[Federal Register Volume 61, Number 250 (Friday, December 27, 1996)]
[Proposed Rules]
[Pages 68340-68381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31968]



[[Page 68339]]

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Part II





Environmental Protection Agency





_______________________________________________________________________



40 CFR Part 72 et al.



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Acid Rain Program; Permits, Alowance System, Sulfur Dioxide Opt-Ins, 
Continuous Emission Monitoring, Excess Emissions, and Appeal 
Procedures; Proposed Rule

  Federal Register / Vol. 61, No. 250 / Friday, December 27, 1996 / 
Proposed Rules  

[[Page 68340]]



ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 72, 73, 74, 75, 77, and 78

[FRL-5656-8]
RIN 2060-AF43, AF46, and AF47


Acid Rain Program: Permits, Allowance System, Sulfur Dioxide Opt-
Ins, Continuous Emission Monitoring, Excess Emissions, and Appeal 
Procedures

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule; revisions of permits, allowance system, sulfur 
dioxide opt-ins, continuous emission monitoring, excess emissions, and 
appeal procedures rules.

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SUMMARY: Title IV of the Clean Air Act (the Act) authorizes the 
Environmental Protection Agency (EPA or Agency) to establish the Acid 
Rain Program. The purpose of the Acid Rain Program is to significantly 
reduce emissions of sulfur dioxide and nitrogen oxides from utility 
electric generating plants in order to reduce the adverse health and 
ecological impacts of acidic deposition (or acid rain) resulting from 
such emissions. On January 11 and March 23, 1993, the Agency 
promulgated final rules governing permitting, the allowance system, 
continuous emissions monitoring, excess emissions, and appeal 
procedures.
    After considering its experience in applying these rules since 
1993, the Agency believes that the permitting, excess emissions, and 
appeal procedures rules (as well as minor aspects of the monitoring 
rule) can be streamlined and improved in order to reduce the burden on 
utilities, State and local permitting authorities, and EPA. The rule 
revisions in today's proposal streamline the Acid Rain Program while 
still ensuring achievement of its statutory goals of reducing sulfur 
dioxide and nitrogen oxides emissions.
    In addition, EPA is revising allocations of sulfur dixoxide 
allowances. Each allowance authorizes the emission of one ton of sulfur 
dioxide. Under the Acid Rain Program, utility units (i.e., fossil fuel-
fired boilers or turbines) are allocated allowances and must not emit 
sulfur dioxide in excess of the amount authorized by the allowances 
that they hold. EPA proposes to revise certain units' allowances in 
response to litigation, in light of Agency errors in making the 
allocations or errors in data relevant to whether facilities are 
covered by the Acid Rain Program, or because of more recent information 
concerning the construction or commercial operation of new units.

DATES: Comments on the regulations proposed by this action must be 
received on or before January 27, 1997.

ADDRESSES: Comments. All written comments must be identified with the 
appropriate docket number (Docket No. A-95-56) and must be submitted in 
duplicate to EPA Air Docket Section (6102), Waterside Mall, Room M1500, 
1st Floor, 401 M Street, SW, Washington DC 20460.
    Docket. Docket No. A-95-56, containing supporting information used 
to develop the proposal 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 at the 
above address. Information concerning the original rules and some of 
the revisions proposed today is found in Docket Nos. A-90-38 (permits), 
A-91-43 and A-92-06 (allowances), A-90-51 (continuous emissions 
monitoring), A-91-68 (excess emissions), A-91-69 (general), and A-93-15 
(appeals). A reasonable fee may be charged for copying.

FOR FURTHER INFORMATION CONTACT: Kathy Barylski, at (202) 233-9074, 
U.S. Environmental Protection Agency, 401 M St. SW, Acid Rain Division 
(6204J), Washington, DC 20460 (concerning revisions of parts 73 and 
75); Dwight C. Alpern, Attorney-advisor, at (202) 233-9151 (same 
address) (concerning all other revisions); or the Acid Rain Hotline at 
(202) 233-9620.

SUPPLEMENTARY INFORMATION:

Regulated Entities

    Entities potentially regulated by this action are fossil-fuel fired 
boilers or turbines that serve generators producing electricity for 
sale. Regulated categories and entities include:

------------------------------------------------------------------------
                                                Examples of regulated   
                 Category                             entities          
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Industry..................................  Electric service providers  
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    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
could potentially be regulated by this action. Other types of entities 
not listed in the table could also be regulated. To determine whether 
your facility is regulated by this action, you should carefully examine 
the applicability criteria in Sec. 72.6 and the exemptions in 
Secs. 72.7 and 72.8 of title 40 of the Code of Federal Regulations and 
the revised Secs. 72.6, 72.7, 72.8, and 72.14 of the proposed rule. If 
you have questions regarding the applicability of this action to a 
particular entity, consult the persons listed in the preceding FOR 
FURTHER INFORMATION CONTACT Section.

Organization

    The information in this preamble is organized as follows:

I. Part 72: Applicability of and Exemptions from Acid Rain Program
    A. Revisions Concerning Applicability
    B. Revisions to Exemptions
    1. Fuel Use and Fuel Testing Requirements Under New Units 
Exemption
    2. Administration of New Units Exemption
    3. Retired Units Exemption
    4. Industrial Units Exemption
II. Part 72: Interaction of Acid Rain Permitting and Title V
    A. Relationship Between Acid Rain Rules and Parts 70 and 71
    B. State Authority to Administer and Enforce Acid Rain Permits
    C. Required Elements for State Acid Rain Program
III. Part 72: Miscellaneous Permitting Matters
    A. Definitions
    B. Designated Representative
    C. Compliance Plans
    l. Submission of Substitution and Reduced Utilization Plans
    2. Repowering Extension Plans
    D. Federal Permit Issuance
    E. Permit Revision
    F. Reduced Utilization Accounting
IV. Part 73: Allowances
    A. Revision of Table 2 Allowances
    l. Allocation Determinations Remanded to EPA
    2. Correction of Agency Errors
    B. Deletion of Units from Table 2
    C. Additions of Units to and Deletions of Units From Table 3
    D. 1998 Revision of Allowance Allocations
    E. Revisions to Small Diesel Refinery Provisions
V. Part 75: Monitoring Requirements for Units Burning Digester or 
Landfill Gas
    VI. Part 77: Excess Emissions
    A. Immediate Deduction of Allowances to Offset Excess Emissions
    B. Deadline for Payment of Excess Emissions Penalties
    C. Excess NOx Emissions Under NOX Averaging Plans
VII. Part 78: Administrative Appeals
VIII. Administrative Requirements
    A. Executive Order 12866
    B. Unfunded Mandates Act
    C. Paperwork Reduction Act
    D. Regulatory Flexibility Act
    E. Miscellaneous

I. Part 72: Applicability of and Exemptions From Acid Rain Program

A. Revisions Concerning Applicability

    Section 72.6 explains what types of units are ``affected units'' 
subject to emissions reduction or limitation

[[Page 68341]]

requirements and other requirements of the Acid Rain Program and what 
types of units are not affected units. Under Sec. 72.6(b) (5) and (6), 
qualifying facilities and independent power production facilities 
meeting certain requirements are not affected units. One such 
requirement is that the facility had, as of November 15, 1990, a 
qualifying power purchase commitment, which may be in the form of a 
letter of intent that is followed by a power sales agreement. Under 
section 405(g)(6)(A) of the Act, the power sales agreement must be 
executed ``within a reasonable time'' following the letter of intent. 
In July 1992 (57 FR 29940, 29947 (July 7, 1992)), EPA proposed a two-
year deadline or no later than November 15, 1992 for execution of the 
power sales agreement. That deadline was not commented on and was made 
final in March 1993 (58 FR 15634, 15648 (March 23, 1993)). 
Subsequently, EPA has received public comment that the two-year 
deadline created a hardship for independent power producers negotiating 
with multiple regulated purchasers.
    To implement the statutory language regarding the time frame for 
execution of a power sales agreement, EPA could set a fixed deadline 
(as in the current rule) or could determine a reasonable time frame on 
a case-by-case basis as part of an applicability determination. 
Particularly where questions of the applicability of the Acid Rain 
Program are involved, EPA maintains that it is preferable to establish 
clear-cut lines. Moreover, EPA is concerned that the two-year period in 
the current rule for execution of an agreement does not take account of 
the time necessary to complete agreements where multiple utility 
purchasers are involved.
    Therefore, EPA is proposing to revise the deadline to three years 
from letter of intent to execution of a power sales agreement. Since 
under section 405(g)(6)(A) of the Act, the letter of intent must be in 
place by November 15, 1990, this means that the power sales agreement 
must have been executed by November 15, 1993, rather than by November 
15, 1992 as under the current rule. Public comment indicates that the 
additional year is reasonable for independent power producers 
negotiating with multiple regulated purchasers. EPA requests comments 
on this revision.
    Section 72.6(c) sets out procedures for petitioning for a 
determination from the Administrator as to whether a unit is an 
affected unit covered by the Acid Rain Program. The current regulation 
allows the submission of the petition by a certifying official, rather 
than requiring that the unit have a designated representative who would 
make the submission. However, the regulation has a general reference 
to, and requires compliance with, Sec. 72.21, which requires that 
submissions be made by a designated representative and include certain 
certifications. To prevent confusion, EPA proposes revisions that 
pinpoint the certification and notice requirements in Sec. 72.21 that a 
certifying official's petition must meet. In addition, language is 
added to Sec. 72.6(c)(1) to clarify that it is the certifying official 
of an owner or operator of a unit that may submit a petition, and some 
superfluous language is removed. Further, this section is revised to 
allow a petition to be submitted at any time but indicating that, if 
possible, the petition should be submitted before the issuance of an 
Acid Rain permit. While EPA wants to facilitate the submission of 
petitions where owners or operators are uncertain as to the status of 
their unit under the Acid Rain Program, EPA's determination on the 
petition may obviate the processing and issuance of a permit for the 
unit.

B. Revisions to Exemptions

    In the current rule, EPA established two exemptions from Acid Rain 
Program requirements. First, in Sec. 72.7 EPA provided for an exemption 
from requirements concerning permitting, allowances, and continuous 
emissions monitoring for small, new units (i.e., units that commence 
commercial operation on or after November 15, 1990 and serve generators 
with a total nameplate capacity of 25 MWe or less) burning clean fuels. 
The exemption was adopted because emissions from these units were 
considered to be de minimis. 58 FR 3390, 3594 (January 11, 1993). 
Second, in Sec. 72.8 EPA provided for an exemption from Phase II 
permitting requirements for affected units that retire permanently 
prior to the issuance of a Phase II Acid Rain permit. Units that 
submitted petitions for such an exemption could also be exempted from 
monitoring requirements under Sec. 75.67.
1. Fuel Use and Fuel Testing Requirements Under New Units Exemption
    EPA is proposing to modify the limitation on fuel use and the 
requirements for fuel testing under the new units exemption. Under the 
current rule, units must use exclusively fuels with a sulfur content of 
0.05 percent or less by weight, and specified tests to measure sulfur 
content must be performed for each delivery of fuel (other than natural 
gas, which is presumed to meet the sulfur content requirement). The 
records of such tests must be retained at the source for 5 years.
    In contrast, today's proposal requires units to use only gaseous 
fuel with an annual average sulfur content of 0.05 percent by weight or 
less and only nongaseous fuel that separately meets this same annual 
average sulfur content limit. The proposal includes formulas for 
calculating the annual average percentage sulfur content by weight for 
gaseous fuels and for nongaseous fuels. Similar to the approach in the 
current rule requiring sampling and sulfur content testing of fuel 
deliveries, the formulas require use of the measured sulfur content of 
periodic samples of fuel deliveries during the year to calculate the 
annual average sulfur content of fuel burned during the year. The 
formulas require sampling of fuel at least once for each delivery or, 
for fuel that is delivered to the unit continuously by pipeline, at 
least once each quarter that the fuel is delivered. Unlike the current 
rule, the formulas do not require the use of any specific testing 
methods to measure sulfur content. Sampling and testing of sulfur 
content of fuel, which may be performed by the fuel supplier rather 
than the unit's owners and operators, are necessary in order to 
demonstrate whether the sulfur content limit is met. As under the 
current rule, the owners and operators of an exempt unit bear the 
burden of proving compliance with the requirements of the exemption.
    However, if the only gaseous fuel burned is natural gas, the 
proposal provides that the 0.05 percent annual average limit for 
gaseous fuel is assumed to be met without making any calculations or 
conducting any sampling or testing. This is consistent with the current 
Sec. 72.7(d)(2)(ii), which provides that natural gas (which is defined 
as a ``fluid mixture of hydocarbons containing'', inter alia, 20 grains 
or less of sulfur (40 CFR 72.2)) is assumed to meet the 0.05 percent 
limit on each delivery of fuel. Moreover, consistent with the current 
rule, which excludes (through the 0.05 percent sulfur content limit on 
each delivery) any use of coal by the units, and because the sulfur 
content of a coal delivery is not necessarily uniform, the proposal 
expressly bars the use of coal or coal-derived fuel (except coal-
derived gas with a sulfur content no greater than natural gas) by 
exempt units.
    EPA believes that the fuel use and testing requirements in the 
proposal are sufficiently stringent to ensure that minimal emissions 
from the exempt units and are significantly less

[[Page 68342]]

burdensome for the owners and operators of the units involved, which in 
many cases are municipally owned units. Allowing a unit to burn some 
fuel that exceeds 0.05 percent sulfur by weight so long as the annual 
average sulfur content of its fuel (weighted by the weight of the fuel) 
does not exceed that level will have little effect on the total 
SO2 emissions for the year. Separate sulfur content limits are 
established by gaseous and nongaseous fuels so that very clean gaseous 
fuel (e.g., pipeline natural gas) cannot be used to offset nongaseous 
fuel with a sulfur content significantly higher than 0.05 percent. EPA 
notes that, under this approach, a unit will be able to use landfill or 
digester gas, which has a higher sulfur content than natural gas but 
lower than some nongaseous fuels.1 Using the annual average will 
give owners and operators more flexibility in that a single delivery of 
fuel in excess of the limit will not automatically invalidate the 
exemption, as is the case under the current rule.
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    \1\ This is consistent with EPA's efforts to encourage use, 
rather than flaring, of such gas. See section V of this preamble.
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    EPA also believes that prescribing more detailed testing methods is 
unnecessary because the appropriate testing methods may vary depending 
on the specific fuel involved and testing data from the fuel supplier 
may be sufficient to establish the sulfur content of the fuel.2 
The proposal requires owners and operators to keep records for 5 years 
(or longer if required in writing by EPA or the permitting authority) 
that demonstrate that the sulfur content limit has been met. This 
approach gives owners and operators more flexibility to determine what 
type of information will support such a demonstration, but the proposal 
also emphasizes that the burden of proof is on the owners and 
operators.
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    \2\ With the elimination of the fuel testing requirements in the 
current rule, the testing methodologies specified in the current 
Sec. 72.7 and incorporated by reference in the current Sec. 72.13 
are unnecessary, and EPA therefore proposes to remove them. The 
provisions of Sec. 72.13 are renumbered to reflect this change.
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2. Administration of New Units Exemption
    The purpose of the exemption, of course, is to relieve owners and 
operators of the burden of complying with permitting, allowance, and 
monitoring requirements for clean new units and to reduce the 
concomitant administrative burden on permitting authorities. In issuing 
new unit exemptions under the current rule, the Agency has found that 
the procedures for obtaining and maintaining an exemption are somewhat 
less burdensome than the procedural requirements for units required to 
have Acid Rain permits. However, the Agency has concluded that the 
exemption procedures are still more burdensome than necessary. In 
particular, the current rule provides that: a potentially exempt unit 
must have a designated representative and submit a petition for a 
written exemption; the permitting authority must issue a written 
exemption after providing public notice (e.g., in a local newspaper) 
and a comment period; and the exemption must be renewed every five 
years.
    The current rule requires a significant amount of processing for 
each unit that seeks to obtain an exemption. The Agency has already 
granted about 130 new unit exemptions using current procedures, and, 
despite extensive public notice, not one comment has been received 
during the public comment periods. Based on its experience with these 
exemptions, EPA does not believe that requiring a designated 
representative to be appointed for each clean unit and submission and 
processing of forms for a new units exemption every five years provides 
any significant environmental benefit.
    The proposal makes the new unit exemptions largely automatic for 
those units that meet the criteria, discussed above, concerning 
capacity, annual fuel use, and recordkeeping. In general, no designated 
representative, petition for exemption, or renewal petition is 
required.3
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    \3\ Because the proposed new units exemption and, as discussed 
below, the proposed retired units exemption, are automatic and 
written exemptions for these units are no longer issued, the 
references in the current part 72 to written exemptions under 
Secs. 72.7 and 72.8 are revised. The revisions to these references 
also reflect, in some cases, the establishment of exemptions for 
industrial units under proposed Sec. 72.14, which is discussed 
below. For example, the criteria for State acid rain programs in 
Sec. 72.72(b) are changed to remove the reference to Secs. 72.7 and 
72.8 written exemptions and to refer instead to Sec. 72.14 
exemptions. By further example, the reference in Sec. 72.9(c)(6) to 
Secs. 72.7 and 72.8 written exemptions is changed to refer to 
exemptions under Secs. 72.7, 72.8, and 72.14. The same change--and 
the only change proposed to part 74--is proposed in Sec. 74.2.
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    The only exception to this approach is for units that are listed 
and allocated one or more allowances on Table 2 or 3 of Sec. 73.10. 
Because they are being exempt from the requirement to hold allowances 
to cover emissions, they should not retain their allowance allocations. 
The proposal requires the designated representative (who handle the 
unit's allowance account) to submit to EPA and the State permitting 
authority a statement that: the unit meets, and will continue to meet, 
the exemption requirements; he or she is surrendering allowances in the 
same amount, and of the same or earlier compliance use date as, the 
unit's allocated allowances; and he or she is returning the proceeds 
for any allowances withheld from the unit for EPA allowance auctions 
under subpart E of part 73. However, apparently because the owners and 
operators of some small units are small entities and not fully aware of 
their obligations under the Acid Rain Program, some potentially exempt 
units have still not selected designated representatives even though 
the units are allocated allowances. In order to facilitate 
implementation of the exemptions by small entities, the proposal 
provides that, if there is no designated representative, a certifying 
official of each owner of the unit may make this submission. This 
reflects the desirability of ensuring that each owner (or the 
designated representative representing all owners) is aware of the 
allowance surrender. The unit will not be exempt until EPA actually 
deducts the allowances from the unit account in the Allowance Tracking 
System and receives the allowance auction proceeds. Upon deduction of 
the allowances, the unit account is closed.
    Although units that meet the exemption criteria and are not 
allocated allowances are automatically exempt, the proposal requires 
the designated representative (or a certifying official of each owner) 
of such unit to submit to EPA and the State permitting authority a 
statement that the unit meets and will continue to meet the exemption, 
which are referenced in the statement. EPA anticipates providing a 
standard form for designated representatives or certifying officials 
for exempt units (whether or not they have allocated allowances) to 
submit the appropriate information. Providing this type of notice to 
EPA and the State permitting authorities imposes little burden on the 
exempt units and has important benefits. First, owners of the units are 
more likely to consider carefully the basis for the exemption and the 
continuing requirements under the exemption if each owners' 
representative must sign and submit such a form. Second, submission of 
the form will ensure that EPA and State permitting authorities can keep 
track of which units are exempt and will not treat such units as 
affected units.
    Under the proposal, a new units exemption is effective on January 1 
of the first full calendar year for which the unit meets the criteria 
for an exemption.

[[Page 68343]]

This reflects the annual nature of the Acid Rain Program. As provided 
in the current rule, the exemption terminates automatically when the 
unit involved no longer satisfies the criteria for an exemption. 
Consistent with the approach taken with other exclusions of units from 
the Acid Rain Program, a unit that had an automatic exemption that 
terminates is an affected unit and cannot requalify for the exemption. 
See 40 CFR 72.6(a)(3)(ii) through (vii). As in the current rule, 
exemption termination subjects the unit to the permitting, allowance, 
and monitoring requirements of the Acid Rain Program. The unit will 
have to have a designated representative, who must submit a complete 
permit application before the later of January 1, 1998 or 60 days after 
the exemption terminates. The unit will have to comply with the 
monitoring requirements within 90 days after the termination.
    Under the current rule, exempt units are still included in the 
definition of ``affected unit.'' As a result, they must generally be 
included in title V operating permits issued by State permitting 
authorities under part 70 and are not eligible to become opt-in units 
under part 74. Part 70 requires sources with affected units to have 
operating permits reflecting Acid Rain Program requirements and any 
other Clean Air Act requirements to which the sources are subject. If a 
unit is subject to other Clean Air Act requirements, the unit must 
continue to comply with such non-title IV provisions, and this will be 
reflected in the title V operating permit.4 However, if a unit is 
not subject to any other Clean Air Act requirements and the unit is 
exempt from Acid Rain permitting, allowance, and monitoring 
requirements, question has been raised as to whether the current rule 
can be read to require the unit to obtain a title V operating permit. 
In such circumstances, it makes little sense to require a title V 
operating permit; after all, the only requirements put in the permit 
will be those for maintaining an exemption and a major purpose of the 
exemption is to relieve the unit and the permitting authority of 
permitting burdens. Although the Agency maintains that a title V 
operating permit is not required for such a unit, the proposal modifies 
Sec. 72.6(b) to make this explicit by stating that any exempt new unit 
is an unaffected unit. Further, because the purpose of the exemption is 
to relieve clean, new units of permitting and other Acid Rain 
requirements, EPA continues to believe that exempt units should be 
excluded from applying to re-enter the Acid Rain Program as opt-in 
sources and the proposal contains such an exclusion.
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    \4\ In order to ensure that owners and operators understand 
this, today's proposal states this expressly. The proposed rule also 
provides that a permitting authority may use the administrative 
amendment procedures under Sec. 72.83 to add to the permit an 
exemption under Sec. 72.7, 72.8, or 72.14.
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    Finally, as discussed above, EPA has already approved a number of 
written exemptions for new units under the current rule. Since the 
proposal provides more flexible requirements for qualifying for and 
maintaining the exemption (e.g., more flexible sulfur content 
requirements and no renewal requirement), the units with written 
exemptions also qualify for the automatic exemption under today's 
proposal. The proposal makes this clear by including, as one category 
of units that qualify for the automatic exemption, those new units that 
have already been granted written exemptions. EPA sees no reason for 
denying already exempt units the flexibility and streamlining benefits 
of the proposal and also sees no purpose to retaining permanently two 
different types of new units exemptions. Consequently, the proposal 
provides that already exempt units must meet the requirements for 
maintaining an automatic exemption, in lieu of the requirements 
contained in the current rule.
    However, while the current rule requires exempt units to surrender 
any allowances allocated to the units under Sec. 73.10 for years for 
which the units are exempt, the written exemptions already granted did 
not extend beyond 5 years. The already exempt units have not yet 
surrendered Phase II allowances and, under the current rule, will have 
to do so when the exemption is renewed. In extending automatically 
these exemptions and removing the need for renewal, the proposal 
requires those exempt units with allocated allowances to surrender such 
allowances and the proceeds from EPA's auctioning of such allowances.
3. Retired Units Exemption
    While retaining the basic criteria in the current rule for 
qualifying for the retired units exemption, EPA proposes to streamline 
the procedures for obtaining and maintaining the exemption. In 
addition, EPA proposes to clarify what Acid Rain requirements are 
covered by the exemption.
    The current rule requires largely the same procedures for the 
retired units exemption as for the new units exemption: submission of a 
petition, issuance of a written exemption subject to public notice and 
comment, and submission of a renewal petition every 5 years. EPA has 
approved about 155 retired units exemptions under these procedures 
without receiving any public comments on them. Since the purpose of the 
exemption is to reduce the burden on the owners and operators of 
retired units and the permitting authorities, EPA believes that, as in 
the case of new units exemptions, the procedures for retired units 
exemptions can be made less burdensome.
    The proposal takes essentially the same approach in setting revised 
procedures for both new units and retired units exemptions. The 
proposed retired units exemption is automatic so long as the unit meets 
the criteria for the exemption: i.e., that the unit is permanently 
retired and does not emit any SO2 or NOX starting on the 
effective date of the exemption. Units that retire are not, of course, 
necessarily small and, since they probably have been participating in 
the Acid Rain Program until retirement, probably have designated 
representatives. Under the proposal, the designated representative of 
each exempt unit must submit to EPA and the State permitting authority 
a statement that the unit meets, and will continue to meet, the 
exemption requirements. EPA anticipates providing a standard form for 
the designated representative of an exempt unit to submit the 
appropriate information. Units already granted retired units exemptions 
also qualify for the automatic exemption and will make no additional 
submissions. As under the current rule, exempt retired units retain 
their allocated allowances since, even without the exemption, they 
would have no SO2 emissions and would not use any allowances. An 
exempt unit's Allowance Tracking System account is subject to the 
requirements for general accounts under part 73. The owners and 
operators of the unit must retain at the source records demonstrating 
that the unit qualifies for the exemption. The exemption terminates 
automatically if the unit resumes operation and emits any SO2 or 
NOX.
    EPA is also proposing to modify the current rule to clarify what 
Acid Rain requirements are covered by the exemption. Currently 
Sec. 72.8 of the regulations exempts retired units only from the 
requirements of part 72. Section 75.67(a) currently provides that units 
that retire before January 1, 1995 and for which a petition for a 
retired units exemption is submitted prior to monitor certification 
deadlines may also obtain an exemption from the monitoring requirements 
of part 75. The Agency maintains that any unit that retires should be 
automatically exempt, starting in the first full year of

[[Page 68344]]

retirement, from both the Phase II permitting requirements of part 72 
and the monitoring requirements of part 75 so long as the unit remains 
retired. If the unit has no emissions, there is nothing to monitor. The 
proposal removes Sec. 75.67(a) and adds the monitoring exemption to 
Sec. 72.8.
    However, as noted above, retired units may still receive allowance 
allocations. Such units must remain subject to subpart B of part 73, 
which governs allowance allocations. Reflecting these considerations, 
the proposal exempts retired units from all Acid Rain Program 
requirements except for the provisions of Secs. 72.2 through 72.6, 
Sec. 72.8, Secs. 72.10 through 72.13, and subpart B of part 73. 
Moreover, retired units that, but for the exemption under Sec. 72.7, 
would be Phase I units, must still comply with the requirements 
concerning Phase I Acid Rain permits and reduced utilization of such 
units during Phase I.5 The purpose of the retired units exemption 
is to exempt the units from Phase II permitting, not to allow them to 
avoid requirements implementing statutory permitting and reduced 
utilization provisions. In fact, the retired unit exemptions issued by 
EPA under the current Sec. 72.8 state expressly that they apply to 
Phase II (as distinguished from Phase I) permitting requirements. In 
order to clarify that reduced utilization requirements apply to units 
with retired unit exemptions, the proposal states that the units must 
submit annual compliance certification reports that include the 
accounting for reduced utilization and are subject to end-of-year 
allowance deduction procedures for Phase I years.
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    \5\  The definition of ``Phase I unit'' in Sec. 72.2 is revised 
to make it clear that units that, but for a retired units exemption, 
would be subject to an Acid Rain emission reduction requirement or 
limitation continue to be treated as Phase I units.
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    For the same reasons as under the proposed new units exemption, EPA 
proposes that units under the retired units exemption be unaffected 
units and that they be excluded from becoming opt-in sources. 
Similarly, retired units already granted written exemptions will be 
covered by the automatic exemption and must comply with the 
requirements for maintaining such an exemption.
4. Industrial Units Exemption
    The purpose of title IV is to reduce the adverse impacts of acid 
deposition through reductions of SO2 and NOx emissions. 
Congress addressed SO2 emissions of both ``utility units'' and 
``industrial sources.'' While ``utility units'' are generally required 
(starting in Phase I, if the unit is listed in Table A of section 404 
or is otherwise a Phase I unit, or Phase II) to meet SO2 emissions 
limitations and to hold allowances to cover their SO2 emissions, 
``industrial sources'' are not specifically required to limit emissions 
or hold allowances. Instead, section 406 of the Clean Air Act 
Amendments of 1990 required the Administrator to prepare and submit to 
Congress a report that inventories national annual SO2 emissions 
from industrial sources. Whenever the inventory indicates that such 
emissions ``may reasonably be expected to exceed 5.6 million tons per 
year,'' the Administrator must ``take such actions under the Clean Air 
Act as may be appropriate to ensure that such emissions do not exceed'' 
the 5.6 million ton cap. 42 U.S.C. 7656. These actions may include 
promulgation of standards of performance for new or existing sources.
    The statutory definitions of ``utility unit'' and ``industrial 
source'' draw the line between facilities (utility units) that are 
subject to the requirement to hold allowances by no later than January 
1, 2000 and industrial sources that are not, but could be, made subject 
to unspecified requirements if the industrial source cap is exceeded. 
However, ``utility unit'' is broadly defined in section 402 of the Act 
to encompass units owned by companies that are generally not treated as 
full-fledged public utilities by State and federal utility regulatory 
authorities.
    Generally, for purposes of State utility regulation, a public 
utility is an entity that owns or operates facilities whose product or 
service is dedicated to public use. Typically, the company must devote 
its facilities to serve the general public or a portion of the general 
public, not simply selected contract customers.6 In contrast, 
under section 201(e) of the Federal Power Act, any persons that sell 
electricity that is in turn resold are ``public utilities'' and are 
subject to regulation of their sales rates and other matters by the 
Federal Energy Regulatory Commission (FERC). While holding that 
industrial companies that sell utilities incidental amounts of 
electricity from non-cogeneration units are themselves public 
utilities, FERC has imposed less burdensome regulatory requirements on 
such industrial sellers. For example, rate schedules for sales by these 
industrial sellers must be filed with FERC but the rates are not 
required to meet traditional cost-of-service standards, under which a 
rate must be based on the seller's costs (including return on capital) 
of providing the electricity. See, e.g., Ford Motor Co. and Rouge Steel 
Co., 50 FERC para. 61,426 (1990), modified on reh'g, 50 FERC para. 
61,025; Cliffs Electric Service Co., 32 FERC para. 61,372 at 61,833 
(1985); Orange & Rockland Utilities, 42 FERC para. 61,012 (1988); St. 
Joe Minerals Corp., 21 FERC para. 61,323 (1982), modified on rehg., 22 
FERC 61,211 (1983).
---------------------------------------------------------------------------

    \6\ See, e.g., Arkansas-Louisiana Electric Cooperative v. 
Arkansas Public Service Comm'n, 194 S.W.2d 673, 678 (S.Ct. Arka. 
1946); Richfield Oil v. Public Utilities Comm'n of California, 354 
P.2d 4, 10-11 and 16 (S.Ct. Cal. 1960); Colorado Utilities v. Public 
Service Comm'n, 61 P.2d 849, 854-55 (S.Ct. Colo. 1936); Mississippi 
River Fuel v. Illinois Commerce Comm'n, 116 N.E.2d 394, 399 (S.Ct. 
Ill. 1953); City of Saint Louis v. Mississippi River Fuel, 97 F.2d 
726, 729-30 (8th Cir. 1938); Llano v. Southern Union Gas, 399 P.2d 
646, 653 (S. Ct. N.Mex. 1964); Ambridge v. Public Sevice Comm'n of 
Pennsylvania, 165 A. 47, 49 (S. Ct. Penn. 1933); Humble Oil and 
Refining v. Railroad Comm'n of Texas, 128 S.W.2d 9, 13 (S.Ct. Tex. 
1939); Valcour v. Morrisville, 184 A. 881, 885 (S. Ct. Ver. 1936); 
Inland Empire Rural Electrification v. Dept. of Public Service of 
Washington, 92 P.2d 258, 262-63 (S.Ct. Wash. 1939); Wilhite v. 
Public Utilities Comm'n of West Virginia, 149 S.E.2d 273, 281 (S.Ct 
W. Wir. 1966); and Union Falls Power v. Oconto Falls, 265 N.W. 722, 
723 (S.Ct. Wisc. 1936) (cases holding that company that serve 
public, not just selected customers, is public utility). But see 
Southern Oklahoma Power v. Corporation Comm'n, 220 P. 370, 371 
(S.Ct. Okla. 1923) (holding that generating company the only 
customer of which is a public utility is itself a public utility).
---------------------------------------------------------------------------

    Under section 402 of the Clean Air Act, a utility unit is ``a unit 
that serves a generator in any State that produces electricity for 
sale,'' regardless of the amount of the sale relative to total 
generation by the unit or generator or whether the sale is to the 
general public or to a public utility for resale to the public. 42 
U.S.C. 7651a(17)(A). Consequently, entities (such as independent power 
producers, small power producers, and cogenerators) that sell 
electricity to a public utility are affected units unless they qualify 
for an exemption under other provisions of title IV. Section 402(17)(C) 
establishes an exemption for units cogenerating steam and electricity: 
a cogeneration unit is not a ``utility unit'' 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 and more 
than 25 megawatts electrical output to any utility power 
distribution system for sale. 42 U.S.C. 7651a(17)(C).

