot meet the
applicable limitation using low NOx burner
technology; or
(2) a unit subject to subsection (b)(2) canot meet the
applicable rate using the technology on which the
Administrator based the applicable emission limitation.

[[Page S7492]]

The permitting authority shall base such determination upon
a showing satisfactory to the permitting authority, in
accordance with regulations established by the Administrator,
that the owner or operator--
(1) has properly installed appropriate control equipment
designed to meet the applicable emission rate;
(2) has properly operated such equipment for a period of
fifteen months (or such other period of time as the
Administrator determines through the regulations), and
provides operating and monitoring data for such period
demonstrating that the unit cannot meet the applicable
emission rate; and
(3) has specified an emission rate that such unit can meet
on an annual average basis. The permitting authority shall
issue an operating permit for the unit in question, in
accordance with section 404 and title V--
(i) that permits the unit during the demonstration period
referred to in subparagraph (2) above, to emit at a rate in
excess of the applicable emission rate;
(ii) at the conclusion of the demonstration period to
revise the operating permit to reflect the alternative
emission rate demonstrated in paragraphs (2) and (3) above.
Units subject to subsection (b)(1) for which an alternative
emission limitation is established shall not be required to
install any additional control technology beyond low
NOx burners. Nothing in this section shall
preclude an owner or operator from installing and operating
an alternative NOx control technology capable of
achieving the applicable emission limitation. The
Administrator shall implement this subsection under 40 CFR
part 76 (2001), amended as appropriate by the Administrator.
(d) Emissions Averaging.--In lieu of complying with the
applicable emission limitations under subsection (b)(1), (2),
or (c), the owner or operator of two or more units subject to
one or more of the applicable emission limitations set
pursuant to these sections, may petition the permitting
authority for alternative contemporaneous annual emission
limitations for such units that ensure that (1) the actual
annual emission rate in pounds of nitrogen oxides per million
Btu averaged over the units in question is a rate that is
less than or equal to (2) Btu-weighted average annual
emission rate for the same units if they had been operated,
during the same period of time, in compliance with
limitations set in accordance with the applicable emission
rates set pursuant to subsections (b)(1) and (2).
If the permitting authority determines, in accordance with
regulations issued by the Administrator that the conditions
in the paragraph above can be met, the permitting authority
shall issue operating permits for such units, in accordance
with section 404 and title V, that allow alternative
contemporaneous annual emission limitations. Such emission
limitations shall only remain in effect while both units
continue operation under the conditions specified in their
respective operating permits. The Administrator shall
implement this subsection under 40 CFR part 76 (2001),
amended as appropriate by the Administrator.

SEC. 442. TERMINATION.

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

Subpart 2. Nitrogen Oxides Allowance Program.

SEC. 451. DEFINITIONS.

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

SEC. 452. APPLICABILITY.

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

SEC. 453. LIMITATIONS ON TOTAL EMISSIONS.

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

TABLE A.--TOTAL NOX ALLOWANCE ALLOCATED OR AUCTIONED FOR EGUS IN ZONE 1
------------------------------------------------------------------------
NOX NOX
Year allowances allowances
allocated auctioned
------------------------------------------------------------------------
2008............................................ 1,546,380 15,620
2009............................................ 1,530,760 31,240
2010............................................ 1,515,140 46,860
2011............................................ 1,499,520 62,480
2012............................................ 1,483,900 78,100
2013............................................ 1,468,280 93,720
2014............................................ 1,452,660 109,340
2015............................................ 1,437,040 124,960
2016............................................ 1,421,420 140,580
2017............................................ 1,405,800 156,200
2018............................................ 1,034,180 127,820
2019............................................ 1,022,560 139,440
2020............................................ 1,010,940 151,060
2021............................................ 999,320 162,680
2022............................................ 987,700 174,300
2023............................................ 976,080 185,920
2024............................................ 964,460 197,540
2025............................................ 952,840 209,160
2026............................................ 941,220 220,780
2027............................................ 929,600 232,400
2028............................................ 900,550 261,450
2029............................................ 871,500 290,500
2030............................................ 842,450 319,550
2031............................................ 813,400 348,600
2032............................................ 784,350 377,650
2033............................................ 755,300 406,700
2034............................................ 726,250 435,750
2035............................................ 697,200 464,800
2036............................................ 668,150 493,850
2037............................................ 639,100 522,900
2038............................................ 610,050 551,950
2039............................................ 581,000 581,000
2040............................................ 551,950 610,050
2041............................................ 522,900 639,100
2042............................................ 493,850 668,150
2043............................................ 464,800 697,200
2044............................................ 435,750 726,250
2045............................................ 406,700 755,300
2046............................................ 377,650 784,350
2047............................................ 348,600 813,400
2048............................................ 319,550 842,450
2049............................................ 290,500 871,500
2050............................................ 261,450 300,550
2051............................................ 232,400 929,550
2052............................................ 203,350 958,650
2053............................................ 174,300 987,700
2054............................................ 145,250 1,016,750
2055............................................ 116,200 1,045,800
2056............................................ 87,150 1,074,850
2057............................................ 58,100 1,103,900
2058............................................ 29,050 1,132,950
2059............................................ 0 1,162,000
------------------------------------------------------------------------

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

TABLE B.--TOTAL NOX ALLOWANCES ALLOCATED FOR EGUS IN ZONE 2
------------------------------------------------------------------------
NOx NOx
Year allowance allowance
allocated auctioned
------------------------------------------------------------------------
2008.............................................. 532,620 5,380
2009.............................................. 527,240 10,760
2010.............................................. 521,860 16,140
2011.............................................. 516,480 21,520
2012.............................................. 511,100 26,900
2013.............................................. 505,720 32,280
2014.............................................. 500,340 37,660
2015.............................................. 494,960 43,040
2016.............................................. 489,580 48,420
2017.............................................. 484,200 53,800
2018.............................................. 478,820 59,180
2019.............................................. 473,440 64,560
2020.............................................. 468,060 69,940
2021.............................................. 462,680 75,320
2022.............................................. 457,300 80,700
2023.............................................. 451,920 86,080
2024.............................................. 446,540 91,460
2025.............................................. 441,160 96,840
2026.............................................. 435,780 102,220
2027.............................................. 430,400 107,600
2028.............................................. 416,950 121,050
2029.............................................. 403,500 134,500
2030.............................................. 390,050 147,950
2031.............................................. 376,600 161,400
2032.............................................. 363,150 174,850
2033.............................................. 349,700 188,300
2034.............................................. 336,250 201,750
2035.............................................. 322,800 215,200
2036.............................................. 309,350 228,650
2037.............................................. 295,900 242,100
2038.............................................. 282,450 255,550
2039.............................................. 269,000 269,000
2040.............................................. 255,550 282,450
2041.............................................. 242,100 295,900
2042.............................................. 228,650 309,350
2043.............................................. 215,200 322,800
2044.............................................. 201,750 336,250
2045.............................................. 188,300 349,700

