[Federal Register Volume 59, Number 224 (Tuesday, November 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28710]


[[Page Unknown]]

[Federal Register: November 22, 1994]


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Part V





Environmental Protection Agency





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40 CFR Part 72




Acid Rain Program: Permits; Final Rule
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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 72

[FRL-5109-6]
RIN 2060-AF55

 
Acid Rain Program: Permits

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: Title IV of the Clean Air Act, as amended by Public Law 101-
549, the Clean Air Act Amendments of 1990 (the Act), authorizes the 
Environmental Protection Agency (EPA or Agency) to establish the Acid 
Rain Program. On January 11, 1993, the Agency promulgated final rules 
under title IV. Several parties filed petitions for review of the 
rules. On August 10, 1994, EPA and other parties signed a settlement 
agreement addressing certain substitution plan issues.
    Based on a review of the record, the Agency concludes that the 
January 11, 1993 regulations concerning the eligibility of units to be 
designated as substitution units should be revised. Under sections 
404(b) and (c) of the Act, a unit that is not listed in Table A of 
section 404 as being subject to Phase I of the Acid Rain Program (i.e., 
a non-Table A unit) and that is under the control of the owner or 
operator of a unit listed in Table A of section 404 (i.e., a Table A 
unit) may be designated as a substitution unit. The January 11, 1993 
regulations state that the Table A unit and each non-Table A unit that 
the Table A unit designates as a substitution unit must have ``the same 
owner or operator.'' The Agency is revising the regulations in order to 
specify more clearly the circumstances under which the statutory 
``control'' requirement for substitution plans is met. The rule 
revision is being issued as a direct final rule because it is 
consistent with the August 10, 1994 settlement and no adverse comment 
is expected.

EFFECTIVE DATE: This direct final rule will be effective on January 3, 
1995 unless significant, adverse comments are received by December 22, 
1994. If significant, adverse comments are timely received on any 
provision of the direct final rule, that provision of the direct final 
rule will be withdrawn through a document in the Federal Register.

ADDRESSES: Docket No. A-93-40, containing supporting information used 
to develop the proposal, copies of all comments received, and responses 
to comments, is available for public inspection and copying from 8:30 
a.m. to 12 p.m. and 1 p.m. to 3:30 p.m., Monday through Friday, 
excluding legal holidays, at EPA's Air Docket Section (LE-131), 
Waterside Mall, room 1500, 1st floor, 401 M Street, SW., Washington DC 
20460. A reasonable fee may be charged for copying.

FOR FURTHER INFORMATION CONTACT: Dwight C. Alpern, Attorney-advisor, at 
(202) 233-9151, Acid Rain Division (6204J), U.S. Environmental 
Protection Agency, 401 M Street, SW., Washington, DC 20460, or the Acid 
Rain Hotline at (202) 233-9620.

SUPPLEMENTARY INFORMATION: All public comment received on any provision 
of this direct final rule on which significant, adverse comments are 
timely received will be addressed in a subsequent final rule based on 
the relevant portions of the rule revision that is noticed as a 
proposed rule in the Proposed Rules Section of this Federal Register 
and that is identical to this direct final rule.
    The contents of the preamble to the final rule are as follows:
I. Control Requirement for Designating Substitution Units
II. Modifications of the January 11, 1993 Regulation Concerning the 
Control Requirement for Substitution Units
    A. Control by Common Owner or Operator
    B. Control by Contract
    C. Plan Termination if Control Requirement is no Longer Met
III. Administrative Requirements
    A. Docket
    B. Executive Order 12866
    C. Paperwork Reduction Act
    D. Regulatory Flexibility Act
    E. Miscellaneous

