[Congressional Record (Bound Edition), Volume 149 (2003), Part 20]
[Senate]
[Pages 28397-28427]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Ms. SNOWE (for herself and Mr. Kennedy):
  S. 1843. A bill to amend titles XIX and XXI of the Social Security 
Act to provide for FamilyCare coverage for parents of enrolled 
children, and for other purposes; to the Committee on Finance.
  Ms. SNOWE. Mr. President, I rise today to join my colleague, Senator 
Edward Kennedy of Massachusetts, in reintroducing the FamilyCare Act of 
2003, which has strong bipartisan support. First developed in 2001, 
FamilyCare extends health insurance coverage to more Americans by 
expanding eligibility for the Medicaid and State-Children's Health 
Insurance Program.
  Increasing access to the health insurance for the uninsured is as 
vexing an issue as Congress will consider, and no issue is as 
compelling. The diagnosis is clear--over 44 million Americans aren't 
getting the health care they need because they lack the money to pay 
for it. And as the most recent Census data shows, the number of 
Americans without health insurance is increasing--by 2 million in 2002 
alone.
  And yet, the number of uninsured Americans could be even higher. If 
it were not for Medicaid and S-CHIP, over a million more people would 
not have had health coverage in 2002. The percentage of children with 
private coverage fell from 66.7 percent in 2001 to 63.9 percent in 
2002; for adults, it slipped from 73.7 percent to 72.3 percent. 
Fortunately, at the same time, the number and percentage of children 
and non-elderly adults covered by public health insurance--primarily 
Medicaid or the State Children's Health Insurance Program (SCHIP)--
increased.
  The number of children who lost private health insurance coverage was 
offset from increased enrollment in public programs, which rose from 
23.6 percent in 2001 to 27.1 percent in 2002; and the percentage of 
non-elderly adults covered rose from 9.4 percent to 10.3 percent. Taken 
together, this means that about 2.5 million more children and 1.6 
million more non-elderly adults had health insurance coverage in 2002 
because Medicaid and SCHIP expanded during the economic downturn.
  We all know about the problem. The question now is, what is the best 
possible cure? And while we know that there is no one answer, I think 
we can all agree that the solutions are long overdue. I find it 
astonishing that here we are in the 21st century, in one of the 
wealthiest countries in the world, and still our citizens are going 
without basic coverage and care. We're talking about working families--
close to three-quarters of the nearly seven million lower-income, 
uninsured parents in America have jobs. They just don't have access to 
affordable coverage.
  Year after year Congress has debated this issue. Last Congress we 
invested $28 billion in a reserve fund to help increase the rolls of 
the insured in America. Then the President, in his fiscal year 2003 
budget, allocated $89 billion to help the uninsured. And finally, this 
Congress in its fiscal year 2004 budget established a $50 billion 
reserve fund. Yet, no action has been taken that actually extends 
coverage to the uninsured.
  Now is the time to act. The news that an additional 2 million 
Americans joined the ranks of the uninsured in 2002 should be a wake-up 
call. We must work together to find common ground so that we finally 
can take the steps necessary to help the millions of working Americans 
and their families who cannot afford health insurance coverage.
  And while my colleagues and I are not claiming that the FamilyCare 
bill is the entire answer, we do believe it is a workable, 
uncomplicated proposal based on a proven approach that has the 
potential of reaching in the neighborhood of 13 million American 
children and their families. With so much at stake, we ought to be 
building on what works, and the S-CHIP program fits the bill. In just 
the six short years since this program passed under the leadership of 
Senators Kennedy, Hatch, Rockefeller and the late John Chafee, this 
federal-state partnership has extended coverage to over 5 million low-
income children.
  In my own home State of Maine under the ``Cub Care'' program, the 
number of children without health insurance has dropped dramatically. 
In 2003 alone, Maine extended health insurance coverage to more than 
12,800 low-income children. Unfortunately, roughly 16,600 or one in 
seventeen children are still without health insurance in Maine. We can 
and must do more.
  We should applaud states for taking the lead and helping to show us 
the answer to this crisis. But a massive national problem requires a 
national solution--and a good place to start is with the over four 
million children nationwide who are eligible for SCHIP benefits but 
remain unenrolled mostly because parents simply don't know the program 
exists.
  Our FamilyCare measure narrows that ``coverage gap'' while at the 
same time adding to the roles of the insured in America by covering the 
parents of low income children. Low-income Americans--those with 
incomes below 200 percent of the poverty level, or about $36,000 for a 
family of four--comprise 65 percent of the uninsured. We take this 
approach because the facts tell us it works. We know that states that 
covered parents through S-CHIP saw a 16 percent increase in the number 
of children enrolled in their program versus only 3 percent for states 
that enrolled only children.
  We also know from the Commonwealth Fund's May 2001 report that almost 
90 percent of low-income children who have insured parents themselves 
are insured as compared to just 348 percent of children with an 
uninsured parent. And we know that low-income children with insured 
parents are more than twice as likely to have health insurance as 
children with uninsured parents.
  That's because states can insure parents at the same time they insure 
the children--offering ``one-stop-shopping'' that also helps ensure 
that services hit their intended target and provides for family-based 
continuity of care. The FamilyCare bill adopts this proven approach and 
with so many pieces already in place we should be able to get moving on 
this because, frankly, if not now, when? And if not now, why? In these 
times of trouble, how could we face the American people and tell them 
we are unwilling to help address one of our nation's highest 
priorities? How could we explain that we reneged on our obligation to 
right this national wrong?
  That's why we want to work with our Committee leadership to see that 
FamilyCare is included to the greatest extent possible in any proposal 
that the Finance Committee considers when it develops its proposal to 
extend coverage to the uninsured. Because, like a

[[Page 28398]]

letter mailed without an address, benefits that aren't delivered to our 
children are benefits that might as well not exist. The bottom line is, 
parental coverage ensures that children will be more likely to be 
enrolled in S-CHIP, and the FamilyCare Act of 2003 will help us provide 
insurance to as many as 13 million parents and children.
  I look forward to working with my colleagues to see that this bill 
gets passed and I urge you all to support this bill.
  Mr. KENNEDY. Mr. President, it's a privilege to join Senator Snowe in 
introducing the Family Care Act to expand health coverage to millions 
of families. The Family Care Act builds on the success of the Child 
Health Insurance Program, by expanding it to cover the parents of low 
income children, so that the whole family is eligible for affordable 
coverage. This expansion is the next logical step toward the day when 
the basic right to health care will be a reality for every American.
  Parents across America get up every day, go to work, and play by the 
rules. But all their hard work does not buy them the health insurance 
they need to keep themselves and their loved ones healthy or to protect 
their family when serious illness strikes. They can't afford the 
coverage on their own, and their employers don't provide it. Family 
Care is a practical solution for millions of hardworking families, and 
it deserves to be a national priority.
  Six years ago, Congress passed bipartisan legislation to cover 
uninsured children in families whose income is too high for Medicaid 
but not high enough to afford private coverage. Today, the Children's 
Health Insurance Program brings quality health care to over 5 million 
children. But there are still millions of children who are uninsured, 
even though they are eligible for coverage, and even those who are 
insured cannot truly enjoy a healthy life when their parents are sick 
and can't afford the care they need.
  Our bill is an important step to build on the Children's Health 
Insurance Program. Over 80 percent of children who are uninsured or 
enrolled in Medicaid or CHIP have uninsured parents. Expanding CHIP to 
cover parents as well as children will make a huge difference to 
millions of working families.
  The legislation will also help sign up the large number of children 
who are already eligible for health coverage through CHIP or Medicaid, 
but who have never enrolled. The numbers are dramatic. Ninety-five 
percent of low-income uninsured children are eligible for Medicaid or 
CHIP. If we can enroll all of these children, we will be taking a giant 
step toward the day when every child has the opportunity for a healthy 
start in life.
  Our legislation makes it easier for families to register and stay 
covered. We also know that many families lose coverage because 
complicated applications and burdensome requirements make it hard to 
stay insured. Under our bill families will have a simple application 
and they won't have to enroll over and over again. When parents enroll, 
they will enroll their children, too.
  These are long-overdue steps to give many more Americans the health 
coverage they deserve. Family Care is a health care bill of rights for 
millions of hardworking parents and their children, and I urge its 
prompt consideration and adoption by the Congress.
                                 ______
                                 
      By Mr. INHOFE:
  S. 1844. A bill to amend the Clean Air Act to reduce air pollution 
through expansion of cap and trade programs, to provide an alternative 
regulatory classification for units subject to the cap and trade 
program, and for other purposes; to the Committee on Environment and 
Public Works.
  Mr. INHOFE. Mr. President, I ask 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. 1844

       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 2003''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Emission reduction programs.

                 TITLE IV--EMISSION REDUCTION PROGRAMS

                       Part A--General Provisions

Sec. 401. (reserved)
Sec. 402. Definitions.
Sec. 403. Allowance system.
Sec. 404. Permits and compliance plans.
Sec. 405. Monitoring, reporting, and recordkeeping requirements.
Sec. 406. Excess emissions penalty; general compliance with other 
              provisions; enforcement.
Sec. 407. Election for additional units.
Sec. 408. Clean coal technology regulatory incentives.
Sec. 409. Electricity reliability

               Part B--Sulfur Dioxide Emission Reductions

Sec. 411. Definitions.
Sec. 412. Allowance allocation.
Sec. 413. Phase I sulfur dioxide requirements.
Sec. 414. Phase II sulfur dioxide requirements.
Sec. 415. Allowances for States with emissions rates at or below 0.80 
              lbs/mmbtu.
Sec. 416. Election for additional sources.
Sec. 417. Auctions, reserve.
Sec. 418. Industrial sulfur dioxide emissions.
Sec. 419. Termination.
Sec. 421. Definitions.
Sec. 422. Applicability.
Sec. 423. Limitations on total emissions.
Sec. 424. EGU allocations.
Sec. 425  Sulfur dioxide early action reduction credits.
Sec. 426. Disposition of sulfur dioxide allowances allocated under 
              subpart 1.
Sec. 427. Incentives for sulfur dioxide emission control technology.
Sec. 431. Definitions.
Sec. 432. Applicability.
Sec. 433. Limitations on total emissions.
Sec. 434. EGU allocations.
Sec. 435. Wrap early action reduction credits.

        Part C--Nitrogen Oxides Clear Skies Emission Reductions

Sec. 441. Nitrogen oxides emission reduction program.
Sec. 442. Termination.
Sec. 451. Definitions.
Sec. 452. Applicability.
Sec. 453. Limitations on total emissions.
Sec. 454. EGU allocations.
Sec. 455. Nitrogen oxides early action reduction credits.
Sec. 461. Definitions.
Sec. 462. General provisions.
Sec. 463. Applicable implementation plan.
Sec. 464. Termination of Federal administration of nox trading program 
              for EGUs.
Sec. 465. Carryforward of pre-2008 nitrogen oxides allowances.
Sec. 466. Non-ozone season voluntary action credits.

                  Part D--Mercury Emissions Reductions

Sec. 471. Definitions.
Sec. 472. Applicability.
Sec. 473. Limitations on total emissions.
Sec. 474. EGU allocations.
Sec. 475. Mercury early action reduction credits.

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

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

     SEC. 2. EMISSION REDUCTION PROGRAMS.

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

                 TITLE IV--EMISSION REDUCTION PROGRAMS

                       Part A--General Provisions

     SEC. 401. (RESERVED)

     SEC. 402. DEFINITIONS.

       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, if applicable, under a specified part or subpart; or
       (B) under subpart 1 of part B or subpart 1 of part C, a 
     unit that is subject to emission reduction requirements or 
     limitations under that subpart.
       (4) 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

[[Page 28399]]

       (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 3 years in which the unit had 
     the highest heat input for the period 1998 through 2002.
       (B) Notwithstanding subparagraph (A), if a unit commenced 
     or commences operation after January 1, 2001, then ``baseline 
     heat input'' means the manufacturer's design heat input 
     capacity for the unit multiplied by 80 percent for coal-fired 
     units, 50 percent for boilers that are not coal-fired, 80 
     percent for combustion turbine cogeneration units elected 
     under section 407, 50 percent for combustion turbines other 
     than simple cycle turbines, and 5 percent for simple cycle 
     combustion turbines.
       (C) 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) Not later than 3 months after the enactment of the 
     Clear Skies Act of 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. Not later than 9 months after the enactment of the 
     Clear Skies Act of 2003, 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 ``coal'' means any solid fuel classified as 
     anthracite, bituminous, subbituminous, or lignite.
       (7) The term ``coal-derived fuel'' means any fuel (whether 
     in a solid, liquid, or gaseous state) produced by the 
     mechanical, thermal, or chemical processing of coal.
       (8) The term ``coal-fired'' with regard to a unit means, 
     except under subpart 1 of part B, subpart 1 of part C, and 
     sections 424 and 434, combusting coal or any coal-derived 
     fuel alone or in combination with any amount of any other 
     fuel in any year.
       (9) The term ``cogeneration unit'' means, except under 
     subpart 1 of part B and subpart 1 of part C, a unit that 
     produces through the sequential use of energy:
       (A) electricity; and
       (B) useful thermal energy (such as heat or steam) for 
     industrial, commercial, heating, or cooling purposes.
       (10) 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.
       (11) The term ``commence commercial operation'' with regard 
     to a unit means the start up of the unit's combustion chamber 
     and the commencement of the generation of electricity for 
     sale.
       (12) The term ``compliance plan'' means either--
       (A) a statement that the facility will comply with all 
     applicable requirements under this title, or
       (B) under subpart 1 of part B or subpart 1 of part C, where 
     applicable, a schedule and description of the method or 
     methods for compliance and certification by the owner or 
     operator that the facility is in compliance with the 
     requirements of that subpart.
       (13) The term ``continuous emission monitoring system'' 
     (CEMS) means the equipment as required by section 405, used 
     to sample, analyze, measure, and provide on a continuous 
     basis a permanent record of emissions and flow (expressed in 
     pounds per million British thermal units (lbs/mmBtu), pounds 
     per hour (lbs/hr) or such other form as the Administrator may 
     prescribe by regulations under section 405.
       (14) The term ``designated representative'' means a 
     responsible person or official authorized by the owner or 
     operator of a unit and the facility that includes the unit to 
     represent the owner or operator in matters pertaining to the 
     holding, transfer, or disposition of allowances, and the 
     submission of and compliance with permits, permit 
     applications, and compliance plans.
       (15) The term ``duct burner'' means a combustion device 
     that uses the exhaust from a combustion turbine to burn fuel 
     for heat recovery.
       (16) The term ``fossil fuel'' means natural gas, petroleum, 
     coal, or any form of solid, liquid, or gaseous fuel derived 
     from such material.
       (17) The term ``fossil fuel-fired'' with regard to a unit 
     means combusting fossil fuel, alone or in combination with no 
     more than ten percent of other fuel.
       (18) The term ``fuel oil'' means a petroleum-based fuel, 
     including diesel fuel or petroleum derivatives.
       (20) The term ``gas-fired'' with regard to a unit means, 
     except under subpart 1 of part B and subpart 1 of part C, 
     combusting only natural gas or fuel oil, with natural gas 
     comprising at least 90 percent, and fuel oil comprising no 
     more than 10 percent, of the unit's total heat input in any 
     year.
       (21) The term ``gasify'' means to convert carbon-containing 
     material into a gas consisting primarily of carbon monoxide 
     and hydrogen.
       (22) The term ``generator'' means a device that produces 
     electricity and, under subpart 1 of part B and subpart 1 of 
     part C, that is reported as a generating unit pursuant to 
     Department of Energy Form 860.
       (23) 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.
       (24) The term ``integrated gasification combined cycle 
     plant'' means any combination of equipment used to gasify 
     fossil fuels (with or without other material) and then burn 
     the gas in a combined cycle combustion turbine.
       (25) The term ``oil-fired'' with regard to a unit means, 
     except under sections 424 and 434, combusting fuel oil for 10 
     percent or more of the unit's total heat input, and 
     combusting no coal or coal-derived fuel, in any year.
       (26) The term ``owner or operator'' with regard to a unit 
     or facility means, except for subpart 1 of part B and subpart 
     1 of part C, any person who owns, leases, operates, controls, 
     or supervises the unit or the facility.
       (27) The term ``permitting authority'' means the 
     Administrator, or the State or local air pollution control 
     agency, with an approved permitting program under title V of 
     the Act.
       (28) The term ``potential electrical output'' with regard 
     to a generator means the nameplate capacity of the generator 
     multiplied by 8,760 hours.
       (29) The term ``simple cycle combustion turbine'' means a 
     combustion turbine that does not extract heat from the 
     combustion turbine exhaust gases.
       (30) The term ``stationary source'' means any building, 
     structure, facility, or installation located on one or more 
     contiguous or adjacent properties under common control or 
     ownership of the same person or persons which emits or may 
     emit any air pollutant subject to regulations under the Clear 
     Skies Act of 2003.
       (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, American 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.
       (32) The term ``unit'' means--
       (A) a fossil fuel-fired boiler, combustion turbine, or 
     integrated gasification combined cycle plant; or
       (B) under subpart 1 of part B and subpart 1 of part C, a 
     fossil fuel-fired combustion device.
       (33) The term ``utility unit'' shall have the meaning set 
     forth in section 411.
       (34) The term ``year'' means calendar year.

     SEC. 403. ALLOWANCE SYSTEM.

       (a) Allocations in General.--
       (1) For the emission limitation programs under this title, 
     the Administrator shall allocate annual allowances for an 
     affected unit, to be held or distributed by the designated 
     representative of the owner or operator in accordance with 
     this title as follows--
       (A) sulfur dioxide allowances in an amount equal to the 
     annual tonnage emission limitation calculated under section 
     413, 414, 415, or 416, except as otherwise specifically 
     provided elsewhere in subpart 1 of part B, or in an amount 
     calculated under section 424 or 434,
       (B) nitrogen oxides allowances in an amount calculated 
     under section 454, and
       (C) mercury allowances in an amount calculated under 
     section 474.
       (2) Notwithstanding any other provision of law to the 
     contrary, the allocation of any allowances for any unit or 
     facility under sections 424, 434, 454, and 474 shall not be 
     enjoined.
       (3) Allowances shall be allocated by the Administrator 
     without cost to the recipient, in accordance with this title.
       (b) Allowance Transfer System.--Allowances allocated or 
     sold by the Administrator

[[Page 28400]]

     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 C.F.R. 
     Part 73 (2002), amended as appropriate by the Administrator. 
     With regard to nitrogen oxides allowances and mercury 
     allowances, the Administrator shall implement this subsection 
     by promulgating regulations not later than 24 months after 
     the date of enactment of the Clear Skies Act of 2003. The 
     regulations under this subsection shall establish the 
     allowance system prescribed under this section, including, 
     but not limited to, requirements for the allocation, 
     transfer, and use of allowances under this title. Such 
     regulations shall prohibit the use of any allowance prior to 
     the calendar year for which the allowance was allocated and 
     shall provide, consistent with the purposes of this title, 
     for the identification of unused allowances, and for such 
     unused allowances to be carried forward and added to 
     allowances allocated in subsequent years, 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 twenty-four months prior to the compliance 
     year, for one or more facility-wide accounts for holding 
     sulfur dioxide allowances, nitrogen oxides allowances, and, 
     if applicable, mercury allowances for all affected units at 
     an affected facility. With regard to sulfur dioxide 
     allowances, the Administrator shall implement this subsection 
     under 40 C.F.R. Part 73 (2002), amended as appropriate by the 
     Administrator. With regard to nitrogen oxides allowances and 
     mercury allowances, the Administrator shall implement this 
     subsection by promulgating regulations not later than 24 
     months after the date of enactment of the Clear Skies Act of 
     2003. All allowance allocations and transfers shall, upon 
     recording by the Administrator, be deemed a part of each 
     unit's or facility's permit requirements pursuant to section 
     404, without any further permit review and revision.
       (d) Nature of Allowances.--A sulfur dioxide allowance, 
     nitrogen oxides allowance, or mercury allowance allocated or 
     sold by the Administrator under this title is a limited 
     authorization to emit one ton of sulfur dioxide, one ton of 
     nitrogen oxides, or one ounce of mercury, as the case may be, 
     in accordance with the provisions of this title. Such 
     allowance does not constitute a property right. Nothing in 
     this title or in any other provision of law shall be 
     construed to limit the authority of the United States to 
     terminate or limit such authorization. Nothing in this 
     section relating to allowances shall be construed as 
     affecting the application of, or compliance with, any other 
     provision of this Act to an affected unit or facility, 
     including the provisions related to applicable National 
     Ambient Air Quality Standards and State implementation plans. 
     Nothing in this section shall be construed as requiring a 
     change of any kind in any State law regulating electric 
     utility rates and charges or affecting any State law 
     regarding such State regulation or as limiting State 
     regulation (including any prudency review) under such a State 
     law. Nothing in this section shall be construed as modifying 
     the Federal Power Act or as affecting the authority of the 
     Federal Energy Regulatory Commission under that Act. Nothing 
     in this title shall be construed to interfere with or impair 
     any program for competitive bidding for power supply in a 
     State in which such program is established. Allowances, once 
     allocated or sold to a person by the Administrator, may be 
     received, held, and temporarily or permanently transferred in 
     accordance with this title and the regulations of the 
     Administrator without regard to whether or not a permit is in 
     effect under title V of the Clean Air Act or section 404 of 
     the Clear Skies Act of 2003 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 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 designated representative 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 the year in which the purchase is made 
     or the prior year. Not later than 36 months after the date of 
     enactment of the Clear Skies Act of 2003, the Administrator 
     shall promulgate regulations providing for direct sales of 
     sulfur dioxide allowances, nitrogen oxides allowances, and 
     mercury allowances to an owner or operator of a facility. The 
     regulations shall provide that--
       (A) such allowances may be used only to meet the 
     requirements of section 422, 432, 452, and 472, as the case 
     may be, for such facility and for the year in which the 
     purchase is made or the prior year,
       (B) each such sulfur dioxide allowance shall be sold for 
     $2,000, each such nitrogen oxides allowance shall be sold for 
     $4,000, and each such mercury allowance shall be sold for 
     $2,187.50, with such prices adjusted for inflation based on 
     the Consumer Price Index on the date of enactment of the 
     Clear Skies Act of 2003 and annually thereafter,
       (C) the proceeds from any sales of allowances under 
     subparagraph (B) shall be, in accordance with paragraph (j), 
     deposited in the Compliance Assistance Account,
       (D) except for allowances subject to (E), the allowances 
     directly purchased for use for the year specified in 
     subparagraph (A) shall be, on a pro rata basis, taken from, 
     and reduce, the amount of sulfur dioxide allowances, nitrogen 
     oxides allowances, or mercury allowances, as the case may be, 
     that would otherwise be allocated under section 423, 453, or 
     473 starting for the second year after the specified year and 
     continuing for each subsequent year as necessary,
       (E) if the designated representative does not use any such 
     allowance in accordance with paragraph (A) the designated 
     representative shall hold the allowance for deduction by the 
     Administrator. The Administrator shall deduct the allowance 
     without refund or other form of recompense.
       (4) Allowances may not be used prior to the calendar year 
     for which they are allocated but may be used in succeeding 
     years. Nothing in this section or in the allowance system 
     regulations shall relieve the Administrator of the 
     Administrator's permitting, monitoring and enforcement 
     obligations under this Act, nor relieve affected facilities 
     of their requirements and liabilities under the Act.
       (f) Competitive Bidding for Power Supply.--Nothing in this 
     title shall be construed to interfere with or impair any 
     program for competitive bidding for power supply in a State 
     in which such program is established.
       (g) Applicability of the Antitrust Laws.--(1) 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 and nitrogen oxides 
     allowances for sulfur dioxide allowances.
       (j) Compliance Assistance Account.--An account shall be 
     established by the Secretary of Energy in consultation with 
     the Administrator:
       (1) Payments or monies deposited in this account in 
     accordance with this title shall be used for the purpose of 
     developing emission control technologies through direct 
     grants to affected units that demonstrate new control 
     technologies regulated under this title.
       (2) The Secretary of Energy in consultation with the 
     Administrator shall promulgate regulations with notice and 
     opportunity for comment to establish criteria for affected 
     units to quality for this subsection.

     SEC. 404. PERMITS AND COMPLIANCE PLANS.

       (a) Permit Program.--The provisions of this title shall be 
     implemented, subject to section 403, by permits issued to 
     units and facilities subject to this title and enforced in 
     accordance with the provisions of title V, as modified by 
     this title. Any such permit issued by the Administrator, or 
     by a State with an approved permit program, shall prohibit--
       (1) annual emissions of sulfur dioxide, nitrogen oxides, 
     and mercury in excess of the number of allowances required to 
     be held in accordance with sections 412(c), 422, 432, 452, 
     and 472,
       (2) exceeding applicable emissions rates under section 441,
       (3) the use of any allowance prior to the year for which it 
     was allocated and
       (4) contravention of any other provision of the permit.