[[Page S7493]]

2046.............................................. 174,850 363,150
2047.............................................. 161,400 376,600
2048.............................................. 147,950 390,050
2049.............................................. 134,500 403,500
2050.............................................. 121,050 416,950
2051.............................................. 107,600 430,400
2052.............................................. 94,150 443,850
2053.............................................. 80,700 457,300
2054.............................................. 67,250 470,750
2055.............................................. 53,800 484,200
2056.............................................. 40,350 497,650
2057.............................................. 26,900 511,100
2058.............................................. 13,450 524,550
2059.............................................. 0 538,000
------------------------------------------------------------------------

SEC. 454. EGU ALLOCATIONS.

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

Subpart 3. Ozone Season Nox Budget Program

SEC. 461. DEFINITIONS.

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

SEC. 462. GENERAL PROVISIONS.

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

SEC. 463. APPLICABLE IMPLEMENTATION PLAN.

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

SEC. 464. TERMINATION OF FEDERAL ADMINISTRATION OF
NOX TRADING PROGRAM.

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

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

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

Part D--Mercury Emissions Reductions

SEC. 471. DEFINITIONS.

For purposes of this subpart--
(1) The term ``adjusted baseline heat input'' with regard
to a unit means the unit's baseline heat input multiplied
by--
(A) 1.0, for the portion of the baseline heat input that is
the unit's average annual combustion of bituminous during the
years on which the unit's baseline heat input is based;
(B) 3.0, for the portion of the baseline heat input that is
the unit's average annual combustion of lignite during the
years on which the unit's baseline heat input is based;
(C) 1.25, for the portion of the baseline heat input that
is the unit's average annual combustion of subbituminous
during the years on which the unit's baseline heat input is
based; and
(D) 1.0, for the portion of the baseline heat input that is
not covered by subparagraph (A), (B), or (C) or for the
entire baseline heat

[[Page S7494]]

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

SEC. 472. APPLICABILITY.

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

SEC. 473. LIMITATIONS ON TOTAL EMISSIONS.

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

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

SEC. 474. EGU ALLOCATIONS.

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

Part E--National Emission Standards; Research; Environmental
Accountability; Major Source Preconstruction Review and Best Available
Retrofit Control Technology Requirements

SECTION 481. NATIONAL EMISSION STANDARDS FOR AFFECTED UNITS

(a) Definitions.--For purposes of this section:
(1) The term ``commenced,'' with regard to construction,
means that an owner or operator has either undertaken a
continuous program of construction or has entered into a
contractual obligation to undertake and complete, within a
reasonable time, a continuous program of construction. For
boilers and integrated gasification combined cycle plants,
this term does not include undertaking such a program or
entering into such an obligation more than 36 months prior to
the date on which the unit begins operation. For combustion
turbines, this term does not include undertaking such a
program or entering into such an obligation more than 18
months prior to the date on which the unit begins
operation.
(2) The term ``construction'' means fabrication, erection,
or installation of an affected unit.
(3) The term ``affected unit'' means any unit that is
subject to emission limitations under subpart 2 of part B,
subpart 2 of part C, or part D.
(4) The term ``existing affected unit'' means any affected
unit that is not a new affected unit.
(5) The term ``new affected unit'' means any affected unit,
the construction or reconstruction of which is commenced
after the date of enactment of the Clear Skies Act of 2002,
except that for the purpose of any revision of a standard
pursuant to subsection (e), ``new affected unit'' means any
affected unit, the construction or reconstruction of which is
commenced after the public of regulations (or, if earlier,
proposed regulations) prescribing a standard under this
section that will apply to such unit.
(6) The term ``reconstruction'' means the replacement of
components of a unit to such an extent that:
(A) the fixed capital cost of the new components exceeds 50
percent of the fixed capital cost that would be required to
construct a comparable entirely new unit; and
(B) it is technologically and economically feasible to meet
the applicable standards set forth in this section.
(7) The term ``simply cycle combustion turbine'' means a
stationary combustion turbine that does not extract heat from
the combustion turbine exhaust gases.
(b) Emission Standards.--
(1) In General.--No later than twelve months after the date
of enactment of the Clear Skies Act of 2002, the
Administrator shall promulgate regulations prescribing the
standards in subsections (c) through (d) for the specified
affected units and establishing requirements to ensure
compliance with these standards, including monitoring,
recordkeeping, and reporting requirements.
(2) Monitoring.--
(A) The owner or operator of any affected unit subject to
the standards for sulfur dioxide, nitrogen oxides, or mercury
under this section shall meet the requirements of section
405, except that, where two or more units utilize a single
stack, separate monitoring shall be required for each
affected unit for the pollutants for which the unit is
subject to such standards.
(B) The Administrator shall, by regulation, require--

[[Page S7495]]

