[Federal Register Volume 62, Number 206 (Friday, October 24, 1997)]
[Rules and Regulations]
[Pages 55460-55488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27495]



[[Page 55459]]

_______________________________________________________________________

Part II





Environmental Protection Agency





_______________________________________________________________________



40 CFR Part 9, et al.



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

  Federal Register / Vol. 62, No. 206 / Friday, October 24, 1997 / 
Rules and Regulations  

[[Page 55460]]



ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 9, 72, 73, 74, 75, 77, and 78

[FRL-5908-5]
RIN 2060-AF43


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

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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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. On December 27, 1996, the Agency published proposed 
revisions to those rules, most of which revisions are addressed in 
today's final rule.
    After considering its experience in applying the Acid Rain Program 
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. 
Today's final rule revisions 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 the sulfur dioxide allowances for one 
unit. 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 annual allowances and must not 
emit sulfur dioxide in excess of the amount authorized by the 
allowances that they hold. Today's final rule revises one unit's 
allowances pursuant to a settlement agreement. In a future final 
action, EPA will act on the other allowance revisions that were set 
forth in the December 27, 1996 proposed rule.

EFFECTIVE DATE: November 24, 1997.

ADDRESSES: Docket No. A-95-56, containing the information used to 
develop the final rule, 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 federal holidays, at EPA's Air Docket Section (6102), 
Waterside Mall, Room M1500, 1st Floor, 401 M Street, SW, Washington, DC 
20460. Additional information concerning the original rules and today's 
final revisions 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: Dwight C. Alpern, Attorney-advisor, at 
(202) 233-9151 (U.S. Environmental Protection Agency, 401 M Street, SW, 
Acid Rain Division (6204J), Washington, DC 20460); 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, 72.8, and 72.14 of title 40 of the Code of Federal 
Regulations. 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. General
II. Part 72: Applicability of and Exemptions From Acid Rain Program
    A. Applicability
    B. Exemptions
    1. New Units Exemption
    2. Retired Units Exemption
    3. Industrial Utility-Units Exemption
III. 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
IV. Part 72: Miscellaneous Permitting Matters
    A. Definitions
    B. Designated Representative
    C. Compliance Plans
    D. Federal Permit Issuance
    E. Permit Revision
    F. Reduced Utilization Accounting
V. Part 73: Allowances
    A. Allowance Tables
    B. Small Diesel Refinery Provisions
VI. Part 75: Monitoring of Units Burning Digester or Landfill Gas
VII. Part 77: Excess Emissions
VIII. Part 78: Administrative Appeals
IX. Administrative Requirements
    A. Executive Order 12866
    B. Unfunded Mandates Act
    C. Paperwork Reduction Act
    D. Regulatory Flexibility
    E. Submission to Congress and the General Accounting Office
    F. Miscellaneous

I. General

    A significant number of the revisions in the December 27, 1996 
proposal did not receive any comment. Most of the proposed revisions, 
including all on which comment was received, are discussed in this 
preamble. Unless otherwise stated below, revisions are adopted in 
today's final rule for the reasons discussed in the proposal.

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

A. Applicability

    The proposal included two types of revisions of the existing rule. 
First, the definition of ``power purchase commitment'' was revised to 
extend to three years the period by which a letter of intent must have 
resulted in execution of a power sales agreement. Second, minor 
revisions were made to the procedure for petitioning for a 
determination by the Administrator on the applicability of the Acid 
Rain Program to a unit. Supportive comment was received on the first 
revisions, and no comment was received on the second. The revisions are 
therefore adopted in today's rule.

B. Exemptions

1. New Units Exemption
    Section 72.7 of the existing rule provides an exemption from most 
Acid Rain Program requirements for new units that serve generators with 
a total capacity of 25 MWe or less and that combust clean fuels. The 
proposal made

[[Page 55461]]

several types of revisions in order to streamline the new units 
exemption. With the changes discussed below,1 revisions are 
adopted in today's rule for the reasons discussed here and in the 
proposal.
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    \1\ In addition, today's rule adds language clarifying that the 
requirement that a unit serve one or more generators with total 
nameplate capacity of 25 MWe or less during the period of the 
exemption does not apply to the time before the unit commenced 
commercial operation. Today's rule also adds language, under 
``Special Provisions'', to reiterate the fact (reflected in 
Sec. 72.7(a)) that an exempt unit must continue to meet the 
requirements (e.g., the sulfur content limits for its fuels) 
throughout the duration of the exemption. Another addition in 
today's rule is language clarifying that when the exemption is lost, 
the unit must comply with Acid Rain permitting and monitoring 
requirements, starting after the loss of the exemption (e.g., 
starting on the first date on which the unit is no longer exempt). 
Similar language is added to the retired units and industrial 
utility-units exemption provisions.
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    First, the requirement for the combustion of clean fuels at the 
unit was revised in the proposal. While the existing rule requires that 
only fuel with a sulfur content 0.05 percent or less by weight be 
combusted, the proposal stated that the unit must burn gaseous fuel 
with an annual average sulfur content of 0.05 percent or less by weight 
and nongaseous fuel with an annual average sulfur content of 0.05 
percent or less by weight. Commenters supported the revisions and 
explained that the existing rule was unduly restrictive. These 
revisions are adopted in today's rule.
    The proposal also set forth revised procedures for determining 
annual average sulfur content by weight for gaseous and nongaseous 
fuel. The proposal eliminated provisions mandating the use of listed 
methods for measuring sulfur content but included provisions concerning 
the required frequency of sampling. The proposal provided explicitly 
that the owners and operators of the unit bear the burden of proving 
compliance with the sulfur content requirement. Commenters supported 
these revisions but suggested that EPA state that any ``recognized 
industry standard such as an ASTM method would be acceptable.'' 
Commenters also urged that the rule state that a unit that burns only 
diesel fuel meeting the requirements of diesel fuel for motor vehicles 
be assumed to meet the limits on sulfur content of fuel.
    The proposed revisions are adopted in today's rule. Under the final 
rule, since methods for measuring sulfur content are not specified, the 
Agency will evaluate on a case-by-case basis the information provided 
by the owners and operators of a unit on sulfur content. In order to 
ensure that owners and operators understand that they must use a 
reasonable method to determine sulfur content, the final rule adopts 
language from section 412 concerning emission monitoring and states 
that the method of determining sulfur content must provide information 
that is reasonably precise, reliable, accessible, and timely. EPA 
anticipates that owners and operators will meet their burden of proof 
by using a method that is generally recognized in the industry (such as 
the applicable ASTM method set forth in the existing rule), is 
applicable to the unit, and is consistent with the other provisions 
(e.g., sampling frequency requirements) of today's rule.
    Further, EPA recognizes that diesel fuel for motor vehicles is 
required under Sec. 80.29 to have a sulfur content of 0.05% by weight. 
Commenters have suggested that such diesel fuel should be assumed to 
meet the sulfur content limit without any testing. One commenter stated 
that the testing by the unit owner was burdensome and duplicative of 
testing by the fuel supplier.
    However, not all diesel fuel is required to meet the sulfur content 
limit; only diesel fuel for use in motor vehicles must meet the limit 
under Sec. 80.29. 40 CFR 80.29(a)(1)(i). A significant amount of diesel 
fuel is produced for other uses (e.g., as fuel for electric generation 
by utilities) has a higher sulfur content than mandated for diesel fuel 
for motor vehicles. Petroleum Supply Annual 1996, Vol. 1 at 51, Table 
17 (Energy Information Administration, June 1997) (indicating that 
about 37% of 1996 U.S. distillate production (which is primarily diesel 
fuel as defined in Sec. 72.2) had a sulfur content above 0.05% by 
weight).2 Moreover, the higher-sulfur diesel fuel is used by 
many utility units that combust diesel fuel. For example, during 1996 
and the first half of 1997, diesel fuel with a sulfur content of 0.05% 
or less by weight accounted for only about 13% of the total heat input 
for affected units that used diesel fuel and were required to report 
the sulfur content of their fuel to EPA. Most of the diesel fuel used 
had a much higher sulfur content; diesel fuel with more than twice the 
sulfur content (i.e., over 0.10% sulfur by weight) accounted for about 
81% of such total heat input.3
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    \2\ Relatively little distillate fuel oil is imported into the 
U.S., and most of it has a sulfur content exceeding 0.05%. Id. at 
55, Table 20.
    \3\ Report to Docket: Diesel Fuel Use of Units Required to Use 
Fuel Sampling Under part 75, appendix D (September 16, 1997).
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    In contrast, virtually all commercially available natural gas in 
the U.S. has sulfur content at or below 0.05% by weight. Because of the 
toxic effects of hydrogen sulfide and its corrosive effect on pipeline 
and customer equipment, pipelines generally provide pipeline 
transportation or distribution service only for natural gas with a very 
low hydrogen sulfide content (e.g., 0.25 to 0.30 grain per 100 standard 
cubic feet), which results in total sulfur content far below 0.05% by 
weight. See, e.g., H. Dale Beggs, Gas Production Operations at 204-5, 
209-11, and 227 (1984); and 49 CFR 192.475(c) (provision, in U.S. 
Department of Transportation minimum safety standards for natural gas 
pipelines, limiting the hydrogen sulfide content of gas ``stored in 
pipe-type or bottle-type holders'' to 0.25 grain per 100 standard cubic 
feet).
    Since diesel fuel is widely available that does not meet the sulfur 
content limit, diesel fuel must be treated like any other fuel that is 
combusted at an exempt new unit and that could potentially exceed the 
limit. The owners and operators of the unit combusting the fuel must 
demonstrate that the limit is being met using the results of reliable 
testing methods consistent with the sampling and other requirements of 
today's rule. Of course, under today's rule, the owners and operators 
are not required to conduct the testing themselves. EPA will consider 
testing by fuel suppliers in determining whether the owners and 
operators have met their burden of proof.
    Second, the proposal streamlined the procedure for obtaining a new 
units exemption and reduced the burden imposed by the procedure on 
owners and operators and permitting authorities. The existing rule 
required owners and operators of a unit to submit an application and 
for permitting authorities to provide notice and opportunity for 
comment before issuing an exemption. The proposal made the obtaining of 
an exemption largely automatic so long as the capacity, annual fuel 
use, and recordkeeping requirements are met. Under the proposal, owners 
and operators of a unit meeting these requirements must submit a 
statement to the permitting authority (and, if EPA is not the 
permitting authority, to EPA) that the unit meets, and will continue to 
meet, the requirements for the exemption. The proposal states that a 
new units exemption is effective on January 1 of the first full 
calendar year for which the unit meets the exemption requirements and 
that the statement must be submitted by December 31 of such year. In 
short, where the end-of-year submission deadline and other requirements 
for an exemption are met, the exemption will cover the entire year in 
which the submission was made. The

[[Page 55462]]

