[Federal Register Volume 65, Number 246 (Thursday, December 21, 2000)]
[Proposed Rules]
[Pages 80398-80409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32396]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 97

[FRL-6919-7]


Findings of Significant Contribution and Rulemaking on Section 
126 Petitions for Purposes of Reducing Interstate Ozone Transport--
Federal NOX Budget Trading Program, Rule Revision

AGENCY: Environmental Protection Agency.

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to 
amend the Federal NOX Budget Trading Program regulations to 
revise the allowance allocations for certain NOX Budget 
units subject to the program. In January 2000, EPA took final action 
(the January 2000 final rule) under section 126 of the Clean Air Act 
(CAA) on petitions filed by eight Northeastern States seeking to 
mitigate interstate transport of nitrogen oxides (NOX), one 
of the precursors of ground-level ozone. EPA determined that a number 
of large electric generating units (EGUs) and large industrial boilers 
and turbines (non-EGUs) named in the petitions emit in violation of the 
CAA prohibitions against significantly contributing to nonattainment or 
maintenance problems in the petitioning States. EPA also established 
the Federal NOX Budget Trading Program as the control remedy 
for these sources, determined allowable emissions for the sources, and 
allocated authorizations to emit NOX (i.e., NOX 
allowances) to the sources.
    After promulgation of EPA's January 2000 final rule, some owners, 
or associations of owners, of EGUs or non-EGUs filed petitions with the 
U.S. Court of Appeals for the District of Columbia Circuit (D.C. 
Circuit) challenging, among other things, the allowance allocations for 
certain units under the rule. Subsequently, EPA entered into 
settlements with these owners or associations of owners. Today's action 
proposes to revise the allocations in the January 2000 final rule for 
these units in a manner consistent with the settlements.
    In addition, after promulgation of the January 2000 final rule, 
owners of non-EGUs requested EPA to correct allowance allocations for 
two other units under the rule. EPA responded that it was treating the 
requests as requests for reconsideration of the two units' allocations 
under the rule and would propose to revise the allocations. Today's 
action includes such a proposal for these units.

DATES: If you want to submit any written comments on this proposed 
rule, EPA must receive the written comments by January 30, 2001.
    Public Hearing: A public hearing will be held at 9:30 a.m. on 
January 2, 2001.

ADDRESSES: Comments: If you submit any written comments on this 
proposed rule, the comments must reference Docket No. A-97-43 and must 
be submitted in duplicate to Air and Radiation Docket and Information 
Center (6102), Attention: Docket No. A-97-43, U.S. Environmental 
Protection Agency, 401 M Street, SW, Room M-1500, Washington, DC 20460.
    Docket: Docket No. A-97-43, containing supporting information used 
in developing the proposed rule, is available for public inspection and 
copying between 8 a.m. and 4 p.m., Monday through Friday, at EPA's Air 
and Radiation Docket and Information Center at the above address. EPA 
may charge a reasonable fee for copying.
    Public Hearing: The public hearing will be held at the EPA 
Auditorium, 401 M Street, SW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Dwight C. Alpern, at (202) 564-9151, 
U.S. Environmental Protection Agency, 1200 Pennsylvania Ave., NW., 
(6204J), Washington, DC 20460; or the Acid Rain Hotline at (202) 564-
9089.

SUPPLEMENTARY INFORMATION:

Availability of Related Information

    The official record for this rulemaking, as well as the public 
version, has been established under Docket No. A-97-43 (including 
comments and data submitted electronically as described below). A 
public version of this record, including printed, paper versions of 
electronic comments, that does not include any information claimed as 
confidential business information, is available for inspection from 8 
a.m. to 4 p.m. Monday through Friday, excluding legal holidays. The 
official rulemaking record is located at the address in the ADDRESSES 
section. In addition, the Federal Register rulemaking actions under 
section 126 and the associated documents are located at http://www.epa.gov/ttn/rto/126.
    The EPA has issued a separate rule on NOX transport 
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'' (the NOX 
State implementation plan call (NOX SIP call)). The 
rulemaking docket for that rule contains information and analyses that 
were relied on in the January 2000 final rule. Therefore, EPA is 
incorporating by reference the entire NOX SIP call record 
for purposes of today's rulemaking. Documents related to the 
NOX SIP call are available for inspection in Docket No. A-
96-56 at the address and times given above. In addition, the documents 
associated with the NOX SIP call are located at http://www.epa.gov/ttn/oarpg/otagsip.html.

Outline

    The information in this preamble is organized as follows:

I. Background
II. Proposed Rule Revisions
    A. Rationale for proposing to revise certain units' allocations.
    1. ``Stranded units''.
    2. West Virginia non-EGUs.
    3. Blue Ridge Paper Products Company, Riley Bark Boiler, Plant 
0159.
    4. Michigan State University, Unit 0056, Plant K3249.
    B. Proposed sources of NOX allowances for revised 
allocations.
    1. Sources of allowances under part 97.
    a. Allocations in Appendices A and B to part 97.
    b. Allocation set-aside.
    c. Compliance supplement pool.
    2. Proposed approach for obtaining allowances for units' revised 
allocations.
    a. Proposed approach for West Virginia non-EGUs.
    b. Proposed approach for remaining units.
    i. Use of allocations to non- NOX Budget units.
    ii. Use of compliance supplement pool allowances.
    C. Proposed amount of allowances for units' revised allocations.
    D. Proposed changes to regulatory text.
III. Administrative Requirements
    A. Executive Order 12866: Regulatory Impacts Analysis
    B. Regulatory Flexibility Act: Small Entity Impacts
    C. Unfunded Mandates Reform Act
    D. Paperwork Reduction Act
    E. Executive Order 13045: Protection of Children from 
Environmental Health Risks and Safety Risks
    F. Executive Order 12898: Environmental Justice
    G. Executive Order 13132: Federalism
    H. Executive Order 13084: Consultation and Coordination with 
Indian Tribal Governments