(1) 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.
(2) the owner or operator of any affected unit subject to
the standards for particulate matter under this section to--
(i) install and operate CEMS for monitoring particulate
matter on the affected unit and to quality assure the data;
(ii) comply with recordkeeping and reporting requirements;
and
(iii) comply with alternative monitoring, quality
assurance, recordkeeping, and reporting requirements for any
period of time for which the Administrator determines that
CEMS with appropriate vendor guarantees are not commercially
available for particulate matter.
(3) Compliance.--For boilers, integrated gasification
combined cycle plants, and combustion turbines that are gas-
fired or coal fired, the Administrator shall require that the
owner or operator demonstrate compliance with the standards
daily, using a 30-day rolling average, except that in the
case of mercury, the compliance period shall be the calendar
year. For combustion turbines that are not gas-fired or coal-
fired, the Administrator shall require that the owner or
operator demonstrate compliance with the standards hourly,
using a 4-hour rolling average.
(c) Boilers and Integrated Gasification Combined Cycle
Plants.--(1) After the effective date of standards
promulgated under subsection (b), no owner or operator shall
cause any boiler or integrated gasification combined cycle
plant that is a new affected unit to discharge into the
atmosphere any gases which contain:
(A) sulfur dioxide in excess of 2.0 lb/MWh;
(B) nitrogen oxides in excess of 1.0 lb/MWh;
(C) particulate matter in excess of 0.20 lb/MWh; or
(D) if the unit is coal-fired, mercury in excess of 0.015
lb/GWh, unless:
(i) mercury emissions from the unit are reduced by 80%
(ii) flue gas desulfurization (FGD) and selective catalytic
reduction (SCR) are applied to the unit and are operated so
as to optimize capture of mercury; or
(iii) a technology is applied to the unit and operated so
as to optimize capture of mercury, and the permitting
authority determines that the technology is equivalent in
terms of mercury capture to the application of FGD and SCR.
(2) Notwithstanding subparagraph (1)(D), integrated
gasification combined cycle plants with a combined capacity
of less than 5 GW are exempt from the mercury requirement
under subparagraph (1)(D) if they are constructed as part of
a demonstration project under the Secretary of Energy that
will include a demonstration of removal of significant
amounts of mercury as determined by the Secretary of Energy
in conjunction with the Administrator as part of the
solicitation process.
(3) After the effective date of standards promulgated under
subsection (b), no owner or operator shall cause any oil-
fired boiler that is an existing affected unit to discharge
into the atmosphere any gases which contain particulate
matter in excess of 0.30 lb/MWh.
(d) Combustion Turbines.--(1) After the effective date of
standards promulgated under subsection (b), no owner or
operator shall cause any gas-fired combustion turbine that is
a new affected unit to discharge into the atmosphere any
gases which contain nitrogen oxides in excess of:
(A) 0.56 lb/MWh (15 ppm at 15 percent oxygen), if the unit
is a simple cycle combustion turbine;
(B) 0.084 lb/MWh (3.5 ppm at 15 percent oxygen), if the
unit is not a simple cycle combustion turbine and either uses
add-on controls or is located within 50 km of a class I area;
(C) 0.21 lb/MWh (9 ppm at 15 percent oxygen), if the unit
is not a simple cycle turbine and neither uses add-on
controls nor is located within 50 km of a class I area.
(2) After the effective date of standards promulgated under
subsection (b), no owner or operator shall cause any coal-
fired combustion turbine that is a new affected unit to
discharge into the atmosphere any gases which contain sulfur
dioxide, nitrogen oxides, particulate matter, or mercury in
excess of the emission limits under subparagraphs (c)(1)(A)
through (D).
(3) After the effective date of standards promulgated under
subsection (b), no owner or operator shall cause any
combustion turbine that is not gas-fired or coal-fired and
that is a new affected unit to discharge into the atmosphere
any gases which contain:
(A) sulfur dioxide in excess of 2.0lb/MWh;
(B) nitrogen oxides in excess of--
(i) 0.289 lb/MWh (12 ppm at 15 percent oxygen), if the unit
is not a simple cycle combustion turbine, is dual-fuel
capable, and uses add-on controls; or is not a simple cycle
combustion turbine and is located within 50 km of a class I
area;
(ii) 1.01 lb/MWh (42 ppm at 15 percent oxygen), if the unit
is a simple cycle combustion turbine; is not a simple cycle
combustion turbine and is not dual-fuel capable; or is not a
simple cycle combustion turbine, is dual-fuel capable, and
does not use add-on controls.
(C) particulate matter in excess of 0.20 lb/MWh.
(e) Periodic Review and Revision.--(1) The Administrator
shall, at least every 8 years following the promulgation of
standards under subsection (b), review and, if appropriate,
revise such standards to reflect the degree of emission
limitation achievable through the application of the best
system of emission reduction which (taking into account the
cost of achieving such reduction and any nonair quality
health and environmental impacts and energy requirements) the
Administrator determines has been adequately demonstrated.
When implementation and enforcement of any requirement of
this Act indicate that emission limitations and percent
reductions beyond those required by the standards promulgated
under this section are achieved in practice, the
Administrator shall, when revising standards promulgated
under this section, consider the emission limitations and
percent reductions achieved in practice.
(2) Notwithstanding the requirements of paragraph (1) the
Administrator need not review any standard promulgated under
subsection (b) if the Administrator determines that such
review is not appropriate in light of readily available
information on the efficacy of such standard.
(f) Effective Date.--Standard promulgated pursuant to this
section shall become effective upon promulgation.
(g) Delegation.--(1) Each State may develop and submit to
the Administration a procedure for implementing and enforcing
standards promulgated under this section for affected units
located in such State. If the Administrator finds the State
procedure is adequate, the Administrator shall delegate to
such State any authority the Administrator has under this Act
to implement and enforce such standards.
(2) Nothing in this subsection shall prohibit the
Administrator from enforcing any applicable standard under
this section.
(h) Violations.--After the effective date of standards
promulgated under this section, it shall be unlawful for any
owner or operator of any affected unit to operate such unit
in violation of any standard applicable to such unit.
(i) Coordination With Other Authorities.--For purposes of
sections 111(e), 113, 114, 116, 120, 303, 304,307 and other
provisions for the enforcement of this Act, each standard
established pursuant to this section shall be treated in
the same manner as a standard of performance under section
111, and each affected unit subject to standards under
this section shall be treated in the same manner as a
stationary source under section 111.
(j) State Authority.--Nothing in this section shall
preclude or deny the right of any State or political
subdivision thereof to adopt or enforce any regulations,
requirement, limitation, or standard relating to affected
units that is more stringent than a regulation, requirement,
limitation or standard in effect under this section or under
any other provision of this Act.
(k) Other Authority Under This Act.--Nothing in this
section shall diminish the authority of the Administrator or
a State to establish any other requirements applicable to
affected units under any other authority of law, including
the authority to establish for any air pollutant a national
ambient air quality standard, except that no new affected
unit subject to standards under this section shall be subject
to standards under section 111 of this Act.

SECTION 482. RESEARCH, ENVIRONMENTAL MONITORING, AND
ASSESSMENT.