I. Control Requirement for Designating Substitution Units

    Sections 404(b) and (c) of the Act set forth the requirements for 
submission and approval of substitution plans, under which a unit 
listed on Table A of section 404 designates one or more non-Table A 
units as substitution units and brings them into Phase I of the Acid 
Rain Program. Congress established substitution plans as a compliance 
option to increase units' compliance flexibility and reduce their 
overall costs of compliance in Phase I while still achieving the 
emissions reductions intended by Congress under title IV. See 58 FR 
60950-60951 (Nov. 18, 1993).
    A substitution plan allows the owner or operator of a Table A unit 
to reassign the unit's emissions reduction obligations to a designated 
non-Table A unit ``under the control of'' that owner or operator. 42 
U.S.C. 7651c(b). Upon approval of the reassignment, the non-Table A 
unit becomes subject to all requirements for Phase I units with regard 
to sulfur dioxide and is allocated allowances. Emissions reductions by 
the non-Table A unit may therefore free up allowances, which may be 
used by the Table A unit (or any other unit) in lieu of making 
emissions reductions.
    Section 71.41 of the January 11, 1993 regulations provided that the 
statutory requirement of control by the Table A unit's owner or 
operator over the non-Table A unit is satisfied where such units have 
``the same owner or operator.'' 40 CFR 72.41(b)(1)(i) (1993). The 
regulation also provided that having the same designated representative 
would be treated as having the same operator and would thus meet the 
control requirement. Id.; see also 58 FR 3600. On March 12, 1993, 
petitions for review of the January 11, 1993 regulations were filed 
with the U.S. Court of Appeals for the District of Columbia Circuit. 
Several petitioners challenged the provisions implementing the control 
requirement.
    On November 18, 1993, the Agency issued proposed revisions to the 
January 11, 1993 regulations, including the provisions concerning the 
control requirement. The Agency proposed to reverse its interpretation 
that having a common designated representative alone meets the 
statutory control requirement for substitution plans and to revise the 
regulations accordingly. 58 FR 60957-60958. Several commenters 
addressed the control requirement in their comments on the November 18, 
1993 proposal. Some commenters opposed any change in the January 11, 
1993 provisions concerning the control requirement.
    Other commenters noted that, although Sec. 72.41(b)(1)(i) requires 
that the substitution and Table A units have ``the same owner or 
operator'' (40 CFR 72.41(b)(1)(i) (1993)), section 404(b) of the Act 
requires that the substitution unit be under the control of the Table A 
unit owner or operator. They argued that, in implementing section 
404(b) and (c), the Agency should also focus on whether there is such 
control. They suggested that common ownership of the units is not 
necessarily determinative of whether the control requirement is met. 
They alleged that where the units have multiple owners only one of 
which is in common, the control requirement may not be met, e.g., where 
the common owner owns only a very small percentage of the proposed 
substitution unit. On the other hand, where the units lack any common 
owner or operator, the control requirement allegedly may be met through 
contractual arrangements under which the owner and operator of the 
substitution unit commit, inter alia, to make emissions reductions and 
deliver allowances to the owner and operator of the Phase I unit.
    In a separate final rule in this Federal Register, the Agency 
adopted the reasoning, set forth in the November 18, 1993 preamble (58 
FR 60957-60958) and in the preamble of the Acid Rain regulations on 
nitrogen oxides (59 FR 13554-13555 (Mar. 22, 1994)), that a designated 
representative is not, merely by holding that position, also an 
operator. In that separate final rule, the Agency revised the January 
11, 1993 regulations to use the statutory language requiring control by 
the Table A unit owner or operator and to provide that having a common 
designated representative does not alone meet the control requirement 
for substitution units. However, the Agency did not address in that 
separate document comments raising issues concerning: under what 
circumstances the existence of one or more common owners satisfies the 
control requirement; and whether and, if so, under what circumstances 
control can be established by contract if there are no common owners or 
common operators. The Agency addresses below those issues and the 
comments on those issues.