[[Page 80399]]

    I. National Technology Transfer and Advancement Act

I. Background

    In January 2000, EPA took final action (the January 2000 final 
rule) under section 126 of the CAA on petitions filed by eight 
Northeastern States seeking to mitigate interstate transport of 
NOX.\1\ 65 FR 2674 (January 18, 2000). Section 126 of the 
CAA authorizes a downwind State to petition EPA for a finding that an 
existing or new (or modified) major stationary source or a group of 
such sources emits or would emit in violation of section 
110(a)(2)(D)(i) by contributing significantly to nonattainment of a 
National Ambient Air Quality Standard or interfering with maintenance 
of such a standard in a downwind State. EPA determined that certain 
large electric generating units (EGUs) and large industrial boilers and 
turbines (non-EGUs) named in the petitions emit in violation of the CAA 
prohibitions against significantly contributing to nonattainment or 
maintenance problems in the petitioning States. The EGUs and non-EGUs 
covered by the January 2000 final rule are in the following States or 
portions of States and the District of Columbia: Delaware; Indiana; 
Kentucky; Maryland; Michigan; North Carolina; New Jersey; New York; 
Ohio; Pennsylvania; Virginia; and West Virginia. 65 FR 2675.
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    \1\ This background is for the convenience of the reader to 
understand better the proposed revisions in sections II.B.2,C, and D 
below. EPA is not reconsidering or requesting comment on any of the 
provisions in part 97, except to the extent discussed in the 
proposals in sections II.B.2,C, and D.
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    EPA established the Federal NOX Budget Trading Program 
as the control remedy for these sources. EPA determined allowable 
emissions for the sources and allocated authorizations to emit 
NOX (i.e., NOX allowances) to the sources. Under 
this program, an affected unit (referred to as a ``NOX 
Budget unit'') may buy or sell allowances but must hold, after the end 
of the ozone season, a number of allowances at least equal to the 
number of tons of NOX that the unit emitted during that 
ozone season.
    For purposes of allocating allowances, EPA set for each State (or 
portion of State) NOX emission budgets (in tons of 
NOX) for EGUs and non-EGUs. EPA then allocated allowances to 
each existing unit, based on the unit's historical heat input. For 
EGUs, the average of the two highest ozone season heat inputs from 
1995-1998 was used as the historical heat input. For non-EGU's, the 
1995 ozone season heat input or, if data were available, the average of 
the two highest ozone season heat inputs from 1995-1998 was used as the 
historical heat input. 40 CFR 97.42(a). EPA also adjusted each unit's 
allocations so that the total number of allowances allocated to EGUs 
and the total number of allowances allocated to non-EGUs in a given 
State equaled 95 percent of the EGU budget and of the non-EGU budget 
respectively for that State. 40 CFR 97.42(b) and (c). Five percent of 
the budget was reserved for allocations to new units.
    After EPA promulgated the January 2000 final rule, owners, or 
associations of owners, of EGUs or non-EGUs filed petitions with the 
D.C. Circuit challenging, among other things, the allowance allocations 
for certain units in the Federal NOX Budget Trading Program 
regulations. Subsequently, EPA entered into settlements with some of 
these owners and associations of owners. Today's action proposes to 
revise the allowance allocations in the January 2000 rule for these 
units, in a manner consistent with the settlements.
    In addition, after promulgation of the January 2000 final rule, 
owners of non-EGUs submitted letters to EPA requesting correction of 
the allowance allocations for two other units under the rule. EPA 
responded that it was treating the letters as requests for 
reconsideration of the two units' allocations under the rule and would 
propose to revise the allocations. Today's action includes such a 
proposal for these units.

II. Proposed Rule Revisions

    EPA is proposing to make specific, limited revisions to provisions 
of the Federal NOX Budget Trading Program rule, i.e., part 
97, in order to change the NOX allowance allocations for 
certain NOX Budget units. In today's proposal, EPA is 
specifying which units will receive revised allocations, how EPA will 
obtain the additional allowances used for the revised allocations, and 
what will be the amount of each unit's revised allocation. For the 
reasons discussed below, EPA proposes to revise the allocations for 
units discussed in section II.A of today's preamble. To provide the 
revised allocations, EPA proposes to use first allowances that were 
allocated initially to units that EPA has subsequently determined are 
not NOX Budget units and therefore not subject to the 
Federal NOX Budget Trading Program. If an insufficient 
amount of allowances are available from such units, EPA proposes to 
then use allowances from the compliance supplement pool. This approach 
to obtaining allowances for the revised allocations is discussed in 
section II.B. In section II.C, EPA proposes the amount of each unit's 
revised allocation.
    The specific rule revisions necessary to implement the above-
described approach are discussed in section II.D of today's preamble. 
EPA is proposing to revise Appendices A and B to part 97 in order to 
include revised allocations for the units identified in section II.A 
and remove allocations for some other units that EPA has previously 
determined not to be NOX Budget units. EPA is also proposing 
changes to Sec. 97.43 (compliance supplement pool provisions) in order 
to provide, where necessary, allowances that supplement the allocation 
change proposed in Appendix A or B.
    Further, EPA is proposing revisions to Sec. 97.42 (allocation 
procedures) to provide the Administrator general authority to issue 
orders to correct other units' allocations, where appropriate, using 
allowances allocated initially to units determined not to be 
NOX Budget units. EPA is also proposing revisions to 
Sec. 97.43 to provide the Administrator general authority to issue 
orders to correct units' allocations, where appropriate, using 
allowances from the compliance supplement pool.
    EPA has not considered, and is not requesting comment on, any other 
changes to part 97 or the January 2000 final rule. This proposal is 
limited to changes to part 97 that are necessary either: to correct the 
allocations for the units specifically identified here; or to provide 
the Administrator general authority to address similar allocation-
quantity issues that may arise in the future.