proposed revisions are adopted in today's rule.
    The proposal established some additional procedures for the 
relatively few new units that were allocated allowances.4 
The owners and operators of such units must submit a statement (similar 
to the one for units without allocations) stating that the owners and 
operators are surrendering the allowances, and proceeds from the 
auction of allowances, starting with the first year for which the unit 
is exempt. Under the proposal, the exemption for a unit allocated 
allowances is effective on January 1 of the first year for which the 
Administrator actually deducts the full allowance allocation and 
actually receives the full amount of auction proceeds. Commenters 
contended that this ``unfairly'' makes the exemption contingent on an 
event (i.e., the deduction of allowances) beyond the control of the 
owners and operators. Allegedly, the exemption should be contingent 
only on submission of the statement surrendering allowances and 
proceeds.
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    \4\ While the proposal referred to allowances allocated under 
Table 2 or 3 of subpart B of part 73, today's rule simply refers to 
allowances allocated under that subpart. Under part 73 as currently 
organized, all allocations to new units are included in the tables. 
Since in the future EPA may reorganize the allowance allocation 
information that is currently presented in two separate tables, 
today's rule adopts a more general reference to new-unit allowance 
allocations.
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    EPA notes that the only issue is the date on which the exemption 
becomes final. Once the Administrator actually makes the necessary 
allowance deductions and receives the proceeds, the exemption runs 
starting from January 1 of the year for which the unit meets the 
requirements (e.g., fuel sulfur limits and allowance and proceeds 
surrender) for this exemption. The difficulty with making the exemption 
effective when the surrender statement is submitted is that there is no 
guarantee that the unit's allowance account actually has sufficient 
allowances to deduct or that the proceeds are actually available to and 
received by the Administrator.
    In order to ensure that the actual deduction of allowances in the 
unit's Allowance Tracking System account is not unduly delayed, the 
final rule requires that, within 5 business days of receiving the 
owners' and operators' surrender statement, the Administrator either 
makes the allowance deductions or notifies the owners and operators 
that there are insufficient allowances for the deductions. This is the 
same period of time in which, under Secs. 73.52 and 73.53, the 
Administrator must act on an allowance transfer request. The approach 
adopted in today's rule accommodates both the concern that the 
necessary number of allowances actually be available for deduction 
before the exemption is effective and the concern that the 
effectiveness of the exemption not be unnecessarily delayed.
    Finally, the proposal provided that a unit with a new units 
exemption is not an ``affected unit'' and so does not need an operating 
permit under part 70 or 71 unless such a permit is required because 
non-title IV, federal requirements applicable to the unit. See 61 FR 
68343. However, for the case where, because of non-title IV 
requirements, the source at which the unit is located has or must have 
an operating permit, the proposal did not exclude the new units 
exemption from the general requirement to incorporate applicable 
federal requirements in the operating permit. See 42 U.S.C. 
7661a(b)(5)(A) and 7661c(a). The final rule adopts the proposed 
provision and makes it clear that if, because of non-title IV 
requirements, an operating permit is issued to the source, the new 
units exemption must be reflected in that operating permit. In 
particular, after the actions necessary for the new units exemption to 
take effect have been completed (e.g., the receipt by the permitting 
authority of a statement of exemption by the owners and operators of 
the unit and the notification by the Administrator that he or she has 
deducted any allowances, and received any allowance proceeds, required 
to be surrendered), the permitting authority must add the provisions 
and ongoing requirements of the exemption to any operating permit that 
covers the source at which the unit is located. Consistent with the 
elimination of the requirement for notice and comment on a new unit's 
exemption, the addition of the exemption to the permit is an 
administrative amendment. A written new units exemption issued under 
the existing rule prior to revision by today's rule must similarly be 
added to any operating permit.
    Under this approach, the exemption alone will not result in 
issuance of an operating permit, but, if an operating permit would be 
issued for the source in any event, that operating permit will include 
the ongoing requirements imposed on the unit under the exemption. This 
approach reasonably implements the concept that an operating permit 
should include the applicable federal requirements for a source. For 
the same reasons, analogous provisions are included in today's rule 
with regard to the retired units exemption and the industrial-utility 
units exemption.
2. Retired Units Exemption
    Section 72.8 of the existing rule provides an exemption from Acid 
Rain Program requirements for retired units. The proposal made several 
types of revisions in order to streamline this retired units exemption. 
First, while the existing rule required owners and operators of a unit 
to submit an application for the exemption and for permitting 
authorities to provide public notice and opportunity for comment before 
issuing a final exemption, the proposal made the obtaining of an 
exemption largely automatic so long as the unit is permanently retired. 
Second, the proposal clarified that the exemption applies to most Acid 
Rain Program requirements.
    No comments were received on these proposed revisions. In order to 
make it clear that only Phase I or Phase II units, and not opt-in units 
under part 74, are eligible for the retired units exemption, today's 
rule states that the exemption applies to ``any affected unit (except 
for an opt-in source)''. This exclusion of opt-in sources is consistent 
with the existing provisions of part 74 that impose separate 
requirements with regard to permanent shutdown of opt-in sources. See, 
e.g., 40 CFR 74.46. In addition, to provide flexibility where a retired 
unit has no allowance allocations and has not selected a designated 
representative, the final rule allows a certifying official to submit 
notice of the exemption to the permitting authority. For the reasons 
discussed here and in the proposal, the revisions, as modified, are 
adopted in today's rule.
3. Industrial Utility-Units Exemption
    Scope of Exemption. In the proposal EPA established a new exemption 
for certain industrial units that generate only incidental amounts of 
electricity for sale. As explained in detail in the preamble of the 
proposal, ``utility units'' (the entities subject to the Acid Rain 
SO2 emission limitation and other requirements of the Acid 
Rain Program) include, with certain exceptions, any unit serving a 
generator that produced electricity for sale any time starting in 1985. 
With certain exceptions (e.g., for cogenerators), an industrial unit 
serving a generator that produced any amount of electricity for sale 
(referred to hereinafter as simply an ``industrial utility-unit'') 
5 is an affected unit under

[[Page 55463]]

the Acid Rain Program regardless of the amount of the sale relative to 
the total generation by the generator and whether or not the sale is to 
the general public or to a public utility for resale to the public. 
Moreover, the requirement to hold allowances to cover SO2 
emissions and to meet any applicable NOX emission limitation 
under the Acid Rain Program applies to all emissions from the unit, not 
simply the portion that might be attributed to generation of the 
electricity sold.
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    \5\ The proposal referred to these units as simply ``industrial 
units''. In order to minimize confusion between these units and 
industrial boilers not used in generation of electricity for sale, 
and because generation of electricity for sale makes industrial 
units ``utility units'' under title IV, the final rule refers to the 
units as ``industrial utility-units''.
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    Despite the applicability of the requirement to hold allowances, 
EPA has not allocated allowances to industrial utility-units that might 
have qualified for allowance allocations under section 405 of the Act, 
including some units whose owners submitted timely comments relating to 
allowance allocations. On March 23, 1993, EPA issued notices stating 
that such industrial utility-units would not be included in the 
National Allowance Database, on which allowance allocations are based, 
because EPA ``believe[d]'' that the units were not affected units. 58 
FR 15720, 15727 (1993). On the same date, EPA also issued a final 
allowance allocation list that allocated allowances only to units then 
``believed'' to be affected units. 58 FR 15634, 15641 (1993). EPA 
stated that no allowances would be allocated to units that were 
subsequently determined to be, or that subsequently became, affected 
units. Id.
    In light of these circumstances, EPA proposed a limited exemption 
from the Acid Rain Program for industrial utility-units that served, 
any time starting in 1985, a generator that produced electricity for 
sale. First, the industrial utility-unit must 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.6 Such unit must not be a cogeneration 
unit since cogeneration units already are covered by an express 
exemption in the title IV. Further, on or before March 23, 1993, the 
owners or operators of the unit must have entered into an 
interconnection agreement (and any related power purchase agreement) 
with a public utility requiring that the generator served by the unit 
produce electricity for sale only for incidental sales of electricity 
to that public utility. Moreover, in 1985 and any year thereafter, the 
generator served by the unit must have actually produced only 
incidental electricity sales for the utility, as required under the 
interconnection agreement and any related power purchase agreement. 
Incidental sales were defined as sales not exceeding the lesser of 10 
percent of the generating output capacity of the generator or 10 
percent of the actual annual electric output of the generator.
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    \6\ In order to prevent the requirement from being circumvented 
through the position of the owner or operator in the corporate 
structure, the proposal stated that no owner or operator, subsidiary 
or affiliate or parent company of the owner or operator, or 
combination thereof could have such a principal business. Consistent 
with this approach, the final rule also applies this to any division 
of the owner or operator.
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    The proposal established a petition and notice-and-comment 
procedure for owners or operators to apply for the exemption and for 
the Agency to review and approve or disapprove the exemption. If, after 
approval of the exemption, any of the conditions for obtaining the 
exemption are no longer met, the exemption terminates automatically. 
The proposal, as changed below, is adopted for the reasons discussed 
here and in the proposal.7
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    \7\ In the proposal, EPA relied on the Report For Docket: 
Industrial Units (October 31, 1996). In the report, EPA estimated 
the number of industrial utility-units in the U.S. that may quality 
for an industrial utility-units exemption under Sec. 72.14 and their 
total annual SO2 and NOX emissions. One 
commenter asserted that the report overestimated the emissions for 
two units owned by the commenter. Assuming the accuracy of the 
commenter's emission estimates, the total annual SO2 and 
NOX emissions estimates for industrial utility-units are 
reduced by about 10%, i.e., to about 41,000 tons of SO2 
and 17,000 tons of NOX. This is not a significant change 
and does not affect EPA's determinations concerning the industrial 
utility-units exemption.
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    All parties commenting on the new industrial utility-units 
exemption supported the concept of such an exemption. However, these 
commenters objected to various, specific provisions. First, commenters 
claimed that EPA should ``totally'' exempt industrial utility-units 
without regard to the amount of electricity sold by an industrial 
utility-unit and/or without regard to whether the unit was 
contractually obligated to sell electricity on or before March 23, 
1993. Allegedly, industrial utility-units not qualifying for the 
exemption will incur significant costs ``not related'' to the 
objectives of title IV. It was argued that if industrial utility-units 
that cannot meet the criteria of the rule are not exempt, 
``agreements'' providing for sales by industrial utility-units to 
utilities may be ``discontinued'', forcing utilities to ``look 
elsewhere for their emergency and backup power needs.'' It was also 
argued that the costs of complying with the Acid Rain Program ``will 
exceed the benefits of the limited reductions to be achieved by the 
regulations'' since the estimated amount of SO2 emissions is 
small relative to the annual 8.95 million ton cap for utility units. 
Since industrial utility-units are allegedly subject to the nationwide 
cap of 5.60 million tons on total annual SO2 emissions by 
``industrial sources'', regulation of industrial utility-units under 
the existing Acid Rain regulations was claimed to be unnecessary.
    However, EPA begins with the fact, undisputed by any commenter, 
that Congress included non-cogeneration industrial utility-units in the 
Acid Rain Program and thus under the annual 8.95 million ton cap for 
SO2 emissions and under applicable NOX emission 
limitations. See 61 FR 68344. Further, although the preamble of the 
proposal stated that industrial utility-units are also under the 5.60 
million ton cap for ``industrial sources'' under section 406(b) of the 
Clean Air Act Amendments of 1990, EPA now believes, on further 
consideration, that industrial utility-units (which served, any time 
starting in 1985, a generator that produced electricity for sale) are 
not covered by the latter cap.
    Section 406(b) of the Clean Air Act Amendments of 1990 states that 
if SO2 emissions from ``industrial sources * * * may 
reasonably be expected to reach levels greater than 5.60 million tons 
per year,'' the Administrator may take actions ``to ensure that such 
emission do not exceed'' the cap. 42 U.S.C. 7651 note. From section 
406(a), it is clear that the definition of ``industrial source'' in 
section 402 of the Clean Air Act applies. Under section 402, an 
``industrial source'' is:
a unit that does not serve a generator that produces electricity, a 
``nonutility unit'' as defined in this section, or a process source 
as defined in section 410(e). 42 U.S.C. 7651a(24)

As discussed above, an industrial utility-unit is a unit that is not 
owned or operated by a utility but that served, anytime starting in 
1985, a generator that produced electricity for sale and therefore is a 
utility unit under section 402(17). Such a unit does not fall within 
any of the three groups of units that are defined as ``industrial 
sources''.8 Consequently, the units that are under 
consideration in this rulemaking for

[[Page 55464]]

inclusion in the industrial utility-units exemption are not covered by 
the 5.60 million ton cap. Contrary to commenters, the Clean Air Act 
Amendments of 1990 do not give EPA the ``option'' of regulating 
industrial utility-units under section 406. In contrast, Congress 
exempted certain cogeneration facilities from the Acid Rain Program 
(e.g., the 8.95-million-ton cap) and included them in the 5.60-million-
ton cap. Under section 402(17)(C) and (25), exempt cogeneration 
facilities are excluded from the definition of ``utility unit'' and so 
are ``nonutility'' units covered by the ``industrial source'' cap.
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    \8\ Section 406(a) also states that ``industrial sources'' 
include units subject to section 405(g)(6), i.e., certain qualifying 
facilities and independent power production facilities that are 
exempt from title IV. The reference in section 406(b) to units 
``subject to section 405(g)(5)'' is an inadvertent error that should 
be read as citing section 405(g)(6). See National Annual Industrial 
Sulfur Dioxide Emission Trends 1995-2015, EPA-454-R-95-001, at ES-2 
(EPA 1995). Industrial utility-units are not exempt under section 
405(g)(6).
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    This reinforces the conclusion that industrial utility-units are 
intended to be covered by the Acid Rain Program and leads to the 
conclusion that a blanket exemption for all industrial utility-units is 
inconsistent with the overall regulatory scheme under title 
IV.9 Exempting all industrial utility-units, without regard 
to the amount of their electricity sales or to when the sales became 
contractually obligated, would result in a potentially increasing group 
of existing and future units that would generate electricity for sale 
but would be outside both the utility unit and the ``industrial 
source'' caps. Particularly since the ongoing changes in the structure 
of the electric industry make it difficult to predict how many 
industrial utility-units there may be in the future and how they may be 
used, EPA rejects such an open-ended exemption from both 
caps.10 Moreover, commenters supporting a blanket exemption 
ignore the fact that the Acid Rain Program is aimed at reducing both 
SO2 emissions and NOX emissions. To the extent 
that existing coal-fired industrial utility-units are Group 1 (i.e., 
dry bottom wall-fired or tangentially fired) or Group 2 (i.e., cell 
burner, cyclone, wet bottom, or vertically fired) boilers, exempting 
them removes the applicability of the Group 1 or Group 2 NOX 
emission limits, which in some cases may be the only NOX 
limits for these boilers under the Act.
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    \9\ EPA rejects as speculative and irrelevant the commenter's 
suggestion that title IV may be amended in a way that would require 
non-exempt industrial utility-units to make additional, 
``prohibitively expensive'' reductions.
    \10\ Even if the ``total'' exemption were limited to the 
specific possible industrial utility-units identified thus far by 
EPA (see Report to Docket: Industrial Units (October 31, 1996)), the 
amount of generation and emissions covered by a ``total'' exemption 
could increase in the future. Moreover, the commenters suggested no 
basis for limiting a ``total'' exemption to those tentatively 
identified industrial utility-units if other units are subsequently 
found to meet the ``total''-exemption criteria.
---------------------------------------------------------------------------