     No permit shall be issued that is inconsistent with the 
     requirements of this title, and title V as applicable.

[[Page 28401]]

       (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) Recording by the Administrator of transfers of 
     allowances shall amend automatically, and will not reopen or 
     require reopening of, any or all applicable proposed or 
     approved permit applications, compliance plans and permits.
       (c) Permits.--The owner or operator of each facility under 
     this title that includes an affected unit subject to title V 
     shall submit a permit application and compliance plan with 
     regard to the applicable requirements under sections 412(c), 
     422, 432, 441, 452, and 472 for sulfur dioxide emissions, 
     nitrogen oxide emissions, and mercury emissions from such 
     unit to the permitting authority in accordance with the 
     deadline for submission of permit applications and compliance 
     plans under title V. The permitting authority shall issue a 
     permit to such owner or operator, or the designated 
     representative of such owner or operator, that satisfies the 
     requirements of title V and this title.
       (d) Amendment of Application and Compliance Plan.--At any 
     time after the submission of an application and compliance 
     plan under this section, the applicant may submit a revised 
     application and compliance plan, in accordance with the 
     requirements of this section.
       (e) Prohibition.--
       (1) It shall be unlawful for any person to operate any 
     facility subject to this title except in compliance with the 
     terms and requirements of a permit application and compliance 
     plan (including amendments thereto) or permit issued by the 
     Administrator or a State with an approved permit program. For 
     purposes of this subsection, compliance, as provided in 
     section 504(f), with a permit issued under title V which 
     complies with this title for facilities subject to this title 
     shall be deemed compliance with this subsection as well as 
     section 502(a).
       (2) In order to ensure reliability of electric power, 
     nothing in this title or title V shall be construed as 
     requiring termination of operations of a unit serving a 
     generator for failure to have an approved permit or 
     compliance plan under this section.
       (f) Certificate of Representation.--No permit shall be 
     issued under this section to an affected unit or facility 
     until the designated representative of the owners or 
     operators has filed a certificate of representation with 
     regard to matters under this title, including the holding and 
     distribution of allowances and the proceeds of transactions 
     involving allowances.
       (g) Multiple Owners.--No permit shall be issued under this 
     section to an affected unit until the designated 
     representative of the owners or operators has filed a 
     certificate of representation with regard to matters under 
     this title, including the holding and distribution of 
     allowances and the proceeds of transactions involving 
     allowances. Where there are multiple holders of a legal or 
     equitable title to, or a leasehold interest in, such a unit, 
     or where a utility or industrial customer purchases power 
     from an affected unit (or units) under life-of-the-unit, firm 
     power contractual arrangements, the certificate shall state:
       (1) that allowances and the proceeds or transactions 
     involving allowance will be deemed to be held or distributed 
     in proportion to each holder's legal, equitable, leasehold, 
     or contractual reservation or entitlement, or
       (2) if such multiple holders have expressly provided for a 
     different distribution of allowances by contract, that 
     allowances and the proceeds of transactions involving 
     allowances will be deemed to be held or distributed in 
     accordance with the contract.

     A passive lessor, of a person who has an equitable interest 
     through such lessor, whose rental payments are not based, 
     either directly or indirectly, upon the revenues or income 
     from the affected unit shall not be deemed to be a holder of 
     a legal, equitable, leasehold, or contractual interest for 
     the purposes of holding or distributing allowances as 
     provided in this subsection, unless expressly provided for in 
     the leasehold agreement. Except as otherwise provided in this 
     subsection, where all legal or equitable title to or interest 
     in an affected unit is held by a single person, the 
     certification shall state that all allowances received by the 
     unit are deemed to be held for that person.

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

       (a) 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 or compliance system that is 
     demonstrated as providing information which is reasonably of 
     the same precision, reliability, accessibility, and 
     timeliness as that provided by CEMS, and for recordkeeping 
     and reporting of information from such systems. Such 
     regulations may include limitations on the use of alternative 
     compliance methods by units equipped with an alternative 
     monitoring system as may be necessary to preserve the orderly 
     functioning of the allowance system, and which will ensure to 
     a reasonable extent the emissions reductions contemplated by 
     this title. Where two or more units utilize a single stack, a 
     separate CEMS shall not be required for each unit, and for 
     such units the regulations shall require that the owner or 
     operator collect sufficient information to permit reliable 
     compliance determinations for each such unit.
       (2)(A) The owner and operator of any facility subject to 
     this title shall be required to install and operate CEMS to 
     monitor the emissions from each affected unit at the 
     facility, and to quality assure the data for--
       (i) sulfur dioxide, opacity, and volumetric flow for all 
     affected units subject to subpart 2 of part B at the 
     facility,
       (ii) nitrogen oxides for all affected units subject to 
     subpart 2 of part C at the facility, and
       (iii) mercury for all affected units subject to part D at 
     the facility.
       (B)(i) The Administrator may specify an alternative 
     monitoring or compliance system for determining mercury 
     emissions. In specifying such alternative monitoring or 
     compliance systems, the lack of commercially available 
     appropriate and reasonable vendor guarantees shall constitute 
     a reasonable and permissible basis for specifying alternative 
     monitoring or compliance systems for mercury.
       (ii) The regulations under clause (i) may include 
     limitations on the use of alternative compliance methods by 
     units equipped with an alternative monitoring system as may 
     be necessary to preserve the orderly functioning of the 
     allowance system, and which will ensure to a reasonable 
     extent the emissions reductions contemplated by this title.
       (iii) The regulations under clause (i) shall not require a 
     separate CEMS or other monitoring system for each unit where 
     two or more units utilize a single stack and shall require 
     that the owner or operator collect sufficient information to 
     permit reliable compliance determinations for such units.
       (b) Deadlines.--
       (1) New utility units.--Upon commencement of commercial 
     operation of each new utility unit under subpart I of part B, 
     the unit shall comply with the requirements of subsection 
     (a)(1).
       (2) Deadline for affected units under subpart 2 of part b 
     for installation and operation of cems.--By the later of the 
     date 12 months before the commencement date of the sulfur 
     dioxide allowance requirement of section 422, or the date on 
     which the unit commences operation, the owner or operator of 
     each affected unit under subpart 2 of part B shall install 
     and operate CEMS, quality assure the data, and keep records 
     and reports in accordance with the regulations issued under 
     paragraph (a)(2) with regard to sulfur dioxide, opacity, and 
     volumetric flow.
       (3) Deadline for affected units under subpart 3 of part b 
     for installation and operation of cems.--By the first covered 
     year or the. date on which the unit commences commercial 
     operation, the owner or operator of each affected unit under 
     subpart 3 of part B shall install and operate CEMS,

[[Page 28402]]

     quality assure the data, and keep records and reports in 
     accordance with the regulations issued under paragraph (a)(2) 
     with regard to sulfur dioxide and volumetric flow.
       (4) Deadline for affected units under subpart 2 of part c 
     for installation and Operation of cems.--By the later of the 
     date the nitrogen oxides allowance requirement under section 
     452, or the date on which the unit commences operation, the 
     owner or operator of each affected unit under subpart 2 of 
     part C shall install and operate CEMS, quality assure the 
     data, and keep records and reports in accordance with the 
     regulations issued under paragraph (a)(2) with regard to 
     nitrogen oxides.
       (5) Deadline for affected units under part d for 
     installation and operation of cems.--By the later of the date 
     12 months before the commencement date of the mercury 
     allowance requirement of section 472 applies to such unit and 
     commences commercial operation, or the date on which the unit 
     commences operation, the owner or operator of each affected 
     unit under part D shall install and operate CEMS, quality 
     assure the data, and keep records and reports in accordance 
     with the regulations issued under paragraph (a)(2) with 
     regard to mercury.
       (c) Unavailability of Emissions Data.--If CEMS data or data 
     from an alternative monitoring system approved by the 
     Administrator under subsection (a) is not available for any 
     affected unit during any period of a calendar year in which 
     such data is required under this title, and the owner or 
     operator cannot provide information, reasonably satisfactory 
     to the Administrator, on emissions during that period, the 
     Administrator in coordination with the owner shall calculate 
     emissions for that period pursuant to regulations promulgated 
     for such purpose. The owner or operator shall be liable for 
     excess emissions fees and offsets under section 406 in 
     accordance with such regulations. Any fee due and payable 
     under this subsection shall not diminish the liability of the 
     unit's owner or operator for any fine, penalty, fee or 
     assessment against the unit for the same violation under any 
     other section of this Act.
       (d) Implementation.--With regard to sulfur dioxide, 
     nitrogen oxides, opacity, and volumetric flow, the 
     Administrator shall implement subsections (a) and (c) under 
     40 C.F.R. Part 75 (2002), amended as appropriate by the 
     Administrator. With regard to mercury, the Administrator 
     shall implement subsections (a) and (c) by issuing proposed 
     regulations not later than 36 months before the commencement 
     date of the mercury allowance requirement under section 472 
     and final regulations not later than 24 months before that 
     commencement date.
       (e) Prohibition.--It shall be unlawful for the owner or 
     operator of any facility subject to this title to operate a 
     facility without complying with the requirements of this 
     section, and any regulations implementing this section.

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

       (a) Excess Emissions Penalty.--
       (1) Amount for oxides of nitrogen.--The owner or operator 
     of any unit subject to the requirements of section 441 that 
     emits nitrogen oxides for any calendar year in excess of the 
     allowances the operator holds for the unit for that calendar 
     year 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 number 
     of allowances held by the operator for the unit for that 
     calendar year multiplied by $2,000.
       (2) Amount for sulfur dioxide before 2008.--The owner or 
     operator of any unit subject to the requirements of section 
     412(c) that emits sulfur dioxide for any calendar year before 
     2008 in excess of the sulfur dioxide allowances the owner or 
     operator holds for use for the unit for that calendar year 
     shall be liable for the payment of an excess emissions 
     penalty, except where such emissions were authorized pursuant 
     to section 110(f) or (g). That penalty shall be calculated as 
     follows:
       (A) the product of the unit's excess emissions (in tons) 
     multiplied by $2,000, if within 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 payment 
     required under this subparagraph.
       (B) if the requirements of clause (A)(i) or (A)(ii) are not 
     met, the product of the unit's excess emissions (in tons) 
     multiplied by $4,000.
       (3) Amount for sulfur dioxide after 2007.--If the units at 
     a facility that are subject to the requirements of section 
     412(c) emit sulfur dioxide for any calendar year after 2007 
     in excess of the sulfur dioxide allowances that the owner or 
     operator of the facility holds for use for the facility for 
     that calendar year, the owner or operator shall be liable for 
     the payment of an excess emissions penalty, except where such 
     emissions were authorized pursuant to section 110(f). That 
     penalty shall be calculated under paragraph (4)(A) or (4)(B).
       (4) Units subject to sections 422, 432, 452, or 472.--If 
     the units at a facility that are subject to the requirements 
     of section 422, 432, 452, or 472 emit sulfur dioxide, 
     nitrogen oxides, or mercury for any calendar year in excess 
     of the sulfur dioxide allowances, nitrogen oxides allowances, 
     or mercury allowances, as the case may be, that the owner or 
     operator of the facility holds for use for the facility or 
     units for that calendar year, the owner or operator shall be 
     liable for the payment of an excess emissions penalty, except 
     where such emissions were authorized pursuant to section 
     110(f). That penalty shall be calculated as follows:
       (A) the product of the units' excess emissions (in tons or, 
     for mercury emissions, in ounces) multiplied by the annual 
     average price of sulfur dioxide allowances, nitrogen oxides 
     allowances, or mercury allowances, as the case may be, sold 
     between allowance holders and recorded in the Allowance 
     Tracking System, if within sixty 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)(2) or (b)(3), as applicable; 
     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, the amount of the units' excess emissions (in tons or, 
     for mercury emissions, in ounces) multiplied by the average 
     annual price of sulfur dioxide allowances, nitrogen oxides 
     allowances, or mercury allowances, as the case may be, sold 
     between allowance holders and recorded in the Allowance 
     Tracking System.
       (5) Payment.--Any penalty under paragraph 1, 2, 3, or 4 
     shall be due and payable without demand to the Administrator 
     as provided in regulations issued by the Administrator. With 
     regard to the penalty under paragraph 1, the Administrator 
     shall implement this paragraph under 40 CFR Part 77 (2002), 
     amended as appropriate by the Administrator. With regard to 
     the penalty under paragraphs 2, 3, and 4, the Administrator 
     shall implement this paragraph by issuing regulations no 
     later than 24 months after the date of enactment of the Clear 
     Skies Act of 2003. Any such payment shall be deposited in the 
     Compliance Assistance Account.
       (b) Excess Emissions Offset.--
       (1) The owner or operator of any unit subject to the 
     requirements of section 412(c) that emits sulfur dioxide 
     during any calendar year before 2008 in excess of the sulfur 
     dioxide allowances held for the unit for the calendar year 
     shall be liable to offset the excess emissions by an equal 
     tonnage amount in the following calendar year, or such longer 
     period as the Administrator may prescribe. The Administrator 
     shall deduct sulfur dioxide allowances equal to the excess 
     tonnage from those held for the facility for the calendar 
     year, or succeeding years during which offsets are required, 
     following the year in which the excess emissions occurred.
       (2) If the units at a facility that are subject to the 
     requirements of section 412(c) emit sulfur dioxide for a year 
     after 2007 in excess of the sulfur dioxide allowances that 
     the owner or operator of the facility holds for use for the 
     facility for that calendar year, the owner or operator shall 
     be liable to offset the excess emissions by an equal amount 
     of tons in the following calendar year, or such longer period 
     as the Administrator may prescribe. The Administrator shall 
     deduct sulfur dioxide allowances equal to the excess 
     emissions in tons from those held for the facility for the 
     year, or succeeding years during which offsets are required, 
     following the year in which the excess emissions occurred.
       (3) If the units at a facility that are subject to the 
     requirements of section 422, 432, 452, or 472 emit sulfur 
     dioxide, nitrogen oxides, or mercury for any calendar year in 
     excess of the sulfur dioxide allowances, nitrogen oxides 
     allowances, or mercury allowances, as the case may be, that 
     the owner or operator of the facility holds for use for the 
     facility for that calendar year, the owner or operator shall 
     be liable to offset the excess emissions by an equal amount 
     of tons or, for mercury, ounces in the following calendar 
     year, or such longer period as the Administrator may 
     prescribe. The Administrator shall deduct sulfur dioxide 
     allowances, nitrogen oxide allowances, or mercury allowances, 
     as the case may be, equal to the excess emissions in tons or, 
     for mercury, ounces from those held for the facility for the 
     year, or succeeding years during which offsets are required, 
     following the year in which the excess emissions occurred.
       (c) Penalty Adjustment.--The Administrator shall, by 
     regulation, adjust the penalty specified in subsection (a)(1) 
     and (a)(2) for inflation, based on the Consumer Price Index, 
     on November 15, 1990, and annually thereafter.
       (d) Prohibition.--It shall be unlawful for the owner or 
     operator of any unit or facility liable for a penalty and 
     offset under this section to fail--
       (1) to pay the penalty under subsection (a); or
       (2) to offset excess emissions as required by subsection 
     (b).
       (e) Savings Provision.--Nothing in this title shall limit 
     or otherwise affect the application of section 113, 114, 120, 
     or 304 except as otherwise explicitly provided in this title.

[[Page 28403]]

       (f) Other Requirements.--Except as expressly provided, 
     compliance with the requirements of this title shall not 
     exempt or exclude the owner or operator of any facility 
     subject to this title from compliance with any other 
     applicable requirements of this Act. Notwithstanding any 
     other provision of this Act, no State or political 
     subdivision thereof shall restrict or interfere with the 
     transfer, sale, or purchase of allowances under this title.
       (g) Violations.--Violation by any person subject to this 
     title of any prohibition of, requirement of, or regulation 
     promulgated pursuant to this title shall be a violation of 
     this Act. In addition to the other requirements and 
     prohibitions provided for in this title, the operation of any 
     affected unit or the affected units at a facility to emit 
     sulfur dioxide, nitrogen oxides, or mercury in violation of 
     section 412(c), 422, 432, 452, and 472, as the case may be, 
     shall be deemed a violation, with each ton or, in the case of 
     mercury, each ounce emitted in excess of allowances held 
     constituting a separate violation.

     SEC. 407. ELECTION FOR ADDITIONAL UNITS.

       (a) Applicability.--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 solid fuel-fired 
     and emits mercury vented only through a stack or duct, the 
     owner or operator shall also designate the unit as an 
     affected unit under part D. If elected unit fires only 
     gaseous fuels, designation may be made under subpart 2 of 
     part C only.
       (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 (m).
       (d) Establishment of Baseline.--
       (1) After approval of the designation under subsection (c), 
     the owner or operator shall install and operate GEMS 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 unless all units utilizing the single 
     stack are designated as affected units.
       (2) The baselines for heat input and sulfur dioxide and 
     nitrogen oxides emission rates, as the case may be, for the 
     unit shall be the unit's heat input and the emission rates of 
     sulfur dioxide and nitrogen oxides for a year starting after 
     approval of the designation under subsection (c). The 
     Administrator shall issue regulations requiring the unit's 
     baselines for heat input and sulfur dioxide and nitrogen 
     oxides emission rates 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. The baseline heat 
     input and emissions baselines in this subparagraph shall be 
     calculated, at the election of the owner or operator of the 
     relevant unit, under (i) or (ii):
       (i) for heat input, the average of the unit's highest heat 
     input for three years of the five years before the year for 
     which the Administrator is determining the allocations and 
     for emissions baselines, the average of the relevant 
     emissions for the same years used to determine heat input.
       (ii) for heat input, the average of any period of twenty-
     four consecutive months during a ten-year period immediately 
     prior to submission of an application under subsection (b), 
     and for emissions baselines, the average of the relevant 
     emissions for the same twenty-four month period used to 
     calculate heat input.
       (3) The regulations implementing subparagraphs (2) shall 
     authorize the use of any reliable data on emissions of sulfur 
     dioxide and nitrogen oxides in addition to, and other than, 
     data collected pursuant to paragraph (1), including, but not 
     limited to, alternative data that has been used to determine 
     compliance with a regulatory or monitoring requirement under 
     this Act or a comparable State law if the data establishes a 
     reliable measure of heat input and sulfur dioxide and 
     nitrogen oxides emissions over a simultaneous period of time; 
     or if such data is not available, the Administrator may 
     prescribe a baseline based on alternative reliable data. In 
     determining the reliability of data, the Administrator may 
     consider the cost of generating more reliable data compared 
     to the quantitative importance of the resulting gain in 
     quantifying emissions.
       (e) Emission Limitations.--After approval of the 
     designation of the unit under 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 approval of the designation;
       (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, 2010, or January 1 of the 
     year after approval of the designation; and
       (3) if applicable, an affected unit under part D, and shall 
     be allocated mercury allowances, starting the later of 
     January l, 2010, or January 1 of the year after approval of 
     designation.
       (f) Allocations.--
       (1) Sulfur dioxide and nitrogen oxides.--The Administrator 
     shall promulgate regulations determining the allocations of 
     sulfur dioxide allowances and nitrogen oxides allowances for 
     each year during which a unit is an affected unit under 
     subsection (e). The regulations shall provide for allocations 
     equal to 70 percent of the following amounts beginning 
     January 1, 2010, and 50 percent of the following amounts 
     beginning January 1, 2018 the unit's baseline heat input 
     under subsection (d) multiplied by the lesser of--
       (A) the unit's baseline sulfur dioxide emission rate or 
     nitrogen oxides emission rate as the case may be; or
       (B) the unit's most stringent State or Federal emission 
     limitation for sulfur dioxide or nitrogen oxides applicable 
     to the year on which the unit's baseline heat input is based 
     under subsection (d).
       (2) Mercury.--The Administrator shall promulgate 
     regulations providing for the allocation of mercury 
     allowances to solid fuel-fired units designated under this 
     section for each year after January 1, 2010 during which a 
     unit is a designated unit under this section. The regulations 
     shall provide for allocations equal to the lesser of the 
     following amounts--
       (A) the unit's annual allowable emissions rate for mercury 
     under the national emissions standards for hazardous air 
     pollutants for boilers and process heaters multiplied by the 
     unit's baseline heat input; or
       (B) the unit's most stringent State or Federal emission 
     limitation for mercury emissions rate multiplied by the 
     unit's baseline heat input.
       (3) Limitation.--Allowances allocated to electing units 
     under subparagraphs (1) and (2) shall comprise a separate 
     limitation on emissions from sections 423, 433, 453, 473, or 
     other section of this Act. These allowances for sulfur 
     dioxide, nitrogen oxides, or mercury, as the case may be, 
     shall be tradeable with allowances allocated under sections 
     414, 424, 454, 474, as applicable, provided that
       (A) electing units may only trade nitrogen oxides within 
     the respective zones established under section 452 within 
     which the electing unit is located, and
       (B) affected units within the WRAP States may only purchase 
     sulfur dioxide allowances allocated or otherwise distributed 
     by the Administrator to electing units within the WRAP 
     States, and will not be counted for purposes the affected 
     unit's emissions within the meaning of the WRAP Annex.
       (4) Incentives for early reductions.--The Administrator 
     shall promulgate regulations within 18 months authorizing the 
     allocation of sulfur dioxide, nitrogen oxides and mercury 
     allowances to units designated under this section that 
     install or modify pollution control equipment or combustion 
     technology improvements identified in such regulations after 
     the date of enactment of this section and prior to January 1, 
     2010. No allowances shall be allocated under this paragraph 
     for emissions reductions attributable to: pollution control 
     equipment or combustion technology improvements that were 
     operational or under construction at any time prior to the 
     date of enactment of this section; fuel switching; or 
     compliance with any Federal regulation. The allowances 
     allocated to any unit under this paragraph shall be in 
     addition to the allowances allocated under paragraphs (1) and 
     (2) and sections 414, 424, 434, 454 and 474 and shall be 
     allocated in an amount equal to one allowance of sulfur 
     dioxide and nitrogen oxides for each 1.05 tons of reduction 
     in emissions of sulfur dioxide and nitrogen oxides, 
     respectively, and 1.05 ounces of reduction in the emissions 
     of mercury achieved by the pollution control equipment or 
     combustion technology improvements starting with the year in 
     which the equipment or improvement is implemented.
       (g) Withdrawal.--The Administrator shall promulgate 
     regulations withdrawing from the approved designation under 
     subsection (c) any unit that qualifies as an affected EGU 
     under subpart 2 of part B or subpart 2 of part C, or part D 
     after the approval of the designation of the unit under 
     subsection (c).
       (h) Regulations.--The Administrator shall promulgate 
     regulations implementing this section within 18 months of the 
     date of enactment of the Clear Skies Act of 2003.
       (i) Application Period.--Applications for designation of 
     units under this section shall be accepted by the 
     Administrator beginning not later than 180 days after the 
     date of enactment of this section and the Administrator shall 
     approve or disapprove of each application within 90 days of 
     receipt.
       (j) Neshap Applicability.--
       (1) A unit that is designated as an affected unit under 
     this section shall not be subject to any national emissions 
     standards for hazardous air pollutants (NESHAP) promulgated 
     pursuant to section 112(d) after November 10, 2003, except 
     that units that are

[[Page 28404]]

     boilers or process heaters shall be subject on and after 
     January 1, 2010 to the emissions limitation for mercury, and 
     associated monitoring and compliance requirements, that would 
     be applicable to such units under the NESHAP for boilers and 
     process heaters promulgated pursuant to section 112(d).
       (2) Not later than 18 months after the date of enactment of 
     this section, the Administrator shall publish and make 
     available for public comment, a peer reviewed preliminary 
     report characterizing the emissions and public health effects 
     that may reasonably be anticipated to occur from the 
     implementation of paragraph (1) and subsection (f). No NESHAP 
     for boilers and process heaters shall be promulgated under 
     section 112(d) until the conclusion of, and considering, this 
     report. Under section 112(n)(1)(A), the Administrator shall 
     publish a final report, including responses to the comments 
     received, not later than 30 months after such date. The 
     requirements of section 112(n)(1)(A), for purposes of this 
     paragraph, shall be amended as follows. The report shall 
     include:
       (A) an estimate of the numbers and types of sources that 
     are expected to be designated under this section;
       (B) an estimate of any increase or decrease in the annual 
     emissions of criteria pollutants and of those hazardous air 
     pollutants subject to emission limitations under the NESHAPs 
     identified in paragraph (1) from such sources that may 
     reasonably be expected to occur for each year through 2018;
       (C) an estimate of any increase or decrease in the annual 
     emissions of criteria pollutants and of those hazardous air 
     pollutants subject to emission limitations under the NESHAPs 
     identified in paragraph (1) from such sources that might 
     reasonably be expected to occur for each year through 2018, 
     if such sources estimated in subparagraph (A) are not 
     designated under this section; and
       (D) a description of the public health and environmental 
     impacts associated with the emissions increases and decreases 
     described in subparagraphs (B) and (C).