II. Modifications of the January 11, 1993 Regulation Concerning the 
Control Requirement for Substitution Units

A. Control by Common Owner or Operator

    Section 404(b) of the Act allows that the ``owner or operator'' of 
a Table A unit to designate, as a substitution unit, a non-Table A unit 
``under the control of such owner or operator.'' 42 U.S.C. 7651c(b). 
The Agency agrees with commenters that, like section 404(b), the 
regulation implementing that section should focus on whether such 
control exists.
    Because many units have multiple owners with varying percentages of 
ownership, there is a wide range of possible relationships between a 
Table A unit and a non-Table A unit, ranging, for example, from no 
common ownership to 100% common ownership and including all the 
possible variations in between. In order to avoid burdensome case-by-
case determinations of whether each particular set of facts meets the 
control requirement and in order to provide more certainty for 
utilities and the public concerning what units qualify for inclusion in 
substitution plans, the Agency is establishing generic criteria for 
applying the control requirement. Further, the generic criteria are 
based on the potential ability of owners and operators to exercise 
control, not the actual exercise of such control potential. Determining 
what entities actually make decisions governing the operation of a unit 
could require the Agency to make lengthy case-by-case inquiries into 
the details of utility operations and involve the Agency in matters 
beyond its expertise.
    In taking this approach, the Agency maintains that section 404(b) 
should be interpreted to require that owners or operators of a Table A 
unit have the ability to exercise a significant degree of control over 
a non-Table A unit. The simplest case for applying this requirement is 
where the Table A and non-Table A units have only a single owner or 
where, regardless of their ownership, the units have a common operator. 
Under these circumstances, it seems clear that the single owner or the 
operator of the Table A unit has the ability to control the non-Table A 
unit.
    For units with multiple owners, the application of the control 
requirement becomes somewhat more complex if they do not have a common 
operator. If one or more owners and operators of a Table A unit own an 
aggregate share of 50% or more of the capacity of a non-Table A unit, 
no major decisions concerning the unit can be made without the 
concurrence of such Table A unit owners and operators. The Agency 
maintains, therefore, that they can control the non-Table A unit to a 
significant extent and meet the control requirement.
    Even where the aggregate ownership share of the one or more owners 
and operators of a Table A unit in a non-Table A unit is less than 50%, 
the degree of control may still be significant. Such control is 
evidenced by the ability of such non-Table A unit owners to determine 
the dispatch of their respective shares of electricity generated by the 
non-Table A unit. Decisions by such owners whether or not to take their 
shares of generation can significantly affect the overall operation of 
the unit. While the Agency recognizes that adopting a minimum level of 
ownership in the non-Table A unit for meeting the control requirement 
is necessarily somewhat arbitrary, the Agency maintains that, as a 
matter of logic, there is some level of ownership below which the 
owners lack significant control. Further, establishing such a minimum 
level of ownership discourages gaming through the acquisition of minute 
ownership shares simply to enable the new owner to qualify the non-
Table A unit as a substitution unit.
    The Agency believes that an aggregate ownership interest of 10% or 
more, and less than 50%, of the capacity of the non-Table A unit meets 
the control requirement, provided that such owners have the ability to 
determine how their respective shares of the non-Table A unit's 
generation are dispatched. The Agency notes that, in some regions of 
the country, utilities have entered into power pool agreements under 
which the utilities agree to centralize in the power pool the dispatch 
of their units. Power pools with central economic dispatch enable 
member utilities to minimize operating costs through the use of the 
units in the pool that have the lowest generation costs. In light of 
the important benefits of such power pools, the Agency maintains that 
utilities in power pools should not be disadvantaged under section 
404(b). Consequently, the determination of whether owners of a non-
Table A unit have, by right of contract, the ability to dispatch their 
respective shares of the unit's generation should be made without 
regard to whether owners that had contractual dispatch authority have 
surrendered that authority to a power pool.
    In sum, the Agency is establishing generic criteria for determining 
whether the control requirement under section 404(b) is met. The first 
category that meets this requirement is where one or more owners or 
operators of a Table A unit have an aggregate ownership interest of 50% 
or more in the non-Table A unit or where the two units have a common 
operator.1 The second category that meets the control requirement 
is where: a Table A and non-Table A unit lack a common operator; one or 
more owners or operators of a Table A unit have an aggregate ownership 
interest of 10% or more and less than 50% in the non-Table A unit; and 
such owners or operators have the contractual ability to determine the 
dispatch of their respective shares of the non-Table A unit's 
generation. The final regulation requires the designated 
representatives submitting substitution plans to state in the 
submission what category is applicable to the units in the plan and to 
provide, upon request, documentation supporting such statements. These 
statements, like all information included in submissions by the 
designated representative, are covered by the certification required 
under Sec. 72.21(b) concerning the truth, accuracy, and completeness of 
the statements.
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    \1\In summing the ownership shares of individual Table A unit 
owners and operators in the capacity of a non-Table unit, a given 
share, and the generation associated with such share, obviously 
cannot be double-counted. Otherwise, the sum of the ownership shares 
of all persons owning a non-Table A unit could exceed 100%.
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B. Control by Contract