    EPA also rejects, as unsupported and speculative, the claim that 
subjecting industrial utility-units to Acid Rain Program requirements 
will make interconnection agreements and related power sales agreements 
between such units and utilities economically prohibitive. EPA agrees 
that industrial companies may have more difficulty than utilities (at 
least under the current scheme of utility rate regulation) in passing 
through the costs of the Acid Rain Program. However, that is a far cry 
from concluding that electricity sales by existing industrial utility-
units would cease or that no new industrial utility-units would 
contract to make such sales.
    EPA therefore maintains that, if there is to be any exemption for 
industrial utility-units, the exemption must be strictly limited in 
order to resolve the specific problem set forth in the preamble of the 
proposal. That problem is that some industrial utility-units have only 
incidental activities (i.e., electricity sales) bringing the entire 
operation of the unit under the Acid Rain Program and that these units 
likely qualified for, but were not allocated, allowances. Strictly 
limiting the exemption to address this problem will minimize the 
potential environmental impact of this resolution on SO2 and 
NOX emissions and will better harmonize the exemption with 
the basic regulatory scheme under title IV. In fact, without the 
specific limits on the exemption set forth in today's rule based on the 
magnitude of electricity sales and the time period when electricity 
sales first became contractually required, EPA would reconsider whether 
any exemption for industrial utility-units should be established.
    As an alternative to a blanket exemption for industrial utility-
units, one commenter suggested modifying the definition of ``incidental 
sales of electricity'' so that units selling up to one-third (rather 
than up to 10 percent, as under the proposal) of their electric 
generation to utilities could qualify as exempt industrial utility-
units. Allegedly, limiting sales to up to one-third of annual electric 
generation would be consistent with the statutory exemption for 
cogeneration facilities. Under section 402(17)(C) and Sec. 72.6(b)(4), 
a cogeneration facility that supplies to a utility, on an annual basis, 
an amount of electricity not exceeding one-third of its potential 
electrical output capacity or 219,000 MWe-hrs is an unaffected unit and 
is not subject to the Acid Rain Program. The commenter supported 
limiting industrial utility-units to annual electricity sales equal to 
the lesser of one-third of capacity or one-third of actual generation.
    Reflecting that the rationales for the industrial utility-units 
exemption and the statutory cogeneration facility exemption are not 
identical, today's rule does not make the requirements for the two 
types of exemptions identical. On one hand, the cogeneration facility 
exemption reflects Congressional intent, manifest in section 402(17)(C) 
of the Act, that certain cogeneration facilities be entirely exempt 
from the Acid Rain Program whether or not they had contracted before 
enactment of title IV to provide electricity at a fixed price. 
Presumably, this is because, by using the same steam both for electric 
generation and industrial purposes, cogeneration facilities are 
inherently more efficient than other units that generate electricity. 
See 40 CFR 72.2 (defining ``cogeneration unit'' as unit producing 
electricity and useful thermal energy ``through sequential use of 
energy''). On the other hand, the industrial utility-units exemption 
addresses the category of industrial utility-units, which were intended 
by Congress to be subject to the Acid Rain Program but, with regard to 
certain individual units, were not allocated allowances for which they 
likely qualified. They lack the sequential use of energy that makes 
cogeneration facilities inherently more efficient. As discussed above, 
EPA maintains that the industrial utility-units exemption should, under 
these circumstances, be more narrowly drawn than the provisions for 
exempting cogeneration facilities. Consequently, EPA disagrees with the 
approach of using the limit on electricity sales by exempt cogeneration 
facilities in setting the limit on electricity sales by exempt 
industrial utility-units.
    In the proposal, the industrial utility-units exemption is limited 
to units that were contractually obligated as of March 23, 1993 to make 
only incidental sales of electricity to utilities. The proposal defines 
``incidental sales'' as sales not exceeding 10 percent of either 
nameplate capacity or total actual generation because that level seemed 
to be consistent with the general level of historical electricity sales 
by the type of unit intended to be covered by the exemption. This 
approach limits the exemption by restricting both the number of units 
covered by the exemption and the amount of electricity sales to 
historical levels and does not allow expansion beyond those levels. 
None of the commenting owners of units potentially qualifying for the 
industrial utility-units exemption claimed that they had actually made, 
in any past year, electricity sales in excess

[[Page 55465]]

of the 10 percent limit or that the 10 percent limit is 
unrepresentative of historical levels. EPA maintains that it is 
appropriate to impose on the industrial utility-units exemption a limit 
reflecting historical levels and that, on their face, electricity sales 
as high as one-third of total generation cannot be regarded as simply 
incidental to the operation of the unit involved. For these reasons, 
while choosing a 10-percent level as the cutoff point for ``incidental 
sales''--like choosing any specific cutoff point--is to some extent 
arbitrary, EPA maintains that the chosen level is reasonable. Today's 
rule, like the proposal, defines ``incidental electricity sales'' as an 
amount of electricity sales that does not exceed the smaller of 10 
percent of the nameplate capacity of the generator served by the unit 
times 8,760 hours per year or 10 percent of the actual annual electric 
output of that generator.
    Today's rule also continues to impose the incidental-electricity-
sales limit on sales starting in 1985 and continues to require that the 
contractual obligation to make such sales must have been in place on 
March 23, 1993. One commenter objected to having ``two different 
deadlines'' and argued that only sales starting in 1993 should have to 
meet the incidental-electricity-sales limit. EPA rejects this approach.
    Under the industrial utility-units exemption, EPA considers the 
electricity sales of the unit starting in 1985 because that is 
analogous to the approach taken by Congress in section 402(17) in 
determining what units are utility units that are subject to the Acid 
Rain Program. With certain exceptions, any unit that at any time 
starting in 1985 or thereafter serves a generator that produces 
electricity for sale is a ``utility unit'' subject to the Acid Rain 
Program. 42 U.S.C. 7651a(17)(A). In crafting the industrial utility-
units exemption, EPA reasonably takes a parallel approach of 
considering actual sales starting in 1985. Actual sales before 1985 
will not be considered. EPA sees no basis for the commenter's 
suggestion of ignoring any non-incidental electricity sales from 1985 
to 1993. In essence, EPA is requiring that, in order to be exempt, a 
unit must have maintained its character as an industrial utility-unit 
making only incidental sales throughout the period generally used to 
determine applicability of the Acid Rain Program.
    The rationale for the ``second deadline'' in the industrial 
utility-units exemption--i.e., the requirement that there be, as of 
March 23, 1993, a contractual obligation to make incidental electricity 
sales--is set forth in detail in the proposal and is adopted here. 61 
FR 68346. This requirement also makes it likely that the unit was 
either (i) in commercial operation as of November 15, 1990 or (ii) was 
under construction by December 31, 1990 and therefore qualified for, 
but was not allocated, allowances in Phase II. See 42 U.S.C. 7651d(a)-
(f) and (h)-(i) (allowances for existing units) and (g) (allowances for 
units under construction and operating by specified deadlines).
    Termination of exemption. Under the proposal, a unit's industrial 
utility-units exemption terminates automatically once any of the 
original requirements for granting the exemption are no longer met. 
Commenters raised concern that the proposal terminates the exemption if 
the contractual agreement that requires incidental electricity sales by 
the unit, and on which the granting of the exemption was originally 
based, expires or is amended. A particular agreement may have a 
termination date even though the parties intend for the relationship to 
continue. Further, an agreement may be modified directly or through 
replacement by a new agreement, e.g., in order to change the names of 
the parties or the electricity prices. According to commenters, the 
exemption should not be terminated so long as there is not an 
obligation to sell more than an incidental amount of electricity.
    EPA understands the concern that replacement of the interconnection 
agreement on which an exemption is based (or of the power purchase 
agreement related to the interconnection agreement) by a follow-on 
agreement that continues to require the same amount of electricity 
sales should not result in termination of the exemption. EPA also 
recognizes a similar concern with regard to amendment of the 
interconnection agreement or power purchase agreement. On one hand, the 
rule should provide for some flexibility allowing agreements to be 
modified or replaced so long as the underlying electricity sales 
obligation of the industrial utility-unit is not altered in a way that 
undermines the original basis for the unit's exemption. On the other 
hand, EPA is concerned that this flexibility should not have the effect 
of allowing expansion of the unit's exemption beyond its original 
scope. For example, just as a unit that as of March 23, 1993 did not 
serve a generator required to produce electricity for sale and that 
begins after that date to be involved in electricity sales is not 
exempt, an exempt unit should not be able to expand its involvement in 
electricity sales after March 23, 1993 and retain the exemption. 
Finally, EPA believes it must consider that future modifications or 
replacements of agreements will be taking place in the context of 
restructuring of the electric industry, where utilities may be 
restructured and renamed.
    In order to meet all of these concerns, today's rule provides that, 
in applying the automatic-termination provisions of the exemption, the 
interconnection agreement (and related power purchase agreement) and 
any successor agreement will be considered. For example, the proposal 
stated that if the interconnection agreement on which the exemption is 
based expires or terminates and the generator served by the unit 
continues to produce electricity for sale, the exemption for the unit 
terminates. Under today's rule, if that interconnection agreement is 
replaced or supplemented by a ``successor agreement'', the expiration 
or termination of the original agreement will not cause termination of 
the exemption. Today's rule defines ``successor agreement'' in a way 
that is aimed, on one hand, at requiring the unit to continue to meet 
the basic requirements for the exemption and taking account of future 
electric industry restructuring and, on the other hand, at preventing 
this flexibility from being used to expand beyond the original scope of 
the exemption when it was approved.
    A ``successor agreement'' is defined as an agreement that modifies, 
replaces, or supersedes the interconnection agreement or related power 
purchase agreement on which the exemption was originally based. 
Further, a ``successor agreement'' must be between owners and operators 
of the unit and another party (which may be the same party as in the 
original agreement) that (i) is principally in the electric utility 
business or is a public utility subject to State or local jurisdiction 
and (ii) is obligated to sell electricity to the owners and operators 
of the unit. In addition, the ``successor agreement'' must require the 
generator served by the unit to produce electricity for sale only for 
incidental electricity sales to that party. Finally, the total amount 
of electricity that the generator served by the unit is required to 
produce for sale under all such contracts that are in effect (i.e., the 
interconnection agreement, related power purchase agreement, and any 
successor agreement) must not exceed the amount that such generator was 
required to produce for sale under the original interconnection 
agreement and related power purchase agreement on which the exemption 
was initially based.
    Procedural and other issues. Under the proposal, a unit seeking an

[[Page 55466]]

industrial utility-units exemption must submit a petition to the local 
permitting authority. The processing of the petition is similar to that 
for an Acid Rain permit. However, once an exemption is approved, it has 
no uniform, fixed term and continues in effect unless and until it is 
automatically terminated. Commenters claimed that the process of 
petitioning for the exemption would be burdensome. They noted that the 
proposal removed the requirements to apply for the new units or retired 
units exemption and argued that the industrial utility-units exemption 
should similarly be made ``self-executing''.
    When the new units and retired units exemptions were first adopted 
by rule, the regulations required submission of petitions for the 
exemptions, processing by the permitting authority using the permit 
notice-and-comment procedures, and renewal every five years. The 
December 27, 1996 proposal and today's rule make those exemptions self-
executing for the most part. With some exceptions, owners and operators 
of units meeting the fairly straightforward requirements of the new 
units or retired units exemptions need only notify the permitting 
authority and EPA of their qualification for the exemption.
    In the case of the industrial utility-units exemption, EPA has 
decided that it is necessary to require the submission of a petition 
and processing by the permitting authority. This is a newly established 
exemption, with which the Agency has had no experience. Moreover, in 
determining whether to establish the exemption, EPA has found it 
difficult to obtain information on which units might qualify. See 
Report to Docket: Industrial Units (October 31, 1996). In addition, 
determination of whether a unit qualifies for the exemption is not as 
straightforward as the determination of qualification for the new units 
or retired units exemption. Qualification for an industrial utility-
units exemption depends, in part, on interpretation of interconnection 
and power purchase agreements. Further, particularly in light of other 
provisions of today's rule that streamline the permit processing 
procedures and thus also apply to processing of a petition for 
industrial utility-units exemption, EPA maintains that the petition and 
review requirements for the exemption are not unduly burdensome on 
either the unit owners and operators or the permitting authorities. 
Today's rule requires a one-time review process in that once approved, 
the exemption continues in effect without the need for renewal.
    One final issue raised by a commenter (Zinc Corporation of America) 
is whether industrial utility-units that do not qualify for an 
industrial utility-units exemption should be allocated allowances. 
Allegedly, such units qualify for allowances but were not allocated any 
due to EPA's ``oversight in allowance allocation''.
    The difficulty with this argument is that it ignores the fact that 
EPA has previously specified deadlines by which parties claiming that 
an erroneous failure to allocate allowances to a unit were required to 
submit such claims and necessary supporting information to EPA. As 
explained in the proposal (61 FR 68345), EPA issued in July 1992 the 
Adjunct Data File listing units of ``nontraditional utilities''. 57 FR 
30034, 30040 (July 7, 1992). EPA indicated that the units might or 
might not be affected units and that, in any event, it lacked 
sufficient information on which to base any allowance allocation. Id. 
Further, EPA gave notice that if the data necessary for allowance 
allocation was not provided by September 8, 1992 for ``a unit that may 
be affected now or in the future'', the unit would not be allocated 
allowances. Id. Moreover, believing that it had corrected all timely 
identified errors in the data and resulting allocations, EPA stated in 
the March 23, 1993 notice on final allowance allocations that no 
allowances will be allocated to any affected unit that was not 
allocated allowances in that notice. 58 FR 15634, 15641 (March 23, 
1993).
    Neither Zinc Corporation of America nor the predecessor-owner (St. 
Joe Minerals Corporation) of the units now owned by Zinc Corporation of 
America submitted any data or any objection to the lack of allowance 
allocations for the units. The only companies that have units 
identified by EPA as potentially industrial utility-units and that 
submitted any comments concerning allowance allocations were LTV Steel 
Mining Company and Ford Motor Company. Both companies claimed that 
their units were not affected units, and neither has ever objected to 
the lack of allowance allocations.
    Thus, there is no basis for allocating allowances now or in the 
future to industrial utility-units, as suggested by the commenter, if 
EPA ultimately determines that any such units do not qualify for the 
industrial utility-units exemption.11 Such units are treated 
like any other unit that has not been allocated allowances and becomes 
an affected unit after that date: No allowances will be allocated. 
EPA's approach of declining to allocate allowances when the deadline 
for submission of information for allowance allocation is missed has 
been upheld by the courts. Texas Municipal Power Agency v. EPA, 89 F.3d 
858. 872-73 (1996).
---------------------------------------------------------------------------