A. Rationale for Proposing To Revise Units' Allocations

    The units for which EPA is proposing revised allocations are 
discussed below.
1. ``Stranded'' Units
    EPA is proposing revised allocations for a group of identified 
units referred to here as ``stranded'' units. These are units that 
commenced operation after May 1, 1995 and before May 1, 1997. In the 
October 21, 1998 proposed rule for the Federal NOX Budget 
Trading Program (October 1998 proposed rule), EPA did not propose any 
allocations for these units for 2003-2007. See, e.g., 63 FR 56292, 
56377-87 (October 21, 1998). However, the proposed rule included a 
provision that established an allocation set-aside for allocating 
allowances to new units for 2003-2007. New units were the units 
commencing operation ``on or after May 1 of period used to calculate 
[historical] heat input'' for determining allocations for existing 
units for 2003-2007. 63 FR 56347

[[Page 80400]]

(Sec. 97.42(d)). For existing EGUs, the historical heat input for 2003-
2007 allocations was ``the average of the two highest amounts of the 
unit's heat input for the control periods in 1995, 1996, and 1997.'' 
Id. (Sec. 97.42(a)(1)(i)). For existing non-EGUs, the historical heat 
input for 2003-2007 allocations was ``the control period in 1995.'' Id. 
(Sec. 97.42(a)(1)(i)). In light of these provisions, owners of units 
commencing operation on or after May 1, 1995 could reasonably have 
assumed that their units would be treated as new units to be allocated 
allowances under Sec. 97.42(d). They therefore had no reason to be 
concerned about the failure to include their units in the allocations 
tables in the October 1998 proposed rule or in a subsequent Notice of 
Data Availability (64 FR 43124 (September 9, 1999)) requesting comment 
on units' heat input.
    In the January 2000 final rule, EPA changed the periods used for 
historical heat input and the cutoff date for distinguishing between 
existing units receiving allocations under Sec. 97.42(b) or (c) and new 
units receiving allocations under Sec. 97.42(d). For purposes of 2003-
2007 allocations, new units are defined as units commencing operation 
on or after May 1, 1997. 40 CFR 97.42(d). Consequently, the final rule 
makes units commencing operation on or after May 1, 1995 but before May 
1, 1997 ineligible for the allocation set-aside.
    However, as in the proposed rule, such units are still not listed 
as existing units with allocations in Appendix A or B in the January 
2000 final rule. EPA has identified three such units: Unit 0B7, plant 
00003, Union Carbide--South Charleston Plant, Kanawha County, West 
Virginia; and the Package Boiler at Weyerhaeuser Paper Company 
Plymouth, plant 0069, Martin County and Power Boiler No. 2 at 
Weyerhaeuser Paper Company New Bern Mill, plant 0104, Craven County in 
North Carolina. As noted above, the owners of such units had no reason 
to comment on the absence of their units in EPA's notices requesting 
comment on allocations or heat input data. Under these circumstances, 
EPA believes that the owners did not have a reasonable opportunity to 
comment on the lack of allocations for their units. Therefore, EPA 
proposes to provide allocations for these units.
    In addition, there is another unit with circumstances analogous to 
those of the ``stranded'' units. SEI Birchwood, plant 12 (Birchwood) 
commenced operation after the ozone season in 1996 and so would have 
been a new unit under the October 1998 proposed rule. Subsequently, in 
the Notice of Data Availability, EPA requested comment on heat input 
data provided by the State of Virginia on Birchwood for 1996-1998. 
These data turned out to be erroneous. The owners had little or no 
reason to comment on the data since, under the October 21, 1998 
proposed rule, the unit seemed to be a new unit that would receive 
allocations under Sec. 97.42(d) based on maximum design heat input, not 
any actual heat input data. 40 CFR 97.42(d)(3) and (4). Under these 
circumstances, EPA believes that, as in the case of the ``stranded'' 
units, there was not a reasonable opportunity for the Birchwood owners 
to comment. Therefore, EPA proposes to provide allocations for this 
unit as well.
2. West Virginia Non-EGUs
    EPA is also proposing revised allocations for the non-EGU units in 
West Virginia. One of these units (Unit 006, plant 00001, Elkem Metals 
Company--Alloy L.P. Plant in Fayette County, West Virginia (Elkem 
Metals)) was allocated 58 allowances in the October 1998 proposed rule. 
Subsequently, EPA received comments from a State agency mistakenly 
indicating that the unit had a significantly higher heat input than the 
heat input on which the proposed allocation was based. The owners of 
the non-EGUs in West Virginia did not realize that erroneous data had 
been submitted and so did not submit comments on the data. Unaware that 
the data was erroneous, EPA increased the unit's allocation to 701 
allowances and adjusted downward the allocations for the other non-EGUs 
in West Virginia so that the total non-EGU allocations would not exceed 
the non-EGU budget for the State. As a result, the allocations for West 
Virginia non-EGUs were distorted, with Elkem Metals receiving a 
significantly overstated allocation and the other non-EGUs receiving 
significantly understated allocations.
    However, the owners of all of the units affected by the erroneous 
data, including the owner of the unit with the overstated allocation, 
agree on what are the correct data and the correct resulting 
allocations. Further, one ``stranded'' non-EGU in West Virginia 
(discussed above) did not receive any allowances. EPA therefore 
proposes to revise the non-EGU allocations in West Virginia to correct 
these errors.
3. Blue Ridge Paper Products Company, Riley Bark Boiler, Plant 0159
    EPA is proposing revised allocations for the Blue Ridge Paper 
Products Company, Riley Bark Boiler, Plant 0159 in Haywood County, 
North Carolina. The unit burns primarily coal, supplemented by some 
bark, and so qualifies as a fossil fuel fired unit. The unit's prior 
owner submitted comments in hardcopy and in electronic format to EPA. 
The comments stated that the unit was fossil fuel fired, and thus a 
NOX Budget unit, and that the unit had been erroneously 
excluded from the non-EGU inventory for North Carolina.
    However, the hardcopy and electronic versions of the comments were 
inconsistent. The electronic version indicted that the unit burned 
primarily bark, which would mean the unit would not actually qualify as 
fossil fuel fired, while the hardcopy version indicated that the unit 
burned primarily coal, which would mean the unit would quality as 
fossil fuel fired. Apparently for this reason, EPA misinterpreted the 
comments and did not include the unit in allocations in either the 
October 1998 proposed rule or the January 2000 final rule and thereby 
allocated zero allowances for the unit. EPA therefore proposes to 
provide allocations for the unit.
4. Michigan State University, Unit 0056, Plant K3249
    EPA is proposing revised allocations for Michigan State University, 
Unit 0056, Plant K3249 in Ingham County, Michigan (Michigan State). In 
the October 1998 proposed rule, EPA allocated 168 allowances to the 
unit. Subsequently, EPA received comments from the State of Michigan 
and attached comments from Michigan State University. The comments 
replaced the information on the unit's NOX emissions for 
1995 with blanks and suggested using 1997 information on the unit 
instead. EPA misinterpreted the comments as indicating that the unit 
was not operating at all. EPA allocated the unit zero allowances in the 
January 2000 final rule. EPA therefore proposes to provide allocations 
for the unit.