     Notwithstanding paragraph (1), the Administrator shall have 
     the authority to regulate emissions of hazardous air 
     pollutants listed under section 112(b), other than mercury 
     compounds, from sources designated under this section in 
     accordance with the regime set forth in section 112(f)(2). 
     The Administrator shall make a determination based on the 
     study and other information satisfying the criteria of the 
     Data Quality Act whether to establish emissions limitations 
     under section 112(f) for sources designated under this 
     section, not later than 24 months after the final report is 
     published. The determination shall be a final agency action 
     subject to judicial review under section 307 and the 
     Administrative Procedures Act.
       (k) Other Combustion Sources.--The owner or operator of an 
     affected unit designated under this section may elect to 
     designate other combustion sources, such as kilns and 
     furnaces (including sources that are not operated to generate 
     electricity) that are located on the same property as 
     affected units under this section provided that the emissions 
     from such sources are vented through a stack or duct. A 
     source that is designated as an affected unit under this 
     section shall not be subject to any national emissions 
     standards for hazardous air pollutants promulgated pursuant 
     to section 112(d) after August 2003. The Administrator shall 
     have the authority to regulate emissions of hazardous air 
     pollutants listed under section 112(b), other than mercury 
     compounds, by units designated as affected units under this 
     section in accordance with the regime set forth in sections 
     112(n)(1)(A) and 112(f)(2) through (4). Any such regulation 
     shall not require compliance with emissions limitations for 
     such pollutants before January l, 2018.
       (l) Exemption From Major Source Preconstruction Review 
     Requirements and Best Available Retrofit Control Technology 
     Requirements.--
       (1) Major source exemption.--A unit designated as an 
     affected unit under this section shall not be considered a 
     major source, or a part of a major emitting facility or major 
     stationary source for purposes of compliance with the 
     requirements of parts C and D of title I. This exemption only 
     applies if, beginning 8 years after the date of enactment of 
     this section, or designation as an affected unit--
       (A) the designated unit either achieves in fact, or is 
     subject to a regulatory requirement to achieve, a limit on 
     the emissions of particulate matter from the affected unit to 
     the level not greater than the level applicable to the unit 
     either pursuant to subpart Db of 40 CFR Part 60 or the 
     national emissions standards for hazardous air pollutants for 
     industrial boilers and process heaters issued pursuant to 
     section 112; or the owner or operator of the affected unit 
     properly operates, maintains and repairs pollution control 
     equipment to limit emissions of particulate matter and
       (B) the owner or operator of the designated unit uses good 
     combustion practices to minimize emissions of carbon 
     monoxide.
       (2) Class i area protections.--Notwithstanding the 
     exemption in paragraph (1), an affected unit located within 
     50 km of a Class I area on which construction commences after 
     the date of enactment of this section is subject to those 
     provisions under part C of title I to the review of a new or 
     modified major stationary source's impact on a Class I area.
       (m) Limitation.--Any unit designated under this section 
     shall not transfer or bank allowances produced as a result of 
     reduced utilization or shutdown. 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.

     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 November 15, 
     1990.
       (b) Revised Regulations for Clean Coal Technology 
     Demonstrations.--
       (1) Applicability.--This subsection applies to physical or 
     operational changes to existing facilities for the sole 
     purpose of installation, operation, cessation, or removal of 
     a temporary or permanent clean coal technology demonstration 
     project. For the purposes of this section, a clean coal 
     technology demonstration project shall mean a project using 
     funds appropriated under the heading ``Department of Energy--
     Clean Coal Technology'', up to a total amount of 
     $2,500,000,000 for commercial demonstration of clean coal 
     technology, or similar projects funded through appropriations 
     for the Environmental Protection Agency. The Federal 
     contribution for qualifying project shall be at least twenty 
     percent of the total cost of the demonstration project.
       (2) Temporary projects.--Installation, operation, 
     cessation, or removal of a temporary clean coal technology 
     demonstration project that is operated for a period of 5 
     years or less, and which complies with the State 
     implementation plans for the State in which the project is 
     located and other requirements necessary to attain and 
     maintain the national ambient air quality standards during 
     and after the project is terminated, shall not subject such 
     facility to the requirements of section 111 or part C or D of 
     title I.
       (3) Permanent projects.--For permanent clean coal 
     technology demonstration projects that constitute repowering 
     as defined in section 411, any qualifying project shall not 
     be subject to standards of performance under section 111 or 
     to the review and permitting requirements of part C for any 
     pollutant the potential emissions of which will not increase 
     as a result of the demonstration project.
       (4) EPA regulations.--Not later than twelve months after 
     November 15, 1990, the Administrator shall promulgate 
     regulations or interpretive rulings to revise requirements 
     under section 111 and parts C and D, as appropriate, to 
     facilitate projects consistent in this subsection. With 
     respect to parts C and D, such regulations or rulings shall 
     apply to all areas in which EPA is the permitting authority. 
     In those instances in which the State is the permitting 
     authority under part C or D, any State may adopt and submit 
     to the Administrator for approval revisions to its 
     implementation plan to apply the regulations or rulings 
     promulgated under this subsection.
       (c) Exemption for Reactivation of Very Clean Units.--
     Physical changes or changes in the method of operation 
     associated with the commencement of commercial operations by 
     a coal-fired utility unit after a period of discontinued 
     operation shall not subject the unit to the requirements of 
     section 111 or part C of the Act where the unit--
       (1) has not been in operation for the two-year period prior 
     to November 15, 1990, and the emissions from such unit 
     continue to be carried in the permitting authority's 
     emissions inventory on November 15, 1990,
       (2) was equipped prior to shut-down with a continuous 
     system of emissions control that achieves a removal 
     efficiency for sulfur dioxide of no less than 85 percent and 
     a removal efficiency for particulates of no less than 98 
     percent,
       (3) is equipped with low-NOX burners prior to 
     the time of commencement, and
       (4) is otherwise in compliance with the requirements of 
     this Act.

     SEC. 409. ELECTRICITY RELIABILITY.

       (a) Reliability.--
       (1) Applicability.--At any time prior the applicability of 
     this Act under sections 422, 432, 454, and 474, in order to 
     ensure the reliability of an electric utility company or 
     system, including a system cooperatively or municipally 
     owned, for a specified geographic area or service territory, 
     as determined by the Department of Energy in consultation 
     with the Administrator, during the installation of sulfur 
     dioxide pollution control technology or scrubbers, nitrogen 
     oxides, mercury or particulate matter control technology, or 
     any combination thereof, the owner or operator of an affected 
     unit may

[[Page 28405]]

     meet the requirements of sections 422, 434, 454, 474 by means 
     of the compliance procedures of this subsection (a).
       (2) Petition.--The owner or operator of an affected unit 
     that believes it may experience an adverse impact on the 
     reliability of the company or system as a result, in 
     substantial part, of the need to construct sulfur dioxide 
     pollution control equipment or scrubbers, nitrogen oxides, 
     mercury or particulate matter control technology, or any 
     combination thereof, may petition the Secretary of Energy, in 
     consultation with the Administrator, for a determination 
     that, to a reasonable degree of certainty, reliability will 
     likely be threatened. Upon such a determination, the owner or 
     operator may elect to adopt a compliance method meeting the 
     requirements of this subsection.
       A. Within 12 months of enactment the Secretary of Energy 
     shall promulgate regulations describing the requirements for 
     a petition and the petition process, which will include 
     notice and public comment. The Secretary of Energy, in 
     consultation with the Administrator, shall make a final 
     determination on a petition within 180 days of the submittal 
     of a reasonably complete petition. Failure to act within the 
     180-day period will extend the applicability by 12 months for 
     all units subject to the petition.
       B. The petition must contain,
       (i) a description of each affected unit, the estimated 
     outage time and a construction schedule;
       (ii) an estimate of demand from date of applicability until 
     2018;
       (iii) the impacts on reliability associated with 
     constructing all of the pollution control projects, including 
     those for sulfur dioxide, nitrogen oxides, mercury, or 
     particulate matter, by the respective deadlines; and
       (iv) how the proposed compliance schedule would alleviate 
     detrimental impacts.
       C. If the Secretary of Energy fails to promulgate final 
     regulations or such regulations are not effective for any 
     reason, within the prescribed time, petitions containing 
     reasonably sufficient information for a final determination 
     may be submitted to the Secretary of Energy and will be 
     deemed complete.
       (3) Final determination.--In making a final determination 
     the Secretary of Energy, in consultation with the 
     Administrator, shall consider the following factors, provided 
     that not all factors need be present to make a determination 
     that, to a reasonable degree, reliability will be threatened:
       (A) The ability of vendors to supply scrubbers; scrubber 
     system equipment, materials and scrubber affected balance of 
     plant equipment including, but not limited to, fans, pumps, 
     electric motors, motor drives, dampers, electrical power 
     supply equipment; at fair prices with meaningful guarantees 
     or warranties as to availability, delivery dates and meeting 
     contracted pollution control reduction requirements or 
     emissions limitations; with similar considerations for 
     nitrogen oxides, mercury or particulate matter control 
     technology, or any combination thereof;
       (B) The availability and limitations of key sulfur dioxide, 
     nitrogen oxides or mercury controls design resources and 
     North American construction resources. The design resources 
     shall include but not be limited to Architect Engineering 
     companies experienced in the design of sulfur dioxide, 
     nitrogen oxides, mercury or particulate matter control 
     technology. The construction resources shall include but not 
     be limited to construction companies with experience in the 
     construction of sulfur dioxide, nitrogen oxides, mercury, or 
     particulate matter control technology and trained and 
     experienced labor resources including but not limited to 
     boilermakers, iron workers, electricians, mechanics;
       (C) The feasibility to complete the construction of all 
     pollution control technology projects by the relevant 
     applicability compliance deadline;
       (D) The impact in terms of unit outages and construction 
     schedules on a company or systems reliability and whether 
     such impact is unreasonable;
       (i) Unreasonable shall be presumed to be an increase in the 
     price of purchase power of (10) percent over the estimated 
     cost in cents per kilowatt for the company, system or state, 
     utilized in the latest submissions to a relevant state or 
     federal agency; or
       (ii) A projected reduction in available generating capacity 
     such that adequate reserve margins for a company, system or 
     state do not exist, as determined by the Secretary of Energy 
     in coordination with the relevant federal or state utility 
     agency or reliability council; or
       (iii) A supply shortage of coal needed to meet emissions 
     control expectations for any proposed emissions control 
     device.
       (E) An company or system which submits a petition to 
     install sulfur dioxide, nitrogen oxides, mercury, or 
     particulate matter control technology, or any combination 
     thereof, on affected units equaling twenty-five percent or 
     more of its coal-fired capacity shall be presumed to meet the 
     requirements of a positive determination from the Secretary 
     of Energy.
       (4) Compliance.--Upon a positive determination by the 
     Secretary of Energy in accordance with the paragraph (3), 
     such affected units will be granted a one year extension from 
     the relevant applicability date under this title.
       (b) During any year covered by this title, an affected unit 
     may submit a petition in accordance with paragraph (a)(2) to 
     allow use of sulfur dioxide allowances, nitrogen oxides 
     allowances, and mercury allowances, as the case may be, 
     allocated for the immediate next year to meet the applicable 
     requirement to hold such allowances equal to the petitioned 
     year's emissions.
       (c) Presidential Waiver.--Notwithstanding subsection (a) or 
     any other provision of this Act, The President of the United 
     States shall have authority to temporarily grant waivers from 
     emission limitations under sections 412, 422, 432, 452, and 
     472, as the case may be, if the President determines that the 
     reliability of any portion of national electricity supply or 
     national security is imperiled.

               Part B--Sulfur Dioxide Emission Reductions

                      Subpart 1--Acid Rain Program

     SEC. 411. DEFINITIONS.

       For purposes of this subpart and subpart 1 of part B:
       (1) The term ``actual 1985 emission rate'', for electric 
     utility units means the annual sulfur dioxide or nitrogen 
     oxides emission rate in pounds per million Btu as reported in 
     the 1985 National Acid Precipitation Assessment Program 
     (NAPAP) Emissions Inventory, Version 2, National Utility 
     Reference File (NURF). For nonutility units, the term 
     ``actual 1985 emission rate'' means the annual sulfur dioxide 
     or nitrogen oxides emission rate in pounds per million Btu as 
     reported in the NAPAP Emission Inventory, Version 2.
       (2) The term ``allowable 1985 emissions rate'' means a 
     federally enforceable emissions limitation for sulfur dioxide 
     or oxides of nitrogen, applicable to the unit in 1985 or the 
     limitation applicable in such other subsequent year as 
     determined by the Administrator if such a limitation for 1985 
     does not exist. Where the emissions limitation for a unit is 
     not expressed in pounds of emissions per million Btu, or the 
     averaging period of that emissions limitation is not 
     expressed on an annual basis, the Administrator shall 
     calculate the annual equivalent of that emissions limitation.
       (3) 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 (NAPAP) Emissions 
     Inventory, Version 2, (NURF) or in a corrected data base as 
     established by the Administrator pursuant to paragraph (3). 
     For nonutility units, the baseline in the NAPAP Emissions 
     Inventory, Version 2. The Administrator, in the 
     Administrator's sole discretion, may exclude periods during 
     which a unit is shutdown for a continuous period of 4 
     calendar months or longer, and make appropriate adjustments 
     under this paragraph. Upon petition of the owner or operator 
     of any unit, the Administrator may make appropriate baseline 
     adjustments for accidents, strikes, disruptions of fuel 
     supplies, failure of equipment, other causes beyond the 
     reasonable control of the owner or operator of the unit that 
     caused prolonged outages.
       (B) For any other nonutility unit that is not included in 
     the NAPAP Emissions Inventory, Version 2, or a corrected data 
     base as established by the Administrator pursuant to 
     paragraph (3), the baseline shall be the annual average 
     quantity, in mmBtu consumed in fuel by that unit, as 
     calculated pursuant to a method which the Administrator shall 
     prescribe by regulation to be promulgated not later than 18 
     months after November 15, 1990.
       (C) The Administrator shall, upon application or on his own 
     motion, by December 31, 1991, supplement data needed in 
     support of this subpart and correct any factual errors in 
     data from which affected Phase II units' baselines or actual 
     1985 emission rates have been calculated. Corrected data 
     shall be used for purposes of issuing allowances under this 
     subpart. Such corrections shall not be subject to judicial 
     review, nor shall the failure of the Administrator to correct 
     an alleged factual error in such reports be subject to 
     judicial review.
       (5) The term ``basic Phase II allowance allocations'' 
     means:
       (A) For calendar years 2000 through 2009 inclusive, 
     allocations of allowances made by

[[Page 28406]]

     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'' with regard 
     to a unit means the start up of the unit's combustion chamber 
     and commencement of the generation of electricity for sale.
       (9) The term ``construction'' means fabrication, erection, 
     or installation of an affected unit.
       (10) The term ``existing unit'' means a unit (including 
     units subject to section 111) that commenced commercial 
     operation before November 15, 1990. Any unit that commenced 
     commercial operation before November 15, 1990 which is 
     modified, reconstructed, or repowered after November 15, 1990 
     shall continue to be an existing unit for the purposes of 
     this subpart. For the purposes of this subpart, existing 
     units shall not include simple combustion turbines, or units 
     which serve a generator with a nameplate capacity of 25 MWe 
     or less.
       (11) The term ``independent power producer'' means any 
     person who owns or operates, in whole or in part, one or more 
     new independent power production facilities.
       (12) The term ``new independent power production facility'' 
     means a facility that--
       (A) is used for the generation of electric energy, 80 
     percent or more of which is sold at wholesale;
       (B) in nonrecourse project-financed (as such term is 
     defined by the Secretary of Energy within 3 months of the 
     date of the enactment of the Clean Air Act Amendments of 
     1990); and
       (C) is a new unit required to hold allowances under this 
     subpart.
       (13) The term ``industrial source'' means a unit that does 
     not serve a generator that produces electricity, a 
     ``nonutility unit'' as defined in this section, or a process 
     source.
       (14) The term ``life-of-the-unit, firm power contractual 
     arrangement'' means a unit participation power sales 
     agreement under which a utility or industrial customer 
     reserves, or is entitled to receive, a specified amount or 
     percentage of capacity and associated energy generated by a 
     specified generating unit (or units) and pays its 
     proportional amount of such unit's total costs, pursuant to a 
     contract either--
       (A) for the life of the unit;
       (B) for a cumulative term of no less than 30 years, 
     including contracts that permit an election for early 
     termination; or
       (C) for a period equal to or greater than 25 years or 70 
     percent of the economic useful life of the unit determined as 
     of the time the unit was built, with option rights to 
     purchase or release some portion of the capacity and 
     associated energy generated by the unit (or units) at the end 
     of the period.
       (15) The term ``new unit'' means a unit that commences 
     commercial operation on or after November 15, 1990.
       (16) The term ``nonutility unit'' means a unit other than a 
     utility unit.
       (17) The term ``Phase II bonus allowance allocations'' 
     means, for calendar year 2000 through 2009, inclusive, and 
     only for such years, allocations made by the Administrator 
     pursuant to section 412, subsections (a)(2), (b)(2), (c)(4), 
     (d)(3) (except as otherwise provided therein), and (h)(2) of 
     section 414, and section 415.
       (18) The term ``qualifying phase I technology'' means a 
     technological system of continuous emission reduction which 
     achieves a 90 percent reduction in emissions of sulfur 
     dioxide from the emissions that would have resulted from the 
     use of fuels which were not subject to treatment prior to 
     combustion.
       (19) The term ``repowering'' means replacement of an 
     existing coal-fired boiler with one of the following clean 
     coal technologies: atmospheric or pressurized fluidized bed 
     combustion, integrated gasification combined cycle, magneto-
     hydrodynamics, direct and indirect coal-fired turbines, 
     integrated gasification fuel cells, or as determined by the 
     Administrator, in consultation with the Secretary of Energy, 
     a derivative of one or more of these technologies, and any 
     other technology capable of controlling multiple combustion 
     emissions simultaneously with improved boiler or generation 
     efficiency and with significantly greater waste reduction 
     relative to the performance of technology in widespread 
     commercial use as of November 15, 1990.
       (20) The term ``reserve'' means any bank of allowances 
     established by the Administrator under this subpart.
       (21)(A) The term ``utility unit'' means--
       (i) a unit that serves a generator located in any State and 
     that produces electricity for sale, or
       (ii) a unit that, during 1985, served a generator located 
     in any State and that produced electricity for sale.
       (B) Notwithstanding subparagraph (A), a unit described in 
     subparagraph (A) that--
       (i) was in commercial operation during 1985, but
       (ii) did not during 1985, serve a generator in any State 
     that produced electricity for sale shall not be a utility 
     unit for purposes of this subpart.
       (C) A unit that cogenerates steam and electricity is not a 
     ``utility unit'' for purposes of this subpart unless the unit 
     is constructed for the purpose of supplying, or commences 
     construction after November 15, 1990 and supplies more than 
     one-third of its potential electric output capacity of more 
     than 25 megawatts electrical output to any utility power 
     distribution system for sale.

     SEC. 412. ALLOWANCE ALLOCATION.

       (a) Except as provided in sections 414(a)(2), 415(a)(3), 
     and 416, beginning January 1, 2000, the Administrator shall 
     not allocate annual emission allowances for sulfur dioxide 
     from utility units in excess of 8.90 million tons except that 
     the Administrator shall not take into account unused 
     allowances carried forward by owners and operators of 
     affected units or by other persons holding such allowances, 
     following the year for which they were allocated. If 
     necessary to meeting the restrictions imposed in the 
     preceding sentence, the Administrator shall reduce, pro rata, 
     the basic Phase II allowance allocations for each unit 
     subject to the requirements of section 414. Subject to the 
     provisions of section 417, the Administrator shall allocate 
     allowances for each affected until at an affected source 
     annually, as provided in paragraphs (2) and (3) and section 
     404. Except as provided in sections 416, the removal of an 
     existing affected unit or source from commercial operation at 
     any time after November 15, 1990 (whether before or after 
     January 1, 1995, or January 1, 2000), shall not terminate or 
     otherwise affect the allocation of allowances pursuant to 
     section 413 or 414 to which the unit is entitled. Prior to 
     June 1, 1998, the Administrator shall publish a revised final 
     statement of allowance allocations, subject to the provisions 
     of section 414(a)(2).
       (b) New Utility Units.--
       (1) 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 ensure electricity reliability, regulations 
     establishing a system for issuing, recording, and tracking 
     allowances under section 403(b) and this subpart shall not 
     prohibit or affect temporary increases and decreases in 
     emissions within utility systems, power pools, or utilities 
     entering into allowance pool agreements, that result from 
     their operations, including emergencies and central dispatch, 
     and such temporary emissions increases and decreases shall 
     not require transfer of allowances among units nor shall it 
     require recording. The owners or operators of such units 
     shall act through a designated representative. 
     Notwithstanding the preceding sentence, the total tonnage of 
     emissions in any calendar year (calculated at the end 
     thereof) from all units in such a utility system, power pool, 
     or allowance pool agreements shall not exceed the total 
     allowances for such units for the calendar year concerned, 
     including for calendar years after 2007, allowances held for 
     such units by the

[[Page 28407]]

     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 1, unless--
       (A) the emissions reduction requirements applicable to such 
     unit have been achieved pursuant to subsection (b) or (d), or
       (B) the owner or operator of such unit holds allowances to 
     emit not less than the unit's total annual emissions, except 
     that, after January 1, 2000, the emissions limitations 
     established in this section shall be superseded by those 
     established in section 414. The owner or operator of any unit 
     in violation of this section be fully liable for such 
     violation including, but not limited to, liability for 
     fulfilling the obligations specified in section 406.
       (2) Not later than December 31, 1991, the Administrator 
     shall determine the total tonnage of reductions in the 
     emissions of sulfur dioxide from all utility units in 
     calendar year 1995 that will occur as a result of compliance 
     with the emissions limitation requirements of this section, 
     and shall establish a reserve of allowances equal in amount 
     to the number of tons determined thereby not to exceed a 
     total of 3.50 million tons. In making such a determination, 
     the Administrator shall compute for each unit subject to the 
     emissions limitation requirements of this section the 
     difference between--
       (A) the product of its baseline multiplied by the lesser of 
     each unit's allowable 1985 emissions rate and its actual 1985 
     emissions rate, divided by 2,000, and
       (B) the product of each unit's baseline multiplied by 2.50 
     lbs/mmBtu divided by 2,000, and sum the computations. The 
     Administrator shall adjust the foregoing calculation to 
     reflect projected calendar year 1995 utilization of the units 
     subject to the emissions limitations of this subpart that the 
     Administrator finds would have occurred in the absence of the 
     imposition of such requirements. Pursuant to subsection (d), 
     the Administrator shall allocate allowances from the reserve 
     established hereunder until the earlier of such time as all 
     such allowances in the reserve are allocated or December 31, 
     1999.
       (3) 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 maybe 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' baselines, actual 1985 
     emissions rates, allowable 1985 emissions rates, and 
     projected utilizations for calendar years 1995 through 1999;
       (D) require CEMS on both the eligible phase I extension 
     unit or units and the transfer unit or units beginning no 
     later than January 1, 1995; and
       (E) specify the emission limitation and number of 
     allowances expected to be necessary for annual operation 
     after the qualifying phase I technology has been installed.
       (3) The Administrator shall review and take final action on 
     each extension proposal in Page order of receipt, consistent 
     with section 404, and for an approved proposal shall

[[Page 28408]]

     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 multiplied by an 
     emission rate of 2.50 lbs/mmBtu, divided by 2,000;
       (B) the difference between the lesser of the average annual 
     emissions in calendar years 1988 and 1989 or the projected 
     emissions tonnage for calendar year 1996 of each eligible 
     phase I extension unit, as designated under paragraph (3), 
     and the product of the unit's baseline multiplied by an 
     emission rate of 2.501bs/mmBtu, divided by 2,000; and
       (C) the amount by which (i) the product of each unit's 
     baseline multiplied by an emission rate of 1.20 lbs/mmBtu, 
     divided by 2,000, exceeds (ii) the tonnage level specified 
     under subparagraph (E) of paragraph (2) of this subsection 
     multiplied by a factor of 3.
       (5) Each eligible Phase I extension unit shall receive 
     allowances determined under subsection (a)(1) or (c) of this 
     section. In addition, for calendar year 1995, the 
     Administrator shall allocate to each eligible Phase I 
     extension unit, from the allowance reserve created pursuant 
     to subsection (a)(2), allowances equal to the difference 
     between the lesser of the average annual emissions in 
     calendar years 1988 and 1989 or its projected emission 
     tonnage for calendar year 1995 and the product of the unit's 
     baseline multiplied by an emission rate of 2.50 lbs/mmBtu, 
     divided by 2,000. In calendar year 1996, the Administrator 
     shall allocate for each eligible unit, from the allowance 
     reserve created pursuant to subsection (a)(2), allowances 
     equal to the difference between the lesser of the average 
     annual emissions in calendar years 1988 and 1989 or its 
     projected emissions tonnage for calendar year 1996 and the 
     product of the unit's baseline multiplied by an emission rate 
     of 2.50 lbs/mmBtu, divided by 2,000. It shall be unlawful for 
     any source or unit subject to an approved extension plan 
     under this subsection to emit sulfur dioxide in excess of the 
     emissions limitations provided for in the permit and approved 
     extension plan, unless the owner or operator of each unit 
     governed by the permit and approved plan holds allowances to 
     emit not less than the unit's total annual emissions.
       (6) In addition to allowances specified in paragraph (4), 
     the Administrator shall allocate for each eligible Phase I 
     extension unit employing qualifying Phase I technology, for 
     calendar years 1997, 1998, and 1999, additional allowances, 
     from any remaining allowances in the reserve created pursuant 
     to subsection (a)(2), following the reduction in the reserve 
     provided for in paragraph (4), not to exceed the amount by 
     which (A) the product of each eligible unit's baseline times 
     an emission rate of 1.20 lbs/mmBtu, divided by 2,000 exceeds 
     (B) the tonnage level specified under subparagraph (E) of 
     paragraph (2) of this subsection.
       (7) After January 1, 1997, in addition to any liability 
     under this Act, including under section 406, if any eligible 
     phase I extension unit employing qualifying phase I 
     technology or any transfer unit under this subsection emits 
     sulfur dioxide in excess of the annual tonnage limitation 
     specified in the extension plan, as approved in paragraph (2) 
     of this subsection, the Administrator shall, in the calendar 
     year following such excess, deduct allowances equal to the 
     amount of such excess from such unit's annual allowance 
     allocation.
       (e) Early Reductions.--
       (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, the allowances 
     awarded under this subsection for early reductions in any 
     prior year may not exceed the amount by which
       (A) the product of
       (i) the quantity of fossil fuel consumed by the unit (in 
     mmBtu) in the prior year multiplied by--
       (ii) the lesser of
       (I) 2.50 or
       (II) the most stringent emission rate (in lbs. per mmBtu) 
     applicable to the unit under the applicable implementation 
     plan, divided by 2,000 exceeds
       (B) the unit's actual tonnage of sulfur dioxide emission 
     for the prior year concerned.

