[Federal Register Volume 64, Number 92 (Thursday, May 13, 1999)]
[Rules and Regulations]
[Pages 25834-25842]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12007]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 72 and 73

[FRL-6341-2]
RIN 2060-A127


Revisions to the Permits and Sulfur Dioxide Allowance System 
Regulations Under Title IV of the Clean Air Act: Compliance 
Determination

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: Title IV of the Clean Air Act (the Act), as amended by the 
Clean Air Act Amendments of 1990, authorized the Environmental 
Protection Agency (EPA or Agency) to establish the Acid Rain Program. 
The program sets emissions limitations to reduce acidic particles and 
deposition and their serious, adverse effects on natural resources, 
ecosystems, materials, visibility, and public health.
    The allowance trading component of the Acid Rain Program allows 
utilities to achieve sulfur dioxide emissions reductions in the most 
cost-effective way. Utilities trade allowances and EPA records 
ownership and trades of allowances in the Allowance Tracking System for 
use in determining compliance at the end of each year. On January 11, 
1993, EPA initially promulgated the regulations governing Acid Rain 
Program permitting and allowance trading. Today's action revises 
certain provisions in the regulations concerning the deduction of 
allowances for determining compliance. The revisions will improve the 
operation of the Allowance Tracking System and the allowance market 
generally, while still preserving the Act's environmental goals.

EFFECTIVE DATE: June 14, 1999.

ADDRESSES: Docket. Docket No. A-98-15, containing supporting 
information used in developing the proposed rule, is available for 
public inspection and copying between 8:30 a.m. and 3:30 p.m., Monday 
through Friday, at EPA's Air Docket Section, Waterside Mall, room 1500, 
1st Floor, 401 M Street, S.W., Washington, DC 20460. EPA may charge a 
reasonable fee for copying.

FOR FURTHER INFORMATION CONTACT: Donna Deneen, Permits and Allowance 
Market Branch, Acid Rain Division (6204J), U.S. Environmental 
Protection Agency, 401 M Street S.W., Washington, DC 20460 (202-564-
9089).

SUPPLEMENTARY INFORMATION: This preamble contains all of the responses 
to public comments received on the revisions finalized in today's 
action.
    The information in this preamble is organized as follows:

I. Affected Entities

II. Background

III. Public Participation

IV. Summary of Comments and Responses

    A. Allowance Deductions From Other Units at the Same Source
    B. Role of Authorized Account Representative
    C. Effective Date of Rule Revisions
    D. Impacts of Rule Revisions on Acid Rain Permits

V. Administrative Requirements

    A. Docket
    B. Executive Order 12866: Regulatory Planning and Review
    C. Executive Order 12875: Enhancing Intergovernmental 
Partnerships
    D. Executive Order 13084: Consultation and Coordination with 
Indian Tribal Governments
    E. Unfunded Mandates Act
    F. Paperwork Reduction Act
    G. Regulatory Flexibility
    H. Applicability of Executive Order 13045: Children's Health 
Protection
    I. National Technology Transfer and Advancement Act
    J. Congressional Review Act

I. Affected Entities

    Entities potentially affected by this action are fossil-fuel fired 
boilers or turbines that serve generators producing electricity, 
generating steam, or cogenerating electricity and steam. Regulated 
categories and entities include:

------------------------------------------------------------------------
                Category                  Examples of regulated entities
------------------------------------------------------------------------
Industry: SIC 49--Electric, Gas and       Electric service providers,
 Sanitary Services.                        boilers from a wide range of
                                           industries.
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    EPA does not intend this table to be exhaustive, but rather to 
provide 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 affected by this action. This action could 
also affect other types of entities not listed in the table. To 
determine whether this action affects your facility, you should 
carefully examine the applicability criteria in Sec. 72.6 and Sec. 74.2 
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.

II. Background

    On January 11, 1993, EPA promulgated the regulations that 
implemented the major provisions of title IV of the Clean Air Act (CAA 
or the Act), including the Permits rule (40 CFR part 72) and the Sulfur 
Dioxide Allowance System rule (40 CFR part 73). Since promulgation, 
these rules have applied to three compliance years, 1995, 1996, and 
1997, for which the rules required affected units to meet annual 
allowance holding requirements. During this time, the Agency has gained 
experience in implementing the requirements and also discovered ways it 
could improve the operation of the Allowance Tracking System and 
allowance market. On August 3, 1998, EPA proposed changes to certain 
provisions in 40 CFR parts 72 and 73 to make these improvements. 63 FR 
41358 (1998). These proposed changes related to the allowance transfer 
deadline, compliance determinations, and the signature requirements for 
allowance transfer requests. EPA finalized the proposed changes to the 
allowance transfer deadline and signature requirements for allowance 
transfer requests on December 11, 1998. 63 FR 68401 (1998). Today's 
action finalizes changes related to the deduction of allowances for 
compliance determinations.

III. Public Participation

    EPA proposed revisions to 40 CFR parts 72 and 73 in the Federal 
Register on August 3, 1998. 63 FR 41358. The notice invited public 
comments. EPA

[[Page 25835]]

received and granted a request to extend the comment period by 15 days 
from September 2, 1998 to September 17, 1998.
    EPA offered to hold a public hearing upon request, but no one made 
such a request and EPA did not hold a hearing. However, after the close 
of the comment period, EPA held several meetings with all parties that 
submitted comments, in order to clarify the parties' comments and 
positions on the issues raised on the notice of proposed rule-making. 
The parties subsequently submitted late comments further explaining 
their positions. Copies of memoranda describing the new information 
received by EPA at the post-comment period meetings are in the 
rulemaking docket.

IV. Summary of Comments and Responses

    During the comment period, EPA received seven letters (or ``initial 
comments'') regarding the proposed revisions to the compliance 
determination provisions in the regulations.1 Several months 
after the comment period, EPA received three additional letters (or 
``late comments'') from the same commenters concerning the provisions. 
All of the commenters were representatives of utility companies or 
groups of utility companies. A copy of each comment received is in the 
rulemaking docket.
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    \1\ Although EPA received five of the seven comment letters one 
to five days after the close of the comment period, EPA is 
responding to all seven comment letters.
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    EPA carefully considered all of the comments and, where 
appropriate, made changes reflected in the final regulations. The 
following sections contain a summary of the comments received and the 
Agency's responses.