In addition, section 405(g)(6) establishes an exemption for ``qualifing 
small power production facilities'', ``qualifying cogeneration 
facilities'', and ``new independent power producers''. 42 U.S.C. 
7651d(g)(6). Such entities (which are defined in sections 405(g)(6) and 
416(a)(2)) that had a committment--through a power sales agreement, a 
order of a State regulatory authority, a letter of intent, or selection 
as a winning bidder in a competitive bid

[[Page 68345]]

solilcitation--as of November 15, 1990 to sell power are not affected 
units. There are no such exceptions for industrial units that do not 
fall within the exempt categories of units under these sections.
    As a result, the requirements of title IV cover non-cogeneration 
industrial units serving generators that produce electricity almost 
exclusively for use by an industrial company and only incidentally for 
sale to a public utility. In one such case, three units and three 
generators (with a total nameplate capacity of about 190 MWe) are owned 
and operated solely by the industrial company. Under the 
interconnection agreement with a public utility and a related power 
purchase agreement, the public utility provides additional electricity, 
through backup and emergency service, for use by the industrial 
company. The industrial company is in turn obligated to sell some 
electricity on a backup and emergency basis to the public utility and, 
starting in 1984, has made such sales, which have been less than 10 
percent of total annual generation. The industrial company obtains 
backup for its capacity, and the public utility avoids constructing 
some additional capacity. Because these industrial units make limited 
electricity sales only to the public utility, the company is apparently 
not regulated by the State utility regulatory authority and is subject 
to relatively light-handed FERC regulation. EPA has received public 
comment suggesting that the units be exempt from the Acid Rain Program.
    In order to determine the scope of the issue, EPA attempted to 
estimate the number of units that might be covered by such an exemption 
for industrial units. About 3,400 industrial combustion sources are 
included in the 1990 Interim Inventory (a database based on the 1985 
NAPAP inventory with emissions projections for 1995). EPA removed, from 
this group of possibly affected industrial units, those industrial 
units thought to be: self-generators consuming rather than selling 
their generation; cogenerators exempt under section 402(17)(C); or 
units exempt under section 402(b) because they were serving only 
generators with a nameplate capacity of 25 MWe or less. EPA estimated 
that about 140 remaining industrial units possibly may be affected 
units under title IV. Based on discussions with industry 
representatives and on review of the electric rate schedules filed at 
FERC for electricity sellers that are not traditional utilities, EPA 
concludes that most of these remaining industrial units are not selling 
any electricity and that there are about 15 industrial units that sell 
some electricity and so are affected units under the current Acid Rain 
rules. See Report to Docket: Industrial Units.
    Even if electricity sales to a public utility make up a very small 
portion of the total amount of electricity produced by an industrial 
unit and associated generator, the Acid Rain Program imposes allowance 
requirements relating to all SO2 emissions from the unit. In such 
a case, no distinction is made between emissions associated with the 
small amount of electricity sales and emissions associated with the 
vast majority of electricity used by the industrial company itself. An 
affected industrial unit must hold allowances, as of the allowance 
transfer deadline, that cover all of the unit's SO2 emissions 
during the year. 40 CFR 72.9(c)(1)(i). Similarly, any NOx emission 
limitation applicable to the industrial unit covers all NOx 
emissions from the unit. See, e.g., 40 CFR 76.5, 76.6, and 76.7.
    The cost to some industrial companies of holding sufficient 
allowances may be exacerbated by the fact that, even though certain 
existing industrial units could have qualified for allowance 
allocations for Phase II under section 405 of the Act, none were 
allocated any allowances. See 40 U.S.C. 73.10 (Tables 2 and 3, which do 
not include any such units). Information on such units was not included 
in the National Allowance Data Base (NADB), which was used to develop 
allowance allocations. However, based on information compiled by the 
Department of Energy on electric generators owned by nonutility 
electric power producers, EPA developed and published the Adjunct Data 
File, which listed units owned by ``nontraditional'' utilities. 57 FR 
30034, 30040 (July 7, 1992). EPA noted that the listed facilities 
potentially could be affected units, but that it did not have 
sufficient information to make an applicabililty determination or to 
allocate allowances to those that were affected units. Consequently, in 
publishing the file, EPA requested owners or operators of units that 
were then or might, in the future, become affected units to provide EPA 
the data elements necessary for allocating allowances. In addition, EPA 
gave notice that if the data was not provided by September 8, 1992, the 
units involved would not be allocated any allowances and, to the extent 
allowances were needed, would have to obtain them on the open market. 
Id. A number of industrial companies submitted comments on the Adjunct 
Data File, each arguing that their units were not affected units.
    On March 23, 1993, EPA issued a notice stating that (with a few 
exceptions not relevant here) that it ``believes'' that none of the 
units in the Adjunct Data File were affected units. 58 FR 15720, 15727 
(March 23, 1993). No allowances were allocated to industrial units in 
the Adjunct Data File (including some units identified in Report to 
Docket: Industrial Units as potentially covered by the proposed 
industrial unit exemption) or to any other industrial units. However, 
EPA stressed that the omission of a unit from the tables indicating 
allowance allocations does not mean that the unit is an unaffected 
unit: ``[a]pplicability will be determined under the (Acid Rain) rules 
in 40 CFR 72.6.'' Id.
    In addition to being required to hold allowances covering all 
SO2 emissions and to meet any applicable NOx emission 
limitation, an affected industrial unit, like all affected units, must 
install, operate, and maintain continuous emission monitoring systems 
for all SO2, NOx, and CO2 emissions and for opacity. 
After EPA approves certification of the systems, they must be tested 
periodically to ensure that the monitoring data is accurate. Further, 
monitoring data (including hourly emissions data) must be reported to 
EPA on a quarterly basis. The average cost per unit of acquisition, 
installation, operation, and maintenance of a continuous emission 
monitoring system (including data handling hardware) is estimated to be 
about $90,600 (in 1993 dollars). Economic Analysis of the Title IV 
Requirements of the 1990 Clean Air Act Amendments at 34 (ICF Resources 
Inc. 1995) (estimating total annualized emission monitoring costs under 
title IV of $200 million for 2,096 units during the period 1997-2010).
    The costs of the Acid Rain Program are more likely to be a problem 
for industrial companies than for public utilities, which in general 
have greater ability to pass through to customers the costs of 
acquiring allowances. First, public utilities generally are subject to 
cost of service ratemaking and charge rates covering their costs of 
service. Second, virtually all fossil fuel-fired utility generation is 
covered by the Acid Rain Program. In contrast, the prices charged by 
industrial companies for their industrial products are generally 
limited by competitive market prices and relatively few industrial 
units are covered by the program. Particularly if one industrial 
company, but not its competitors, must meet the costs of the Acid Rain 
Program as applied to its units, market prices will not necessarily 
cover all such costs. EPA notes that in

[[Page 68346]]

section 405(g)(6)(A) cogeneration units that, as of November 15, 1990, 
had already contracted or otherwise committed to sell electricity to a 
public utility were exempted from the Acid Rain Program because of 
their limited ability to pass through allowance costs to customers. 58 
FR 15634, 15638 (March 23, 1993); see also Cong. Rec. S3027-28 (March 
22, 1990).
    In short, as a result of a very small portion of its operations 
(i.e., incidental electricity sales to public utilities under existing 
interconnection and power purchase agreements), a non-cogeneration 
industrial unit may be subject to allowance and monitoring requirements 
affecting all of its electric generation activities and imposing 
significant costs.7 Further, once the industrial unit has begun 
making any such incidental electricity sales, the unit becomes an 
affected utility unit permanently subject to all the requirements of 
the Acid Rain Program. In the absence of an exemption, such a unit is 
an affected utility unit if, during 1985, it served a generator that 
produced electricity sold to a public utility or if, at any time 
thereafter, the unit serves such a generator. See 42 U.S.C. 
7651a(17)(A). The unit remains an affected utility unit even if the 
industrial company subsequently terminates its interconnection 
agreement with and stops selling electricity to the public utility.
---------------------------------------------------------------------------

    \7\ The Acid Rain Program also requires the owners and operators 
of affected industrial units to select a designated representative 
and obtain an Acid Rain permit covering the units. While these 
requirements impose some costs, the costs are relatively small.
---------------------------------------------------------------------------

    EPA is concerned that, because of an incidental portion of the 
operations of a non-cogeneration industrial unit, an industrial company 
will be burdened with significant regulatory requirements and resulting 
costs that were unanticipated when the incidental electricity sales 
were made and that are unavoidable in that they remain even if the 
incidental sales are now terminated. However, this concern applies only 
where (1) the industrial units are not cogeneration units; (2) these 
units serve generators that were contractually obligated to make 
incidental sales under an interconnection agreement (and any related 
power purchase agreement) and have made only incidential electricity 
sales; and (3) this contractual obligation was effective on or before 
March 23, 1993. This new exemption is not necessary for cogeneration 
units since Congress already provided an exemption for cogeneration 
units based on the amount of utility sales. Moreover, non-cogeneration 
industrial units making more than incidental electricity sales should 
be affected units since, in title IV, Congress generally applied the 
Acid Rain Program to units serving generators that sell electricity.
    The basis for limiting the exemption to units under a contractual 
obligation as of March 23, 1993 is related to the Agency's handling of 
allowance allocations for industrial units. After November 15, 1990, 
industrial units' owners were on constructive notice that if they 
contractually obligated themselves to sell electricity, they would be 
subject to title IV requirements. However, as noted above, on March 23, 
1993 EPA issued a notice stating that it believed that the industrial 
units listed in the Adjunct Data File (a list of units owned by 
``nontraditional utilities'') were unaffected units. 58 FR 15727. The 
notice did not explain the basis for this ``belief'', which appears to 
have been erroneous with regard to at least some of the listed 
noncogeneration industrial units. As a result, EPA did not add the 
industrial units to the allowance allocation tables and did not 
allocate any allowances to these units. Id. Also on March 23, 1993, EPA 
issued a final list of the Phase II allowance allocations under section 
403(a) of the Act.8 58 FR 15634 (March 23, 1993). As discussed 
below, EPA is today correcting certain Agency errors in the March 23, 
1993 allocations. However, except for these limited corrections, EPA 
will not allocate allowances to units that were not listed as receiving 
allowance allocations in the March 23, 1993 notice and that become 
affected units after that date. 58 FR 15641. Consequently, if, after 
March 23, 1993, a non-cogeneration industrial unit becomes 
contractually obligated to sell electricity to a utility and, by making 
the sales, becomes an affected unit, the unit will not be allocated 
allowances. Non-generation industrial units that were contractually 
obligated on or before March 23, 1993 and were affected units probably 
should have been, but were not, allocated allowances. Therefore, EPA 
proposes to apply the new exemption to non-cogeneration industrial 
units that were contractually obligated as of March 23, 1993.
---------------------------------------------------------------------------

    \8\ Section 403(a) required the final list of allowance 
allocations to be published by December 31, 1992, but the final list 
was issued late.
---------------------------------------------------------------------------

    Under this approach, the non-cogeneration industrial units that 
meet the exemption criteria and are issued an exemption may continue to 
serve generators making incidential, contractually required electricity 
sales and remain exempt. However, if the units serve generators that 
make sales after the contractual obligation is no longer in effect or 
to make sales beyond the contractual obligation, the units will become 
affected units under the Acid Rain Program.
    Exempting non-cogeneration industrial units will exempt their 
SO2 emissions from the requirement to hold allowances and thus 
from the 8.95 million ton cap in Phase II for utility units. The total 
estimated annual SO2 emissions from exempt industrial units are 
relatively small: about 47,000 tons. Report to Docket: Industrial 
Units. The environmental impact of removing these units from the 
utility unit cap is mitigated by the fact that emissions from the 
exempt industrial units are still subject to the 5.6 million ton cap 
for industrial sources. As discussed above, the Administrator is 
required to take action under section 406 of the Clean Air Act 
Amendments of 1990 to ensure that the industrial source cap is not 
exceeded.
    The industrial units exemption will also exempt these units from 
Acid Rain NOX emissions limitations to the extent that the units 
have coal-fired boilers of the types covered in Phase II. Again, the 
total estimated annual NOX emissions from exempt units is 
relatively small: about 19,000 tons. Id. In April 1995 EPA promulgated 
NOX emission limitations for dry bottom wall-fired or tangentially 
fired boilers. 60 FR 18751, 18763 (April 13, 1995). In January 1996, 
EPA proposed to revise these limitations and establish new limitations 
for most other types of existing coal-fired boilers. 61 FR 1442, 1480 
(January 19, 1996).
    For these reasons, EPA proposes to establish a narrow exemption for 
non-cogeneration industrial units, i.e., non-cogeneration units that 
have no owner or operator of which the principal business is 
electricity sale, transmission, or distribution or that is a public 
utility subject to State or local utility regulation. In determining 
whether this requirement is met, any affiliate or subsidiary or parent 
company of an owner or operator will be considered so that the 
requirement cannot be circumvented through the position of the owner or 
operator in a corporate structure. The exemption will apply where there 
is a showing that, on or before March 23, 1993, the owners or operators 
of the unit entered into an interconnection agreement (and any related 
power purchase agreement) with a public utility requiring that 
generators served by the unit produce electricity for sale only for 
incidental sales of electricity to a public utility. There also must be 
a showing that the unit served generators that, in 1985 and any year 
thereafter, actually produced electricity

[[Page 68347]]

for sale only for incidental electricity sales to a public utility as 
required under that interconnection agreement and any related power 
purchase agreement. If any of the requirements of the exemption are not 
met, the exemption terminates automatically.
    Two aspects of the proposed exemption ensure that it is limited to 
situations involving only incidental electricity sales. First, the 
sales must be required under an interconnection agreement (and any 
related power purchase agreement) between the owners or operators of 
the industrial unit and the public utility to which the electricity 
sales are made. The fact that the sales are made in connection with the 
agreement through which the industrial company obtains electricity for 
its own use from the public utility indicates that the sales are 
incidental to the industrial company's business. Second, the sales to 
the public utility must not exceed, in any calendar year, the lesser of 
10 percent of the generating output capacity of the generator served by 
the unit (which is the nameplate capacity of the generator times the 
number of hours (8,760) in a year) for that year or 10 percent of the 
actual annual electric output of the generator. EPA believes that these 
limits on the amount of annual sales are reasonable and will help 
ensure that the unit's electricity sales are truly incidental. Applying 
these limits to a hypothetical industrial unit serving a generator with 
nameplate capacity of 75 MWe, the generator output capacity is 657,000 
MWe-hr. Assuming that the generator's actual annual electrical output 
is 300,000 MWe-hr, this unit can sell up to 30,000 MWe-hr and qualify 
for an industrial unit exemption under this proposal.
    Because of EPA's lack of experience with this proposed exemption 
and because applying the exemption criteria to specific cases may 
require analysis and exercise of administrative judgment and may 
benefit from public comment, EPA proposes to require submission of an 
application for an exemption and provide for public notice and comment 
before approving or disapproving the exemption for any industrial unit. 
The designated representative of an industrial unit must submit an 
application that provides the information necessary to rule on the 
exemption. Using the procedures applicable to permit issuance, the 
permitting authority will issue a draft exemption or denial of 
exemption for public comment and then issue or deny a final exemption 
(or proposed exemption if a State is the permitting authority). An 
industrial unit with an approved exemption will become an unaffected 
unit and will be exempt from the provisions of the Acid Rain Program, 
except for the provisions of Sec. 72.14 (the new section providing for 
and setting conditions on the exemption), Secs. 72.2 through 72.6, 
Secs. 72.10 through 72.13. Like other exempt units, an exempt 
industrial unit cannot become an opt-in source. The exemption need not 
be renewed and is effective so long as the unit meets the requirements, 
discussed above, for maintaining the exemption.
    EPA requests comment on all aspects of the proposed industrial unit 
exemption.

II. Part 72: Interaction of Acid Rain Permitting and Title V

    Section 408 of the Act requires that title IV be implemented by 
``permits issued to units subject to this title (and enforced) in 
accordance with the provisions of title V, as modified by (title IV) . 
. . No permit shall be issued that is inconsistent with the 
requirements of (title IV), and title V as applicable.'' 42 U.S.C. 
7651g(a).
    Title V, in turn, sets forth requirements for permit programs to be 
implemented by State and local air pollution control agencies. Under 
title V, it is unlawful to operate an affected source in the Acid Rain 
Program or other specified sources ``except in compliance with a permit 
issued by a permitting authority under (title V).'' 42 U.S.C. 7652b(a). 
The permit must include enforceable emission limitations and standards 
and other conditions ``as are necessary to ensure compliance with 
applicable requirements of (the Act).'' 42 U.S.C. 7652d(a). Title V 
states that its provisions ``apply to permits implementing the 
requirements of title IV except as modified by that title.'' 42 U.S.C. 
7652f(b).
    EPA proposes to revise the current regulations governing the 
interaction of titles IV and V with regard to several matters: the 
provisions explaining the relationship between the Acid Rain rules and 
rules implementing title V (i.e., parts 70 and 71); establishment of 
State authority to administer and enforce Acid Rain permits; and the 
required elements of a State Acid Rain program.

A. Relationship Between Acid Rain Rules and Parts 70 and 71

    The current part 72 states that parts 72 and 78 take precedence 
over part 70 (which governs title V permitting) to the extent that any 
requirements of parts 72 and 78 are ``inconsistent with'' part 70. 40 
CFR 72.70(b). The current rules also state that part 72 governs Acid 
Rain permitting by the Administrator but do not specifically address 
the rules (i.e., part 71) for permitting by the Administrator under 
title V since part 71 had not been issued when the current part 72 was 
issued. See 40 CFR 72.60(a). As noted above, both titles IV and V 
establish the precedence of the Acid Rain regulations over title V 
regulations for purposes of administering Acid Rain permits. Since the 
issuance of the current part 72 in January 1993, additional Acid Rain 
regulations relating to permit administration (i.e., part 74 for opt-in 
sources and part 76 for NOx emissions) have been promulgated. In 
addition, part 71, setting forth permitting procedures for the 
Administrator under title V, has been proposed and then issued as a 
final rule. 61 FR 34202 (July 1, 1996).
    EPA proposes today to revise the current provisions addressing the 
relationship between Acid Rain and title V rules to reflect the 
additional rulemaking activity. The revisions also clarify what 
constitutes an ``inconsistency'' between the two sets of regulations 
and the circumstances under which the Acid Rain rules take precedence. 
With regard to State permitting activities, the proposal states in 
Sec. 72.70(b) that parts 72, 74, 76, and 78 take precedence to the 
extent that such parts ``contain provisions not included in, or 
expressly eliminate or replace provisions of, part 70 concerning the 
acid rain permit application and the Acid Rain portion of an operating 
permit.'' 9
---------------------------------------------------------------------------

    \9\ Language in the current Sec. 72.70(b) concerning petitions 
for exemption and draft, proposed, and final written exemptions is 
removed because it is redundant. The requirements for exemptions are 
already included in part 72.
---------------------------------------------------------------------------

    An analogous provision is proposed in Sec. 72.60(a) with regard to 
permitting by the Administrator. In addition, the proposal explains 
that the Acid Rain requirements concerning permit applications, 
compliance plans, permit content and permit shield, permit processing 
and issuance, permit revision, and administrative appeals replace the 
provisions in part 71 with regard to Acid Rain permit applications and 
permits. The provision also states that the part 71 provisions 
concerning Indian tribes, delegation of a part 71 program, affected 
State review of draft permits, and public petitions to reopen a permit 
for cause are not eliminated or replaced by the Acid Rain provisions 
and so apply to the Acid Rain Program.

[[Page 68348]]

B. State Authority To Administer and Enforce Acid Rain Permits

    The current rule provides that if a State or local agency receives 
full, interim, or partial approval of an operating permits program 
under title V by July 1, 1996, that agency becomes the permitting 
authority for the issuance of Phase II Acid Rain permits.See 40 CFR 
72.73(a). (Under the Acid Rain Program, the term ``State'' is defined 
to include the 48 continguous States, the District of Columbia, and 
local authorities; henceforth in this preamble, ``State'' will be used 
with that meaning.) 10 The State permitting authority must issue 
Phase II Acid Rain permits by December 31, 1997. If the State operating 
permits program is not approved by July 1, 1996, the Administrator is 
the permitting authority for Phase II Acid Rain permits and must issue 
them by January 1, 1998. After a State operating permits program is 
approved, the Administrator will suspend issuance of Acid Rain permits. 
See 40 CFR 72.74.
---------------------------------------------------------------------------

    \10\ In the proposal, EPA is expanding the definition of 
``State'' to include eligible Indian tribes in order to be 
consistent with the treatment of Indian tribes that has been 
proposed for parts 70 and 71. See 59 FR 43956 (August 25, 1994) 
(proposed regulations implementing section 301(d) of the Act), 60 FR 
45530 (August 31, 1995) (proposed revisions to part 70), 60 FR 20804 
(April 27, 1995) (proposed part 71), and 61 FR 34213-4 (final part 
71). To ensure that the approach taken to Indian tribes under part 
72 is consistent with the approach that is ultimately adopted under 
parts 70 and 71, today's proposal provides that ``eligible Indian 
tribe'' be defined as in part 71. EPA's proposals concerning the 
treatment of Indian Tribes were issued subject to public comment and 
may be modified before they are issued in final form. EPA may need 
to make conforming changes to today's proposal to reflect any 
relevant revisions made to those proposals.
---------------------------------------------------------------------------

    EPA has found that this approach should be modified. Some States 
have submitted, and EPA has granted interim or full approval of, 
operating permits programs that do not include all necessary Acid Rain 
provisions. State permitting authorities that have approval but lack a 
full Acid Rain program are not in a position to process, issue, and 
otherwise administer properly Acid Rain permits. Further, some States 
have indicated that they want to adopt some portions of the Acid Rain 
Program (e.g., the permitting requirements for sources with Phase I and 
Phase II units) 11 but not other portions of the program (e.g., 
permitting requirements for opt-in sources).
---------------------------------------------------------------------------

    \11\ Phase I units are subject to Acid Rain emissions reduction 
requirements or emissions limitations starting in Phase I. Phase II 
units are subject starting in Phase II. While only Phase I units 
must have Acid Rain permits for Phase I, both Phase I and Phase II 
units must have permits for Phase II. Section 72.31 is revised to 
clarify that Phase II permit applications must cover all affected 
units at the source.
---------------------------------------------------------------------------

    Consequently, EPA proposes to revise the current rule to reflect 
the variety of circumstances concerning State adoption of Acid Rain 
programs. Under the proposal, a State becomes responsible for 
administering and enforcing Acid Rain permits for affected sources if 
it has both an operating permits program approved under part 70 and 
Acid Rain regulations that are accepted by the Administrator through a 
notice in the Federal Register that cover the sources. (The term 
``administer'' includes all aspects of processing a permit, e.g., 
issuance, renewal, and revision.) Until these requirements are met, the 
Administrator will be the permitting authority for purposes of issuing 
Acid Rain permits (or the Acid Rain portion of operating permits) for 
the sources.
    Section 408(d) of the Act requires that Phase II Acid Rain permits 
be issued for sources with Phase I and Phase II units by December 31, 
1997 if a State is the permitting authority. In order to allow 
sufficient time for a State to meet this statutory deadline, the 
proposal states that a State must have an approved operating permits 
program (whether full or interim approval) and accepted Acid Rain 
regulations by January 1, 1997 or such later date as the Administrator 
may set (rather than a fixed date of July 1, 1996, as in the current 
rule) if the State is to be the permitting authority for the initial 
Phase II Acid Rain permits. Otherwise, the Administrator will be 
responsible for issuing such permits. EPA has already issued notices 
identifying the status of State permitting authorities' acid rain 
regulations. See, e.g., 60 FR 16127 (March 29, 1995); 60 FR 52911 
(October 11, 1995); and 60 FR 62846 (December 7, 1995).
    If EPA is issuing permits and, after January 1, 1997, the State 
meets the requirements to become the permitting authority for Acid Rain 
permits, the Administrator will cease issuing Phase II Acid Rain 
permits to sources in that State. However, the Administrator will 
continue to administer and enforce those Acid Rain permits that he or 
she has already issued until the permits are replaced by State-issued 
Acid Rain permits. The State may issue replacement permits on or before 
the expiration date of the EPA-issued permits. Further, the 
Administrator may retain jurisdiction over the EPA-issued permits until 
any administrative or judicial appeals of them are completed.
    The proposal also provides flexibility where a State has proposed a 
partial Acid Rain program, e.g., where the proposed program covers 
permitting of Phase I and Phase II units but not opt-in sources. In 
that circumstance, the Administrator may accept the State Acid Rain 
regulations, issue a notice stating that the State is the permitting 
authority for Phase I and Phase II units, and retain the authority to 
issue permits for opt-in sources.
    If a State has become the Acid Rain permitting authority but the 
Administrator determines that the State is not adequately administering 
or enforcing the State Acid Rain program, the proposal sets forth a 
procedure for withdrawal of that program and for administration and 
enforcement by the Administrator. The procedure is modeled after, but 
not identical to, the analogous procedures under parts 70 and 71. 
Because the Acid Rain Program relies on a nationwide, market-based 
system of allowances to achieve cost-effective SO2 emissions 
reductions, it is particularly important that Acid Rain requirements be 
implemented in a uniform manner by permitting authorities throughout 
the U.S. In order to provide the Administrator the flexibility to 
respond in a timely fashion where Acid Rain requirements are not being 
properly implemented, the proposal does not fix the time frames by 
which a State must address deficiencies in its program or by which EPA 
becomes the permitting authority. The proposal leaves it to the 
Administrator to set these time frames based on the specific 
circumstances.
    The proposal also includes a provision under which the 
Administrator may delegate to a State all or part of his or her 
responsibility to administer and enforce Phase II Acid Rain permits. If 
a State does not meet the requirements for acting as the Acid Rain 
permitting authority (e.g., does not yet have Acid Rain regulations 
accepted by EPA), the Administrator may delegate to the State the 
administration and enforcement of Phase II Acid Rain permits using 
regulations established by the Administrator. This approach is 
analogous to the approach in part 71.12
---------------------------------------------------------------------------

    \12\  The definition of ``permitting authority'' in Sec. 72.2 is 
revised to include a State permitting authority to which authority 
to administer and enforce Acid Rain permits is delegated.
---------------------------------------------------------------------------

    Further, the current rule does not expressly address the question 
of whether the provisions of Phase I or Phase II Acid Rain permits 
issued by the Administrator constitute ``applicable requirements'' 
under part 70. It may be argued that under title V the provisions of 
federally issued Acid Rain permits are ``applicable requirements'' 
under part 70 and therefore must be included in State-issued operating 
permits. In

[[Page 68349]]

that case, a State would have to formally incorporate, in each 
operating permit for an affected source, any federally issued Acid Rain 
permit.
    However, title IV, which supersedes title V in Acid Rain matters, 
requires all Phase I Acid Rain permits to be issued by the 
Administrator. There is little purpose in requiring States to duplicate 
Phase I permits in their operating permits. Moreover, any revisions of 
federal Phase I permits would have to be repeated for any State 
operating permits that included Phase I provisions. With regard to 
federally issued Phase II Acid Rain permits, the proposal explicitly 
requires that States replace the federal permit with a State-issued 
Acid Rain permit by the end of the five-year effective period of the 
federal permit. It is unnecessarily burdensome to require State 
incorporation of the federal permit in the operating permit prior to 
the federal permit's expiration. To incorporate the federal permit, the 
State must essentially repeat the notice and comment process that was 
used to issue the federal permit in the first place. Consequently, the 
proposal states that the provisions of federally issued Phase I or 
Phase II Acid Rain permits shall not be ``applicable requirements'' for 
purposes of part 70.
    Finally, the current Sec. 72.73(b)(2) requires State permitting 
authorities to reopen Phase II Acid Rain permits by January 1, 1999 
``to add'' Acid Rain NOX requirements. It is unclear whether this 
language requires the reopening process to be completed or simply to 
begin by that date. Under part 76, Phase II NOX compliance plans 
must be submitted to permitting authorities by January 1, 1998. It 
seems desirable to have a deadline (prior to Phase II) by which Acid 
Rain permits will include Phase II NOX requirements. However, EPA 
is also concerned that State permitting authorities have sufficient 
time to process the permits. EPA therefore proposes to clarify in 
Sec. 72.73(b)(2) that the reopening process and the addition of 
NOX requirements must be completed by July 1, 1999.13
---------------------------------------------------------------------------

    \13\ A similar revision is proposed, in Sec. 72.74(c)(2), where 
the Administrator is the permitting authority, except that reopening 
must be completed within 6 months of submission of a complete 
NOX compliance plan.
---------------------------------------------------------------------------

C. Required Elements for State Acid Rain Program

    The current rule sets forth the criteria for approval of the Acid-
Rain-related provisions of State operating permit programs. The basic 
approach is that the State Acid Rain program is required to comply with 
part 70 requirements and the additional Acid-Rain-specific requirements 
listed in Sec. 72.72(b). Where the listed requirements are inconsistent 
with part 70 requirements, the listed requirements must be met in lieu 
of such part 70 requirements.
    EPA has carefully re-examined the listed Acid-Rain-specific 
requirements with an eye to minimizing the differences between State 
Acid Rain permit procedures and other State operating permit 
procedures. EPA recognizes that the Acid Rain permits make up a 
relatively small portion of a full State operating permit program. 
Minimizing the number of unique Acid Rain requirements and reducing the 
number of different procedures that must be followed will reduce the 
burden on States and affected-source owners and operators. In addition, 
removal of Acid Rain requirements that duplicate provisions already in 
part 70 will streamline Sec. 72.72 and reduce the potential for 
confusion as to whether something other than the part 70 provisions is 
required.
    Upon re-examination of the listed requirements in Sec. 72.72(b), 
EPA believes that the following requirements are unnecessary or 
redundant and proposes to eliminate or revise them in order to allow 
States to streamline their Acid Rain programs and permit 
administration:
    1. The requirement that the State permitting authority submit to 
EPA any written notice of the completeness of a permit application and 
a copy of each draft permit imposes an unnecessary burden. Therefore, 
EPA proposes to remove the requirement. The permitting authority 
already must provide EPA copies of the application and the proposed 
permit under part 70, and that seems sufficient.
    2. The requirement that the permitting authority include a 
statement of basis in the draft permit is redundant since that is 
already required under part 70. EPA therefore proposes to remove the 
provision.
    3. The requirement that the permitting authority provide for public 
notice of the opportunity to comment and request a hearing is proposed 
to be revised to be less burdensome. First, based on its experience in 
processing Phase I Acid Rain permits, EPA maintains that, where a unit 
is required in a draft permit simply to comply with the standard 
SO2 emissions limitation (i.e., the requirement to hold allowances 
covering emissions), there is little in the portion of the draft permit 
on which to comment. EPA believes that this is also the case to the 
extent a draft permit for a unit subject to Acid Rain NOX 
requirements imposes only the standard NOX emissions limitations 
under Secs. 76.5, 76.6, or 76.7, a NOX averaging plan, or a 
NOX early election plan. There is little to comment on because the 
requirements for compliance in these circumstances are set forth in 
detail in the rule and there is little discretion involved in adopting 
such permit provisions. In contrast, other compliance options, such as 
Phase II repowering plans or NOX alternative emission limitations, 
have more general requirements that must be crafted to fit the unique 
circumstances of the unit involved. Few, if any, comments were received 
on draft Phase I permits for units that were simply adopting the 
standard SO2 or NOX emissions limitations or NOX 
averaging plans. The Agency also found that providing notice in a 
newspaper local to each source is a time consuming and expensive 
process. Consequently, if a draft permit or permit revision only 
requires units to meet the standard SO2 or NOX emissions 
limitations or a NOX averaging plan, EPA proposes to give 
permitting authorities the discretion to give notice by serving a 
notice on the appropriate list of persons and omitting publication in a 
local newspaper or State publication.14
---------------------------------------------------------------------------

    \14\  In addition, the specific references in the current rule 
to part 70 provisions stating what persons must be served notice are 
superfluous and so are eliminated.
---------------------------------------------------------------------------

    Second, the proposal explicitly provides that a State permitting 
authority may, in its discretion, use the so-called ``direct final'' 
procedure in order to meet the requirements for issuing draft permits, 
providing notice and comment, and issuing proposed permits. Under the 
``direct final'' procedure (which has been used by EPA in rulemakings 
and other actions under the Clean Air Act) 15 the State permitting 
authority may issue, as a single document, a draft Acid Rain permit and 
a proposed Acid Rain permit and provide notice of the opportunity for 
public comment on the draft Acid Rain permit. In the notice the State 
permitting authority states that, if no significant, adverse comment on 
the draft Acid Rain permit is timely submitted, the proposed Acid Rain 
permit will be deemed to be issued on a specified date without further 
notice. The notice also states that, if such significant, adverse 
comment is timely submitted, a proposed Acid Rain permit or denial of a 
proposed Acid Rain permit will be issued and the comments addressed. 
This procedure streamlines the permitting process in cases where no 
adverse comment is anticipated. While EPA believes that the current 
rule