    The Agency agrees that, under certain circumstances, control over a 
substitution unit by the owners and operators of the Table A unit may 
be established by contract where the above-described criteria based on 
a common operator or the level of common ownership are not met. The 
contract must be a binding agreement between the owners and operators 
of a Table A unit and the owners and operators of the non-Table A unit 
that is designated as the Table A unit's substitution unit. Several 
commenters supported an interpretation of section 404(b) that would 
allow the control requirement to be met through a contract. The final 
regulation specifies the circumstances under which the Administator 
will find that control is established by contract.
    Several determinations have guided the Agency's development of the 
regulation concerning control by contract. First, the Agency believes 
that the regulation should set forth detailed, generic requirements for 
establishing control by contract. Leaving the specification of detailed 
requirements to case-by-case development would increase the burden both 
on the owners and operators interested in submitting contract-based 
substitution plans and on the Agency, which must review such 
submissions. A commenter supporting the approval of contract-based 
substitution plans suggested that the Agency develop generic criteria.
    Second, the Agency believes that the control requirement of section 
404(b) of the Act should be interpreted in light of the emissions 
reduction goals of title IV. The Agency maintains that a determination 
of whether control is established by contract should focus on whether 
the owners and operators of the Table A unit have the ability, under 
the contract, to require emissions reductions by the non-Table A unit 
and thereby to affect the overall operation of the unit. It is not 
necessary in this context for the Table A unit's owners and operators 
to have contractual authority over all facets of the non-Table A unit's 
day-to-day operations.
    Third, if the control requirement is to be met by simply showing 
that Table A unit owners and operators have the ability, by contract, 
to require emissions reductions by the non-Table A unit, the Agency 
maintains that the contract must require emissions reductions that are 
significant, new reductions that would not otherwise have been 
implemented by the non-Table A unit. It is difficult to see how control 
could be demonstrated if a contract with a Table A unit merely required 
a non-Table A unit to ``make'' reductions that the non-Table A unit had 
already implemented, was already in the process of implementing, or 
would have implemented even in the absence of the contract. Further, 
because a unit might be able to realize relatively minor reductions 
while making little change in its operations, the scale of the 
reductions required by contract should be significant in order to 
demonstrate control of the non-Table A unit by owners and operators 
that otherwise lack any operational responsibilities for that unit. A 
commenter suggested that the contract between the Table A and non-Table 
A units should specify a percentage emissions rate reduction that the 
non-Table A unit is required to achieve.
    To ensure that the contract requires significant, new reductions by 
the non-Table A unit, the final regulation requires that the contract 
establish a maximum annual average SO2 emissions rate for the 
unit. The maximum emissions rate must be less than or equal to 70% of 
the lesser of the following emissions rates for the non-Table A unit: 
the 1985 actual SO2 emissions rate; the 1985 allowable SO2 
emissions rate; the greater of the 1989 or 1990 actual SO2 emissions 
rate; the most stringent federally enforceable or State enforceable 
SO2 emissions limitation, as of November 15, 1990, applicable in 
Phase I; and the lesser of the average actual SO2 emissions rate 
or the most stringent federally enforceable or State enforceable 
SO2 emissions limitation for the four-quarter period immediately 
preceding the submission of the contract-based substitution plan.2 
The latter set of emissions rates (i.e., the current actual and 
allowable rates) are included to ensure that the required reduction in 
the unit's emissions rate is at least 30% of the emissions rate 
achieved, or required to be achieved, by the non-Table A unit around 
the time of the submission of the substitution plan. The other 
emissions rates (i.e., those for 1985, 1989, 1990, and Phase I) are 
used to ensure that the current actual or allowable rate does not 
represent a spike in the emissions rate achieved by or required for the 
unit since 1985.3 A commenter supported using all of these 
emissions rates to set a maximum emissions rate for the non-Table A 
unit.
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    \2\Some units are subject to a non-unit-specific emissions limit 
(e.g., a utility-wide emissions tonnage or rate limit). The final 
regulation provides that if such a unit is designated as a 
substitution unit in a contract-based substitution plan, the 
Administrator will determine on a case-by-case basis how to apply 
the non-unit-specific limit in setting the maximum annual SO2 
emissions rate. If a non-unit-specific Federal limit was in effect 
and applicable to the unit in 1985, that limit is already reflected 
in the 1985 allowable SO2 emissions rate (in the National 
Allowance Data Base), which will be treated as representing the non-
unit- specific Federal limit.
    \3\For the reasons set forth in a separate final rule in this 
Federal Register, these other emissions rates are also used to 
allocate allowances for any substitution unit and to ensure that 
allowances are not allocated for emissions reductions that would 
have been made without a substitution plan.
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    The Agency maintains that a 30% reduction in the emissions rate 
that the non-Table A unit would otherwise achieve represents a 
significant reduction. A commenter supporting approval of contract-
based substitution plans asserted that it has identified about 30 Phase 
II units that lack a common owner or operator with a Table A unit and 
for which such plans would be economically feasible. The commenter 
stated that this group of units could reduce their current emissions 
rates by 50 to 70% and indicated that a 30% reduction might be an 
acceptable requirement for approval of this type of substitution plan.
    As a further means of ensuring that the non-Table A unit's 
reductions are new, the final regulation requires that the contract-
based substitution plan include a description of the actions that will 
be undertaken so that the non-Table A unit will comply with the maximum 
emissions rate. Such actions may include, for example, the addition or 
modification of a scrubber or fuel switching. The owners and operators 
of the Table A and non-Table A units must show that the described 
actions will not be implemented in Phase I unless the non-Table A unit 
is approved as a substitution unit. The description of the actions that 
will be taken must be sufficiently detailed so that the Agency can 
determine whether the showing has been made. Information relevant to 
the showing includes, inter alia, whether contracts implementing these 
actions were entered into before submission of the substitution plan. 
Under the regulation, the owners and operators must implement the 
described actions but may seek to amend the substitution plan to change 
the required actions.
    In general, the Agency maintains that it is difficult to make 
determinations, particularly in a large number of cases, of whether 
owners and operators will take certain future actions in the absence of 
a substitution plan. However, the Agency must make a determination of 
this type in reviewing the actions described in each contract-based 
substitution plan in order to make sure that the non-Table A unit is 
really obligated to make new reductions. This will be a one-time 
determination made when the plan is approved (or disapproved) unless 
the designated representative subsequently seeks to modify the 
description of actions in the plan. Further, the Agency does not expect 
a large number of contract-based substitution plans to be submitted. As 
noted above, commenters have identified only about 30 units for which 
such a plan would be economic.
    Fourth, it is important to ensure that the contract imposes an 
effective emissions reduction requirement--i.e., a requirement that is 
likely to be enforced by Table A unit owners and operators claiming 
control of the non-Table A unit. Consequently, the contract should 
include a meaningful remedy in the event that the required emissions 
reductions are not achieved. The concept of requiring a meaningful 
remedy in the event of default was supported by a commenter.
    If the Table A unit owners and operators must surrender allowances 
to the Administrator to the extent that the non-Table A unit fails to 
make the required emissions reductions, then the Table A owners and 
operators will bear responsibility for the reductions that they claim 
to control and will have the incentive to take actions to ensure 
achievement of the reductions. This puts the Table A owners and 
operators in a position similar to that of owners and operators that 
control a unit directly by owning or operating the unit. If, instead of 
such allowance surrender by the Table A unit, the non-Table A unit had 
to give allowances to the Table A unit (or to the Agency), then the 
Table A unit owners and operators would bear no responsibility for the 
non-Table A unit that they claim to control. Further, without elaborate 
limitations on the transfer of allowances between the Table A and non-
Table A units, there would be no way of preventing the units from 
arranging a future return to the non-Table A unit of any allowances 
surrendered by the non-Table A unit to the Table A unit.
    Under the final regulation, if the non-Table A unit fails to comply 
with the maximum emissions rate during the year, the Table A unit 
owners and operators must surrender a number of allowances equal to the 
non-Table A unit's baseline multiplied by the difference between the 
actual emissions rate for the year and the maximum emissions rate. This 
approach segregates out the effect of utilization changes and leaves 
such changes to be handled under the reduced utilization and allowance 
surrender provisions (e.g., Sec. Sec. 72.43, 72.91, and 72.92) 
applicable to all Phase I units. The surrendered allowances must have 
the same or an earlier compliance use date as the allowances allocated 
to the non-Table A unit for the year, and the surrender must be made on 
or before the allowance transfer deadline. In order to encourage early 
reductions at non-Table A units and innovative approaches to achieving 
such reductions, the surrender and deduction of allowances will be the 
only remedy under the Act for failure to meet the maximum emissions 
rate. Of course, the deduction of allowances for failure to achieve the 
maximum emissions rate may result in a unit having insufficient 
allowances to cover its annual emissions, and the full panoply of 
remedies for excess emissions will then apply.
    Finally, in order to facilitate the Table A unit owners' and 
operators' exercise of control and the Agency's review and enforcement, 
where necessary, of the substitution plan, the units involved should 
have a common designated representative. A commenter supported the need 
for a common designated representative for this type of substitution 
plan.4 The final regulation provides that the requirement to have 
a common designated representative is not met by simply having a common 
alternate designated representative. This is because, as explained in 
the preamble of the November 18, 1993 proposed rule, an alternate 
designated representative does not carry the same level of 
responsibilities as, and thus is not equivalent to, a designated 
representative. 58 FR 60958.
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    \4\The commenter also suggested that the non-Table A owners and 
operators be required to submit quarterly and annual reports to the 
Table A unit owners and operators and to indemnify such owners and 
operators for any violations at the non-Table A unit. These 
requirements are not in the final rule because the Agency believes 
that these matters are not central to the issue of control and are 
better left to the owners and operators of the two units.
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C. Plan Termination if Control Requirement is no Longer met