A. Allowance Deductions From Other Units at the Same Source

    After the allowance transfer deadline, EPA determines whether each 
affected unit is in compliance with the requirement to hold allowances 
at least equal to the unit's sulfur dioxide emissions for the previous 
year. See 40 CFR 72.9(c)(1)(i). Units that do not meet the requirement 
are subject to the excess emissions and offset plan requirements in 40 
CFR part 77.
    On August 3, 1998, EPA proposed revisions that would change how it 
deducts allowances and determines the amount of excess emissions at a 
unit at the end of a compliance year. Under the proposed revisions, EPA 
would allow reduction (but not complete avoidance) of excess emissions 
that a unit would otherwise have after deductions for compliance under 
Sec. 73.35(b)(2). EPA would allow excess emissions to be reduced at a 
unit by allowing deductions of up to a certain number of allowances for 
that unit from the allowance accounts of other units at the same source 
that had unused allowances. The proposed revisions included a formula 
for calculating the allowance deductions allowed from other units' 
accounts. The formula would result in the unit making an excess 
emissions penalty payment equal to about three times the allowance 
price of the allowances needed to offset the unit's excess emissions in 
the absence of allowance deductions from other units' accounts. The 
Agency proposed these changes because EPA was concerned that a utility 
could become subject to an enormous penalty payment for making 
inadvertent, minor errors when accounting for allowances at the end of 
the year even if the utility had enough allowances among the units at 
the source.
    All the commenters expressed general support of EPA's decision to 
propose rule changes that would allow utilities to reduce the effects 
of inadvertent, minor errors in accounting for allowances. The specific 
approach proposed by EPA for doing this, however, generated a variety 
of comments. The following discussion addresses these comments.
    Comment: Several commenters stated in their initial comments that 
the proposed provision limiting the use of unused allowances to those 
held by other units at the same source was inconsistent with section 
403(d)(2) of the Act.2 The commenters argued that section 
403(d)(2) authorizes ``aggregation of allowances among units with the 
same designated representative'' for purposes of determining compliance 
with the requirement to hold allowances covering a unit's annual 
SO2 emissions. Comments of UARG at 7 (September 16, 1998). 
While section 403(d)(1) requires the Administrator to promulgate 
regulations establishing a system for issuing, recording, and tracking 
allowances, section 403(d)(2) provides:

    \2\ These commenters subsequently stated, in late comments, that 
the Agency would satisfy all their concerns if, among other things, 
EPA increased the amount of allowances potentially deducted from 
other units at the same source beyond the amount provided in the 
proposed revisions. Because regulations implementing the Acid Rain 
Program must be consistent with title IV, EPA is addressing here the 
issue of statutory consistency.
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    In order to insure electric reliability, such regulations shall 
not prohibit or affect temporary increases and decreases in 
emissions within utility systems, power pools, or utilities entering 
into allowance pool agreements, that result from their operations, 
including emergencies and central dispatch, and such temporary 
emissions increases and decreases shall not require transfer of 
allowances among units nor shall it require recordation. The owners 
or operators of such units shall act through a designated 
representative. Notwithstanding the preceding sentence, the total 
tonnage of emissions in any calendar year (calculated at the end 
thereof) from all units in such a utility system, power pool, or 
allowance pool agreements shall not exceed the total allowances for 
such units for the calendar year concerned. 42 U.S.C. 7651b(d)(2).

Commenters claimed that the last sentence of this section requires EPA 
to allow units with a common designated representative and included in 
the same utility system, power pool, or allowance pool to aggregate 
their allowances for use in determining whether these units hold 
allowances at least equal to their annual SO2 emissions. The 
commenters noted that EPA acknowledges that title IV requires 
allowances to be held for a unit but does not specify the account in 
which the allowances must be held. According to these commenters, EPA 
should revise Sec. 73.34 to allow a designated representative to cover 
a unit's emissions with allowances from any accounts for which he or 
she is the designated representative. The commenters argued that EPA 
should allow this regardless of whether the accounts are for units at 
the same source.
    One of the commenters added that EPA's position that plant owners 
must fill thousands of unit compliance subaccounts with an exact or an 
excess number of allowances in order to avoid a penalty is unproductive 
both for EPA and plant owners. The commenter stated that EPA should 
give the designated representative the option of naming the unit's 
compliance subaccount as the primary allowance source and general 
accounts as secondary and tertiary accounts from which EPA could deduct 
allowances at year end.
    Response: EPA disagrees with the commenters who asserted that the 
provision limiting the use of unused allowances to those held by other 
units at the same source is inconsistent with section 403(d)(2) of the 
Act. As discussed below, EPA maintains that the same-source 
limitation--coupled with the limit on the number of allowances a unit 
can use from another unit--are consistent with the pervasive unit-by-
unit orientation of title IV (including section 403(d)(2)).3 
See also

[[Page 25836]]