B. Proposed Sources of NOX Allowances for Revised 
Allocations

    This section discusses the proposed sources of NOX 
allowances for revised allocations for the units identified above. EPA 
maintains that, to ensure that the overall environmental goals of the 
section 126 rulemaking are met and to provide finality concerning the 
State EGU and non-EGU budgets set by EPA rulemakings,\2\ the quantity 
of NOX

[[Page 80401]]

emissions allowed from all units in a particular State should not 
change under today's proposed rule from the amount allowed from such 
units under the January 2000 final rule. Therefore, the proposed rule 
revisions must revise the identified units' allocations in a way that 
holds constant the total number of allowances available in each State.
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    \2\ The State EGU and non-EGU budgets are the result of 
extensive rulemaking proceedings. See, e.g., 62 FR 60318 (November 
7, 1997) (proposing State EGU and non-EGU budgets), 63 FR 57356 
(October 27, 1998) (setting EGU and non-EGU budgets), 63 FR 71220 
(December 24, 1998) (extending comment period on EGU and non-EGU 
budgets), 64 FR 26298 (May 14, 1999) (technical amendment to EGU and 
non-EGU budgets in response to comments), 65 FR 11222 (March 2, 
2000) (second technical amendment to EGU and non-EGU budgets in 
response to comments).
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    Under the January 2000 final rule, allowances may be allocated to 
units in a State from several pools of allowances: a pool consisting of 
95% of the State EGU or non-EGU budget and used for allocations to 
existing units in Appendix A or B; a pool (the allocation set-aside) 
consisting of 5% of the State EGU and non-EGU budgets used for 
allocations to new units; and the compliance supplement pool for the 
State established to address electric reliability concerns. Part 97 
includes provisions addressing allocations from each of these pools of 
allowances. In today's rulemaking, EPA is considering using allowances 
from one or more of these pools to provide revised allocations for the 
units identified in today's proposal.
    With regard to the West Virginia non-EGUs (including one of the 
``stranded'' units), EPA believes that the revised allocations can be 
implemented by redistributing among the units the allowances allocated 
to West Virginia non-EGUs in Appendix B of the January 2000 final rule. 
EPA is proposing today such a redistribution of the allowances for West 
Virginia non-EGUs.
    For the remaining units identified as warranting revised 
allocations (i.e., two ``stranded'' units and the Birchwood, Blue 
Ridge, and Michigan State units), EPA is proposing today to use the 
allowances that were allocated in the January 2000 final rule to other 
units subsequently determined not to be NOX Budget units. To 
the extent an insufficient amount of allowances are available from such 
non-NOX Budget units, EPA is proposing to use allowances 
from the compliance supplement pool.
1. Sources of A allowances Under Part 97
    The discussion below summarizes the existing provisions of part 97 
that establish several pools of allowances that may be allocated to 
units.\3\
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    \3\ This background information is for the convenience of the 
reader to understand better the proposed revisions in sections 
II.B.2, C, and D below. EPA is not reconsidering or requesting 
comment on any of the provisions of part 97, except to the extent 
discussed in the proposals in sections II.B.2, C, and D.
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    a. Allocations in Appendices A and B to part 97. First, part 97 
establishes pools consisting of 95% of the State EGU or non-EGU budgets 
respectively and uses these allowances for allocations to existing 
units each year during 2003-2007, as listed in Appendices A and B. 
Section 97.42(b) and (c) set forth the procedures for determining 
allocations from the pools for EGUs and non-EGUs respectively. See 40 
CFR 97.42(b)(2) and (c)(2) (providing for adjustment of unit 
allocations to ensure that the total amount of allocations equal 95% of 
the EGU or non-EGU budget for the State). Further, Sec. 97.42(g) 
establishes procedures for handling allocations provided in Appendix A 
or B to a recipient that is not actually a NOX Budget unit 
