[Federal Register Volume 65, Number 220 (Tuesday, November 14, 2000)]
[Rules and Regulations]
[Pages 68078-68082]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-28707]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[NH-042-7169a; A-1-FRL-6871-2]


Approval and Promulgation of Air Quality Implementation Plans; 
New Hampshire; New Hampshire--Nitrogen Oxides Budget and Allowance 
Trading Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: EPA is approving State Implementation Plan (SIP) revisions 
submitted by the State of New Hampshire. This action consists of 
approving regulations in New Hampshire, as well as a case-specific 
order and two emission quantification protocols for Public Service of 
New Hampshire (PSNH). The regulations and order are part of a regional 
nitrogen oxide ( NOX) reduction program designed to reduce 
stationary source NOX emissions during the ozone season in 
the Ozone Transport Region (OTR) of the northeastern United States. 
Section 184(a) of the Clean Air Act defines the OTR as the States of 
Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, 
New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and the 
Consolidated metropolitan Statistical Area that includes the District 
of Columbia. These SIP revisions were submitted pursuant to section 110 
of the Clean Air Act (CAA).

DATES: This direct final rule is effective on January 16, 2001 without 
further notice, unless EPA receives adverse comment by December 14, 
2000. If adverse comment is received, EPA will publish a timely 
withdrawal of the direct final rule in the Federal Register and inform 
the public that the rule will not take effect.

ADDRESSES: Comments may be mailed to David Conroy, Manager, Air Quality 
Planning Unit, Office of Ecosystem

[[Page 68079]]

Protection (mail code CAQ), U.S. Environmental Protection Agency, 
Region I, One Congress Street, Suite 1100, Boston, MA 02114-2023. 
Copies of the documents relevant to this action are available for 
public inspection during normal business hours, by appointment at the 
Office Ecosystem Protection, U.S. Environmental Protection Agency, 
Region I, One Congress Street, 11th floor, Boston, MA, and at the New 
Hampshire Air Resources Division, Department of Environmental Services, 
6 Hazen Drive, P.O. Box 95, Concord, NH 03301.

FOR FURTHER INFORMATION CONTACT: Dan Brown, (617) 918-1532 or at 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

A. Clean Air Act Requirements

    Sections 182(b)(1)(A) and 182(c)(2)(A) of the CAA require States 
with areas classified as ``moderate,'' ``serious,'' and ``severe'' 
ozone nonattainment to submit revisions to their applicable SIPs to 
provide for specific annual reductions in emissions of volatile organic 
compounds (VOCs) and oxides of nitrogen as necessary to attain the 
national primary ambient air quality standard for ozone. Additionally, 
section 110 of the Act requires that such plans be subject to public 
notice, comment, and hearing procedures and that the States adopt and 
submit the plans to EPA.
    As part of New Hampshire's efforts to meet the CAA requirements, on 
July 27, 1998, the New Hampshire Department of Environmental Services 
(NH DES) submitted a request to revise its SIP by adding CHAPTER Env-A 
3200 `` NOX BUDGET TRADING PROGRAM'' and Final RACT Order 
ARD-98-001. The regulations and order impose statewide and source-
specific caps on NOX emissions from certain industrial 
equipment (e.g., electric utility boilers, industrial boilers, 
combustion turbines, etc.). New Hampshire's CHAPTER Env-A 3200 is based 
closely on a model rule which was developed using the EPA's economic 
incentive program (EIP) guidance (67 FR 16690, April 7, 1994) as the 
regulatory framework.