[[Page 68350]]

does not bar using this streamlined procedure, the proposed rule makes 
explicit the option to use the procedure.16
---------------------------------------------------------------------------

    \15\ See, e.g., 60 FR 18462 and 18472 (April 11, 1995).
    \16\  For the same reasons, the proposed rule includes an 
analogous provision in subpart F, which sets forth the Acid Rain 
permit issuance procedures when the Administrator is the permitting 
authority.
---------------------------------------------------------------------------

    4. The requirements that the permitting authority submit a copy of 
the proposed permit for review by the Administrator and affected States 
and incorporate changes resolving objections to the proposed permit are 
redundant since part 70 already imposes these requirements. These 
provisions in Sec. 72.72(b) are unique only to the extent that they 
specifically refer to issuance or denial of Acid Rain permits. EPA 
believes that such reference is unnecessary because the authority to 
deny a permit where basic requirements (e.g., meeting the applicability 
criteria for the Acid Rain Program) are not met is obvious. EPA does 
not see any reason for addressing the possibility of permit denials 
differently in part 72 than in part 70 and part 71.
    5. The requirement that invalidation of the Acid Rain portion of 
the operating permit not affect the remaining provisions of the permit 
and vice versa is redundant. Part 70 already requires that invalidation 
of any operating permit provision not affect any other operating permit 
provisions.
    6. The limitation on the filing of State administrative or judicial 
appeals of an Acid Rain permit to no more than 90 days from the 
issuance of the permit to be appealed makes appeals of Acid Rain 
provisions different from appeals of any other aspect of an operating 
permit. Under part 70, the availability of and procedures for 
administrative appeals are left entirely to the States; there are no 
mandated time limitations on filing such appeals. With regard to 
judicial appeals, part 70 provides that appeals may be filed after a 
fixed period (which may not exceed 90 days) if the appeal is based 
solely on grounds arising after the deadline. EPA has proposed to 
lengthen the maximum period under part 70 from 90 to 125 days. 59 FR 
44460, 44516 (August 29, 1994). EPA sees no reason for treating appeals 
of Acid Rain provisions differently than appeals of other permit 
provisions and is concerned that the different appeal periods may 
engender confusion. Having different appeal periods could result in 
different parts of the same operating permit having different deadlines 
for filing appeals. The proposal eliminates the limitation on Acid Rain 
appeals.
    7. The requirement that a permitting authority give the 
Administrator notice of administrative or judicial orders relating to 
an Acid Rain permit is retained. The proposal removes language 
indicating that, after issuance of such an order, the Administrator 
will review and may veto the Acid Rain permit under the procedures for 
reviewing proposed permits under Sec. 70.8. The language was intended 
to provide for EPA review where, for example, an Acid Rain permit that 
had already undergone EPA review under Sec. 70.8 was then significantly 
altered on appeal. Upon reconsideration, EPA concludes that this 
approach in the current Sec. 72.72 is confusing since it may put into 
question whether an ostensibly final permit becomes a proposed permit 
when there is a State determination (e.g., a State court order) 
modifying the permit. This approach is also unnecessary since the 
Administrator already has the authority to reopen permits for cause, 
which authority is available in the event of such a State determination 
or interpretation.17
---------------------------------------------------------------------------

    \17\ For the same reasons, an analogous provision in 
Sec. 72.80(e) is also removed.
---------------------------------------------------------------------------

    8. The requirement that State administrative appeals not result in 
the stay of any provisions that could not be stayed under part 78 is 
proposed to be removed for several reasons. First, as discussed below 
(in section VII of this preamble), the provision on stays in part 78 is 
eliminated because, under current case law, a permit appealed under 
part 78 is not a final agency action, and cannot be implemented, 
pending the administrative appeal. Further, in reviewing State 
operating permit programs, EPA has found that States have a variety of 
administrative appeals processes. In many States the administrative 
appeal precedes the issuance of a final permit and so the stay 
provision in the current part 72 is meaningless. In addition, the 
provision bars stays of requirements in the permit (i.e., allowance 
allocations, the standard Acid Rain requirements, monitoring and 
reporting requirements, and the certificate of representation) that are 
imposed, under part 72 and other Acid Rain rules, independently from 
the permit. Even if a source has no permit, the source must meet these 
requirements. In short, the stay provision has little practical effect.
    9. The requirements that State permitting authorities 
``coordinate'' with utility regulatory authorities and evaluate the 
sufficiency of fees supporting the State acid rain program are proposed 
to be removed as unnecessary. The relationship between State agencies 
is best left to the States, and part 70 fully addresses issues 
concerning fees.
    In reconsidering the requirements for State operating permit 
programs, EPA has become aware of another issue concerning State 
programs. The current rule requires that a permitting authority issue, 
for each affected source, only one Acid Rain permit covering all 
affected units at that source. EPA received comment that, in a few 
cases, States have historically issued separate permits to units that 
are at the same source but that were constructed at different times. 
The States plan to continue separate permitting of the units under 
their operating permits programs. Rather than requiring State 
permitting authorities to restructure their permitting of such sources, 
EPA proposes to give permitting authorities the discretion to allow 
separate Acid Rain permit applications for, and thus to issue separate 
Acid Rain permits to, the units at the source. However, this provision 
does not change the designated-representative requirements for the 
units: all units at the source must still have the same designated 
representative and, if applicable, the same alternate designated 
representative.
    A large number of State permitting authorities have already adopted 
Acid Rain regulations consistent with the current provisions of part 
72. The most efficient and most frequently used method of State 
adoption of Acid Rain regulations has been incorporation of part 72 by 
reference. The part 72 rule changes proposed today are primarily aimed 
at streamlining Acid Rain permitting (whether EPA or the State is the 
permitting authority). EPA therefore anticipates that State permitting 
authorities will want to adopt the final revisions relatively soon 
after promulgation. However, EPA recognizes that revising State 
regulations, even when accomplished through incorporation by reference 
of the revised part 72, can be a time consuming process. Moreover, 
State permitting authorities are required to issue initial Phase II 
Acid Rain permits by December 31, 1997. None of today's proposed 
revisions are so fundamental that a State permitting authority with 
Acid Rain regulations consistent with the current part 72 should not 
start or even complete the process of issuing the Phase II permits 
before revising its Acid Rain regulations to conform to today's 
revisions. In order to ensure that States have both sufficient 
authority to issue Phase II permits and sufficient time to revise their 
Acid Rain regulations, EPA will continue to accept State Acid Rain

[[Page 68351]]

rules that conform with the current part 72 until 2 years after the 
date on which the final revisions are promulgated. Starting on the date 
2 years after the promulgation of the final revisions, EPA expects all 
State Acid Rain regulations to incorporate the revisions.
    EPA notes that many States have not added to their Acid Rain rules 
the provisions of part 74 (opt-in program) and part 76 (NOx compliance 
plans and emissions limitations), which were issued relatively recently 
in April 1995. Further, EPA has proposed additional part 76 provisions 
setting Phase II NOx emissions limitations and expects to issue final 
provisions by January 1, 1997. States may want to consider coordinating 
adoption of the final revisions based on today's proposal with adoption 
of the provisions of parts 74 and 76.

III. Part 72: Miscellaneous Permitting Matters

    In addition to the revisions discussed above, EPA proposes a number 
of revisions of sections of part 72 concerning matters such as 
designated representatives, compliance plans, federal procedures for 
permit issuance and revision, and confirmation reports on verified 
savings from energy conservation and increased unit efficiency 
measures. The primary purpose of these proposed changes is to 
streamline the Acid Rain rules and reduce the administrative burden on 
owners and operators of affected units.

A. Definitions

    In addition to the definition revisions discussed elsewhere in this 
notice, the Agency proposes the following revisions.
    The definition of ``Acid Rain emissions limitation,'' for purposes 
of sulfur dioxide emissions, is revised to make complete the list of 
statutory provisions under which affected units may be allocated 
allowances. Section 404(h), which is inadvertantly left out of the 
current definition, is added. The definition of the term, for purposes 
of nitrogen oxides emissions, is revised to remove references to 
regulations implementing section 407 of the Act. The NOx Acid Rain 
regulations in part 76 became final on May 23, 1995 and so the 
definition is revised simply to cite part 76. Analogous changes are 
made elsewhere in part 72 to replace general references to regulations 
under section 407 by specific references to part 76 or sections of part 
76.
    The definition of ``coal-fired'' is revised to exclude the 
superfluous reference to part 73 and to correct the reference to the 
regulations implementing section 407 of the Act (i.e., part 76) to 
reflect the fact that part 76 includes its own definition of ``coal-
fired.''
    The definition of ``dispatch system'' is eliminated. In light of 
the detailed provisions concerning dispatch system in section 72.33, 
the definition is superfluous and potentially confusing.
    The definition of ``permitting authority'' is revised to omit some 
superfluous language and to reference part 70, rather than refering 
generally to the regulations promulgated under title V. Such general 
references in other provisions of part 72 are also changed to specific 
references to parts 70 and 71 as appropriate.
    The definition of ``submit or serve'' is revised in order to allow 
documents, information, or correspondence to be provided to the 
Administrator or any State permitting authority using any service of 
the U.S. Postal Service or any equivalent means of dispatch and 
delivery. The requirement in the current rule that such delivery be 
accomplished using only certified mail or an equivalent service is 
eliminated. Based on its experience in operating the Acid Rain Program, 
EPA has found that the certified-mail requirement is not necessary and 
may be burdensome on private parties.

B. Designated Representative

    The current rule requires the selection of one designated 
representative for each affected source and allows the selection of one 
alternate designated representative per source. EPA has received 
comment requesting that under certain limited circumstances a second 
alternate designated representative be allowed. According to the 
commenter, in general, the current rules give operating companies the 
flexibility of having a designated representative at the upper 
management level and an alternate who is closer to the plant operations 
level in the company. Allegedly, this flexibility is in effect denied 
to operating companies that are part of a holding company if the 
holding company plans to use a NOx averaging plan under part 76 to 
comply with the applicable Acid Rain NOx emission limitation.
    Under Sec. 76.11, units that are subject to the standard NOx 
emission limitations (in Secs. 76.5, 76.6, or 76.7), are under the 
control of the same owner or operator, and have the same designated 
representative may average their NOx emissions through a 
compliance plan approved by the permitting authority. The detailed 
requirements for determining whether units are in compliance with the 
plan are set forth in Sec. 76.11. The commenter states that it is one 
of several operating companies in a holding company and that all of the 
operating companies intend to participate in a holding-company-wide 
NOx averaging plan, which under Sec. 76.11 requires the selection 
of a single designated representative for the entire holding company. 
According to the commenter, that designated representative must, as a 
practical matter, be someone at the holding-company management level. 
Since each operating company can select only one alternate, each 
operating company will be unable to have a designated representative or 
alternate at both the management and the operations levels of the 
operating company. Allegedly, this is important because each operating 
company operates relatively independently, reflecting the fact that 
each is in a different State and is subject to regulation by a 
different utility regulatory authority.
    In order to accomodate this limited circumstance where additional 
flexibility may be needed, EPA proposes to allow the selection of a 
second alternate designated representative in this circumstance. The 
Agency requests comment on the need for this flexibility in this case.
    The current rule also establishes procedures for the selection of a 
designated representative and an alternate. Using these procedures, all 
Phase I units and many Phase II units have selected designated 
representatives. In addition, alternates were originally selected or 
were added later in some cases, and some units have changed their 
representatives. Based on this experience with the prescribed 
procedures, EPA proposes to simplify the procedures and reduce the 
burden they impose on owners and operators. The Agency maintains that 
this can be done without negatively impacting the rights of minority or 
other owners.
    In particular, Secs. 72.20(c) and 72.24(a)(5) require that whenever 
a designated representative or alternate is originally selected or 
changed, notice must be provided daily for one week in a newspaper of 
general circulation where the source is located or in a State 
publication. The Agency has learned that this provision of newspaper 
notice is often expensive and can be particularly cumbersome where a 
single designated representative or alternate is selected or changed 
for a group of units spread over a relatively wide geographic area 
(e.g., a State) or where local newpapers are weekly rather than daily. 
While some notice of designated-representative selection seems 
desirable, EPA believes that the current rule is

[[Page 68352]]

unduly burdensome. EPA proposes to revise the rules to require only one 
notice in the newspaper (i.e., notice for one day), rather than daily 
notices for a week. Further, since the designated representative is the 
primary person representing the owners and operators and is responsible 
for all actions by any alternate, it seems unnecessary to require 
notice of selection or change of an alternate.
    EPA also proposes a minor correction of Sec. 72.25. That section 
currently provides that the Administrator will rely on a certificate of 
representation until a superseding one is ``submitted.'' 40 CFR 
72.25(a). However, the Administrator will be unaware of any superseding 
certificate until he or she receives it. Further, Sec. 72.20(b) states 
that a certificate of representation is binding upon receipt of the 
complete certificate by the Administrator. Section 72.25 is therefore 
revised to provide that a certificate is relied on until ``receipt'' of 
a superseding certificate.

C. Compliance Plans

l. Submission of Substitution and Reduced Utilization Plans
    Sections 72.41 and 72.42 currently state that a new substitution 
plan or reduced utilization plan may be submitted not later than 90 
days before the allowance transfer deadline. A submission must be made 
by both the Phase I unit and its prospective substitution or 
compensating unit so that the plan will be reflected in their Acid Rain 
permits. However, there are other provisions of the rules that affect 
when such plans may be approved and take effect and that must be 
considered in deciding when to submit a plan. An affected unit must, as 
of the allowance transfer deadline, hold sufficient allowances to cover 
its emissions for the prior year. Consequently, the status of a unit as 
an affected unit for a given year (e.g., in Phase I, its status as a 
substitution unit or a compensating unit) must be determined as of the 
allowance transfer deadline. A new compliance plan designating a new 
substitution or compensating unit for a Phase I unit must be approved 
and active by the allowance transfer deadline in order to be effective 
for the year to which the allowance transfer deadline applies.
    A new plan may include both a Phase I unit and a prospective 
substitution or compensating unit at a source that has no Phase I units 
and so lacks a Phase I permit. Since each unit must have a Phase I 
permit that includes the plan, the plan must be added to the Phase I 
unit's existing permit and included in a new Phase I permit for the 
source with the substitution or compensating unit. Because the Agency 
has up to 6 months to act on a new permit, the Phase I unit's plan and 
the source's new permit application that includes the plan should be 
submitted at least 6 months before the allowance transfer deadline. 
Later submission will not ensure approval of the plan in time for use 
for the year to which that allowance transfer deadline applies.
    If all the units in a new plan are at sources that already have 
Phase I permits, then the plan can be added to both the Phase I unit's 
permit and the prospective substitution or compensating unit's permit 
through a permit revision. If the permit modification procedures are 
used, the Agency still has up to 6 months to act. However, if the fast-
track amendment procedures are used, the Agency has 60 days from the 
start of the public comment period to act. In the latter case, the 
submission deadline of 90 days prior to the allowance transfer deadline 
provides sufficient time for approval of the plan.18
---------------------------------------------------------------------------

    \18\ Section 72.30(b)(3) references the deadlines in subpart D 
of part 72 and part 76 for applying for compliance plans. The 
provision is redundant and is therefore removed.
---------------------------------------------------------------------------

    In order to ensure that designated representatives consider the 
procedures and timing that must be followed in submitting new plans, 
EPA proposes to revise Secs. 72.41(b)(3) and (c)(4). The revisions 
state that new plans must be submitted no later than 6 months prior to 
the allowance transfer deadline but that, if the fast-track amendment 
procedures are available, submission must be no later than 90 days 
before the allowance transfer deadline.
2. Repowering Extension Plans
    The current Sec. 72.44 includes provisions concerning failed 
repowering projects. The regulation requires that, if efforts to 
complete and test the project are terminated prior to construction or 
start-up testing, the designated representative must demonstrate to the 
satisfaction of the Administrator that the efforts were in good faith. 
Similarly, if the project is properly constructed and tested but is 
unable to achieve emission reductions specified in the repowering 
extension plan, a demonstration must be provided. Under the current 
Sec. 72.81(a), determinations concerning failed projects must be 
processed as permit modifications. However, the interaction between the 
demonstration requirements in the current Sec. 72.44(g) and the 
procedures in Sec. 72.81 is unclear, particularly when the State 
permitting authority issued the permit containing the repowering 
extension plan and is therefore handling the permit modifications.
    EPA proposes to revise Sec. 72.44(g) to clarify the interaction of 
the substantive and procedural requirements concerning failed projects. 
Under the revisions, the designated representative submits to the 
permitting authority a permit modification in which he or she makes the 
necessary demonstrations. The Administrator determines whether the 
demonstrations have been made. Where the State is the permitting 
authority, the State acts on the permit modification consistent with 
the Administrator's determination.

D. Federal Permit Issuance

    1. The current Sec. 72.60(b) requires that the Administrator issue 
or deny an Acid Rain permit within 6 months of receipt of a complete 
permit application. However, Sec. 72.74(b) provides that initial Phase 
II permits, for which applications are due by January 1, 1996, must be 
issued by the statutory deadline of January 1, 1998 if they are issued 
by the Administrator. EPA proposes to revise Sec. 72.60(b) to provide 
that deadline in Sec. 72.74(b) applies, rather than the 6-month 
deadline, to any initial Phase II permits issued by the Administrator.
    2. The current Sec. 72.61 provides that a permit application is 
deemed complete after 30 days in the absence of notification by the 
Administrator that it is incomplete. When additional information is 
requested by the Administrator, the designated representative has at 
least 30 days to respond. EPA proposes to revise this section to make 
it consistent with the currently different completeness provisions of 
part 71 (and part 70) in order to avoid having two types of 
completeness procedures. Under the revisions, automatic completeness 
occurs after 60 days from receipt and additional information must be 
submitted within a reasonable period specified by the Administrator. In 
addition, language in parts 70 and 71 is added to this section 
requiring designated representatives to provide supplementary 
information when they become aware that relevant information was not 
submitted or incorrect information was submitted.19
---------------------------------------------------------------------------

    \19\ This language in parts 70 and 71 is also added to 
Sec. 72.80 with regard to permit revisions.
---------------------------------------------------------------------------

    3. As discussed above, EPA is proposing to revise the provisions 
for Acid Rain permitting by States in order to allow, for certain types 
of draft permits, service of notice on a list of persons and foregoing 
of newspaper

[[Page 68353]]

notice. For the same reasons, EPA proposes a similar type of revision 
for federal Acid Rain permitting. The Administrator may provide Federal 
Register notice and notice for a list of persons and omit newspaper 
notice where the only Acid Rain emissions limitations in the draft 
permit are the requirements to hold sufficient allowances for SO2 
or to comply with NOX emission limitations under Secs. 76.5, 76.6, 
76.7, or 76.11.
    Moreover, the list of persons required to be served notice of draft 
and final permits under the current rule is different than the list of 
persons required to be served under parts 70 and 71. This difference 
complicates the notice process without any significant benefit. EPA 
proposes to revise the list of persons for required service of 
federally-processed draft and final permits to be consistent with parts 
70 and 71.20 For example, parts 70 and 71 do not require service 
on the State or local utility regulatory authorities with jurisdiction 
over the unit involved or the owners of the unit. No utility regulatory 
authorities commented on any of the Acid Rain permits or permit 
revisions that have been issued by EPA for Phase I. The proposal 
therefore eliminates such authorities from automatically-required 
service.21 Any utility regulatory authorities that want to receive 
notice of draft and final permits will still have the option of 
requesting to be treated as an interested person and thereby receiving 
notice.
---------------------------------------------------------------------------

    \20\ The same change is proposed for the list of persons on 
which requested fast-track amendments submitted to the Administrator 
must be served under Sec. 72.82. Where requested fast-track 
amendments are submitted to the State as the permitting authority, 
the proposal provides that the list of persons is the same persons 
on which the State permitting authority must serve notice of draft 
permits under the State operating permits program. Further, since 
parts 70 and 71 require service of notice on ``affected States'' and 
include a definition of that term, today's proposal includes a new 
definition that adopts the ``affected State'' definition in part 71.
    \21\ The proposal therefore also eliminates the requirement to 
identify such authorities in submissions to EPA (e.g., in a source's 
certificate of representation).
---------------------------------------------------------------------------

E. Permit Revision

    1. EPA proposes to make minor revisions to remove specific 
reference to part 70 procedures from, and to add specific references to 
Sec. 72.80 in, Sec. 72.81 concerning permit modifications.
    2. EPA proposes to lengthen the deadline by which a State 
permitting authority must act on a fast-track modification. Under the 
current rule, the Administrator or State permitting authority must act 
within 30 days of the close of the 30-day comment period. State 
permitting authorities must handle many more permits covering a broader 
range of types of sources and emission limitations than EPA's Acid Rain 
Division, which handles only Acid Rain permits for the Administrator. 
EPA is concerned that the 30-day deadline for States to act on a fast-
track modification may be unrealistic in light of their other, 
significant responsibilities. To put the 30-day deadline in 
perspective, States under title V can take up to 18 months to issue 
permits or make significant permit modifications. Under today's 
proposal, the 30-day deadline will continue to apply to the 
Administrator but a 90-day deadline from the end of the comment period 
will apply to State permitting authorities.
    3. EPA proposes to remove and replace certain confusing language at 
the end of the fast-track modification provisions concerning review by 
the Administrator and affected States. The current language makes fast-
track modifications subject to the same review as significant permit 
amendments. The proposal states this more directly. Such review is 
appropriate since fast-track modifications can involve important 
changes to a permit.
    4. The current rule concerning administrative permit amendments 
relies heavily on, and cites, the part 70 administrative permit 
amendment procedures. These part 70 procedures are currently the 
subject of an on-going rulemaking in which extensive revisions have 
been proposed. See 59 FR 44475-79. EPA proposes to remove the citations 
to part 70 and to set forth in Sec. 72.83 itself the procedures for 
administrative amendments to Acid Rain permits. EPA believes that the 
administrative amendment procedures currently applicable to Acid Rain 
permits are simple and, except as discussed below, should not be 
substantively changed.
    While the proposal continues to require action by the permitting 
authority within 60 days of receipt, the period for acting on one 
potentially very complicated administrative amendment, i.e., the 
addition of an alternative emissions limitation demonstration period 
for NOX, is lengthened to 90 days. Before implementing the 
addition of an alternative emissions limitation demonstration period, a 
permitting authority must determine whether the requirements of 
Sec. 76.10 have been met. The designated representative must provide 
extensive information, e.g., showing that the unit has a properly 
installed and operated NOX emission control system designed to 
meet the standard NOX emission limitation (under Secs. 76.5, 76.6, 
or 76.7), describing why the unit cannot meet the standard emission 
limitation, and outlining the testing and procedures to be undertaken 
to determine the maximum emission reduction that can be achieved with 
the installed system. EPA maintains that 60 days will likely be 
insufficient time, particularly for State permitting authorities, to 
evaluate this information and, if the requirements of Sec. 76.10 are 
met, grant a requested alternative emissions limitation demonstration 
period and that 90 days is a more reasonable deadline.
    The proposal also adds a provision explicitly allowing the 
permitting authority to make administrative permit amendments (other 
than the addition of an alternative emission limitation demonstration 
period) on its own motion. This procedure may be used to correct minor 
errors in a permit that come to the attention of the permitting 
authority.
    Also added to Sec. 72.83 are provisions in the current part 70 that 
allow immediate implementation of administrative permit amendments that 
meet applicable requirements and that eliminate review of such 
amendments by the Administrator or affected States. This adds directly 
to part 72 provisions that the current Sec. 72.83 makes applicable by 
reference to part 70.
    5. The current rule concerning permit reopenings relies heavily on, 
and cites, part 70 reopening procedures. EPA proposes to eliminate the 
references and set forth in Sec. 72.85 the full procedures. Consistent 
with the current part 70 provisions, the proposal states that reopening 
for cause may occur when: Additional Acid Rain requirements become 
applicable; there is a material mistake in the permit; inaccurate 
statements were made in establishing a permit term or condition; or a 
permit revision is necessary to assure compliance with the Acid Rain 
Program.

F. Reduced Utilization Accounting

    Under the current rule, Phase I units must account for any 
underutilization. A few revisions are proposed with regard to this 
accounting.
    1. The current rule allows a designated representative to submit an 
identification of dispatch system in order to change a unit's dispatch 
system from what is listed in the NADB, which indicates the operator of 
each unit. A dispatch-system identification must be submitted by 
January 30 of the first year for which the new dispatch system is to 
take effect. Traditionally, there have been relatively few changes in 
the operator and the dispatching of utility

[[Page 68354]]

units. However, in light of increased competition in the electric 
industry and the potential of future restructuring of the industry, the 
Agency is concerned that changes in owners and operators and in 
dispatching of units may occur more frequently and at times that make 
it impossible to meet the January 30 deadline. EPA therefore proposes 
to give the Administrator the discretion to grant exemptions from that 
deadline in order to allow late submissions.
    2. The current rule sets forth procedures for claiming kilowatt 
hour savings from energy conservation measures or heat rate reductions 
from improved unit efficiency measures and using the resulting heat 
input reductions to reduce the surrender of allowances to account for 
reduced utilization of Phase I units. In the annual compliance 
certification reports submitted by March 1, a designated representative 
may include estimated savings from energy conservation or estimated 
heat rate reductions from improved unit efficiency measures for the 
prior year. If any such estimates are included in the annual compliance 
certification report, the designated representative must submit a 
confirmation report by July 1 that provides and supports the verified 
amounts.
    The current language in Sec. 72.91(b)(1)(iii) concerning the 
methods for supporting the verified amounts of kilowatt hour savings, 
heat rate improvement, and resulting heat input reductions needs some 
clarification.22 The purpose of the provision is to provide two 
alternative approaches to verification: documentation that may follow 
the EPA Conservation Verification Protocol; or certification by the 
appropriate State utility regulatory authority. The current provision 
could be read to require that only one of these approaches be used for 
all estimated savings and heat input reductions so that, for example, 
if certification is to be used, it must be used for all the estimates. 
EPA proposes to revise the provision to make it clear that there is 
flexibility to use documentation with regard to improved unit 
efficiency measures or some energy conservation measures and to use 
certification for other measures.
---------------------------------------------------------------------------

    \22\ The verification process, found in Sec. 72.91(b), is 
incorrectly cross-referenced in Sec. 72.43(b)(2)(iii)(B) of the 
current rule. Today's proposal corrects the reference. In addition, 
certain typographical errors in Sec. 72.91(b) (e.g., incomplete 
reference to ``improved unit efficiency measures'') are corrected.
---------------------------------------------------------------------------

    3. The current regulatory provisions concerning heat input 
reductions due to measures that reduce a unit's heat rate need 
clarification and revision. A measure that reduces a unit's heat rate 
may be treated as a supply-side energy conservation measure by another 
unit or as an improved unit efficiency measure by the unit at which the 
measure is implemented. Over a given period of time, a number of 
specific measures may be implemented at a unit to reduce its heat rate. 
However, these measures may be offset by reductions in generation 
efficiency at the same unit resulting from other factors, e.g., from 
the aging or changed operations of the unit. In that case, even though 
each measure may, in itself, reduce the heat rate of the unit below 
what the heat rate would otherwise have been, the net effect of all the 
measures on the unit's heat rate will be less than the sum of the 
reductions attributed to each measure.
    It is the net effect of these measures on the unit's heat rate that 
should be treated as accounting for reduced utilization. Consequently, 
EPA proposes to add a provision that puts a ceiling on the total heat 
input reductions that may be claimed for all measures that reduce a 
given unit's heat rate, whether the measures are treated as energy 
conservation or improved unit efficiency measures. Under the proposal, 
the total verified heat input reductions attributed to such measures 
may not exceed the difference between the kilowatt hour generation 
attributed to the unit for the calendar year times the difference 
between the unit's heat rate for 1987 and its heat rate for the 
calendar year. This ensures that heat input reductions cannot exceed 
the heat input reductions attributable to net heat rate improvement 
since the end of the base period (i.e., 1985-1987). Heat rate 
improvements made up through 1987 are already reflected in the baseline 
utilization and so cannot be used to account for underutilization of a 
unit since the base period. See 58 FR 60950, 60961 (November 18, 1993).
    In light of this ceiling on heat input reductions claimed for 
energy conservation measures improving generation efficiency (as well 
as for improved unit efficiency measures), EPA sees no need to burden 
State utility regulatory authorities with the verification of claimed 
reductions from this limited category of energy conservation measures. 
EPA will instead review the verification presented by designated 
representatives and will compare the claimed heat input reductions to 
the ceiling. Consequently, EPA proposes to remove the option of 
verification by State utility regulatory authorities of claimed 
reductions from energy conservation measures improving generation 
efficiency.
    4. The current rule provides that, if the total verified amount of 
heat input reductions in the confirmation report differs from the total 
estimated amount in the annual compliance certification report, the 
confirmation report must calculate the number of allowances, if any, to 
be surrendered or returned as a result. EPA maintains that the 
provision concerning calculation of allowances to be returned needs 
clarification and revision.
    a. Under the current rule, if the total verified heat input 
reductions exceed the total estimated heat input reductions, returned 
allowances are to be calculated using a specified formula in 
Sec. 72.91(b)(4) based on the difference between the verified and 
estimated amounts. Section 72.91(a)(7) sets a limit on the total amount 
of ``plan reductions'' (i.e., offsets to underutilization that are 
attributed to energy conservation, improved unit efficiency, sulfur-
free generation, and compensating units). A Phase I unit's plan 
reductions minus any compensating generation that it provides as a 
compensating unit cannot exceed the Phase I unit's baseline minus its 
actual utilization. The purpose of this limitation is ``to prevent plan 
reductions from one Phase I unit from being used to offset the 
underutilization of another Phase I unit that has no reduced 
utilization plan.'' 58 FR 60962. This purpose applies equally whether 
the plan reductions involved reflect estimated offsets from 
conservation and improved unit efficiency or verified offsets. The 
confirmation process simply replaces estimated with verified offset 
amounts and corrects for any differences; it is not intended to allow 
greater offsets than if the verified offset amounts had been available 
when the annual compliance certification report was submitted.
    The simplest way to ensure that designated representatives 
understand that this limitation applies is to limit the number of 
allowances that are to be returned to the total number of allowances 
that were deducted from the unit's Allowance Tracking System account 
for underutilization based on the annual compliance certification 
report. EPA proposes to add language (in Sec. 72.91(b)(4)(iv)) setting 
forth this limitation. To the extent allowances were deducted based on 
the annual certification report, then those allowances represented 
underutilization of the unit (i.e., a positive difference between the 
unit's baseline and its actual utilization after accounting for all 
offsets). If allowances in excess of the amount of that allowance 
deduction were returned, then verified offsets from

[[Page 68355]]

conservation or improved unit efficiency would be used, in effect, to 
offset some other unit's underutilization.
    b. Under the current rule, if the total verified offsets are less 
than the total estimated offsets, surrendered allowances are to be 
calculated using the absolute value of the formula specified for 
returning allowances in Sec. 72.91(b)(4). EPA has found that this 
provision concerning the allowances to be surrendered is not correct in 
all cases and should be revised.
    Under Secs. 72.91 and 72.92, allowance surrender is determined 
initially on a dispatch-system-wide basis so that underutilization of 
one Phase I unit in the dispatch system may be offset by 
overutilization of another Phase I unit in that dispatch system. Once 
it is determined that allowances must be surrendered for the dispatch 
system, each Phase I unit's share of the surrender is calculated. The 
approach in the current rule is accurate if the Phase I unit had to 
surrender allowances based on the annual compliance certification 
report. In that case, the unit's underutilization was not offset 
completely by other Phase I units and any overstatement of offsets in 
the estimates used in the annual compliance certification report must 
result in additional surrender of allowances by the unit.
    In contrast, if the Phase I unit did not have to surrender 
allowances based on the annual compliance certification report, the 
overstatement of offsets in the estimates could be offset by 
overutilization of other Phase I units. The provisions of the current 
Sec. 72.91(b)(5) do not take account of that possibility.
    EPA proposes to revise Sec. 72.91(b)(5) to correct this problem and 
ensure that the confirmation process does not result in the surrender 
of more allowances than if the verified amounts for conservation or 
improved unit efficiency offsets had been available when the annual 
compliance certification report was submitted. The revision provides 
that each Phase I unit that used estimated conservation or improved 
unit efficiency offsets must recalculate its adjusted utilization using 
the verified amounts and then that the allowance surrender formula in 
Sec. 72.92(c) must be reapplied using the recalculated adjusted 
utilizations. To the extent this results in greater allowance surrender 
than the surrender based on the annual compliance certification report, 
the difference must be surrendered.
    c. Under the current rule, the designated representative must 
include in the confirmation report calculations of any change in the 
excess emissions that were previously determined based on the annual 
compliance certification report. EPA has decided that this is an 
unnecessary burden to impose on the designated representative. The 
current rule does not require the designated representative to 
calculate in the annual compliance certification report the amount of 
any excess emissions. Moreover, under the revisions of part 77 
discussed below, the offset plan submitted by the designated 
representative of a unit with excess emissions will also not be 
required to state the amount of excess emissions.
    Consistent with this approach, EPA proposes to eliminate the 
requirement that the confirmation report calculate the impact of the 
verified offsets on excess emissions. Instead, Sec. 72.91(b)(6) and (7) 
are revised to require the Administrator to determine the amount of 
excess emissions (if any) that would have resulted if the verified, 
rather than estimated, offsets had been used to make deductions from 
the allowances in the unit's compliance subaccount as of the allowance 
transfer deadline. Further, if the resulting excess emissions differ 
from the amount determined based on the estimated offsets, the 
Administrator must determine whether additional offset allowances must 
be deducted and penalty payments must be made or whether allowances and 
penalty payments must be returned.
    5. The current Sec. 72.95 sets forth the formula for making 
allowance deductions for each year that a unit is subject to the Acid 
Rain emissions limitations for SO2. Although the formula does not 
specifically refer to allowance deductions with respect to substitution 
or compensating units, Secs. 72.41(d)(3) and (e)(1)(iii)(B) and 
72.43(d)(2) expressly require such deductions under certain 
circumstances. In order to make the formula consistent with those 
express deduction provisions, EPA proposes to revise the formula to 
include those deductions, which are required in any event.