    \11\ EPA stresses that it has made no determination at this time 
on the qualification of these companies' units for the industrial 
utility-units exemption and will await submission of the necessary 
applications before making any determination. None of the companies 
that commented stated that it could not meet the proposed exemption 
requirements.
---------------------------------------------------------------------------

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

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

    The proposal attempted to clarify the extent to which the Acid Rain 
rules apply in lieu of provisions of parts 70 and 71, which address 
permitting by State permitting authorities and by the Administrator 
under title V of the Act. No comments were received on these revisions. 
The revisions are adopted in today's rule with some changes. The 
language in several sections of the proposal stating that the Acid Rain 
rules ``supersede'' provisions of parts 70 or 71 is removed from the 
final rule because of concern that such language might cause confusion 
as to whether parts 70 and 71 remain in effect at all.
    Instead, today's Sec. 72.60 clarifies that part 72 governs, 
notwithstanding the requirements of part 71, and the list of specific 
procedural matters that part 72 governs is clarified and augmented so 
that the list includes all matters covered by subparts C, D, E, F, and 
H of part 72.12 The list of specific matters to which part 
71 still applies is also clarified. Further, today's Sec. 72.70 retains 
the language in the existing rule stating that subpart G governs to the 
extent that the subpart is ``inconsistent'' with part 70. Upon 
reconsideration of the language, EPA concludes that this existing 
language is reasonably clear, particularly with the revisions in 
Sec. 72.72 reducing the number of differences between subpart G and 
part 70. EPA also notes that the existing language avoids any potential 
confusion about the overall effectiveness of part 70.
---------------------------------------------------------------------------

    \12\ For similar reasons, the same general approach is used in 
Sec. 72.80, which states that subpart H, rather than part 70 or 71, 
governs revisions of Acid Rain permit provisions.
---------------------------------------------------------------------------

B. State Authority to Administer and Enforce Acid Rain Permits

    Under the proposal, a State becomes responsible for administering 
and enforcing Acid Rain permits for affected sources if the State has 
an operating permits program approved under part

[[Page 55467]]

70 and to the extent the State Acid Rain regulations are accepted by 
the Administrator. The proposal also established a procedure for 
withdrawal of the Acid Rain Program from a State where the 
Administrator determines that the State is not adequately administering 
or enforcing the program.
    Today's rule adopts the revisions, with several changes. Under the 
proposal, the Administrator accepts all or a portion of State Acid Rain 
regulations through issuance of a notice in the Federal Register. 
Particularly since the State regulations will then become part of the 
State title V operating permits program, EPA believes that notice and 
opportunity for public comment should be provided before the 
Administrator issues a final acceptance or rejection of all or a 
portion of the State regulations. This approach is consistent with the 
requirement in part 70 that notice and opportunity for public comment 
be provided on the Administrator's approval or disapproval of a State 
operating permits program under title V. See 40 CFR 70.4(e). Today's 
rule includes language that imposes a notice-and-comment requirement 
but is flexible enough to allow use of a direct final procedure under 
which, for example, the proposed and final acceptance of State 
regulations are issued in simultaneous notices and the acceptance 
becomes automatically final if no significant, adverse comments are 
timely submitted.
    Further, the proposal revised the provision concerning the date by 
which a State permitting authority must reopen Phase II Acid rain 
permits to add Acid Rain NOX requirements. The existing 
provision requires the permits to be reopened by January 1, 1999 but is 
unclear as to whether this is the deadline for completion, or simply 
commencement, of the reopening procedure. In order to clarify the 
provision and ensure that State permitting authorities have sufficient 
time to process the permits, the proposal stated that the reopening 
must be completed by July 1, 1999.
    Commenters objected to the July 1, 1999 completion deadline on the 
ground that utilities need more than 6 months to plan for compliance 
with the NOX terms of their Acid Rain permits. No comment 
was received supporting the Agency's concern that State permitting 
authorities might need additional time beyond January 1, 1999 to 
complete the reopening of the permit. Further, as discussed elsewhere 
in this preamble, today's rule includes provisions that enable State 
permitting authorities to expedite permit processing, e.g., the 
provisions for elimination of newspaper notice and for use of direct 
proposed procedures. By further example, today's rule provides that any 
EPA-approved early election plan that has not been terminated must be 
added to the Phase II permit through an administrative amendment, 
rather than through a notice-and-comment procedure. This reflects the 
fact that Sec. 76.8, governing early election plans, requires a State 
permitting authority to approve, as part of the Phase II permit, any 
ongoing early election plans previously approved by EPA. These 
streamlining provisions will reduce the administrative burden on the 
State permitting authorities.
    Consequently, today's rule retains the January 1, 1999 deadline and 
makes it clear that the reopening of the permit to add NOX 
requirements must be completed by that deadline. By its terms, the 
January 1, 1999 deadline for adding the NOX provisions only 
applies to the extent that the provisions were included in a timely, 
complete permit application concerning NOX emissions. EPA 
notes that, under Sec. 76.9(b)(2), such permit application must be 
submitted by January 1, 1998 and that, where the State permitting 
authority with jurisdiction over the unit has responsibility for 
issuing Acid Rain permits covering NOX, the submission 
should be made to that State permitting authority.
    Finally, language is added (e.g., to Sec. 72.73(b)(1) and 
Sec. 72.74(a)) to make it clear that the State permitting authority 
issues Acid Rain permits to the extent that it has State Acid Rain 
regulations, accepted by EPA, that apply to the sources involved and to 
the Acid Rain requirements involved. For example, if accepted State 
Acid Rain regulations include the Acid Rain emissions limitation for 
SO2 but not the emissions limitations for NOX by 
the applicable deadline under Sec. 72.73, EPA has the flexibility to 
determine whether the State permitting authority will be responsible 
for issuing Acid Rain permits covering both SO2 requirements 
under part 72 and NOX requirements under part 76.

C. Required Elements for State Acid Rain Program

    The existing rule set forth the criteria for approval of a State 
operating permit program under title V and acceptance of the State Acid 
Rain regulations. The proposal eliminated or modified several of the 
criteria in the existing rule because EPA believed that they were 
unnecessary or redundant. Comments were received on only three of these 
revisions. With the changes discussed below, all the revisions are 
adopted in today's rule for the reasons discussed here and in the 
proposal.
    First, the existing rule required State permitting authorities to 
give written notice of draft permits to specified persons and also to 
provide notice in a newspaper or State publication. The proposal gave 
State permitting authorities the option of foregoing newspaper or State 
publication notice of draft permits that require only that a unit meet 
the standard SO2 or NOX emission limitations, a 
NOX averaging plan, or a NOX early election plan. 
Commenters supported this revision, which is adopted in today's rule.
    Second, the proposal gave State permitting authorities the option 
of using what was referred to as a ``direct final'' procedure for 
issuing Acid Rain permits. Under the procedure, a State permitting 
authority issues simultaneously a draft permit and a proposed permit. 
If no significant, adverse comments are received, the proposed permit 
is deemed to be issued and, after the period for review by the 
Administrator, the State permitting authority issues the final permit. 
Commenters supported this option and urged that EPA clarify that it 
applies to permit revisions as well as permit issuance. EPA notes that 
the procedure is misnamed in the proposal in that the permit that is 
issued in the absence of significant, adverse comment is a ``proposed 
permit'' that is still subject to the Administrator's review. 
Consequently, today's rule refers to this option as the ``direct 
proposed'' procedure and adopts the provision. 13
---------------------------------------------------------------------------

    \13\ Today's rule also removes language in Sec. 72.72(b)(1)(iv) 
stating that after the comment period on a draft permit, the State 
permitting authority will issue or deny a proposed permit. Some 
State permitting authorities have provided, with EPA's concurrence, 
that the comment period on the draft permit and EPA's review of the 
permit run concurrently so long as no adverse comment is received 
and no change is made in the draft permit. The language in 
Sec. 72.72 is removed in order to allow State permitting authorities 
to take this approach, which reduces the length of the permitting 
process, for Acid Rain permits.
---------------------------------------------------------------------------

    With regard to the use of the direct proposed procedure for permit 
revisions, EPA notes that Sec. 72.81(c)(2) in the proposal and in 
today's rule states that, with certain exceptions not relevant here, 
permit modifications must be treated as permit applications. Consistent 
with Sec. 72.81(c)(2), the procedures for permit issuance (including, 
e.g., the direct proposed procedure) apply to permit modifications. 
Similarly, permit issuance procedures apply to permit reopenings. 
Because the other types of permit revisions, i.e., fast-track

[[Page 55468]]

modifications and administrative permit amendments, have their own 
procedures set forth in the proposal and today's rule, the direct 
proposed procedure does not apply to such revisions.
    Third, the proposal eliminated a provision in the existing rule 
limiting 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. As a result, part 70, which imposes no limit on State 
administrative appeals and limits judicial appeals to no more than 90 
days from permit issuance, would govern appeals of Acid Rain permits. 
40 CFR 70.4(b)(3)(xii); see also 59 FR 44460, 44516 (August 29, 1994) 
(proposing to allow States to provide up to 125 days for judicial 
appeals).
    Commenters objected to the removal of any limit on the periods for 
State administrative appeals, and for judicial appeals, under part 72. 
The commenters contended that, in the absence of a limit in part 72 (or 
in part 70) on administrative appeals, owners and operators ``would 
never be able to know whether their permits would be subject to 
challenge''. However, the commenters ignored the fact that, in imposing 
no federally mandated limit on State administrative appeals, part 72 
leaves the matter to the States, which are highly likely to impose such 
limits in the interests of finality and administrative efficiency. EPA 
is not aware of any State operating permit programs that, to the extent 
they provided for administrative appeal, failed to set a time limit on 
the filing of administrative appeals. In short, the question here is 
not whether to have any limit but rather whether to leave the matter 
for the States or impose a federally mandated limit. EPA maintains that 
it is preferable to allow each State flexibility to craft time limits 
for Acid Rain appeals. Under this approach, each State can set a single 
time limit appropriate for and applicable to all administrative 
appeals--and also one for all judicial appeals--of the entire title V 
operating permit, rather than having one set of time limits for an Acid 
Rain permit and another set of time limits for the remaining portions 
of the operating permit.
    The commenters contended that the Acid Rain permits are a ``stand-
alone portion'' of the operating permit and so it would not be 
confusing to have a different deadline for appealing the Acid Rain 
portion and appealing the rest of the operating permit. EPA disagrees. 
Although the Acid Rain permit is a separate portion of the operating 
permit, State permitting authorities are likely, as a matter of 
efficiency, to conduct notice and comment and other permitting 
procedures for the rest of the operating permit at one time and to 
issue a single, all inclusive operating permit, particularly since the 
Acid Rain permit is likely to comprise a relatively small part of the 
entire title V operating permit. In fact, in response to State concern 
over how to coordinate the processing of the Acid Rain permit and the 
operating permit, EPA has issued guidance on alternative approaches for 
achieving coordination. See Guidance on Coordinating Title IV/Title V 
Permitting Schedules (March 15, 1994). EPA believes that having a 
single administrative appeal deadline and a single judicial appeal 
deadline for the entire operating permit is simpler and less likely to 
result in inadvertent failure to meet the applicable filing deadline.
    The commenters also alleged that the Acid Rain portion incorporates 
new compliance obligations while the remainder of the operating permit 
merely restates existing obligations. This, of course, depends on the 
timing of the issuance of the operating permit. State permitting 
authorities are allowed to phase in the issuance of operating permits 
and new obligations may arise before issuance of, and therefore may be 
included in, a given operating permit. Moreover, to the extent this 
distinction applies, it is likely to apply only for the initial Phase 
II Acid Rain permit; in most cases, a subsequent Acid Rain permit will 
restate the obligations (e.g., the requirement to hold sufficient 
allowances to cover SO2 emissions) already in the initial 
Acid Rain permit.
    EPA concludes that, with regard to the question of limiting State 
administrative and judicial appeals, the Acid Rain portions of 
operating permits should not be treated any differently than the 
remaining portions of operating permits. The provision in the proposal 
is adopted in today's rule.
    In the proposal EPA noted that many States have already adopted 
Acid Rain rules based on the existing rule. EPA stated that it expected 
that, if rule revisions are adopted in final, States will incorporate 
the revisions within 2 years after the promulgation of the final rule. 
No comment was received on this approach, and EPA continues to believe 
that this is a reasonable time frame. To the extent a State permitting 
authority fails to incorporate the revisions in a timely manner, EPA 
will consider whether the State is adequately administering and 
enforcing the Acid Rain Program and may take action under Sec. 72.74 of 
today's rule to administer all or a part of the Acid Rain Program for 
sources located in the State.