    The January 11, 1993 regulations provide that where, as a result of 
ownership or other changes, the units in a substitution plan no longer 
meet the common owner or operator requirement in those regulations, the 
substitution plan must be terminated. The final regulation adopted here 
takes a similar approach. If there are changes that result in the 
control requirement no longer being met, the designated representative 
must terminate the plan, whether the plan is based on common owners or 
operators or on a contract. The Administrator may, on his or her own 
motion, terminate the plan under such circumstances.
    The only exception to this requirement is for substitution plans 
approved, and included in final permits issued, under the January 11, 
1993 regulations and the Partial Settlement in Environmental Defense 
Fund v. Carol M. Browner, No. 93-1203 (D.C. Cir. 1993) (signed May 4, 
1994). So long as the Table A and non-Table A units under each plan 
continue to meet the common owner, operator, or designated 
representative requirement in the January 11, 1993 regulations, such 
plans will not be terminated for the first year (and, in some cases, 
for the second year) for which the substitution unit received a total 
number of allowances equal to the number provided in those regulations. 
This exception is consistent with both the May 4, 1993 settlement and 
the Second Partial Settlement in Environmental Defense Fund v. Carol M. 
Browner, No. 93-1203 (D.C. Cir. 1993) (signed August 10, 1994). The 
Agency maintains that both settlements reasonably resolve the 
substitution plan issues raised in the litigation, including the issues 
relating to the control requirement.

III. Administrative Requirements

A. Docket

    The docket is the organized and complete file of all the 
information considered by EPA in the development of this rulemaking. 
Along with the preamble of the direct final rule, the contents of the 
docket--except for interagency review materials--will constitute the 
record in case of judicial review. See 42 U.S.C. 7607(d)(7)(A).

B. Executive Order 12866

    Under Executive Order 12866, 58 FR 51735 (Oct. 4, 1993), the 
Administrator must determine whether the regulatory action is 
``significant'' and therefore subject to Office of Management and 
Budget (OMB) review and the requirements of the Executive Order. The 
Order defines ``significant regulatory action'' as one that is likely 
to result in a rule that may:

    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.