     Allowances allocated under this subsection for units may be 
     allocated only for emission reductions achieved as a result 
     of physical changes or changes in the method of operation 
     made after November 15, 1990, including changes in the type 
     or quantity of fossil fuel consumed.
       (3) In no event shall the provisions of this paragraph be 
     interpreted as an event of force majeure or a commercial 
     impracticability or in any other way as a basis for excused 
     nonperformance by a utility system under a coal sales 
     contract in effect before November 15, 1990.

            TABLE A--AFFECTED SOURCES AND UNITS IN PHASE I AND THEIR SULFUR DIOXIDE ALLOWANCES (TONS)
----------------------------------------------------------------------------------------------------------------
                                                                                                       Phase I
                     State                                      Plant name                Generator   allowances
----------------------------------------------------------------------------------------------------------------
Alabama........................................  Colbert................................          1       13,570
                                                                                                  2       15,310
                                                                                                  3       15,400
                                                                                                  4       15,410
                                                                                                  5       37,180
                                                 E.C. Gaston............................          1       18,100
                                                                                                  2       18,540
                                                                                                  3       18,310
                                                                                                  4       19,280
                                                                                                  5       59,840
Florida........................................  Big Bend...............................          1       28,410
                                                                                                  2       27,100
                                                                                                  3       26,740
                                                 Crist..................................          6       19,200
                                                                                                  7       31,680
Georgia........................................  Bowen..................................          1       56,320

[[Page 28409]]

 
                                                                                                  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

[[Page 28410]]

 
                                                                                                  5       36,700
Missouri.......................................  Asbury.................................          1       16,190
                                                 James River............................          5        4,850
                                                 Labadie................................          1       40,110
                                                                                                  2       37,710
                                                                                                  3       40,310
                                                                                                  4       35,940
                                                 Montrose...............................          1        7,390
                                                                                                  2        8,200
                                                                                                  3       10,090
                                                 New Madrid.............................          1       28,240
                                                                                                  2       32,480
                                                 Sibley.................................          3       15,580
                                                 Sioux..................................          1       22,570
                                                                                                  2       23,690
                                                 Thomas Hill............................          1       10,250
                                                                                                  2       19,390
New Hampshire..................................  Merrimack..............................          1       10,190
                                                                                                  2       22,000
New Jersey.....................................  B.L. England...........................          1        9,060
                                                                                                  2       11,720
New York.......................................  Dunkirk................................          3       12,600
                                                                                                  4       14,060
                                                 Greenidge..............................          4        7,540
                                                 Milliken...............................          1       11,170
                                                                                                  2       12,410
                                                 Northport..............................          1       19,810
                                                                                                  2       24,110
                                                                                                  3       26,480
                                                 Port Jefferson.........................          3       10,470
                                                                                                  4       12,330
Ohio...........................................  Ashtabula..............................          5       16,740
                                                 Avon Lake..............................          8       11,650
                                                                                                  9       30,480
                                                 Cardinal...............................          1       34,270
                                                                                                  2       38,320
                                                 Conesville.............................          1        4,210
                                                                                                  2        4,890
                                                                                                  3        5,500
                                                                                                  4       48,770
                                                 Eastlake...............................          1        7,800
                                                                                                  2        8,640
                                                                                                  3       10,020
                                                                                                  4       14,510
                                                                                                  5       34,070
                                                 Edgewater..............................          4        5.050
                                                 Gen. J.M. Gavin........................          1       79,080
                                                                                                  2       80,560
                                                 Kyger Creek............................          1       19,280
                                                                                                  2       18,560
                                                                                                  3       17,910
                                                                                                  4       18,710
                                                                                                  5       18,740
                                                 Miami Fort.............................          5          760
                                                                                                  6       11,380
                                                                                                  7       38,510
                                                 Muskingum River........................          1       14,880
                                                                                                  2       14,170
                                                                                                  3       13,950
                                                                                                  4       11,780
                                                                                                  5       40,470
                                                 Niles..................................          1        6,940
                                                                                                  2        9,100
                                                 Picway.................................          5        4,930
                                                 R.E. Burger............................          3        6,150
                                                                                                  4       10,780
                                                                                                  5       12,430
                                                 W.H. Sammis............................          5       24,170
                                                                                                  6       39,930
                                                                                                  7       43,220
                                                 W.C. Beckjord..........................          5        8,950
                                                                                                  6       23,020
Pennsylvania...................................  Armstrong..............................          1       14,410
                                                                                                  2       15,430
                                                 Brunner Island.........................          1       27,760
                                                                                                  2       31,100
                                                                                                  3       53,820
                                                 Cheswick...............................          1       39,170
                                                 Conemaugh..............................          1       59,790
                                                                                                  2       66,450
                                                 Hatfield's Ferry.......................          1       37,830
                                                                                                  2       37,320
                                                                                                  3       40,270
                                                 Martins Creek..........................          1       12,660
                                                                                                  2       12,820
                                                 Portland...............................          1        5,940
                                                                                                  2       10,230
                                                 Shawville..............................          1       10,320
                                                                                                  2       10,320
                                                                                                  3       14,220
                                                                                                  4       14,070
                                                 Sunbury................................          3        8,760
                                                                                                  4       11,450
Tennessee......................................  Allen..................................          1       15,320

[[Page 28411]]

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

       (f) Energy Conservation and Renewable Energy.--
       (1) Definitions.--As used in this subsection:
       (A) Qualified energy conservation measure.--The term 
     ``qualified energy conservation measure'' means a cost 
     effective measure, as identified by the Administrator in 
     consultation with the Secretary of Energy, that increases the 
     efficiency of the use of electricity provided by an electric 
     utility to its customers.
       (B) Qualified renewable energy.--The term ``qualified 
     renewable energy'' means energy derived from biomass, solar, 
     geothermal, or wind as identified by the Administrator in 
     consultation with the Secretary of Energy.
       (C) Electric utility.--The term ``electric utility'' means 
     any person, State agency, or Federal agency, which sells 
     electric energy.
       (2) Allowances for Emissions Avoided Through Energy 
     Conservation and Renewable Energy.--
       (A) In general.--The regulations under paragraph (4) of 
     this subsection shall provide that for each ton of sulfur 
     dioxide emissions avoided by an electric utility, during the 
     applicable period, through the use of qualified energy 
     conservation measures or qualified renewable energy, the 
     Administrator shall allocate a single allowance to such 
     electric utility, on a first-come-first-served basis from the 
     Conservation and Renewable Energy Reserve established under 
     subsection (g), up to a total of 300,000 allowances for 
     allocation from such Reserve.
       (B) Requirements for Issuance.--The Administrator shall 
     allocate allowances to an electric utility under this 
     subsection only if all of the following requirements are met:
       (i) Such electric utility is paying for or participating in 
     the qualified energy conservation measures or qualified 
     renewable energy.
       (ii) The emissions of sulfur dioxide avoided through the 
     use of qualified energy conservation measures or qualified 
     renewable energy are quantified in accordance with 
     regulations promulgated by the Administrator under this 
     subsection.
       (iii)(I) Such electric utility has adopted and is 
     implementing a least cost energy conservation and electric 
     power plan which evaluates a range of resources, including 
     new power supplies, energy conservation, and renewable energy 
     resources, in order to meet expected future demand at the 
     lowest system cost.
       (II) The qualified energy conservation measures or 
     qualified renewable energy, or both, are consistent with that 
     plan.
       (III) In the case of electric utilities subject to the 
     jurisdiction of a State regulatory authority such plan shall 
     have been approved by such authority. For electric utilities 
     not subject to the jurisdiction of a State regulatory 
     authority such plan shall have been approved by the 
     Administrator.
       (iv) In the case of qualified energy conservation measures 
     undertaken by a State regulated electric utility, the 
     Secretary of Energy has certified that the State regulatory 
     authority with jurisdiction over the electric rates of such 
     electric utility has established rates and charges which 
     ensure that the net income of such electric utility after 
     implementation of specific cost effective energy conservation 
     measures is at least as high as such net income would have 
     been if the energy conservation measures had not been 
     implemented. Upon the date of any such certification by the 
     Secretary of Energy, all allowances which, but for this 
     paragraph, would have been allocated under subparagraph (B) 
     before such date, shall be allocated to the electric utility. 
     This clause is not a requirement for qualified renewable 
     energy.
       (v) Such utility or any subsidiary of the utility's holding 
     company owns or operates at least one affected unit.
       (C) Period of applicability.--Allowances under this 
     subsection shall be allocated only with respect to kilowatt 
     hours of electric energy saved by qualified energy 
     conservation measures or generated by qualified renewable 
     energy after January 1, 1992, and before the earlier of (i) 
     December 31, 2000, or (ii) the date on which any electric 
     utility steam generating unit owned or operated by the 
     electric utility to which the allowances are allocated 
     becomes subject to this subpart (including those sources that 
     elect to become affected by this title, pursuant to section 
     417).
       (D) Determination of avoided emissions.--
       (i) Application.--In order to receive allowances under this 
     subsection, an electric utility shall make an application 
     which--
       (I) designates the qualified energy conservation measures 
     implemented and the qualified renewable energy sources used 
     for purposes of avoiding emissions;
       (II) calculates, in accordance with subparagraphs (F) and 
     (G), the number of tons of emissions avoided by reason of the 
     implementation of such measures or the use of such renewable 
     energy sources; and
       (III) demonstrates that the requirements of subparagraph 
     (B) have been met.
       (ii) Approval.--Such application for allowances by a State 
     regulated electric utility shall require approval by the 
     State regulatory authority with jurisdiction over such 
     electric utility. The authority shall review the application 
     for accuracy and compliance with this subsection and the 
     rules under this subsection. Electric utilities whose retail 
     rates are not subject to the jurisdiction of a State 
     regulatory authority shall apply directly to the 
     Administrator for such approval.

[[Page 28412]]

       (E) Avoided Emissions from Qualified Energy Conservation 
     Measures.--For the purposes of this subsection, the emission 
     tonnage deemed avoided by reason of the implementation of 
     qualified energy conservation measures for any calendar year 
     shall be a tonnage equal to the product of multiplying--
       (i) the kilowatt hours that would otherwise have been 
     supplied by the utility during such year in the absence of 
     such qualified energy conservation measures, by
       (ii) 0.004, and dividing the product so derived by 2,000.
       (F) Avoided emissions from the use of qualified renewable 
     energy.--The emissions tonnage deemed avoided by reason of 
     the use of qualified renewable energy by an electric utility 
     for any calendar year shall be a tonnage equal to the product 
     of multiplying--
       (i) the actual kilowatt hours generated by, or purchased 
     from, qualified renewable energy, by
       (ii) 0.004, and dividing the product so derived by 2,000.
       (G) Prohibitions.--
       (i) No allowances shall be allocated under this subsection 
     for the implementation of programs that are exclusively 
     informational or educational in nature.
       (ii) No allowances shall be allocated for energy 
     conservation measures or renewable energy that were 
     operational before January 1, 1992.
       (3) Savings Provision.--Nothing in this subsection 
     precludes a State or State regulatory authority from 
     providing additional incentives to utilities to encourage 
     investment in demand-side resources.
       (4) Regulations.--The Administrator shall implement this 
     subsection under 40 C.F.R. Part 73 (2002), amended as 
     appropriate by the Administrator. Such regulations shall list 
     energy conservation measures and renewable energy sources 
     which may be treated as qualified energy conservation 
     measures and qualified renewable energy for purposes of this 
     subsection. Allowances shall only be allocated if all 
     requirements of this subsection and the rules promulgated to 
     implement this subsection are complied with. The 
     Administrator shall review the determinations of each State 
     regulatory authority under this subsection to encourage 
     consistency from electric utility and from State-to-State in 
     accordance with the Administrator's rules. The Administrator 
     shall publish and make available to the public the findings 
     of this review no less than annually.
       (g) Conservation and Renewable Energy Reserve.--The 
     Administrator shall establish a Conservation and Renewable 
     Energy Reserve under this subsection. Beginning on January 1, 
     1995, the Administrator may allocate from the Conservation 
     and Renewable Energy Reserve an amount equal to a total of 
     300,000 allowances for emissions of sulfur dioxide pursuant 
     to section 411. In order to provide 300,000 allowances for 
     such reserve, in each year beginning in calendar year 2000 
     and until calendar year 2009, inclusive, the Administrator 
     shall reduce each unit's basic Phase II allowance allocation 
     on the basis of its pro rata share of 30,000 allowances. 
     Notwithstanding the prior sentence, if allowances remain in 
     the reserve on January 1, 2010, the Administrator shall 
     allocate such allowances for affected units under section 414 
     on a pro rata basis. For purposes of this subsection, for any 
     unit subject to the emissions limitation requirements of 
     section 414, the term ``pro rata basis'' refers to the ratio 
     which the reductions made in such unit's allowances in order 
     to establish the reserve under this subsection bears to the 
     total of such reductions for all such units.
       (h) Alternative Allowance Allocation for Units in Certain 
     Utility Systems With Optional Baseline.--
       (1) Optional Baseline for Units in Certain Systems.--In the 
     case of a unit subject to the emissions limitation 
     requirements of this section which (as of November 15, 
     1990)--
       (A) has an emission rate below 1.0 lbs/mmBtu,
       (B) has decreased its sulfur dioxide emissions rate by 60 
     percent or greater since 1980, and
       (C) is part of a utility system which has a weighted 
     average sulfur dioxide emissions rate for all fossil fueled-
     fired units below 1.0 lbs/mmBtu, at the election to the owner 
     or operator of such unit, the unit's baseline may be 
     calculated
       (i) as provided under section 411, or
       (ii) by utilizing the unit's average annual fuel 
     consumption at a 60 percent capacity factor. Such election 
     shall be made no later than March 1, 1991.
       (2) Allowance Allocation.--Whenever a unit referred to in 
     paragraph (1) elects to calculate its baseline as provided in 
     clause (ii) of paragraph (1), the Administrator shall 
     allocate allowances for the unit pursuant to section 412(a), 
     this section, and section 414 (as Basic Phase II allowance 
     allocations) in an amount equal to the baseline selected 
     multiplied by the lower of the average annual emission rate 
     for such unit in 1989, or 1.0 lbs./mmBtu. Such allowance 
     allocation shall be in lieu of any allocation of allowances 
     under this section and section 414.

     SEC. 414. PHASE II. SULFUR DIOXIDE REQUIREMENTS.

       (a) Applicability.--
       (1) After January l, 2000, each existing utility unit as 
     provided below is subject to the limitations or requirements 
     of this section. Each utility unit subject to an annual 
     sulfur dioxide tonnage emission limitation under this section 
     is an affected unit under this subpart. Each source that 
     includes one or more affected units is an affected source. In 
     the case of an existing unit that was not in operation during 
     calendar year 1985, the emission rate for a calendar year 
     after 1985, as determined by the Administrator, shall be used 
     in lieu of the 1985 rate.
       (2) 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 1.201bs/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 Page-69- 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.--

[[Page 28413]]

       (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 for a year after 
     2007, or the owner or operator of the source that includes 
     such unit holds allowances to emit not less than the total 
     annual emissions of all affected units at the source.
       (2) After January 1, 2000, it shall be unlawful for a coal 
     or oil-fired existing utility unit that serves a generator 
     with nameplate capacity of less than 75 MWe and an actual 
     1985 emission rate equal to, or greater than, 1.20 lbs/mmBtu 
     (excluding units subject to section 111 of the Act or to a 
     federally enforceable emissions limitation for sulfur dioxide 
     equivalent to an annual rate of less than 1.20 lbs/mmBtu) and 
     which is a unit owned by a utility operating company whose 
     aggregate nameplate fossil fuel steam-electric capacity is, 
     as of December 31, 1989, less than 250 MWe, to exceed an 
     annual sulfur dioxide tonnage emissions limitation equal to 
     the product of the unit's baseline multiplied by the lesser 
     of its actual 1985 emissions rate or its allowable 1985 
     emissions rate, divided by 2,000, unless the owner or 
     operator of such unit holds allowances to emit not less than 
     the unit's total annual emissions, for a year after 2007, or 
     the owner or operator of the source that includes such unit 
     holds allowances to emit not less than the total annual 
     emissions of all affected units at the source.
       (3) After January 1, 2000 it shall be unlawful for any 
     existing utility unit with a nameplate capacity below 75 MWe 
     and an actual 1985 emissions rate equal to, or greater than, 
     1.20 lbs/mmBtu which became operational on or before December 
     31, 1965, which is owned by a utility operating company with, 
     as of December 31, 1989, a total fossil fuel steam-electric 
     generating capacity greater than 250 MWe, and less than 450 
     MWe which serves fewer than 78,000 electrical customers as of 
     November 15, 1990, to exceed an annual sulfur dioxide 
     emissions tonnage limitation equal to the product of its 
     baseline multiplied by the lesser of its actual or allowable 
     1985 emission rate, divided by 2,000, unless the owner or 
     operator holds allowances to emit not less than the units 
     total annual emissions or, for a year after 2007, unless the 
     owner or operator of the source that includes such unit holds 
     allowances to emit not less than the total annual emissions 
     of all affected units at the source. After January 1, 2010, 
     it shall be unlawful for each unit subject to the emissions 
     limitation requirements of this paragraph to exceed an annual 
     emissions tonnage limitation equal to the product of its 
     baseline multiplied by an emissions rate of 1.20 lbs/mmBtu, 
     divided by 2,000, unless the owner or operator holds 
     allowances to emit not less than the unit's total annual 
     emissions for a year after 2007, or the owner or operator of 
     the source that includes such unit holds allowances to emit 
     not less than the total annual emissions of all affected 
     units at the source.
       (4) In addition to allowances allocated pursuant to 
     paragraph (1) and section 412(a) as basic Phase II allowance 
     allocations, beginning January 1, 2000, and for each calendar 
     year thereafter until and including 2009, inclusive, the 
     Administrator shall allocate annually for each unit subject 
     to the emissions limitation requirements of paragraph (1) 
     with an actual 1985 emissions rate equal to, or greater than, 
     1.20 lbs/mmBtu and less than 2.50 lbs/mmBtu and a baseline 
     capacity factor of less than 60 percent, allowances from the 
     reserve created pursuant to subsection (a)(2) in an amount 
     equal to 1.20 lbs/mmBtu multiplied by 50 percent of the 
     difference, on a Btu basis, between the unit's baseline and 
     the unit's fuel consumption at a 60 percent capacity factor.
       (5) After January 1, 2000, it shall be unlawful for any 
     existing unit with a nameplate capacity below 75 MWe and an 
     actual 1985 emissions rate equal to, or greater than, 1.20 
     lbs/mmBtu which is part of an electric utility system which, 
     as of November 15, 1990--
       (A) has at least 20 percent of its fossil-fuel capacity 
     controlled by flue gas desulfurization devices,
       (B) has more than 10 percent of its fossil-fuel capacity 
     consisting of coal-fired 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, for a year after 2007, or 
     the owner or operator of the source that includes such unit 
     holds allowances to emit not less than the total annual 
     emissions of all affected units at the source. After January 
     1, 2010, it shall be unlawful for each unit subject to the 
     emissions limitation requirements of this paragraph to exceed 
     an annual emissions tonnage limitation equal to the project 
     of its baseline multiplied by an emissions rate of 1.20 lbs/
     mmBtu, divided by 2,000, unless the owner or operator holds 
     for use allowances to emit not less than the unit's total 
     annual emissions for a year after 2007, or the owner or 
     operator of the source that includes such unit holds 
     allowances to emit not less than the total annual emissions 
     of all affected units at the source.
       (d) Coal-Fired Units Below 1.20 lbs/mmBtu.--
       (1) After January 1, 2000, it shall be unlawful for any 
     existing coal-fired utility unit the lesser of whose actual 
     or allowable 1985 sulfur dioxide emissions rate is less than 
     0.60 lbs/mmBtu to exceed an annual sulfur dioxide tonnage 
     emission limitation equal to the product of the unit's 
     baseline multiplied by--
       (A) the lesser of 0.60 lbs/mmBtu or the unit's allowable 
     1985 emissions rate, and
       (B) a numerical factor of 120 percent, divided by 2,000, 
     unless the owner or operator of such unit holds allowances to 
     emit not less than the unit's total annual emissions for a 
     year after 2007, or the owner or operator of the source that 
     includes such unit holds allowances to emit not less than the 
     total annual emissions of all affected units at the source.
       (2) After January 1, 2000, it shall be unlawful for any 
     existing coal-fired utility unit the lesser of whose actual 
     or allowable 1985 sulfur dioxide emissions rate is equal to, 
     or greater than, 0.60 lbs/mmBtu and less than 1.20 lbs/mmBtu 
     to exceed an annual sulfur dioxide tonnage emissions 
     limitation equal to the product of the unit's baseline 
     multiplied by (A) the lesser of its actual 1985 emissions 
     rate or its allowable 1985 emissions rate, and (B) a 
     numerical factor of 120 percent, divided by 2,000, unless the 
     owner or operator of such unit holds allowances to emit not 
     less than the unit's total annual emissions for a year after 
     2007, or the owner or operator of the source that includes 
     such unit holds allowances to emit not less than the total 
     annual emissions of all affected units at the source.
       (3)(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 
     11 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 l, 2000, 
     the Administrator shall allocate in lieu of allocation, 
     pursuant to paragraph (1), (2), (3), (5), or (6), allowances 
     for a unit subject to the emissions limitation requirements 
     of this subsection which commenced commercial operation on or 
     after January 1, 1981 and before December 31, 1985, which was 
     subject to, and in compliance with, section 111 of the Act in 
     an amount equal to the unit's annual fuel consumption, on a 
     Btu basis, at a 65 percent capacity factor multiplied by the 
     unit's allowable 1985 emissions rate, divided by 2,000.