IV. Part 72: Miscellaneous Permitting Matters

A. Definitions

    The proposal modified or eliminated several definitions. Only one 
of the changes (i.e., the revised definition of ``submit or serve'' to 
eliminate the requirement for use of certified mail) received comment 
and that comment was supportive. The definition revisions, as modified 
below, are adopted in today's rule.14
---------------------------------------------------------------------------

    \14\ One of the proposed definitions, ``State'', is modified in 
today's rule. The proposed definition removed language, stating that 
``State'' has its conventional meaning where it is clear ``from the 
context'', and listed one specific instance where the conventional 
meeting would apply. Because there are several contexts in which the 
conventional meaning applies, today's rule retains the formulation 
in the existing rule. Thus, for example, in Sec. 72.40(b)(2) the 
term ``State'' has its broader meaning (which includes the 
jurisdiction of any non-federal permitting authority) while in 
Sec. 72.22(e)(1)(i) ``State'' has its conventional meaning.
---------------------------------------------------------------------------

B. Designated Representative

    The proposal included two types of revisions concerning designated 
representatives. First, the procedures for selecting or changing the 
designated representative or an alternate were simplified and made less 
burdensome. Commenters supported the revisions, which are adopted in 
today's final rule.
    Second, the proposal provided the option of selecting two alternate 
designated representatives for an affected source in certain limited 
circumstances. The proposal was aimed at providing flexibility for 
sources with units located in more than one State that are in a 
NOX averaging plan under Sec. 76.11 and that are subject to 
two levels of management, one at the subsidiary operating company and 
one at the parent company. In particular, as requested by a commenter, 
the proposal allowed a multi-state utility holding company with a 
NOX averaging plan covering units in two or more States to 
designate for sources with units in the plan a single designated 
representative at the holding company level and two alternates, one at 
the management level and one at the operations level of the operating 
company. Commenters supported the additional flexibility but suggested 
certain changes to the proposal.15
---------------------------------------------------------------------------

    \15\ One commenter suggested that there is no basis for the 
requirement in Sec. 76.11 that units in a NOX averaging 
plan have the same designated representative. This suggestion is 
outside the scope of the rulemaking. While it is unclear whether the 
commenter intended to raise that issue here, EPA did not propose, 
and is not considering here, such a change in Sec. 76.11.

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[[Page 55469]]

    The commenter that originally requested this type of provision in 
the proposal expressed concern that the references in the proposal to a 
holding company with multiple subsidiaries may become obsolete in light 
of future restructuring of the electric industry. For example, a 
holding company with subsidiaries operating generation facilities may 
be restructured to include all generation facilities in a single 
subsidiary. This commenter also was concerned that the proposal limited 
the option of having two alternates to cases where the NOX 
averaging plan covered all units operated by the subsidiaries. If any 
units are covered by early election plans or have alternative emission 
limitations and so are outside the NOX averaging plan, the 
proposal would not apply. Other commenters echoed these concerns but 
suggested that EPA allow any source to have two alternates, regardless 
of whether the source has units that are in a NOX averaging 
plan or are subject to management at both the subsidiary and parent 
company levels.
    While retaining the general rule that a source must have one 
designated representative and may have one alternate, EPA proposed 
allowing two alternates in limited circumstances where it was shown 
that such flexibility might be needed. The proposed provision, as 
modified in today's rule, covers the only specific circumstance for 
which a need for multiple alternates has been explained by commenters, 
i.e., where units are in different States but in the same 
NOX averaging plan and are subject to both subsidiary and 
parent company management. While commenters make a general suggestion 
that having two alternates gives greater assurance that a ``point of 
contact'' for a source will be available ``at all times'', the 
commenters do not claim that having one alternate has generally been 
insufficient or point to any other specific circumstances where two 
alternates are needed. EPA therefore declines to expand the provision 
any further.
    For the reasons discussed here and in the proposal, today's rule 
adopts the proposed provision, with changes to meet other concerns 
stated by commenters. First, the provision expressly covers a unit 
whose utility system is the subsidiary of a company (not necessarily a 
``holding company''). Second, the provision will cover cases where the 
units in the NOX averaging plan are operated by a single 
subsidiary or by two or more subsidiaries. Each unit must be in a 
utility-system subsidiary of a company, but they may be in the same 
such subsidiary. Third, the NOX averaging plan need not 
include all units operated by subsidiaries of the company; instead the 
plan must simply cover two or more units in more than one State.

C. Compliance Plans

    The proposal revised the provisions concerning the submission of 
substitution plans and reduced utilization plans in order to clarify 
the deadlines and the procedures to be used. No comments were received, 
and the revisions are adopted in today's rule.
    The proposal also revised the procedures for review of failed 
repowering projects. No comments were received on the revisions, which 
are adopted in today's rule.
    Finally, the proposal revised the deadline for activating 
conditional repowering extension plans from December 31, 1997 to July 
1, 1997. No comments were received. However, today's rule is being 
published after July 1, 1997, and EPA has decided not to revise the 
activation deadline retroactively.

D. Federal Permit Issuance

    The proposal made several revisions to the federal permit issuance 
procedures. For example, the period after which an Acid Rain permit 
application received by EPA is deemed to be complete was lengthened 
from 30 days to 60 days. This was done in order to be consistent with 
part 71, under which the period applicable to operating permit 
applications is 60 days. Commenters objected that this prolongs the 
``period of uncertainty'' over the completeness of the Acid Rain 
application and stated that Acid Rain permitting ``generally proceeds 
along a separate track'' from other title V permitting. However, the 
commenters' assumption that the Acid Rain portion of the operating 
permit is processed separately from the rest of the operating permit is 
not necessarily correct. If the State permitting authority is generally 
responsible for issuing title V operating permits but, because its Acid 
Rain rules are not fully approved, EPA issues the Acid Rain permits, 
then the Acid Rain permits may be processed separately. In cases where 
EPA is responsible for issuing entire title V operating permits 
(including the title IV portion), the title IV and title V procedures 
may be coordinated as a matter of efficiency, particularly if EPA 
delegates the title IV and title V permitting to the State. See 40 CFR 
71.10 (delegation of permitting under title I); and 72.74(a)(2) of 
today's rule (delegation of permitting under title IV). A single 
completeness review (as well as a single notice and comment procedure) 
may be conducted for the entire operating permit. EPA maintains that 
the ability to coordinate Acid Rain permitting and title V permitting 
and to realize potential efficiencies is enhanced by minimizing the 
differences between Acid Rain permitting and title V permitting.
    Moreover, the Acid Rain portion of the operating permit is 
generally relatively small compared to the entire title V permit 
application. It is therefore logical to make the completeness review 
period for the title IV permit conform to the 60-day period for title V 
permits, rather than to shorten the title V completeness review period 
to 30 days. While the period during which owners and operators are 
uncertain about the completeness of Acid Rain permit applications will 
be lengthened for 30 days, EPA maintains that the advantage of a 
consistent completeness review period outweighs the relatively minor, 
additional uncertainty.
    Further, the proposed rule altered the provision concerning the 
time period within which a designated representative must respond to a 
request for supplemental information by the Administrator. While the 
existing rule set an automatic 30-day period for responding and allowed 
the Administrator to lengthen the response period, the proposal stated 
that a reasonable period would be set on a case-by-case basis by the 
Administrator. A commenter objected on the ground that it is unlikely 
that a period less than 30 days would be reasonable and that it would 
generally be in the interest of a designated representative to respond 
expeditiously. However, the commenter ignores the fact that there can 
be significant, but readily remedied gaps or errors in the information 
submitted to EPA in a permit application. Setting a minimum response 
period of 30 days is likely to lengthen unnecessarily the permitting 
process. In addition, while the Agency could treat applications with 
such errors as incomplete and avoid the minimum 30-day response period, 
EPA maintains that it is preferable to have the flexibility to set a 
reasonable, short response period. This flexible approach both promotes 
orderly and expeditious processing of permits and protects the 
designated representative from unreasonable requests. This is also 
preferable to the commenter's approach of assuming that designated 
representatives will necessarily respond expeditiously and in a time 
frame that meets the Agency's schedule for permit processing.

[[Page 55470]]

E. Permit Revision

    The proposal made several changes to the permit revision 
procedures. Changes concerning permit reopenings received no comment 
and are adopted in the final rule; changes concerning fast-track 
amendments and administrative amendments are adopted as discussed 
below.
    With regard to fast-track modifications, the proposal lengthened 
the period within which a State permitting authority must act on a 
fast-track modification of a permit from 30 to 60 days after the end of 
the public comment period. Commenters objected claiming that there is 
no evidence that State permitting authorities need more time and that 
the revisions entitled to fast-track modification required little 
exercise of administrative discretion and are unlikely to receive 
public comment.
    EPA notes that, while a NOX averaging plan or plan 
change may require little administrative discretion and elicit little 
comment, the processing of other types of revisions (e.g., changes to 
repowering plans or thermal energy plans) is more likely to involve 
discretion or public comment. Further, the processing of Acid Rain 
permits and permit revisions represents a very small portion of the 
operating permit processing required of State permitting authorities 
under title V. Reflecting the significant burden of operating permit 
processing, part 70 allows State permitting authorities to take up to 
18 months from receipt of a complete permit application to issue an 
operating permit and a similar period to make significant modifications 
to an existing operating permit. 40 CFR 70.7(a)(2) and (e)(4)(ii). By 
comparison, a 90-day period (i.e., the 30-day comment period and 60 
days after the end of the period) for completing a fast-track 
modification is certainly expedited. EPA maintains that, in light of 
the permitting burden faced by State permitting authorities, it is 
preferable to set a more realistic, and yet still expedited, deadline 
for action by State permitting authorities.
    With regard to administrative amendments, the proposal set forth 
the amendment procedures in detail, rather than citing the procedures 
in part 70. Further, the period for action on one administrative 
amendment, an alternative emission limitation (AEL) demonstration 
period, was lengthened from 30 days to 60 days after receipt of an AEL 
demonstration period petition determined by the permitting authority to 
meet all the requirements of Sec. 76.10. No comments were made on these 
revisions, which are adopted in today's rule.
    In addition, the administrative amendment procedures were changed 
to allow a permitting authority to correct minor errors in a permit on 
its own motion. Noting that the proposed provision was not explicitly 
limited to ``minor'' errors, commenters argued that notice should be 
given to the designated representative before even minor changes are 
made to the permit. In response to these concerns, today's rule 
explicitly limits administrative permit amendments on the motion of the 
permitting authority to corrections of typographical errors or 
similarly noncontroversial changes (e.g., adding a new units or retired 
units exemption for which the requirements were previously met). 
Moreover, the rule requires that a permitting authority provide at 
least 30 days' notice to the designated representative of the source 
involved before making, on its own motion, any administrative permit 
amendments. This approach will enable the permitting authority to 
correct minor errors with minimal delay while providing the designated 
representative the opportunity to commment.
    In order to make the reopening provision consistent with the 
provision allowing a permitting authority to make administrative 
amendments on its own motion, language is added to Sec. 72.85. This 
language makes it clear that administrative amendment procedures, 
rather than reopening procedures, may be used for typographical or 
similar errors.