    Pursuant to the terms of Executive Order 12866, it has been 
determined that this rule is a ``significant regulatory action'' 
because the rule seems to raise novel legal or policy issues. As such, 
this action was submitted to OMB for review. Any changes made in 
response to OMB suggestions or recommendations are documented in the 
public record. Any written comments from OMB to EPA and any written EPA 
response to those comments are included in the docket. The docket is 
available for public inspection at the EPA's Air Docket Section, which 
is listed in the ADDRESSES section of this preamble.

C. Paperwork Reduction Act

    The information collection requirements in this rule have been 
approved by OMB under the Paperwork Reduction Act, 44 U.S.C. 3501, et 
seq., and have been assigned control number 2060-0258.
    This collection of information has an estimated burden averaging 
17.5 to 28 hours per response for about 43 responses. These estimates 
include time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information.
    An Information Collection Request document and estimates of the 
public reporting burden were prepared in connection with the January 
11, 1993 regulations. 56 FR 63098; 58 FR 3650. The regulation 
modifications contained in this document will not significantly change 
the reporting burden that was previously estimated.
    Send comments regarding this burden analysis or any other aspect of 
this collection of information, including suggestions for reducing the 
burden, to Chief, Information Policy Branch, EPA, 401 M Street, SW., 
(Mail Code 2136), Washington, DC 20460; and to the Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
Washington, DC 20503, marked ``Attention: Desk Officer for EPA.''

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., requires 
each Federal agency to consider potential impacts of its regulations on 
small business ``entities.'' Under 5 U.S.C. 604(a), an agency issuing a 
notice of proposed rulemaking must prepare and make available for 
public comment a regulatory flexibility analysis. Such an analysis is 
not required if the head of an agency certifies that a rule will not 
have a significant economic impact on a substantial number of small 
entities, pursuant to 5 U.S.C. 605(b).
    In the preamble of the January 11, 1993 regulations, the 
Administrator certified that those regulations, including the 
provisions revised by today's final rule, would not have a significant 
impact. 58 FR 3649. The final rule revisions adopted today are not 
significant enough to change the economic impact addressed in the 
preamble of the January 11, 1993 regulations, which were certified as 
not having a significant impact. Pursuant to the provisions of 5 U.S.C. 
605(b), I hereby certify that the revised rule will not have a 
significant, adverse impact on a substantial number of small entities.

E. Miscellaneous

    In accordance with section 117 of the Act, publication of this rule 
was preceded by consultation with any appropriate advisory committees, 
independent experts, and Federal departments and agencies.

List of Subjects in 40 CFR Part 72

    Environmental protection, Acid rain, Air pollution control, 
Electric utilities, Permits, Reporting and recordkeeping requirements, 
Sulfur dioxide.

    Dated: November 14, 1994.
Carol M. Browner,
Administrator.

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

PART 72--[AMENDED]

    1. The authority citation for part 72 continues to read as follows:

    Authority: 42 U.S.C. 7601 and 7651 et seq.

    2. Section 72.41 is amended by revising paragraphs (c)(5) and 
(e)(3)(iv) and adding paragraphs (c)(6), (c)(7), and (e)(1)(iii) to 
read as follows:


Sec. 72.41  Phase I substitution plans.