(a) Purposes.--The Administrator, in collaboration with the
Secretary of Energy and the Secretary of the Interior, shall
conduct a comprehensive program of research and environmental
monitoring and assessment to enhance scientific understanding
of the human health and environmental effects of particulate
matter and mercury and to demonstrate the efficacy of
emission reductions under this title. The purposes of such a
program are to:
(1) expand current research and knowledge of the
contribution of emissions from electricity generation to
exposure and health effects associated with particulate
matter and mercury;
(2) enhance current research and development of promising
multi-pollutant control strategies and CEMS for mercury;
(3) produce peer-reviewed scientific and technology
information to inform the review of emissions levels under
section 410;
(4) improve environmental monitoring and assessment of
sulfur dioxide, nitrogen oxides and mercury, and their
transformation products, to track changes in human health and
the environment attributable to emission reductions under
this title; and
(5) periodically provide peer-reviewed reports on the
costs, benefits, and effectiveness of emission reductions
achieved under this title.
(b) Research.--The Administrator shall enhance planned and
ongoing laboratory and field research and modeling analyses,
and conduct new research and analyses to produce peer-
reviewed information concerning the human health and
environmental effects of mercury and particulate matter and
the contribution of U.S. electrical generating units to those
effects. Such information shall be included in the report
under subsection (d). In addition, such research and analyses
shall:
(1) improve understanding of the rates and processes
governing chemical and physical transformations of mercury in
the atmosphere, including speciation of emissions from

[[Page S7496]]

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

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

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

[[Page S7497]]

(3) for a modified unit, the unit must comply prior to
beginning operation with either the performance standards of
section 481 or best available control technology as defined
in part C of title I for the pollutants whose hourly
emissions will increase at the unit's maximum capacity.
(4) the State must provide for an opportunity for
interested persons to comment on the Class I area protections
and preconstruction requirements as set forth in this
section.
(d) Definitions.--For purposes of this section:
(1) The term ``affected unit'' means any unit that is
subject to emission limitations under subpart 2 of part B,
subpart 2 of part C, or part D.
(2) The term ``construction'' includes the construction of
a new affected unit and the modification of any affected
unit.
(3) The term ``modification'' means any physical change in,
or change in the method of operation of, an affected unit
which increases the hourly emissions of any air pollutant at
the unit's maximum capacity.''.

SEC. 3. OTHER AMENDMENTS.

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

[[Page S7498]]

enactment of the Clear Skies Act of 2002 seeks a finding for
any affected unit, then, notwithstanding any provision in
subsections (a) through (c) to the contrary--
(A) In determining whether to make a finding under
subsection (b) for any affected unit, the Administrator shall
consider, among other relevant factors, emissions reductions
required to occur by the attainment date or dates of any
relevant nonattainment areas in the petitioning State or
political subdivision.
(B) The Administrator may not determine that affected units
emit or would emit any air pollutant in violation of the
prohibition of section 110(a)(2)(D)(i) unless that
Administrator determines that:
(i) such emissions may be reduced at least as cost-
effectively as emissions from each other principal category
of sources of sulfur dioxide or nitrogen oxides, including
industrial boilers, on-road mobile sources, and off-road
mobile sources, and any other category of sources that the
Administrator may identify; and
(ii) reductions in such emissions will improve air quality
in the petitioning state's nonattainment area(s) at least as
cost-effectively as reductions in emissions from each other
principal category of sources of sulfur dioxide or nitrogen
oxides to the maximum extent that a methodology is reasonably
available to make such a determination. In making this
determination, the Administrator will use the best available
peer reviewed models and methodology that consider the
proximity of the source or sources to the petitioning State
or political subsidision and incorporate other sources
characteristics.
(C) The Administrator shall develop an appropriate peer
reviewed methodology for making determinations under
subparagraph (B) by December 31, 2006.
(D) The Administrator shall not make any findings with
respect to an affected unit under this section prior to
January 1, 2009. For any petition submitted prior to January
1, 2007, the Administrator shall make a finding or deny the
petition by January 31, 2009.
(E) The Administrator, by rulemaking, shall extend the
compliance and implementation deadlines in subsection (c) to
the extent necessary to assure that no affected unit shall be
subject to any such deadline prior to January 1, 2012.''
(b) Title III of the Clean Air Act is amended by modifying
section 307(d)(1(G) to read as follows:
``(G) the promulgation or revision of any regulation under
title IV,''.
(C) Title IV of the Clean Air Act (relating to noise
pollution) (42 U.S.C. 7641 et seq.) is--
(1) amended by renumbering sections 401 through 403 as
sections 701 through 703, respectively; and
(2) renumbered as title VII.
(d) Title VIII of the Clean Air Act Amendments of 1990
(miscellaneous provisions) is amended by modifying section
821(a) to read as follows:
``(a) Monitoring.--The Administrator of the Environmental
Protection Agency shall promulgate regulations within 18
months after November 15, 1990 to require that all affected
sources subject to subpart 1 of part B of title IV of the
Clean Air Act shall also monitor carbon dioxide emissions
according to the same timetable as in section 405(b). The
regulations shall require that such data be reported to the
Administrator. The provisions of section 405(e) of title IV
of the Clean Air Act shall apply for purposes of this section
in the same manner and to the same extent as such provision
applies to the monitoring and data referred to in section
405. The Administrator shall implement this subsection under
40 CFR part 75 (2001), amended as appropriate by the
Administrator.''
______