and that therefore is not subject to part 97.\4\ In particular, if the 
Administrator determines that the recipient is not a NOX 
Budget unit, the Administrator will not generally record in the 
NOX Allowance Tracking System the recipient's allocation 
listed in Appendix A or B. 40 CFR 97.42(g)(1)(i). Instead, the 
Administrator will transfer the unrecorded allowances to the allocation 
set-aside for new units for the State. 40 CFR 97.42(g)(2).
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    \4\ As discussed in section II.D.1 below, EPA has issued letters 
determining that 31 units allocated allowances in Appendix A or B to 
part 97 are not actually NOX Budget units and that the 
allowances will therefore not be recorded. Generally, a unit was 
misidentified as a NOX Budget unit due to an error 
concerning the size, type, fuel, or location of the unit.
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    b. Allocation Set-Aside. A second pool of allowances established by 
part 97 is the allocation set-aside, consisting of 5% of the sum of the 
State EGU and non-EGU budgets. 40 CFR 97.42(d)(1). As noted above, the 
rule uses the allocation set-aside to allocate allowances to new units, 
i.e., units that began operating after the period whose heat input 
values are used to allocate to existing units under Sec. 97.42(b) or 
(c). New units are initially allocated allowances year-by-year based on 
the unit's maximum design heat input. 40 CFR 97.42(d)(3) and (4). After 
the ozone season, the Administrator deducts an amount of allowances 
equal to the difference between the initial allocation and an 
allocation based on the unit's actual ozone season heat input. 40 CFR 
97.42(e)(1). The deducted allowances are transferred back to the 
allocation set-aside, whose unallocated allowances are distributed to 
the existing units. 40 CFR 97.42(e)(2) and (f).
    c. Compliance Supplement Pool. The third pool of allowances 
established by part 97 is the compliance supplement pool, as set forth 
for each State in Appendix D to part 97. Compliance supplement pool 
allowances may be used in 2003 or 2004 to meet the requirement to hold 
allowances at least equal to NOX emissions. These allowances 
expire after 2004. 40 CFR 97.43(c)(7). The purpose of the compliance 
supplement pool is to provide additional allowances above and beyond 
the State EGU and non-EGU budgets for 2003 and 2004 for units ``that 
are unable to meet the compliance deadline'' during those years. 63 FR 
57356, 57428 (October 27, 1998) (explaining purpose of pool in 
NOX SIP call); see also 64 FR 28250, 28310 (May 25, 1999) 
(adopting pool in Federal NOX Budget Trading Program for 
same reasons as in NOX SIP call). EPA explained that it 
believed that the compliance deadline is feasible without the 
compliance supplement pool. However, the additional allowances in this 
pool will ensure that any unit unable to install NOX control 
equipment (e.g., because of concerns for electric reliability during a 
shutdown for installation) in the first two years of the Federal 
NOX Budget Trading Program are able to obtain allowances 
until they can install the equipment. See 63 FR 57428.
    Owners and operators of units that reduce the units' NOX 
emissions below a specified level after 2000 and before 2003, the year 
when the control requirements of the Federal NOX Budget 
Trading Program first take effect, may apply for compliance supplement 
pool allowances. 40 CFR 97.43(a). Owners and operators of units in the 
Ozone Transport Commission NOX Budget Program may also apply 
for compliance supplement pool allowances to the extent the units have 
banked allowances for 2000 or 2001 under that program. 40 CFR 97.43(b). 
Although the compliance supplement pool is distributed to units with 
early reductions or with banked allowances under the Ozone Transport 
Commission NOX Budget Trading Program, units ``that need 
extra allowances for compliance will have access to them through the 
allowance market.'' 65 FR 2714; see also Responses to Significant 
Comments on the Proposed Findings of Significant Contribution and 
Rulemaking on Section 126 Petitions for Purposes of Reducing Interstate 
Ozone Transport, Docket No. A-97-43, XI-C-01 (December 1999) (Response 
to Comment for January 2000 rule), section II.F.1 at 65 (stating that 
any unit unable to install controls by 2003 ``may buy allowances from 
other sources'' and therefore