IV. Part 73: Allowances

A. Revision of Table 2 Allowances

    EPA proposes to revise the allowances of certain units on Table 2 
of Sec. 73.10(b).
l. Allowance Determinations Remanded to EPA
    Section 405(c) of the Act establishes allowances in Phase II for 
smaller units (under 75 MWe nameplate capacity) with higher emissions 
(over 1.2 lb/mmBtu). Paragraph (c)(1) of the section specifies the 
formula for calculating basic allowances for units owned by larger 
operating companies (with capacity of at least 250 MWe). Paragraph 
(c)(2) specifies the formula for basic allowances for such units owned 
by smaller operating companies (with capacity of less than 250 MWe). 
Paragraph (c)(3) provides special basic allowances for such units that 
are owned by larger operating companies (with capacity greater than 250 
MWe and less than 450 MWe) that serve fewer than 78,000 customers. 
Paragraph (c)(4) provides bonus allowances for units under paragraph 
(c)(1) for the period 2000 through 2009. Paragraph (c)(5) provides 
special basic allowances to units under paragraph (c)(1) in utility 
systems that have units with high costs for retrofitting flue gas 
desulfurization devices.
    The language in section 405(c) raises questions of how to measure 
utility capacity or size for purposes of applying the various 
paragraphs in the section. Paragraphs (c)(1) and (2) state that they 
apply to units of a ``utility operating company whose aggregate 
nameplate fossil fuel steam-electric capacity is'' of specified 
magnitudes. 42 U.S.C. 7651d(c)(1) and (2). In contrast, paragraph 
(c)(3) states that it applies to units of ``a utility operating company 
with, as of December 31, 1989, a total fossil fuel steam-electric 
generating capacity'' within a specified range of megawatts and with 
fewer than 78,000 electrical customers.
    EPA proposed and finalized Phase II allowances allocations based on 
its interpretation that, despite the language differences among these 
statutory phrases, all of the phrases incorporate the same approach for 
defining a utility operating company's capacity. In applying all the 
provisions of section 405(c), EPA summed the nameplate capacity of the 
generators operated by the unit's operating utility to determine that 
utility's capacity. See 57 FR 29940, 29953-54 (July 7, 1992); and 58 FR 
15662 and 15697.
    Two utilities challenged EPA's allowance allocations to their units 
under section 405(c). Madison Gas & Electric Co. (Madison Gas) 
challenged EPA's position that only the nameplate capacities of the 
units operated by a given utility should be considered in determining 
utility capacity, rather than instead considering the nameplate 
capacity of the units owned in whole or in part by the utility. The 
City of Springfield, Illinois, City Water, Light and Power (City of 
Springfield) challenged EPA's use of nameplate capacity, rather than 
summer net dependable capability, as the measure of generating capacity 
under section

[[Page 68356]]

405(c)(3). Madison Gas and City of Springfield petitioned for judicial 
review of their allowance allocations. On May 27, 1994, the U.S. Court 
of Appeals for the Seventh Circuit remanded to EPA the allowance 
allocations for these utilities in order for the Agency to reconsider 
these two issues concerning utility capacity. Madison Gas & Electric v. 
U.S. EPA, 4 F.3d 529 (7th Cir. 1994).
    Madison Gas argued, in its comments on EPA's original allowance 
allocations, that the language of section 405(c)(1) and (2) compel EPA 
to measure utility capacity based on the utility's ownership of 
capacity in any unit, including partially owned units. Sections 
405(c)(1) and (2) apply to units owned by a utility ``whose aggregate 
nameplate fossil fuel steam-electric capacity'' is of a specified 
magnitude. 42 U.S.C. 7651d(c)(1) and (2). According to Madison Gas, the 
use of the word ``whose'' in this context means that the capacity must 
be owned by the utility. In contrast, EPA read the word ``whose'' to 
mean that the capacity must be operated by the utility.
    EPA now believes that this language in section 405(c)(1) and (2) 
can support either interpretation. Further, EPA has identified at least 
two other utilities whose allocations would be affected by the adoption 
of Madison Gas's interpretation. EPA is concerned that adopting Madison 
Gas's interpretation and reducing, at this late date, the number of 
allowances allocated to these other utilities would disrupt the 
compliance planning already undertaken for these units. Therefore, on 
reconsideration, EPA believes that a fair and appropriate approach is 
to read the language in section 405(c)(1) and (2) to mean either 
aggregate nameplate capacity owned by a utility operating company or 
aggregate nameplate capacity operated by a utility operating company 
and to apply the most favorable reading to the utility involved. EPA 
believes that permitting the alternative interpretations is acceptable 
in light of the ambiguity of the statutory language. Moreover, this 
gives the three utilities affected by this issue the opportunity to 
claim and receive the most favorable allowance allocation available 
under these provisions, with little practical effect on other 
utilities.
    From data submitted by Madison Gas in its comments on the original 
allowance allocations, Madison Gas, as of 1989, owned more than 250 MWe 
of capacity. Madison Gas recognized that the interpretation of section 
405(c) (1) and (2) that it favors results in it receiving more 
allowances each year during 2000 through 2009 but fewer allowances each 
year thereafter and fewer total allowances. EPA therefore proposes to 
apply Madison Gas' interpretation of the provisions and to provide 
allowances to Madison Gas' Blount Street plant in Wisconsin as follows: 
unit 7, 116 unadjusted basic allowances each year in perpetuity under 
section 405(c)(1) and 1374 bonus allowances each year during 2000-2009 
under section 405(c)(4); unit 8, 473 unadjusted basic allowances and 
716 bonus allowances; and unit 9, 633 unadjusted basic allowances and 
629 bonus allowances. These will be in lieu of the allowances for the 
units in the current Table 2.
    Two other utilities are potentially affected by the interpretation 
of the utility-size language in section 405(c) (1) and (2). If the 
language is interpreted to refer to total owned capacity, Potomac 
Edison Company's R P Smith unit 9 in Maryland will be provided 320 
unadjusted basic allowances under section 405(c)(1) and 354 bonus 
allowances under section 405(c)(4). Interpreting section 405 as 
referring to operated capacity, the unit receives 386 unadjusted basic 
allowances under section 405(c)(2) and no bonus allowances. City of 
Henderson's Henderson unit in Kentucky would have a lower allowance 
allocation when total owned capacity, rather than total operated 
capacity, is considered. EPA proposes to change the allowances for the 
R P Smith unit and leave unchanged the allowances for the Henderson 
unit. Comments are requested on this proposed resolution and from any 
utility with a unit that may be affected by the proposed interpretation 
of utility capacity.
    City of Springfield argued, in its comments on the original 
allowance allocations, that EPA should not use nameplate capacity for 
determining utility capacity under section 405(c)(3). While section 
405(c) (1) and (2) refer to a utility's ``aggregate nameplate fossil 
fuel steam-electric capacity, section 405(c)(3) refers to a utility's 
``total fossil fuel steam-electric generating capacity.'' Data 
available from the Energy Information Administration (EIA) of the 
Department of Energy includes three different ``capacity'' terms: 
nameplate capacity, summer net dependable capability, and winter net 
dependable capability. Nameplate capacity is the gross maximum capacity 
(in MWe) that a generator is designed to deliver, whereas capability 
refers to the highest number of MWe actually delivered during a given 
season. City of Springfield recommended summing, for a utility, the 
summer net dependable capability of each of its units in applying 
section 405(c)(3).
    Under EPA's original allowance allocations, City of Springfield's 
Lakeside units 7 and 8 received basic allowances under section 
405(c)(1) because City of Springfield operated units with a total of 
463 MWe of nameplate capacity. Since the total summer net dependable 
capability of these units was 443 MWe, City of Springfield's 
interpretation will result in Lakeside units 7 and 8 instead receiving 
unadjusted basic allowances under section 405(c)(3).
    EPA now agrees that the utility-capacity language in section 
405(c)(3) is ambiguous, particularly in light of the specific 
references in section 405(c) (1) and (2) to nameplate capacity. The 
legislative history does not directly address the use of different 
utility-capacity language in these provisions of section 405. Further, 
differences in statutory language are generally interpreted as 
differences in meaning. Section 405(c)(3), unlike section 405(c) (1) 
and (2), does not specify nameplate capacity. Under these 
circumstances, EPA agrees that it is reasonable to conclude that some 
other capacity measure was intended to be used. Most utilities in the 
United States are summer peaking utilities and have larger summer net 
dependable capability than winter net dependable capability. 
Consequently, given the capacity measures in available EIA data, summer 
net dependable capability is the most logical alternative to nameplate 
capacity. EPA has not identified any units, other than the City of 
Springfield's units in Illinois, whose allocations are affected by this 
change in interpretation of section 405(c)(3).
    Therefore, EPA proposes, for the purposes of section 405(c)(3) 
only, to interpret utility capacity as the aggregate summer net 
dependable capability. This allows City of Springfield's Lakeside unit 
7 to receive 2,919 unadjusted basic allowances for 2000 through 2009 
and 722 unadjusted basic allowances for 2010 and thereafter. Lakeside 
unit 8 will receive 1,652 unadjusted basic allowances for 2000 through 
2009 and 371 for 2010 and thereafter. These allowances will be in lieu 
of the basic allowances provided to the units in the current Table 2. 
Comments are requested on this approach.
    EPA proposes another revision related to the application of section 
405(c)(3). As noted above, eligibility for section 405(c)(3) 
allocations is contingent on a unit being owned by an electric 
generating company with fewer than 78,000 customers as of November 15, 
1990. The current rule defines

[[Page 68357]]

``customer'' as ``a purchaser of electricity not for purposes of 
transmission or resale.'' 40 CFR 72.2. EPA understands that generating 
rural electrical cooperatives under the Rural Electrification Act (7 
U.S.C. 901, et seq.) are required to serve distributing cooperatives, 
which in turn serve the retail customers. Generating rural electrical 
cooperatives therefore do not have ``customers,'' as the term is 
currently defined. In order to address the unique circumstances of such 
cooperatives, EPA is proposing to revise the definition of ``customer'' 
to provide that customers of a generating rural electrical 
cooperative's distributing cooperative are considered customers of the 
generating cooperative.
    The effect of this change is to make Southern Illinois Power 
Cooperative's Marion plant in Illinois eligible for allowances under 
section 405(c)(3). For years 2000 through 2009, Marion units 1, 2, and 
3 will be provided 2,376, 2,434, and 2,640 unadjusted basic allowances 
respectively, rather than their current allowances for those years of 
534, 547, and 593.
    EPA proposes to implement, in this rulemaking, the above discussed 
revisions in the unadjusted allowances for the Madison Gas, Potomac 
Edison, City of Springfield, and Southern Illinois Power units in Table 
2. However, EPA proposes that in this proceeding it will not insert in 
the table the adjusted allowance figures (i.e., the allowance 
allocations, which take account of the 8.9 million ton nationwide cap 
on SO2 emissions and are referred to as the ``total annual phase 
II'' allowances in Tables 2 and 3) for these units and will not revise 
the allowance allocations of the other units on the tables to take 
account of the allowance impact of the revised Madison Gas, Potomac 
Edison, City of Springfield, and Southern Illinois Power unadjusted 
allowances. Instead, all of these changes will be made in a future 
rulemaking.
    With few exceptions, sections 403(a) and 405(a)(3) prohibit total 
annual allowance allocations in Phase II for all affected units from 
exceeding 8.95 million. In this way, annual, nationwide SO2 
emissions are essentially capped at 8.95 million tons. When total 
unadjusted annual basic allowances calculated under section 405 exceed 
the 8.95 million ceiling, each unit's basic allowances must be adjusted 
(i.e., ``racheted'' down proportionately) to prevent the ceiling from 
being exceeded. Because the current Tables 2 and 3 already reflect a 
ratcheting down of each unit's allowances, any net increase or decrease 
in the unadjusted annual basic allowances in Phase II for any affected 
units probably changes the amount of ratcheting and thus probably 
requires a change in the allowance allocations shown on Table 2 or 3 
for every other unit. Only if the increases in unadjusted basic 
allowances proposed today were essentially equal to the proposed 
decreases would the allowance allocations of the other units remain 
unchanged. In point of fact, the net effect of the revisions proposed 
today (including the allowance revisions discussed above and the 
corrections of Agency errors and addition of units to and deletion of 
units from the tables discussed below) is a relatively small net 
reduction in the total number of unadjusted basic allowances. This will 
result in a small reduction in the level of ratcheting necessary to 
implement the 8.95 million allowance ceiling. Reduced ratcheting may 
result in a relatively small number of additional allowances being 
allocated for Phase II to many units that are not otherwise affected by 
today's proposal.
    Adjusting all the allocation entries on Tables 2 and 3 is 
administratively burdensome and expensive. Moreover, under section 403 
of the Act, the allocations in the tables will have to be adjusted, and 
the tables republished, in June 1998 in any event. Section 403(a) 
required the Administrator to publish a final list of allowances 
allocations by December 31, 1992, reflecting estimated allowances to be 
allocated to units that apply for and receive repowering extensions in 
the future under section 409. Section 403(a) also requires the 
Administrator to publish a revised final list by June 1, 1998, 
reflecting, inter alia, allowances allocated to units for which 
repowering extensions are actually approved.
    EPA believes that no one will be prejudiced in any significant way 
by EPA's deferring allowance adjustments until the 1998 publication of 
the final list of allowance allocations. The owners of units whose 
unadjusted allowances are increased if today's proposal is finalized 
can trade the allowance increase in anticipation of the actual 
allocation in 1998. See 42 U.S.C. 7651b(b). As noted above, the change 
in the ratchet and the difference between the amount of the unadjusted 
allowances for these units and the amount allocated to them after 
adjustment due to ratcheting will be relatively small. Similarly, the 
amount of the ratcheting adjustment in 1998 of the allowances of other 
units otherwise not affected by today's proposal will be small. The 
owners of units that, under the proposal, are on Table 2 or 3 can trade 
their current allocations and base trading decisions on the existing 
ratchet for Phase II (about 10%).
    Consistent with its authority under section 403(b) to establish 
allowance system regulations, EPA proposes to revise the unadjusted 
allowances for the Madison Gas, Potomac Edison, City of Springfield, 
and Southern Illinois Power units in Table 2. The proposal includes a 
provision stating that the unadjusted allowances in Table 2 (or Table 
3, as appropriate) for these (and certain other) units are superseded 
and setting forth the new number of unadjusted allowances for such 
units. However, EPA proposes not to change, in this rulemaking, the 
ratchet used to adjust all allowances on the tables. Rather than 
recalculating the ratchet and applying it to all units in the tables, 
EPA will leave in place the current allowance allocations for the 
Madison Gas, Potomac Edison, City of Springfield, and Southern Illinois 
Power units and the other units remaining in the tables. When EPA 
develops the June 1998 revised list of allowance allocations required 
under section 403, EPA will calculate a new ratchet and apply it to the 
unadjusted basic allowances of all units remaining on Tables 2 and 3. 
The resulting allowance allocations will then be reflected in the 
units' Allowance Tracking System accounts.
2. Correction of Agency Errors
    EPA developed the NADB in order to calculate Phase II allowance 
allocations for all affected units. In July 1991, EPA released for 
comment version 2.0 of the NADB. 56 FR 33278 (July 19, 1991). Section 
402(4)(C) of the Act required the Administrator, by December 31, 1991, 
to ``supplement data needed in support of [title IV] and correct any 
factual errors in data from which affected Phase II units' baselines or 
actual 1985 emission rates have been calculated * * * for purposes of 
issuing allowances under the title.'' 42 U.S.C. 7651a(4)(C). EPA stated 
in the July 1991 notice that it would not accept comments on the data 
base after September 3, 1991 (the close of the comment period) except 
if the data sought was not available by that date. EPA added that it 
would not change any data after December 31, 1991, when it expected to 
issue the final data base. 56 FR 33279 and 33283.
    In July 1992, EPA released version 2.1 of the NADB, believing that 
version to be the final, and proposed Phase I and Phase II allowance 
allocations. 57 FR 30034. After correcting errors made by the Agency in 
version 2.1, EPA released version 2.11 of the NADB in March 1993, along 
with the final Phase II allowance allocations. 58 FR 15720 (NADB); and 
58 FR 15634 (allocations).

[[Page 68358]]

The corrections to the NADB were made ``only in response to comments, 
verified by EPA, that either changes were made to the data which, based 
on the data in the possession of EPA at the time, were known to be 
incorrect or the Agency failed to make a correction requested by a 
commenter that was true and properly documented at the time.'' 58 FR 
15720. At that time, EPA believed it had corrected all of these errors.
    However, several utilities subsequently informed EPA that the NADB 
still contained errors that were of the type that EPA had intended to 
correct. In the following cases, EPA agrees that the error in the 
current NADB results from the Agency's own actions. This is because the 
NADB data issues had been identified to EPA by a commenter by December 
31, 1991 and the commenter submitted to EPA, before EPA's issuance of 
NADB version 2.1 on July 7, 1992, sufficient documentation to support 
the correction of the data. Because in the March 1993 notices EPA had 
intended to correct such problems, EPA proposes today to correct them 
by revising the units' unadjusted allowances to reflect the correct 
data. Consistent with the approach taken in the March 1993 notices, EPA 
will not address any errors that were not identified by December 31, 
1991 or not sufficiently documented by July 7, 1992 and will not 
consider new requests for data changes, new data submissions, or new 
requests for outage adjustments.23
---------------------------------------------------------------------------

    \23\ As discussed below in sections IV(B) and (C) of this 
preamble, there are two exceptions to this approach toward data 
errors. First, where data errors result in unaffected facilities 
being improperly categorized as affected units, EPA proposes to 
adopt the proper categorization of the units regardless of when the 
data errors are corrected. Second, where projections, rather than 
actual data, are involved (i.e., projected dates for commencement of 
commercial operation), EPA will correct the projected dates if EPA 
is made aware of the actual dates within a reasonable time after 
commercial operation is commenced and all other necessary data had 
been provided by December 31, 1991.
---------------------------------------------------------------------------

    a. In the case of Manitowoc unit 8 in Wisconsin, the shared heat 
input at 60 percent capacity (HT60SHR) is not accurate. While EPA 
developed a methodology for sharing heat input at 60 percent capacity 
(HEAT60) that was accurate for most situations, the methodology was 
inaccurate for Manitowoc's unique circumstances, i.e., where only one 
boiler in a multiheader configuration was on-line as of December 31, 
1987. The owner of Manitowoc timely commented on the inaccuracy on 
August 30, 1991. However, EPA failed in March 1993 to correct the 
methodology in a way that would account for Manitowoc's situation. EPA 
has reviewed the methodology for splitting HEAT60 and developed a 
method that is appropriate for multi-header configurations where one or 
more, but not all, units came on-line after the baseline period. EPA is 
proposing to use the proportional share of design heat input. For 
example, if boiler 1 had a 100 mmBtu/hr design heat input, boiler 2 had 
200 mmBtu/hr and boiler 3 had 300 mmBtu/hr, boiler 1 would be allotted 
\1/6\ of the generator's HEAT60, boiler 2 would be allotted \1/3\, and 
boiler 3 would be allotted \1/2\. For Manitowoc unit 8, this approach 
will result in 271 unadjusted basic allowances, as opposed to 27 listed 
in the current Table 2.
    b. In the case of the Reedy Creek Improvement District's (Reedy 
Creek) Combined Cycle 1, unit 32432 (formerly unit 11*STG) in Florida, 
EPA erroneously failed to include the unit in Table 2, believing the 
unit was a simple combustion turbine and so was not an affected unit. 
Reedy Creek's timely comments, submitted on August 30, 1991, provided 
sufficient information to properly characterize the unit as a combined 
cycle turbine with auxiliary firing and thus as an affected unit and to 
determine its allowance allocation. EPA proposes to include the unit in 
Table 2 with 69 unadjusted basic allowances under section 405(g)(1).
    c. In the case of Central Louisiana Electric Company's (Central 
Louisiana) Rodemacher unit 2, EPA failed to correctly characterize the 
outage request for the unit. Central Louisiana submitted the outage 
request for the unit on March 21, 1991 and supplemented the request 
with additional information on February 10, 1992. On July 7, 1992, as 
part of the notice of the NADB (57 FR 30034), EPA proposed a 
classification scheme for outage requests received by EPA prior to 
finalization of the NADB. EPA proposed, at that time, and later 
finalized allowing baseline adjustments for discontinuous but related 
outages totalling four months or greater (``Category II''). See 58 FR 
15724. However, EPA mischaracterized Rodemacher unit 2's outage as less 
than four months. EPA now recognizes that Central Louisiana's earlier 
submissions provided timely notice and sufficient documentation of a 
discontinuous outage at Rodemacher of over four months. Unfortunately, 
the February 10, 1992 supplemental submission documenting the requested 
outage was received by EPA but was not directed to the docket or the 
Acid Rain Division to be considered with other outage requests. The 
outage at Rodemacher clearly fits the Category II classification and 
would have been so classified in 1992 if Central Louisiana's 
supplemental submission had been docketed. EPA stresses that it is not 
reconsidering or changing the criteria for evaluating outage requests 
but rather is correcting its mistake in applying the existing criteria. 
Therefore, EPA proposes to allow 2,312 additional unadjusted basic 
allowances for Rodemacher unit 2, bringing its total to 20,774.
    d. For the reasons discussed above in section IV(A)(1) of this 
preamble, EPA is proposing today changes to the unadjusted allowances 
for the Manitiwoc and Rodemacher units and adding the Combined Cycle 1 
unit and its unadjusted allowances to Table 2, as addressed in this 
section, but is not proposing to change or add the resulting allowance 
allocations in this rulemaking. The units' allowance allocations 
reflecting the new figures for unadjusted allowances will be put in 
Table 2 when the revised Tables 2 and 3 are issued in June 1998. At 
that time, any resulting revisions of the allowance allocations for the 
other units on the tables will also be made.

B. Deletion of Units From Table 2

    EPA proposes to delete certain units from Table 2 of Sec. 73.10(b), 
which set forth the Phase II allowance allocations for existing units. 
Because of data errors, these units were erroneously treated as 
affected units and included in the table. As discussed above, EPA 
generally will consider correcting NADB data errors and, as a result, 
changing an affected unit's allowances only where a data problem was 
identified to EPA by a commenter by December 31, 1991 and was 
sufficiently documented by July 7, 1992. Because the March 1993 notices 
were intended to correct such errors, EPA now considers the errors to 
be Agency errors and, as noted above, proposes to correct them. Other 
NADB data errors relating to allocations of affected units will not be 
corrected. However, EPA is taking a different approach to data errors 
(whether or not the data is in the NADB) that result in units being 
improperly categorized as affected units when they actually are 
unaffected units.
    In the latter cases, EPA will delete the units from Table 2 (or 
Table 3, as appropriate) regardless of whether the data errors result 
from the Agency's own actions. Any allowances allocated to such units 
must be offset by return of the same number of allowances with the same 
or an earlier compliance use date as those allocated. Further, the 
proceeds from EPA's auctioning of any allowances allocated to such 
units must be returned to EPA. Data errors, regardless of their cause, 
cannot expand

[[Page 68359]]

the applicability of the Acid Rain Program as set forth in title IV of 
the Act.24 The deletion of units from Table 2 is discussed below.
---------------------------------------------------------------------------

    \24\ While the July 1991 notice established a December 31, 1991 
cut-off for changing NADB data, the notice did not suggest that 
units that are unaffected units and ineligible for any allowances 
would continue to be allocated allowances. EPA explained that 
``[u]nits eligible for allowances will be allocated allowances based 
on the data contained in the final database.'' 56 FR 33283.
---------------------------------------------------------------------------

    1. Following publication of the March 1993 notices, EPA was 
notified by owners or operators of Grand Avenue, Kettle Falls, Maddox, 
Mobile, R S Nelson, and South Meadow that these units are not affected 
units under Sec. 72.6 (the applicability provisions of the Acid Rain 
Program) and so should not have been listed in Table 2. All of the 
units were allocated allowances.
    EPA agrees that Grand Avenue units 7 and 9 in Missouri are 
cogeneration facilities excluded from the Acid Rain Program under 
section 402(17)(C) of the Act and Sec. 72.6(b)(4)(i). The Grand Avenue 
units commenced operation prior to 1990. The NADB does not include data 
on the operations of cogeneration units. The units were designed and 
operated to produce municipal steam heat and electricity and are still 
operated in that manner. They each supplied less than 219,000 MWe-hr 
per year in 1985-1987 and in every year since 1990. EPA proposes to 
remove the units from Table 2.
    EPA agrees that Kettle Falls in Washington also should be deleted 
from Table 2 and excluded from the Acid Rain Program as a solid waste 
incinerator under Sec. 72.6(b)(7). This unit commenced commercial 
operation in 1983 burning ``hog'' fuel (waste from the logging and 
lumber industry). The NADB erroneously labeled Kettle Falls as an oil 
and gas-fired unit. In 1991 during development of the NADB, EPA had 
data demonstrating Kettle Falls' use of non-fossil fuel and 
qualification under Sec. 72.6(b)(7). EPA proposes to delete the unit 
from Table 2.
    Maddox unit **3 in New Mexico is a simple combustion turbine (as 
defined in Sec. 72.2) that originally commenced commercial operation in 
1963. The turbine was moved from one site in New Mexico, where it was 
called ``Roswell,'' to its present site in 1989. Section 402(8) of the 
Act and Sec. 72.6(b)(1) exclude from the Acid Rain Program simple 
combustion turbines that commenced commercial operation prior to 
November 15, 1990. Because Maddox **3 meets these criteria, EPA agrees 
that it should be removed from Table 2.
    EPA agrees that Mobile unit **2 in South Dakota is not an affected 
unit under the Acid Rain Program. Only units at stationary sources are 
affected units. 60 FR 17100, 17108 (April 4, 1995). Mobile **2 is a 
mobile source, not a stationary source, and thus, should not be 
included on Table 2 as an affected unit in the Acid Rain Program.
    The operator of R S Nelson units 1 and 2 in Lousiana requested on 
July 17, 1992 that the units be removed from Table 2 because they are a 
qualifying facility excluded from the Acid Rain Program under 
Sec. 72.6(b)(5). EPA failed to act on the request before finalization 
of the allocations in March 1993 but now agrees with the request. The 
units are a ``qualifying facility'' (Federal Energy Regulatory 
Commission Docket No. QF86-512) and are subject to a qualifying power 
purchase commitment, as defined in Sec. 72.2. The installed capacity of 
the units is 227.2 MWe (measured in gross), which does not exceed 130% 
of the planned net output capacity of 201 MWe (measured in net). EPA 
proposes to remove the units from Table 2.
    EPA agrees that South Meadow units 11, 12, and 13 (now called 
``Mid-CT RRF'') in Connecticut should be deleted from Table 2 because 
they are solid waste incinerators excluded from the Acid Rain Program 
under Sec. 72.6(b)(7). The NADB erroneously failed to reflect that, 
while these units were originally coal-fired utility units, they were 
shut down in 1969 and were substantially modified and resumed operation 
as solid waste incinerators in 1988. EPA proposes to delete them from 
Table 2.
    2. EPA believes the following additional units, presently listed in 
Table 2, are not affected units under Sec. 72.6:

------------------------------------------------------------------------
            State                    Plant             Units        ORIS
------------------------------------------------------------------------
CO...........................  Valmont.........  11,12,13,22,23..   0477
KS...........................  Ripley..........  **2,**3.........   1244
MI...........................  Delray..........  11..............   1728
MS...........................  Wright..........  W4..............   2063
NY...........................  Rochester 3.....  1,2,4...........   2640
PA...........................  Richmond........  63,64...........   3168
PA...........................  Southwark.......  11,12,21,22.....   3170
TX...........................  Concho..........  2,4,5,6.........   3518
TX...........................  Deepwater.......  DWP1-DWP6.......   3461
------------------------------------------------------------------------

    The units were not in operation during the baseline period (1985- 
1987) and were designated by the Energy Information Administration 
(EIA) of the U.S. Department of Energy as having retired before 
November 15, 1990. In the preamble of the March 1993 notice of final 
allowance allocations (58 FR 15636), EPA discussed the treatment of 
retired units. At that time, EPA attempted to identify all units that 
were not in operation during the baseline period and that had retired 
prior to November 15, 1990; such units were considered to be unaffected 
units and were deleted from Table 2. Because the units listed above 
also meet these criteria, EPA proposes to delete them from Table 2. 
Most of these units were not allocated allowances.
    EPA requests notification during the comment period by the owners 
or operators of any other unit listed on Table 2 that was not in 
operation during 1985-1987 and that is designated by EIA as having 
retired before November 15, 1990. If the unit will not be returned to 
service, EPA may delete such units from Table 2.
    3. EPA believes that several other facilities listed in Table 2 are 
unaffected units because they are not fossil fuel-fired combustion 
devices. El Centro 2 in California, Lauderdale PFL4 and PFL5 in 
Florida, and Chesterfield **8B in Virginia are heat recovery boilers 
that use exhaust gases from combustion turbines to produce steam in the 
boilers and do not use any fossil fuel, e.g., through auxiliary firing. 
NA 2--7246 **1 in Arkansas is planned to be a hydroelectric generation 
facility and thus will not use any fossil fuel. These facilities were 
allocated allowances in Table 2. EPA proposes to remove these 
facilities from Table 2.
    4. EPA reviewed the status of all units listed in Table 2 using the 
Department of Energy's ``Inventory of Power Plants 1993'' (published in 
December 1994)

[[Page 68360]]

and ``Inventory of Power Plants 1994'' (published in October 1995). 
Based on that review, EPA proposes to delete units from Table 2 that 
have been canceled or postponed indefinitely and therefore are not 
affected units at this time. None of these units were allocated 
allowances in Table 2. EPA requests comment from the owners or 
operators of the following units concerning deletion of the units from 
Table 2:

------------------------------------------------------------------------
            State                    Plant             Unit         ORIS
------------------------------------------------------------------------
AL...........................  Future Fossil...  **1.............   7064
                               McIntosh CAES...  **2.............   7063
                               McWilliams......  **CT1 **CT2        0553
                                                  **CT3.                
IL...........................  Lakeside........  GT2.............   0964
IN...........................  Na1--7221.......  **2.............   7221
                               Na1--7228.......  **4,**5.........   7228
KY...........................  J K Smith.......  1...............   0054
MN...........................  Future Base.....  **1.............   7240
MO...........................  Combustion        **NA7...........   7160
                                Turbine 1 (``CT                         
                                Plant 1'').                             
MO...........................  Empire Energy     **4 **NA2 **NA3.   6223
                                Ctr.                                    
NE...........................  NA1--7019.......  **NA2...........   7019
NJ...........................  Butler..........  **4.............   7152
NJ...........................  NA5--7217.......  **2.............   7217
                               NA6--7218.......  **2.............   7218
NM...........................  Escalante.......  **2.............   0087
ND...........................  Dakotas.........  **1.............   7081
OK...........................  Inola...........  **1.............   0798
                               GT98............  **1, **2........   7243
                               GT99............  **1-**3.........   7225
                               NA1-7216........  **1, **2........   7216
                               San Miguel......  **2.............   6183
                               TNP One.........  **3, **4........   7030
WI...........................  Manitowoc.......  9...............   4125
                               Na-7222.........  **1.............   7222
------------------------------------------------------------------------

    EPA also requests comment from owners or operators of other units 
in Table 2 that will not be built or that actually are not affected 
units under Sec. 72.6. EPA notes that if the owners and operators of 
any unit listed in Table 2 believe that their unit is not an affected 
unit, a certifying official for owners or operators of the unit may 
submit a petition under Sec. 72.6(c) to have the Administrator 
determine if the Acid Rain Program rules apply to the unit.25 
Units that are not affected units or will not be built may be deleted 
from Table 2.
---------------------------------------------------------------------------

    \25\ The applicability of the Acid Rain Program is described in 
the guidance document, ``Do the Acid Rain SO2 Regulations Apply 
to You?'', which is available from the Acid Rain Hotline at (202) 
233-9620.
---------------------------------------------------------------------------

    5. EPA proposes to implement, in today's rulemaking, the above-
discussed deletions from Table 2 and the other deletions from or 
additions to Tables 2 and 3 addressed in this proposal. However, for 
the reasons previously discussed, EPA proposes that, in this 
rulemaking, it will not change the allowance allocations of units 
remaining on the tables or show the allowance allocations of units 
added to the tables. These changes will be made in a future rulemaking 
in June 1998.
    Specifically, with regard to units proposed for deletion from Table 
2 or 3, EPA proposes, in this rulemaking, to remove from the table each 
such unit and the information concerning its allowances. Further, EPA 
proposes to require the designated representative of each unit that is 
proposed for deletion as an unaffected unit and has been allocated 
allowances, pursuant to the tables, to surrender to EPA, for each such 
allowance, an allowance of the same or earlier compliance use date. The 
Agency will deduct such allowances from the unit's Allowance Tracking 
System account. The designated representative of each such unit must 
also return to EPA the allowance proceeds that were distributed for any 
allowances withheld from such unit for the EPA allowance auction under 
subpart E of part 73. If, as proposed today, these units are not 
affected units, they were not eligible for any allowance allocations, 
and any allowances or allowance proceeds that they received must be 
returned. The allowances and proceeds must be returned within 60 days 
of the effective date of the final rule resulting from today's 
proposal. In the future, EPA will redistribute the returned allowance 
proceeds among the units that are properly allocated allowances and 
from which allowances are properly withheld for the auction. At that 
time, EPA will explain the procedure used for making the 
redistribution.
    With regard to units proposed for addition to a table, EPA proposes 
to add to the appropriate table the units proposed for addition and 
their unadjusted basic allowances. EPA proposes not to change, in this 
rulemaking, the ratchet used to adjust all allowances on the tables. 
Rather than recalculating the ratchet and applying it to units added to 
or remaining in the tables, EPA will not calculate the allowance 
allocations (``total annual phase II allowances'' in the tables) for 
the added units but will show these allocations as ``NA'' (not 
available). Allowances will not be placed in the Allowance Tracking 
System accounts of the added units at this time. Further, EPA will not 
change the allowance allocations (and the allowances actually reflected 
in the Allowance Tracking System accounts) for the units remaining in 
the tables. When EPA develops the June 1998 revised list of allowance 
allocations required under section 403, EPA will calculate a new 
ratchet and apply it to the unadjusted basic allowances of all units on 
Tables 2 and 3 at that time. The resulting allowance allocations 
(including those for the added units) will then be reflected in the 
units' Allowance Tracking System accounts.