63 FR 41362 (consistency with section 403(g), 411, and 414). Further, 
to the extent allowing a unit to use any allowances from another unit 
is a departure from a strict unit-by-unit approach, the same-source 
limitation closely restricts any such departure by allowing a unit to 
use only allowances held for units that are at the same geographic 
location, i.e., the same plant.
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    \3\ To the extent some commenters asserted section 403(d)(2) 
authorizes, rather than requires, the Agency to allow the use of 
allowances from units at other sources, EPA interprets the provision 
to mean that the Agency is neither required nor authorized to allow 
the use of such allowances.
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    As explained in the preamble of the proposed rule, title IV 
incorporates a pervasive unit-by-unit orientation, particularly with 
regard to SO2 emissions. Title IV requires: determination of 
applicability of the Acid Rain Program unit-by-unit; allocation of 
allowances and setting of SO2 emissions limitations 
generally unit-by-unit; determination of excess emissions and penalties 
unit-by-unit; and monitoring of emissions generally unit-by-unit. See 
63 FR 41360.
    Maintaining that section 403(d)(2) similarly reflects this unit-by-
unit orientation, EPA rejects the commenters' interpretation that 
section 403(d)(2) requires the Agency to allow designated 
representatives to use allowances from units at other sources. The last 
sentence of section 403(d)(2) is ambiguous, but EPA maintains that a 
reasonable interpretation is that this section requires a unit-by-unit 
orientation in compliance. The first sentence of the section states 
that the allowance system regulations shall not prohibit temporary 
changes in emissions by units included in utility systems, power pools, 
or allowance pools and that such changes will not require allowance 
transfers. The second sentence requires that all owners or operators of 
such units act through a designated representative. The third sentence 
states that total annual emissions from ``all'' such units cannot 
``exceed the total allowances for such units'' for the year involved. 
Id.
    This reference in the third sentence to ``all'' units either could 
mean each and every unit in a particular utility system, power pool, or 
allowance pool or could mean all units in the aggregate in such a 
system or pool. Thus, the statutory language could arguably support 
either of two possible interpretations: (1) Total annual emissions for 
each unit in a particular utility system, power pool, or allowance pool 
must not exceed the unit's total allowances; or (2) the aggregate 
annual emissions of all the units in the utility system, power pool, or 
allowance pool must not exceed the aggregate allowances for all these 
units. While the commenters support the second interpretation, EPA has 
consistently followed the first interpretation. See 56 FR 63002, 63049-
50 (1991) (explaining that section 403(d)(2) does not ``require or 
authorize'' pool-wide compliance). For the following reasons, EPA 
continues to adopt the first interpretation.
    First, as discussed above, title IV incorporates a unit-by-unit 
orientation. While these other provisions of title IV may not be 
determinative of the proper interpretation of section 403(d)(2), EPA 
maintains it is reasonable to interpret section 403(d)(2) to reflect 
the same unit-by-unit orientation that Congress adopted in the major 
statutory provisions governing the Acid Rain Program. The commenters' 
interpretation would represent a significant departure from the other 
provisions of title IV.
    Second, contrary to the commenters' claim, the legislative history 
of title IV supports EPA's interpretation, rather than the commenters' 
interpretation, of section 403(d)(2). The most authoritative document 
in the legislative history, the Conference Report that accompanied the 
Clean Air Act Amendments of 1990, states that section 403(d):

Makes it clear that allowances are annual; temporary increases and 
decreases in emissions within utility systems or power pools do not 
require allowance transfers or recordation so long as the total 
tonnage emitted in any year matches allowances held for that year. 
Thus, utilities must ``true up'' at year end to ensure that 
allowances match emissions for each unit. Conference Report, House 
Rep. No. 101-952, 101st Cong. 2d Sess. at 343 (October 26, 1990) 
(emphasis added).

In short, the Conference Report indicates that, at the end of each 
year, allowances must cover emissions for each unit in a utility system 
or pool, not for all units in the system or pool on an aggregate basis.
    Ignoring the Conference Report, the commenters instead focused on 
comparing the enacted provisions of title IV with provisions of an 
earlier House version (H.R. 3030) of title IV. The House bill (in 
section 503(d)(4) of H.R. 3030) required promulgation of regulations 
for a system of issuing, recording, and tracking allowances and stated 
that:

In order to insure electric reliability, such regulations shall not 
prohibit or affect temporary increases and decreases in emissions 
within utility systems or power pools that result from their 
operations, including emergencies and central dispatch, and such 
temporary emissions increases and decreases shall not require 
transfer of allowances among units nor shall it require recordation. 
Notwithstanding the preceding sentence, the total tonnage of 
emissions in any calendar year (calculated at the end thereof) from 
each unit involved shall not exceed the allowances allocated to the 
unit for the calendar year concerned and issued to the owner or 
operator of the unit for that year, plus or minus allowances 
transferred to or from the unit for such calendar year or carried 
forward to that year from prior years. House Rep. No. 101-490, 101st 
Cong. 2d Sess. at 629-30 (May 17, 1990).

    In the House Committee Report accompanying the House bill, the 
House Committee on Commerce and Energy explained this House bill 
provision using language subsequently adopted word-for-word in the 
Conference Report (quoted above) to explain section 403(d)(2) of the 
final version of title IV. See House Rep. No. 101-490 at 373-74. In 
particular, the House Report explained that utilities must ensure at 
the end of each year that ``allowances match emissions for each unit.'' 
Id. at 374. The fact that the Conference Committee explained section 
403(d)(2) using, word-for-word, the House Committee's explanation of 
unit-by-unit compliance provided under the House bill indicates that 
Congress intended to continue to require unit-by-unit compliance in 
section 403(d)(2). This also shows that Congress did not intend the 
language differences between section 403(d)(2) and the comparable House 
bill provision to alter the requirement for unit-by-unit compliance. 
Thus, the Conference Report and House Committee Report belie the 
importance the commenters place on the difference between the reference 
in section 403(d)(2) to total emissions and total allowances for ``all 
units'' in a utility system, power pool, or allowance pool agreements 
and the reference in the House bill to emissions and allowances of 
``each unit.''
    Rather than addressing the Conference Report or the House Committee 
Report, the commenters based their argument on a floor statement of one 
member of the House of Representatives. The Courts do not generally 
consider Congressmen's floor statements alone as providing 
authoritative explanations of Congressional intent. See, e.g., Garcia 
v. U.S, 469 U.S. 70, 76 and 78 (1984); Brock v. Pierce, 476 U.S. 253, 
263 (1986); and U.S. v. McGoff, 831 F.2d 1071, 1090-91 (D.C. Cir. 
1987).
    Moreover, the floor statement on which the commenters rely does not 
support their interpretation of section 403(d)(2). In the statement 
cited by the commenters, Congressman Oxley stated:


[[Page 25837]]


    Barriers to allowance transactions may take any number of forms, 
and the Administrator must use great care to avoid doing anything to 
help erect those barriers. That is why the conference committee has 
streamlined the process whereby a utility or utilities can pool 
allowances so as to operate within the confines of the law. Under 
provisions of the allowance tracking system, we have provided for 
the creating of allowance pools. Owners or operators need only 
record with the Administrator that they intend to enter into such 
agreements. Once in place, these voluntary pooling agreements can 
operate to reduce the number of actual transfers of allowances and, 
thus, the overall compliance burden. For example, utilities or 
operating companies can keep and share one set of allowance books to 
accommodate their emission allowance requirements. Here, as 
elsewhere, it is necessary to keep the volume of information that 
buyers and sellers are required to provide to a minimum, lest the 
system breakdown in the face of heavy trading. A Legislative History 
of the Clean Air Act Amendments of 1990, Vol. 1 at 1418 (1990) 
(quoting from House debate on the Conference Report and bill on 
October 26, 1990).