B. The OTC MOU Program

    The model rule used by New Hampshire was developed by the Northeast 
States for Coordinated Air Use Management (NESCAUM) and the Mid-
Atlantic Regional Air Management Association (MARAMA) entitled, 
``NESCAUM/MARAMA NOX Budget Model Rule.'' The NESCAUM/MARAMA 
model rule was issued on May 1, 1996. The basis for the model rule was 
a memorandum of understanding entitled, ``Memorandum of Understanding 
Among the States of the Ozone Transport Commission on Development of a 
Regional Strategy Concerning the Control of Stationary Source Nitrogen 
Oxide Emissions,'' dated September 27, 1994, otherwise known as the 
``OTC MOU.''
    The OTC MOU committed the MOU signatory States to require certain 
major stationary sources to reduce their NOX emissions 
through several regulatory stages. The NOX RACT regulations 
required by section 182 of the Clean Air Act have reduced emissions at 
major stationary sources of NOX since 1995. Those reductions 
are considered ``phase I'' of the OTC program. Under ``phase II'' of 
the program, the MOU committed the signatory states to imposing a cap 
on regional NOX emissions during the five month periods 
between May 1 through September 30 of 1999, 2000, 2001, and 2002. The 
third stage of the OTC program, i.e., ``phase III,'' will tighten the 
regional cap and is set to begin on May 1, 2003 and continue in each 
ozone season thereafter.

II. Chapter Env-A 3200 `` NOX BUDGET TRADING PROGRAM''

    New Hampshire's Chapter Env-A 3200 contains both phase II and phase 
III NOX budget program reduction requirements. New 
Hampshire's NOX budget regulations set a statewide, five 
month (May through October) NOX ``budget,'' or mass emission 
limit in tons, to reduce the aggregate emissions from large fossil fuel 
fired combustion equipment by as much as 75% from a 1990 baseline. In 
order to achieve the aggregate NOX reductions, the 
regulations proportion NOX ``allowances'' (in tons) to the 
facilities with emission units subject to the program. The regulations 
require each owner or operator of each unit to hold, by December 31 of 
each year, at least as many NOX allowances in their 
compliance account as total tons of NOX emitted during the 
previous five month ozone season.
    Under the NOX Budget regulations, NOX 
allowances may be bought or sold and unused allowances may be banked 
from one year to another in a central registry administered by EPA. The 
program requires NOX emissions to be monitored by either a 
continuous emission monitoring system (CEMS) or equivalent, although 
the use of alternatives is allowed where approved by the State and EPA. 
The program began on May 1, 1999. Starting in 2002 and occurring every 
three years after, New Hampshire and the OTC will conduct an audit of 
the program to ensure that the expected reductions are occurring.

III. RACT Order 98-001 & Emission Quantification Protocols for 
Public Service of New Hampshire

    In addition to Chapter Env-A 3200, on July 27, 1998, New Hampshire 
also submitted Final RACT Order 98-001 which was issued to PSNH under 
Part Env-A 1211. First, the order requires PSNH's unit #2 at its 
Merrimack Station (MK2) to meet an emission limitation of 15.4 tons of 
NOX per 24 hour calendar day by May 31, 1999. This limit can 
be met directly at MK2 or through the use of approved emission credits 
generated in the ozone season at other facilities. Second, the order 
requires PSNH to meet an emissions cap of 4,662 tons during the period 
between May 1 and October 1 for the combined NOX emissions 
from the following units: units #1 and #2 at Merrimack Station, unit #1 
at Newington Station, and units #4, #5, and #6 at Schiller Station, 
during the years 1999, 2000, 2001, and 2002. Beginning on May 1, 2003, 
the order requires those units, to comply with an ozone season cap of 
3,627 tons, minus any tons allocated to new sources subject to the 
program. Additionally, the order requires the PSNH units to meet a 
NOX cap of 8,208 tons between October 1 and April 30 of each 
year, beginning in 1999.
    Order ARD 98-001 also contains provisions that allow PSNH to 
generate discrete emission reductions (DERs) according to the 
requirements of Chapter Env-A 3100, New Hampshire's discrete emission 
reduction trading regulation, by reducing emissions below the 
NOX limitations contained in Env-A 1211, Order ARD 97-001, 
and all other applicable emission limits. However, because Env-A 3100 
has not yet been approved into the New Hampshire SIP, New Hampshire 
submitted the emission reduction protocols as case-specific SIP 
revisions. The SIP submittal included two credit generation protocols, 
as well as the credits created by the protocols that were generated by 
PSNH from May 1, 1995 through September 30, 1997.