[[Page 68361]]

C. Additions of Units to and Deletions of Units From Table 3

    The current Table 3 of Sec. 73.10 lists units that were expected to 
be eligible for allowances under section 405(g)(4) of the Act. Units 
were considered eligible if EPA was informed (as reflected in the EPA's 
Supplemental Data File finalized on March 23, 1993) that they had 
commenced construction prior to December 31, 1990 and (as reflected in 
the NADB) that they were planning to commence commercial operation from 
January 1, 1993 through December 31, 1995. EPA required that owners and 
operators of units on Table 3 submit documentation to EPA by December 
31, 1995 of the commencement of construction. 58 FR 15722. For units 
commencing construction before December 31, 1990, eligibility under 
section 405(g)(4) ultimately depends on them being affected units that 
actually commenced commercial operation by what was a future date 
(December 31, 1995) at the time the data underlying Table 3 was 
gathered. While some data about a unit (e.g., its generating capacity 
or allowable emissions rate) is known before construction is completed 
or operation begins, other information (in this case, the commencement 
date for commercial operation) can only be a projection that, not 
surprisingly, may turn out to be wrong.
    As discussed above, EPA's general approach to correcting data 
errors that lead to allowance revisions has been to require that the 
owners or operators have informed EPA by December 31, 1991 and 
sufficiently documented the correction by July 7, 1992. However, as of 
either of those dates, owners or operators of units in Table 3 that 
ultimately commenced commercial operation in 1993-1995 had only 
projections of commercial operation commencement dates, not actual 
data. Because such owners or operators could not have informed EPA by 
December 31, 1991 that the projected dates were erroneous, EPA is 
taking a different approach with regard to errors in the projected 
dates. EPA proposes to correct errors in a unit's projected commercial 
operation dates and to make the resulting allowance revisions if the 
Agency was made aware of the error within a reasonable time after the 
actual commencement of commercial operation. In addition, EPA is 
continuing to take the approach of correcting data errors (e.g., as 
discussed below, errors concerning completion of construction of units 
or status of units as fossil fuel-fired combustion devices), regardless 
of when EPA became aware of the corrected information, to the extent 
necessary to ensure that unaffected units are not erroneously treated 
as affected units. As a result, EPA proposes several additions of units 
to and deletions of units from Table 3.
    a. EPA has reviewed various documents regarding planned utility 
units and understands that many units presently listed on Table 3 are 
not likely ever to be built. In some cases, EPA's information in the 
Supplemental Data File on construction commencement was erroneous, and, 
in other cases, construction was commenced but not completed. 
Obviously, such units are not affected units and should not be included 
in any table as affected units. From the Department of Energy's 
``Inventory of Power Plants 1993'' and ``Inventory of Power Plants 
1994'', EPA believes the following units will not be built and proposes 
to delete them from Table 3:

------------------------------------------------------------------------
            State                    Plant             Units        ORIS
------------------------------------------------------------------------
FL...........................  G W Ivey........  **2.............   0665
IL...........................  Lakeside........  GT1.............   0964
IA...........................  Na1--7230.......  **1.............   7230
MO...........................  Empire Energy     **3.............   6223
                                Ctr.                                    
                               Lake Road.......  **8.............   2098
NJ...........................  Butler..........  **3.............   7152
OH...........................  Dover...........  **7.............   2914
PA...........................  Trenton Cogen     **1.............   9902
                                Proj.                                   
SC...........................  NA2--7107.......  **GT2...........   7107
                               NA3--7108.......  **GT3...........   7108
SD...........................  Ct..............  **5.............   7236
UT...........................  Bonanza.........  **2.............   7790
WI...........................  Combustion        **1.............   7157
                                Turbine.                                
                               Na2.............  **1.............   7250
------------------------------------------------------------------------

    Table 3 also currently includes other units that are not affected 
units. Harbor Gen Station **10 in California, Martin **3ST and **4ST in 
Florida, and Clark **9 and **10 in Nevada on Table 3 are heat recovery 
boilers served by existing simple turbines. As discussed above, this 
type of unit is not a fossil fuel-fired combustion device. Therefore, 
these are not affected units and should not be listed in any of the 
tables. EPA today proposes to delete them from Table 3.
    In addition, EPA proposes to delete the following units from Table 
3 and include them on Table 2 with zero allowances. NA1-7228 **1, **2, 
and **3 in Indiana did not submit the required documentation of the 
date for commencement of construction. Harry Allen **GT1 and **GT2 in 
Nevada did not commence construction before January 1, 1990. The 
remaining units did not commence commercial operation before December 
31, 1995.

------------------------------------------------------------------------
                                                                    ORIS
            State                 Plant name           Units        code
------------------------------------------------------------------------
AL...........................  McWilliams......  **4.............   0533
AZ...........................  Springerville...  3...............   8223
IN...........................  NA1-7228........  **1, **2, **3...   7228
KS...........................  Wamego..........  **NA1...........   1328
MD...........................  Easton 2........  **25............   4257
                               Perryman........  **51............   1556
MS...........................  Moselle.........  **4, **5........   2070
MO...........................  Combustion        **1.............   7160
                                Turbine 1.                              
MO...........................  Combustion        **2.............   7161
                                Turbine 2.                              

[[Page 68362]]

                                                                        
NE...........................  Na1-7019........  **NA1...........   7019
NV...........................  Harry Allen.....  **GT1, **GT2....   7082
NJ...........................  Butler..........  **1.............   7152
NJ...........................  Na1-7139........  **1.............   7139
NJ...........................  Na2-7140........  **1.............   7140
OH...........................  Woodsdale.......  **GT7...........   7158
SC...........................  NA1- 7106.......  **GT1...........   7106
VA...........................  East Chandler...  **2.............   7186
------------------------------------------------------------------------

    Finally, Twin Oak 2 in Texas is eligible for allowances under 
section 405(g)(2) and was listed in Table 3 as also eligible for 
allowances under section 405(g)(4). This unit did not actually commence 
commercial operation by December 31, 1995 and therefore is not eligible 
under section 405(g)(4). EPA proposes that Twin Oak 2 be removed from 
Table 3 and listed in Table 2 with 1,760 unadjusted basic allowances 
under section 405(g)(2).
    b. EPA understands that Angus Anson unit 3 in Minnesota (listed in 
Table 2 as ``NA1-7237, **2''), Cope unit 1 in South Carolina (listed in 
Table 2 as ``NA4-7210, **ST1'') and Fond Du Lac CT3 in Wisconsin 
(listed in Table 2 as ``Na1-7203'') actually commenced construction 
prior to December 31, 1990 and commercial operation in 1995 and are not 
listed in Table 3. In 1991, EPA had received documentation of their 
pre-1991 commencement of construction but did not list the units in 
Table 3 because they were not projected to commence commercial 
operation until 1996. EPA was informed, within a reasonable time after 
actual commencement of commercial operation, that the projections were 
wrong. EPA proposes to include these units in Table 3 with the 
following unadjusted basic allowances under section 405(g)(4) of the 
Act: Angus Anson unit 3, 1,166 allowances; Cope unit 1, 2,989 
allowances; and Fond Du Lac CT3, 44 allowances.
    In addition, EPA believes that it erred by not including West 
Marinette unit 33 in Wisconsin in Table 3. On August 28, 1991, the 
owner of West Marinette informed EPA that the unit had commenced 
construction before December 31, 1990 and was projected to commence 
commercial operation before 1996. EPA erroneously recorded the date for 
commencement of construction as being after 1990 and therefore failed 
to include the unit in the table. Because the owner timely informed EPA 
of the data error and because the unit actually commenced commercial 
operation in 1995, EPA considers this an Agency error and is correcting 
the error and adding the unit to Table 3. West Marinette unit 33 is 
eligible for 874 unadjusted basic allowances.
    EPA proposes to include these three units in Table 3 with the 
proper unadjusted basic allowances.
    c. EPA is proposing to make, in this rulemaking, the deletions and 
additions of units and the changes to the unadjusted allowances 
discussed in this section. These changes will be implemented in the 
manner described, and for the reasons discussed, in section IV(B) of 
this preamble. The units' allowance allocations will be revised to 
reflect the new figures for unadjusted allowances when the revised 
Tables 2 and 3 are issued in June 1998.

D. 1998 Revision of Allowance Allocations

    As noted above, section 403(a)(1) of the Act requires EPA to 
publish a revised statement of allowance allocations no later than June 
1, 1998. That revision must account for units eligible for allowances 
under section 405(g)(4) (units commencing operation from 1992 through 
1995), units eligible for allowances under section 405(i)(2) (units 
that reduce their emissions rates), and section 409 (units with 
approved repowering extensions). Rules for the revision of allowance 
allocations were published on March 23, 1993. 58 FR 15634.
    EPA is presently planning the procedures for revising allowance 
allocations in 1998. EPA has determined that the current regulations 
should be revised to facilitate the 1998 allowance allocation revision.
    The current rule requires each unit eligible under section 
405(i)(2) to submit a copy of the Form EIA-767 (showing the actual 
SO2 emissions rate) for the unit for 1997 no later than March 1, 
1998. Because EPA must provide a comment period on the revision to 
allocations and because of the administrative requirements for issuance 
of rules, there is insufficient time for EPA to issue a final rule in 
June 1998 using data submitted to EPA in March 1998. EPA is therefore 
proposing to use instead 1996 actual SO2 emissions rate data as 
reported by the unit's continuous emissions monitors under part 75. 
That data will be available in the spring of 1997, allowing EPA time to 
complete the revisions by the statutory deadline. Submission of the 
1997 Form EIA-767 will no longer be required.
    The revisions to the allowance allocations are also dependent upon 
a reasonably accurate calculation of the number of allowances allocated 
for units with repowering extensions. EPA finalized the allowance 
allocations in 1993 based on its estimate of the number of allowances 
that could be allocated for units projected to apply for and be granted 
repowering extensions. The current part 72 allows for approval of a 
conditional repowering extension plan that does not go into effect 
until the plan is activated, which may occur as late as December 31, 
1997. Thus, until January 1998, EPA will not know the number of 
repowering extension plans in effect and the resulting number of 
allowances to be allocated for units with repowering extensions. This 
date is too late for EPA to complete allowance allocation revisions by 
June 1998.
    Therefore, EPA proposes to require activation of repowering 
extension plans by June 1, 1997. That is the same date as the deadline 
for submission to EPA of petitions for approval of repowering 
technology under Sec. 72.44(d). Under Sec. 72.44, a repowering 
extension can be approved only if the Administrator determines that the 
technology proposed to be used for repowering is a qualified repowering 
technology, consistent with the definition of ``repowering'' in section 
402(12) of the Act. EPA believes that, as a practical matter, the June 
1, 1997 deadline will provide sufficient flexibility for a utility to 
decide whether to commit to repowering a unit, particularly since the 
utility will still have until December 31, 1999 to terminate a 
repowering extension plan. Although the June 1998 revision will reflect 
repowering plans that the utility retains the right to terminate, EPA 
maintains that approved plans provide a sounder basis for the June 1998

[[Page 68363]]

allocations than conditional plans that may not even be activated.

E. Revisions to Small Diesel Refinery Provisions

    Section 410(h) of the Act provides a total of 35,000 allowances for 
small diesel refineries that desulfurize diesel fuel from October 1, 
1993 through December 31, 1999. Small diesel refineries are not 
affected units under the Acid Rain Program and do not need allowances 
to comply with any provision of the Act but may sell their allowances. 
Regulations for the allocation of allowances to small diesel refineries 
are contained in subpart G of part 73.
    After finalization of subpart G, EPA was informed that the equation 
in Sec. 73.90(c), for calculating allowances in instances where the 
allowances requested by small refineries exceed the 35,000 limit under 
section 410(h), is in error. EPA agrees. The factor for prorating 
allowances to the 35,000 level was inverted. Today, EPA proposes to 
correct the equation and eliminate some redundant language.
    Also, after finalizing the rule, EPA realized that the list of 
items (in Sec. 73.90(a)) to be submitted to support a certification 
that the refinery is a small diesel refinery eligible for allowances is 
insufficient, as compared to the definition of small diesel refinery in 
Sec. 72.2. That definition requires data on crude oil throughput for 
1988 through 1990 but the current rule requires submission of EIA-810 
forms only for 1990. EPA has had to routinely request applicants to 
supplement their initial submissions with copies of the 1988 and 1989 
EIA-810 forms. It is less burdensome for the applicant and EPA to have 
properly stated submission requirements in the first instance. Today, 
EPA proposes to revise the rule to correct this error.

V. Part 75: Monitoring Requirements for Units Burning Digester and 
Landfill Gas

    EPA has received questions regarding treatment, under part 75, of 
utility units that burn digester or landfill gas in addition to natural 
gas. The definition of ``natural gas'' clearly excludes digester and 
landfill gas. The present definition of ``gas-fired'' includes natural 
gas and other gaseous fuels, but, for the purposes of monitoring 
requirements under part 75, excludes gaseous fuels that contain more 
sulfur than natural gas. In general, digester and landfill gas contain 
significantly more sulfur than natural gas, although still much less 
than coal. The monitoring rules of part 75 treat units that burn 
digester or landfill gas as ``other'' units, subject to the same 
requirements as coal-fired units to use continuous emissions monitoring 
systems to monitor SO2, NOX, carbon dioxide, and opacity.
    Use of digester or landfill gas for generation of electricity is 
encouraged by the Agency in order to decrease the emission of 
greenhouse gases and to efficiently use this waste product. However, 
the Agency has limited information concerning the range of the sulfur 
content of digester or landfill gas and methods, other than continuous 
emissions monitoring, for determining the amount of SO2 emissions 
from units combusting such gas. On one hand, EPA does not wish to 
discourage electricity production from digester and landfill gases by 
having overly burdensome monitoring requirements. In fact, use of such 
gases for electric generation can reduce methane and other emissions 
while reducing the financial burden on municipal landfills and other 
emitters of such gases. 61 FR 9905,9909-10 (March 12, 1996). On the 
other hand, accurate monitoring of SO2 emissions from affected 
units is essential to the integrity and effectiveness of the Acid Rain 
Program.
    Under these circumstances, EPA is not proposing any changes to part 
75 concerning monitoring of emissions from units combusting digester or 
landfill gas. Instead, the Agency requests information on: the sulfur 
content of such gas and the variability of sulfur content over time; 
the available methods, in addition to continuous emissions monitoring, 
for determining SO2 and NOX emissions from units combusting 
such gas; and the cost and accuracy of such methods. Other than the 
change in Sec. 75.67(a), discussed above, concerning exemptions from 
monitoring requirements for retired units, EPA is not proposing any 
changes to part 75 and will not accept comments on any other provisions 
of part 75 in this rulemaking.26
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    \26\ Under Sec. 75.50, information required under part 75 must 
be retained for at least 3 years from the date of each record. The 
general recordkeeping provision in Sec. 72.9(f)(1), which requires 
record retention for at least 5 years, is revised to incorporate 
specifically the 3-year period for part 75 records.
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VI. Part 77: Excess Emissions

A. Immediate Deduction of Allowances to Offset Excess Emissions

    Under the current rule, the designated representative of a unit 
that has excess emissions for a calendar year must submit an offset 
plan showing when allowances offsetting the excess emissions should be 
deducted. In the plan, the designated representative must state the 
amount of the excess emissions and of the resulting offset allowances 
and may state that the allowances should be deducted either immediately 
or on a future specified date. A plan providing for immediate deduction 
of all offset allowances will generally be approved without any further 
proceedings. A plan specifying a future date for deduction must be 
processed using notice and comment procedures analogous to the Agency's 
Acid Rain permit issuance procedures. If the future deduction date is 
in a year after the year in which the plan is submitted, there must be 
a showing that a deduction during the year of submittal will interfere 
with electric reliability.
    This approach provides the options of, inter alia, submitting an 
offset plan for immediate deduction of allowances, which is 
automatically approved, or an offset plan providing for deduction later 
in the year in which the plan is submitted, which must go through 
notice and comment. However, since offset plans are submitted by March 
1 and deductions will not actually be made until after completion of 
Agency review of emission data for the calendar year of the excess 
emissions, there is relatively small timing difference between an 
immediate deduction and one that takes place by the end of the same 
year. It seems doubtful that a designated representative would find 
that the timing difference warrants the burden of the notice and 
comment procedures applicable to plans not providing for immediate 
deductions. Further, it is less administratively burdensome for EPA to 
make deductions when it is already examining a unit's Allowance 
Tracking System acccount to determine if the allowances cover the 
unit's emissions than to defer the deductions to a later date in the 
same year. From a public policy standpoint, immediate deductions will 
also have the advantage of a more timely closing of compliance 
activities for the unit for the year of the excess emissions.
    For these reasons, EPA proposes to modify the current rule to 
require the offset plan to provide either for immediate deduction or 
deduction on a specified date in a subsequent year. Immediate deduction 
offset plans will continue to be subject to automatic approval while 
any other plans will have to include a showing of the impact of an 
immediate deduction on electric reliability and will be subject to 
notice and comment.27
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    \27\ Revisions concerning the notice and comment procedure for 
offset plans are also proposed. The provisions setting the time 
period for submission of supplemental information requested by the 
Administrator and establishing the list of persons on which the 
Administrator must serve notice of a draft offset plan are revised 
for the same reasons as the analogous revisions (discussed above) of 
the notice and comment procedure for Acid Rain permits. Further, the 
proposal requires service of automatic approvals of immediate-
deduction offset plans only on the designated representative of the 
unit involved and no longer requires service on other persons. This 
seems appropriate since with the completion of the immediate 
deduction, the designated representative has fully completed his or 
her offset obligation and the approval of the offset plan will still 
be noticed in the Federal Register.

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[[Page 68364]]

    In addition, under the proposal, it will be optional to specify in 
the offset plan the number of offset allowances to be deducted. Excess 
emissions and the offset requirement are determined by allowance 
account data, monitoring data, and other data (e.g., for Phase I, 
reduced utilization data) submitted to and reviewed by the 
Administrator. There is no purpose in requiring the designated 
representative to state in the plan the amount of excess emissions and 
of resulting offset allowances. This is consistent with the approach 
taken in the requirements for the annual compliance certification 
report, which does not require the designated representative to certify 
the amount of annual emissions or of allowances held as of the 
allowance transfer deadline. See 40 CFR 72.90.

B. Deadline for Payment of Excess Emissions Penalties

    Under the current rule, the owners and operators of a unit must pay 
any excess emissions penalties ($2,000, adjusted for inflation, per 
excess ton) by 60 days after the end of the year (i.e., by March 1) in 
which the excess emissions occur. Penalty payments for additional 
excess emissions resulting from the process of confirming kilowatt hour 
savings or heat rate improvement from energy conservation or improved 
unit efficiency measures under Sec. 72.91(b) must be paid by July 1.
    The difficulty with this approach is that the Agency's review of 
the emissions for that year may not have been completed by the date 
that the payment is due. With regard to Phase I, the information 
concerning reduced utilization and allowance surrender, which also 
affect the excess emissions determination, will be submitted around the 
same time (i.e., no later than March 1) and will not have yet been 
reviewed. Moreover, reduced utilization information submitted by March 
1 by Phase I units with reduced utilization plans relying on energy 
conservation or improved unit efficiency measures will reflect only 
estimates of the kilowatt hour savings or heat rate improvement from 
conservation or improved efficiency. Verified figures will not be 
submitted until July 1, and the Administrator has the discretion to 
extend the July 1 submission date for good cause. Agency review of 
emissions data and reduced utilization information may result in a 
change in the determination of excess emissions and the penalty payment 
that is due.
    Consequently, while section 411(a) of the Act expressly requires 
automatic payment of excess emissions penalties without demand by the 
Agency, the requirement to submit such payments by March 1 seems 
premature. Further, if Agency review results in a reduction in the 
amount calculated as excess emissions, there will have to be a refund 
of overpayment of penalties.
    For these reasons, EPA proposes to change the current rule to 
provide that excess emissions penalties are automatically due 30 days 
after the Administrator serves the designated representative of the 
unit involved a notice, stating that the Agency has completed the end-
of-year recordation process set forth in the current Sec. 73.34(a), 
but, in any event, no later than July 1 of the year after the year in 
which the excess emissions occur. That end-or-year recordation process 
entails: deduction of allowances, from the balance in the unit's 
compliance subaccount as of the allowance transfer deadline, for 
SO2 emissions during the prior calendar year; deduction of 
allowances pursuant to any other rule provisions (e.g., for reduced 
utilitization) from such balance; and transfer into the compliance 
subaccount of allowances allocated for the new calendar year. EPA 
anticipates that the notice will also provide information on the final 
balance in the account after all deductions are made. EPA notes that 
under the current Sec. 73.50(b)(2) the unit's compliance subaccount is 
frozen, so that no transfers can be made in or out of the account, 
until the recordation process in Sec. 73.34(a) is completed.
    If the penalty is not paid within 30 days after the notice is sent, 
EPA proposes that a second notice will be sent by the Administrator, 
i.e., a demand notice stating that the excess emissions penalty and 
interest charges are due. Interest will accrue from the date on which 
the second notice is mailed. This is consistent with the requirements 
of the Debt Collection Act (31 U.S.C. 3717).
    With regard to additional excess emissions that may stem from the 
process of confirming the results of energy conservation or improved 
unit efficiency measures, EPA proposes to make the payment due 30 days 
after the Administrator serves the designated representative a notice 
stating that the process set forth in Sec. 72.92(b) is completed. Under 
Sec. 72.92(b), the Administrator must review the confirmation report 
and determine whether additional excess emissions have resulted and 
whether any penalty (or refund of a penalty) is owed.

C. Excess NOX Emissions Under NOX Averaging Plans

    The current Sec. 77.6 states that owners and operators of each unit 
with excess emissions of NOX during a year must pay a penalty of 
$2,000 (adjusted by the Consumer Price Index) per ton of excess 
emissions of NOX. In part 76, Sec. 76.13 states how to calculate 
the amount of excess emissions of NOX. In particular, 
Sec. 76.13(b) addresses the calculation where a unit is in an approved 
NOX averaging plan under Sec. 76.11.
    Each unit in a NOX averaging plan has an individual NOX 
emission limitation (in lbs of NOX/mmBtu of heat input) and an 
individual heat input limit. However, if a group showing of compliance 
by the units in the plan can be made (i.e., if the Btu-weighted average 
emission rate for the units is less than or equal to the Btu-weighted 
average emission rate had the units operated in compliance with the 
standard emission limitations applicable to the units in the absence of 
the NOX averaging plan), the units are deemed to be in compliance 
with their individual emission limitations and heat input limits. See 
40 CFR 76.11(d)(1)(ii) (A) and (C). Under Sec. 76.13(b), if at least 
one unit in a NOX averaging plan fails to meet its individual 
emission limitation or heat input limit and the units in the plan fail 
to make a group showing of compliance, excess emissions for NOX 
equal the difference between actual total NOX emissions for the 
group of units for the year and total NOX emissions for the group 
for the year if each unit had met the standard emission limitations 
otherwise applicable to the unit.
    Applying the current Sec. 77.6(b), each unit that is in the 
NOX averaging plan and that has excess emissions of NOX must 
pay $2,000 (adjusted for inflation) per ton for the total amount of 
excess emissions under the plan as set forth in Sec. 76.13(b). If more 
than one unit violates its individual emission limitation or heat input 
limit, this could result in multiple $2,000 penalty payments on the 
same ton of excess emissions. EPA proposes to change part 77 to prevent 
such a result. The proposal states that where a NOX averaging plan 
covers one or more units that fail to meet their individual emission 
limitations or heat

[[Page 68365]]

input limits for the year and a group showing of compliance cannot be 
made, excess emissions occur at all such units in the plan and the 
total amount of excess emissions for such units for the year will equal 
the amount of excess emissions calculated in accordance with 
Sec. 76.13(b). The owners and operators of these units are responsible 
for paying the resulting excess emissions penalty under Sec. 77.6(b). 
Which of the owners and operators actually make the payments is left to 
the owners and operators to determine so long as the correct total 
amount of penalties is paid.

VII. Part 78: Administrative Appeals

    In a proposal promulgated on September 24, 1993, EPA proposed to 
add language to part 78 to clarify that, where a person contests a 
decision of the Administrator under the Acid Rain Program, exhaustion 
of the administrative appeals under part 78 is a prerequisite to 
judicial review. 58 FR 50088, 50104 (September 24, 1993). The proposal 
did not change the language in Sec. 78.7 providing that decisions on 
administrative appeal will be effective pending such appeal unless a 
stay is granted by the Environmental Appeals Board or the Presiding 
Officer.
    The Agency received comments on the proposed language. The 
commenters argued that the current part 78 is not ambiguous and should 
be interpreted not to require exhaustion of administrative remedies 
prior to judicial review. The commenters cite Darby v. Cisneros, 509 
U.S. 137, 154 (1993), in which the Supreme Court held that exhaustion 
of administrative appeals is ``a prerequisite to judicial review only 
when expressly required by statute or when an agency rule requires 
appeal before review and the administrative action is made inoperative 
pending that review.'' According to the Supreme Court, the requirement 
for exhaustion of administrative remedies must be ``clearly'' imposed 
by statute or rule. Id. at 146. Moreover, the commenters allege that 
because part 78 does not include a complete list of the specific 
decisions of the Administrator that are appealable under part 78, a 
requirement for exhaustion of administrative remedies would not be 
sufficiently clear. Finally, the commenters state that since the 
September 24, 1994 proposal would make the Administrator's decisions 
inoperative pending administrative appeal, this may have a disruptive 
effect and the Agency should solicit additional comment on the effect 
of the September 24, 1993 proposal.
    EPA proposes to modify the language in part 78 to state clearly 
that exhaustion of administrative appeals is a prerequisite for 
judicial review of any decision appealable under part 78, i.e., any 
final decision of the Administrator under the Acid Rain Program 
(excluding the matters listed in Sec. 78.3(d)). In addition to the 
changes in the September 24, 1993 proposal, changes are proposed to 
make it clear that if a petition for review under part 78 is not filed 
for a decision appealable under that part, the exhaustion prerequisite 
for judicial review is not met and to provide that if such a petition 
is filed, the decision is inoperative pending completion of the 
administrative appeal procedures. One such change is the elimination of 
Sec. 78.7 limiting the granting of stays of decisions during 
administrative appeal. Another change is the removal of the current 
provision in Sec. 78.3(d)(1) barring appeal of matters for which a 
claim of error could have been, but was not, submitted.28 This 
latter change will ensure that Agency decisions on such matters are 
reviewed by a superior agency authority (i.e., the Environmental 
Appeals Board) before judicial review can be sought.
---------------------------------------------------------------------------

    \28\ In addition, since the right to administrative appeal is no 
longer conditioned on taking the opportunity to file a claim of 
error, references in several sections in part 78 to such opportunity 
are replaced by references to actual submissions of, or Agency 
responses to, such claims.
---------------------------------------------------------------------------

    These revisions in part 78 require a few conforming changes in part 
72, which are included in today's proposal. Section 72.32 is revised to 
state that an affected unit is governed by its complete permit 
application until its Acid Rain permit is issued or denied. If an 
administrative appeal of a permit is filed under part 78, the permit is 
not in effect during the appeal and the application continues to govern 
until there is final agency action subject to judicial review. If an 
administrative appeal is filed under State appeal procedures, the State 
procedures will determine when the permit is ``issued'' and thus in 
effect. Further, since the revised provisions of this section and of 
sections in part 78 address in detail when an Acid Rain permit is 
final, the references to administrative appeals in the definition of 
``Acid Rain permit'' in Sec. 72.2 are superfluous and are removed.
    EPA maintains that the approach proposed here for administrative 
appeals is consistent with Darby and provides an opportunity for the 
Agency to correct decisions that persons allege are erroneous. Because 
Sec. 78.1 provides, in paragraph (a), a clear, general description of 
the decisions that are appealable under part 78 and, in paragraph (b), 
a list of the many (but not necessarily all) of the specific types of 
decisions that are appealable, EPA believes that the mandate to exhaust 
administative remedies prior to judicial appeal is clear and meets the 
requirements of Darby.
    A few additional changes to part 78 are proposed. The provisions 
setting time periods for filings by parties (e.g., the 30-day time 
periods within which motions to intervene in part 78 appeal proceedings 
may be filed and within which parties may file objections to a proposed 
decision of a Presiding Officer) are changed. In order to provide more 
flexibility, the changes allow the Administrator, Environmental Appeals 
Board, or Presiding Officer (as appropriate) to set reasonable time 
periods that are shorter or longer time than the usually applicable 
time periods in the rule. Since a decision appealed under part 78 is 
inoperative pending completion of the administrative appeal, the Agency 
needs to have the ability to accelerate the appeals proceeding where 
delay due to the pending appeal will have significant, adverse 
consequences. In addition, the usually applicable time period within 
which the Environmental Appeals Board may decide sua sponte to review a 
Presiding Officer's proposed decision is lengthened to 45 days so that, 
before the Board must decide whether to undertake review, the Board 
will know whether any party has requested such review. Further, 
requirements for service of notices of petitions for administrative 
review are changed to be consistent with the changes proposed above for 
service requirements, under part 72, for notices of draft Acid Rain 
permits.