[[Page 28414]]

       (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 1.201bs/mmBtu, divided by 2,000.
       (e) Oil and Gas-Fired Units Equal to or Greater Than 0.60 
     lbs/mmBtu and Less Than 1.20 lbs/mmBtu.--After January 1, 
     2000, it shall be unlawful for any existing oil and gas-fired 
     utility unit the lesser of whose actual or allowable 1985 
     sulfur dioxide emission rate is equal to, or greater than, 
     0.60 lbs/mmBtu, but less than 1.20 lbs/mmBtu to exceed an 
     annual sulfur dioxide tonnage limitation equal to the product 
     of the unit's baseline multiplied by (A) the lesser of the 
     unit's allowable 1985 emissions rate or its actual 1985 
     emissions rate and (B) a numerical factor of 120 percent 
     divided by 2,000, unless the owner or operator of such unit 
     holds allowances to emit not less than the unit's total 
     annual emissions for a year after 2007, or the owner or 
     operator of the source that includes such unit holds 
     allowances to emit not less than the total annual emissions 
     of all affected units at the source.
       (f) Oil and Gas-Fired Units Less Than 0.601bs/mmBtu.--
       (1) After January 1, 2000, it shall be unlawful for any oil 
     and gas-fired existing utility unit the lesser of whose 
     actual or allowance 1985 emission rate is less than 0.60 lbs/
     mmBtu and whose average annual fuel consumption during the 
     period 1980 through 1989 on a Btu basis was 90 percent or 
     less in the form of natural gas to exceed an annual sulfur 
     dioxide tonnage emissions limitation equal to the product of 
     the unit's baseline multiplied by--
       (A) the lesser of 0.60 lbs/mmBtu or the unit's allowance 
     1985 emissions, and
       (B) a numerical factor of 120 percent, divided by 2,000, 
     unless the owner or operator of such unit holds allowances to 
     emit not less than the unit's total annual emissions, for a 
     year after 2007, or the owner or operator of the source that 
     includes such unit holds allowances to emit not less than the 
     total annual emissions of all affected units at the source.
       (2) In addition to allowances allocated pursuant to 
     paragraph (1) as basic Phase II allowance allocations and 
     section 412(a), beginning January l, 2000, the Administrator 
     shall, in the case of any unit operated by a utility that 
     furnishes electricity, electric energy, steam, and natural 
     gas within an area consisting of a city and 1 contiguous 
     county, and in the case of any unit owned by a State 
     authority, the output of which unit is furnished within that 
     same area consisting of a city and 1 contiguous county, the 
     Administrator shall allocate for each unit in the utility its 
     pro rata share of 7,000 allowances and for each unit in the 
     State authority its pro rata share of 2,000 allowances.
       (g) Units That Commence Commercial Operation Between 1986 
     and December 31, 1995.--
       ``(1) After January 1, 2000, it shall be unlawful for any 
     utility unit that has commenced commercial operation on or 
     after January 1, 1986, but not later than September 30, 1990 
     to exceed an annual tonnage emission limitation equal to the 
     product of the unit's annual fuel consumption, on a Btu 
     basis, at a 65 percent capacity factor multiplied by the 
     unit's allowance 1985 sulfur dioxide emission rate 
     (converted, if necessary, to pounds per mmBtu), divided by 
     2,000 unless the owner or operator of such unit holds 
     allowances to emit not less than the unit's total annual 
     emissions for a year after 2007, or the owner or operator of 
     the source that includes such unit holds allowances to emit 
     not less than the total annual emissions of all affected 
     units at the source.
       (2) After January 1, 2000, the Administrator shall allocate 
     allowances pursuant to section 411 to each unit which is 
     listed in table B of this paragraph in an annual amount equal 
     to the amount specified in table B.

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

       Notwithstanding any other paragraph of this subsection, for 
     units subject to this paragraph, the Administrator shall not 
     allocate allowances pursuant to any other paragraph of this 
     subsection, provided that the owner or operator of a unit 
     listed on Table B may elect an allocation of allowances under 
     another paragraph of this subsection in lieu of an allocation 
     under this paragraph.
       (3) Beginning January 1, 2000, the Administrator shall 
     allocate to the owner or operator of any utility unit that 
     commences commercial operation, or has commenced commercial 
     operation, on or after October 1, 1990, but not later than 
     December 31, 1992 allowances in an amount equal to the 
     product of the unit's annual fuel consumption, on a Btu 
     basis, at a 65 percent capacity factor multiplied by the 
     lesser of 0.30 lbs/mmBtu or the unit's allowable sulfur 
     dioxide emission rate (converted, if necessary, to pounds per 
     mmBtu), divided by 2,000.
       (4) Beginning January 1, 2000, the Administrator shall 
     allocate to the owner or operator of any utility unit that 
     has commenced construction before December 31, 1990 and that 
     commences commercial operation between January 1, 1993 and 
     December 31, 1995, allowances in an amount equal to the 
     product of the unit's annual fuel consumption, on a Btu 
     basis, at a 65 percent capacity factor multiplied by the 
     lesser of 0.30 lbs/mmBtu or the unit's allowable sulfur 
     dioxide emission rate (converted, if necessary, to pounds per 
     mmBtu), divided by 2,000.
       (5) After January 1, 2000, it shall be unlawful for any 
     existing utility unit that has completed conversion from 
     predominantly gas fired existing operation to coal fired 
     operation between January 1, 1985 and December 31, 1987, for 
     which there has been allocated a proposed or final 
     prohibition order pursuant to section 301(b) of the 
     Powerplant and Industrial Fuel Use Act of 1978 (42 U.S.C. 
     8301 et seq, repealed 1987) to exceed an annual sulfur 
     dioxide tonnage emissions limitation equal to the product of 
     the unit's annual fuel consumption, on a Btu basis, at a 65 
     percent capacity factor multiplied by the lesser of 1.20 lbs/
     mmBtu or the unit's allowable 1987 sulfur dioxide emissions 
     rate, divided by 2,000, unless the owner or operator of such 
     unit has obtained allowances equal to its actual emissions 
     for a year after 2007, or the owner or operator of the source 
     that includes such unit holds allowances to emit not less 
     than the total annual emissions of all affected units at the 
     source.
       (6) Unless the Administrator has approved a designation of 
     such facility under section 417, the provisions of this 
     subpart shall not apply to a ``qualifying small power 
     production facility'' or ``qualifying cogeneration facility'' 
     (within the meaning of section 3(17)(C) or 3(18)(B) of the 
     Federal Power Act) or to a 'new independent power production 
     facility' if, as of November 15, 1990--
       (A) an applicable power sales agreement has been executed;
       (B) the facility is the subject of a State regulatory 
     authority order requiring an electric utility to enter into a 
     power sales agreement with, purchase capacity from, or (for 
     purposes of establishing terms and conditions of the electric 
     utility's purchase of power) enter into arbitration 
     concerning, the facility;
       (C) an electric utility has issued a letter of intent or 
     similar instrument committing to purchase power from the 
     facility at a previously offered or lower price and a power 
     sales agreement is executed within a reasonable period of 
     time; or
       (D) the facility has been selected as a winning bidder in a 
     utility competitive bid solicitation.
       (h) Oil and Gas-Fired Units Less Than 10 Percent Oil 
     Consumed.--
       (1) After January 1, 2000, it shall be unlawful for any 
     oil- and gas-fired utility unit whose average annual fuel 
     consumption during the period 1980 through 1989 on a Btu 
     basis exceeded 90 percent in the form of natural gas to 
     exceed an annual sulfur dioxide tonnage limitation equal to 
     the product of the unit's baseline multiplied by the unit's 
     actual 1985 emissions rate divided by 2,000 unless the owner 
     or operator of such unit holds allowances to emit not less 
     than the unit's total annual emissions for a year after 2007, 
     or the owner or operator of the source that includes such 
     unit holds allowances to emit not less than the total annual 
     emissions of all affected units at the source.
       (2) 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
       (i) the number of allowances that would be allocated for 
     the unit pursuant to the emissions limitation requirements of 
     this section

[[Page 28415]]

     applicable to the unit adjusted to reflect the unit's annual 
     average fuel consumption on a Btu basis of any three 
     consecutive calendar years between 1980 and 1989 (inclusive) 
     as elected by the owner or operator and
       (ii) the number of allowances allocated for the unit 
     pursuant to the emissions limitation requirements of this 
     section:

     Provided, That the number of allowances allocated pursuant to 
     this subsection shall not exceed an annual total of 40,000. 
     If necessary to meeting the 40,000 allowance restriction 
     imposed under this subsection the Administrator shall reduce, 
     pro rata, the additional annual allowances allocated to each 
     unit under this subsection.
       (2) Beginning January 1, 2000, in addition to allowances 
     allocated pursuant to this section and section 403(a)(1) as 
     basic Phase II allowance allocations, the Administrator shall 
     allocate annually for each unit subject to the emissions 
     limitation requirements of subsection (b)(1)--
       (A) the lesser of whose actual or allowable 1980 emissions 
     rate has declined by 50 percent or more as of November 15, 
     1990,
       (B) whose actual emissions rate is less than 1.2 lbs/mmBtu 
     as of January 1, 2000,
       (C) which commenced operation after January 1, 1970,
       (D) which is owned by a utility company whose combined 
     commercial and industrial kilowatt-hour sales have increased 
     by more than 20 percent between calendar year 1980 and 
     November 15, 1990, and
       (E) whose company-wide fossil-fuel sulfur dioxide emissions 
     rate has declined 40 percent or more from 1980 to 1988, 
     allowances in an amount equal to the difference between--
       (i) the number of allowances that would be allocated for 
     the unit pursuant to the emissions limitation requirements of 
     subsection (b)(1) adjusted to reflect the unit's annual 
     average fuel consumption on a Btu basis for any three 
     consecutive years between 1980 and 1989 (inclusive) as 
     elected by the owner or operator, and
       (ii) the number of allowances allocated for the unit 
     pursuant to the emissions limitation requirements of 
     subsection (b)(1)

     Provided, That the number of allowances allocated pursuant to 
     this paragraph shall not exceed an annual total of 5,000. If 
     necessary to meeting the 5,000 allowance restriction imposed 
     in the last clause of the preceding sentence the 
     Administrator shall reduce, pro rata, the additional 
     allowances allocated to each unit pursuant to this paragraph.
       (j) Certain Municipally Owned Power Plants.--Beginning 
     January 1, 2000, in addition to allowances allocated pursuant 
     to this section and section 412(a) as basic Phase II 
     allowance allocations, the Administrator shall allocate 
     annually for each existing municipally owned oil and gas-
     fired utility unit with nameplate capacity equal to, or less 
     than, 40 MWe, the lesser of whose actual or allowable 1985 
     sulfur dioxide emission rate is less than 1.20 lbs/mmBtu, 
     allowances in an amount equal to the product of the unit's 
     annual fuel consumption on a Btu basis at a 60 percent 
     capacity factor multiplied by the lesser of its allowable 
     1985 emission rate or its actual 1985 emission rate, divided 
     by 2,000.

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

       (a) Election of Governor.--In addition to basic Phase II 
     allowance allocations, upon the election of the Governor of 
     any State, with a 1985 statewide annual sulfur dioxide 
     emissions rate equal to or less than, 0.80 lbs/mmBtu, 
     averaged over all fossil fuel-fired utility steam generating 
     units, beginning January 1, 2000, and for each calendar year 
     thereafter until and including 2009, the Administrator shall 
     allocate, in lieu of other Phase 11 bonus allowance 
     allocations, allowances from the reserve created pursuant to 
     section 414(a)(2) to all such units in the State in an amount 
     equal to 125,000 multiplied by the unit's pro rata share of 
     electricity generated in calendar year 1985 at fossil fuel-
     fired utility steam units in all States eligible for the 
     election.
       (b) Notification of Administrator.--Pursuant to section 
     412(a), each Governor of a State eligible to make an election 
     under paragraph (a) shall notify the Administrator of such 
     election. In the event that the Governor of any such State 
     fails to notify the Administrator of the Governor's 
     elections, the Administrator shall allocate allowances 
     pursuant to section 414.
       (c) Allowances After January 1, 2010.--After January 1, 
     2010, the Administrator shall allocate allowances to units 
     subject to the provisions of this section pursuant to section 
     414.

     SEC. 416. ELECTION FOR ADDITIONAL SOURCES.

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

     SEC. 417. AUCTIONS, RESERVE.

       (a) Special Reserve of Allowances.--For purposes of 
     establishing the Special Allowance Reserve, the Administrator 
     shall withhold--
       (1) 2.8 percent of the allocation of allowances for each 
     year from 1995 through 1999 inclusive; and
       (2) 2.8 percent of the basic Phase 11 allowance allocation 
     of allowances for each year beginning in the year 2000

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

[[Page 28416]]

     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     auction
                                                      year)
------------------------------------------------------------------------
1993..............................................     50,000    100,000
1994..............................................     50,000    100,000
1995..............................................     50,000    100,000
1996..............................................    150,000    100,000
1997..............................................    150,000    100,000
1998..............................................    150,000    100,000
1999..............................................    150,000    100,000
2000..............................................    125,000    125,000
2001..............................................    125,000    125,000
2002..............................................    125,000    125,000
2003..............................................    125,000          0
2004-2009.........................................    125,000          0
------------------------------------------------------------------------

       (3) Proceeds.--
       (A) Transfer.--Notwithstanding section 3302 of title 31 of 
     the United States Code or any other provision of law, within 
     90 days of receipt, the Administrator shall transfer the 
     proceeds from the auction under this section, on a pro rata 
     basis, to the owners or operators of the affected units at an 
     affected source from whom allowances were withheld under 
     subsection (b). No funds transferred from a purchaser to a 
     seller of allowances under this paragraph shall be held by 
     any officer or employee of the United States or treated for 
     any purpose as revenue to the United States or the 
     Administrator.
       (B) Return.--At the end of each year, any allowances 
     offered for sale but not sold at the auction shall be 
     returned without charge, on a pro rata basis, to the owner or 
     operator of the affected units from whose allocation the 
     allowances were withheld. With 170 days after the date of 
     enactment of the Clear Skies Act of 2003, any allowance 
     withheld under paragraph (a)(2) but not offered for sale at 
     an auction shall be returned without charge, on a pro rata 
     basis, to the owner or operator of the affected units from 
     whose allocation the allowances were withheld.
       (4) Recording by epa.--The Administrator shall record and 
     publicly report the nature, prices and results of each 
     auction under this subsection, including the prices of 
     successful bids, and shall record the transfers of allowances 
     as a result of each auction in accordance with the 
     requirements of this section. The transfer of allowances at 
     such auction shall be recorded in accordance with the 
     regulations promulgated by the Administrator under this 
     subpart.
       (c) Changes in Auctions and Withholding.--Pursuant to 
     rulemaking after public notice and comment the Administrator 
     may at any time after the year 1998 (in the case of advance 
     auctions) and 2005 (in the case of spot auctions) decrease 
     the number of allowances withheld and sold under this 
     section.
       (d) Termination of Auctions.--Not later than the 
     commencement date of the sulfur dioxide allowance requirement 
     under section 422, the Administrator shall terminate the 
     withholding of allowances and the auction sales under this 
     section. Pursuant to regulations under this section, the 
     Administrator may by delegation or contract provide for the 
     conduct of sales or auctions under the Administrator's 
     supervision by other departments or agencies of the United 
     States Government or by nongovernmental agencies, groups, or 
     organizations.
       (e) The Administrator shall implement this section under 40 
     CFR Part 73 (2002), amended as appropriate by the 
     Administrator.

     SEC. 418. INDUSTRIAL SULFUR DIOXIDE EMISSIONS.

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

     SEC. 419. TERMINATION.

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

        Subpart 2--Clear Skies Sulfur Dioxide Allowance Program

     SEC. 421. DEFINITIONS.

       For purposes of this subpart--
       (1) The term ``affected EGU'' means--
       (A) for a unit serving a generator before the date of 
     enactment of the Clear Skies Act of 2003, a unit in a State 
     serving a generator with a nameplate capacity of greater than 
     25 megawatts that produced or produces electricity for sale 
     during 2002 or any year thereafter, except for a cogeneration 
     unit that meets the criteria for qualifying cogeneration 
     facilities codified in Section 292.205 of Title 18 of the 
     Code of Federal Regulations as issued on April 1, 2002 during 
     2002 and each year thereafter; and
       (B) for a unit commencing service of a generator on or 
     after the date of enactment of the Clear Skies Act of 2003, a 
     unit in a State serving a generator that produces electricity 
     for sale during any year starting with the year the unit 
     commences service of a generator, except for a unit serving 
     one or more generators with total nameplate capacity of 25 
     megawatts or less, or a cogeneration unit that meets the 
     criteria for qualifying cogeneration facilities codified in 
     Section 292.205 of Title 18 of the Code of Federal 
     Regulations as issued on April 1, 2002, during each year 
     starting with the year the unit commences services of a 
     generator.
       Notwithstanding paragraphs (A) and (B), the term ``affected 
     EGU'' does not include a solid waste incineration unit 
     subject to section 129 or a unit for the treatment, storage, 
     or disposal of hazardous waste subject to section 3005 of the 
     Solid Waste Disposal Act.
       (2) The term ``coal-fired'' with regard to a unit means, 
     for purposes of section 424, combusting coal or any coal-
     derived fuel alone or in combination with any amount of any 
     other fuel in any year during 1998 through 2002 or, for a 
     unit that commenced operation on or after January 1, 2003, a 
     unit designed to combust coal or any coal-derived fuel alone 
     or in combination with any other fuel.
       (3) 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 C.F.R. Part 
     73.31(c) (2002), 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 10 
     percent of the unit's total heat input, and combusting no 
     coal or coal-derived fuel, in any year during 1998 through 
     2002 or, for a unit that commenced operation on or after 
     January 1, 2003, a unit designed to combust oil for more than 
     10 percent of the unit's total heat input and not to combust 
     any coal or coal-derived fuel.
       (6) 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) (2002), amended as appropriate by the Administrator.

     SEC. 422. APPLICABILITY.

       (a) Prohibition.--Starting January 1, 2010, it shall be 
     unlawful for the affected EGUs at a facility to emit a total 
     amount of sulfur dioxide during the year in excess of the 
     number of sulfur dioxide allowances held for such facility 
     for that year by the owner or operator of the facility.
       (b) Allowances Held.--Only sulfur dioxide allowances under 
     section 423 shall be held in order to meet the requirements 
     of subsection (a), except as provided under section 425.

     SEC. 423. LIMITATIONS ON TOTAL EMISSIONS.

       (a) For affected EGUs for 2010 and each year thereafter, 
     the Administrator shall allocate sulfur dioxide allowances 
     under section 424.

            TABLE A--TOTAL SO2 ALLOWANCES ALLOCATED FOR EGUs
------------------------------------------------------------------------
                                                                 S02
                            Year                              allowances
                                                              allocated
------------------------------------------------------------------------
2010.......................................................    4,416,666
2011-2012..................................................    4,416,667
2013-2017..................................................    4,500,000
2018 and thereafter........................................    3,000,000
------------------------------------------------------------------------

     SEC. 424. EGU ALLOCATIONS.

       (a) In General.--Not later than 36 months before the 
     commencement date of the sulfur dioxide allowance requirement 
     of section 422, the Administrator shall promulgate 
     regulations determining allocations of sulfur dioxide 
     allowances for affected EGUs for each year during 2010 and 
     thereafter. The regulations shall provide that:
       (1) 93 percent of the total amount of sulfur dioxide 
     allowances allocated each year to fossil-fuel-fired affected 
     EGUs under section

[[Page 28417]]

     424 shall be allocated by the Administrator to individual 
     EGUs in the proportion to which the number of allowances to 
     emit sulfur dioxide allocated to such EGUs under sections 
     413, 415, and 416 or their predecessors in effect prior to 
     enactment of the Clear Skies Act of 2003 based on the 
     aggregated number of allowances to emit sulfur dioxide issue 
     to all sources under subpart 1 of part B of this title or its 
     predecessor in effect prior to enactment of the Clear Skies 
     Act of 2003.
       (A) 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) For each unit account and each general account in the 
     Allowance Tracking System, the Administrator shall determine 
     the total amount of sulfur dioxide allowances allocated under 
     subpart 1 for 2010 and thereafter that are recorded, as of 
     12:00 noon, Eastern Standard time, on the date 180 days after 
     enactment of the Clear Skies Act of 2003. The Administrator 
     shall determine this amount in accordance with 40 CFR Part 73 
     (2002), amended as appropriate by the Administrator, except 
     that the Administrator shall apply a discount rate of 7 
     percent for each year after 2010 to the amounts of sulfur 
     dioxide allowances allocated for 2011 or later.
       (ii) For each unit account and each general account in the 
     Allowance Tracking System, the Administrator shall determine 
     an amount of sulfur dioxide allowances equal to the 
     allocation amount under subparagraph (A) multiplied by the 
     ratio of the amount of sulfur dioxide allowances determined 
     to be recorded in that account under clause (i) to the total 
     amount of sulfur dioxide allowances determined to be recorded 
     in all unit accounts and general accounts in the Allowance 
     Tracking System under clause (i).
       (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 shall allocate to 
     each general account in the Allowance Tracking System the 
     amount of sulfur dioxide allowances determined under clause 
     (ii) for that general account.
       (2)(A) 7 percent of the total amount of sulfur dioxide 
     allowances allocated each year under section 423 shall be 
     allocated for units at a facility that are affected EGUs, but 
     did not receive sulfur dioxide allocations under subpart 1 of 
     this title.
       (B) The Administrator shall allocate each year for the 
     units under subparagraph (A) that commenced operation before 
     January 1, 2001, an amount of sulfur dioxide allowances 
     determined by:
       (i) For such units at the facility that are coal-fired, 
     multiplying 0.40 lb/mmBtu by the total baseline heat input of 
     such units and converting to tons.
       (ii) For such units at the facility that are oil-fired, 
     multiplying 0.20 lb/mmBtu by the total baseline heat input of 
     such units and converting to tons.
       (iii) For all such other units at the facility that are not 
     covered by clause (i) or (ii), multiplying 0.05 lb/mmBtu by 
     the total baseline heat input of such units and converting to 
     tons.
       (iv) If the total of the amounts for all facilities under 
     clauses (i), (ii), and (iii) exceeds the allocation amount 
     under subparagraph (A), multiplying the allocation amount 
     under subparagraph (A) by the ratio of the total of the 
     amounts for the facility under clauses (i), (ii), and (iii) 
     to the total of the amounts for all facilities under clause 
     (i), (ii), and (iii).
       (v) Allocating to each facility the lesser of the total of 
     the amounts for the facility under clauses (i), (ii), and 
     (iii) or, if the total of the amounts for all facilities 
     under clauses (i), (ii), and (iii) exceeds the allocation 
     amount under subparagraph (A), the amount under clause (iv).
       (C) The Administrator shall allocate each year for units 
     under subparagraph (A) that commence commercial operation on 
     or after January l, 2001 and before January 1, 2005, an 
     amount of sulfur dioxide allowances determined by:
       (i) For such units at the facility that are coal-fired or 
     oil-fired, multiplying 0.19 lb/ mmBtu by the total baseline 
     heat input of such units and converting to tons.
       (ii) For all such other units at the facility that are not 
     covered by clause (i), multiplying .005 lb/mmBtu by the total 
     baseline heat input of such units and converting to tons.
       (iii) If the total of the amounts for all facilities under 
     clauses (i) and (ii) exceeds the allocation amount under 
     subparagraph (A), multiplying the allocation amount under 
     subparagraph (A) by the ratio of the total of the amounts for 
     the facility under clauses (i) and (ii) to the total of the 
     amounts for all facilities under clauses (i) and (ii).
       (iv) Allocating to each facility the lesser of the total of 
     the amounts for the facility under clauses (i) and (ii) or, 
     if the total of the amounts for all facilities under clauses 
     (i) and (ii) exceeds the allocation amount under subparagraph 
     (A), the amount under clause (iv). The Administrator shall 
     allocate to the facilities under paragraphs (1) and (2) on a 
     pro rata basis (based on the allocations under those 
     paragraphs) any unallocated allowances under this paragraph.
       (D) The Administrator shall allocate each year for units 
     under subparagraph (A) that commence commercial operation on 
     or after January 1, 2005, an amount of sulfur dioxide 
     allowances determined for each such unit at the facility by 
     multiplying the applicable National Emissions Standard under 
     section 481 by the applicable ``baseline heat input,'' 
     considering fuel and combustion type, as defined in section 
     402(5)(B) and converting to tons.
       (E) In the event that allocation demand exceeds supply, the 
     Administrator shall allocate allowances under subparagraph 
     (A) giving first priority to units qualifying under 
     subparagraph (B), second priority to units qualifying under 
     subparagraph (C), and third priority to units qualifying 
     under subparagraph (D). Allowances allocated under 
     subparagraph (D) shall be allocated to units on a first come 
     basis determined by date of unit commencement of 
     construction, provided that such unit actually commences 
     operation. As such, allocations to units under paragraph (D) 
     will not be reduced as a result of new units commencing 
     commercial operation.
       (b)(1) Failure To Promulgate.--For each year 2010 and 
     thereafter, if the Administrator has not promulgated 
     regulations, determining allocations under subsection (a), 
     each affected EGU shall comply with section 422 by providing 
     annual notice to the permitting authority. Such notice shall 
     indicate the amount of allowances the affected EGU believes 
     it has for the relevant year and the amount of sulfur dioxide 
     emissions for such year. The amount of sulfur dioxide 
     emissions shall be determined using reasonable industry 
     accepted methods unless the Administrator has promulgated 
     applicable monitoring and alternative monitoring 
     requirements.
       (b)(2) Upon promulgation of regulations under subsection 
     (a) determining the allocations for 2010 and thereafter, and 
     promulgating regulations under section 403(b) providing for 
     the transfer of sulfur dioxides and section 403(c) 
     establishing an Allowance Transfer System for sulfur dioxide 
     allowances, each unit's emissions shall be compared to and 
     reconciled to its actual allocations under the promulgated 
     regulations. Each unit will have nine (9) months to purchase 
     any allowance shortfall through allowances purchased from 
     other allowance holders or through direct sale. Any unit with 
     an allowance excess shall be credited allowances in 
     accordance with section 425.