IV. EPA Evaluation

    Based on the EIP, EPA finds the NOX cap and trade 
regulations, case-specific NOX RACT order, and 
quantification protocols fully approvable. See ``Technical Support 
Document for the Approval of New Hampshire's CHAPTER Env-A 3200 
NOX BUDGET TRADING PROGRAM and Final RACT Order 98-001,'' 
dated January 7, 1999, for EPA's detailed evaluation. The technical 
support document is available,

[[Page 68080]]

upon request, from the EPA Regional Office listed in the ADDRESSES 
section of this document.

V. Issues

    One issue related to New Hampshire's NOX Budget Trading 
Program involves the overlap of New Hampshire's NOX Budget 
Trading Program and the EPA's NOX SIP Call summarized below.

A. NOX SIP Call

    From 2003 onward, the geographic size of the market for allowances 
issued by New Hampshire will be directly affected by the promulgation 
of EPA's rule entitled, ``Finding of Significant Contribution and 
Rulemaking for Certain States in the Ozone Transport Assessment Group 
Region for Purposes of Reducing Regional Transport of Ozone,'' 
otherwise known as the `` NOX SIP call.'' See 63 FR 57356, 
October 27, 1998, aff'd in part, State of Michigan v. U.S. EPA, No. 98-
1497 (D.C. Cir., March 3, 2000).
    The NOX SIP call requires specified States to submit SIP 
revisions to prohibit specified amounts of NOX emissions, in 
order to reduce emissions in each of those States to a level within the 
statewide NOX emissions budget established in the 
NOX SIP call final rule. The NOX SIP call gives 
States the flexibility to choose any mix of pollution-reduction 
measures that will achieve the required reductions. The NOX 
SIP call, however, suggests that imposing statewide NOX 
emissions caps on large fossil-fuel fired industrial boilers and 
electricity generators would provide a cost effective means for States 
to meet their NOX budgets. In fact, the NOX SIP 
call State budgets were set at levels which reflect the NOX 
reduction possible assuming a 0.15 lbs/mmBtu-based cap being applied to 
the large industrial boilers and electricity generators.
    One option to comply with the NOX SIP call is the 
adoption of a State rule based on the EPA's model NOX Budget 
Trading Program (40 CFR part 96), which was finalized in the October 
1998 NOX SIP call rule. Part 96 sets forth a cap-and-trade 
program for NOX emissions that employs a cap on total 
NOX emissions for the ozone season. This mechanism ensures 
that emissions reductions are achieved and maintained, while providing 
the cost-effectiveness of a market-based system. The NOX SIP 
call requires the covered states to adopt regulations which implement 
control strategies starting in 2003 in order to achieve the specific 
statewide budgets by 2007.
    Although EPA's notice of proposed rulemaking (NPR) for the 
NOX SIP call (November 7, 1997) examined the effects of 
transport from the 36 States and the District of Columbia which made up 
the ozone transport assessment group (OTAG) region, EPA has not yet 
finalized the NOX SIP call for all 37 entities specified in 
the October 1998 final rulemaking notice. EPA is continuing to evaluate 
air quality modeling for 15 States which were part of the OTAG region, 
including New Hampshire, in order to make a final determination of 
whether they significantly contribute to the transport of ozone. 
Whether New Hampshire ultimately will be part of the NOX SIP 
call is uncertain at this time.