By Mr. BAUCUS (for himself, Mr. Grassley, Mr. McCain, Mr. DeWine,
Ms. Landrieu, Mr. Johnson, Mrs. Carnahan, Mr. Hatch, Mr.
Rockefeller, Mrs. Lincoln, Mr. Torricelli, Mr. Durbin, Mr.
Murkowski, and Mr. Kerry):
S. 2816. A bill to amend the Internal Revenue Code of 1986 to improve
tax equity for military personnel, and for other purposes; to the
Committee on Finance.
Mr. BAUCUS. Mr. President, I rise today to introduce the Foreign and
Armed Services Tax Fairness Act of 2002, FAST Fairness, that will not
only correct inequities in the current tax code our military men and
women are subject to, but it will also provide incentives for our
dedicated forces to continue their service to America.
On July 9, 2002, the House passed unanimously a bill, H.R. 5063, that
provided limited relief to military personnel. The bill would provide a
special rule for members of the armed forces in determining the
exclusion of gain from the sale of a principal residence and would
restore the tax-exempt status of death gratuity payments to members of
the armed forces. I support the efforts of the House, but believe we
can go farther.
These are the men and women that put their lives on the line for our
freedom on a daily basis. We need to ensure that laws that we here in
Congress pass do not negatively impact them. We should also develop
sound policy that serves as an incentive for our youth to follow in the
steps of the men and women that went before them to defend our country.
It is with these principles in mind that I move forward with this
military tax package and incorporate additional provisions already
introduced by my colleagues. I would now like to describe the
provisions that I have chosen to include in this critical piece of
legislation:
On July 24, 2002, Senator Carnahan introduced S. 2783, which would
restore the tax exempt status of all death gratuity payments. This
proposal is similar to the provision included in H.R. 5063.
Why is this provision so important? Under current law, death gratuity
benefits are excludable from income only to the extent that they were
as of September 9, 1986. In 1986, the death gratuity benefit was
$3,000. In 1991, the benefit was increased to $6,000, but the tax code
was never adjusted to exclude the additional $3,000 from income.
Because of this oversight, the U.S. government has been taxing families
for the death of a family member who died in combat. This is just
wrong.
I support the provisions of H.R. 5063 and S. 2783, therefore I have
included them in this piece of legislation.
In 1997, Congress passed legislation revising the taxation of capital
gains on the sale of a person's principal residence. The new rule is
that up to $250,000, $500,000 per couple, is excluded on that sale of a
principal residence if the individual has lived in the house for at
least two of the previous five years.
However, when enacted, Congress failed to provide a special rule for
military and Foreign Service personnel who are required to move either
within the U.S. or abroad. Senators McCain and Graham both have
introduced legislation to address this oversight.
I agree that we should adjust the rule for our service men and women.
We shouldn't penalize them for choosing to serve our country. My
proposal would permit service personnel and members of the Foreign
Service to suspend the five-year period while away on assignment,
meaning those years would count toward neither the two years nor the
five year periods. This is a also similar to provisions on H.R. 5063.
The Department of Defense provides payments to members of the Armed
Services to offset diminution in housing values due to military base
realignment or closure. For example, if a house near a base was worth
$180,000 prior to the base closure and $100,000 after the base closure,
DOD may provide the owner with a payment to offset some, but not all of
the $80,000 diminution in value. Under current law, those amounts are
taxable as compensation.
There will be another round of base closures in the near future. That
fate was decided in the FY2002 Defense Authorization bill. We should
ensure that those men and women losing value in their homes due to a
federal government decision are not adversely affected financially. The
proposal would provide that payments for lost value are not includible
into income. Recently, Senator Cleland introduced a package that
included this provision. I thank him for his unending pursuit to
provide military personnel with the best quality of life available.
And, I'm happy to include this provision in my legislation.
Under current law, military personnel in a combat zone are afforded
an extended period for filing tax returns. However, this does not apply
to contingency operations. This proposal would extend the same benefits
to military personnel assigned to contingency operations.
It can't be easy trying to figure out our complicated tax system
while you are overseas and protecting our nation's freedom. Those men
and women that have been sent to uphold freedom in other countries are
confronted with similar circumstances, such as in Operation Just Cause
in Panama, 1989, or in Operation Restore Hope in Somalia in 1992 and
1993, or in Operation Uphold Democracy in Haiti, 1994. Contingency
operations are just as demanding as combat zone deployment, although
not always in the same manner. I would like to thank Senator Johnson
for introducing S. 2785. It is important that we support all our troops
when they are overseas.

[[Page S7499]]

Some reservists who travel one weekend per month and two weeks in the
summer for reserve duty incur significant travel and lodging expenses.
Under current law, these are deductible as itemized deductions but must
exceed 2 percent of adjusted gross income. For lower income reservists,
this deduction does not provide a benefit, because they do not itemize.
For higher income reservists, the 2 percent floor limits the amount of
the benefit of the deductions.
In my home state of Montana, we have approximately 3500 reservists,
800 of which travel each month across the State for their training.
These 800 reservists pay out of their own pocket the expense for
travel, and hotel rooms. In Montana we rank 48th in the Nation for per
capita personal income. I know it can't be easy for Montanans to incur
approximately $200 in expenses each and every month. Yet, they continue
selflessly to provide their services to our country at their own
expense. For those reservists that travel out of State for their
training, this expense is higher on average. This proposal would
provide an above the line deduction for overnight travel costs and
would be available for all reservists and members of the National
Guard.

This issue is currently addressed in S. 540, which Senator DeWine
introduced back in March of 2001. I can't tell you just how many people
have contacted our office in support of this bill. I support what this
bill does and I am glad that we can include some of its provisions in
my military tax package.
Recently, Senator Harkin introduced S. 2789, which would expand the
membership for Veteran's organizations. Currently, qualified veterans'
organizations under section 501(c)(19) of the tax code are both tax-
exempt and contributions to the organization are tax-deductible. In
order to qualify under 501(c)(19), the organization must meet several
tests, including 75 percent of the members must be current or former
active military, and substantially all of the members must be either
current or former active military or widows of former active military.
The proposal would permit lineal descendants and ancestors to qualify
for the ``substantially all'' test.
It is important that our veterans' organizations continue the good
work that they do. But, as the organizations age, they are in danger of
losing their tax-exempt status. I support Senator Harkin's bill, as
does the American Legion. I have included it in my tax package.
Finally, I want to ensure that women in the military can continue
their dedicated service even once they have entered motherhood knowing
that their children are being well taken care of. The military provides
extensive childcare benefits to its employees. DOD employees at DOD-
owned facilities provide childcare services while other areas contract
out their childcare.
When Congress passed the Tax Reform Act of 1986, we included a
provision stating that qualified military benefits are excluded from
income. It is not absolutely clear whether child care provisions are
covered under this provision. The proposal would clarify that any
childcare benefit provided to military personnel would be excludable
from income. Senator Landrieu has introduced S. 2807, a similar
measure. I support this measure and am proud to include it in this
piece of legislation.
It is my intention to mark-up this legislation soon in hopes that we
can move it through the Senate quickly. It is important that we
continue to show members of the armed forces our support and solidarity
during this time of conflict. The War on Terrorism has brought to light
the essential role the armed services play in upholding freedom
throughout the world. I would like to see a military tax equity bill
signed into law by the President before the end of the year.
Mr. President, I ask consent that the text of the bill be printed in
the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 2816

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

SECTION 1. SHORT TITLE; ETC.

(a) Short Title.--This Act may be cited as the ``Foreign
and Armed Services Tax Fairness Act of 2002''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act
is as follows:

Sec. 1. Short title; etc.
Sec. 2. Restoration of full exclusion from gross income of death
gratuity payment.
Sec. 3. Special rule for members of uniformed services and Foreign
Service in determining exclusion of gain from sale of
principal residence.
Sec. 4. Qualified military base realignment and closure fringe benefit.
Sec. 5. Extension of tax filing delay provisions to military personnel
serving in contingency operations.
Sec. 6. Deduction of certain expenses of members of the reserve
component.
Sec. 7. Modification of membership requirement for exemption from tax
for veterans' organizations.
Sec. 8. Clarification of the treatment of dependent care assistance
programs sponsored by the Department of Defense for
members of the Armed Forces of the United States.