    The Congressman's statement addresses the use of allowance pools to 
reduce ``[b]arriers to allowance transactions,'' not the use of 
allowance pools to show compliance with the requirement to hold 
allowances at least equal to each unit's annual SO2 
emissions. Id. The ability to hold allowances in a single account for 
all units in a utility system, power pool, or allowance pool reduces 
the number of allowance transfers submitted to the Administrator for 
recordation in the Allowance Tracking System. Once such an allowance 
account is established, a utility system, power pool, or allowance pool 
can, for internal bookkeeping purposes, move allowances among any of 
the units in the utility system, power pool, or allowance pool 
throughout the year and, for purposes of the Allowance Tracking System, 
hold the allowances in the same account (i.e., a general account for 
the utility system, power pool, or allowance pool). See 40 CFR 73.31(c) 
(providing for the establishing of ``general accounts'' by ``any 
person''). However, this does not negate the requirement that, for 
compliance purposes, the designated representative must ultimately 
transfer the allowances to each unit's individual allowance account by 
the allowance transfer deadline. In fact, this is just the sort of 
annual ``true up'' for each unit that Congress described in the 
Conference Report.
    In short, EPA concludes that its long-standing interpretation of 
the ambiguous language in section 403(d)(2) is a reasonable reading of 
the statutory language and is consistent with other provisions of title 
IV and with the legislative history.
    Today's final rule is consistent with the requirement, reflected in 
section 403(d)(2), that each unit have allowances covering its 
emissions. The rule restricts the number of allowances that can be held 
for a unit by other units and requires that these other units must be 
at the same source. As a result, EPA believes that there is still 
strong incentive for owners and operators to hold sufficient allowances 
in an affected unit's account and that owners and operators will 
routinely comply on a unit-by-unit basis and only use allowances from 
other units at the source in unusual circumstances, e.g., to correct an 
inadvertent error. Of course, the allowances that a unit uses from 
other units must be from the same geographic location, i.e., the same 
plant. See 63 FR 41362-41363 (explaining that, in effect, common stack 
units can already use allowances from other units, but only at the same 
plant, under Sec. 73.35(e)). EPA therefore maintains that today's final 
rule is consistent with section 403(d)(2) and strikes a reasonable 
balance between the unit-by-unit orientation of title IV and compliance 
flexibility to reduce excess emission penalty payments where units fail 
to hold enough allowances because of inadvertent, minor errors.
    The same-source restriction in the final rule is not only 
consistent with title IV, but also is practical to implement. The 
restriction ensures that only one designated representative is involved 
in the deduction of allowances from other units' compliance 
subaccounts. The limitation thereby minimizes the changes necessary to 
existing contracts involving allowance agreements among different 
owners of units.
    Finally, in response to the commenter that supported allowing a 
designated representative the option of naming a unit's primary, 
secondary, and tertiary accounts from which EPA would deduct 
allowances, EPA notes that the allowance account tracking necessary to 
implement the approach would be far too complicated and unwieldy. Such 
a time and resource intensive approach would likely cause significant 
and unacceptable delays in EPA's ability to perform timely end of year 
accounting and unfreeze allowance accounts. After the allowance 
transfer deadline, allowances that are useable for the compliance year 
must be frozen until EPA completes the process of deducting allowances 
to cover each unit's emissions.
    Comment: Several commenters stated in initial comments that units 
should be able to use available allowances from other unit accounts 
after the allowance transfer deadline to avoid all excess emissions. 
They argued that the language in section 403(d)(2), quoted and 
discussed above, reflects Congress' intent that EPA allow full 
offsetting. One of these commenters argued that allowing the use of 
allowances from other unit accounts to avoid excess emissions 
completely would not compromise the Acid Rain Program's unit-by-unit 
orientation because EPA would deduct allowances from the affected 
unit's compliance subaccount first, before allowing deductions from 
other units at the same source. The commenter also pointed out that 
under the proposed rule, the consequences of making an inadvertent 
error (such as transposing figures in allowance serial numbers in an 
allowance transfer form so the transaction transfers an insufficient 
number of allowances to a unit) could widely vary, depending on the 
exact error made. Suggesting that the penalties should not differ for 
the same type of error, the commenter argued that allowing units to 
avoid excess emissions with all available allowances at other unit 
accounts would address this concern.
    Response: EPA rejects the commenters' views that EPA must allow the 
full use, instead of the limited use, of allowances in other units' 
compliance subaccounts. As discussed above, the Act has a pervasive 
unit-by-unit orientation and, therefore, the final rule allows the 
designated representative to use, for a unit that would otherwise have 
excess emissions, a large portion (but not all) of the needed 
allowances from the compliance subaccounts of other units at the same 
source. Further, for the reasons detailed above, EPA rejects the 
commenters' interpretation of section 403(d)(2).
    In response to the commenter who claimed that allowing the complete 
avoidance of excess emissions would not compromise the unit-by-unit 
orientation of title IV, EPA does not agree. Allowing units to use 
allowances from other unit compliance subaccounts to avoid completely 
excess emissions and the resulting excess emissions penalty payment 
provides owners and operators with little or no incentive to ensure 
that the individual account for each of their units holds sufficient 
allowances at the end of each year. While the flexibility to deduct 
allowances from other units is aimed at minor, inadvertent errors, 
owners and operators can use this flexibility when any errors occur. 63 
FR 41363. Providing this flexibility without any significant, excess 
emissions penalty