B. Overlap of OTC and NOX SIP call Allowance Trading 
Programs

    Based on the SIP submittals by Connecticut, Massachusetts, New 
Jersey, and Rhode Island, EPA anticipates that the OTR States which are 
part of the OTC NOX budget and allowance trading program 
and, which are subject to the NOX SIP call, will participate 
in a regional cap and trade program to meet the NOX SIP call 
requirements. Therefore, the issue associated with the approval of the 
New Hampshire program relates to the fact that although New Hampshire 
is an OTC state, it is not a NOX SIP call state.
    EPA is currently administering the emissions tracking and allowance 
tracking systems for the OTC NOX budget program. EPA will 
also be administering the NOX SIP call emissions and 
allowance tracking systems. This means that for States subject to both 
the OTC and NOX SIP call programs, 1999 through 2002 
NOX allowances will be tracked in the OTC allowance tracking 
system, and then eligible 2003 and beyond allowances will be tracked in 
the NOX SIP call allowance tracking system.
    The New Hampshire regulations are not considered a NOX 
SIP call submission nor is today's SIP action an approval of trading 
these allowances for NOX SIP call purposes. Therefore, 
because the OTC phase III NOX cap in New Hampshire is not as 
stringent as a NOX SIP call cap would be, New Hampshire OTC 
phase III allowances will not be transferable to accounts in the 
NOX SIP call tracking system. As of May 1, 2003, New 
Hampshire's NOX allowances will not be available for 
compliance purposes in NOX SIP call affected States. 
However, because the NOX SIP call program requirements would 
be more stringent than the OTC program requirements, NOX SIP 
call program allowances will be available for sources to meet the New 
Hampshire OTC phase III emission limits.
    Final Action: EPA is approving New Hampshire's CHAPTER Env-A 3200 
`` NOX BUDGET TRADING PROGRAM,'' Order ARD 98-001, and two 
emission quantification protocols.
    The EPA is publishing this action without prior proposal because 
the Agency views this as a noncontroversial amendment and anticipates 
no adverse comments. However, in the proposed rules section of this 
Federal Register publication, EPA is publishing a separate document 
that will serve as the proposal to approve the SIP revision should 
relevant adverse comments be filed. This rule will be effective January 
16, 2001 without further notice unless the Agency receives relevant 
adverse comments by December 14, 2000.
    If the EPA receives such comments, then EPA will publish a notice 
withdrawing the final rule and informing the public that the rule will 
not take effect. All public comments received will then be addressed in 
a subsequent final rule based on the proposed rule. The EPA will not 
institute a second comment period on the proposed rule. Only parties 
interested in commenting on this action should do so at this time.

VI. Administrative Requirements

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
action is not a ``significant regulatory action'' and therefore is not 
subject to review by the Office of Management and Budget. This action 
merely approves state law as meeting federal requirements and imposes 
no additional requirements beyond those imposed by state law. 
Accordingly, the Administrator certifies that this rule will not have a 
significant economic impact on a substantial number of small entities 
under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because 
this rule approves pre-existing requirements under state law and does 
not impose any additional enforceable duty beyond that required by 
state law, it does not contain any unfunded mandate or significantly or 
uniquely affect small governments, as described in the Unfunded 
Mandates Reform Act of 1995 (Public Law 104-4). For the same reason, 
this rule also does not significantly or uniquely affect the 
communities of tribal governments, as specified by Executive Order 
13084 (63 FR 27655, May 10, 1998). This rule will not have substantial 
direct effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government, as specified 
in Executive Order 13132 (64 FR 43255, August 10, 1999), because it 
merely

[[Page 68081]]

approves a state rule implementing a federal standard, and does not 
alter the relationship or the distribution of power and 
responsibilities established in the Clean Air Act. This rule also is 
not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), 
because it is not economically significant.
    In reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the Clean Air Act. In 
this context, in the absence of a prior existing requirement for the 
State to use voluntary consensus standards (VCS), EPA has no authority 
to disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission that otherwise 
satisfies the provisions of the Clean Air Act. Thus, the requirements 
of section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3 
of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing 
this rule, EPA has taken the necessary steps to eliminate drafting 
errors and ambiguity, minimize potential litigation, and provide a 
clear legal standard for affected conduct. EPA has complied with 
Executive Order 12630 (53 FR 8859, March 15, 1988) by examining the 
takings implications of the rule in accordance with the ``Attorney 
General's Supplemental Guidelines for the Evaluation of Risk and 
Avoidance of Unanticipated Takings' issued under the executive order. 
This rule does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et 
seq.).
    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 action is not a ``major rule'' as defined by 5 U.S.C. 
804(2).
    Under section 307(b)(1) of the Clean Air Act, petitions for 
judicial review of this action must be filed in the United States Court 
of Appeals for the appropriate circuit by January 16, 2001. Interested 
parties should comment in response to the proposed rule rather than 
petition for judicial review, unless the objection arises after the 
comment period allowed for in the proposal. Filing a petition for 
reconsideration by the Administrator of this final rule does not affect 
the finality of this rule for the purposes of judicial review nor does 
it extend the time within which a petition for judicial review may be 
filed, and shall not postpone the effectiveness of such rule or action. 
This action may not be challenged later in proceedings to enforce its 
requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by 
reference, Intergovernmental relations, Nitrogen dioxide, Ozone, 
Particulate matter, Reporting and recordkeeping requirements.