SEC. 2. RESTORATION OF FULL EXCLUSION FROM GROSS INCOME OF
DEATH GRATUITY PAYMENT.

(a) In General.--Subsection (b)(3) of section 134 (relating
to certain military benefits) is amended by adding at the end
the following new subparagraph:
``(C) Exception for death gratuity adjustments made by
law.--Subparagraph (A) shall not apply to any adjustment to
the amount of death gratuity payable under chapter 75 of
title 10, United States Code, which is pursuant to a
provision of law enacted after September 9, 1986.''.
(b) Conforming Amendment.--Subparagraph (A) of section
134(b)(3) is amended by striking ``subparagraph (B)'' and
inserting ``subparagraphs (B) and (C)''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to deaths occurring after September
10, 2001.

SEC. 3. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES AND
FOREIGN SERVICE IN DETERMINING EXCLUSION OF
GAIN FROM SALE OF PRINCIPAL RESIDENCE.

(a) In General.--Subsection (d) of section 121 (relating to
exclusion of gain from sale of principal residence) is
amended by adding at the end the following new paragraph:
``(9) Members of uniformed services and foreign service.--
``(A) In general.--At the election of an individual with
respect to a property, the running of the 5-year period
described in subsection (a) with respect to such property
shall be suspended during any period that such individual or
such individual's spouse is serving on qualified official
extended duty as a member of the uniformed services or of the
Foreign Service.
``(B) Maximum period of suspension.--The 5-year period
described in subsection (a) shall not be extended more than 5
years by reason of subparagraph (A).
``(C) Qualified official extended duty.--For purposes of
this paragraph--
``(i) In general.--The term `qualified official extended
duty' means any extended duty while serving at a duty station
which is at least 50 miles from such property or while
residing under Government orders in Government quarters.
``(ii) Uniformed services.--The term `uniformed services'
has the meaning given such term by section 101(a)(5) of title
10, United States Code, as in effect on the date of the
enactment of this paragraph.
``(iii) Foreign service of the united states.--The term
`member of the Foreign Service' has the meaning given the
term `member of the Service' by paragraph (1), (2), (3), (4),
or (5) of section 103 of the Foreign Service Act of 1980.
``(iv) Extended duty.--The term `extended duty' means any
period of duty pursuant to a call or order to such duty for a
period in excess of 90 days or for an indefinite period.
``(D) Special rules relating to election.--
``(i) Election limited to 1 property at a time.--An
election under subparagraph (A) with respect to any property
may not be made if such an election is in effect with respect
to any other property.
``(ii) Revocation of election.--An election under
subparagraph (A) may be revoked at any time.''.
(b) Effective Date.--The amendment made by this section
shall apply to elections made after the date of the enactment
of this Act for suspended periods under section 121(d)(9) of
the Internal Revenue Code of 1986 (as added by this section)
beginning after such date.

SEC. 4. QUALIFIED MILITARY BASE REALIGNMENT AND CLOSURE
FRINGE BENEFIT.

(a) In General.--Section 132(a) (relating to the exclusion
from gross income of certain fringe benefits) is amended by
striking ``or'' at the end of paragraph (6), by striking the
period at the end of paragraph (7) and inserting ``, or'' and
by adding at the end the following new paragraph:

[[Page S7500]]

``(8) qualified military base realignment and closure
fringe.''.
(b) Qualified Military Base Realignment and Closure
Fringe.--Section 132 is amended by redesignating subsection
(n) as subsection (o) and by inserting after subsection (m)
the following new subsection:
``(n) Qualified Military Base Realignment and Closure
Fringe.--For purposes of this section, the term `qualified
military base realignment and closure fringe' means 1 or more
payments under the authority of section 1013 of the
Demonstration Cities and Metropolitan Development Act of 1966
(42 U.S.C. 3374) to offset the adverse effects on housing
values as a result of a military base realignment or
closure.''.
(c) Effective Date.--The amendments made by this section
shall apply to payments made after the date of the enactment
of this Act.

SEC. 5. EXTENSION OF TAX FILING DELAY PROVISIONS TO MILITARY
PERSONNEL SERVING IN CONTINGENCY OPERATIONS.

(a) In General.--Section 7508(a) (relating to time for
performing certain acts postponed by reason of service in
combat zone) is amended--
(1) by inserting ``or when deployed outside the United
States away from the individual's permanent duty station
while participating in an operation designated by the
Secretary of Defense as a contingency operation (as defined
in section 101(a)(13) of title 10, United States Code) or
which became such a contingency operation by operation of
law'' after ``section 112'',
(2) by inserting in the first sentence ``or at any time
during the period of such contingency operation'' after ``for
purposes of such section'',
(3) by inserting ``or operation'' after ``such an area'',
and
(4) by inserting ``or operation'' after ``such area''.
(b) Conforming Amendments.--
(1) Section 7508(d) is amended by inserting ``or
contingency operation'' after ``area''.
(2) The heading for section 7508 is amended by inserting
``or contingency operation'' after ``combat zone''.
(3) The item relating to section 7508 in the table of
sections for chapter 77 is amended by inserting ``or
contingency operation'' after ``combat zone''.
(c) Effective Date.--The amendments made by this section
shall apply to any period for performing an act which has not
expired before the date of the enactment of this Act.

SEC. 6. DEDUCTION OF CERTAIN EXPENSES OF MEMBERS OF THE
RESERVE COMPONENT.

(a) Deduction Allowed.--Section 162 (relating to certain
trade or business expenses) is amended by redesignating
subsection (p) as subsection (q) and inserting after
subsection (o) the following new subsection:
``(p) Treatment of Expenses of Members of Reserve Component
of Armed Forces of the United States.--For purposes of
subsection (a), in the case of an individual who performs
services as a member of a reserve component of the Armed
Forces of the United States at any time during the taxable
year, such individual shall be deemed to be away from home in
the pursuit of a trade or business during any period for
which such individual is away from home in connection with
such service.''.
(b) Deduction Allowed Whether or Not Taxpayer Elects To
Itemize.--Section 62(a)(2) (relating to certain trade and
business deductions of employees) is amended by adding at the
end the following new subparagraph:
``(E) Certain expenses of members of reserve components of
the armed forces of the united states.--The deductions
allowed by section 162 which consist of expenses, in amounts
not in excess of the rates for travel expenses (including per
diem in lieu of subsistence) authorized for employees of
agencies under subchapter I of chapter 57 of title 5, United
States Code, paid or incurred by the taxpayer in connection
with the performance of services by such taxpayer as a member
of a reserve component of the Armed Forces of the United
States.''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2001.