F. Reduced Utilization Accounting

    The proposal made several changes in the reduced utilization 
accounting provisions. Most of the changes received no comment or only 
favorable comment and are adopted in today's rule. Commenters objected 
to one change: The provision that, in accounting for the effect of heat 
rate improvements on a Phase I unit's utilization, credit for such 
improvements must be limited to the net effect of the improvements on 
the unit's heat rate. According to the commenters, if a unit's heat 
rate (i.e., Btu/Kwh) since the 1985-1987 base period deteriorates 
(i.e., increases) and measures are taken that offset that 
deterioration, the entire effect of the heat rate improvements should 
be included in accounting for reduced utilization. The commenters 
alleged that the statutory reduced utilization provision in section 
408(c)(1)(B) of the Act establishes a ``baseline'' heat input, not a 
``baseline'' heat rate.
    In asserting that there is no connection between utilization in the 
base period and heat input in the base period, the commenters ignore 
the basic purpose of accounting for reduced utilization and heat rate 
improvements. The purpose of the reduced utilization provisions is to 
ensure that any increased emissions resulting from reducing utilization 
of, and shifting generation from, Phase I units to units compensating 
for the reduced utilization ``are accounted for in the allowance 
system.'' 56 FR 63002, 63019 (December 3, 1991). Reduced utilization 
``as a result of * * * improved unit efficiency programs'' need not be 
accounted for through allowance surrender because these programs 
``cause decreases in utilization without any shifts of generation to 
unaffected units.'' 56 FR 63021. To the extent utilization (i.e., total 
annual heat input in mmBtus) at a Phase I unit is reduced below the 
baseline level because that unit has improved its heat rate after 1987 
over the level reflected in the baseline utilization, there is no 
increase in SO2 emissions and allowances need not be 
surrendered. In this case, the Phase I unit is using less fuel because 
it can produce a kilowatthour of electricity with less fuel and thus 
less SO2 emissions.
    However, if the Phase I unit's heat rate deteriorates from the 
level reflected in the unit's baseline utilization and heat rate 
improvement measures are instituted after 1987 that bring heat rate 
back to the level reflected in the baseline utilization, then the unit 
is using the same amount of fuel to produce a kilowatthour of 
electricity. In the latter case, the heat rate improvements made after 
1987 do not account for the use of less fuel at the Phase I unit. Just 
as heat rate improvements made before 1987 and reflected in baseline 
utilization cannot account for utilization below baseline, heat rate 
improvements made after 1987 that simply restore the heat rate to the 
level reflected in the baseline cannot account for reduced utilization. 
See 61 FR 68354. The same logic applies if a Phase I unit is attempting 
to account for its reduced utilization through heat rate improvements 
at another unit that simply restore the latter unit's heat rate to the 
1987 level.
    Thus, contrary to the commenters' assertions, EPA did not simply 
``assume'' that limiting heat rate improvement to net improvement since 
1987 is warranted. On the contrary, EPA explained, albeit in less 
detail than in today's rule, the basis for the limitation. Id. 
Moreover, the limitation is consistent with long-standing explanations 
of the purpose of reduced utilization accounting, as discussed

[[Page 55471]]

above, and with other, regulatory provisions governing such accounting. 
In particular, limiting heat rate improvement to net improvement since 
1987 is analogous to the approach taken in the existing rule concerning 
sulfur-free generation, which is not at issue here. Only the net 
increase in current generation at a sulfur-free generator (i.e., the 
increase in current generation over the sulfur-free generator's average 
1985-1987 annual generation), not the increase from one year to the 
next, is used to account for reduced utilization. See 40 CFR 
72.91(a)(3)(iii); and 58 FR 3590, 3606-7 (January 11, 
1993).16 The commenters' approach is therefore rejected as 
inconsistent with the entire thrust of reduced utilization accounting, 
and the proposed provision is adopted in today's rule.
---------------------------------------------------------------------------

    \16\ While EPA uses 1985-1987 average sulfur-free generation as 
the bench mark for limiting the use of sulfur-free generation in 
reduced utilization accounting, the proposal and today's rule use 
1987 heat rate as the bench mark for limiting the use of unit 
efficiency improvements. This is because annual generation was more 
likely to vary during 1985-1987 than was a unit's annual heat rate 
and the use of the 1987 heat rate, which captures any efficiency 
improvement measures instituted before 1988, is less burdensome for 
utilities and EPA to determine than the average 1985-1987 heat rate.
---------------------------------------------------------------------------

V. Part 73: Allowances

A. Allowance Tables

    In the proposal, EPA proposed a number of changes in unadjusted 
allowances and in the units and allowance figures listed in Tables 2 
and 3 of Sec. 73.10, reflecting those allowance changes. For purposes 
of the proposal, EPA was able to list the changes in the rule without 
reprinting Tables 2 and 3. However, consistent with the requirements of 
the Federal Register concerning finalization of multiple changes to 
regulatory tables and in the interest of facilitating public 
understanding of the final changes, EPA concludes that the changes 
should be finalized through republication of information in the tables. 
Further, section 403(a) of the Act requires the Administrator to issue 
prior to June 1, 1998 a revision of the final allowance allocations 
primarily to account for allocations for repowered units under section 
409. That revision will necessitate recalculation of all units' 
allowance allocations and so must also be implemented through 
republication of information in Tables 2 and 3. In order to avoid the 
confusion likely to result from, and the large expense associated with, 
multiple republications of information in the tables, EPA has decided 
not to finalize at this time the allowance revisions in the December 
27, 1996 rule. Instead, EPA intends to propose in the near future the 
revisions associated with the June 1, 1998 allocations and to 
coordinate finalization of both the allowance revisions in the December 
27, 1996 proposal and that future proposal.
    The only exception to this approach is the allowance changes for 
Central Louisiana Electric Company's Rodemacher unit 2. In the December 
27, 1996 proposal, the allowances for Rodemacher unit 2 were changed to 
20,774 unadjusted allowances. Under a settlement of litigation 
concerning Rodemacher unit 2's allowance allocation, the Administrator 
agreed to sign a final rule adopting the revision to the unit's 
allowances by October 1997. Consistent with that settlement, the 
proposed unadjusted allowances for Rodemacher unit 2 are adopted in 
today's rule. This single change can be made without republishing the 
allowance tables.

B. Small Diesel Refinery Provisions

    The proposal made certain revisions to the provisions to small 
refinery allowance allocations. No comment was received, and the 
revisions are adopted in today's rule.

VI. Part 75: Monitoring of Units Burning Digester or Landfill Gas

    In the proposal, EPA requested comment on monitoring requirements 
for units burning digester or landfill gas. No comments were received. 
EPA intends to consider this matter in future proceedings.

VII. Part 77: Excess Emissions

    The proposal made changes to part 77 concerning immediate deduction 
of allowances to offset excess emissions, the deadline for paying 
excess emissions penalties, and excess NOX emissions under a 
NOX averaging plan. The changes received no comment or only 
favorable comment and are adopted in the final rule.

VIII. Part 78: Administrative Appeals

    The proposal made changes to part 78 to clarify that an 
administrative appeal is a prerequisite for judicial review of 
decisions of the Administrator under the Acid Rain Program and to 
ensure that the requirement for exhaustion of administrative remedies 
is consistent with the Supreme Court's decision in Darby v. Cisneros, 
509 U.S. 137 (1993). On September 24, 1993, the Agency originally 
proposed to add language stating explicitly that administrative appeal 
is a prerequisite for judicial review. 58 FR 50088, 50104 (1993). 
Certain commenters stated, in response to the September 24, 1993 
proposal, that, in light of the alleged potential for ``disruptive 
effects'' resulting from an administrative exhaustion requirement, the 
Agency should solicit additional comment on the effect of Darby on part 
78. EPA therefore did not finalize the September 24, 1993 proposal. 
Instead, EPA provided further opportunity for comment by publishing the 
December 27, 1996 proposal, which included both the changes explicitly 
requiring exhaustion of administrative remedies and some additional 
changes to conform with Darby. In its comments on the December 27, 1996 
proposed rule, the same commenters submitted further comments. In their 
second set of comments, the commenters failed to go beyond their 
generalized claim of ``disruptive effects''. Rather than providing any 
specific claims or examples of when administrative appeal of a 
particular type of Administrator's decision would be ``disruptive'' to 
the Acid Rain Program or to affected sources' compliance efforts, the 
commenters simply expressed general concern that EPA ``failed to 
consider'' unspecified ``disruptive'' effects.
    In the September 24, 1993 and December 27, 1996 proposals, EPA set 
forth both the basis for requiring exhaustion of administrative 
remedies and provisions addressing concerns over delay pending 
completion of administrative review. Requiring exhaustion of 
administrative remedies promotes efficient use of administrative and 
judicial resources in that it ``allows the Agency to review * * * 
decisions for correctness before having to defend (them) * * * in 
Federal court.'' 58 FR 50104 (quoting the original proposed appeals 
procedures at 56 FR 63002, 63033 (December 3, 1991)). Decisions that a 
petitioner shows are erroneous can be reversed or corrected without 
resource-intensive litigation before the federal courts and decisions 
that a petitioner shows are insufficiently explained can be reexamined 
and either reversed or better explained. The overall effect is to 
increase the likelihood of sound decision-making and reduce the need 
for recourse to the courts.17
---------------------------------------------------------------------------

    \17\ EPA maintains that, contrary to commenters' assertion, the 
provision in section 307(b)(1) of the Clean Air Act on motions for 
reconsideration is irrelevant to the question of administrative 
appeals and is not properly interpreted as evidencing ``hostility'' 
to the exhaustion requirement involved here. Section 307(b)(1) 
involves judicial appeals and the effect of agency reconsideration 
of a final action on such appeals. To the extent section 307(b)(1) 
addresses reconsideration of a final rule, the section is irrelevant 
to this case, which concerns administrative appeals of individual, 
adjudicative decisions. To the extent the section addresses 
reconsideration of an adjudicative decision, the section is still 
irrelevant here. Reconsideration provides a second opportunity for 
agency review of an adjudicative decision, for which an opportunity 
for administrative review was already provided. In contrast, the 
issue here is whether there should be an initial opportunity for EPA 
to review its decisions on Acid Rain matters before the decisions 
may be appealed to the courts.

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[[Page 55472]]

    Further, while nothing in the record indicates that delay pending 
administrative appeal of Acid Rain Program decisions (during which 
appeal the decisions will not be operative) will likely have 
``significant, adverse consequences'', the December 27, 1993 proposal 
took reasonable account of the general possibility of such consequences 
pending appeal.18 61 FR 68365. Despite two opportunities to 
provide information on the alleged, potential, adverse effect of the 
exhaustion requirement, the commenters originally objecting to the 
requirement were apparently unable to identify any specific 
circumstances in the Acid Rain Program under which significant, adverse 
consequences would result from the requirement, much less provide any 
information on the likelihood of such circumstances arising. No such 
circumstances have been identified to EPA, and EPA is not aware of any, 
particularly in light of the ability of the Agency, under the proposal 
and today's rule, to expedite administrative appeals. EPA therefore 
rejects the commenters' claim concerning ``disruptive effects'' of the 
exhaustion requirement as speculative and unsupported.
---------------------------------------------------------------------------

    \18\ EPA did not ``acknowledge'' that there would be cases of 
``significant, adverse consequences'' due to delay pending appeal or 
that any such cases would be likely to occur. Instead, EPA provided 
procedures that could address such cases (regardless of their 
likelihood) if they arose.
---------------------------------------------------------------------------

    Moreover, the Agency's general approach under the regulatory 
statutes that it administers is to require exhaustion of administrative 
remedies prior to judicial review. See, e.g., 40 CFR 71.11(l)(4) 
(administrative appeal of final permit decision under title V of Clean 
Air Act); 40 CFR 124.19(f)(1) (administrative appeal of final permit 
decision under the Solid Waste Disposal Act as amended by the Resource 
Conservation and Recovery Act (RCRA), Prevention of Significant 
Deterioration (PSD) program in the Clean Air Act, or Underground 
Injection Control (UCI) program in the Safe Drinking Water Act); and 40 
CFR 124.60(g) (administrative appeal of final permit decision under 
National Pollutant Discharge Elimination System (NPDES)). Today's rule 
is consistent with that general approach.
    Nevertheless, the Agency crafted the proposed rule for Acid Rain 
Program appeals to provide for flexibility to minimize delay, 
particularly if future cases arise where delay will have a significant, 
adverse effect. Specifically, the proposal revised the existing rule to 
allow the Administrator, the Environmental Appeals Board, or the 
Presiding Officer (as appropriate) to set different, reasonable time 
periods (which could be shorter or longer than in the existing rule) 
for administrative-appeal-related filing by parties. For example, the 
30-day period within which motions to intervene in part 78 appeals may 
be filed was changed to allow a different period to be set. As 
explained in the proposal, this approach gives the Agency ``the ability 
to accelerate the appeals proceeding where delay due to the pending 
appeal will have significant, adverse consequences.'' 61 FR 68365. The 
commenters argued that the Agency might not always ``share an affected 
source's interest in avoiding'' such adverse consequences. However, the 
Agency's approach of allowing adjustment of the time periods gives the 
Agency the authority to accommodate the need for expeditious 
administrative appeal and gives the affected source the opportunity to 
show that expedition is necessary. Particularly in cases where such a 
showing is made, the Agency intends to make reasonable efforts to 
minimize the delay caused by the appeal. The Agency maintains that this 
approach reasonably balances, on one hand, the important role of the 
exhaustion requirement and, on the other, the commenter's generalized 
concern that appeals not cause undue delay.
    The commenters failed to recommend any other approach but merely 
stated that the Agency had not considered limiting the applicability of 
the exhaustion requirement, foregoing the exhaustion requirement, or 
setting tighter time limits on procedural steps. However, in explaining 
the need for the exhaustion requirement (see 56 FR 63033, 58 FR 50104, 
and 61 FR 68365), the Agency rejected the notion of limiting or 
foregoing the requirement. Further, recognizing that the major purpose 
of providing flexibility in the time periods for filings is to expedite 
administrative appeals, EPA is modifying the proposal to provide that, 
with a few exceptions discussed below, the time periods involved may be 
shortened, but not lengthened.
    One of the more important exceptions to that approach is the period 
for filing of administrative appeals.19 Commenters raised 
concern that an Administrator's decision under the Acid Rain Program 
would remain ``in limbo'' during a period of uncertain duration for the 
filing of an administrative appeal. Today's rule reduces the standard 
period for appeal to 30 days from issuance of the Administrator's 
decision and establishes that as a fixed period that cannot be changed 
on a case-by-case basis. The Agency is concerned that a period shorter 
than 30 days would not provide enough time for preparation of a 
petition that fully addresses the issues on appeal, as required under 
Sec. 78.3(c). See, e.g., 40 CFR 78.3(c)(1) and (3) (requiring a list of 
material issues and a clear and concise brief supporting the petition). 
This standard appeal period is consistent with the 30-day time period 
for administrative appeal of other actions of the Administrator under 
the Clean Air Act and other statutes administered by EPA. See, e.g., 40 
CFR 71.11(l)(1) (administrative appeal of final permit decision under 
title V); 40 CFR 124.19(a) (administrative appeal of final permit 
decision under RCRA, PSD program, or UIC program); and 40 CFR 
124.91(a)(1) (administrative appeal of final permit decision under 
NPDES). The reduced time period for filing appeals reduces the period 
of uncertainty on the status of the decision while still providing a 
reasonable opportunity for administrative appeal.20
---------------------------------------------------------------------------

    \19\ A minor exception under today's rule is the period for 
curing defects in filings, which remains as 7 days subject to 
shortening or lengthening at the discretion of the Environmental 
Appeals Board or the Presiding Officer. This will minimize the 
likelihood of a filing being permanently excluded for purely 
technical reasons. The Agency is confident that flexibility 
concerning this limited type of procedural deadline can be 
implemented in a way that will not result in unnecessary delay of 
proceedings.
    \20\ For similar reasons, the period for appealing a proposed 
decision of a Presiding Officer to the Environmental Appeals Board 
is fixed at 30 days under Sec. 78.20(a).
---------------------------------------------------------------------------

    From the time a decision is issued until the expiration of the 
appeal period, there is necessarily some uncertainty about the status 
of the decision: the parties will not know for certain whether the 
decision will be final until the expiration of the appeal period. 
However, this uncertainty is tempered by the fact, admitted by the 
commenters, that the vast majority of decisions under the Acid Rain 
Program have not been, and probably will not be, appealed. Further, the 
limitations on the presenting of new evidence and on the raising of new 
issues during an administrative appeal of a decision for which there 
was an opportunity to comment will encourage parties interested in a 
decision to submit comments. As a result, parties' positions will 
probably be known when the decision is issued and the likelihood of 
appeal can then be evaluated.