VIII. 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 $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,

[[Page 68366]]

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 response 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 ADDRESSES 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 $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 promulating 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 proposed 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.
    As discussed in detail in this preamble, the proposal has the net 
effect of reducing the burden of parts 72, 77, and 78 of the Acid Rain 
regulations on regulated entities (including both investor-owned and 
municipal utilities) and on State permitting authorities (which may 
include State, local, and tribal governments). For example, the 
proposal reduces the burden of obtaining or providing new units and 
retired units exemptions from the Acid Rain Program and of issuing Acid 
Rain permits.
    The proposed revisions to part 73 also do not have a significant, 
adverse effect on regulated entities (including small entities) and 
have no effect on State permitting authorities. The proposal increases 
the annual unadjusted basic allowances for certain units and reduces 
the annual unadjusted basic allowances of other units, for a net 
reduction in total basic allowances of about 27,000 during 2000-2009 
and 24,000 in 2010 and thereafter. Since sections 403(a) and 405(a)(3) 
of the Act set a nationwide cap on annual allowance allocations, the 
net reduction of allowances under this proposal will result in a small 
increase in the annual allocations of each of the other units that 
already receive allowances; the total increase will equal the amount of 
the above-discussed reductions. In addition, the proposal increases the 
annual bonus allowances by a total of about 3,000 during 2000-2009; 
these end in 2009 and are not subject to the cap.
    In most cases where a unit's allowance allocation is reduced, the 
entire allocation is eliminated because EPA proposes to find that the 
unit is an unaffected unit and therefore to remove the unit from Table 
2 or 3. These tables list affected units, which are expected to comply 
with all Acid Rain Program requirements. The loss of allowances is more 
than offset by the removal of any obligation of such a unit to meet the 
emission limitations and permitting, monitoring, and recording and 
recordkeeping requirements of the program. The only units that have 
reduced allowance allocations and that remain affected units are units 
that were conditionally granted allowances under section 405(g)(4) of 
the Act and therefore were listed on Table 3 of Sec. 73.10(c). The 
allowances were conditioned on the owners and operators documenting 
that the units commenced construction before December 31, 1990 and 
commenced commercial operation by December 31, 1995. Because these 
conditions were not met by certain units, the units are not eligible 
for the allowances. See 58 FR 15641. Today's rule revisions simply 
reflect this ineligibility and propose to delete the units from Table 3 
and add them to Table 2 with zero allowances. EPA maintains that the 
rule, therefore, does not have a significant, adverse impact on 
regulated entities, including entities that are owners or operators of 
the units removed from Table 3.
    As part of the process of developing this proposal, EPA discussed 
with some State air regulators, the proposed revisions to part 72 
affecting State permitting authorities. These air regulators expressed 
general support for the approach of reducing the need for States to 
review and approve new unit or retired unit exemptions. They also 
generally supported the approach of streamlining notice and comment 
procedures for issuance of Acid Rain permits and spelling out more 
clearly or reduce the differences between the Acid Rain and title V 
permitting procedures. The approach of allowing States not to adopt 
opt-in regulations and providing that the Administrator issue opt-in 
permits under part 74 for sources in such States was also generally 
supported.

C. Paperwork Reduction Act

    The information collection requirements in this proposed rule have 
been submitted for approval to the OMB under the Paperwork Reduction 
Act, 44 U.S.C. 3501, et seq. An Information Collection Request (ICR) 
document has been prepared by EPA (ICR No. 1633.10) and a copy may be 
obtained from Sandy Farmer, OPPE Regulatory Information Division; U.S. 
Environmental Protection Agency (2137); 401 M St., SW.; Washington, DC 
20460 or by calling (202) 260-2740.
    The only additional information required by this collection of 
information is data concerning industrial units that exercise the 
option of applying for an exemption from most requirements of the Acid 
Rain Program, e.g., allowance, monitoring, and annual compliance 
requirements. This is a new industrial units exemption that EPA 
proposes, in today's rule, to establish. The requirements from which 
qualified industrial units will be exempt are significantly more 
burdensome than the information collection requirements for obtaining 
the exemption.29 In order to

[[Page 68367]]

obtain the exemption, an industrial unit must meet the information 
collection requirements, which involve submission of information that 
is necessary, and will be used, for determining whether the units 
qualify and will continue to qualify for the exemption.
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    \29\ Because the information collection burden on non-
cogeneration industrial units in the absence of this new exemption 
was not included in the ICR for the current rule, the effect of 
removing such burden through the new exemption is not included in 
the ICR for today's proposal. Consequently, the ICR for today's 
proposal shows an increase in burden even though exempt industrial 
units will actually experience a significant net reduction in the 
burden imposed on them by the Acid Rain Program. In addition, as 
discussed in detail in this preamble, today's proposal includes 
other revisions that will reduce somewhat the burden of the program 
on units that are not exempt. Because the burden reduction for non-
exempt units is small relative to the total burden of the Acid Rain 
Program, the reduction is not reflected in the ICR for today's 
proposal.
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    The additional information collection increases the estimated 
burden, as compared to the burden under the current regulations, by an 
average of 24 hours per response for about 15 responses. Burden means 
the total time, effort, or financial resources expended by persons to 
generate, maintain, retain, or disclose or provide information to or 
for a federal agency. This includes the time needed to review 
instructions; develop, acquire, install, and utilize technology and 
systems for the purposes of collecting, validating, and verifying 
information, processing and maintaining information, and disclosing and 
providing information; adjust the existing ways to comply with any 
previously applicable instructions and requirements; train personnel to 
be able to respond to a collection of information; search data sources; 
complete and review the collection of information; and transmit or 
otherwise disclose the information.
    An agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information, unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.
    Comments are requested on the Agency's need for this information, 
the accuracy of the provided burden estimates, and any suggested 
methods for minimizing respondent burden, including through the use of 
automated collection techniques. Send comments on the ICR to: the 
Director, OPPE Regulatory Information Division, U.S. Environmental 
Protection Agency (2137), 401 M St., S.W., Washington, DC 20460; and 
the Office of Information and Regulatory Affairs, Office of Management 
and Budget, 725 17th St., N.W., Washington, DC 20503, marked 
``Attention: Desk Officer for EPA.'' Include the ICR number in any 
correspondence. Since OMB is required to make a decision concerning the 
ICR between 30 and 60 days after December 27, 1996, a comment to OMB is 
best assured of having its full effect if OMB receives it by January 
27, 1997. The final rule will respond to any OMB or public comments on 
the information collection requirements contained in this proposal.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., requires 
federal agencies to consider potential impacts of its regulations on 
small entities. Under 5 U.S.C. 604(a), an agency issuing a notice of 
proposed rulemaking must prepare and make available for public comment 
an initial regulatory flexibility analysis. Such an analysis is not 
required if the head of an agency determines, under 5 U.S.C. 605(b), 
that the proposed rule will not have a significant economic impact on a 
substantial number of small entities.
    In the preamble of the January 11, 1993 rule, the Administrator 
certified that the rule, including the provisions revised by today's 
proposal, would not have a significant, adverse impact on small 
entities. 58 FR 3649. The proposed revisions are not significant enough 
to change the overall economic impact addressed in the January 11, 1993 
preamble. Moreover, as discussed in detail in this preamble, the 
proposal has the net effect of reducing the burden of the Acid Rain 
regulations on regulated entities, including small entities. For 
example, the proposal makes it less burdensome to obtain new units and 
retired units exemptions from the Acid Rain Program. Further, as 
discussed in section VIII(B) of this preamble, while the proposal 
reduces and, in some cases, increases the allowance allocations for 
individual units, these changes in allocations will not have a 
significant, adverse effect on the owners or operators of the units. 
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 Parts 72, 73, 74, 75, 77, and 78

    Environmental protection, Acid rain, Administrative practice and 
procedure, Air pollution control, Compliance plans, Continuous 
emissions monitors, Electric utilities, Intergovernmental relations, 
Nitrogen oxides, Penalties, Permits, Reporting and recordkeeping 
requirements, Sulfur oxides.

    Dated: November 21, 1996.
Carol M. Browner,
Administrator.
    For the reasons set out in the preamble, title 40, chapter 1 of the 
Code of Federal Regulations is proposed to be amended as follows:

PART 72--[AMENDED]

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

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


Sec. 72.1  [Amended]

    2. Section 72.1 is amended by removing from paragraph (b) the words 
``part 70'' and adding, in their place, the words ``parts 70 and 71''.
    3. Section 72.2 is amended by: Removing the definition for 
``Dispatch system''; adding in alphabetical order the definitions for 
``Affected States'' and ``Eligible Indian tribe''; and revising 
paragraphs (1)(i) and (2) of the definition for ``Acid Rain emissions 
limitation'', the definition for ``Acid Rain permit or permit'', 
paragraph (2) of the definition of ``Coal-fired'', the definitions for 
``Customer'' and ``Permitting authority'' and ``Phase I unit'', 
paragraph (3) of the definition of ``Power purchase commitment'', and 
the definitions for ``Submit or serve'' and ``State'' and ``State 
operating permits program'' to read as follows:


Sec. 72.2   Definitions.

* * * * *
    Acid Rain emissions limitation means:
    (1) * * *
    (i) The tonnage equivalent of the allowances authorized to be 
allocated to an affected unit for use in a calendar year under section 
404(a)(1), (a)(3), and (h) of the Act, or the basic Phase II allowance 
allocations authorized to be allocated to an affected unit for use in a 
calendar year, or the allowances authorized to be allocated to an opt-
in source under section 410 of the Act for use in a calendar year;
* * * * *
    (2) For purposes of nitrogen oxides emissions, the applicable 
limitation under part 76 of this chapter.
* * * * *
    Acid Rain permit or permit means the legally binding written 
document or portion of such document, including any permit revisions, 
that is issued by a permitting authority under this part and specifies 
the Acid Rain Program requirements applicable to an affected source and 
to the owners and operators and the designated representative of the 
affected source or the affected unit.
* * * * *

[[Page 68368]]

    Affected States means any affected State as defined in part 71 of 
this chapter.
* * * * *
    Coal-fired means * * *
    (2) For all other purposes under the Acid Rain Program, except for 
purposes of applying part 76 of this chapter, a unit is ``coal-fired'' 
if it uses coal or coal-derived fuel as its primary fuel (expressed in 
mmBtu); provided that, if the unit is listed in the NADB, the primary 
fuel is the fuel listed in the NADB under the data field ``PRIMEFUEL''.
* * * * *
    Customer means a purchaser of electricity not for the purposes of 
retransmission or resale. For generating rural electrical cooperatives, 
the customers of the distribution cooperatives served by the generating 
cooperative will be considered customers of the generating cooperative.
* * * * *
    Eligible Indian tribe means any eligible Indian tribe as defined in 
part 71 of this chapter.
* * * * *
    Permitting authority means either:
    (1) When the Administrator is responsible for administering Acid 
Rain permits under subpart G of this part, the Administrator or a 
delegatee agency authorized by the Administrator; or
    (2) The State air pollution control agency, local agency, other 
State agency, or other agency authorized by the Administrator to 
administer Acid Rain permits under subpart G of this part and part 70 
of this chapter.
* * * * *
    Phase I unit means any affected unit, except an affected unit under 
part 74 of this chapter, that is subject to an Acid Rain emissions 
reduction requirement or Acid Rain emissions limitation beginning in 
Phase I; or any unit exempted under Sec. 72.8 that, but for such 
exemption, would be subject to an Acid Rain emissions reduction 
requirement or Acid Rain emissions limitation beginning in Phase I.
* * * * *
    Power purchase commitment means a commitment or obligation of a 
utility to purchase electric power from a facility pursuant to:
* * * * *
    (3) A letter of intent or similar instrument committing to purchase 
power (actual electrical output or generator output capacity) from the 
source at a previously offered or lower price and a power sales 
agreement applicable to the source is executed within the time frame 
established by the terms of the letter of intent but no later than 
November 15, 1993 or, where the letter of intent does not specify a 
time frame, a power sale agreement applicable to the source is executed 
on or before November 15, 1993; or
* * * * *
    Submit or serve means to send or transmit a document, information, 
or correspondence to the person specified in accordance with the 
applicable regulation:
    (1) In person;
    (2) By United States Postal Service; or
    (3) By other equivalent means of dispatch, or transmission, and 
delivery. Compliance with any ``submission'', ``service'', or 
``mailing'' deadline shall be determined by the date of dispatch, 
transmission, or mailing and not the date of receipt.
* * * * *
    State means one of the 48 contiguous States and the District of 
Columbia, any non-federal authorities in or including such States or 
the District of Columbia (including local agencies, interstate 
assocations, and State-wide agencies), and any eligible Indian tribe in 
an area in such State or the District of Columbia. The term ``State'' 
shall have its conventional meaning when used in the phrase ``the 48 
contiguous States.''
    State operating permit program means an operating permit program 
that the Administrator has approved under part 70 of this chapter.
* * * * *
    4. Section 72.6 is amended by adding paragraphs (b)(9) and revising 
paragraph (c) (1) and (2) to read as follows:


Sec. 72.6   Applicability.

* * * * *
    (b) * * *
    (9) A unit for which an exemption under Sec. 72.7, Sec. 72.8, or 
Sec. 72.14 is in effect. Although such a unit is not an affected unit, 
the unit shall be subject to the requirements of Sec. 72.7, Sec. 72.8, 
or Sec. 72.14, as applicable to the exemption.
    (c) A certifying official of an owner or operator of any unit may 
petition the Administrator for a determination of applicability under 
this section.
    (1) Petition Content. The petition shall be in writing and include 
identification of the unit and relevant facts about the unit. In the 
petition, the certifying official shall certify, by his or her 
signature, the statement set forth at Sec. 72.21(b)(2). Within 10 
business days of receipt of any written determination by the 
Administrator covering the unit, the certifying official shall provide 
each owner or operator of the unit, facility, or source with a copy of 
the petition and a copy of the Administrator's response.
    (2) Timing. The petition may be submitted to the Administrator at 
any time but, if possible, should be submitted prior to the issuance 
(including renewal) of a Phase II Acid Rain permit for the unit.
* * * * *
    5. Section 72.7 is revised to read as follows:


Sec. 72.7   New units exemption.

    (a) Applicability. This section applies to any new utility unit 
that has not previously lost an exemption under paragraph (e)(4) of 
this section and that, in each year starting with the first year for 
which the unit is to be exempt under this section,
    (1) serves one or more generators with total nameplate capacity of 
25 MWe or less,
    (2) burns fuel that does not include any coal or coal-derived fuel 
(except coal-derived gaseous fuel with a sulfur content no greater than 
natural gas) and
    (3) burns gaseous fuel with an annual average sulfur content of 
0.05 percent or less by weight (as determined under paragraph (c)(3) of 
this section) and nongaseous fuel with an annual average sulfur content 
of 0.05 percent or less by weight (as determined under paragraph (c)(3) 
of this section).
    (b)(1) Any new utility unit that meets the requirements of 
paragraph (a) of this section and that is not allocated any allowances 
on Table 2 or 3 of Sec. 73.10 of this chapter shall be exempt from the 
Acid Rain Program, except for the provisions of this section, 
Secs. 72.2 through 72.6, and Secs. 72.10 through 72.13.
    (2) The exemption under paragraph (b)(1) of this section shall be 
effective on January 1 of the first full calendar year for which the 
unit will meet the requirements of paragraph (a) of this section. By 
December 31 of the first year for which the unit is to be exempt under 
this section, a statement signed by the designated representative 
(authorized in accordance with subpart B of this part) or, if no 
designated representative has been authorized, a certifying official of 
each owner of the unit shall be submitted to permitting authority 
otherwise responsible for administering a Phase II Acid Rain permit for 
the unit. If the Administrator is not the permitting authority, a copy 
of the statement shall be submitted to the Administrator. The 
statement, which shall be in a format prescribed by the Administrator, 
shall identify the unit, state the nameplate capacity of each generator 
served by the unit and the fuels currently burned or expected to be 
burned by the unit and their sulfur content by weight, and state that 
the

[[Page 68369]]

owners and operators of the unit will comply with paragraph (e) of this 
section.
    (c)(1) Any new utility unit that meets the requirements of 
paragraph (a) of this section and that is allocated one or more 
allowances in Table 2 or 3 of Sec. 73.10 of this chapter shall be 
exempt from the Acid Rain Program, except for the provisions of this 
section, Secs. 72.2 through 72.6, and Secs. 72.10 through 72.13, if 
each of the following requirements are met:
    (i) The designated representative (authorized in accordance with 
subpart B of this part) or, if no designated representative has been 
authorized, a certifying official of each owner of the unit submits to 
the permitting authority otherwise responsible for administering a 
Phase II Acid Rain permit for the unit a statement (in a format 
prescribed by the Administrator) that
    (A) identifies the unit and states the nameplate capacity of each 
generator served by the unit and the fuels currently burned or expected 
to be burned by the unit and their sulfur content by weight,
    (B) states that the owners and operators of the unit will comply 
with paragraph (e) of this section,
    (C) surrenders allowances equal in number to, and with the same or 
earlier compliance use date as, all of those allocated to the unit 
under subpart B of part 73 of this chapter for the first year that the 
unit is to be exempt under this section and for each subsequent year, 
and
    (D) surrenders any proceeds for allowances under paragraph 
(c)(1)(i)(C) withheld from the unit under Sec. 73.10 of this chapter. 
If the Administrator is not the permitting authority, a copy of the 
statement shall be submitted to the Administrator.
    (ii) The Administrator deducts from the unit's Allowance Tracking 
System account allowances under paragraph (c)(1)(i)(C) of this section 
and receives proceeds under paragraph (c)(1)(i)(D) of this chapter. 
Upon completion of such deductions and receipt of such proceeds, the 
Administrator will close the unit's Allowance Tracking System account 
and notify the designated representative (or certifying official) and, 
if the Administrator is not the permitting authority otherwise 
responsible for administering a Phase II Acid Rain permit for the unit, 
the permitting authority.
    (2) The exemption under paragraph (c)(1) of this section shall be 
effective on January 1 of the first full calendar year for which the 
requirements of paragraphs (a) and (c)(1) of this section are met.
    (3) Compliance with the requirement that fuel burned during the 
year have an annual average sulfur content of 0.05 percent by weight or 
less shall be determined as follows:
    (i) For gaseous fuel burned during the year, if natural gas is the 
only gaseous fuel burned, the requirement is assumed to be met;
    (ii) For gaseous fuel burned during the year where other gas in 
addition to or besides natural gas is burned, the requirement is met if 
the annual average sulfur content is equal to or less than 0.05 percent 
by weight. The annual average sulfur content, as a percentage by 
weight, for the gaseous fuel burned shall be calculated as follows:
[GRAPHIC] [TIFF OMITTED] TP27DE96.000

Where:

%Sannual = annual average sulfur content of the fuel burned 
during the year, as a percentage by weight;
%Sn = sulfur content of the nth sample of the fuel delivered 
during the year to the unit, as a percentage by weight;
Vn = volume of the fuel in a delivery during the year to the 
unit of which the nth sample is taken, in standard cubic feet; or, 
for fuel delivered during the year to the unit continuously by 
pipeline, volume of the fuel delivered starting from when the nth 
sample of such fuel is taken until the next sample of such fuel is 
taken, in standard cubic feet;
dn = density of the nth sample of the fuel delivered during the 
year to the unit, in lb per standard cubic foot; and
n = each sample taken of the fuel delivered during the year to the 
unit, taken at least once for each delivery; or, for fuel that is 
delivered during the year to the unit continuously by pipeline, at 
least once each quarter during which the fuel is delivered.

    (iii) For nongaseous fuel burned during the year, the requirement 
is met if the annual average sulfur content is equal to or less than 
0.05 percent by weight. The annual average sulfur content, as a 
percentage by weight, shall be calculated using the equation in 
paragraph (c)(3)(ii) of this section. In lieu of the factor, volume 
times density (Vn dn), in the equation, the factor, mass 
(Mn), may be used, where Mn is: mass of the nongaseous fuel 
in a delivery during the year to the unit of which the nth sample is 
taken, in lb; or, for fuel delivered during the year to the unit 
continuously by pipeline, mass of the nongaseous fuel delivered 
starting from when the nth sample of such fuel is taken until the next 
sample of such fuel is taken, in lb.
    (d)(1) A utility unit that was issued a written exemption under 
this section and that meets the requirements of paragraph (a) of this 
section shall be exempt from the Acid Rain Program, except for the 
provisions of this section, Secs. 72.2 through 72.6, and Secs. 72.10 
through 72.13 and shall be subject to the requirements of paragraphs 
(d)(2) and (e) of this section in lieu of the requirements set forth in 
the written exemption.
    (2) If a utility unit under paragraph (d)(1) of this section is 
allocated one or more allowances in Table 2 or 3 of Sec. 73.10 of this 
chapter, the designated representative (authorized in accordance with 
subpart B of this part) or, if no designated representative has been 
authorized, a certifying official of each owner of the unit shall 
submit to the permitting authority that issued the written exemption a 
statement (in a format prescribed by the Administrator) meeting the 
requirements of paragraph (c)(1)(i)(C) and (D) of this section. The 
statement shall be submitted by December 31, 1997 and, if the 
Administrator is not the permitting authority, a copy shall be 
submitted to the Administrator.
    (e) Special Provisions. (1) The owners and operators and, to the 
extent applicable, the designated representative of a unit exempted 
under this section shall comply with the requirements of the Acid Rain 
Program concerning all periods for which the exemption is not in 
effect, even if such requirements arise, or must be complied with, 
after the exemption takes effect.
    (2) For any period for which a unit is exempt under this section, 
the unit is not an affected unit under the Acid Rain Program and parts 
70 and 71 of this chapter and is not eligible to be an opt-in source 
under part 74 of this chapter. As an unaffected unit, the unit shall 
continue to be subject to any other applicable requirements under parts 
70 and 71 of this chapter.
    (3) For a period of 5 years from the date the records are created, 
the owners and operators of a unit exempt under this section shall 
retain at the source that includes the unit records demonstrating that 
the requirements of paragraph (a) of this section are met. The 5-year 
period for keeping records may be extended for cause, at any time prior 
to the end of the period, in writing by the Administrator or the 
permitting authority.
    (i) Such records shall include, for each delivery of fuel to the 
unit, the type of fuel and the sulfur content or, for fuel delivered to 
the unit

[[Page 68370]]

continuously by pipeline, the type of fuel and the sulfur content of 
each sample taken.
    (ii) The owners and operators bear the burden of proof that the 
requirements of paragraph (a) of this section are met.
    (4) Loss of exemption. (i) On the earliest of the following dates, 
a unit exempt under paragraph (a) of this section shall lose its 
exemption and become an affected unit under the Acid Rain Program and 
parts 70 and 71 of this chapter:
    (A) The date on which the unit first serves one or more generators 
with total nameplate capacity in excess of 25Mwe;
    (B) The date on which the unit burns any coal or coal-derived fuel 
except for coal-derived gaseous fuel with the sulfur content no greater 
than natural gas; or
    (C) January 1 of the year following the year in which the annual 
average sulfur content for gaseous fuel burned at the unit exceeds 0.05 
percent by weight (as determined under paragraph (c)(3) of this 
section) or for nongaseous fuel burned at the unit exceeds 0.05 percent 
by weight (as determined under paragraph (c)(3) of this section).
    (ii) Notwithstanding Sec. 72.30(b) and (c), the designated 
representative for a unit that loses its exemption under this section 
shall submit a complete Acid Rain permit application on the later of 
January 1, 1998 or 60 days after the date on which the unit is no 
longer exempt.
    (iii) For the purpose of applying monitoring requirements under 
part 75 of this chapter, a unit that loses its exemption under this 
section shall be treated as a new unit that commenced commercial 
operation on the date on which the unit is no longer exempt.
    6. Section 72.8 is revised to read as follows:


Sec. 72.8   Retired units exemption.

    (a) This section applies to any affected unit that is permanently 
retired.
    (b)(1) Any affected unit that is permanently retired shall be 
exempt from the Acid Rain Program, except for the provisions of this 
section, Secs. 72.2 through 72.6, Secs. 72.10 through 72.13, and 
subpart B of part 73 of this chapter.
    (2) The exemption under paragraph (b)(1) of this section shall 
become effective on January 1 of the first full calendar year during 
which that the unit will be permanently retired. By December 31 of the 
first year that the unit is to be exempt under this section, the 
designated representative (authorized in accordance with subpart B of 
this section) of the unit shall submit a statement to the permitting 
authority otherwise responsible for administering a Phase II Acid Rain 
permit for the unit. If the Administrator is not the permitting 
authority, a copy of the statement shall be submitted to the 
Administrator. The statement shall state (in a format prescribed by the 
Administrator) that the unit is permanently retired and will comply 
with the requirements of paragraph (d) of this section.
    (c) A utility unit that was issued a written exemption under this 
section and that is permanently retired shall be exempt from the Acid 
Rain Program, except for the provisions of this section, Secs. 72.2 
through 72.6, Secs. 72.10 through 72.13, and subpart B of part 73 of 
this chapter, and shall be subject to the requirements of paragraph (d) 
of this section in lieu of the requirements set forth in the written 
exemption.
    (d) Special Provisions. (1) A unit exempt under this section shall 
not emit any sulfur dioxide and nitrogen oxides starting on the date 
that the exemption takes effect. The owners and operators of the unit 
will be allocated allowances in accordance with subpart B of part 73 of 
this chapter. If the unit is a Phase I unit, for each calendar year in 
Phase I, the designated representative of the unit shall submit a Phase 
I permit application in accordance with subparts C and D of this part 
72 and an annual certification report in accordance with Secs. 72.90 
through 72.92 and is subject to Secs. 72.95 and 72.96.
    (2) A unit exempt under this section shall not resume operation 
unless the designated representative of the source that includes the 
unit submits a complete Acid Rain permit application under Sec. 72.31 
for the unit not less than 24 months prior to the later of January 1, 
2000 or the date the unit is to resume operation.
    (3) The owners and operators and, to the extent applicable, the 
designated representative of a unit exempted under this section shall 
comply with the requirements of the Acid Rain Program concerning all 
periods for which the exemption is not in effect, even if such 
requirements arise, or must be complied with, after the exemption takes 
effect.
    (4) For any period for which a unit is exempt under this section, 
the unit is not an affected unit under the Acid Rain Program and parts 
70 and 71 of this chapter and is not eligible to be an opt-in source 
under part 74 of this chapter. As an unaffected unit, the unit shall 
continue to be subject to any other applicable requirements under parts 
70 and 71 of this chapter.
    (5) For a period of 5 years from the date the records are created, 
the owners and operators of a unit exempt under this section shall 
retain at the source that includes the unit records demonstrating that 
the unit is permanently retired. The 5-year period for keeping records 
may be extended for cause, at any time prior to the end of the period, 
in writing by the Administrator or the permitting authority. The owners 
and operators bear the burden of proof that the unit is permanently 
retired.
    (6) Loss of exemption. (i) On the earlier of the following dates, a 
unit exempt under this section shall lose its exemption and become an 
affected unit under the Acid Rain Program and parts 70 and 71 of this 
chapter:
    (A) The date on which the designated representative submits an Acid 
Rain permit application under paragraph (d)(2) of this section; or
    (B) The date on which the designated representative is required 
under paragraph (d)(2) of this section to submit an Acid Rain permit 
application.
    (ii) For the purpose of applying monitoring requirements under part 
75 of this chapter, a unit that loses its exemption under this section 
shall be treated as a new unit that commenced commercial operation on 
the date on which the unit resumes operation.


Sec. 72.9  [Amended]

    7. Section 72.9 is amended by:
    a. removing from paragraphs (b)(1) and (2) the words ``and section 
407 of the Act and regulations implementing section 407 of the Act'';
    b. removing from paragraph (b)(3) the words ``and regulations 
implementing section 407 of the Act'';
    c. removing from paragraph (c)(6) the words ``the written exemption 
under Secs. 72.7 and 72.8'' and adding in their place, the words ``an 
exemption under Secs. 72.7, 72.8, or 72.14'';
    d. removing from paragraph (f)(1)(ii) the punctuation ``.'' and 
adding in its place the words ``; provided that a 3-year period (rather 
than a 5-year period) for recordkeeping under part 75 shall apply.'' ;
    e. removing from paragraph (g)(1) the words ``a written exemption 
under Sec. 72.7 or Sec. 72.8'' and adding, in their place, the words 
``an exemption under Secs. 72.7, 72.8, or 72.14'';
    f. removing from paragraph (g)(6) the words ``part 76 of this 
chapter'' and adding, in their place, the words ``Sec. 76.11 of this 
chapter; and
    g. removing from paragraph (h) introductory text the words ``a 
written exemption under Secs. 72.7 or 72.8'' and adding, in their 
place, the words ``an exemption under Secs. 72.7, 72.8, or 72.14''.


Sec. 72.13  [Amended]

    8. Section 72.13 is amended by:
    a. removing paragraphs (a)(1), (a)(5), (a)(6), (a)(7), (a)(9), and 
(a)(10);

[[Page 68371]]

    b. redesignating paragraph (a)(2) as paragraph (a)(1);
    c. redesignating paragraph (a)(3) as paragraph (a)(2);
    d. redesignating paragraph (a)(4) as paragraph (a)(3), and
    e. redesignating paragraph (a)(8) as paragraph (a)(4).
    9. Section 72.14 is added to read as follows:


Sec. 72.14  Industrial units exemption.

    (a) Applicability. This section applies to any non-cogeneration, 
utility unit that has not previously lost an exemption under paragraph 
(d)(4) of this section and that meets the following criteria:
    (1) Starting on the date of the signing of the interconnection 
agreement under paragraph (a)(2) of this section and thereafter, there 
has been no owner or operator of the unit, subsidiary or affiliate or 
parent company of an owner or operator of the unit, or combination 
thereof whose principal business is the sale, transmission, or 
distribution of electricity or that is a public utility under the 
jurisdiction of a State or local utility regulatory authority;
    (2) On or before March 23, 1993, the owners or operators of the 
unit entered into an interconnection agreement and any related power 
purchase agreement with a person whose principal business is the sale, 
transmission, or distribution of electricity or that is a public 
utility under the jurisdiction of a State or local utility regulatory 
authority, requiring the generator or generators served by the unit to 
produce electricity for sale only for incidental electricity sales to 
such person;
    (3) The unit served or serves one or more generators that, in 1985 
or any year thereafter, actually produced electricity for sale only for 
incidental electricity sales required under the interconnection 
agreement and any related power purchase agreement under paragraph 
(a)(2) of this section; and
    (4) Incidental electricity sales, under this section, are total 
annual sales of electricity produced by a generator that do not exceed 
10 percent of the nameplate capacity of that generator times 8,760 
hours per year and do not exceed 10 percent of the actual annual 
electric output of that generator.
    (b) Petition for exemption. The designated representative 
(authorized in accordance with subpart B of this part) of a unit under 
paragraph (a) of this section may submit to the permitting authority 
otherwise responsible for administering a Phase II Acid Rain permit for 
the unit a complete petition for an exemption for the unit from certain 
requirements of the Acid Rain Program. If the Administrator is not the 
permitting authority, a copy of the petition shall be submitted to the 
Administrator. A complete petition shall include the following elements 
in a format prescribed by the Administrator:
    (1) Identification of the unit;
    (2) A statement that the unit is not a cogeneration unit;
    (3) A list of the current owners and operators of the unit and any 
other owners and operators of the unit, starting on the date of the 
signing of the interconnection agreement under paragraph (a)(2) of this 
section, and a statement that, starting on that date, there has been no 
owner or operator of the unit, subsidiary or affiliate or parent 
company of an owner or operator of the unit, or combination thereof 
whose principal business is the sale, transmission, or distribution of 
electricity or that is a public utility under the jurisdiction of a 
State or local utility regulatory authority;
    (4) A summary of the terms of the interconnection agreement and any 
related power purchase agreement under paragraph (a)(2) of this 
section, including the date on which the agreement was signed, the 
amount of electricity that may be required to be produced for sale by 
the generator served by the unit, and the provisions for expiration or 
termination of the agreement;
    (5) A copy of the interconnection agreement and any related power 
purchase agreement under paragraph (a)(2) of this section;
    (6) The nameplate capacity of each generator served by the unit;
    (7) For each year starting in 1985, the actual annual electrical 
output of each generator served by the unit, the total amount of 
electricity produced for sales to any customer by each generator, and 
the total amount of electricity produced and sold as required by the 
interconnection agreement and any related power purchase agreement 
under paragragh (a)(2) of this section;
    (8) A statement that the generator or generators served by the unit 
actually produced electricity for sale only for incidental electricity 
sales (in accordance with paragraph (a)(4) of this section) required 
under the interconnection agreement and any related power purchase 
agreement under paragraph (a)(2) of this section; and
    (9) The special provisions of paragraph (d) of this section.
    (c) Permitting Authority's Action.
    (1) (i) For any unit meeting the requirements of paragraphs (a) and 
(b) of this section, the permitting authority shall issue an exemption 
from the requirements of the Acid Rain Program, except for the 
provisions of this section, Secs. 72.2 through 72.6 and Secs. 72.10 
through 72.13.
    (ii) If a petition for exemption is submitted for a unit but the 
designated representative fails to demonstrate that the requirements of 
paragraph (a) are met, the permitting authority shall deny an exemption 
under this section.
    (2) In issuing or denying an exemption under paragraph (c)(1) of 
this section, the permitting authority shall treat the petition for 
exemption as a permit application and apply the procedures used for 
issuing or denying draft, proposed (if the Administrator is not the 
permitting authority otherwise responsible for administering a Phase II 
Acid Rain permit for the unit), and final Acid Rain permits.
    (3) An exemption issued under paragraph (c)(1)(i) of this section 
shall become effective on January 1 of the first full year the unit 
meets the requirements of paragraph (a) of this section.
    (4) An exemption issued under paragraph (c)(1)(i) of this section 
shall be effective until the date on which the unit loses the exemption 
under paragraph (d)(4) of this section.
    (d) Special Provisions. (1) The owners and operators and, to the 
extent applicable, the designated representative of a unit exempt under 
this section shall comply with the requirements of the Acid Rain 
Program concerning all periods for which the exemption is not in 
effect, even if such requirements arise, or must be complied with, 
after the exemption takes effect.
    (2) For any period for which a unit is exempt under this section, 
the unit is not an affected unit under the Acid Rain Program and parts 
70 and 71 of this chapter and is not eligible to be an opt-in source 
under part 74 of this chapter. As an unaffected unit, the unit shall 
continue to be subject to any other applicable requirements under parts 
70 and 71 of this chapter.
    (3) For a period of 5 years from the date the records are created, 
the owners and operators of a unit exempt under this section shall 
retain at the source that includes the unit records demonstrating that 
the requirements of paragraph (a) of this section are met. The 5-year 
period for keeping records may be extended for cause, at any time prior 
to the end of the period, in writing by the Administrator or the 
permitting authority. Such records shall include the following 
information:
    (i) A copy of the interconnection agreement and any related power

[[Page 68372]]

purchase agreement under paragraph (a)(2) of this section;
    (ii) The nameplate capacity of each generator served by the unit; 
and
    (iii) For each year starting in 1985, the actual annual electrical 
output of each generator served by the unit, the total amount of 
electricity produced for sales to any customer by each generator, and 
the total amount of electricity produced and sold as required by the 
interconnection agreement and any related power purchase agreement 
under paragraph (a)(2) of this section.
    (4) Loss of exemption. (i) On the earliest of the following dates, 
a unit exempt under this section shall lose its exemption and become an 
affected unit under the Acid Rain Program and parts 70 and 71 of this 
chapter:
    (A) The first date on which there is an owner or operator of the 
unit, subsidiary or affiliate or parent company of an owner or operator 
of the unit, or combination thereof, whose principal business is the 
sale, transmission, or distribution of electricity or that is a public 
utility under the jurisdiction of a State or local utility regulatory 
authority.
    (B) If any generator served by the unit actually produces any 
electricity for sale other than for sale to the person specified as the 
purchaser in the interconnection agreement or any related power 
purchase agreement under paragraph (a)(2) of this section, then the day 
after the date on which such electricity is sold.
    (C) If any generator served by the unit actually produces any 
electricity for sale to the person specified as the purchaser in the 
interconnection agreement or any related power purchase agreement under 
paragraph (a)(2) of this section where such sale is not required under 
that interconnection agreement or related power purchase agreement or 
where such sale will result in total sales for a calendar year 
exceeding 10 percent of the nameplate capacity of that generator times 
8,769 hours per year, then the day after the date on which such sale is 
made.
    (D) If any generator served by the unit actually produces any 
electricity for sale to the person specified as the purchaser in the 
interconnection agreement or related power purchase agreement under 
paragraph (a)(2) of this section where such sale results in total sales 
for a calendar year exceeding 10 percent of the actual electric output 
of the generator for that year, then January 1 of the year after such 
year.
    (E) If the interconnection agreement or related power purchase 
agreement under paragraph (a)(2) of this section expires or is 
terminated and any generator served by the unit actually produces any 
electricity for sale, then the day after the date on which such 
electricity is sold.
    (ii) Notwithstanding Sec. 72.30 (b) and (c), the designated 
representative for a unit that loses its exemption under this section 
shall submit a complete Acid Rain permit application on the later of 
January 1, 1998 or 60 days after the date on which the unit is no 
longer exempted.
    (iii) For the purpose of applying monitoring requirements under 
part 75 of this chapter, a unit that loses its exemption under this 
section shall be treated as a new unit that commenced commercial 
operation on the date on which the unit is no longer exempted.
    10. Section 72.22 is amended by adding paragraph (e) to read as 
follows:


Sec. 72.22  Alternate designated representative.