[[Page 25838]]

payment would likely discourage efforts to ensure unit-by-unit 
compliance and encourage routine use of allowances from other units at 
the same source.
    In response to the same commenter's concerns that under EPA's 
proposal the amount of a unit's allowance deficiency and the resulting 
penalty payment resulting from an inadvertent error could vary widely 
depending on the specific error, EPA notes that this potential variance 
already exists under the current rule. The proposed rule--and to a 
greater extent, today's final rule--actually reduces the potential 
variance by reducing the penalty payment for minor, inadvertent errors. 
By reducing the potential penalties, the final rule helps to alleviate 
the problem of widely divergent penalties. As discussed above, EPA 
believes that the final rule thus balances the unit-by-unit orientation 
of title IV with increased compliance flexibility.
    Comment: EPA received several initial and late comments on the 
formula, in proposed Sec. 73.35(b)(3)(i), for calculation of the 
maximum allowances available for a unit for deduction from other unit 
accounts. The proposed formula would use a ratio of three times the 
average allowance price for the year to the excess emissions penalty 
per ton in order to limit deductions from other unit accounts. 
Notwithstanding the ratio, the proposed formula also would not allow 
deductions from other unit accounts that would bring excess emissions 
below 10 tons. This would establish a minimum penalty where the formula 
is used.
    In their initial comments, several commenters raised objections to 
the formula. After objecting to any limitation being placed on the 
number of allowances that could be deducted, one commenter stated that 
if EPA adopted such a limitation, the Agency should revise the formula 
to allow use of more allowances from other unit accounts. Specifically, 
this commenter recommended revising the formula to change the ratio of 
three times the allowance price to the excess emissions penalty to a 
ratio of one times the allowance price to the excess emissions penalty. 
The commenter also recommended, notwithstanding the formula, imposing a 
10 percent cap as the maximum amount of allowances that a unit could 
not use from other units' accounts to offset a unit's emissions. The 
commenter claimed that this approach would result in utilities planning 
to comply under the existing unit-by-unit approach to avoid the 
financial penalty represented by even a limited discount factor.
    A second commenter argued in initial comments that, because minor 
accounting mistakes would typically result in less than 10 tons of 
excess emissions, EPA's proposed formula and 10-ton minimum penalty was 
arbitrary and capricious. This commenter further claimed that if EPA 
did not revise the proposal to allow the use of unlimited allowances 
from other unit accounts, EPA should at least revise the formula to 
penalize the first excess emission ton much less than the eleventh 
excess emission ton. In a third set of initial comments, another 
commenter stated that EPA should revise the formula to allow deduction 
of any needed allowances from other unit accounts without penalty if 
less than 10 tons of excess emissions occurred. A fourth commenter 
characterized the formula as too complicated.
    As noted above, EPA held several post-comment period meetings with 
all parties that submitted initial comments. During these meetings, the 
parties and EPA discussed the initial comments and their views 
concerning issues, raised in the preamble of the proposed rule, about 
the proposed formula. In particular, the participants addressed 
reducing or removing the allowance-price-to-excess-emissions-penalty 
ratio, retaining the 10-ton minimum, and adding a percentage cap on the 
amount of allowances that a unit could not use from other units' 
accounts to offset a unit's emissions. The participants discussed these 
issues in the context of alternative scenarios for the formula, all of 
which were logical outgrowths of the proposed rule. As a result of 
these discussions, the commenters submitted late comments to the Agency 
on these issues to supplement their views. EPA has taken these late 
comments into consideration in developing the final rule.
    Response: The proposed formula generally would make it four times 
as expensive to not hold enough allowances in a unit account than to 
hold enough allowances in the unit's account, as of the allowance 
transfer deadline.4 EPA agrees that, in light of the kinds 
of errors the revisions are meant to address (i.e., inadvertent, minor 
ones), the penalty payment, after application of the proposed formula, 
could still be excessive. Therefore, EPA believes that it should modify 
the proposed formula to allow the deduction of more allowances from 
other units at the same source.
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    \4\ Under the proposed revisions, a unit that simply complied 
with the allowance holding requirement would use one allowance for 
each ton of emissions (e.g., 100 allowances for 100 tons of 
SO2). However, if the unit failed to comply with the 
allowance holding requirement using its own allowances, the unit 
would use one allowance (i.e., from either another unit account or a 
future year account under the offset provisions in Sec. 77.3) for 
each ton of emissions (e.g., 100 allowances for 100 tons of 
SO2), plus its owners and operators would be subject to 
an excess emissions penalty payment approximately equal to the cost 
of three allowances for each ton of emissions (e.g., the cost of 300 
allowances).
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    EPA considered the suggestion, in initial comments, of increasing 
the allowances allowed to be deducted from other unit accounts by 
changing the proposed formula so that it contains a ratio of one times 
the average allowance price to the excess emissions penalty, instead of 
three times the average allowance price to the excess emissions 
penalty. EPA agrees that such a change would result in a total penalty 
payment that is more in line with the gravity of making an inadvertent, 
minor error. Nevertheless, EPA is concerned that making only this 
change would fail to address comments that the deduction formula is 
overly complicated. EPA maintains that the penalty formula will be more 
effective if it is simpler and easier to apply.
    EPA and the commenters discussed a simplified formula for 
calculation of penalties in the post-comment meeting on December 3, 
1998. In late comments, commenters stated that if EPA adopted this 
simplified formula, the Agency would satisfy their concerns about the 
proposed formula. Under the simplified formula, the owner or operator 
of a unit may use from the compliance subaccounts of other units at the 
same source up to 95 percent of the allowances needed after using all 
the allowances in the unit's own compliance subaccount. However, the 
simplified formula retains the 10-ton minimum on the amount of excess 
emissions remaining after using allowances from other units' accounts.
    The simplified formula has a result comparable to that of the 
formula suggested in initial comments that would reduce the ratio in 
the proposal from three to one times the average allowance price to the 
excess emissions penalty. Under 1998 market conditions, both the 
commenter's suggested formula and the simplified formula would result 
in allowing deduction of 95 percent of the allowances needed by a unit 
from other unit accounts (i.e., using the 1998 average allowance price 
of $117 and an excess emissions penalty of $2581 per ton of excess 
emissions). While the average allowance price and excess emissions 
penalty may change each year, resulting in a disparity in the 
allowances calculated under the commenter's suggested formula and the