[[Page 55473]]

    The commenters also suggested that a decision should be considered 
operative during the period between the date the decision is issued and 
the expiration of the appeal period (i.e., 30 days under today's rule) 
unless and until a petition for administrative appeal is filed with the 
Environmental Appeals Board. Prior to today's rule revisions, part 78 
provided that a decision was operative from the date of issuance and 
throughout the administrative appeal period, except to the extent the 
decision was stayed by the Environmental Appeals Board or the Presiding 
Officer designated by the Board. 40 CFR 78.7(a). While today's rule 
makes a decision inoperative once a timely petition for administrative 
appeal is filed, the status of the decision prior to appeal or the 
running of the period for filing an appeal is unchanged. The decision 
itself (e.g., the approval or denial of an Acid Rain permit or permit 
revision or of a petition under part 75) may specify the date on which 
the decision is effective. Unless the decision itself specifies an 
effective date that is different than the date on which the decision is 
actually issued, the decision is operative on the issuance date unless 
and until the filing of a timely petition for administrative appeal in 
accordance with part 78. For example, with regard to a decision 
concerning the transfer of allowances to or from an Allowance Tracking 
System Account, the requirement in the existing rule that the 
Administrator implement, within 5 business days of receipt, an 
allowance transfer request that he or she determines to be properly 
submitted (40 CFR 73.52 and 73.53) is unchanged in the December 27, 
1996 proposal and today's rule. In principle, if the transfer were 
appealed under part 78, the Administrator could take action to render 
the transfer inoperative pending appeal. However, appeal in such 
circumstances is highly unlikely since an allowance transfer must be 
authorized by the designated representative of the party transferring 
the allowances. See 42 U.S.C. 7651b(b).
    For the reasons discussed here and in the September 24, 1993 and 
December 27, 1996 proposals, the December 27, 1996 revisions are 
adopted as modified above.

IX. 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, 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 final 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

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 104-4, establishes requirements for federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost-benefit 
analysis, before promulgating a proposed or final 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 205 generally requires that, 
before promulgating a rule for which a written statement must be 
prepared, EPA identify and consider a reasonable number of regulatory 
alternatives and adopt the least costly, most cost-effective, or least 
burdensome alternative that achieves the objectives of the rule. The 
provisions of section 205 do not apply when they are inconsistent with 
applicable law. Moreover, section 205 allows EPA to adopt an 
alternative other than the least costly, most cost-effective, or least 
burdensome alternative if the Administrator explains why that 
alternative was not adopted. Finally, section 203 requires that, before 
establishing any regulatory requirements that may significantly or 
uniquely affect small governments, EPA must have developed a small 
government agency plan. The plan must provide for notifying any 
potentially affected small govenments, enabling officials of affected 
small governments to have meaningful and timely input in the 
development of EPA regulatory proposals with significant federal 
intergovernmental mandates, and informing, educating, and advising 
small governments on compliance with the regulatory requirements.
    Because this final rule is estimated to result in the expenditure 
by State, local, and tribal governments or the private sector of less 
than $100 million in any one year, the Agency has not prepared a 
budgetary impact statement or specifically addressed the selection of 
the least costly, most cost-effective, or least burdensome alternative. 
Because small governments will not be significantly or uniquely 
affected by this rule, the Agency is not required to develop a plan 
with regard to small governments.
    For the reasons discussed in detail here and in the proposal (61 FR 
68340), the final rule 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 final rule 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 final 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 final rule 
increases the annual unadjusted basic allowances for one unit by 2,312 
allowances. In a future action, the Agency will act on the other 
allowance revisions in the proposal. Sections 403(a) and 405(a)(3) of 
the Act set a nationwide cap on annual allowance allocations. Because 
of the requirement to adhere to the cap, the increase of allowances 
under this final rule (if not offset by the other allowance revisions 
when they are finalized) would eventually necessitate an equal decrease 
in the total annual allocations of all other units. The small decrease 
(i.e., 2,312 allowances out of an annual

[[Page 55474]]

nationwide cap of about 8.95 million allowances or about 0.026 percent) 
would be spread among all other units, and so the effect on any one 
unit would be insignificant. Moreover, EPA is not, in today's rule, 
adjusting the allocations of the other units to account for this small 
allowance increase.

C. Paperwork Reduction Act

    OMB has approved the information collection requirements contained 
in this final rule under the provisions of the Paperwork Reduction Act, 
44 U.S.C. 3501, et seq., and has assigned OMB control number 2060-0258.
    The only additional information required by this collection of 
information is data concerning industrial utility-units that exercise 
the option of applying for the industrial utility-units exemption 
established by today's rule. If granted, the industrial utility-units 
exemption exempts the unit from most requirements of the Acid Rain 
Program, e.g., allowance, monitoring, and annual compliance 
requirements. The requirements from which qualified industrial utility-
units will be exempt are significantly more burdensome than the 
information collection requirements for obtaining the 
exemption.21 An industrial utility-unit seeking the 
exemption must meet the information collection requirements, which 
involve submission of information that is necessary, and will be used, 
for determining whether the unit qualifies and will continue to qualify 
for the exemption.
---------------------------------------------------------------------------

    \21\ Because the information collection burden on industrial 
utility-units in the absence of this new exemption was not included 
in the ICR for the existing rule, the effect of removing such burden 
through the new exemption is not included in the ICR for today's 
rule. Consequently, the ICR for today's rule shows an increase in 
burden even though exempt industrial utility-units will actually 
experience a significant net reduction in the burden imposed on them 
by the Acid Rain Program. In addition, as discussed in this 
preamble, today's rule 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 program, the reduction is not reflected 
in the ICR for today's rule.
---------------------------------------------------------------------------

    The additional information collection increases the estimated 
burden, as compared to the burden under the existing rule, by an 
average of 24 hours per response for an estimated 15 one-time 
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. EPA is amending the table in 
40 CFR part 9 of currently approved ICR control numbers issued by OMB 
for various regulations to list the information requirements contained 
in this final rule.

D. Regulatory Flexibility

    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 
final rulemaking under section 553 of the Administrative Procedure Act, 
must prepare and make available for public comment a final 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 final 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 
rule, would not have a significant, adverse impact on small entities. 
58 FR 3649. Today's final revisions are not significant enough to 
change the overall economic impact addressed in the January 11, 1993 
preamble. Moreover, as discussed in this preamble, today's rule has the 
net effect of reducing the burden of the Acid Rain regulations on 
regulated entities, including small entities. For example, the rule 
makes it less burdensome to obtain new units and retired units 
exemptions from the Acid Rain Program. Further, the rule increases the 
allowances for one unit, which increase will have an insignificant 
effect on other units' allowance allocations.
    For the reasons discussed above, EPA has determined that it is not 
necessary to prepare a regulatory flexibility analysis in connection 
with this final rule. EPA has determined that this rule will not have a 
significant, economic impact on a substantial number of small entities.

E. Submission to Congress and the General Accounting Office

    Under 5 U.S.C. 801(a)(1)(A) as added by the Small Business 
Regulatory Enforcement Fairness Act of 1996, EPA submitted a report 
containing this rule and other required information to the U.S. Senate, 
the U.S. House of Representatives, and the Comptroller General of the 
General Accounting Office prior to publication of the rule in today's 
Federal Register. This rule is not a ``major rule'' as defined by 5 
U.S.C. 804(2).

F. Miscellaneous

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

List of Subjects in 40 CFR Parts 9, 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 dioxide.

    Dated: October 6, 1997.
Carol M. Browner,
Administrator.

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

PART 9--[AMENDED]

    1. The authority citation for part 9 continues to read as follows:

    Authority: 7 U.S.C. 135, et seq., 136-136y; 15 U.S.C. 2001, 
2003, 2005, 2006, 2601-2671; 21 U.S.C. 331j, 346a, 348; 31 U.S.C. 
9701; 33 U.S.C. 1251, et seq., 1311, 1313d, 1314, 1321, 1326, 1330, 
1342, 1344, 1345(d) and (e), 1361; E.O. 11735, 38 FR 21243, 3 CFR, 
1971-1975 Comp. p. 973; 42 U.S.C. 241, 242b, 243, 246, 300f, 300g, 
300g-1, 300g-2, 300g-3, 300g-4, 300g-5, 300g-6, 300j-1, 300j-2, 
300j-3, 300j-4, 300j-9, 1857, et seq., 6901-6992k, 7401-7671q, 7542, 
9601-9657, 11023, 11048.


Sec. 9.1  [Amended]

    2. Section 9.1 is amended by adding to the table under Permits 
Regulation in the column ``40 CFR Citation'', after the entry for 
``72.7-72.10'', the entry ``72.14'' and adding to the table, as the 
corresponding entry in the column ``OMB Control No.'', the entry 
``2060-0258''.

[[Page 55475]]

PART 72--[AMENDED]

    3. 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]

    4. 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''.
    5. 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.
* * * * *
    Affected States means any affected States 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 exempt 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 
associations, 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 where such meaning is 
clear from the context.
    State operating permit program means an operating permit program 
that the Administrator has approved under part 70 of this chapter.
* * * * *
    6. Section 72.6 is amended by adding paragraph (b)(9) and revising 
paragraphs (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.
* * * * *

[[Page 55476]]

    7. 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 (f)(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 during the entire year (except for any period before the 
unit commenced commercial operation) 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 total 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 (d) of 
this section) and nongaseous fuel with an annual average sulfur content 
of 0.05 percent or less by weight (as determined under paragraph (d) 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 
under subpart B of part 73 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 meets 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 owners and operators of the unit will comply with paragraph (f) of 
this section.
    (3) After receipt of the statement under paragraph (b)(2) of this 
section, the permitting authority shall amend under Sec. 72.83 the 
operating permit covering the source at which the unit is located, if 
the source has such a permit, to add the provisions and requirements of 
the exemption under paragraphs (a), (b)(1), (d), and (f) 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 under subpart B of part 73 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 (f) 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) or this section 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 section. 
Within 5 business days of receiving a statement in accordance with 
paragraph (c)(1)(i) of this section, the Administrator shall either 
deduct the allowances under paragraph (c)(1)(i)(C) of this section or 
notify the owners and operators that there are insufficient allowances 
to make such deductions. 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. 
After notification by the Administrator under the third sentence of 
paragraph (c)(1)(ii) of this section, the permitting authority shall 
amend under Sec. 72.83 the operating permit covering the source at 
which the unit is located, if the source has such a permit, to add the 
provisions and requirements of the exemption under paragraphs (a), 
(c)(1), (d), and (f) of this section.
    (d) 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 using a method of determining 
sulfur content that provides information with reasonable precision, 
reliability, accessibility, and timeliness:
    (1) For gaseous fuel burned during the year, if natural gas is the 
only gaseous fuel burned, the requirement is assumed to be met;
    (2) 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] TR24OC97.001

Where:

%Sannual=annual average sulfur content of the fuel burned 
during the year by the unit, 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

[[Page 55477]]

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.
    (3) 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 (d)(2) 
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.
    (e)(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 
(a), (d), (e)(2), and (f) of this section in lieu of the requirements 
set forth in the written exemption. The permitting authority shall 
amend under Sec. 72.83 the operating permit covering the source at 
which the unit is located, if the source has such a permit, to add the 
provisions and requirements of the exemption under this paragraph 
(e)(1) and paragraphs (a), (d), (e)(2), and (f) of this section.
    (2) If a utility unit under paragraph (e)(1) of this section is 
allocated one or more allowances under subpart B of part 73 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 June 31, 1998 and, if the Administrator 
is not the permitting authority, a copy shall be submitted to the 
Administrator.
    (f) Special Provisions. (1) The owners and operators and, to the 
extent applicable, the designated representative of a unit exempt under 
this section shall:
    (i) Comply with the requirements of paragraph (a) of this section 
for all periods for which the unit is exempt under this section; and
    (ii) 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 or for fuel delivered to the unit continuously by pipeline, the 
type of fuel, the sulfur content, 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 paragraphs (b), (c), or (e) 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 25 MWe;
    (B) The date on which the unit burns any coal or coal-derived fuel 
except for coal-derived gaseous fuel with a total 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 (d) of this section) 
or for nongaseous fuel burned at the unit exceeds 0.05 percent by 
weight (as determined under paragraph (d) 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 first 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 first date on which the unit is no longer exempt.
    8. Section 72.8 is revised to read as follows:


Sec. 72.8  Retired units exemption.