[[Page 80402]]

rejecting claim that ``additional allowances [e.g., compliance 
supplement pool allowances] * * * need to be distributed via a 
mechanism other than the allowance market to ensure that all sources 
will be in compliance'').
    If the total amount of compliance supplement pool allowances 
requested for units in a State exceeds the total amount of allowances 
in the State's compliance supplement pool, the Administrator adjusts 
the amounts allocated so that the allocations are limited by the amount 
in the pool. 40 CFR 97.43(c)(4). If the total amount requested is less 
than the amount in the pool, the unrequested amount is not allocated to 
any unit.
2. Proposed Approach for Obtaining Allowances for Units' Revised 
Allocations
    EPA's general approach to obtaining allowances for revised 
allocations is to adopt a methodology that will result in the least 
disruption to the Federal NOX Budget Trading Program, while 
maintaining unchanged the environmental benefits of the program. In 
particular, EPA believes it should minimize the disruption to 
NOX Budget units not involved in the issues giving rise to 
the need for revised allocations.
    a. Proposed Approach for West Virginia Non-EGUs. Since the issues 
concerning the West Virginia non-EGUs (including one ``stranded'' unit) 
involve the entire West Virginia non-EGU budget sector, EPA proposes to 
obtain allowances for the non-EGUs' revised allocations by 
redistributing the allocations for that sector. The redistribution will 
not affect any units other than those needing revised allocations. 
Further, the redistribution is the least disruptive approach for 
revising the units' allocations. In fact, since the owners of all the 
West Virginia non-EGUs have agreed on the amounts of the revised 
allocations for the units, the owners could have accomplished this 
redistribution on their own at any time, simply by using the 
unrestricted trading allowed under the Federal NOX Budget 
Trading Program to transfer allowances among the units. Nonetheless, 
EPA is proposing to redistribute the allocations, as requested by the 
owners, through today's rulemaking.
    b. Proposed approach for other units. For the other units 
identified above, EPA is proposing to use first the allowances that 
were allocated in the January 2000 final rule to units that EPA 
subsequently determined not to be NOX Budget units. To the 
extent an insufficient amount of allowances are available from such 
non-NOX Budget units, EPA proposes to use allowances from 
the compliance supplement pool.
    If the two ``stranded'' units \5\ and the Birchwood, Blue Ridge, 
and Michigan State units had been provided the proper number of 
allowances in the January 2000 final rule, the allocations for all 
units in their respective budget sectors in their respective States 
would have been affected. This is because, under Sec. 97.42(b) and (c), 
each existing unit is allocated its proportionate share of the budget 
for its respective sector (EGU or non-EGU) for its respective State. 
For example, allocations for an EGU in a given State are determined by: 
multiplying an emission rate (0.15 lb/mmBtu) times each unit's 
historical heat input; totaling the results for all EGUs in the State; 
and adjusting each EGU's allocation proportionately until the total 
number of allowances allocated to the EGUs in the State equals 95 
percent of the State's EGU budget. Non-EGU allocations are determined 
in the same way except that the emission rate (0.17 lb/mmBtu) is 
different and the allocations must equal 95 percent of the non-EGU 
budget.
---------------------------------------------------------------------------

    \5\ The third ``stranded'' unit is a West Virginia non-EGU, 
whose revised allocation is addressed above in section II.B.2.a of 
this preamble.
---------------------------------------------------------------------------

    One approach to providing revised allocations for the ``stranded'', 
Birchwood, Blue Ridge, and Michigan State units would be to recreate 
the allocations that would have resulted if those units had been 
properly handled in the January 2000 rule. This would require 
reallocating allowances for each, entire budget sector (i.e., the EGU 
or non-EGU sector for a given State) that includes one or more of these 
five units. EPA believes that approach would result in disruption of 
the Federal NOX Budget Trading Program, and for the units in 
the program, far out of proportion to the scope of the problem. 
Consequently, EPA is proposing an approach that appears to be less 
disruptive to the Federal NOX Budget Trading Program and the 
units in the program.
    i. Use of allocations to non-NOX Budget units. EPA 
believes that using allowances that were allocated mistakenly under the 
January 2000 final rule to units that were not actually NOX 
Budget units is the least disruptive method of providing allowances for 
the revised allocations.\6\ Appendices A and B of the January 2000 
final rule list the allocations for specific units thought to be 
NOX Budget units. Under Sec. 97.42(g)(1)(i), if EPA 
subsequently determines that any unit in Appendix A or B is not 
actually a NOX Budget unit, the Administrator will not 
record the listed allocations in an account for the unit. Instead, the 
Administrator will record the allocations in the allocation set-aside 
for new units in the State in which the unit is located, in addition to 
the 5 percent of the EGU and non-EGU budgets already comprising the 
set-aside. 40 CFR 97.42(g)(2).
---------------------------------------------------------------------------

    \6\ See n.3.
---------------------------------------------------------------------------

    In establishing this mechanism for correcting allocations to non-
NOX Budget units, EPA stated that it expected that such 
allocations would occur ``rarely, if ever.'' 65 FR 2707. Obviously, 
EPA's intent was not to make errors resulting in allocations to non-
NOX Budget units. Since the mechanism for correcting such 
errors was expected to be rarely needed, owners and operators of new 
units had no reasonable expectation that the mechanism would ever be 
used and that any incorrectly allocated allowances would be added to 
the allocation set-aside. Consequently, EPA believes that revising 
NOX Budget units' allocations using allowances erroneously 
allocated to non-NOX Budget units is the approach that is 
the least disruptive of reasonable expectations of owners and operators 
and, thus, of compliance planning for NOX Budget units.
    ii. Use of compliance supplement pool allowances. EPA believes 
that, to the extent the number of allowances available from non-
NOX Budget units in a State under Sec. 97.42(g) is 
insufficient to cover the revised allocations for the units in the 
State, the compliance supplement pool for the State represents the next 
least disruptive source for obtaining the remaining allowances needed 
for revised allocations.\7\ As discussed above, the purpose of the 
compliance supplement pool is to make available allowances in addition 
to the EGU and non-EGU budget amounts so any units unable to install 
NOX emission controls by 2003 can buy additional allowances 
in the market to help meet the requirement to hold allowances equal to 
emissions. 63 FR 57428 and 65 FR 2714; see also Response to Comment for 
January 2000 rule, section II.F.1 at 65.
---------------------------------------------------------------------------