* * * * *
    (e)(1) Notwithstanding paragraph (a) of this section, the 
certification of representation may designate two alternate designated 
representatives for a unit if:
    (i) the unit's utility system is a subsidiary of a holding company 
with two or more subsidiaries that are utility systems in two or more 
of the contiguous 48 States or the District of Columbia; and
    (ii) a single designated representative is designated for all the 
units in the utility-system subsidiaries of the holding company under 
paragraph (e)(1)(i) of this section and submits a NOx averaging 
plan under Sec. 76.11 of this chapter that covers all such units 
subject to part 76 of this chapter, is approved by the permitting 
authority, and continues to be in effect.
    (2) Except in this paragraph (e), whenever the term ``alternate 
designated representative'' is used under the Acid Rain Program, the 
term shall be construed to include either of the alternate designated 
representatives authorized under this paragraph (e). Except in this 
section, Sec. 72.23, and Sec. 72.24, whenever the term ``designated 
representative'' is used under the Acid Rain Program, the term shall be 
construed to include either of the alternate designated representatives 
authorized under this paragraph (e).
    11. Section 72.24 is amended by revising paragraphs (a) (3), (5), 
(10), and (11) to read as follows:


Sec. 72.24  Certificate of representation.

    (a) * * *
    (3) A list of the owners and operators of the affected source and 
of each affected unit at the source.
* * * * *
    (5) The following statement: ``I certify that I have given notice 
of the agreement, selecting me as the `designated representative' for 
the affected source and each affected unit at the source identified in 
this certificate of representation, in a newspaper of general 
circulation in the area where the source is located or in a State 
publication designed to give general public notice.''
* * * * *
    (10) If an alternate designated representative is authorized in the 
certificate of representation, the following statement: ``The agreement 
by which I was selected as the alternate designated representative 
includes a procedure for the owners and operators of the source and 
affected units at the source to authorize the alternate designated 
representative to act in lieu of the designated representative.''
    (11) The signature of the designated representative and any 
alternate designated representative who is authorized in the 
certificate of representation and the date signed.
* * * * *
    12. Section 72.25 is amended by removing from paragraph (a) the 
words ``submitted to'' and adding, in their place, the words ``received 
by''.
    13. Section 72.30 is amended by removing paragraph (b)(3) and 
adding paragraph (e) to read as follows:


Sec. 72.30  Requirement to apply.

* * * * *
    (e) Where two or more affected units are located at a source, the 
permitting authority may, in its sole discretion, allow the designated 
representative of the source to submit, under paragraph (a) or (c) of 
this section, two or more Acid Rain permit applications covering the 
units at the source, provided that each affected unit is covered by one 
and only one such application.
    14. Section 72.31 is amended by removing from paragraph (b) the 
words ``Phase II unit'' and adding in their place the words ``affected 
unit (except as provided under part 74 of this chapter)''.
    15. Section 72.32 is amended by revising paragraphs (b) and (c) and 
adding paragraph (d) to read as follows:


Sec. 72.32  Permit application shield and binding effect of permit 
application.

* * * * *
    (b) Prior to the date on which an Acid Rain permit is issued or 
denied, an affected unit governed by and operated

[[Page 68373]]

in accordance with the terms and requirements of a timely and complete 
Acid Rain permit application shall be deemed to be operating in 
compliance with the Acid Rain Program.
    (c) A complete Acid Rain permit application shall be binding on the 
owners and operators and the designated representative of the affected 
source and the affected units covered by the permit application and 
shall be enforceable as an Acid Rain permit from the date of submission 
of the permit application until the issuance or denial of an Acid Rain 
permit covering the units.
    (d) If agency action concerning a permit is appealed under part 78 
of this chapter, issuance or denial of the permit shall occur when the 
Administrator takes final agency action subject to judicial review.
    16. Section 72.33 is amended by adding a sentence to the end of 
paragraph (b)(3) to read as follows:


Sec. 72.33  Identification of dispatch system.

* * * * *
    (b) * * *
    (3) * * * A designated representative may request, and the 
Administrator may grant at his or her discretion, an exemption allowing 
the submission of an identification of dispatch system after the 
otherwise applicable deadline for such submission.
* * * * *
    17. Section 72.40 is amended by:
    a. removing from paragraph (a)(2) the words ``applicable emission 
limitation established by regulations implementing section 407 of the 
Act'' and adding, in their place, the words ``applicable emission 
limitation under Secs. 76.5, 76.6, and 76.7 of this chapter'';
    b. removing from paragraph (a)(2) the words ``in accordance with 
section 407 and the regulations implementing section 407'' and adding, 
in their place, the words ``part 76 of this chapter'';
    c. removing from paragraph (b)(1) the words ``an NOX averaging 
plan contained in part 76 of this chapter'' and adding, in their place, 
the words ``a NOX averaging plan under Sec. 76.11 of this 
chapter''; and
    d. removing from paragraphs (c) introductory text, (c)(1), and 
(d)(1) the words ``regulations implementing section 407 of the Act'' 
and adding, in their place, the words ``part 76 of this chapter''.


Sec. 72.41  [Amended]

    18. Section 72.41 is amended by: removing from paragraph (b)(3) the 
words ``90 days'' and adding, in their place, the words ``6 months (or 
90 days if submitted in accordance with Sec. 72.82)''; and removing 
from paragraph (e)(1)(ii) the words ``section 407 of the Act and 
regulations implementing section 407 of the Act'' and adding, in their 
place, the words ``part 76 of this chapter''.


Sec. 72.43  [Amended]

    19. Section 72.43 is amended by: removing from paragraph 
(b)(2)(iii)(B) the words ``under Sec. 72.92'' and adding, in their 
place, the words ``under Sec. 72.91(b)''; removing from paragraph 
(b)(4) the words ``90 days'' and adding, in their place, the words ``6 
months (or 90 days if submitted in accordance with Sec. 72.82 or 
Sec. 72.83)''; and removing from paragraph (f)(1)(i) the words 
``section 407 of the Act and regulations implementing section 407 of 
the Act'' and adding, in their place, the words ``part 76 of this 
chapter''.


Sec. 72.44  [Amended]

    20. Section 72.44 is amended by:
    a. removing from paragraph (c)(3) the words ``December 31'' and 
adding, in their place, the words ``June 1'';
    b. removing from paragraphs (g) (1)(i) and (2) the words ``proposed 
permit revision'' and adding, in their place, the words ``requested 
permit modification'';
    c. adding between the first and second sentences of paragraphs (g) 
(1)(i) and (2), introductory text, the words ``If the Administrator is 
not the permitting authority, a copy of the requested permit 
modification shall be submitted to the Administrator.'';
    d. removing from paragraph (g)(2)(iii) the words ``December 21'' 
and adding, in their place, the words ``December 31''; and
    e. removing from paragraph (h)(1)(ii) the words ``section 407 of 
the Act and regulations implementing section 407 of the Act'' and 
adding, in their place, the words ``part 76 of this chapter''.


Sec. 72.51  [Amended]

    21. Section 72.51 is amended by: removing the words ``parts 73, 75, 
77, and 78 of this chapter, and regulations implementing section 407 of 
the Act'' and adding, in their place, the words ``parts 73, 74, 75, 76, 
77, and 78 of this chapter''; and removing the words ``of this part''.
    22. Section 72.60 is revised to read as follows:


Sec. 72.60  General.

    (a) Scope. This subpart and parts 74, 76, and 78 of this chapter 
contain the procedures for federal issuance of Acid Rain permits for 
Phase I of the Acid Rain Program and Phase II for sources for which the 
Administrator is the permitting authority under Sec. 72.74. This part 
and parts 74, 76, and 78 of this chapter supersede part 71 of this 
chapter to the extent that they contain provisions that are not 
included in, or that expressly eliminate or replace provisions of, part 
71 of this chapter.
    (1) The provisions of subparts C, D, E, F, and H of this part and 
of parts 74, 76, and 78 of this chapter replace the provisions of part 
71 of this chapter concerning, for Acid Rain permit applications and 
permits: submission, content, and effect of permit applications; 
content and requirements of compliance plans and compliance options; 
content of permits and permit shield; procedures for determining 
completeness of permit applications; issuance of draft permits; public 
notice and comment and public hearings on draft permits; response to 
comments on draft permits; issuance of permits; permit revisions; and 
administrative appeal procedures. The provisions of part 71 of this 
chapter concerning Indian tribes, delegation of a part 71 program, 
affected State review of draft permits, and public petitions to reopen 
a permit for cause are not eliminated or replaced by this part or part 
74, 76, or 78 of this chapter.
    (2) The procedures in this subpart do not apply to the issuance of 
Acid Rain permits by State permitting authorities with operating permit 
programs approved under part 70 of this chapter, except as expressly 
provided in subpart G of this part.
    (b) Permit Decision Deadlines. Except as provided in 
Sec. 72.74(c)(1)(i), the Administrator will issue or deny an Acid Rain 
permit under Sec. 72.69(a) within 6 months of receipt of a complete 
Acid Rain permit application submitted for a unit, in accordance with 
Sec. 72.21, at the U.S. EPA Regional Office for the Region in which the 
source is located.
    (c) Use of Direct Final Procedures. The Administrator may, in his 
or her discretion, issue, as single document, a draft Acid Rain permit 
in accordance with Sec. 72.62 and an Acid Rain permit in final form and 
may provide public notice of the opportunity for public comment on the 
draft Acid Rain permit in accordance with Sec. 72.65. The Administrator 
may provide that, if no significant, adverse comment on the draft Acid 
Rain permit is timely submitted, the Acid Rain permit will be deemed to 
be issued on a specified date without further notice and, if such 
significant, adverse comment is timely submitted, an Acid Rain permit 
or denial of an Acid Rain permit will be issued in accordance with 
Sec. 72.69. Any notice provided under this paragraph (c) will include a 
description of the procedure in the prior sentence.


[[Page 68374]]


    23. Section 72.61 is amended by revising paragraphs (a) and 
(b)(2)(i) and adding paragraph (b)(3) to read as follows:


Sec. 72.61  Completeness.

    (a) Determination of Completeness. The Administrator will determine 
whether the Acid Rain permit application is complete within 60 days of 
receipt by the U.S. EPA Regional Office for the region in which the 
source is located. The permit application shall be deemed to be 
complete if the Administrator fails to notify the designated 
representative to the contrary within 60 days of receipt.
    (b) * * *
    (2)(i) Within a reasonable period determined by the Administrator, 
the designated representative shall submit the information required 
under paragraph (b)(1) of this section.
* * * * *
    (3) Any designated representative who fails to submit any relevant 
information or who has submitted incorrect information in a permit 
application shall, upon becoming aware of such failure or incorrect 
submittal, promptly submit such supplementary information or corrected 
information to the Administrator.

    24. Section 72.65 is amended by revising paragraphs (b)(1)(ii), 
(b)(1)(iii), and (b)(2) to read as follows:


Sec. 72.65  Public notice of opportunities for public comment.

* * * * *
    (b) * * *
    (1) * * *
    (ii) The air pollution control agencies of affected States; and
    (iii) Any interested person.
    (2) Giving notice by publication in the Federal Register and in a 
newspaper of general circulation in the area where the source covered 
by the Acid Rain permit application is located or in a State 
publication designed to give general public notice. Notwithstanding the 
prior sentence, if a draft permit requires the affected units at a 
source to comply with Sec. 72.9(c)(1) and to meet any applicable 
emission limitation for NOX under Secs. 76.5, 76.6, 76.7, 76.8, or 
76.11 of this chapter and does not include for any unit a compliance 
option under Sec. 72.44, part 74 of this chapter, or Sec. 76.10 of this 
chapter, the Administrator may, in his or her discretion, provide 
notice of the draft permit by Federal Register publication and may omit 
notice by newspaper or State publication.
* * * * *
    25. Section 72.69 is amending by revising paragraph (a) to read as 
follows:


Sec. 72.69  Issuance and effective date of Acid Rain permits.

    (a) After the close of the public comment period, the Administrator 
will issue or deny an Acid Rain permit. The Administrator will serve a 
copy of any Acid Rain permit and the response to comments on the 
designated representative for the source covered by the issuance or 
denial and serve written notice of the issuance or denial on any 
persons who are entitled to written notice under Sec. 72.65(b)(1) (ii) 
or (iii) or who submitted written or oral comments on the issuance or 
denial of the draft Acid Rain permit. The Administrator will also give 
notice in the Federal Register.
* * * * *
    26. Section 72.70 is revised to read as follows:


Sec. 72.70  Relationship to title V operating permit program.

    (a) Scope. This subpart sets forth criteria for acceptance of State 
acid rain programs, the procedure for including State acid rain 
programs in a title V operating permit program, and the requirements 
with which State permitting authorities with accepted programs shall 
comply, and with which the Administrator will comply in the absence of 
an accepted State program, to issue Phase II Acid Rain permits.
    (b) Relationship to operating permit program. Each State permitting 
authority with an affected source shall act in accordance with this 
part and parts 70, 74, 76, and 78 of this chapter for the purpose of 
incorporating Acid Rain Program requirements into each affected 
source's operating permit or for issuing exemptions under Sec. 72.14. 
To the extent that this part or parts 74, 76, or 78 of this chapter 
contain provisions that are not included in, or that expressly 
eliminate or replace provisions of, part 70 of this chapter, this part 
and parts 74, 76, and 78 of this chapter shall take precedence.
    27. Section 72.71 is revised to read as follows:


Sec. 72.71  Acceptance of State Acid Rain programs--general.

    (a) Each State shall submit, to the Administrator for review and 
acceptance, a State Acid Rain program meeting the requirements of 
Secs. 72.72 and 72.73.
    (b) The Administrator will review each State Acid Rain program or 
portion of a State Acid Rain program and accept, by notice in the 
Federal Register, all or a portion of such program to the extent that 
it meets the requirements of Secs. 72.72 and 72.73. At his or her 
discretion, the Administrator may accept, with conditions and by notice 
in the Federal Register, all or a portion of such program despite the 
failure to meet requirements of Secs. 72.72 and 72.73. On the later of 
the date of publication of such notice in the Federal Register or the 
date on which the State operating permit program is approved under part 
70 of this chapter, the State Acid Rain program accepted by the 
Administrator will become a portion of the approved State operating 
permit program.
    (c)(1) Except as provided in paragraph (c)(2) of this section, the 
Administrator will issue all Acid Rain permits for Phase I. The 
Administrator reserves the right to delegate the remaining 
administration and enforcement of Acid Rain permits for Phase I to 
approved State operating permit programs.
    (2) The State permitting authority will issue an opt-in permit for 
a combustion or process source subject to its jurisdiction if, on the 
date on which the combustion or process source submits an opt-in permit 
application, the State permitting authority has opt-in regulations 
accepted under paragraph (b) of this section and an approved operating 
permits program under part 70 of this chapter.
    28. Section 72.72 is amended by:
    a. removing paragraphs (b)(1)(i)(C), (b)(1)(vii), (b)(1)(viii), 
(b)(1)(xi), (b)(1)(xiii), (b)(5)(vii), (b)(7), and (b)(8);
    b. removing the last sentence of paragraph (b)(5)(v);
    c. redesignating paragraphs (ix) and (x) as paragraphs (vii) and 
(viii) respectively;
    d. redesignating paragraph (xii) as paragraph (ix);
    e. redesignating paragraph (xiv) as paragraph (x);
    f. removing and reserving paragraph (b)(5)(ii); and
    g. revising the heading, the introductory text, and paragraphs (b) 
introductory text, (b)(1)(ii), (b)(1)(iii), (b)(1)(iv), (b)(1)(v), 
(b)(1)(vi), the first sentence of (b)(5)(i), (b)(5)(vi), and (b)(6) to 
read as follows:


Sec. 72.72  Criteria for State operating permit program.

    A State operating permit program (including a State Acid Rain 
program) shall meet the following criteria. Any aspect of a State 
operating permits program or any implementation of a State operating 
permit program that fails to meet these criteria shall be grounds for 
withdrawal of all or part of the Acid Rain portion of an approved State 
operating permit program by the Administrator or for disapproval or 
withdrawal of approval of the State

[[Page 68375]]

operating permit program by the Administrator.
* * * * * *
    (b) The State operating permit program shall require the following 
provisions, which are adopted to the extent that this paragraph (b) is 
incorporated by reference or is otherwise included in the State 
operating permit program.
    (1) * * *
    (ii) Draft Permit. (A) The State permitting authority shall prepare 
the draft Acid Rain permit in accordance with subpart E of this part 
and part 76 of this chapter or, for a combustion or process source, 
with subpart B of part 74 of this chapter, or deny a draft Acid Rain 
permit.
    (B) Prior to issuance of a draft permit for a combustion or process 
source, the State permitting authority shall provide the designated 
representative of a combustion or process source an opportunity to 
confirm its intention to opt-in, in accordance with Sec. 74.14 of this 
chapter.
    (iii) Public Notice and Comment Period. Public notice of the 
issuance or denial of the draft Acid Rain permit and the opportunity to 
comment and request a public hearing shall be given by publication in a 
newpaper of general circulation in the area where the source is located 
or in a State publication designed to give general public notice. 
Notwithstanding the prior sentence, if a draft permit requires the 
affected units at a source to comply with Sec. 72.9(c)(1) and to meet 
any applicable emission limitation for NOX under Secs. 76.5, 76.6, 
76.7, 76.8, or 76.11 of this chapter and does not include for any unit 
a compliance option under Sec. 72.44, part 74 of this chapter, or 
Sec. 76.10 of this chapter, the State permitting authority may, in its 
discretion, provide notice by serving notice on persons entitled to 
receive a written notice and may omit notice by newspaper or State 
publication.
    (iv) Proposed permit. Following the public notice and comment 
period on a draft Acid Rain permit, the State permitting authority 
shall incorporate all changes necessary and issue a proposed Acid Rain 
permit in accordance with subpart E of this part and part 76 of this 
chapter or, for a combustion or process source, with subpart B of part 
74 of this chapter, or deny a proposed Acid Rain permit.
    (v) Direct final procedures. The State permitting authority may, in 
its discretion, issue, as a single document, a draft Acid Rain permit 
in accordance with paragraph (b)(1)(ii) of this section and a proposed 
Acid Rain permit and may provide public notice of the opportunity for 
public comment on the draft Acid Rain permit in accordance with 
paragraph (b)(1)(iii) of this section. The State permitting authority 
may provide that, if no significant, adverse comment on the draft Acid 
Rain permit is timely submitted, the proposed Acid Rain permit will be 
deemed to be issued on a specified date without further notice and, if 
such significant, adverse comment is timely submitted, a proposed Acid 
Rain permit or denial of a proposed Acid Rain permit will be issued in 
accordance with paragraph (b)(1)(iv) of this paragraph. Any notice 
provided under this paragraph (b)(1)(v) shall include a description of 
the procedure in the prior sentence.
    (vi) Acid Rain Permit Issuance. Following the Administrator's 
review of the proposed Acid Rain permit, the State permitting authority 
shall or, under part 70 of this chapter, the Administrator will, 
incorporate any required changes and issue or deny the Acid Rain permit 
in accordance with subpart E of this part and part 76 of this chapter 
or, for a combustion or process source, with subpart B of part 74 of 
this chapter.
    (5) * * * (i) Appeals of the Acid Rain portion of an operating 
permit issued by the State permitting authority that do not challenge 
or involve decisions or actions of the Administrator under this part or 
part 73, 74, 75, 76, 77, or 78 of this chapter shall be conducted 
according to procedures established by the State in accordance with 
part 70 of this chapter. * * *
    (vi) A failure of the State permitting authority to issue an Acid 
Rain permit in accordance with Sec. 72.73(b)(1) or, with regard to 
combustion or process sources, Sec. 74.14(c)(6) of this chapter shall 
be ground for filing an appeal.
    (6) Industrial Units Exemption. The State permitting authority 
shall act in accordance with Sec. 72.14 on any petition for exemption 
from requirements of the Acid Rain Program

    .29. Section 72.73 is revised to read as follows:


Sec. 72.73  State issuance of Phase II permits.

    (a) State Permit Issuance. (1) A State that is authorized to 
administer and enforce an operating permit program under part 70 of 
this chapter and that has a State Acid Rain program accepted by the 
Administrator under Sec. 72.71 shall be responsible for administering 
and enforcing Acid Rain permits effective in Phase II for all affected 
sources:
    (i) That are located in the geographic area covered by the 
operating permits program; and
    (ii) To the extent that the accepted State Acid Rain program is 
applicable.
    (2) In administering and enforcing Acid Rain permits, the State 
permitting authority shall comply with the procedures for issuance, 
revision, renewal, and appeal of Acid Rain permits under this subpart.
    (b) Permit Issuance Deadline. (1) On or before December 31, 1997, a 
State that is responsible under paragraph (a) of this section as of 
January 1, 1997 or such later date as the Administrator may establish, 
for administering and enforcing Acid Rain permits shall issue an Acid 
Rain permit for Phase II covering the affected units (other than opt-in 
sources) at each source in the geographic area for which the program is 
approved; provided that the designated representative of the source 
submitted a timely and complete Acid Rain permit application in 
accordance with Sec. 72.21 and meets the requirements of this subpart 
and part 70 of this chapter.
    (2) Each Acid Rain permit issued in accordance with this section 
shall have a term of 5 years commencing on its effective date; provided 
that, at the discretion of the permitting authority, the first Acid 
Rain permit for Phase II issued to a source may have a term of less 
than 5 years where necessary to coordinate the term of such permit with 
the term of an operating permit to be issued to the source under a 
State operating permit program. Each Acid Rain permit issued in 
accordance with paragraph (b)(1) of this section shall take effect by 
the later of January 1, 2000, or, where the permit governs a unit under 
Sec. 72.6(a)(3) of this part, the deadline for monitor certification 
under part 75 of this chapter.
    (3) Nitrogen Oxides. Within the period required under the approved 
State operating permit program but not later than July 1, 1999, the 
State permitting authority shall reopen the Acid Rain permit and add 
the Acid Rain Program nitrogen oxides requirements; provided that the 
designated representative of the affected source submitted a timely and 
complete Acid Rain permit application for nitrogen oxides in accordance 
with Sec. 72.21.

    30. Section 72.74 is revised to read as follows:


Sec. 72.74  Federal issuance of Phase II permits.

    (a)(1) The Administrator will be responsible for administering and 
enforcing Acid Rain permits for Phase II for any affected sources in a 
geographic area that is not under the jurisdiction of a State 
permitting authority responsible, as of January 1, 1997 or such later 
date

[[Page 68376]]

as the Administrator may establish, for administering and enforcing 
Acid Rain permits for such sources under Sec. 72.73(a).
    (2) After the State permitting authority becomes responsible for 
administering and enforcing Acid Rain permits under Sec. 72.73(a), the 
Administrator will suspend federal administration of Acid Rain permits 
for Phase II for sources and units subject to the accepted State Acid 
Rain program, except as provided in paragraph (b)(4) of this section.
    (b)(1) The Administrator will administer and enforce Acid Rain 
permits effective in Phase II for sources and units during any period 
that the Administrator is administering and enforcing an operating 
permit program under part 71 of this chapter for the geographic area in 
which the sources and units are located.
    (2) The Administrator will administer and enforce Acid Rain permits 
effective in Phase II for sources and units otherwise subject to a 
State Acid Rain program under Sec. 72.73(a) if:
    (i) The Administrator determines that the State permitting 
authority is not adequately administering or enforcing all or a portion 
of the State Acid Rain program, notifies the State permitting authority 
of such determination and the reasons therefore, and publishes such 
notice in the Federal Register;
    (ii) The State permitting authority fails either to correct the 
deficiencies within a reasonable period (established by the 
Administrator in the notice under paragraph (b)(3)(i) of this section) 
after issuance of the notice or to take significant action to assure 
adequate administration and enforcement of the program within a 
reasonable period (established by the Administrator in the notice) 
after issuance of the notice; and
    (iii) The Administrator publishes in the Federal Register a notice 
that he or she will administer and enforce Acid Rain permits effective 
in Phase II for sources and units subject to the State Acid Rain 
program or a portion of the program. The effective date of such notice 
shall be a reasonable period (established by the Administrator in the 
notice) after the issuance of the notice.
    (3) When the Administrator administers and enforces Acid Rain 
permits under paragraph (b)(1) or (b)(2) of this section, the 
Administrator will administer and enforce each Acid Rain permit issued 
under the State Acid Rain program or portion of the program until the 
permit is replaced by a permit issued under this section. After the 
later of the date for publication of a notice in the Federal Register 
that the State operating permit program is currently approved by the 
Administrator or that the State Acid Rain program or portion of the 
program is currently accepted by the Administrator, the Administrator 
will suspend federal administration of Acid Rain permits effective in 
Phase II for sources and units subject to the State Acid Rain program 
or portion of the program, except as provided in paragraph (b)(4) of 
this section.
    (4) After the State permitting authority becomes responsible for 
administering and enforcing Acid Rain permits effective in Phase II 
under Sec. 72.73(a), the Administrator will continue to administer and 
enforce each Acid Rain permit issued under paragraph (a)(1), (b)(1), or 
(b)(2) of this section until the permit is replaced by a permit issued 
under the State Acid Rain program. The State permitting authority may 
replace an Acid Rain permit issued under paragraph (a)(1), (b)(1), or 
(b)(2) of this section by issuing a permit under the State Acid Rain 
program by the expiration of the permit under paragraph (a)(1), (b)(1), 
or (b)(2) of this section. The Administrator may retain jurisdiction 
over the Acid Rain permits issued under paragraph (a)(1), (b)(1), or 
(b)(2) of this section for which the administrative or judicial review 
process is not complete and will address such retention of jurisdiction 
in a notice in the Federal Register.
    (c) Permit Issuance Deadline. (1)(i) On or before January 1, 1998, 
the Administrator will issue an Acid Rain permit for Phase II setting 
forth the Acid Rain Program sulfur dioxide requirements for each 
affected unit (other than opt-in sources) at a source not under the 
jurisdiction of a State permitting authority that is responsible, as of 
January 1, 1997 or such later date as the Administrator may establish, 
under Sec. 72.73(a) of this section for administering and enforcing 
Acid Rain permits; provided that the designated representative for the 
source submitted a timely and complete Acid Rain permit application in 
accordance with Sec. 72.21. The failure by the Administrator to issue a 
permit in accordance with this paragraph shall be grounds for the 
filing of an appeal under part 78 of this chapter.
    (ii) Each Acid Rain permit issued in accordance with this section 
shall have a term of 5 years commencing on its effective date. Each 
Acid Rain permit issued in accordance with paragraph (c)(1)(i) of this 
section shall take effect by the later of January 1, 2000 or, where a 
permit governs a unit under Sec. 72.6(a)(3), the deadline for monitor 
certification under part 75 of this chapter.
    (2) Nitrogen Oxides. Not later than 6 months following submission 
by the designated representative of an Acid Rain permit application for 
nitrogen oxides, the Administrator will reopen the Acid Rain permit for 
Phase II and add the Acid Rain Program nitrogen oxides requirements for 
each affected source not under the jurisdiction of a State permitting 
authority that is responsible, as of January 1, 1997 or such later date 
as the Administrator may establish, under Sec. 72.73(a) for issuing 
Acid Rain permits with such requirements; provided that the designated 
representative for the source submitted a timely and complete Acid Rain 
permit application for nitrogen oxides in accordance with Sec. 72.21.
    (d) Permit Issuance. (1) The Administrator may utilize any or all 
of the provisions of subparts E and F of this part to administer Acid 
Rain permits as authorized under this section or may adopt by 
rulemaking portions of a State Acid Rain program in substitution of or 
in addition to provisions of subparts E and F of this part to 
administer such permits. The provisions of Acid Rain permits for Phase 
I or Phase II issued by the Administrator shall not be applicable 
requirements under part 70 of this chapter.
    (2) The Administrator may delegate all or part of his or her 
responsibility, under this section, for administering and enforcing 
Phase II Acid Rain permits or opt-in permits to a State. Such 
delegation will be made consistent with the requirements of this part 
and the provisions governing delegation of a part 71 program under part 
71 of this chapter.
    31. Section 72.80 is amended by revising paragraphs (a), (b), (d), 
(e), (f), and (g) to read as follows:


Sec. 72.80  General.

    (a) The subpart shall govern revisions to any Acid Rain permit 
issued by the Administrator and to the Acid Rain portion of any 
operating permit issued by a State permitting authority.
    (b) The provisions of this subpart shall supersede the operating 
permit revision procedures specified in parts 70 and 71 of this chapter 
with regard to revision of any Acid Rain Program permit provision.
* * * * *
    (d) The terms of the Acid Rain permit shall apply while the permit 
revision is pending, except as provided in Sec. 72.83 for 
administrative permit amendments.
    (e) The standard requirements of Sec. 72.9 shall not be modified or 
voided by a permit revision.

[[Page 68377]]

    (f) Any permit revision involving incorporation of a compliance 
option that was not submitted for approval and comment during the 
permit issuance process or involving a change in a compliance option 
that was previously submitted, shall meet the requirements for applying 
for such compliance option under subpart D of this part and parts 74 
and 76 of this chapter.
    (g) Any designated representative who fails to submit any relevant 
information or who has submitted incorrect information in a permit 
revision shall, upon becoming aware of such failure or incorrect 
submittal, promptly submit such supplementary information or corrected 
information to the permitting authority.
* * * * *
    32. Section 72.81 is amended by: removing from paragraph (c)(1)(ii) 
the words ``and under Sec. 70.7(e)(4)(ii) of this chapter''; and 
revising paragraph (c)(2) to read as follows:


Sec. 72.81  Permit modifications.

