[Federal Register Volume 61, Number 110 (Thursday, June 6, 1996)]
[Rules and Regulations]
[Pages 28761-28763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14114]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 73
RIN 2060-AG41
[FRL-5513-4]
Acid Rain Program; Elimination of Direct Sale Program and IPP
Written Guarantee Program: Final Rule
AGENCY: Environmental Protection Agency (EPA).
ACTION: Direct final rule.
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SUMMARY: Title IV of the Clean Air Act, as amended by the Clean Air Act
Amendments of 1990, (the Act) authorized the U.S. Environmental
Protection Agency to establish the Acid Rain Program to reduce the
adverse health and ecological effects of acidic deposition. Under the
Acid Rain Program, electric utilities must have an allowance for each
ton of sulfur dioxide (SO2) that their generating facilities emit.
Title IV mandates that EPA hold or sponsor yearly auctions and direct
sales of allowances for a small portion of the total allowances
allocated each year. EPA is also required to make available to new
independent power producers (IPPs) guarantees ensuring priority in
purchasing allowances in the direct sales.
Section 416(c)(7) of the Act directs the Administrator to terminate
the direct sale program if, during any two-year period, less than 20
percent of the allowances available for direct sales have been
purchased. The direct sale and IPP provisions were designed to help
ensure that units, including new IPPs, have a public source of
allowances beyond those already allocated initially. Because no
allowances have been sold through the direct sale program since it
began in June 1993, EPA is revising its regulations to terminate the
direct sales. The allowances available previously in the direct sale
program will now be available in the annual allowance auctions, the
proceeds of which will continue to be returned to the utilities from
which the allowances were withheld. In addition, because the IPP
written guarantee program is implemented through the direct sales and
no applications for such guarantees have been received, EPA is revising
its regulations to terminate the guarantee program.
The rule revision is being issued as a direct final rule because
the Act mandates this action and no adverse comment is expected.
DATES: This direct final rule will be effective on August 5, 1996,
unless significant, adverse comments are received by July 8, 1996. If
significant adverse comments are received on any portion of this direct
final rule, that portion of the direct final rule will be withdrawn
through a notice in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Kenon Smith, U.S. Environmental
Protection Agency, Acid Rain Division (6204J), 401 M Street, SW,
Washington, D.C. 20460, (202) 233-9164, call the Acid Rain Hotline at
(202) 233-9620, or visit the Acid Rain Program web page at http://
www.epa.gov/docs/acidrain/ardhome.html. All material supporting this
notice is available for viewing and copying under Docket A-96-19, EPA
Air Docket (6102), U.S. Environmental Protection Agency, 401 M Street,
SW., Washington, DC 20460, Telephone (202) 260-7548.
SUPPLEMENTARY INFORMATION: Any significant adverse comments received on
any portion of this direct final rule, by the date listed above, will
be addressed in a subsequent final rule. That final rule will be based
on the relevant portion of the rule revision that is noticed as a
proposed rule in the Proposed Rule Section of this Federal Register and
that is identical to this direct final rule.
EPA's Acid Rain Program established an innovative, market-based
allowance trading system to reduce S02 emissions, one of the
primary precursors of acid rain. Under this system, fossil fuel-fired
power plants, the principal emitters of S02, were allotted
tradeable allowances based on their past fuel usage and emissions. Each
allowance entitles a boiler unit in a plant to emit 1 ton of S02
during or after the year specified in the allowance serial number. At
the end of the year, the number of allowances a unit holds must equal
or exceed the total emissions at that unit; otherwise, stringent
penalties will apply. After the year 2000, the total number of
allowances allocated each year will be about half of what the utility
industry emitted in 1980.
[[Page 28762]]
Allowances may be bought, sold, or banked like any other commodity.
If a unit has surplus allowances, it may sell them to units whose
emissions levels exceed their allowance supply, or it may bank the
allowances for future years.
Because the availability of allowances is crucial to ensure the
economic efficiency of the emissions limitation program and facilitate
the addition of new electric-generating capacity, title IV mandates
that EPA hold or sponsor yearly auctions and direct sales of allowances
for a small portion of the total allowances allocated each year. The
auction and the direct sales include both spot sales (allowances first
usable in the year of sale) and advance sales (allowances first usable
in the 7th year after the year of sale). In addition, title IV requires
that EPA provide a written guarantee ensuring priority for certain new
independent power producers in purchasing allowances in the direct
sales. The auctions, sales, and IPP guarantee provisions of title IV
were designed to help ensure that units, including new IPPs, would have
a public source of allowances beyond those allocated initially.
To supply the sales and auctions with allowances, EPA, as directed
by the Act, has set aside in a Special Allowance Reserve 2.8 percent of
the total annual allowances allocated to all units. During Phase I,
when the allowances allocated total 5.7 million allowances annually,
150,000 allowances are available every year for auctions. During Phase
II, when allowance allocations total 8.95 million allowances yearly,
200,000 allowances are earmarked annually for auctions and 50,000
designated for the direct sales. The Act set the direct sale price for
allowances to be $1,500 per allowance, adjusted by the Consumer Price
Index.
Section 416(c)(7) of the Act directs the Administrator to terminate
the direct sale subaccount and transfer such allowances to the auction
subaccount ``[i]f the Administrator determines that, during any period
of 2 consecutive calendar years, less than 20 percent of the allowances
available in the subaccount for direct sales established under this
subsection have been purchased.'' 42 U.S.C. 76510(c)(7); see also 4O
CFR 73.73(b). Since no allowances have ever been sold through the
direct sale program since it began in 1993, EPA is terminating the
direct sale program, beginning with the 1996 direct sale, and removing
the regulations that established the program.