    \7\ As discussed below, EPA presently anticipates that it will 
need to use compliance supplement pool allowances only for the 
Birchwood unit and that allocations for non-NOX Budget 
units will be sufficient to provide the revised allocations for the 
other identified units. However, EPA proposes to use the compliance 
supplement pool whenever allocations to non-NOX Budget 
units are insufficient to provide the full amount of the revised 
allocations determine to be appropriate for a unit.
---------------------------------------------------------------------------

    Under the January 2000 final rule, this purpose is accomplished by 
distributing the compliance supplement pool allowances to owners and 
operators of

[[Page 80403]]

units that make NOX emission reductions before the 2003 
compliance date for the Federal NOX Budget Trading Program. 
See 40 CFR 97.43(a) and (b) (requirements for early reductions or for 
banked allowances in the Ozone Transport Commission NOX 
Budget Program) and 97.43(c) (procedure for distributing compliance 
supplement pool).
    EPA believes that using allowances from the compliance supplement 
pool for revised allocations to the ``stranded'', Birchwood, Blue 
Ridge, and Michigan State units is consistent with the purpose of the 
compliance supplement pool. Whether the recipients of compliance 
supplement pool allowances are units that made early reductions or are 
units receiving revised allocations, these allowances still represent 
an increase in the total supply of allowances beyond the State EGU and 
non-EGU budgets. While the ``stranded'', Birchwood, Blue Ridge, and 
Michigan State units are NOX Budget units and so will need 
to use some allowances to cover emissions, this would be true whether 
or not the units receive revised allocations from the compliance 
supplement pool. Thus, the use of compliance supplement pool allowances 
to provide revised allocations represents a real increase in the total 
supply of allowances. Any units that need allowances for compliance 
will have greater access to allowances for purchase due to the 
increased supply in the market, regardless of who initially receives 
allowances from the compliance supplement pool.
    EPA notes that compliance supplement pool allowances are only 
available for two years (2003 and 2004), after which unused compliance 
supplement pool allowances expire. The revised allocations for the 
``stranded'', Birchwood, Blue Ridge, and Michigan State units are for 
five years (2003-2007). Some of the compliance supplement pool 
allowances used to provide revised allocations may expire before the 
year for which the units may need them for compliance. However, this 
should not pose a problem since the owners and operators of those units 
will, to the extent necessary for compliance, be able to sell their 
compliance supplement pool allowances in the allowance market and buy 
other allowances that will not expire.\8\
---------------------------------------------------------------------------

    \8\ EPA notes that part 97 integrates the allowance markets 
under the Federal NOX Budget Trading Program and under 
any approved State NOX Budget Trading Program by allowing 
units in the two programs to trade allowances. See 40 CFR 97.2 
(defining ``NOX allowance'' to include allowances issued 
under approved State programs).
---------------------------------------------------------------------------

    EPA recognizes that using some of the compliance supplement pool 
allowances for revised allocations reduces the amount of allowances 
potentially available for early reductions. However, the purpose of the 
compliance supplement pool is not to reward early reductions but rather 
is to increase the total supply of allowances to ensure units meet the 
2003 compliance deadline. EPA provided credit for early reductions 
``merely as a mechanism for managing the [compliance supplement pool], 
not as an independent program with a purpose separate from that of the 
[compliance supplement pool]''. State of Michigan v. EPA, 213 F.3d 663, 
694 (D.C. Cir. 2000). Further, EPA believes that the potential for 
reduced availability (as a result of today's proposal) of compliance 
supplement pool allowances for early reductions should be balanced 
against the fact that, as discussed below, using other sources of 
allowances for revised allocations would be more disruptive to the 
Federal NOX Budget Trading Program and other units.
    In particular, using allowances from the new-unit allocation set-
aside or reallocating to all units in the respective budget sectors of 
the ``stranded'', Birchwood, Blue Ridge, and Michigan State units would 
be significantly more disruptive to the Federal NOX Budget 
Trading Program and other units than using compliance supplement pool 
allowances. The allocation set-aside plays the important role of 
integrating new units into the Federal NOX Budget Trading 
Program. 65 FR 2705 The set-aside is the sole source of allowances for 
allocating to new units until such units are treated as existing units 
in future allocation updating. EPA set the size of the allocation set-
aside at 5 percent of the EGU and non-EGU budgets so that the pool 
would be large enough to accommodate all new sources. Id. EPA also 
decided to distribute the set-aside each year to all new units whose 
owners and operators request allocations by January 1 of that year, 
rather than distributing the set-aside on a first-come, first-served 
basis because the former approach is likely to ensure that each new 
unit receives at least some allowances. 65 FR 2706. EPA is concerned 
that using the allocation set-aside for revised allocations for 
existing units would likely reduce the allocation made to each new 
unit.
    Further, EPA believes that the most disruptive approach for 
obtaining allowances for revised allocations would be to reallocate to 
all units in the respective State EGU or non-EGU budget sector for the 
``stranded'', Birchwood, Blue Ridge, or Michigan State units. As 
discussed above, reallocation would likely change the allocation for 
every unit in the State budget sector. This would result in disruption 
of the Federal NOX Budget Trading Program and for other 
units far out of proportion to the need to obtain allowances for five 
units.
    In summary, EPA must balance several considerations in deciding 
whether to use compliance supplement pool allowances for revised 
allocations. On one hand, using such allowances will make fewer 
allowances potentially available for early reductions. On the other 
hand, this use of compliance supplement pool allowances is consistent 
with the pool's purpose of increasing the supply of allowances to 
ensure that units will be able to meet the 2003 compliance deadline. 
Further, the impact of using compliance supplement pool allowances for 
revised allocations will be limited because these allowances will be 
used only to the extent that the allocations to non-NOX 
Budget units are insufficient to implement revised allocations. 
Finally, the alternative approaches to obtaining allowances would be 
more disruptive to the Federal NOX Budget Trading Program 
and other units. On balance, EPA believes that the use of compliance 
supplement pool allowances is the best approach (after using the non-
NOX Budget unit allocations) for obtaining allowances in the 
limited cases where revised allocations are warranted.
    EPA therefore proposes this approach. However, EPA requests comment 
on alternative approaches discussed above.