     SEC. 425. SULFUR DIOXIDE EARLY ACTION REDUCTION CREDITS.

       (a) The Administrator shall promulgate regulations within 
     18 months authorizing the allocation of sulfur dioxide 
     allowances to units designated under this section that 
     install or modify pollution control equipment or combustion 
     technology improvements identified in such regulations after 
     the date of enactment of this section and prior to January 1, 
     2010.
       (b) No allowances shall be allocated under this paragraph 
     for emissions reductions: attributable to pollution control 
     equipment or combustion technology improvements that were 
     operational or under construction at any time prior to the 
     date of enactment of this section; attributable to fuel 
     switching; or required under any federal regulation.
       (c) The allowances allocated to any unit under this 
     paragraph shall be in addition to the allowances allocated 
     under section 424 and shall be allocated in an amount equal 
     to one allowance of sulfur dioxide for each 1.05 tons of 
     reduction in emissions of sulfur dioxide achieved by the 
     pollution control equipment or combustion technology 
     improvements starting with the year in which the equipment or 
     improvement is implemented. The early compliance reduction 
     allowances available under this section shall be used and 
     tradeable in the same manner as allowances under section 424.
       (d) The Administrator shall promulgate regulations as 
     necessary to ensure affected units receive early compliance 
     allowance credit. Early compliance allowances shall be 
     allocated at the end of an early compliance year. Should the 
     Administrator fail to promulgate allocation regulations by 
     the end of a given year, early compliance allowances for each 
     year shall be allocated at the earliest possible time after 
     allocation regulations are promulgated.

     SEC. 426. DISPOSITION OF SULFUR DIOXIDE ALLOWANCES ALLOCATED 
                   UNDER SUBPART 1.

       (a) Removal From Accounts.--After allocating allowances 
     under section 424(a)(1), the Administrator shall remove from 
     the unit accounts and general accounts in the Allowance 
     Tracking System under section 403(c) and from the Special 
     Allowances Reserve under section 418 all sulfur dioxide 
     allowances allocated or deposited under subpart 1 for 2010 or 
     later.
       (b) Regulations.--The Administrator shall promulgate 
     regulations as necessary to assure that the requirement to 
     hold allowances under section 422 may be met using sulfur 
     dioxide allowances allocated under subpart 1 for 1995 through 
     2009. No part of this Act shall be construed to prevent use 
     of unused pre-2010 allowances to meet the requirements of 
     section 422.

[[Page 28418]]



     SEC. 427. INCENTIVES FOR SULFUR DIOXIDE EMISSION CONTROL 
                   TECHNOLOGY.

       (a) Reserve.--The Administrator shall establish a reserve 
     of 250,000 sulfur dioxide allowances comprising 83,334 sulfur 
     dioxide allowances for 2010, 83,333 sulfur dioxide allowances 
     for 2011, and 83,333 sulfur dioxide allowances for 2012.
       (b) Application.--Not later than 18 months after the 
     enactment of the Clear Skies Act of 2003, an owner or 
     operator of an affected EGU that commenced operation before 
     2001 and that during 2001 combusted Eastern bituminous may 
     submit an application to the Administrator for sulfur dioxide 
     allowances from the reserve under subsection (a). The 
     application shall include each of the following:
       (1) A statement that the owner or operator will install and 
     commence commercial operation of specified sulfur dioxide 
     control technology at the unit within 24 months after 
     approval of the application under subsection (c) if the unit 
     is allocated the sulfur dioxide allowances requested under 
     paragraph (4). The owner or operator shall provide 
     description of the control technology.
       (2) A statement that, during the period starting with the 
     commencement of operation of sulfur dioxide technology under 
     paragraph (1) through 2009, the unit will combust Eastern 
     bituminous at a percentage of the unit's total heat input 
     equal to or exceeding the percentage of total heat input 
     combusted by the unit in 2001 if the unit is allocated the 
     sulfur dioxide allowances requested under paragraph (4).
       (3) A demonstration that the unit will achieve, while 
     combusting fuel in accordance with paragraph (2) and 
     operating the sulfur dioxide control technology specified in 
     paragraph (1), a specified tonnage of sulfur dioxide emission 
     reductions during the period starting with the commencement 
     of operation of sulfur dioxide control technology under 
     subparagraph (1) through 2009. The tonnage of emission 
     reductions shall be the difference between emissions 
     monitored at a location at the unit upstream of the control 
     technology described in paragraph (1) and emissions monitored 
     at a location at the unit downstream of such control 
     technology, while the unit is combusting fuel in accordance 
     with paragraph (2).
       (4) A request that the Administrator allocate for the unit 
     a specified number of sulfur dioxide allowances from the 
     reserve under subsection (a) for the period starting with the 
     commencement of operation of the sulfur dioxide technology 
     under paragraph (1) through 2009.
       (5) A statement of the ratio of the number of sulfur 
     dioxide allowances requested under paragraph (4) to the 
     tonnage of sulfur dioxide emissions reductions under 
     paragraph (3).
       (c) Approval or Disapproval.--By order subject to notice 
     and opportunity for comment, the Administrator shall--
       (1) determine whether each application meets the 
     requirements of subsection (b);
       (2) list the applications meeting the requirements of 
     subsection (b) and their respective allowance-to-emission-
     reduction ratios under paragraph (b)(5) in order, from lowest 
     to highest, of such ratios;
       (3) for each application listed under paragraph (2), 
     multiply the amount of sulfur dioxide emission reductions 
     requested by each allowance-to-emission-reduction ratio on 
     the list that equals or is less than the ratio for the 
     application;
       (4) sum, for each allowance-to-emission-reduction ratio in 
     the list under paragraph (2), the amounts of sulfur dioxide 
     allowances determined under paragraph (3);
       (5) based on the calculations in paragraph (4), determine 
     which allowance-to-emission-reduction ratio on the list under 
     paragraph (2) results in the highest total amount of 
     allowances that does not exceed 250,000 allowances; and
       (6) approve each application listed under paragraph (2) 
     with a ratio equal to or less than the allowance-to-emission-
     reduction ratio determined under paragraph (5) and disapprove 
     all the other applications.
       (d) Monitoring.--An owner or operator whose application is 
     approved under subsection (c) shall install and operate a 
     CEMS for monitoring sulfur dioxide and to quality assure the 
     data. The installation of the CEMS and the quality assurance 
     of data shall be in accordance with subparagraph (a)(2)(B) 
     and subsections (c) through (e) of section 405, except that, 
     where two or more units utilize a single stack, and one or 
     more units are not subject to such standards, separate 
     monitoring shall be required for each unit.
       (e) Allocations.--Not later than 6 months after the 
     commencement date of the sulfur dioxide allowance requirement 
     of section 422, for the units for which applications are 
     approved under subsection (c), the Administrator shall 
     allocate sulfur dioxide allowances as follows:
       (1) For each unit, the Administrator shall multiply the 
     allowance-to-emission-reduction ratio of the last application 
     that the Administrator approved under subsection (c) by the 
     lesser of--
       (A) the total tonnage of sulfur dioxide emissions 
     reductions achieved by the unit, during the period starting 
     with the commencement of operation of the sulfur dioxide 
     control technology under subparagraph (b)(1) through 2009, 
     through use of such control technology; or
       (B) the tonnage of sulfur dioxide emission reductions under 
     paragraph (b)(3).
       (2) If the total amount of sulfur dioxide allowances 
     determined for all units under paragraph (1) exceeds 250,000 
     sulfur dioxide allowances, the Administrator shall multiply 
     250,000 sulfur dioxide allowances by the ratio of the amount 
     of sulfur dioxide allowances determined for each unit under 
     paragraph (1) to the total amount of sulfur dioxide 
     allowances determined for all units under paragraph (1).
       (3) The Administrator shall allocate to each unit the 
     lesser of the amount determined for that unit under paragraph 
     (1) or, if the total amount of sulfur dioxide allowances 
     determined for all units under paragraph (1) exceeds 250,000 
     sulfur dioxide allowances, under paragraph (2). The 
     Administrator shall allocate to the facilities under section 
     424 paragraphs (1) and (2) on a pro rata basis (based on the 
     allocations under those paragraphs) any unallocated 
     allowances under this paragraph.

              Subpart 3--Western Regional Air Partnership

     SEC. 431. DEFINITIONS.

       For purposes of this subpart--
       (1) The term ``adjusted baseline heat input'' means the 
     average annual heat input used by a unit during the three 
     years in which the unit had the highest heat input for the 
     period from the eighth through the fourth year before the 
     first covered year.
       (A) Notwithstanding paragraph (1), if a unit commences 
     operation during such period and--
       (i) on or after January 1 of the fifth year before the 
     first covered year, then ``adjusted baseline heat input'' 
     shall mean the average annual heat input used by the unit 
     during the fifth and fourth years before the first covered 
     year; and
       (ii) on or after January 1 of the fourth year before the 
     first covered year, then ``adjusted baseline heat input'' 
     shall mean the annual heat input used by the unit during the 
     fourth year before the first covered year.
       (B) A unit's heat input for a year shall be the heat 
     input--
       (i) required to be reported under section 405 for the unit, 
     if the unit was required to report heat input during the year 
     under that section;
       (ii) reported to the Energy Information Administrator for 
     the unit, if the unit was not required to report heat input 
     under section 405;
       (iii) based on data for the unit reported to the WRAP State 
     where the unit is located as required by State law, if the 
     unit was not required to report heat input during the year 
     under section 405 and did not report to the Energy 
     Information Administration; or
       (iv) based on fuel use and fuel heat content data for the 
     unit from fuel purchase or use records, if the unit was not 
     required to report heat input during the year under section 
     405 and did not report to the Energy Information 
     Administration and the WRAP State.
       (2) The term ``affected EGU'' means an affected EGU under 
     subpart 2 that is in a WRAP State and that--
       (A) in 2000, emitted 100 tons or more of sulfur dioxide and 
     was used to produce electricity for sale; or
       (B) in any year after 2000, emits 100 tons or more of 
     sulfur dioxide and is used to produce electricity for sale.
       (3) The term ``coal-fired'' with regard to a unit means, 
     for purposes of section 434, a unit combusting coal or any 
     coal-derived fuel alone or in combination with any amount of 
     any other fuel in any year during the period from the eighth 
     through the fourth year before the first covered year.
       (4) The term ``covered year'' means--
       (A)(i) the third year after the year 2018 or later when the 
     total annual sulfur dioxide emissions of all affected EGUs in 
     the WRAP States first exceed 271,000 tons; or
       (ii) the third year after the year 2013 or later when the 
     Administrator determines by regulation that the total annual 
     sulfur dioxide emissions of all affected EGUs in the WRAP 
     States are reasonably projected to exceed 271,000 tons in 
     2018 or any year thereafter. The Administrator may make such 
     determination only if all the WRAP States submit to the 
     Administrator a petition requesting that the Administrator 
     issue such determination and make all affected EGUs in the 
     WRAP States subject to the requirements of sections 432 
     through 434; and
       (B) each year after the ``covered year'' under subparagraph 
     (A).
       (5) The term ``oil-fired'' with regard to a unit means, for 
     purposes of section 434, a unit combusting fuel oil for more 
     than 10 percent of the unit's total heat input, and 
     combusting no coal or coal-derived fuel, and any year during 
     the period from the eighth through the fourth year before the 
     first covered year.
       (6) The term ``WRAP State'' means Arizona, California, 
     Colorado, Idaho, Nevada, New Mexico, Oregon, Utah, and 
     Wyoming.

     SEC. 432. APPLICABILITY.

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

[[Page 28419]]

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

     SEC. 433. LIMITATIONS ON TOTAL EMISSIONS.

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

     SEC. 434. EGU ALLOCATIONS.

       (a) In General.--By January 1 of the year before the first 
     covered year, the Administrator shall promulgate regulations 
     determining, for each covered year, the allocations of sulfur 
     dioxide allowances for the units at a facility that are 
     affected EGUs as of December 31 of the fourth year before the 
     covered year by--
       (1) for such units at the facility that are coal-fired, 
     multiplying 0.40 lb/mmBtu by the total adjusted baseline heat 
     input of such units and converting to tons;
       (2) for such units at the facility that are oil-fired, 
     multiplying 0.20 lb/mmBtu by the total adjusted baseline heat 
     input of such units and converting to tons;
       (3) for all such other units at the facility that are not 
     covered by paragraph (1) or (2) multiplying 0.05 lb/mmBtu by 
     the total adjusted baseline heat input of such units and 
     converting to tons; and
       (4) multiplying by 0.95 the allocation amount under section 
     433 by the ratio of the total of the amounts for the facility 
     under paragraphs (1), (2), and (3) to the total of the 
     amounts for all facilities under paragraphs (1), (2), and 
     (3); and
       (5)(A) 5 percent of the total amount of sulfur dioxide 
     allowances allocated each year under section 433 shall be 
     allocated for units at a facility that are affected EGUs, but 
     did not receive sulfur dioxide allocations under paragraph 
     (4). These units shall be allocated allowances in accordance 
     with paragraphs (1), (2), and (3).
       (B) Allowances allocated under subparagraph (A) shall be 
     allocated to units on a first come basis determined by date 
     of unit commencement of construction, provided that such unit 
     actually commences operation. As such, allocations to units 
     under paragraph (A) will not be reduced as a result of new 
     units commencing commercial operation.
       (C) Allowances not allocated under subparagraph (B) shall 
     be allocated to units in paragraphs (A) and (B) on a pro rata 
     basis.
       (b)(1) Failure To Promulgate.--For each year 2010 and 
     thereafter, if the Administrator has not promulgated 
     regulations, determining allocations under paragraph (a), 
     each affected EGU shall comply with section 422 by provided 
     annual notice to the permitting authority. Such notice shall 
     indicate the amount of allowances the affected EGU believes 
     it has for the relevant year and the amount of sulfur dioxide 
     emissions for such year. The amount of sulfur dioxide 
     emissions shall be determined using reasonable industry 
     accepted methods unless the Administrator has promulgated 
     applicable monitoring and alternative monitoring 
     requirements.
       (2) Upon promulgation of regulations under subsection (a) 
     determining the allocations for 2010 and thereafter, and 
     promulgating regulations under section 403(b) providing for 
     the transfer of sulfur dioxides and section 403(c) 
     establishing an Allowance Transfer System for sulfur dioxide 
     allowances, each unit's emissions shall be compared to and 
     reconciled to its actual allocations under the promulgated 
     regulations. Each unit will have nine (9) months to purchase 
     any allowance shortfall through allowances purchased from 
     other allowance holders or through direct sale. Any unit with 
     an allowance excess shall be credited allowances in 
     accordance with section 435.

     SEC. 435. WRAP EARLY ACTION REDUCTION CREDITS

       (a) The Administrator shall promulgate regulations within 
     18 months authorizing the allocation of sulfur dioxide 
     allowances to units designated under this section that 
     install or modify pollution control equipment or combustion 
     technology improvements identified in such regulations after 
     the date of enactment of this section and prior to January 1, 
     2010.
       (b) No allowances shall be allocated under this paragraph 
     for emissions reductions: attributable to pollution control 
     equipment or combustion technology improvements that were 
     operational or under construction at any time prior to the 
     date of enactment of this section; attributable to fuel 
     switching; or required under any federal regulation.
       (c) The allowances allocated to any unit under this 
     paragraph shall be in addition to the allowances allocated 
     under section 434 and shall be allocated in an amount equal 
     to one allowance of sulfur dioxide for each 1.05 tons of 
     reduction in emissions of sulfur dioxide achieved by the 
     pollution control equipment or combustion technology 
     improvements starting with the year in which the equipment or 
     improvement is implemented. The early compliance reduction 
     allowances available under this section shall be used and 
     tradeable in the same manner as allowances under section 434.
       (d) The Administrator shall promulgate regulations as 
     necessary to ensure affected units receive early compliance 
     allowance credit. Early compliance allowances shall be 
     allocated at the end of an early compliance year. Should the 
     Administrator fail to promulgate allocation regulations by 
     the end of a given year, early compliance allowances for each 
     year shall be allocated at the earliest possible time after 
     allocation regulations are promulgated.

        Part C--Nitrogen Oxides Clear Skies Emission Reductions

                      Subpart 1--Acid Rain Program

     SEC. 441. NITROGEN OXIDES EMISSION REDUCTION PROGRAM.

       (a) Applicability.--On the date that a coal-fired utility 
     unit becomes an affected unit pursuant to sections 413 or 
     414, or on the date a unit subject to the provisions of 
     section 413(d), must meet the NOX 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 Part 76.5 (2002). The maximum 
     allowable emission rates are as follows:
       (A) for tangentially fired boilers, 0.45 lb/mmBtu; and
       (B) for dry bottom wall-fired boilers (other than units 
     applying cell burner technology), 0.50 lb/mmBtu. After 
     January 1, 1995, it shall be unlawful for any unit that is an 
     affected unit on that date and is of the type listed in this 
     paragraph to emit nitrogen oxides in excess of the emission 
     rates set by the Administrator pursuant to this paragraph.
       (2) The Administrator shall, by regulation, establish 
     allowable emission limitations on a lb/mmBtu, annual average 
     basis, for nitrogen oxides for the following types of utility 
     boilers:
       (A) wet bottom wall-fired boilers;
       (B) cyclones;
       (C) units applying cell burner technology; and
       (D) all other types of utility boilers.

       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 C.F.R. Parts 76.6 and 76.7 (2002).
       (c) Alternative Emission Limitations.--(1) The permitting 
     authority shall, upon request of an owner or operator of a 
     unit subject to this section, authorize an emission 
     limitation less stringent than the applicable limitation 
     established under subsection (b)(1) or (b)(2) upon a 
     determination that--
       (A) a unit subject to subsection (b)(1) cannot meet the 
     applicable limitation using low NOX burner 
     technology; or
       (B) a unit subject to subsection (b)(2) cannot meet the 
     applicable rate using the technology on which the 
     Administrator based the applicable emission limitation.
       (2) The permitting authority shall base such determination 
     upon a reasonable showing satisfactory to the permitting 
     authority, in accordance with regulations established by the 
     Administrator, that the owner or operator--
       (A) has properly installed appropriate control equipment 
     designed to meet the applicable emission rate;
       (B) has properly operated such equipment for a period of 15 
     months (or such other period of time as the Administrator 
     determines through the regulations), and provides operating 
     and monitoring data for such period demonstrating that the 
     unit cannot meet the applicable emission rate; and
       (C) has specified an emission rate that such unit can meet 
     on an annual average basis. The permitting authority shall 
     issue an operating permit for the unit in question, in 
     accordance with section 404 and title V--
       (i) that permits the unit during the demonstration period 
     referred to in subparagraph (B), to emit at a rate in excess 
     of the applicable emission rate;
       (ii) at the conclusion of the demonstration period to 
     revise the operating permit to reflect the alternative 
     emission rate demonstrated in subparagraphs (B) and (C).
       (3) 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

[[Page 28420]]

     control technology capable of achieving the applicable 
     emission limitation. The Administrator shall implement this 
     subsection under 40 C.F.R. Part 76 (2002), amended as 
     appropriate by the Administrator.
       (d) Emissions Averaging.--
       (1) In lieu of complying with the applicable emission 
     limitations under subsection (b)(1), (2), or (c), the owner 
     or operator of two or more units subject to one or more of 
     the applicable emission limitations set pursuant to these 
     sections, may petition the permitting authority for 
     alternative contemporaneous annual emission limitations for 
     such units that ensure that--
       (A) the actual annual emission rate in pounds of nitrogen 
     oxides per million Btu averaged over the units in question is 
     a rate that is less than, or equal to,
       (B) the Btu-weighted average annual emission rate for the 
     same units if they had been operated, during the same period 
     of time, in compliance with limitations set in accordance 
     with the applicable emission rates set pursuant to 
     subsections (b)(1) and (2).
       (2) If the permitting authority determines, in accordance 
     with regulations issued by the Administrator that the 
     conditions in paragraph (1) can be met, the permitting 
     authority shall issue operating permits for such units, in 
     accordance with section 404 and title V, that allow 
     alternative contemporaneous annual emission limitations. Such 
     emission limitations shall only remain in effect while both 
     units continue operation under the conditions specified in 
     their respective operating permits. The Administrator shall 
     implement this subsection under 40 C.F.R. Part 76 (2002), 
     amended as appropriate by the Administrator.

     SEC. 442. TERMINATION.

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

        Subpart 2--Clear Skies Nitrogen Oxides Allowance Program

     SEC. 451. DEFINITIONS.

       For purposes of this subpart:
       (1) The term ``affected EGU'' means--
       (A) for a unit serving a generator before the date of 
     enactment of the Clear Skies Act of 2003, a unit in a State 
     serving a generator with a nameplate capacity of greater than 
     25 megawatts that produced or produces electricity for sale 
     during 2002 or any year thereafter, except for a cogeneration 
     unit that meets the criteria for qualifying for a 
     cogeneration facility codified in Section 292.205 of Title 18 
     of the Code of Federal Regulations as issued on April 1, 2002 
     during 2002 and each year thereafter; and
       (B) for a unit commencing service of a generator on or 
     after the date of enactment of the Clear Skies Act of 2003, a 
     unit in a State serving a generator that produces electricity 
     for sale during any year starting with the year the unit 
     commences service of a generator, except for a gas-fired unit 
     serving one or more generators with total nameplate capacity 
     of 25 megawatts or less, or a cogeneration unit that meets 
     the criteria for qualifying for a cogeneration facility 
     codified in Section 292.205 of Title 18 of the Code of 
     Federal Regulations as issued on April 1, 2002, during each 
     year starting when 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 ``adjusted baseline heat input'' with regard 
     to a unit means, for purposes of allocating nitrogen oxides 
     allowances in a particular year under this subpart, the units 
     baseline multiplied by--
       (A) 1.0 for affected coal-fired units for 2008 and each 
     year thereafter;
       (B) 0.55 for affected oil- and gas-fired units located in a 
     Zone 1 State for years 2008 through 2017 inclusive;
       (C) 0.8 for affected oil- and gas-fired units located in a 
     Zone 1 State for 2018 and each year thereafter; and
       (D) 0.4 for affected oil- and gas-fired units located in a 
     Zone 2 State for 2008 and each year thereafter.
       (3) The term ``allowable nitrogen oxides emissions rate'' 
     means the most stringent federally enforceable emissions 
     limitation for nitrogen oxides that applies to the unit as of 
     date of enactment of this subpart. If the emissions 
     limitation for a unit is not expressed in pounds of emissions 
     per million Btu, or the averaging period of that emissions 
     limitation is not expressed on an annual basis, the 
     Administrator shall calculate the annual equivalent of that 
     emissions limitation to establish the allowable rate. Such 
     limitation shall not include any requirement to hold nitrogen 
     oxides allowances under the federal NOX Budget 
     Trading Program as codified at 40 C.F.R. Part 97 (2002), or 
     any State program adopted to meet the requirements of the 
     NOX SIP Call as codified at 40 C.F.R. 51.121 
     (2002).
       (4) The term ``Zone 1 State'' means Alabama, Arkansas, 
     Connecticut, Delaware, the District of Columbia, Florida, 
     Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, 
     Maryland, Massachusetts, Michigan, Mississippi, the fine grid 
     portion of Missouri, New Hampshire, New Jersey, New York, 
     North Carolina, Ohio, Pennsylvania, Rhode Island, South 
     Carolina, Tennessee, Texas east of Interstate 35, Vermont, 
     Virginia, West Virginia, and Wisconsin.
       (5) The term ``Zone 2 State'' means Alaska, American Samoa, 
     Arizona, California, Colorado, the Commonwealth of the 
     Northern Mariana Islands, the Commonwealth of Puerto Rico, 
     Guam, Hawaii, Idaho, Kansas, Minnesota, the coarse grid 
     portion of Missouri, Montana, Nebraska, North Dakota, New 
     Mexico, Nevada, Oklahoma, Oregon, South Dakota, Texas west of 
     Interstate 35, Utah, the Virgin Islands, Washington, and 
     Wyoming.

     SEC. 452. APPLICABILITY.

       (a) Zone 1 Prohibition.--(1) 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) Zone 2 Prohibition.--(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) Zone 1 Allocations.--For affected EGUs in the Zone 1 
     States for 2008 and each year thereafter, the Administrator 
     shall allocate nitrogen oxides allowances under section 
     454(a) as specified in Table A.