EPA is also revising part 73 to provide that the allowances
available previously in the direct sale program will now be available
in the annual allowance auctions, the proceeds of which will continue
to be returned to the utilities from which the allowances were
originally withheld. As done in the previous three auctions, unsold
advance allowances from the 1996 direct sale will be sold in the 6-year
advance auction in the 1997 EPA auctions as allowances first usable in
the 6th year after the year of sale. Allowances originally set aside
for the advance direct sale in 1997, and each year thereafter, will be
included in the advance auction of that respective year. Allowances
originally set aside for the direct spot sales beginning in 2000, and
each year thereafter, will be included in the spot auction of each
respective year.
In addition, EPA is eliminating the IPP written guarantee program
(and the relevant regulations) under which IPPs can apply for and
receive priority for purchasing allowances in direct sales. Under
section 417(c), the guarantee program is implemented exclusively
through the direct sale program, which is being terminated. Further,
since the publication of the regulations establishing the guarantee
program in December 1991 (56 FR 65592 (December 17, 1991)), no
applications have been submitted to obtain guaranteed allowances.
Because the Act set the price of guaranteed allowances to be $1,500.00
per allowance, adjusted by the Consumer Price Index (CPI), EPA does not
expect there to be any applications. Sufficient quantities of
allowances are readily available in the private market at prices well
below the guaranteed price.
Administrative Requirements
A. Executive Order 12866
Under Executive Order 12866, 58 FR 51735 (October 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 Sec. 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 written comments from
OMB to EPA, any written EPA responses to those comments, and any
changes made in response to OMB suggestions or recommendations are
included in the docket. The docket is available for public inspection
at the EPA's Air Docket Section, which is listed in the FOR FURTHER
INFORMATION section of this preamble.
B. Unfunded Mandates Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded
Mandates Act'') requires that the Agency prepare a budgetary impact
statement before promulgating a rule that includes a Federal mandate
that may result in expenditure by State, local, and tribal governments,
in aggregate, or by the private sector, of Sec. 100 million or more in
any one year. Section 203 requires the Agency to establish a plan for
obtaining input from and informing, educating, and advising any small
governments that may be significantly or uniquely affected by the rule.
Under section 205 of the Unfunded Mandates Act, the Agency must
identify and consider a reasonable number of regulatory alternatives
before promulgating a rule for which a budgetary impact statement must
be prepared. The Agency must select from those alternatives the least
costly, most cost-effective, or least burdensome alternative that
achieves the objectives of the rule, unless the Agency explains why
this alternative is not selected or the selection of this alternative
is inconsistent with law.
Because this direct final rule is estimated to result in the
expenditure by State, local, and tribal governments or the private
sector of less than $100 million in any one year, the Agency has not
prepared a budgetary impact statement or specifically addressed the
selection of the least costly, most cost-effective, or least burdensome
alternative. Because small governments will not be significantly or
uniquely affected by this rule, the Agency is not required to develop a
plan with regard to small governments. However, as discussed in this
preamble, the rule reduces the potential burden on regulated entities
(which may include
[[Page 28763]]
some investor-owned or municipal utilities) of participating in direct
sales or applying for written guarantees.
C. Paperwork Reduction Act
This rule does not provide for any new collection of information
and, in fact, removes some information requirements of the current
regulations. The removal of these requirements reduces the estimated
burden, as compared to the burden under the current regulations, by an
average of 48.5 hours per IPP guarantee application and 1.5 hours per
direct sale application for an overall burden reduction from the
original estimation of 4,850 hours. 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 current regulations establishing the direct sale
and guarantee programs. 56 FR 65601.
Send comments regarding this collection of 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 current regulations establishing the direct
sale and guarantee programs, the Administrator certified that those
regulations, including the provisions revised by today's final rule,
would not have a significant impact. 56 FR 65601. The final rule
revisions adopted today are not significant enough to change the
economic impact addressed in that preamble. 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, issuance 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 73
Environmental protection, Acid rain, Air pollution control,
Electric utilities, Reporting and recordkeeping requirements, and
Sulfur dioxide.
Dated: May 24, 1996.
Carol M. Browner,
Administrator, U.S. Environmental Protection Agency.
For the reasons set forth in the preamble, chapter I of title 40 of
the Code of Federal Regulations is amended as follows:
PART 73--[AMENDED]
1. The authority citation for part 73 continues to read as follows:
Authority: 42 U. S.C. 7601 and 7651, et seq.
2. Section 73.70 is amended by revising table I of paragraph (a) as
follows: Sec. 73.70 Auctions.
(a) * * *
Table I.--Allowance Schedule for Auctions
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Spot Advance Advance
Year of purchase auction auction auction*
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1993..................................... 50,000 a 100,000 b
1994..................................... 50,000 a 100,000 b 25,000 c
1995..................................... 50,000 a 100,000 b 25,000 c
1996..................................... 150,000 100,000 b 25,000 c
1997..................................... 150,000 125,000 b 25,000 c
1998..................................... 150,000 125,000 b
1999..................................... 150,000 125,000 b
2000 and after........................... 125,000 125,000 b
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a Not usable until 1995.
b Not usable until 7 years after purchase.
c Not usable until 6 years after purchase.
*These are unsold advance allowances from the direct sale program for
1993, 1994, 1995, and 1996 respectively.
* * * *
3. Section 73.72 is revised to read as follows:
Sec. 73.72 Direct sales.
Allowances that were formerly part of the direct sale program,
which has been terminated under Sec. 73.73(b), will be included in the
annual allowance auctions in accordance with Sec. 73.70(a).
4. Sections 73.74, 73.75, 73.76, and 73.77 are removed from subpart
E.
[FR Doc. 96-14114 Filed 6-5-96; 8:45 am]
BILLING CODE 6560-50-P