SEC. 7. MODIFICATION OF MEMBERSHIP REQUIREMENT FOR EXEMPTION
FROM TAX FOR VETERANS' ORGANIZATIONS.

(a) In General.--Subparagraph (B) of section 501(c)(19)
(relating to list of exempt organizations) is amended by
striking ``or widowers'' and inserting ``, widowers, or
ancestors or lineal descendants''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.

SEC. 8. CLARIFICATION OF THE TREATMENT OF DEPENDENT CARE
ASSISTANCE PROGRAMS SPONSORED BY THE DEPARTMENT
OF DEFENSE FOR MEMBERS OF THE ARMED FORCES OF
THE UNITED STATES.

(a) In General.--Section 134(b) (defining qualified
military benefit) is amended by adding at the end the
following new paragraph:
``(4) Clarification of certain benefits.--For purposes of
paragraph (1), such term includes any dependent care
assistance program sponsored by the Department of Defense for
members of the Armed Forces of the United States.''.
(b) Conforming Amendments.--
(1) Section 3121(a)(18) is amended by striking ``or 129''
and inserting ``, 129, or 134(b)(4)''.
(2) Section 3306(b)(13) is amended by striking ``or 129''
and inserting ``, 129, or 134(b)(4)''.
(3) Section 3401(a)(18) is amended by striking ``or 129''
and inserting ``, 129, or 134(b)(4)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
(d) No Inference.--No inference may be drawn from the
amendments made by this section with respect to the tax
treatment of any amounts under the program described in
section 134(b)(4) of the Internal Revenue Code of 1986 (as
added by this section) for any taxable year beginning before
January 1, 2002.
______

By Mr. KENNEDY (for himself, Mr. Hollings, Mr. Bond, and Ms.
Mikulski):
S. 2817. A bill to authorize appropriations for fiscal years 2003,
2004, 2005, 2006, and 2007 for the National Science Foundation, and for
other purposes; to the Committee on Health, Education, Labor, and
Pensions.
Mr. KENNEDY. Mr. President, I am pleased to introduce today the
National Science Foundation Doubling Act. This important legislation
has been crafted with the extensive cooperation of Senator Hollings,
Chairman of the Senate Committee on Commerce, Science, and
Transportation, Senator Mikulski and Senator Bond, the respective Chair
and Ranking Member of the Senate Committee on Appropriations
Subcommittee on Veterans Affairs, Housing and Urban Development, and
Independent Agencies. I commend each of them for their leadership in
federal support for the sciences .
The National Science Foundation, NSF, has two key missions, and it
carries both of them out well. It supports basic research and
development in math, science, engineering, and technology, and it
promotes math and science learning at every level, from K-12 through
post-graduate education.
NSF has funded basic research leading to the creation of speech
recognition software, MRI machines, and even World Wide Web browsers
such as Netscape and Microsoft's Internet Explorer. In education, NSF
initiatives of the late 1980s were the forerunners of the standards-
based school reform movement embraced throughout the Nation today.
We can and should build on NSF's distinguished record in improving
the lives of millions of Americans. The 20th Century was the era of the
industrial age, and the 21st Century will be the era of information
technology and the life sciences. With the leadership of Senator Harkin
and others, we have doubled the budget of the National Institutes of
Health over the last five years. We should do the same for NSF. We
should double our support for research and development in theoretical
mathematics and the physical sciences, because they support advances in
the health sciences and because they are also valuable in their own
right.
As former Senator Glenn has pointed out so frequently, we need to do
much more to interest young minds in math and science and recruit
tomorrow's scientists and engineers. Over the next 10 years, the number
of jobs requiring technical skills will grow by 50 percent.
Unfortunately, high school student performance on math and science
exams is alarmingly low. The number of American students studying the
sciences at the post-secondary level is flat. Too many women and
minorities continue to shy away from the sciences.
The bill we are introducing today authorizes a doubling of the NSF
budget over the next five years. It makes sense to match the growth of
NIH. As we enhance research and development in the life sciences, we
should also be strengthening research and development in the physical
sciences.
This legislation also builds on NSF's Systemic Initiatives by
supporting a Secondary School Systemic Initiative to develop models to
improve high school student math and science performance and
preparation for college-level or technical work.
The bill supports model Math and Science Partnerships between
institutions of higher education and local school districts to improve
the knowledge and teaching techniques of current math and science
teachers.
The bill supports institutions of higher education in increasing the

[[Page S7501]]