* * * * *
    (c) * * *
    (5) A demonstration that the substitution plan meets the 
requirement that each unit under paragraph (a)(2) of this section is 
under the control of the owner or operator of each unit under paragraph 
(a)(1) of this section that designates the unit under paragraph (a)(2) 
of this section as a substitution unit. The demonstration shall be one 
of the following:
    (i) If the unit under paragraph (a)(1) of this section has one or 
more owners or operators that have an aggregate percentage ownership 
interest of 50 percent or more in the capacity of the unit under 
paragraph (a)(2) of this section or the units have a common operator, a 
statement identifying such owners or operators and their aggregate 
percentage ownership interest in the capacity of the unit under 
paragraph (a)(2) of this section or identifying the units' common 
operator. The designated representative shall submit supporting 
documentation upon request by the Administrator.
    (ii) If the unit under paragraph (a)(1) of this section has one or 
more owners or operators that have an aggregate percentage ownership 
interest of at least 10 percent and less than 50 percent in the 
capacity of the unit under paragraph (a)(2) of this section and the 
units do not have a common operator, a statement identifying such 
owners or operators and their aggregate percentage ownership interest 
in the capacity of the unit under paragraph (a)(2) of this seciton and 
stating that each such owner or operator has the contractual right to 
direct the dispatch of the electricity that, because of its ownership 
interest, it has the right to receive from the unit under paragraph 
(a)(2) of this section. The fact that the electricity that such owner 
or operator has the right to receive is centrally dispatched through a 
power pool will not be the basis for determining that the owner or 
operator does not have the contractual right to direct the dispatch of 
such electricity. The designated representative shall submit supporting 
documentation upon request by the Administrator.
    (iii) A copy of an agreement that is binding on the owners and 
operators of the unit under paragraph (a)(2) of this section and the 
owners and operators of the unit under paragraph (a)(1) of this 
section, provides each of the following elements, and is supported by 
documentation meeting the requirements of paragraph (c)(6) of this 
section:
    (A) The owners and operators of the unit under paragraph (a)(2) of 
this section must not allow the unit to emit sulfur dioxide in excess 
of a maximum annual average SO2 emissions rate (in lbs/mmBtu), 
specified in the agreement, for each year during the period that the 
substitution plan is in effect.
    (B) The maximum annual average SO2 emissions rate for the unit 
under paragraph (a)(2) of this section shall not exceed 70 percent of 
the lesser of: the unit's 1985 actual SO2 emissions rate; the 
unit's 1985 allowable SO2 emissions rate; the greater of the 
unit's 1989 or 1990 actual SO2 emissions rate; the most stringent 
federally enforceable or State enforceable SO2 emissions 
limitation, as of November 15, 1990, applicable to the unit in Phase I; 
or the lesser of the average actual SO2 emissions rate or the most 
stringent federally enforceable or State enforceable SO2 emissions 
limitation for the unit for four consecutive quarters that immediately 
precede the 30-day period ending on the date the substitution plan is 
submitted to the Administrator. If the unit is covered by a non-unit-
specific federally enforceable or State enforceable SO2 emissions 
limitation in the four consecutive quarters or, as of November 15, 
1990, in Phase I, the Administrator will determine, on a case-by-case 
basis, how to apply the non-unit-specific emissions limitation for 
purposes of determining whether the maximum annual average SO2 
emissions rate meets the requirement of the prior sentence. If a non-
unit-specific federally enforceable SO2 emissions limitation is 
not different from a non-unit-specific federally enforceable SO2 
emissions limitation that was effective and applicable to the unit in 
1985, the Administrator will apply the non-unit-specific SO2 
emissions limitation by using the 1985 allowable SO2 emissions 
rate.
    (C) For each year that the actual SO2 emissions rate of the 
unit under paragraph (a)(2) of this section exceeds the maximum annual 
average SO2 emissions rate, the designated representative of the 
unit under paragraph (a)(1) of this section must surrender allowances 
for deduction from the Allowance Tracking System account of the unit 
under paragraph (a)(1) of this section. The designated representative 
shall surrender allowances authorizing emissions equal to the baseline 
of the unit under paragraph (a)(2) of this section multiplied by the 
difference between the actual SO2 emissions rate of the unit under 
paragraph (a)(2) of this section and the maximum annual average 
SO2 emissions rate and divided by 2000 lbs/ton. The surrender 
shall be made by the allowance transfer deadline of the year of the 
exceedance, and the surrendered allowances shall have the same or an 
earlier compliance use date as the allowances allocated to the unit 
under paragraph (a)(2) of this section for that year. The designated 
representative may identify the serial numbers of the allowances to be 
deducted. In the absence of such identification, allowances will be 
deducted on a first-in, first-out basis under Sec. 73.35(c)(2) of this 
chapter.
    (D) The unit under paragraph (a)(2) of this section and the unit 
under paragraph (a)(1) of this section shall designate a common 
designated representative during the period that the substitution plan 
is in effect. Having a common alternate designated representative shall 
not satisfy the requirement in the prior sentence.
    (E) Except as provided in paragraph (c)(6)(i) of this section, the 
actual SO2 emissions rate for any year and the average actual 
SO2 emissions rate for any period shall be determined in 
accordance with part 75 of this chapter.
    (6) A demonstration under paragraph (c)(5)(iii) of this section 
shall include the following supporting documentation:
    (i) The calculation of the average actual SO2 emissions rate 
and the most stringent federally enforceable or State enforceable 
SO2 emissions limitation for the unit for the four consecutive 
quarters that immediately preceded the 30-day period ending on the date 
the substitution plan is submitted to the Administrator. To the extent 
that the four consecutive quarters include a quarter prior to January 
1, 1995, the SO2 emissions rate for the quarter shall be 
determined applying the methodology for calculating SO2 emissions 
set forth in appendix C of this part. This methodology shall be applied 
using data submitted for the quarter to the Secretary of Energy on 