       TABLE A.--TOTAL NOX ALLOWANCES ALLOCATED FOR EGUs IN ZONE 1
------------------------------------------------------------------------
                                                                 NOX
                            Year                              allowances
                                                              allocated
------------------------------------------------------------------------
2008-2017..................................................    1,473,603
2018 and thereafter........................................    1,073,603
------------------------------------------------------------------------

       (b) Zone 2 Allocations.--For affected EGUs in the Zone 2 
     States for 2008 and each year thereafter, the Administrator 
     shall allocate nitrogen oxides allowances under section 
     454(b) as specified in Table B.

       TABLE B.--TOTAL NOX ALLOWANCES ALLOCATED FOR EGUs IN ZONE 2
------------------------------------------------------------------------
                                                                 NOX
                            Year                              allowance
                                                              allocated
------------------------------------------------------------------------
2008 and thereafter........................................      714,794
------------------------------------------------------------------------

     SEC. 454. EGU ALLOCATIONS.

       (a) EGU Allocations in the Zone 1 States.--
       (1) EPA regulations.--Not later than 18 months before 
     commencement date of the nitrogen oxides allowance 
     requirement of section 452, the Administrator shall 
     promulgate regulations determining the allocation of nitrogen 
     oxides allowances for 2008 and each subsequent year for units 
     at a facility in a Zone 1 State that are affected EGUs as of 
     the date of enactment of this section.
       (A) The regulations shall determine the allocation for such 
     units for each year and future year by multiplying by 0.95 
     the allocation amount under section 453(a) by the ratio of 
     the total amount of the adjusted baseline heat input of such 
     units at the facility to the total amount of adjusted 
     baseline heat input to all affected EGUs in the Zone 1 
     States. However, the regulations shall not allocate 
     allowances to any affected unit in excess of the product of 
     the unit's baseline heat input multiplied by the unit's 
     allowable nitrogen oxides emissions rate, divided by 2000.
       (B) 5 percent of the total amount of nitrogen oxides 
     allowances allocated each year under section 453 shall be 
     allocated for units at a facility that are affected EGUs, but 
     did not receive nitrogen oxides allocations under paragraph 
     (A). These units shall be allocated allowances for each year 
     by multiplying the allocation amount under section 453(a) by 
     the ratio of the total amount of the adjusted baseline heat 
     input of such units at the facility to the total amount of 
     adjusted baseline heat input to all affected EGUs in the Zone 
     1 States, including those covered in (A). However, the 
     regulations shall not allocate allowances to any affected 
     unit in excess of the product of the unit's baseline heat 
     input multiplied by the unit's allowable nitrogen oxides 
     emissions rate, divided by 2000.
       (C) Allowances allocated under subparagraph (B) shall be 
     allocated to units on a first come basis determined by date 
     of unit commencement of construction, provided that such unit 
     actually commences operation. As such, allocations to units 
     under paragraph (B) will not be reduced as a result of new 
     units commencing commercial operation.
       (D) Allowances not allocated under subparagraph (B) shall 
     be allocated to units in paragraphs (A) and (B) on a pro rata 
     basis.
       (E) For each year 2008 and thereafter, if the Administrator 
     has not promulgated the regulations determining allocation 
     under subsection (a):

[[Page 28421]]

       (i) each affected unit shall comply with section 452 by 
     providing annual notice to the permitting authority. Such 
     notice shall indicate the amount of allowances the affected 
     unit believes it has for the relevant year and the amount of 
     nitrogen oxide emissions for such year. The amount of 
     nitrogen oxide emissions shall be determined using reasonable 
     industry accepted methods unless the Administrator has 
     promulgated applicable monitoring and alternative monitoring 
     requirements; and
       (ii) Upon promulgation of regulations under subsection (a) 
     for Zone 1 determining the allocations for 2008 and 
     thereafter, and promulgating regulations under section 403(b) 
     providing for the transfer of nitrogen oxides and section 
     403(c) establishing an Allowance Transfer System for nitrogen 
     oxide allowances, each unit's emissions shall be compared to 
     and reconcile its actual allocations under the promulgated 
     regulations. Each unit will have nine (9) months to submit 
     allowances to the Administrator, without recompense, for any 
     allowances shortfall. The submitted allowances may have been 
     obtained and held by any mechanism consistent with this Act 
     including, but not limited to, direct sale. Any unit with an 
     allowance excess shall be credited allowances in accordance 
     with section 455.
       (b) EGU Allocations in the Zone 2 States.--
       (1) EPA regulations.--Not later than 18 months before the 
     commencement date of the nitrogen oxides allowance 
     requirement of section 452, the Administrator shall 
     promulgate regulations determining the allocation of nitrogen 
     oxides allowances for 2008 and each subsequent year for units 
     at a facility in a Zone 2 State that are affected EGUs as of 
     the date of enactment of this section.
       (A) The regulations shall determine the allocation for such 
     units for each year by multiplying by 0.95 the allocation 
     amount under section 453(b) by the ratio of the total amount 
     of the adjusted baseline heat input of such units at the 
     facility to the total amount of the adjusted baseline heat 
     input to all affected EGUs in the Zone 2 States. However, the 
     regulations shall not allocate allowances to any affected 
     unit in excess of the product of the unit's baseline heat 
     input multiplied by the unit's allowable nitrogen oxides 
     emissions rate, divided by 2000.
       (B) 5 percent of the total amount of nitrogen oxides 
     allowances allocated each year under section 453 shall be 
     allocated for units at a facility that are affected EGUs, but 
     did not receive nitrogen oxides allocations under paragraph 
     (A). These units shall be allocated allowances for each year 
     by multiplying the allocation amount under section 453(a) by 
     the ratio of the total amount of the adjusted baseline heat 
     input of such units at the facility to the total amount of 
     adjusted baseline heat input to all affected EGUs in the Zone 
     2 States, including those covered in (A). However, the 
     regulations shall not allocate allowances to any affected 
     unit in excess of the product of the unit's baseline heat 
     input multiplied by the unit's allowable nitrogen oxides 
     emissions rate, divided by 2000.
       (C) Allowances allocated under subparagraph (B) shall be 
     allocated to units on a first come basis determined by date 
     of unit commencement of construction, provided that such unit 
     actually commences operation. As such, allocations to units 
     under subparagraph (B) will not be reduced as a result of new 
     units commencing commercial operation.
       (D) Allowances not allocated under subparagraph (B) shall 
     be allocated to units in paragraphs (A) and (B) on a pro rata 
     basis.
       (E) For each year 2008 and thereafter, if the Administrator 
     has not promulgated the regulations determining allocation 
     under subsection (a):
       (i) each affected unit shall comply with section 452 by 
     providing annual notice to the permitting authority. Such 
     notice shall indicate the amount of allowances the affected 
     unit believes it has for the relevant year and the amount of 
     nitrogen oxide emissions for such year. The amount of 
     nitrogen oxide emissions shall be determined using reasonable 
     industry accepted methods unless the Administrator has 
     promulgated applicable monitoring and alternative monitoring 
     requirements; and
       (ii) Upon promulgation of regulations under subsection (b) 
     for Zone 2 determining the allocations for 2008 and 
     thereafter, and promulgating regulations under section 403(b) 
     providing for the transfer of nitrogen oxides and section 
     403(c) establishing an Allowance Transfer System for nitrogen 
     oxide allowances, each unit's emissions shall be compared to 
     and reconcile with its actual allocations under the 
     promulgated regulations. Each unit will have nine (9) months 
     to submit allowances to the Administrator, without 
     recompense, for any allowance shortfall. The submitted 
     allowances may have been obtained and held by any mechanism 
     consistent with this Act including, but not limited to, 
     direct sale. Any unit with an allowance excess shall be 
     credited allowances in accordance with section 455.

     SEC. 455 NITROGEN OXIDES EARLY ACTION REDUCTION CREDITS.

       (a) The Administrator shall promulgate regulations within 
     18 months authorizing the allocation of nitrogen oxides 
     allowances to units designated under this section that 
     install or modify pollution control equipment or combustion 
     technology improvements identified in such regulations after 
     the date of enactment of this section and prior to January l, 
     2010.
       (b) No allowances shall be allocated under this paragraph 
     for emissions reductions: attributable to pollution control 
     equipment or combustion technology improvements that were 
     operational or under construction at any time prior to the 
     date of enactment of this section; attributable to fuel 
     switching; or required under any federal regulation.
       (c) The allowances allocated to any unit under this 
     paragraph shall be in addition to the allowances allocated 
     under section 454 and shall be allocated in an amount equal 
     to one allowance of nitrogen oxides for each 1.05 tons of 
     reduction in emissions of nitrogen oxides achieved by the 
     pollution control equipment or combustion technology 
     improvements starting with the year in which the equipment or 
     improvement is implemented. The early compliance reduction 
     allowances available under this section shall be used and 
     tradeable in the same manner as allowances under section 454.
       (d) The Administrator shall promulgate regulations as 
     necessary to ensure affected units receive early compliance 
     allowance credit. Early compliance allowances shall be 
     allocated at the end of an early compliance year. Should the 
     Administrator fail to promulgate allocation regulations by 
     the end of a given year, early compliance allowances for each 
     year shall be allocated at the earliest possible time after 
     allocation regulations are promulgated.

         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 1 
     through September 30, for each year starting in 2004 and 
     thereafter.
       (2) The term ``non-ozone season'' means
       (A) with regard to Connecticut, Delaware, the District of 
     Columbia, Maryland, Massachusetts, New Jersey, New York, 
     Pennsylvania, and Rhode Island, the period October 1 through 
     April 30 and
       (B) with regard to all other States, the period October 1, 
     2003, through May 29, 2004 and the period October 1 through 
     April 30 beginning in the year 2004 and for each year 
     thereafter.
       (3) The term ``NOX SIP Call State'' means 
     Connecticut, Delaware, the District of Columbia, Illinois, 
     Indiana, Kentucky, Maryland, Massachusetts, New Jersey, New 
     York, North Carolina, Ohio, Pennsylvania, Rhode Island, South 
     Carolina, Tennessee, Virginia, and West Virginia and the fine 
     grid portions of Alabama, Georgia, Michigan, and Missouri.
       (4) The term ``fine grid portions of Alabama, Georgia, 
     Michigan, and Missouri'' means the areas in Alabama, Georgia, 
     Michigan, and Missouri subject to 40 C.F.R. Part 51.121 
     (2001).

     SEC. 462. GENERAL PROVISIONS.

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

     SEC. 463. APPLICABLE IMPLEMENTATION PLAN.

       (a) SIPS.--Except as provided in subsection (b), the 
     applicable implementation plan for each NOX SIP 
     Call State shall be consistent with the requirements, 
     including the NOX SIP Call State's nitrogen oxides 
     budget and compliance supplement pool, in 40 C.F.R. Part 
     51.121 and 51.122 (2001)
       (b) Requirements.--Notwithstanding any provision to the 
     contrary in 40 C.F.R. Part 51.121 and 51.122 (2001),
       (1) the applicable implementation plan for each 
     NOX SIP Call State shall require full 
     implementation of the required emission control measures 
     starting no later than the first ozone season; and
       (2) starting January 1, 2008--
       (A) the owners and operators of a boiler, combustion 
     turbine, or integrated gasification combined cycle plant 
     subject to emission reduction requirements or limitations 
     under part B, C, or D shall not longer be subject to the 
     requirements in a NOX SIP Call State's applicable 
     implementation plan that meet the requirements of subsection 
     (a) and paragraph (1); and
       (B) notwithstanding subparagraph (A), if the Administrator 
     determines, by December 31, 2007, that a NOX SIP 
     Call State's applicable implementation plan meets the 
     requirements of subsection (a) and paragraph (1), such 
     applicable implementation plan shall be deemed to continue to 
     meet such requirements; and
       (3)(A) The owner or operator or designated representative 
     of a boiler, combustion turbine, or combined cycle system may 
     submit to the Administrator a petition to allow use of 
     nitrogen oxides allowances allocated for 2005 to meet the 
     applicable requirement to hold nitrogen oxides allowances at 
     least equal to 2004 ozone season emissions of such boiler, 
     combustion turbine, or combined cycle system.
       (B) A petition under this paragraph shall be submitted to 
     the Administrator by February 1, 2004.

[[Page 28422]]

       (C) The petition shall demonstrate that the owner or 
     operator made reasonable efforts to install, at the boiler, 
     combustion turbine, or combined cycle system, nitrogen oxides 
     control technology designed to allow the owner or operator to 
     meet such requirement to hold nitrogen oxides allowances.
       (D) The petition shall demonstrate that there is an undue 
     risk for the reliability of electricity supply (taking into 
     account the feasibility of purchasing electricity or nitrogen 
     oxides allowances) because--
       (i) the owner or operator is not likely to be able to 
     install and operate the technology under subparagraph (C) on 
     a timely basis; or
       (ii) the technology under subparagraph (C) is not likely to 
     be able to achieve its design control level on a timely 
     basis.
       (E) The petition shall include a statement by the 
     NOX SIP Call State where the boiler, combustion 
     turbine, or combined cycle system is located that the 
     NOX SIP Call State does not object to the 
     petition.
       (F) By May 30, 2004, by order, the Administrator shall 
     approve the petition if it meets the requirements of 
     subparagraphs (B) through (E).
       (c) Savings Provision.--Nothing in this section or section 
     464 shall preclude or deny the right of any State or 
     political subdivision thereof to adopt or enforce any 
     regulation, requirement, limitation, or standard, relating to 
     a boiler, combustion turbine, or integrated gasification 
     combined cycle plant subject to emission reduction 
     requirements or limitations under part B, C, or D, that is 
     more stringent than a regulation, requirement, limitation, or 
     standard in effect under this section or under any other 
     provision of this Act.

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

       Starting January 1, 2008, with regard to any boiler, 
     combustion turbine, or integrated gasification combined cycle 
     plant subject to emission reduction requirements or 
     limitations under part B, C, or D, the Administrator shall 
     not administer any nitrogen oxides trading program included 
     in any NOX SIP Call State's applicable 
     implementation plan and meeting the requirements of section 
     463(a) and (b)(1).

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

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

     SEC. 466. NON-OZONE SEASON VOLUNTARY ACTION CREDITS

       An affected facility that voluntarily elects to operate 
     selective catalytic reduction (SCR) units, installed prior to 
     enactment of this title, during the non-ozone season under 
     section 461(2) shall be credited 0.5 allowances per ton of 
     NOX emissions avoided as a result of operating 
     these controls. The amount avoided will equal every ton of 
     nitrogen oxides reduction below the allowable emission rate. 
     The Administrator shall determine if any other existing 
     NOX emission control devices are generally 
     uneconomic to operate unless EGUs are provided incentives to 
     control NOX emissions during the non-ozone season. 
     If the Administrator finds that incentives using different 
     control equipment are necessary to make the operation of 
     these devices economic, the Administrator shall specify these 
     types of control devices and, for an affected facility with 
     these specified devices, installed prior to enactment of this 
     title, that voluntarily elects to operate these devices 
     during the nonozone season under section 461(2) shall be 
     credited 0.5 allowances per ton of emissions avoided as a 
     result of operating these controls. The Administrator shall 
     promulgate regulations as necessary to establish this 
     NOX allowance credit program. Failure of the 
     Administrator to promulgate implementing regulations prior to 
     voluntary reductions being undertaken by affected facilities 
     shall not in any manner reduce the number of allowances an 
     otherwise qualifying facility shall be credited upon 
     promulgation of the regulations.

                  Part D--Mercury Emissions Reductions

     SEC. 471. DEFINITIONS.

       For purposes of this part:
       (1) The term ``adjusted baseline heat input'' with regard 
     to a unit means the unit's baseline heat input multiplied 
     by--
       (A) 1.0, for the portion of the baseline heat input that is 
     the unit's average annual combustion of bituminous during the 
     years on which the unit's baseline heat input is based;
       (B) 3.0, for the portion of the baseline heat input that is 
     the unit's average annual combustion of lignite during the 
     years on which the unit's baseline heat input is based;
       (C) 1.25, for the portion of the baseline heat input that 
     is the unit's average annual combustion of subbituminous 
     during the years on which the unit's baseline heat input is 
     based; and
       (D) 1.0, for the portion of the baseline heat input that is 
     not covered by subparagraph (A), (B), or (C) or for the 
     entire baseline heat input if such baseline heat input is not 
     based on the unit's heat input in specified years.
       (2) The term ``affected EGU'' means--
       (A) for a unit serving a generator before the date of 
     enactment of the Clear Skies Act of 2003, a coal-fired unit 
     in a State serving a generator with a nameplate capacity of 
     greater than 25 megawatts that produced or produces 
     electricity for sale during 2002 or any year thereafter, 
     except for a cogeneration unit meets the criteria for 
     qualifying for a cogeneration facilities codified in Section 
     292.205 of Title 18 of the Code of Federal Regulations as 
     issued on April 1, 2002 during 2002 and each year thereafter; 
     and
       (B) for a unit commencing service of a generator on or 
     after the date of enactment of the Clear Skies Act of 2003, a 
     coal-fired unit in a State serving a generator that produces 
     electricity for sale during any year starting with the year 
     the unit commences service of a generator, except for a 
     cogeneration unit that meets the criteria for qualifying for 
     a cogeneration facilities codified in Section 292.205 of 
     Title 18 of the Code of Federal Regulations as issued on 
     April 1, 2002, during each year starting with the year the 
     unit commences service of a generator.
       (C) Notwithstanding paragraphs (A) and (B), the term 
     ``affected EGU'' does not include a solid waste incineration 
     unit subject to section 129, a unit for the treatment, 
     storage, or disposal of hazardous waste subject to section 
     3005 of the Solid Waste Disposal Act, or a unit with de 
     minimus emissions equal to or less than 50 pounds on an 
     annual basis.

     SEC. 472. APPLICABILITY.

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

     SEC. 473. LIMITATIONS ON TOTAL EMISSIONS.

       For affected EGUs for 2010 and each year thereafter, the 
     Administrator shall allocate mercury allowances pursuant to 
     section 474.

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

     SEC. 474. EGU ALLOCATIONS.

       (a)(1) In General.--Not later than 24 months before the 
     commencement date of the mercury allowance requirement of 
     section 472, the Administrator shall promulgate regulations 
     determining allocations of mercury allowances for 2010 and 
     thereafter for units at a facility that commence commercial 
     operation by and are affected EGUs as of date of enactment. 
     The regulations shall provide that the Administrator shall 
     allocate each year for such units an amount determined by 
     multiplying by 0.95 the allocation amount in section 473 by 
     the ratio of the total amount of the adjusted baseline heat 
     input of such units at the facility to the total amount of 
     adjusted baseline heat input of all affected EGUs.
       (2) 5 percent of the total amount of nitrogen oxides 
     allowances allocated each year under section 473 shall be 
     allocated for units at a facility that commence commercial 
     operation and are affected EGUs after the date of enactment. 
     These units shall be allocated allowances for each year by 
     multiplying the allocation amount under section 473 by the 
     ratio of the total amount of the adjusted baseline heat input 
     of such units at the facility to the total amount of adjusted 
     baseline heat input to all affected EGUs, including those 
     covered in paragraph (1). However, the regulations shall not 
     allocate allowances to any affected unit in excess of the 
     product of the unit's baseline heat input multiplied by the 
     unit's allowable mercury emissions rate, divided by 2000.
       (3) Allowances allocated under paragraph (2) shall be 
     allocated to units on a first come basis determined by date 
     of unit commencement of construction, provided that such unit 
     actually commences commercial operation. As such, allocations 
     to units under paragraph (2) will not be reduced as a result 
     of new units commencing commercial operation.
       (4) Allowances not allocated under paragraph (2) shall be 
     allocated to units in paragraphs (1) and (2) on a pro rata 
     basis.
       (5) For each year 2010 and thereafter, if the Administrator 
     has not promulgated the regulations determining allocation 
     under subsection (a):
       (i) each affected unit shall comply with section 472 by 
     providing annual notice to the permitting authority. Such 
     notice shall indicate the amount of allowances the affected 
     unit believes it has for the relevant year and the amount of 
     mercury emissions for such year. The amount of mercury 
     emissions shall be determined using reasonable industry 
     accepted methods unless the Administrator has promulgated 
     applicable monitoring and alternative monitoring 
     requirements; and
       (ii) upon promulgation of regulations under subsection (a) 
     determining the allocations for 2010 and thereafter, and 
     promulgating regulations under section 403(b) providing for 
     the transfer of mercury allowances and section 403(c) 
     establishing an Allowance Transfer System for mercury 
     allowances, each unit's emissions shall be compared to

[[Page 28423]]

     and reconcile with its actual allocations under the 
     promulgated regulation. Each unit will have nine (9) months 
     to submit allowances to the Administrator, without 
     recompense, for any allowances shortfall. The submitted 
     allowances may have been obtained and held by any mechanism 
     consistent with the Act including, but not limited to, direct 
     sale. Any unit with an allowance excess shall be credited 
     allowances in accordance with section 475.

     SEC. 475. MERCURY EARLY ACTION REDUCTION CREDITS.

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

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

     SEC. 481. NATIONAL EMISSION STANDARDS FOR AFFECTED UNITS.

       (a) Definitions.--For purposes of this section:
       (1) 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 2003, except that for the purpose of any revision of a 
     standard pursuant to subsection (e), ``new affected unit'' 
     means any affected unit, the construction or reconstruction 
     of which is commenced after the publication of regulations 
     (or, if earlier, proposed regulations) prescribing a standard 
     under this section that will apply to such unit.
       (6) The term ``reconstruction'' means the replacement of 
     components of a unit to such an extent that--
       (A) the fixed capital cost of the new components exceeds 50 
     percent of the fixed capital cost that would be required to 
     construct a comparable entirely new unit; and
       (B) it is technologically and economically feasible to meet 
     the applicable standards set forth in this section.
       (b) Emission Standards.--
       (1) In general.--No later than 12 months after the date of 
     enactment of the Clear Skies Act of 2003, the Administrator 
     shall promulgate regulations prescribing the standards in 
     subsections (c) through (d) for the specified affected units 
     and establishing requirements to ensure compliance with these 
     standards, including monitoring, recordkeeping, and reporting 
     requirements.
       (2) Monitoring.--(A) The owner or operator of any affected 
     unit subject to the standards for sulfur dioxide, nitrogen 
     oxides, or mercury under this section shall meet the 
     requirements of section 405, except that, where two or more 
     units utilize a single stack, separate monitoring shall be 
     required for each affected unit for the pollutants for which 
     the unit is subject to such standards.
       (B) The Administrator shall, by regulation, require--
       (i) the owner or operator of any affected unit subject to 
     the standards for sulfur dioxide, nitrogen oxides, or mercury 
     under this section to--
       (I) install and operate GEMS for monitoring output, 
     including electricity and useful thermal energy, on the 
     affected unit and to quality assure the data; and
       (II) comply with recordkeeping and reporting requirements, 
     including provisions for reporting output data in megawatt 
     hours.
       (ii) the owner or operator of any affected unit subject to 
     the standards for particulate matter under this section to--
       (I) install and operate CEMS for monitoring particulate 
     matter on the affected unit and to quality assure the data;
       (II) comply with recordkeeping and reporting requirements; 
     and
       (III) comply with alternative monitoring, quality 
     assurance, recordkeeping, and reporting requirements for any 
     period of time for which the Administrator determines that 
     CEMS with appropriate vendor guarantees are not commercially 
     available for particulate matter.
       (3) Compliance.--For boilers, integrated gasification 
     combined cycle plants, and coal fired or gas-fired combustion 
     turbines the Administrator shall require that the owner or 
     operator demonstrate compliance with the standards daily, 
     using a 30-day rolling average, except that in the case of 
     mercury, the compliance period shall be the calendar year. 
     For combustion turbines that are oil-fired the Administrator 
     shall require that the owner or operator demonstrate 
     compliance with the standards hourly, using a 4-hour rolling 
     average.
       (c) Boilers and Integrated Gasification Combined Cycle 
     Plants.--
       (1) After the effective date of standards promulgated under 
     subsection (b), no owner or operator shall cause any boiler 
     or integrated gasification combined cycle plant that is a new 
     affected unit to discharge into the atmosphere any gases 
     which contain--
       (A) sulfur dioxide in excess of 2.0 lb/MWh;
       (B) nitrogen oxides in excess of 1.0 lb/MWh;
       (C) particulate matter in excess of 0.20 lb/MWh; or
       (D) if the unit is coal-fired, mercury in excess of 0.015 
     lb/GWh, unless--
       (i) mercury emissions from the unit, determined assuming no 
     use of on-site or off-site pre-combustion treatment of coal 
     and no use of technology that captures mercury, are reduced 
     by 80 percent;
       (ii) flue gas desulfurization (FGD) and selective catalytic 
     reduction (SCR) are applied to the unit; or
       (iii) a technology is applied to the unit and the 
     permitting authority determines that the technology is 
     equivalent in terms of mercury capture to the application of 
     FGD and SCR.
       (2) 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; 
     or
       (C) 0.21 lb/MWh (9 ppm at 15 percent oxygen), if the unit 
     is not a simple cycle turbine and neither uses add-on 
     controls nor is located within 50 km of a class I area.
       (2) 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--

[[Page 28424]]

       (A) sulfur dioxide in excess of 2.0 lb/MWh;
       (B) nitrogen oxides in excess of--
       (i) 0.2891b/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 demonstrated by substantial 
     evidence to be achievable through the application of the best 
     system of emission reduction which (taking into account the 
     cost of achieving such reduction and any nonair quality 
     health and environmental impacts and energy requirements). 
     When implementation and enforcement of any requirement of 
     this Act indicate that emission limitations and percent 
     reductions beyond those required by the standards promulgated 
     under this section are achieved in practice, the 
     Administrator shall, when revising standards promulgated 
     under this section, consider the emission limitations and 
     percent reductions achieved in practice.
       (2) Notwithstanding the requirements of paragraph (1) the 
     Administrator need not review any standard promulgated under 
     subsection (b) if the Administrator determines that such 
     review is not appropriate in light of readily available 
     information on the efficacy of such standard.
       (f) Effective Date.--The standard promulgated pursuant to 
     this section shall become effective upon promulgation.
       (g) Delegation.--
       (1) 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, established by this section 
     applicable to such unit.
       (i) Coordination With Other Authorities.--For purposes of 
     sections III(e), 113, 114, 116, 120, 303, 304, 307 and other 
     provisions for the enforcement of this Act, each standard 
     established pursuant to this section shall be treated in the 
     same manner as a standard of performance under section 111, 
     and each affected unit subject to standards under this 
     section shall be treated in the same manner as a stationary 
     source under section 111.
       (j) State Authority.--Nothing in this section shall 
     preclude or deny the right of any State or political 
     subdivision thereof to adopt or enforce any regulation, 
     requirement, limitation, or standard relating to affected 
     units, or other EGUs, that is more stringent than a 
     regulation, requirement, limitation, or standard in effect 
     under this section or under any other provision of this Act.
       (k) Other Authority Under This Act.--Nothing in this 
     section shall diminish the authority of the Administrator or 
     a State to establish any other requirements applicable to 
     affected units under any other authority of law, including 
     the authority to establish for any air pollutant a national 
     ambient air quality standard, except that no new affected 
     unit subject to standards under this section shall be subject 
     to standards under section 111 of this Act.