    (a) This section applies to any affected unit (except for an opt-in 
source) that is permanently retired.
    (b)(1) Any affected unit (except for an opt-in source) 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 is 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 part), 
or, if no designated representative has been authorized, a certifying 
official of each owner 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.
    (3) After receipt of the notice under paragraph (b)(2) of this 
section, the permitting authority shall amend under Sec. 72.83 the 
operating permit covering the source at which the unit is located, if 
the source has such a permit, to add the provisions and requirements of 
the exemption under paragraphs (b)(1) and (d) of this section.
    (c) A 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,

[[Page 55478]]

and shall be subject to the requirements of paragraph (d) of this 
section in lieu of the requirements set forth in the written exemption. 
The permitting authority shall amend under Sec. 72.83 the operating 
permit covering the source at which the unit is located, if the source 
has such a permit, to add the provisions and requirements of the 
exemption under this paragraph (c) and paragraph (d) of this section.
    (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 on which the unit is first to resume operation.
    (3) 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.
    (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 paragraph (b) or (c) 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 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 first date on which the unit resumes operation.


Sec. 72.9  [Amended]

    9. 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 to the extent that part 
75 provides for a 3-year period for recordkeeping, the 3-year period 
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]

    10. Section 72.13 is amended by:
    a. Removing paragraphs (a)(1), (a)(5), (a)(6), (a)(7), (a)(9), and 
(a)(10);
    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).
    11. Section 72.14 is added to read as follows:


Sec. 72.14  Industrial utility-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, division or 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 or a successor agreement under paragraph 
(d)(4)(ii) 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 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. 
If the Administrator is

[[Page 55479]]

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, division or 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 
and any successor agreement under paragraph (d)(4)(ii) 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 each 
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 and any 
successor agreement under paragraph (d)(4)(ii) 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 paragraph (a)(2) of this section or any successor agreement under 
paragraph (d)(4)(ii) of this section;
    (8) A statement that each generator 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 or any successor agreement under 
paragraph (d)(4)(ii) 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) of this section 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.
    (5) After issuance of the exemption under paragraphs (c)(1) and (2) 
of this section, the permitting authority shall amend under Sec. 72.83 
the operating permit covering the source at which the unit is located, 
if the source has such a permit, to add the provisions and requirements 
of the exemption under paragraphs (c)(1)(i) and (d) 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 owners 
and operators bear the burden of proof that the requirements 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 
purchase agreement under paragraph (a)(2) of this section and any 
successor agreement under paragraph (d)(4)(ii) 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 or any successor agreement under 
paragraph (d)(4)(ii) 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, division or 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 or a 
successor agreement under paragraph (d)(4)(ii) 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

[[Page 55480]]

related power purchase agreement under paragraph (a)(2) of this section 
or a successor agreement under paragraph (d)(4)(ii) of this section 
where such sale is not required under that interconnection agreement or 
related power purchase agreement or successor 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 or a successor agreement under 
paragraph (d)(4)(ii) 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, no successor agreement under paragraph (d)(4)(ii) of this 
section is in effect, 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) A ``successor agreement'' is an agreement that:
    (A) Modifies, replaces or supersedes the interconnection agreement 
or related power purchase agreement under paragraph (a)(2) of this 
section;
    (B) Is between the owners and operators of the unit and a person 
that is contractually obligated to sell electricity to the owners and 
operators of the unit and either 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; and
    (C) Requires the generator served by the unit to produce 
electricity for sale to the person under paragraph (d)(4)(ii)(B) of 
this section and only for incidental electricity sales, such that the 
total amount of electricity that such generator is required to produce 
for sale under the interconnection agreement or related power purchase 
agreement (to the extent they are still in effect) and the successor 
agreement shall not exceed the total amount of electricity that such 
generator was required to produce for sale under the interconnection 
agreement or related power purchase agreement under paragraph (a)(2) of 
this section.
    (iii) 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 first date on which the unit is no 
longer exempt.
    (iv) 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 first date on which the unit is no longer exempt.
    12. 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 and at least one other unit, which are located in two 
or more of the contiguous 48 States or the District of Columbia, each 
have a utility system that is a subsidiary of the same company; and
    (ii) The designated representative for the units under paragraph 
(e)(1)(i) of this section submits a NOX averaging plan under 
Sec. 76.11 of this chapter that covers such units and is approved by 
the permitting authority, provided that the approved plan remains 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).
    13. 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.
* * * * *


Sec. 72.25  [Amended]

    14. Section 72.25 is amended by removing from paragraph (a) the 
words ``submitted to'' and adding, in their place, the words ``received 
by''.
    15. 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.


Sec. 72.31  [Amended]

    16. 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 for an opt-in source)''.
    17. 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 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

[[Page 55481]]

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.
    18. 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.
* * * * *


Sec. 72.40  [Amended]

    19. Section 72.40 is amended by:
    a. Removing from paragraph (a)(2) the words ``applicable 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, or 76.7 of this chapter'';
    b. Removing from paragraph (a)(2) the words ``section 407 of the 
Act 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]

    20. 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]

    21. 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]

    22. Section 72.44 is amended by:
    a. Removing from paragraphs (g)(1)(i) and (2) the words ``proposed 
permit revision'' and adding, in their place, the words ``requested 
permit modification'';
    b. Adding between the first and second sentences of paragraphs 
(g)(1)(i) and (2) the words ``If the Administrator is not the 
permitting authority, a copy of the requested permit modification shall 
be submitted to the Administrator.'';
    c. Removing from paragraph (g)(2)(iii) the words ``December 21'' 
and adding, in their place, the words ``December 31''; and
    d. 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]

    23. 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''.
    24. 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.
    (1) Notwithstanding the provisions of part 71 of this chapter, the 
provisions of subparts C, D, E, F, and H of this part and of parts 74, 
76, and 78 of this chapter shall govern the following requirements 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; administrative record; public notice and 
comment and public hearings on draft permits; response to comments on 
draft permits; issuance and effectiveness 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 shall apply to Acid Rain permit applications and 
permits.
    (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.
    25. 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

[[Page 55482]]

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


Sec. 72.65  Public notice of opportunities of 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.
* * * * *
    27. 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 the air 
pollution control agencies of affected States and any interested 
person. The Administrator will also give notice in the Federal 
Register.
* * * * *
    28. 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 approval of State 
operating permit programs and 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 part 74, 76, or 78 of this chapter is 
inconsistent with the requirements of part 70 of this chapter, this 
part and parts 74, 76, and 78 of this chapter shall take precedence and 
shall govern the issuance, denial, revision, reopening, renewal, and 
appeal of the Acid Rain portion of an operating permit.
    29. 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. Before accepting or rejecting all or a portion of a 
State Acid Rain Program, the Administrator will provide notice and 
opportunity for public comment on such acceptance or rejection.
    (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.
    30. 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 (b)(1)(ix) and (x) as paragraphs 
(b)(1)(vii) and (viii) respectively;
    d. Redesignating paragraph (b)(1)(xii) as paragraph (b)(1)(ix);
    e. Redesignating paragraph (b)(1)(xiv) as paragraph (b)(1)(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 
nonacceptance or 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 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

[[Page 55483]]

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 
newspaper 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. 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 proposed 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 section. 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(b)(6) of this chapter shall 
be ground for filing an appeal.
    (6) Industrial Utility-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.
    31. 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) A State, to the extent that it is 
responsible under paragraph (a) of this section as of December 31, 1997 
(or such later date as the Administrator may establish) for 
administering and enforcing Acid Rain permits, shall:
    (i) On or before December 31, 1997, 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.
    (ii) On or before January 1, 1999, for each unit subject to an Acid 
Rain NOX emissions limitation, amend the Acid Rain permit 
under Sec. 72.83 and add any NOX early election plan that 
was approved by the Administrator under Sec. 76.8 of this chapter and 
has not been terminated and reopen the Acid Rain permit and add any 
other 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.
    (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.
    32. 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 to 
the extent that a State permitting authority is not responsible, as of 
January 1, 1997 or such later date as the Administrator may establish, 
for administering and enforcing Acid Rain permits for such sources 
under Sec. 72.73(a).
    (2) After and to the extent the State permitting authority becomes 
responsible for administering and enforcing Acid Rain permits under 
Sec. 72.73(a), the Administrator will

[[Page 55484]]

suspend federal administration of Acid Rain permits for Phase II for 
sources and units to the extent that they are 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)(2)(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, and 
except to the extent that, 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 to the 
extent that they are 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, and except to the extent that, 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 with such requirements; 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 amend under Sec. 72.83 the Acid 
Rain permit and add any NOX early election plan that was 
approved under Sec. 76.8 of this chapter and has not been terminated 
and reopen the Acid Rain permit for Phase II and add any other 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.
    33. Section 72.80 is amended by revising paragraphs (a), (b), (d), 
(e), (f), and (g) to read as follows:


Sec. 72.80  General.

    (a) This 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) Notwithstanding the operating permit revision procedures 
specified in parts 70 and 71 of this chapter, the provisions of this 
subpart shall govern 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 55485]]

    (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.
* * * * *
    34. Section 72.81 is amended by: removing from paragraph (c)(1)(ii) 
the words ``and 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).
    35. 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 sources are 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.
    36. 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 that was 
approved by the Administrator under Sec. 76.8 of this chapter;
    (13) The addition of an exemption for which the requirements have 
been met under Sec. 72.7 or Sec. 72.8 or which was approved by the 
permitting authority under Sec. 72.14; and
    (14) Incorporation of changes that the Administrator has determined 
to be similar to those in paragraphs (a)(1) through (13) of this 
section.
    (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 under paragraph (a)(3), (a)(4), 
(a)(12), or (a)(13) of this section at least 30 days after providing 
notice to the designated representative of the amendment and without 
providing any other 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. 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.
    37. 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 an inaccurate statement was made in 
establishing the emissions standards or other terms or conditions of 
the permit, unless the mistake or statement is corrected in accordance 
with Sec. 72.83; 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)(1) 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.
* * * * *
    38. 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 paragraph (b)(3) the words ``unit efficiency 
measures'' and adding, in their place, the words ``improved unit 
efficiency measures'';
    f. Removing from paragraph (b)(4) introductory text, the word 
``units's'' and adding, in its place, the word ``unit's'';
    g. Removing from the formula in paragraph (b)(4) introductory text, 
the word ``hear'' and adding, in its place, the word ``heat'';
    h. 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

[[Page 55486]]

    i. 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 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 paragraph (b)(5) of this section 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 paragraph (b)(5) of this 
section shall equal the amount under paragraph (b)(5)(ii)(B) of this 
section, 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 section 
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.
* * * * *
    39. 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]

    40. The authority citation for part 73 continues to read as 
follows:

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

    41. Section 73.10 is amended by revising the section heading and 
adding paragraph (b)(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 Louisiana, Rodemacher 2 are 20,774.
* * * * *
    42. 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

[[Page 55487]]

    (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.

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* * * * *

PART 74--[AMENDED]

    43. 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]

    44. 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]

    45. 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]

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

PART 77--[AMENDED]

    47. The authority citation continues to read as follows:

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

    48. 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 sulfur 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.
    49. 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) through (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.
* * * * *
    50. 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)

[[Page 55488]]

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.
    (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]

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

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

    52. 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. 78.3   [Amended]

    53. Section 78.3 is amended by:
    a. Removing from paragraph (b)(1) the words ``60 days'' and adding, 
in their place, the words ``30 days'';
    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. 78.1(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.


Sec. 78.4  [Amended]

    54. 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.''.
    55. 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. 78.5  [Amended]


Sec. 78.7  [Removed and reserved]

    8056. Section 78.7 is removed and reserved.


Sec. 78.11  [Amended]

    57. 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 shorter, reasonable period established by the Administrator when 
giving notice)''.


Sec. 78.12  [Amended]

    58. 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]

    59. 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 shorter, 
reasonable period established by the Presiding Officer)''; and removing 
from paragraph (c)(1) the words ``Rule 408 of''.


Sec. 78.15  [Amended]

    60. 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 shorter, reasonable period established by the Presiding 
Officer)''; and removing the last sentence from paragraph (c).


Sec. 78.16  [Amended]

    61. 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 shorter, reasonable period established by the 
Presiding Officer)''.


Sec. 78.17  [Amended]

    62. Section 78.17 is amended by: removing the words ``45 days'' and 
adding, in their place, the words ``45 days (or other shorter, 
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]

    63. 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 words ``unless:''.


Sec. 78.20  [Amended]

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

[FR Doc. 97-27495 Filed 10-23-97; 8:45 am]
BILLING CODE 6560-50-P