United States Department of Energy Form 767 or, if such data has not 
been submitted for the quarter, using the dataprepared for such 
submission for the quarter.
    (ii) A description of the actions that will be taken in order for 
the unit under paragraph (a)(2) of this section to comply with the 
maximum annual average SO2 emissions rate under paragraph 
(c)(5)(iii) of this section.
    (iii) A description of any contract for implementing the actions 
described in paragraph (c)(6)(ii) of this section that was executed 
before the date on which the agreement under paragraph (c)(5)(iii) of 
this section is executed. The designated representative shall state the 
execution date of each such contract and state whether the contract is 
expressly contingent on the agreement under paragraph (c)(5)(iii) of 
this section.
    (iv) A showing that the actions described under paragraph 
(c)(6)(ii) of this section will not be implemented during Phase I 
unless the unit is approved as a substitution unit.
    (7) The special provisions in paragraph (e) of this section.
* * * * *
    (e) * * *
    (1) * * *
    (iii) Where an approved substitution plan includes a demonstration 
under paragraphs (c)(5)(iii) and (c)(6) of this section.
    (A) The owners and operators of the substitution unit covered by 
the demonstration shall implement the actions described under paragraph 
(c)(6)(ii) of this section, as adjusted by the Administrator in 
approving the plan or in revising the permit. The designated 
representative may submit proposed permit revisions changing the 
description of the actions to be taken in order for the substitution 
unit to achieve the maximum annual average SO2 emissions rate 
under the approved plan and shall include in any such submission a 
showing that the actions in the changed description will not be 
implemented during Phase I unless the unit remains a substitution unit. 
The permit revision will be treated as an administrative amendment, 
except where the Administrator determines that the change in the 
description alters the fundamental nature of the actions to be taken 
and that public notice and comment will contribute to the decision-
making process, in which case the permit revision will be treated as a 
permit modification or, at the option of the designated representative, 
a fast-track modification.
    (B) The designated representative of the unit under paragraph 
(a)(1) of this section shall surrender allowances, and theAdministrator 
will deduct allowances, in accordance with paragraph (c)(5)(iii)(C) of 
this section. The surrender and deduction of allowances as required 
under the prior sentence shall be the only remedy under the Act for a 
failure to meet the maximum annual average SO2 emissions rate, 
provided that, if such deduction of allowance results in excess 
emissions, the remedies for excess emissions shall be fully applicable.
* * * * *
    (3) * * *
    (iv)(A) If there is a change in the ownership interest of the 
owners or operators of any unit under a substitution plan approved as 
meeting the requirements of paragraph (c)(5)(i) or (ii) of this section 
or a change in such owners' or operators' right to direct dispatch of 
electricity from a substitution unit under such a plan and the 
demonstration under paragraph (c)(5)(i) or (ii) of this section cannot 
be made, then the designated representatives of the units governed by 
this plan shall submit a notification to terminate the plan so that the 
plan will terminate as of January 1 of the calendar year during which 
the change is made.
    (B) Where a substitution plan is approved as meeting the 
requirements of paragraph (c)(5)(iii) of this section, if there is a 
change in the agreement under paragraph (c)(5)(iii) of this section and 
a demonstration that the agreement, as changed, meets the requirements 
of paragraph (c)(5)(iii) cannot be made, then the designated 
representative of the units governed by the plan shall submit a 
notification to terminate the plan so that the plan will terminate as 
of January 1 of the calendar year during which the change is made. 
Where a substitution plan is approved as meeting the requirements of 
paragraph (c)(5)(iii) of this section, if the requirements of the first 
sentence of paragraph (e)(1)(iii)(A) of this section are not met during 
a calendar year, then the designated representative of the units 
governed by the plan shall submit a notification to terminate the plan 
so that the plan will terminate as of January 1 of such calendar year.
    (C) If the plan is not terminated in accordance with paragraphs 
(e)(3)(iv)(A) or (B) of this section, the Administrator, on his or her 
own motion, will terminate the plan and deduct the allowances required 
to be surrendered under paragraph (e)(3)(ii) of this section.
    (D) Where a substitution unit and the Phase I unit designating the 
substitution unit in an approved substitution plan have a common owner, 
operator, or designated representative during a year, the plan shall 
not be terminated under paragraphs (e)(3)(iv)(A), (B), or (C) of this 
section with regard to the substitution unit if the year is as 
specified in paragraph (e)(3)(iv)(D)(1) or (2) of this section and the 
unit received from the Administrator for the year, under the Partial 
Settlement in Environmental Defense Fund v. Carol M. Browner, No. 93-
1203 (D.C. Cir. 1993) (signed May 4, 1993), a total number of 
allowances equal to the unit's baseline multiplied by the lesser of the 
unit's 1985 actual SO2 emissions rate or 1985 allowable SO2 
emissions rate.
    (1) Except as provided in paragraph (e)(3)(iv)(D)(2) of this 
section, paragraph (e)(3)(iv)(D) of this section shall apply to the 
first year in Phase I for which the unit is and remains an active 
substitution unit.
    (2) If the unit has a Group 1 boiler under part 76 of this chapter 
and is and remains an active substitution unit during 1995, paragraph 
(e)(3)(iv)(D) of this section shall apply to 1995 and to the second 
year in Phase I for which the unit is and remains an active 
substitution unit.
    (3) If there is a change in the owners, operators, or designated 
representative of the substitution unit or the Phase I unit during a 
year under paragraph (e)(3)(iv)(D)(1) or (2) of this section and, with 
the change, the units do not have a common owner, operator, or 
designated representative, then the designated representatives for such 
units shall submit a notification to terminate the plan so that the 
plan will terminate as of January 1 of the calendar year during which 
the change is made. If the plan is not terminated in accordance with 
the prior sentence, the Administrator, on his or her own motion, will 
terminate the plan and deduct the allowances required to be surrendered 
under paragraph (e)(3)(ii) of this section.
[FR Doc. 94-28710 Filed 11-21-94; 8:45 am]
BILLING CODE 6560-50-F