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

       (a) Purposes.--The Administrator, in collaboration with the 
     Secretary of Energy and the Secretary of the Interior, shall 
     conduct a comprehensive program of research, environmental 
     monitoring, and assessment to enhance scientific 
     understanding of the human health and environmental effects 
     of particulate matter and mercury and to demonstrate the 
     efficacy of emission reductions under this title for purposes 
     of reporting to Congress under (e)(2). The purposes of such a 
     program are to--
       (1) expand current research and knowledge of the 
     contribution of emissions from electricity generation to 
     exposure and health effects associated with particulate 
     matter and mercury;
       (2) enhance current research and development of promising 
     multi-pollutant control strategies and CEMS for mercury;
       (3) produce peer-reviewed scientific and technology 
     information;
       (4) improve environmental monitoring and assessment of 
     sulfur dioxide, nitrogen oxides and mercury, and their 
     transformation products, to track changes in human health and 
     the environment attributable to emission reductions under 
     this title; and
       (5) periodically provide peer-reviewed reports on the 
     costs, benefits, and effectiveness of emission reductions 
     achieved under this title.
       (b) Research.--The Administrator shall enhance planned and 
     ongoing laboratory and field research and modeling analyses, 
     and conduct new research and analyses to produce peer-
     reviewed information concerning the human health and 
     environmental effects of mercury and particulate matter and 
     the contribution of United States electrical generating units 
     to those effects. Such information shall be included in the 
     report under subsection (d). In addition, such research and 
     analyses shall--
       (1) improve understanding of the rates and processes 
     governing chemical and physical transformations of mercury in 
     the atmosphere, including speciation of emissions from 
     electricity generation and the transport of these species;
       (2) improve understanding of the contribution of mercury 
     emissions from electricity generation to mercury in fish and 
     other biota, including--
       (A) the response of and contribution to mercury in the 
     biota owing to atmospheric deposition of mercury from U.S. 
     electricity generation on both local and regional scales;
       (B) long-term contributions of mercury from U.S. 
     electricity generation on mercury accumulations in 
     ecosystems, and the effects of mercury reductions in that 
     sector on the environment and public health;
       (C) the role and contribution of mercury, from U.S. 
     electricity generating facilities and anthropogenic and 
     natural sources to fish contamination and to human exposure, 
     particularly with respect to sensitive populations;
       (D) the contribution of U.S. electricity generation to 
     population exposure to mercury in freshwater fish and seafood 
     and quantification of linkages between U.S. mercury emissions 
     and domestic mercury exposure and its health effects; and
       (E) the contribution of mercury from U.S. electricity 
     generation in the context of other domestic and international 
     sources of mercury, including transport of global 
     anthropogenic and natural background levels;
       (3) improve understanding of the health effects of fine 
     particulate matter components related to electricity 
     generation emissions (as distinct from other fine particle 
     fractions and indoor air exposures) and the contribution of 
     U.S. electrical generating units to those effects including--
       (A) the chronic effects of fine particulate matter from 
     electricity generation in sensitive population groups; and
       (B) personal exposure to fine particulate matter from 
     electricity generation; and
       (4) improve understanding, by way of a review of the 
     literature, of methods for valuing human health and 
     environmental benefits associated with fine particulate 
     matter and mercury.
       (c) Innovative Control Technologies.--The Administrator 
     shall collaborate with the Secretary of Energy to enhance 
     research and development, and conduct new research that 
     facilitates research into and development of innovative 
     technologies to control sulfur dioxide, nitrogen oxides, 
     mercury, and particulate matter at a lower cost than existing 
     technologies. Such research and development shall provide 
     updated information on the cost and feasibility of 
     technologies. Such information shall be included in the 
     report under subsection (d). In addition, the research and 
     development shall--
       (1) upgrade cost and performance models to include results 
     from ongoing and future electricity generation and pollution 
     control demonstrations by the Administrator and the Secretary 
     of Energy;
       (2) evaluate the overall environmental implications of the 
     various technologies tested including the impact on the 
     characteristics of coal combustion residues;
       (3) evaluate the impact of the use of selective catalytic 
     reduction on mercury emissions from the combustion of all 
     coal types;
       (4) evaluate the potential of integrated gasification 
     combined cycle to adequately control mercury;
       (5) expand current programs by the Administrator to conduct 
     research and promote, lower cost CEMS capable of providing 
     real-time measurements of both speciated and total mercury 
     and integrated compact CEMS that provide cost-effective real-
     time measurements of sulfur dioxide, nitrogen oxides, and 
     mercury;
       (6) expand lab- and pilot-scale mercury and multi-pollutant 
     control programs by the Secretary of Energy and the 
     Administrator, including development of enhanced sorbents and 
     scrubbers for use on all coal types;
       (7) characterize mercury emissions from low-rank coals, for 
     a range of traditional control technologies, like scrubbers 
     and selective catalytic reduction; and
       (8) improve low cost combustion modifications and controls 
     for dry-bottom boilers.
       (d) Environmental Accountability.--
       (1) Monitoring and assessment.--The Administrator shall 
     conduct a program of environmental monitoring and assessment 
     to track on a continuing basis, changes in

[[Page 28425]]

     human health and the environment attributable to the emission 
     reductions required under this title. Such a program shall--
       (A) develop and employ methods to routinely monitor, 
     collect, and compile data on the status and trends of mercury 
     and its transformation products in emissions from affected 
     facilities, atmospheric deposition, surface water quality, 
     and biological systems. Emphasis shall be placed on those 
     methods that--
       (i) improve the ability to routinely measure mercury in dry 
     deposition processes;
       (ii) improve understanding of the spatial and temporal 
     distribution of mercury deposition in order to determine 
     source-receptor relationships and patterns of long-range, 
     regional, and local deposition;
       (iii) improve understanding of aggregate exposures and 
     additive effects of methylmercury and other pollutants; and
       (iv) improve understanding of the effectiveness and cost of 
     mercury emissions controls;
       (B) modernize and enhance the national air quality and 
     atmospheric deposition monitoring networks in order to cost-
     effectively expand and integrate, where appropriate, 
     monitoring capabilities for sulfur, nitrogen, and mercury to 
     meet the assessment and reporting requirements of this 
     section;
       (C) perform and enhance long-term monitoring of sulfur, 
     nitrogen, and mercury, and parameters related to 
     acidification, nutrient enrichment, and mercury 
     bioaccumulation in freshwater and marine biota;
       (D) maintain and upgrade models that describe the 
     interactions of emissions with the atmosphere and resulting 
     air quality implications and models that describe the 
     response of ecosystems to atmospheric deposition; and
       (E) assess indicators of ecosystems health related to 
     sulfur, nitrogen, and mercury, including characterization of 
     the causes and effects of episodic exposure to air pollutants 
     and evaluation of recovery.
       (2) Reporting requirements.--Not later than January 1, 
     2008, and not later than every 4 years thereafter, the 
     Administrator shall provide a peer reviewed report to the 
     Congress on the costs, benefits, and effectiveness of 
     emission reduction programs under this title.
       (A) The report under this subparagraph shall address the 
     relative contribution of emission reductions from U.S. 
     electricity generation under this title compared to the 
     emission reductions achieved under other titles of the Clean 
     Air Act with respect to--
       (i) actual and projected emissions of sulfur dioxide, 
     nitrogen oxides, and mercury;
       (ii) average ambient concentrations of sulfur dioxide and 
     nitrogen oxides transformation products, related air quality 
     parameters, and indicators of reductions in human exposure;
       (iii) status and trends in total atmospheric deposition of 
     sulfur, nitrogen, and mercury, including regional estimates 
     of total atmospheric deposition;
       (iv) status and trends in visibility;
       (v) status of terrestrial and aquatic ecosystems (including 
     forests and forested watersheds, streams, lakes, rivers, 
     estuaries, and nearcoastal waters);
       (vi) status of mercury and its transformation products in 
     fish;
       (vii) causes and effects of atmospheric deposition, 
     including changes in surface water quality, forest and soil 
     conditions;
       (viii) occurrence and effects of coastal eutrophication and 
     episodic acidification, particularly with respect to high 
     elevation watersheds; and
       (ix) reduction in atmospheric deposition rates that should 
     be achieved to prevent or reduce adverse ecological effects.
       (B) The report under this subparagraph shall address the 
     relative contribution of the United States to world-wide 
     emissions as well as a comparison of the stringency of fossil 
     fuel-fired requirements under the Act to other countries.

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

       (a) Major Source Exemption.--An affected unit shall 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 parts C and part D of title I nor shall it 
     otherwise be subject to the requirements of section 169A or 
     169B. This applicability provision only applies to affected 
     units that are either subject to the performance standards of 
     section 481 or meet the following requirements within 3 years 
     after the date of enactment of the Clear Skies Act of 2003:
       (1) The owner or operator of the affected unit properly 
     operates, maintains and repairs pollution control equipment 
     to limit emissions of particulate matter, or the owner or 
     operator of the affected unit is subject to an enforceable 
     permit issued pursuant to title V or a permit program 
     approved or promulgated as part of an applicable 
     implementation plan to limit the emissions of particulate 
     matter from the affected unit to 0.03 lb/mmBtu within 8 years 
     after the date of enactment of the Clear Skies Act of 2003, 
     and
       (2) The owner or operator of the affected unit uses good 
     combustion practices to minimize emissions of carbon 
     moNOXide. Good combustion practices may be 
     accomplished through control technology, combustion 
     technology improvements, or workplace practices.
       (b) Class I Area Protections.--Notwithstanding the 
     provisions of subsection (a), an affected unit located within 
     50 km of a Class I area on which construction commences after 
     the date of enactment of the Clear Skies Act of 2003 is 
     subject to those provisions under part C of title I 
     pertaining to the review of a new or reconstructed major 
     stationary source's impact on a Class I area.
       (c) Preconstruction Requirements.--Each State shall include 
     in its plan under section 110, as program to provide for the 
     regulation of the construction of an affected unit that 
     ensures that the following requirements are met prior to the 
     commencement of construction of an affected unit--
       (1) in an area designated as attainment or unclassifiable 
     under section 107(d), the owner or operator of the affected 
     unit must demonstrate to the State that the emissions 
     increase from the construction or operation of such unit will 
     not cause, or contribute to, air pollution in excess of any 
     national ambient air quality standard;
       (2) in an area designated as nonattainment under section 
     107(d), the State must determine that the emissions increase 
     from the construction or operation of such unit will not 
     interfere with any program to assure that the national 
     ambient air quality standards are achieved provided that 
     interference with any program will be deemed not to occur, 
     with respect to each nonattainment area located wholly or 
     partially within the State, if on the date of submission of a 
     complete permit application and throughout a continuous 
     period of three years immediately preceding such date, the 
     nonattainment area was in full compliance with all 
     requirements of this Act, including but not limited to 
     requirements for State Implementation Plans;
       (3) for a reconstructed unit, prior to beginning operation, 
     the unit must comply with either the performance standards of 
     section 481 or best available control technology as defined 
     in part C of title I for the pollutants whose hourly 
     emissions will increase at the unit's maximum capacity; and
       (4) the State must provide for an opportunity for 
     interested persons to comment on the Class I area protections 
     and preconstruction requirements as set forth in this 
     section.
       (d) Definitions.--For purposes of this section:
       (1) 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 
     that increases the maximum hourly emissions of any pollutant 
     regulated under this Act above the maximum hourly emissions 
     achievable at that unit during the 5 years prior to the 
     change or that results in the emission of any pollutant 
     regulated under this Act and not previously emitted.
       (e) Savings Clause.--Nothing in this section shall preclude 
     or deny the right of any State or political subdivision 
     thereof to adopt to enforce any regulation, requirements, 
     limitation, or standard relating to affected units that is 
     more stringent than a regulation, requirement, limitation, or 
     standard in effect under this section or under any other 
     provision of this Act.

     SEC. 3. OTHER AMENDMENTS.

       (a) Title I of the Clean Air Act is amended as follows:
       (1) In section 103 by repealing subparagraphs (E) and (F).
       (2) In section 107--
       (A) By amending subparagraph (A) of subsection (d)(1) as 
     follows:
       (i) strike `or' at the end of clause (ii);
       (ii) strike the period at the end of clause (iii) and 
     insert, ``or'';
       (iii) add the following clause (iv) after clause (iii): 
     (iv) notwithstanding clauses (i) through (iii), an area may 
     be designated transitional for the PM 2.5 national primary or 
     secondary ambient air quality standards or the 8-hour ozone 
     national primary or secondary ambient air quality standard if 
     the Administrator has performed air quality modeling and, in 
     the case of an area that needs additional local control 
     measures, the State has performed supplemental air quality 
     modeling, demonstrating that the area will attain the 
     applicable standard or standards 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.
       (iv) add at the end a sentence to read as follows: `For 
     purposes of the PM 2.5 national primary or secondary ambient 
     air quality standards, the time period for the State to 
     submit the designations shall be extended to no later than 
     December 31, 2003.
       (B) By amending clause (i) of subsection (d)(1)(B) by 
     adding at the end a sentence to read as follows: `The 
     Administrator shall not be required to designate areas for 
     the revised PM 2.5 national primary or secondary ambient air 
     quality standards prior to 6 months

[[Page 28426]]

     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 December 31, 2004.
       (3) In section 110 as follows:
       (A) By amending clause (i) of subsection (a)(2)(D) by 
     inserting ``except as provided in subsection (q),'' before 
     the word ``prohibiting''.
       (B) By adding the following new subsections at the end 
     thereof:
       ``(q) Review of Certain Plans.--(1) The Administrator 
     shall, in reviewing, under clause (i) of subsection 
     (a)(2)(D), any plan with respect to affected units, within 
     the meaning of section 126(d)(l)--
       (A) consider, among other relevant factors, emissions 
     reductions required to occur by the attainment date or dates 
     of any relevant nonattainment areas in the other State or 
     States;
       ``(B) not require submission of plan provisions mandating 
     emissions reductions from such affected units, unless the 
     Administrator determines that--
       ``(i) emissions from such units may be reduced at least as 
     cost-effectively as emissions from each other principal 
     category of sources of the relevant pollutant, pollutants, or 
     pre-cursors thereof, including industrial boilers, on-road 
     mobile sources, and off-road mobile sources, and any other 
     category of sources that the Administrator may identify, and
       ``(ii) reductions in such emissions will improve air 
     quality in the other State's or States' nonattainment areas 
     at least as cost-effectively as reductions in emissions from 
     each other principal category of sources of the relevant 
     pollutant, pollutants, or pre-cursors thereof, to the maximum 
     extent that a methodology is reasonably available to make 
     such a determination;
       ``(C) develop an appropriate peer reviewed methodology for 
     making determinations under subparagraph (B) by December 31, 
     2006; and
       ``(D) not require submission of plan provisions subjecting 
     affected units, within the meaning of section 126(d)(1), to 
     requirements with an effective date prior to December 31, 
     2014.
       ``(2) In making the determination under clause (ii) of 
     subparagraph (B) of paragraph (1), the Administrator will use 
     the best available peer-reviewed models and methodology that 
     consider the proximity of the source or sources to the other 
     State or States and incorporate other source characteristics.
       ``(3) Nothing in paragraph (1) shall be interpreted to 
     require revisions to the provisions of 40 C.F.R. Parts 51.121 
     and 51.122 (2001).
       ``(r) Transitional Areas.--
       ``(1) Maintenance.--(A) By December 31, 2011, each area 
     designated as transitional pursuant to section 107(d)(1) 
     shall submit an updated emission inventory and an analysis of 
     whether growth in emissions, including growth in vehicle 
     miles traveled, will interfere with attainment by December 
     31, 2014.
       ``(B) No later than December 31, 2011, the Administrator 
     shall review each transitional area's maintenance analysis, 
     and, if the Administrator determines that growth in emissions 
     will interfere with attainment by December 31, 2014, the 
     Administrator shall consult with the State and determine what 
     action, if any, is necessary to assure that attainment will 
     be achieved by December 31, 2014.
       ``(2) Prevention of significant deterioration.--Each area 
     designated as transitional pursuant to section 107(d)(1) 
     shall be treated as an attainment or unclassifiable area for 
     purposes of the prevention of significant deterioration 
     provisions of part C of this title.
       ``(3) Consequences of failure to attain by 2015.--No later 
     than June 30, 2016, the Administrator shall determine whether 
     each area designated as transitional for the 8-hour ozone 
     standard or for the PM 2.5 standard has attained that 
     standard. If the Administrator determines that a transitional 
     area has not attained the standard, the area shall be 
     redesignated as nonattainment within 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) In section 111(b)(1) by adding the following new 
     subparagraph (C) after subparagraph (B):
       ``(C) No standards of performance promulgated under this 
     section shall apply to units subject to regulations 
     promulgated pursuant to section 481.
       ``(5) In section 112:
       ``(A) by amending paragraph (1) of subsection (c) to read 
     as follows:
       ``(1) In general.--Not later than 12 months after November 
     15, 1990, the Administrator shall publish, and shall from 
     time to time, but not less often than every 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). 
     Electric utility steam generating units not subject to 
     section 3005 of the Solid Waste Disposal Act shall not be 
     included in any category or subcategory listed under this 
     subsection. The Administrator shall have the authority to 
     regulate the emission of hazardous air pollutants listed 
     under section 112(b), other than mercury compounds, by 
     electric utility steam generating units, provided that any 
     determination shall be based on public health concerns and, 
     on an individual source basis shall: consider the effects of 
     emissions controls installed or anticipated to be installed 
     in order to meet other emission reduction requirements under 
     this Act by 2018; and, be based on a peer reviewed study with 
     notice and opportunity to comment, to be completed not before 
     January 2015. Any such regulations shall be promulgated 
     within, and shall not take effect before, the date 8 years 
     after the commencement date of the requirements set forth in 
     section 472. To the extent practicable, the categories and 
     subcategories listed under this subsection shall be 
     consistent with the list of source categories established 
     pursuant to section 111 and part C. Nothing in the preceding 
     sentence limits the Administrator's authority to establish 
     subcategories under this section, as appropriate.
       ``(B) By amending subparagraph (A) of subsection (n)(1) is 
     amended to read as follows:
       ``(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) Section 126 is amended as follows:
       ``(A) By replacing `section 110(a)(2)(D)(ii) or this 
     section' in subsection (b) with `section 110(a)(2)(D)(i)'.
       ``(B) By replacing `this section and the prohibition of 
     section 110(a)(2)(D)(ii)' in subsection (e)(1) with `the 
     prohibition of section 110(a)(2)(D)(i)'.
       ``(C) In the language at end of subsection (c) by striking 
     `section 110(a)(2)(D)(ii)' and inserting `section 
     110(a)(2)(D)(i)' and deleting the last sentence.
       ``(D) By amending 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, or is a designated unit under section 407.
       ``(2) To the extent that any petition submitted under 
     subsection (b) after the date of enactment of the Clear Skies 
     Act of 2003 seeks a finding for any affected unit, then, 
     notwithstanding any provision in subsections (a) through (c) 
     to the contrary--
       ``(A) in determining whether to make a finding under 
     subsection (b) for any affected unit, the Administrator shall 
     consider, among other relevant factors, emissions reductions 
     required to occur by the attainment date or dates of any 
     relevant nonattainment areas in the petitioning State or 
     political subdivision;
       ``(B) the Administrator may not determine that affected 
     units emit, or would emit, any air pollutant in violation of 
     the prohibition of section 110(a)(2)(D)(i) unless that 
     Administrator determines that--
       ``(i) such emissions may be reduced at least as cost-
     effectively as emissions from each other principal category 
     of sources of sulfur dioxide or nitrogen oxides, including 
     industrial boilers, on-road mobile sources, and off- road 
     mobile sources, and any other category of sources that the 
     Administrator may identify; and
       ``(ii) reductions in such emissions will improve air 
     quality in the petitioning State's nonattainment area or 
     areas at least as cost-effectively as reductions in emissions 
     from each other principal category of sources of sulfur 
     dioxide or nitrogen oxides to the maximum extent that a 
     methodology is reasonably available to make such a 
     determination.

     In making the determination under clause (ii), the 
     Administrator shall use the best available peer-reviewed 
     models and methodology that consider the proximity of the 
     source or sources to the petitioning State or political 
     subdivision and incorporate other sources characteristics.
       ``(C) The Administrator shall develop an appropriate peer 
     reviewed methodology for making determinations under 
     subparagraph (B) by December 31, 2006.
       ``(D) The Administrator shall not make any findings with 
     respect to an affected unit under this section prior to 
     December 1, 2011. For any petition submitted prior to January 
     1, 2010, the Administrator shall make a finding or deny the 
     petition by the December 31, 2011.
       ``(E) The Administrator, by rulemaking, shall extend the 
     compliance and implementation deadlines in subsection (c) to 
     the extent necessary to assure that no affected unit shall be 
     subject to any such deadline prior to January 1, 2014.''
       (b) Title III.--Section 307(d)(1)(G) of title III of the 
     Clean Air Act is amended to read as follows:
       ``(G) the promulgation or revision of any regulation under 
     title IV,''.
       (c) Noise Pollution.--Title N of the Clean Air Act 
     (relating to noise pollution) (42 U.S.C. 7641 et seq.) is 
     redesignated as title VII and amended by renumbering sections 
     401 through 403 as sections 701 through 703, respectively and 
     conforming all cross-references thereto accordingly.

[[Page 28427]]

       (d) Section 406.--Title IV of the Clean Air Act Amendments 
     of 1990 (relating to acid deposition control) is amended by 
     repealing section 406 (industrial Sulfur dioxide emissions).
       (e) Monitoring.--Section 821 (a) of title VIII of the Clean 
     Air Act Amendments of 1990 (miscellaneous provisions) is 
     amended to read as follows:
       ``(a) Monitoring.--The Administrator shall promulgate 
     regulations within 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 as of December 31, 
     2009, shall also monitor carbon dioxide emissions according 
     to the same timetable as in section 405(b). The required 
     monitoring may be no more stringent than that required by any 
     two of the four most populous countries for units comparable 
     to the affected units in the United States. The regulations 
     shall require that such data be reported to the 
     Administrator. The provisions of section 405(e) of title IV 
     of the Clean Air Act shall apply for purposes of this section 
     in the same manner and to the same extent as such provision 
     applies to the monitoring and data referred to in section 
     405. The Administrator shall implement this subsection under 
     40 CFR Part 75 (2002), amended as appropriate by the 
     Administrator.''

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