[[Page 25839]]

formula in the final rule,5 EPA believes this is not a 
significant concern. EPA sees no overwhelming reason to ensure the 
penalty payment increases as average allowance price increases, as long 
as the penalty payment for excess emissions remains significant and 
provides owners and operators with a strong incentive to comply with 
the allowance holding requirements on a unit-by-unit basis.
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    \5\ As of December 1998, the market price of an allowance was 
about $190, an amount which, if it had been the average allowance 
price for 1998, would have resulted in 93 percent of a unit's needed 
allowances to be deducted from other unit accounts.
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    Under both the proposed formula and the simplified formula, the 
excess emissions remaining after deductions from other unit accounts 
are subject to the excess emissions penalty of $2000 per ton, as 
adjusted by the Consumer Price Index.
    In light of the late comments unanimously supporting the simplified 
formula discussed in the December 3, 1998 post-comment period meeting, 
EPA has decided to modify the proposal and adopt the simplified 
formula. Use of the simplified formula will increase, by an amount 
comparable to the amount suggested in initial comments, the number of 
allowances that can be deducted from other unit accounts. EPA believes 
that the simplified formula will achieve the objectives intended by the 
proposed formula, but will be far easier for both the utilities and EPA 
to use to calculate the amount of excess emissions.
    As noted above, the simplified formula retains the 10-ton minimum 
on the amount of excess emissions that remains after deducting 
allowances from other units' accounts. EPA believes the restriction is 
necessary to ensure that, for units with 10 or more tons of emissions 
exceeding the allowances in their unit accounts (before deducting from 
other unit accounts), the penalty remains significant. This will 
provide owners and operators with a strong incentive to meet their 
allowance holding requirements on a unit-by-unit basis. EPA also notes 
that, under the final rule, a unit having the minimum 10 tons of excess 
emissions (after the formula is applied) for 1998 will be subject to a 
penalty payment of $25,810, about the same maximum penalty that can be 
assessed per day of violation under sections 113(b) and (d) in the 
Clean Air Act.

B. Role of Authorized Account Representative

    Comment: EPA received several comments on two options, presented in 
the proposal, concerning the role of the authorized account 
representative (who also is, for any affected unit, the designated 
representative) in deducting allowances from other unit accounts. 
Option 1 would prescribe the unit accounts for, and order of, such 
deductions but allow the authorized account representative, before the 
allowance transfer deadline, to tell EPA not to make any deductions 
from other unit accounts. Option 2 would allow the authorized account 
representative to specify, within 15 days of receiving notice from the 
Agency of a unit's failure to hold sufficient allowances, the serial 
numbers of the allowances to deduct and the compliance subaccounts from 
which to deduct those allowances. All of the commenters supported 
Option 2. One commenter argued that Option 2 is consistent with section 
403(d)(2) in the Act which states that owners and operators must ``act 
through a designated representative'' and language in Parts 72 and 73 
of the current regulations that authorize designated representatives to 
specify by serial number the allowances deducted from compliance. 
Several commenters also noted Option 2 was preferable because it would 
avoid potential allowance surrender issues that could arise where units 
at a source are jointly owned.
    Response: In light of the comments received, the Agency has chosen 
Option 2 over Option 1 for the final rule. As pointed out in the 
comments, Option 2 will provide owners and operators with more 
flexibility because the authorized account representative can specify 
any unused allowance for deduction, as long as a unit at the same 
source holds the allowance. This flexibility makes it unnecessary for 
owners and operators to renegotiate their allowance agreements in order 
to take into account the Agency-mandated pattern in Option 1 for 
allowance deduction from other unit accounts. EPA recognizes that 
Option 2 may delay its end-of-year compliance determinations and the 
unfreezing of allowance accounts. 63 FR 41362. However, EPA believes 
the benefits of Option 2, highlighted by the commenters, outweigh the 
drawbacks of such a delay. In adopting Option 2, EPA made a few, minor 
word changes to the proposed revisions of Secs. 72.2 and 73.35 in order 
to make the rule easier to understand.

C. Effective Date of Rule Revisions

    Comment: One commenter, in a late comment, urged the Agency to 
finalize the rule in a manner that would allow the compliance 
determination revisions to apply to the 1998 compliance year.
    Response: Today's rule will apply to all compliance years for which 
the excess emissions penalty payment deadline under Sec. 77.6(a)(3) 
(i.e., July 1) is on or after the effective date of today's rule. 
Section 77.6(a)(3) requires submission of the payment within 30 days of 
notice by the Administrator of completion of its process for 
determining end-of-year compliance, but not later than July 1. EPA 
anticipates that July 1 will be the applicable deadline for the 1998 
compliance year. EPA believes that the penalty payment deadline should 
be the cut-off date because that deadline is the date on which the 
designated representative must determine, and notify EPA of, the 
specific number of tons of excess emissions at a unit. Today's rule can 
change the amount of a unit's excess emissions and so should apply only 
if it is effective before the July 1 deadline for determining excess 
emissions for the compliance year.
    EPA considered applying today's rule revisions only to those 
compliance years for which the annual compliance certification and 
excess emissions offset plan deadline (60 days after the end of the 
year) is on or after the effective date of the revisions. This 
approach, however, would prevent use of the new provisions for the 1998 
compliance year and would serve no useful purpose. Neither the annual 
compliance certification nor the excess emissions offset plan requires 
the designated representative to state the specific number of tons of 
excess emissions at a unit. Instead, the designated representative must 
indicate whether a unit held enough allowances in its compliance 
subaccount and, if not, whether EPA should deduct immediately (i.e., as 
soon as EPA completes its determination of end-of-year compliance) 
allowances to offset the unit's excess emissions. EPA must deduct 
offsetting allowances immediately unless the designated representative 
makes the unusual showing that the deduction would jeopardize electric 
reliability. See 40 CFR 72.90(c)(1) and 77.3(d). Since any unit having 
excess emissions under the current rule will still have excess 
emissions under today's rule, the required information in the annual 
compliance certification and offset plan is the same under either rule. 
Therefore, it is unnecessary to limit the application of the revisions 
to only compliance years for which the annual compliance certification 
and excess emissions offset plan deadline (60 days after the end of the 
year) is on or after the effective date of the revisions. Today's rule 
will

[[Page 25840]]

instead apply to all compliance years for which the July 1 excess 
emissions penalty payment deadline is on or after the effective date of 
the revisions. The 1998 compliance year will therefore be the first 
year to which the rule will apply.