* * * * *
    (c) * * *
    (2) For purposes of applying paragraph (c)(1) of this section, a 
requested permit modification shall be treated as a permit application, 
to the extent consistent with Sec. 72.80 (c) and (d).
    33. Section 72.82 is amended by revising paragraphs (a) and (d) to 
read as follows:


Sec. 72.82  Fast-track modifications.

* * * * *
    (a) If the Administrator is the permitting authority, the 
designated representative shall serve a copy of the fast-track 
modification on the Administrator and any person entitled to a written 
notice under Sec. 72.65(b)(1) (ii) and (iii). If a State is the 
permitting authority, the designated representative shall serve such a 
copy on the Administrator, the permitting authority, and any person 
entitled to receive a written notice of a draft permit under the 
approved State operating permit program. Within 5 business days of 
serving such copies, the designated representative shall also give 
public notice by publication in a newspaper of general circulation in 
the area where the source is located or in a State publication designed 
to give general public notice.
* * * * *
    (d) Within 30 days of the close of the public comment period if the 
Administrator is the permitting authority or within 90 days of the 
close of the public comment period if a State is the permitting 
authority, the permitting authority shall consider the fast-track 
modification and the comments received and approve, in whole or in part 
or with changes or conditions as appropriate, or disapprove the 
modification. A fast-track modification shall be subject to the same 
provisions for review by the Administrator and affected States as are 
applicable to a permit modification under Sec. 72.81.
    34. Section 72.83 is amended by: removing from paragraph (a)(10) 
the words ``regulations implementing section 407 of the Act'' and 
adding, in their place, the words ``part 76 of this chapter''; and 
revising paragraphs (a)(12) and (b) and adding paragraphs (a)(13), 
(a)(14), (c), and (d) to read as follows:


Sec. 72.83  Administrative permit amendment.

    (a) * * *
    (12) The addition of a NOX early election plan under Sec. 76.8 
of this chapter that was approved by the Administrator;
    (13) The addition of an exemption for which the requirements have 
been met under Sec. 72.7, 72.8, or 72.14; and
    (14) Incorporation of changes that the Administrator has determined 
to be similar to those in paragraphs (a) (1) through (13).
    (b)(1) The permitting authority will take final action on an 
administrative permit amendment within 60 days, or, for the addition of 
an alternative emissions limitation demonstration period, within 90 
days, of receipt of the requested amendment and may take such action 
without providing prior public notice. The source may implement any 
changes in the administrative permit amendment immediately upon 
submission of the requested amendment, provided that the requirements 
of paragraph (a) of this section are met.
    (2) The permitting authority may, on its own motion, make an 
administrative permit amendment without providing prior public notice.
    (c) The permitting authority will designate the permit revision 
under paragraph (b) of this section as having been made as an 
administrative permit amendment and will notify the designated 
representative after making such revision. Where a State is the 
permitting authority, the permitting authority shall submit the revised 
portion of the permit to the Administrator.
    (d) An administrative amendment shall not be subject to the 
provisions for review by the Administrator and affected States 
applicable to a permit modification under Sec. 72.81.
    35. Section 72.85 is amended by revising paragraphs (a) and (c) to 
read as follows:


Sec. 72.85  Permit reopenings.

    (a) The permitting authority shall reopen an Acid Rain permit for 
cause whenever:
    (1) Any additional requirement under the Acid Rain Program becomes 
applicable to any affected unit governed by the permit;
    (2) The permitting authority determines that the permit contains a 
material mistake or that inaccurate statements were made in 
establishing the emissions standards or other terms or conditions of 
the permit; or
    (3) The permitting authority determines that the permit must be 
revised or revoked to assure compliance with Acid Rain Program 
requirements.
* * * * *
    (c) As provided in Secs. 72.73(b)(3) and 72.74(c)(2), the 
permitting authority shall reopen an Acid Rain permit to incorporate 
nitrogen oxides requirements, consistent with part 76 of this chapter.
* * * * *
    36. Section 72.91 is amended by:
    a. removing from paragraph (b)(1)(i) the words ``improved unit 
measures'' and adding, in their place, the words ``improved unit 
efficiency measures'';
    b. removing from paragraph (b)(1)(iii), introductory text, the 
words ``all figures'' and adding, in their place, the words ``each 
figure'';
    c. removing from paragraph (b)(1)(iii)(B) the words ``measures, 
and'' and adding, in their place, the words ``measures, or'';
    d. removing from paragraph (b)(1)(iii)(C) the words ``measures.'' 
and adding, in their place, the words ``measures, except measures 
relating to generation efficiency.'';
    e. removing from the formula in paragraph (b)(4) the word ``hear'' 
and adding, in its place, the word ``heat'';
    f. removing from paragraph (b)(4)(i) the word ``units''' and 
adding, in its place, the word ``unit's''; revising paragraphs (b)(5), 
(b)(6), and (b)(7); and
    g. adding paragraphs (b)(1)(iv) and (b)(4)(iv) to read as follows:


Sec. 72.91  Phase I unit adjusted utilization.

* * * * *
    (b) * * *
    (1) * * *
    (iv) The sum of the verified reductions in a unit's heat input from 
all measures implemented at the unit to reduce the unit's heat rate 
(whether the measures are treated as supply-side measures or improved 
unit efficiency measures) shall not exceed the

[[Page 68378]]

generation (in kwh) attributed to the unit for the calendar year times 
the difference between the unit's heat rate for 1987 and the unit's 
heat rate for the calendar year.
* * * * *
    (4) * * *
    (iv) The allowances credited shall not exceed the total number of 
allowances deducted from the unit's compliance subaccount for the 
calendar year in accordance with Secs. 72.92 (a) and (c) and 73.35(b) 
of this chapter.
    (5) If the total, included in the confirmation report, of the 
amount of verified reduction in the unit's heat input for energy 
conservation and improved unit efficiency measures is less than the 
total estimated in the unit's annual compliance certification report 
for such measures for the calendar year, then the designated 
representative shall include in the confirmation report the number of 
allowances to be deducted from the unit's compliance subaccount 
calculated in accordance with this paragraph (b)(5).
    (i) If any allowances were deducted from the unit's compliance 
subaccount for the calendar year in accordance with Secs. 72.92 (a) and 
(c) and 73.35(b) of this chapter, then the number of allowances to be 
deducted under this paragraph (b)(5) equals the absolute value of the 
result of the formula for allowances credited under paragraph (b)(4) of 
this section (excluding paragraph (b)(4)(iv) of this section).
    (ii) If no allowances were deducted from the unit's compliance 
subaccount for the calendar year in accordance with Secs. 72.92 (a) and 
(c) and 73.35(b) of this chapter:
    (A) The designated representative shall recalculate the unit's 
adjusted utilization in accordance with paragraph (a) of this section, 
replacing the amounts for reduction from energy conservation and 
reduction from improved unit efficiency by the amount for verified heat 
input reduction. ``Verified heat input reduction'' is the total of the 
amounts of verified reduction in the unit's heat input (in mmBtu) from 
energy conservation and improved unit efficiency measures included in 
the confirmation report.
    (B) After recalculating the adjusted utilization under paragraph 
(b)(5)(ii)(A) of this section for all Phase I units that are in the 
unit's dispatch system and to which paragraph (b)(5) of this section is 
applicable, the designated representative shall calculate the number of 
allowances to be surrendered in accordance with Sec. 72.92(c)(2) using 
the recalculated adjusted utilizations of such Phase I units.
    (C) The allowances to be deducted under this paragraph (b)(5) shall 
equal the amount under paragraph (b)(5)(ii)(B) of this section minus 
the amount for allowances deducted from the unit's compliance 
subaccount for the calendar year in accordance with Secs. 72.92(a) and 
(c) and 73.35(b) of this chapter; provided that if the amount 
calculated under this paragraph (b)(5)(ii)(C) is equal to or less than 
zero, then the amount of allowances to be deducted is zero.
    (6) The Administrator will determine the amount of allowances that 
would have been included in the unit's compliance subaccount and the 
amount of excess emissions of sulfur dioxide that would have resulted 
if the deductions made under Sec. 73.35(b) of this chapter had been 
based on the verified, rather than the estimated, reduction in the 
unit's heat input from energy conservation and improved unit efficiency 
measures.
    (7) The Administrator will determine whether the amount of excess 
emissions of sulfur dioxide under paragraph (b)(6) of this paragraph 
differs from the amount of excess emissions determined under 
Sec. 73.35(b) of this chapter based on the annual compliance 
certification report. If the amounts differ, the Administrator will 
determine: the number of allowances that should be deducted to offset 
any increase in excess emissions or returned to account for any 
decrease in excess emissions; and the amount of excess emissions 
penalty (excluding interest) that should be paid or returned to account 
for the change in excess emissions. The Administrator will deduct 
immediately from the unit's compliance subaccount the amount of 
allowances that he or she determines is necessary to offset any 
increase in excess emissions or will return immediately to the unit's 
compliance subaccount the amount of allowances that he or she 
determines is necessary to account for any decrease in excess 
emissions. The designated representative may identify the serial 
numbers of the allowances to be deducted or returned. In the absence of 
such identification, the deduction will be on a first-in, first-out 
basis under Sec. 73.35(b)(2) of this chapter and the return will be at 
the Administrator's discretion.
* * * * *
    37. Section 72.95 is amended by revising the formula in the 
introductory text and adding paragraph (d) to read as follows:


Sec. 72.95  Allowance deduction formula

* * * *
Total allowances deducted=Tons emitted+Allowances surrendered for 
underutilization+Allowances deducted for Phase I 
extensions+Allowances deducted for substitution or compensating 
units

Where:
* * * *
    (d) ``Allowances deducted for substitution or compensating units'' 
is the total number of allowances calculated in accordance with the 
surrender requirements specified under Sec. 72.41(d)(3) or 
(e)(1)(iii)(B) or Sec. 72.43(d)(2).

PART 73--[AMENDED]

    38. The authority citation for part 73 is revised to read as 
follows:

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

    39. Section 73.10 is amended by revising the heading and adding 
paragraphs (b)(3), (b)(4), (b)(5), and (c)(3) to read as follows:


Sec. 73.10  Initial allocations for Phase I and Phase II.

* * * * *
    (b) * * *
    (3) Notwithstanding the amounts in Table 2 of this section, the 
unadjusted basic allowances for years 2000-2009 and for years 2010 and 
thereafter for the following boilers are: Illinois, Lakeside, 7, 2,919 
unadjusted basic for 2000-2009 and 722 unadjusted basic for 2010 and 
thereafter; Illinois, Lakeside, 8, 1,652 unadjusted basic for 2000-2009 
and 371 unadjusted basic for 2010 and thereafter; Illinois, Marion, 1, 
2,376 unadjusted basic for 2000-2009 and for 2010 and thereafter; 
Illinois, Marion, 2, 2,434 unadjusted basic for 2000-2009 and for 2010 
and thereafter; Illinois, Marion, 3, 2,640 unadjusted basic for 2000-
2009 and for 2010 and thereafter; Louisiana, Rodemacher, 2, 20,774 
unadjusted basic for 2000-2009 and for 2010 and thereafter; and 
Wisconsin, Manitowoc, 8, 271 unadjusted basic for 2000-2009 and for 
2010 and thereafter.
    (4) Notwithstanding the amounts in Table 2 of this section, the 
unadjusted basic allowances and total bonus allowances for years 2000-
2009 and for years 2010 and thereafter for the following boilers are: 
Maryland, R P Smith, 9,320 unadjusted basic and 354 total bonus for 
2000-2009 and 320 unadjusted basic for 2010 and thereafter; Wisconsin, 
Blount Street, 7, 116 unadjusted basic and 1,374 total bonus for 2000-
2009 and 116 unadjusted basic for 2010 and thereafter; Wisconsin, 
Blount Street, 8,473 unadjusted basic and 716 total

[[Page 68379]]

bonus for 2000-2009 and 473 unadjusted basic for 2010 and thereafter; 
and Wisconsin, Blount Street, 9,633 unadjusted basic and 629 total 
bonus for 2000-2009 and 633 unadjusted basic for 2010 and thereafter.
    (5) If a unit was allocated allowances in Table 2 of this section 
as of March 23, 1993 is subsequently removed from Table 2, the owners 
of the unit shall surrender, for each allowance allocated to the unit 
in such table, an allowance of the same or earlier compliance use date 
as the allowance allocated and shall return to the Administrator any 
proceeds received for allowances withheld from the unit under 
Sec. 73.10 of this chapter. The allowances shall be surrendered and the 
proceeds shall be returned within 60 days after the effective date of 
this paragraph (b)(5).
    (c) * * *
    (3) If a unit was allocated allowances in Table 3 of this section 
as of March 23, 1993 is subsequently removed from Table 3, the owners 
of the unit shall surrender, for each allowance allocated to the unit 
in such table, an allowance of the same or earlier compliance use date 
as the allowance allocated and shall return to the Administrator any 
proceeds received for allowances withheld from the unit under 
Sec. 73.10 of this chapter. The allowances shall be surrendered and the 
proceeds shall be returned within 60 days after the effective date of 
this paragraph (c)(3).
* * * * *


Sec. 73.10  [Amended]

    40. Section 73.10, paragraph (b)(2), Table 2, is amended by:
    a. removing the entries for Alabama, Future Fossil, **1; Alabama, 
McIntosh CAES, **2; Alabama, McWilliams, **CT1; Alabama, McWilliams, 
**CT2; Alabama, McWilliams, **CT3; Arkansas, NA2--7246, **1; 
California, El Centro, 2; Colorado, Valmont, 11; Colorado, Valmont, 12; 
Colorado, Valmont, 13; Colorado, Valmont, 22; Colorado, Valmont, 23; 
Connecticut, South Meadow, 11; Connecticut, South Meadow, 12; 
Connecticut, South Meadow, 13; Florida, Lauderdale, PFL4; Florida, 
Lauderdale, PFL5; Illinois, Lakeside, GT2; Indiana Na1--7221, **2; 
Indiana, Na1--7228, **4; Indiana, Na1--7228, **5; Kansas, Ripley, **2; 
Kansas, Ripley, **3; Kentucky, J K Smith, 1; Louisiana, R S Nelson, 1; 
Louisiana, R S Nelson, 2; Michigan, Delray, 11; Minnesota, Future Base, 
**1; Minnesota, NA1-7237, **2; Mississippi, Wright, W4; Missouri, 
Combustion Turbine 1, **NA7; Missouri, Empire Energy Ctr, **4; 
Missouri, Empire Energy Ctr, **NA2; Missouri, Empire Energy Ctr, **NA3; 
Missouri, Grand Avenue, **7; Missouri, Grand Avenue, **9; Nebraska, 
NA1--7019, **NA2; New Jersey, Butler, **4; New Jersey, NA5--7217, **2; 
New Jersey, NA6--7218, **2; New Mexico, Escalante, **2; New Mexico, 
Maddox, **3; New York, Rochester 3, 1; New York, Rochester 3, 2; New 
York, Rochester 3, 4; North Dakota, Dakotas, **1; Oklahoma, Inola, **1; 
Pennsylvania, Richmond, 63; Pennsylvania, Richmond, 64; Pennsylvania, 
Southwark, 11; Pennsylvania, Southwark 12; Pennslyvania, Southwark, 21; 
Pennsylvania, Southwark, 22; South Carolina, Na4--7210, **ST1; South 
Dakota, Mobile, **2; Texas, Concho, 2; Texas, Concho, 4; Texas, Concho, 
5; Texas, Concho, 6; Texas, Deepwater, DWP1; Texas, Deepwater, DWP2; 
Texas, Deepwater, DWP3; Texas, Deepwater, DWP3; Texas, Deepwater, DWP4; 
Texas, Deepwater, DWP5; Texas, Deepwater, DWP6; Texas, GT98, **1; 
Texas, GT98, **2; Texas, GT99, **1; Texas, GT99, **2; Texas, GT99, **3; 
Texas, NA1--7216, **1; Texas, NA1--7216, **2; Texas, San Miguel, **2; 
Texas, TNP One, **3; Texas, TNP One, **4; Virginia, Chesterfield, **8B; 
Washington, Kettle Falls, 1; Wisconsin, Manitowoc, 9; Wisconsin, Na1--
7203, **CT3; and Wisconsin, Na--7222, unit **1; and
    b. by adding in alphabetical order the entries ``Alabama'' 
``McWilliams'', ``**4'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', 
``0'', ``0'', and ``0''; ``Arizona'', ``Springerville'', ``3'', ``0'', 
``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', and ``0''; 
``Florida'', ``Reedy Creek Combined Cycle'', ``32432'', ``69'', ``0'', 
``0'', ``0'', ``NA'', ``18'', ``0'', ``0'', and ``NA''; ``Indiana'', 
``NA1--7228'', ``**1'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', 
``0'', ``0'', and ``0''; ``Indiana'', ``NA1--7228'', ``**2'', ``0'', 
``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'' and ``0''; ``Indiana'', 
``NA1--7228'', ``**3'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', 
``0'', ``0'' and ``0''; ``Kansas'', ``Wamego'', ``**NA1'', ``0'', 
``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'' and ``0''; 
``Maryland'', ``Easton 2'', ``**25'', ``0'', ``0'', ``0'', ``0'', 
``0'', ``0'', ``0'', ``0'', and ``0''; ``Maryland'', ``Perryman'', 
``**51'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', and 
``0''; ``Mississippi'', ``Moselle'', ``**4'', ``0'', ``0'', ``0'', 
``0'', ``0'', ``0'', ``0'', ``0'' and ``0''; ``Mississippi'', 
``Moselle'', ``**5'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', 
``0'', and ``0''; ``Missouri'', ``Combustion Turbine 1'', ``**1'', 
``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', and ``0''; 
``Missouri'', ``Combustion Turbine 2'', ``**2'', ``0'', ``0'', ``0'', 
``0'', ``0'', ``0'', ``0'', ``0'', and ``0''; ``Nebraska'', ``Na1--
7019'', ``**NA1'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', 
``0'', and ``0''; ``Nevada'',''Harry Allen'', ``**GT1'', ``0'', ``0'', 
``0'', ``0'', ``0'', ``0'', ``0'', ``0'', and ``0''; ``Nevada'',''Harry 
Allen'', ``**GT2'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', 
``0'', and ``0''; ``New Jersey'', ``Butler'', ``**1'', ``0'', ``0'', 
``0'', ``0'', ``0'', ``0'', ``0'', ``0'', and ``0''; ``New Jersey'', 
``Na1--7139'', ``**1'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', 
``0'', ``0'', and ``0''; ``New Jersey'', ``Na2--7140'', ``**1'', ``0'', 
``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', and ``0''; ``Ohio'', 
``Woodsdale'', ``**GT7'', 2 ``South Carolina'', ``NA1--7106'', ``GT1'', 
``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', and ``0''; 
``Texas'', ``Twin Oak'', ``2'', ``1,760'', ``0'', ``0'', ``0'', ``NA'', 
``1,760'', ``0'', ``0'', and ``NA''; and ``Virginia'', ``East 
Chandler'', ``**2'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', ``0'', 
``0'' and ``0''.
    41. Section 73.10, paragraph (c)(2), Table 3 is amended by:
    a. removing the entries for Alabama, McWilliams, **4; Arizona, 
Springerville, 3; California, Harbor, **10; Florida, G W Ivey, **22; 
Florida, Martin, **3ST; Florida, Martin, **4ST; Illinois, Lakeside, 
GT1; Indiana, NA1--7228, **1; Indiana, NA1--7228, **2; Indiana, NA1--
7228, **3; Iowa, Na1--7230, **1; Kansas, Wamego, **NA1; Maryland, 
Easton 2, **25; Maryland, Perryman, **51; Mississippi, Moselle, **4; 
Mississippi, Moselle, **5; Missouri, Combustion Turbine 1, **1; 
Missouri, Combustion Turbine 2, **2; Missouri, Empire Energy Center, 
**3; Missouri, Lake Road, **8; Nebraska, NA1--7019, **NA1; Nevada, 
Clark, **9; Nevada, Clark, **10; Nevada, Harry Allen, **GT1; Nevada, 
Harry Allen, **GT2; New Jersey, Butler, **1; New Jersey, Butler, **3; 
New Jersey, Na1--7139; New Jersey, Na2--7140, **1; Ohio, Dover, **7; 
Ohio, Woodsdale, **GT7; Pennsylvania, Trenton Cogen Proj, **1; South 
Carolina, NA1--7106, **GT1; South Carolina, NA2--7107, **GT2; South 
Carolina, Na3--7108, **GT3; South Dakota, CT, **5; Texas, Twin Oak, 2; 
Utah, Bonanza, **2; Virginia, East Chandler, **2; Wisconsin, Combustion 
Turbine, **1; and Wisconsin, Na2, **1; and b. adding in alphabetical 
order the entries ``Minnesota'', ``Angus Anson'', ``3'', ``1,166'', 
``0'', ``0'', ``0'', ``NA'', ``1,166'', ``0'', ``0'', and ``NA''; 
``South Carolina'', ``Cope'', ``1'', ``2,989'', ``0'', ``0'', ``0'', 
``NA'', ``2,989'', ``0'', ``0'', and ``NA''; ``Wisconsin'', ``Fond du 
Lac'', ``**CT3'', ``44'', ``0'', ``0'', ``0'', ``NA'', ``44'', ``0'', 
``0'', and ``NA''; and ``Wisconsin'', ``West Martinette'', ``33'', 
``874'', ``0'', ``0'', ``0'', ``NA'', ``874'', ``0'', ``0'', and 
``NA''.
    42. Section 73.19 is amended by removing and reserving paragraph 
(b)

[[Page 68380]]

and revising paragraph (a)(5) to read as follows:


Sec. 73.19  Certain units with declining SO2 rates.

    (a) * * *
    (5) Its 1996 annual SO2 emission rate (determined in 
accordance with part 75 of this chapter) is less than 1.2 lb/mmBtu;
* * * * *
    43. Section 73.90 is amended by: removing from the formula in 
paragraph (c)(3) the words ``Total Allowances Requested'' and adding, 
in their place, the words ``35,000''; removing from the formula in 
paragraph (c)(3) the words ``35,000'' and adding, in their place, the 
words ``Total Allowances Requested''; and revising paragraphs (a)(1), 
(a)(2), and (a)(3) to read as follows:


Sec. 73.90  Allowance allocations for small diesel refineries.

    (a) * * *
    (1) Photocopies of Form EIA-810 for each month of calendar years 
1988 through 1990 for the refinery;
    (2) Photocopies of Form EIA-810 for each month of calendar years 
1988 through 1990 for each refinery owned or controlled by the refiner 
that owns or controls the refinery seeking certification; and
    (3) A letter certified by the certifying official that the 
submitted photocopies are exact duplicates of those forms filed with 
the Department of Energy for 1988 through 1990.
* * * * *

PART 74--[AMENDED]

    44. The authority citation for part 74 continues to read as 
follows:

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


Sec. 74.2  [Amended]

    45. Section 74.2 is amended by removing the words ``a written 
exemption under Sec. 72.7 or Sec. 72.8 of this chapter'' and adding, in 
their place, the words ``an exemption under Sec. 72.7, Sec. 72.8 or 
Sec. 72.14 of this chapter''.

PART 75--[AMENDED]

    46. The authority citation for part 75 is revised to read as 
follows:

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


Sec. 75.67  [Amended]

    47. Section 75.67 is amended by removing and reserving paragraph 
(a).

PART 77--[AMENDED]

    48. The authority citation is revised to read as follows:

    Authority: 42 U.S.C. 7601 and 7651j.

    49. Section 77.3 is amended by revising paragraphs (d)(3),(5), and 
(6) to read as follows:


Sec. 77.3  Offset plans for excess emissions of sufur dioxide.

* * * * *
    (d) * * *
    (3) At the designated representative's option, the number of 
allowances to be deducted from the unit's Allowance Tracking System 
account to offset the excess emissions for the year for which the plan 
is submitted.
* * * * *
    (5) A statement either that allowances to offset the excess 
emissions are to be deducted immediately from the unit's compliance 
subaccount or that they are to be deducted on a specified date in a 
subsequent year.
    (6) If the proposed offset plan does not propose an immediate 
deduction of allowances under paragraph (d)(5) of this section, a 
demonstration that such a deduction will interfere with electric 
reliability.
    50. Section 77.4 is amended by revising paragraphs (b)(1), 
(c)(2)(i), (f)(2)(i), (g)(2)(i)(B), (g)(2)(i)(C), the last two 
sentences of (k)(1), and (k)(2) to read as follows:


Sec. 77.4  Administrator's action on proposed offset plans.

* * * * *
    (b) Review of proposed offset plans. (1) If the designated 
representative submits a complete proposed offset plan for immediate 
deduction, from the unit's compliance subaccount, of allowances 
required to offset excess emissions of sulfur dioxide, the 
Administrator will approve the proposed offset plan without further 
review and will serve written notice of any approval on the designated 
representative. The Administrator will also give notice of any approval 
in the Federal Register. The plans will be incorporated in the unit's 
Acid Rain permit in accordance with Sec. 72.84 of this chapter 
(automatic permit amendment) and will not be subject to the 
requirements of paragraphs (d) and (k) of this section.
* * * * *
    (c) * * *
    (2)(i) The designated representative shall submit the information 
required under paragraph (c)(1) of this section within a reasonable 
period determined by the Administrator.
* * * * *
    (f) * * *
    (2) * * *
    (i) The reasons, and supporting authority, for approval or 
disapproval of any proposed offset plan that does not require immediate 
deduction of allowances, including references to applicable statutory 
or regulatory provisions and to the administrative record; and
* * * * *
    (g) * * *
    (2) * * *
    (i) * * *
    (B) The air pollution control agencies of affected States; and
    (C) Any interested person.
* * * * *
    (k) * * *
    (1) * * * The Administrator will serve a copy of any approved 
offset plan and the response to comments on the designated 
representative for the affected unit involved and serve written notice 
of the approval or disapproval of the offset plan on any persons who 
are entitled to written notice under paragraphs (g)(2)(i)(B) and (C) of 
this section or who submitted written or oral comments on the approval 
or disapproval of the draft offset plan. The Administrator will also 
give notice in the Federal Register.
    (2) The Administrator will approve an offset plan requiring 
immediate deduction from the unit's compliance subaccount of all 
allowances necessary to offset the excess emissions except to the 
extent the designated representative of the unit demonstrates that such 
a deduction will interfere with electric reliability.
* * * * *
    51. Section 77.6 is amended by revising paragraph (a) to read as 
follows:


Sec. 77.6  Penalties for excess emissions of sulfur dioxide and 
nitrogen oxides.

    (a)(1) If excess emissions of sulfur dioxide or nitrogen oxide 
occur at an affected unit during any year, the owners and operators of 
the affected unit shall pay, without demand, an excess emissions 
penalty, as calculated under paragraph (b) of this section.
    (2) If one or more affected units governed by an approved NOX 
averaging plan under Sec. 76.11 of this chapter fail (after applying 
Sec. 76.11(d)(1)(ii)(C) of this chapter) to meet their respective 
alternative contemporaneous emission limitations or annual heat input 
limits, then excess emissions of nitrogen oxides occur during the year 
at each such unit. The sum of the excess emissions of nitrogen oxides 
of such units shall equal the amount determined under Sec. 76.13(b) of 
this chapter. The owners and operators of such units shall pay an 
excess emissions penalty, as calculated under paragraph (b) of this 
section using the sum of the excess emissions of nitrogen oxides of 
such units.

[[Page 68381]]

    (3) Except as otherwise provided in this paragraph (a)(3), payment 
under paragraphs (a) (1) or (2) of this section shall be submitted to 
the Administrator by 30 days after the date on which the Administrator 
serves the designated representative a notice that the process of 
recordation set forth in Sec. 73.34(a) of this chapter is completed or 
by July 1 of the year after the year in which the excess emissions 
occurred, whichever date is earlier. Payment under paragraph (a)(1) of 
this section for any increase in excess emissions of sulfur dioxide 
determined after adjustments made under Sec. 72.91(b) of this chapter 
shall be submitted to the Administrator by 30 days after the date on 
which the Administrator serves the designated representative a notice 
that process set forth in Sec. 72.91(b) of this chapter is completed.
* * * * *

PART 78--[AMENDED]

    52. The authority citation for part 78 continues to read as 
follows:

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

    53. Section 78.1 is amended by revising paragraphs (a) and 
(b)(1)(v) to read as follows:


Sec. 78.1  Purpose and scope.

    (a)(1) This part shall govern appeals of any final decision of the 
Administrator under parts 72, 73, 74, 75, 76, and 77 of this chapter; 
provided that matters listed Sec. 78.3(d) and preliminary, procedural, 
or intermediate decisions, such as draft Acid Rain permits, may not be 
appealed.
    (2) Filing an appeal, and exhausting administrative remedies, under 
this part shall be a prerequisite to seeking judicial review. For 
purposes of judicial review, final agency action occurs only when a 
decision appealable under this part is issued and the procedures under 
this part for appealing the decision are exhausted.
    (b) * * *
    (1) * * *
    (v) The issuance or denial of an exemption under Sec. 72.14 of this 
chapter;
* * * * *


Sec. 78.31  [Amended]

    54. Section 78.3 is amended by:
    a. removing from paragraph (b)(1) the words ``60 days'' and adding, 
in their place, the words ``60 days (or other reasonable period 
established by the Administrator in such decision)'';
    b. removing from paragraph (b)(1) the words ``action.'' and adding, 
in their place, the words ``action and shall not meet the prerequisite 
for judicial review under Sec. 72.1(a)(2).'';
    c. removing from paragraph (b)(3)(ii) the words ``the persons 
entitled to written notice under Sec. 72.65(b)(1) (ii), (iii), and (iv) 
of this chapter.'' and adding, in their place, the words ``the air 
pollution control agencies of affected States and any interested 
person.'';
    d. adding at the end of paragraph (c)(6) the word ``and''; removing 
from paragraph (c)(7) the words ``; and'' and adding, in their place, 
the word ``.'';
    e. removing paragraph (c)(8);
    f. removing paragraph (d)(1); and
    g. redesignating paragraphs (d)(2), (d)(3), and (d)(4) as 
paragraphs (d)(1), (d)(2), and (d)(3) respectively.
    55. Section 78.4 is amended by: removing from paragraph (c)(1) the 
words ``7 days'' and adding, in its place, the words ``7 days (or other 
reasonable period established by the Environmental Appeals Board or 
Presiding Officer),''; and removing from paragraph (c)(1) the words 
``it, unless the Environmental Appeals Board or Presiding Officer 
authorizes a longer time based on good cause.'' and adding, in their 
place, the words ``it.''.


Sec. 78.5  [Amended]

    56. Section 78.5 is amended by removing from paragraph (a) the 
words ``to submit a claim of error notification'' and adding, in their 
place, the words ``a claim of error notification was submitted''.


Sec. 78.7  [Removed]

    57. Section 78.7 is removed and reserved.
    58. Section 78.11 is amended by removing from paragraph (a) the 
words ``30 days'' and adding, in their place, the words ``30 days (or 
other reasonable period established by the Administrator when giving 
notice)''.


Sec. 78.12  [Amended]

    59. Section 78.12 is amended by removing from paragraph (a)(2) the 
words ``a written exemption under Secs. 72.7 or 72.8'' and adding, in 
their place, the words ``an exemption under Sec. 72.14''.


Sec. 78.14  [Amended]

    60. Section 78.14 is amended by; removing from paragraph (a), 
introductory text, the word ``theses'' and adding, in its place, the 
word ``these''; removing from paragraph (a)(10) the words ``15 days'' 
and adding, in their place, the words ``15 days (or other reasonable 
period established by the Presiding Officer)''; and removing from 
paragraph (c)(1) the words ``Rule 408 of''.


Sec. 78.15  [Amended]

    61. Section 78.15 is amended by: removing from paragraph (c) the 
words ``10 days'' and adding, in their place, the words ``10 days (or 
other reasonable period established by the Presiding Officer)''; and 
removing the last sentence from paragraph (c).


Sec. 78.16  [Amended]

    62. Section 78.16 is amended by removing from paragraphs (d)(1) and 
(d)(2) the words ``7 days'' and adding, in their place, the words ``7 
days (or other reasonable period established by the Presiding 
Officer)''.


Sec. 78.17  [Amended]

    63. Section 78.17 is amended by: removing the words ``45 days'' and 
adding, in their place, the words ``45 days (or other reasonable period 
established by the Presiding Officer)''; and removing the words ``, for 
good cause shown, may shorten or extend the time for filing and''.


Sec. 78.18  [Amended]

    64. Section 78.18 is amended by removing from paragraph (b), 
introductory text, the words ``30 days after service unless within that 
time:'' and adding, in their place, the word ``unless:''.


Sec. 78.20  [Amended]

    65. Section 78.20 is amended by: removing from paragraph (a), 
introductory text, the words ``30 days'' and adding, in their place, 
the words ``30 days (or other reasonable period established by the 
Environmental Appeals Board)''; and removing from paragraph (b) the 
words ``30 days'' and adding, in their place, the words ``45 days (or 
other reasonable period established by the Environmental Appeals 
Board)''.

[FR Doc. 96-31968 Filed 12-26-96; 8:45 am]
BILLING CODE 6560-50-P