number of students, particularly women and minorities, who study toward
and obtain degrees in science, math, engineering, and technology.
Finally, the bill reforms NSF's program on major research and
facilities equipment, to help prioritize projects and guard against
cost overruns and non-merit reviewed proposals.
Scientific discovery and development continues to set America apart
from other Nations and is one of our enduring legacies. The National
Science Foundation Doubling Act is a solid piece of legislation
building on our Nation's history in the sciences and promoting a better
future. It deserves to be considered quickly, and I believe favorably,
by the United States Senate.
Mr. HOLLINGS. Mr. President, I join my colleagues, Senator Kennedy,
and Senator Mikulski and Senator Bond, in introducing this bill to
authorize the National Science Foundation through FY 2007. My friends
and I represent three Committees with a strong interest in NSF, and we
chose a straightforward title for the name of this bill, the NSF
Doubling Act, because our intentions our simple and straightforward.
Congress's intent is to double NSF's budget by fiscal year 2007. NSF is
the Nation's premier federal science agency that invests in basic
research across all disciplines that is on the frontiers of science. In
1945, Vannevar Bush's report for President Roosevelt led to the
establishment of the National Science Foundation. Since then, this
nation has been on a path of solid investment in the scientific
research that underlies our future economic health and well being. It's
no mistake that Alan Greenspan and other important economists have
noted that more than one-half of our Nation's economic growth since
World War I has stemmed from technology driven by science.
By next year, we in Congress will have succeeded in our goal to
double the budget of the National Institutes of Health. I applaud that
effort. But as scientific disciplines have become fundamentally
interdependent, advances in the health sciences necessarily depend on
advances in math, computer science, and engineering. NSF is the only
Federal agency specifically charged with ensuring a broad and deep base
of fundamental knowledge across disciplines. This mission is critical
to technological innovation, our economy, and our general health and
welfare as a Nation.
I have said that our intentions are simple and straightforward. So
let me set out three simple reasons why this doubling is vital to our
future:
The first concerns our security. Not only does NSF fund areas, such
as cyber security, that are critical to protecting our nation, but NSF
is the agency that takes the lead in ensuring that this country has
sufficient human capital to ensure our continued world leadership in
science and technology. The Hart-Rudman Commission on National Security
warned that our failure to invest in science and to reform math and
science education was the second biggest threat to our national
security, only the threat of a weapon of mass destruction in an
American city was a greater danger. NSF invests in math and science
education from kindergarten all the way through to the post-doctoral
level and beyond. This bill allows the Foundation to increase that
investment, while reaffirming our commitment to women, minorities, and
people with disabilities. These underrepresented groups, together, make
up more than half of our Nation's work force and are only increasing.
Letting these groups fall by the wayside would not only threaten our
economic competitiveness, but also our national security.
Second pertains to our economy. I have already talked about science
and technology driving our economic growth. Let me give just one
example of how NSF's investments can spur our economy. NSF is the
leading agency in the National Nanotechnology Initiative.
Nanotechnology, which is the science of manipulating matter at the
atomic and molecular level, will cut across every scientific
discipline, including materials and manufacturing, healthcare and
medicine, energy and the environment, agriculture, biotechnology,
information technology, and national security. Worldwide, the market
for nanotechnology is expected to be $1 trillion annually within 10 to
15 years. NSF's cross-disciplinary approach, which includes
groundbreaking research into the way society and this new technology
will interact, will help this nation take advantage of Nanotechnology
sooner, better, and with greater confidence.
The third involves basic research. NSF is responsible for the overall
health and well-being of the research enterprise in this country. One
way NSF does this is through continued support for the EPSCoR program.
EPSCoR supports the development of the science and technology resources
of individual States like South Carolina, through partnerships that
involve the State's universities, industry, government, and the Federal
research and development enterprise. For example, NSF supports an
Engineering Research Center focused on advanced fibers and films at
Clemson University that, through partnerships and continued investment
over the next 10 years, will make Clemson the national leader in
advanced fibers and films technologies.
I think these arguments are solid, simple, and straightforward. We
can talk about NSF's past outstanding contributions to science. We can
talk about the future and the importance of science and technology to
our economy. But, where the rubber meets the road, we have to stop
talking and invest, with real money, in the science and engineering
enterprise that will guaranty the health, economic viability, and
security of our future. I, for one, appreciate the hard work that NSF
has done over the past 52 years promoting the progress of science, and
I urge my Senate colleagues to support me in providing this agency the
resources needed to conquer tomorrow.
Mr. BOND. Mr. President, I rise today to express my strong support
for the National Science Foundation Doubling Act of 2002. As an
original co-sponsor, I am pleased to join my colleagues, Senators
Kennedy, Hollings, and Mikulski in introducing this important
legislation that will strengthen the long-term economic competitiveness
and health of our Nation. As an appropriator and as an authorizer of
NSF, I have a special interest in NSF and the basic science research it
supports. I believe this bill underscores the critical role NSF plays
in the economic and intellectual growth and well-being of this Nation.
As many of my colleagues know, Senator Mikulski and I have led a
bipartisan, bi-cameral effort to double NSF's budget and this
reauthorization bill further supports our doubling effort over a five-
year period. NSF is funding innovative and cutting-edge research in
nanotechnology, plant biotechnology, and information technology.
Doubling NSF's funding is not only important for these research
programs but also in the area of education. NSF plays a valuable role
in supporting math and science education and developing the Nation's
supply of scientists and engineers in this country.
Unfortunately, despite our efforts on the appropriations committee,
the Federal Government has not provided adequate support to NSF and the
physical sciences in general. I believe the lack of adequate support
for the physical sciences puts our Nation's capabilities for scientific
innnovation at risk and, equally important, at risk of falling behind
other industrial nations.
Further, doctors throughout Missouri and the country have told me
that despite the tremendous support we have provided for the life
sciences, their research in the biomedical field will stagnate without
adequate government support of the physical sciences that NSF supports.
Many medical technologies such as magnetic resonance imaging,
ultrasound, digital mammography and genomic mapping could not have
occurred, and cannot improve to the next level of proficiency, without
NSF-supported work in biology, physics, chemistry, mathematics,
engineering, and computer sciences. Simply put: supporting NSF supports
NIH.
The high-tech industry also in concerned about NSF funding because
they are struggling to find qualified homegrown engineers and
scientists and becoming more reliant on foreign nationals to fill their
positions. Many notable researchers in the high-tech industry have told
me that the significant shortages of trained American engineers and
scientists have limited the growth potential of the electronics and
software industries and allowed foreign

[[Page S7502]]

competitors to catch up to U.S. industry capabilities.

To address the development of tech talent in this country, NSF
provides a wide array of support to preK-12, undergraduate, and
graduate level schools. One new important tool is the Math and Science
partnership program--a new joint program between NSF and the Department
of Education. This program encourages partnerships among local school
systems, higher education entities, and other organizations to improve
student outcomes in math and science for all students.
Another important tool that I support is the tech talent program.
This program was initiated at the urging of me and my Senate
colleagues--Senators Lieberman, Frist, Mikulski, and Domenici. Last
year, we introduced S. 1549, the Tech Talent Act to improve
undergraduate education in math, science, engineering, and technology.
We provided $5 million in the Fiscal Year 2002 VA-HUD and Independent
Agencies Appropriations Act to jumpstart this important initiative and
another $20 million was added in the fiscal year 2003 bill that passed
the Appropriations Committee last week. NSF has already received 177
applications requesting an aggregate sum of almost $60 million.
Lastly, I am very supportive of efforts to improve the accountability
of NSF's programs and activities--especially those projects funded
through the major research equipment and facilities construction
account. The bill includes a number of provisions to ensure that
funding decisions on large research facilities are done in a rationale
and understandable manner.
Before the bill reaches the floor, I hope to work with my colleagues
on addressing other issues related to the National Science Board. As
the budget for NSF grows, it is important that the Board has the tools
it needs to fulfill its statutory responsibilities. Specifically, we
need to provide the chairman of the Board the authority to hire its own
staff to support the Board's oversight and policy-making
responsibilities and to ensure that it can provide the Congress and the
President with independent science policy advice. These tools will also
ensure that the Board is not a ``rubber stamp'' for the Director of
NSF.
I urge my colleagues to support this bill. I understand that some of
my colleagues have concerns about the bill, but I believe that overall,
this is a good bill. I look forward to working with my colleagues in
the Senate and the House in moving a strong bipartisan NSF
reauthorization bill and in advancing our effort to double NSF's
budget.
I thank the Chair.

____________________