D. Impacts of Rule Revisions on Acid Rain Permits

    EPA designed today's revisions to become effective without changing 
the contents of existing acid rain permits and the State regulations 
for issuing acid rain permits. With the exception of changes in the 
definitions of ``compliance subaccount'' and ``current year 
subaccount,'' all of today's revisions are in 40 CFR part 73. As 
explained in the preamble to the proposed rule (63 FR 41364), it is 
unnecessary for State permitting authorities to revise the acid rain 
permits they have issued or regulations they have adopted to reflect 
today's final revisions to 40 CFR part 73.
    Similarly, the revisions can go into effect without State 
permitting authorities revising acid rain permits or regulations to 
reflect the revised definitions of ``compliance subaccount'' and 
``current year subaccount'' in 40 CFR part 72. Even if a State issued 
an acid rain permit before today's revision of the definitions become 
effective, the Agency will apply the final revised definitions, along 
with the revisions in 40 CFR part 73, to the units covered by the 
permit. The Agency will use the revised definitions in determining end-
of-year compliance for all calendar years for which the July 1 excess 
emissions penalty payment deadline is on or after the effective date of 
the revised definitions.
    Moreover, the revised definitions will not affect the permitting 
activities of State permitting authorities under 40 CFR part 72. 
Instead, the revised definitions affect EPA's operation of the 
Allowance Tracking System under 40 CFR part 73.
    While EPA will apply the revised definitions in Sec. 72.2, State 
permitting authorities should revise their own regulations to reflect 
the new definitions. This will avoid any potential confusion on the 
part of regulated entities and the public as to how EPA determines end-
of-year compliance.

V. Administrative Requirements

A. Docket

    A docket is an organized and complete file of all the information 
considered by EPA in the development of this rulemaking. The docket is 
a dynamic file since EPA and participants add material throughout the 
rulemaking development. The docketing system allows members of the 
public and industries involved to identify and locate documents readily 
so that they can effectively participate in the rulemaking process. 
Along with the preambles of the proposed and final rule (which include 
EPA responses to significant comments), the contents of the docket will 
serve as the record in case of judicial review to the extent provided 
in section 307(d)(7)(A) of the Act.

B. Executive Order 12866: Regulatory Planning and Review

    Under Executive Order 12866 (58 FR 51735 (October 4, 1993)), the 
Agency 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 Executive 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, OMB has determined 
that today's rule is not a ``significant regulatory action.''

C. Executive Order 12875: Enhancing Intergovernmental Partnerships

    Under Executive Order 12875, EPA may not issue a regulation that is 
not required by statute and that creates a mandate upon a State, local 
or tribal government, unless the Federal government provides the funds 
necessary to pay the direct compliance costs incurred by those 
governments or unless EPA consults with those governments. If EPA 
complies by consulting, Executive Order 12875 requires EPA provide to 
the Office of Management and Budget a description of the extent of 
EPA's prior consultation with representatives of affected State, local 
and tribal governments, the nature of their concerns, copies of any 
written communications from the governments, and a statement supporting 
the need to issue the regulation. In addition, Executive Order 12875 
requires EPA to develop an effective process permitting elected 
officials and other representatives of State, local and tribal 
governments ``to provide meaningful and timely input in the development 
of regulatory proposals containing significant unfunded mandates.''
    Today's rule does not create a new mandate on State, local or 
tribal governments. It modifies an existing mandate in a way that 
imposes no additional duties and no additional costs on these entities. 
Accordingly, the requirements of section 1(a) of Executive Order 12875 
do not apply to this rule.

D. Executive Order 13084: Consultation and Coordination With Indian 
Tribal Governments

    Under Executive Order 13084, EPA may not issue a regulation that is 
not required by statute, that significantly or uniquely affects the 
communities of Indian tribal governments, and that imposes substantial 
direct compliance costs on those communities, unless the Federal 
government provides the funds necessary to pay the direct compliance 
costs incurred by the tribal governments or unless EPA consults with 
those governments. If EPA complies by consulting, EPA must provide to 
the Office of Management and Budget, in a separately identified section 
of the preamble to the rule, a description of the extent of EPA's prior 
consultation with representatives of affected tribal governments, a 
summary of the nature of their concerns, and a statement supporting the 
need to issue the regulation. In addition, Executive Order 13084 
requires EPA to develop an effective process permitting elected and 
other representatives of Indian tribal governments ``to provide 
meaningful and timely input in the development of regulatory policies 
on matters that significantly or uniquely affect their communities.''
    Today's rule does not significantly or uniquely affect, or impose 
any substantial direct compliance costs on, the communities of Indian 
tribal governments. The rule does not impose any enforceable duties on 
these entities. Accordingly, the requirements of section 3(b) of 
Executive Order 13084 do not apply to this rule.

E. Unfunded Mandates Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for

[[Page 25841]]

federal agencies to assess the effects of their regulatory actions on 
State, local, and tribal governments and the private sector. Under 
section 202 of 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 must 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 
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 today's 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.
    Today's final revisions to parts 72 and 73 will potentially reduce 
the burden on regulated entities by providing more flexible allowance 
holding requirements. The revisions will not otherwise have any 
significant impact on State, local, and tribal governments.