    Dated: September 6, 2000.
Mindy S. Lubber,
Regional Administrator, EPA-New England.
    Part 52 of chapter I, title 40 of the Code of Federal Regulations 
is amended as follows:

PART 52--[AMENDED]

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

    Authority: 42 U.S.C. 7401 et seq.

Subpart EE--New Hampshire

    2. Section 52.1520 is amended by adding paragraphs (c)(57) and 
(c)(64) to read as follows:


Sec. 52.1520  Identification of plan.

* * * * *
    (c) * * *
    (57) Revision to the State Implementation Plan submitted by the New 
Hampshire Air Resources Division on July 27, 1998.
    (i) Incorporation by reference.
    (A) Regulation Chapter Env-A 3200 NOX Budget Trading 
Program adopted and effective on July 17, 1998.
    (ii) Additional materials.
    (A) Letter from the New Hampshire Air Resources Division dated July 
27, 1998 submitting Chapter Env-A 3200 NOX Budget Trading 
Program as a revision to the New Hampshire State Implementation Plan.
* * * * *
    (64) Revisions to the State Implementation Plan submitted by the 
New Hampshire Air Resources Division on July 27, 1998.
    (i) Incorporation by reference.
    (A) Order ARD 98-001 issued by the New Hampshire Department of 
Environmental Services to Public Service Company of New Hampshire on 
July 17, 1998, with attachments: Discrete emission reduction protocol 
for Public Service of New Hampshire's Schiller Station, Units 4, 5 and 
6, submitted to the New Hampshire Department of Environmental Services 
on April 10, 1998; and Discrete emission reduction protocol for Public 
Service of New Hampshire's Newington Station, Unit 1, submitted to the 
New Hampshire Department of Environmental Services on April 10, 1998.
    (ii) Additional materials.
    (A) Letter from the New Hampshire Air Resources Division dated July 
17, 1998 submitting Final RACT Order 98-001 as a revision to the New 
Hampshire State Implementation Plan.
* * * * *

    3. In Sec. 52.1525, Table 52.1525 is amended by revising the column 
heading ``Comments'' to read ``Explanation''; adding a new state 
citation for ``Part Env-A 3200'' in numerical order to the entries for 
``Part Env-A''; and by adding Source specific ``Order ARD 98-001'' in 
numerical order to the entries for ``Order ARD'' as follows:


Sec. 52.1525  EPA-approved New Hampshire state regulations.

* * * * *

[[Page 68082]]



                                         Table 52.1525.--EPA--Approved Rules and Regulations \1\--New Hampshire
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                                         State citation      Date submitted   Date approved     Federal Register
           Title/subject                   chapter \2\          by State         by EPA             citation           52.1520          Explanation
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                                              *         *         *         *         *         *         *
NOX Budget Trading Program.........  Part Env-A 3200.......         7/27/98        11/14/00  65 FR 68082...........      (c)(57)  Approval of OTC NOX
                                                                                                                                   budget and allowance
                                                                                                                                   trading program.
 
                                              *         *         *         *         *         *         *
Source specific order..............  Order ARD 98-001......         7/17/98        11/14/00  65 FR 68082...........      (c)(64)  Source-specific NOX
                                                                                                                                   RACT order and
                                                                                                                                   discrete emission
                                                                                                                                   reduction protocols
                                                                                                                                   for Public Service of
                                                                                                                                   New Hampshire.
 
                                              *         *         *         *         *         *         *
NOX Budget Trading Program.........  Part Env-A 3200.......         7/27/98        11/14/00  65 FR 68082...........      (c)(57)  Approval of OTC NOX
                                                                                                                                   budget and allowance
                                                                                                                                   trading program.
 
                                              *         *         *         *         *         *         *
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\1\ These regulations are applicable statewide unless otherwise noted in the Explanation section.
\2\ When the New Hampshire Department of Environmental Services was established in 1987, the citation chapter title for the air regulations changed from
  CH Air to Env-A.

[FR Doc. 00-28707 Filed 11-13-00; 8:45 am]
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