F. Paperwork Reduction Act

    Today's final revisions to parts 72 and 73 will not impose any new 
information collection burden subject to the Paperwork Reduction Act 
(44 U.S.C. 3501, et seq.). OMB has previously approved the relevant 
information collection requirements contained in parts 72 and 73 under 
the provisions of the Paperwork Reduction Act and has assigned OMB 
control number 2060-0258. 58 FR 3590, 3650 (1993).
    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.
    Copies of the previously approved ICR may be obtained from the 
Director, Regulatory Information Division; EPA; 401 M St. SW (mail code 
2137); Washington, DC 20460 or by calling (202) 564-2740. Include the 
ICR and/or OMB number in any correspondence.

G. Regulatory Flexibility

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq., 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
Small entities include small businesses, small not-for-profit 
enterprises, and small government jurisdictions.
    As discussed above, today's final revisions will reduce the burden 
on regulated entities by adding flexibility to the regulations. For 
this reason, EPA has determined that this rule will not have a 
significant economic impact on a substantial number of small entities.

H. Applicability of Executive Order 13045: Children's Health Protection

    Executive Order 13045 (62 FR 19885, April 29, 1997) applies to any 
rule if EPA determines (1) that the rule is economically significant as 
defined under Executive Order 12866, and (2) that the environmental 
health or safety risk addressed by the rule has a disproportionate 
effect on children. If the regulatory action meets both criteria, EPA 
must evaluate the environmental health or safety effects of the planned 
rule on children and explain why the planned regulation is preferable 
to other potentially effective and reasonably feasible alternatives 
considered by EPA.
    This final action is not subject to Executive Order 13045, because 
the action is not economically significant as defined by Executive 
Order 12866 and does not address an environmental health or safety risk 
having a disproportionate effect on children.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), Public Law 104-113, section 12(d)(15 U.S.C. 272 
note), directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, or business practices) that are developed or 
adopted by voluntary consensus standards bodies. The NTTAA requires EPA 
to provide Congress, through OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    Today's final rule does not involve any technical standards that 
would require Agency consideration of voluntary consensus standards 
pursuant to section 12(d) of the NTTAA.

J. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA will submit 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 United States prior 
to publication of the rule in the Federal Register. A major rule cannot 
take effect until 60 days after it is published in the Federal 
Register. This rule is not a ``major rule'' as defined by 5 U.S.C. 
804(2). This rule will be effective 30 days after publication in the 
Federal Register.

List of Subjects in 40 CFR Parts 72 and 73

    Environmental protection, Acid rain, Administrative practice and 
procedure,

[[Page 25842]]

Air pollution control, Compliance plans, Electric utilities, Penalties, 
Reporting and recordkeeping requirements, Sulfur dioxide.

    Dated: May 5, 1999.
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 72--[AMENDED]

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

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

    2. Section 72.2 is amended by:
    a. Removing from the definition of ``Compliance subaccount'' the 
words ``by the unit'' whenever they appear and the word ``unit's'' 
after the words ``meeting the''; and
    b. Removing from the definition of ``Current year subaccount'' the 
words ``by the unit'' and replacing the word ``its'' with the word 
``the''.
    3. Section 72.40 is amended by adding to paragraph (a)(1) the words 
``, or in the compliance subaccount of another affected unit at the 
same source to the extent provided in Sec. 73.35(b)(3),'' after the 
words ``under Sec. 73.34(c) of this chapter)''.

PART 73--[AMENDED]

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

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

    5. Section 73.35 is amended by revising paragraph (a)(2) and adding 
paragraph (b)(3) to read as follows:


Sec. 73.35  Compliance.

    (a) * * *
    (2) Such allowance is:
    (i) Recorded in the unit's compliance subaccount; or
    (ii) Transferred to the unit's compliance subaccount, with the 
transfer submitted correctly pursuant to subpart D of this part for 
recordation in the compliance subaccount for the unit by not later than 
the allowance transfer deadline in the calendar year following the year 
for which compliance is being established; or
    (iii) Held in the compliance subaccount of another affected unit at 
the same source in accordance with paragraph (b)(3) of this section.
    (b) * * *
    (3)(i) If, after the Administrator completes the deductions under 
paragraph (b)(2) of this section for all affected units at the same 
source, a unit would otherwise have excess emissions and one or more 
other affected units at the source would otherwise have unused 
allowances in their compliance subaccounts and available for such other 
units under paragraph (a)(1) and (a)(2)(i) and (ii) of this section for 
the year for which compliance is being established, the Administrator 
will notify in writing the authorized account representative. The 
Administrator will state that the authorized account representative may 
specify in writing which of such allowances to deduct up to the amount 
calculated as follows, in order to reduce the tons of excess emissions 
otherwise at the unit:

    Maximum deduction from other units = 0.95  x  Excess emissions 
if no deduction from other units
    Where:
    ``Maximum deduction from other units'' is the maximum number of 
allowances that may be deducted for the year for which compliance is 
being established, for the unit otherwise having excess emissions, 
from the compliance subaccounts of other units at the same source, 
rounded to the nearest allowance.
    ``Excess emissions if no deduction from other units'' is the 
tons of excess emissions that the unit would otherwise have if no 
allowances were deducted for the unit from other units under this 
paragraph (b)(3)(i) or paragraph (b)(3)(ii) of this section.

    (ii) Notwithstanding paragraph (b)(3)(i) of this section, if the 
amount calculated results in less than 10 tons of excess emissions, the 
maximum deduction from other units shall be adjusted so that 10 tons of 
excess emissions, or the tons of excess emissions that would result if 
no allowances could be deducted from other units, whichever is less, 
remain for the unit.
    (iii) If the authorized account representative submits within 15 
days of receipt of a notification under paragraph (b)(3)(i) of this 
section a written request specifying allowances to deduct in accordance 
with paragraphs (b)(3)(i) and (ii) of this section, the Administrator 
will deduct such allowances, and reduce the tons of excess emissions 
otherwise at the unit by an equal amount, up to the amount calculated 
under paragraphs (b)(3)(i) and (ii) of this section.
* * * * *
[FR Doc. 99-12007 Filed 5-12-99; 8:45 am]
BILLING CODE 6560-50-P