C. Proposed Amounts of Allowances for Units' Revised Allocations

    EPA proposes to use, as revised allocations for the West Virginia 
non-EGUs (including one ``stranded'' unit), the allocations requested 
by the owners of those units in the request for administrative stay and 
petition for reconsideration submitted to EPA on May 1, 2000. (EPA 
intends to respond directly to the request for administrative stay, 
apart from today's action.) All of the owners for West Virginia non-
EGUs--including the owner of the unit that received a significantly 
overstated allocation in the January 2000 final rule--agree on the 
amounts of the allocations and the total of those allocations equals 
the West Virginia non-EGU budget. Under these circumstances, EPA 
believes that the requested allocations should be used as the revised 
allocations in today's proposal.

[[Page 80404]]

    Further, EPA proposes to calculate the revised allocations for two 
``stranded'' units and the Birchwood, Blue Ridge, and Michigan State 
units by using the average emission rate underlying the allocations for 
the respective unit's State budget sector (EGUs or non-EGUs) in 
Appendix A or B in the January 2000 final rule. As discussed above, the 
allocations to each EGU in Appendix A are calculated by multiplying the 
unit's historical heat input by an initial average emission rate (0.15 
lb/mmBtu) and then adjusting the results so that the total of the 
allocations to all EGUs in the unit's State equals 95 percent of the 
State EGU budget. As a result of the latter adjustment, all EGU 
allocations for the State have the same underlying average emission 
rate that, when multiplied by each unit's respective historical heat 
input, equals the unit's allocation. The same is true for non-EGUs 
except that the initial average emission rate is 0.17 lb/mmBtu, total 
non-EGU allocations for a State equal 95 percent of the State's non-EGU 
budget, and the underlying average emission rate for all non-EGUs' 
allocations in the State may differ from that for EGUs' allocations in 
that State.
    In calculating allocations for the ``stranded'', Birchwood, Blue 
Ridge, and Michigan State units, EPA proposes to use the underlying 
average emission rate for units in the State budget sector in the same 
State as the respective unit. EPA proposes to multiply each unit's 
historical heat input by the appropriate underlying average emission 
rate. Each unit's historical heat input is the heat input for the 
period set forth in Sec. 97.42(a) and is supported by documentation 
submitted to EPA. The supporting documentation is generally heat input 
data routinely submitted to the State or routinely recorded by the 
owners and operators. See 40 CFR 97.42(a) (establishing 1995-1998 as 
the historical period for 2003-2007 allocations). This approach ensures 
that the ``stranded'', Birchwood, Blue Ridge, and Michigan State units 
are allocated allowances on the same basis as units in the each 
respective State budget sector. See Memorandum on Calculation of 
Revised Allocations (showing how the revised allocations are calculated 
and attaching the supporting documentation of the heat input data).

D. Proposed Changes to Regulatory Text

    This section discusses the proposed revisions to the language of 
specific sections of part 97. EPA is not considering, and is not 
requesting comment on, any other changes to these sections or to part 
97 in general.
1. Appendices A and B Revisions
    EPA is proposing several rule revisions to implement the above-
described revised allocations and approach for obtaining allowances for 
those allocations. First, EPA is proposing to revise Appendices A and B 
to part 97 in order to include revised allocation amounts for the 
identified units and remove allocations for some other units that EPA 
has previously determined not to be NOX Budget units. In 
addition, when Appendix A or B incorrectly references an identified 
unit or fails to list the unit at all, EPA is proposing correction of 
these errors.
    Specifically, EPA proposes to revise Appendix A to increase the 
allocation listed in Appendix A for the Birchwood unit, as discussed 
above. Because Appendix A erroneously shows 2 units at Birchwood, 
rather than only 1 unit, the revision also corrects that error.
    In addition, EPA proposes to remove from Appendix A each of the 4 
units that EPA has previously determined not to be a NOX 
Budget unit. Under Sec. 97.42(g), the Administrator may determine that 
a unit allocated allowances in Appendix A or B does not meet the 
applicability requirements in Sec. 97.4 and so is not actually a 
NOX Budget unit. In response to requests for such 
determinations, EPA has issued letters finding that 4 units listed in 
Appendix A are not NOX Budget units and will not have 
allocations recorded in their accounts. Each letter provided a 30-day 
period, after the letter's issuance date, for submission of any 
objections. Since no objections were submitted, the determinations in 
the letters are final. EPA proposes to reflect these final 
determinations in revisions of Appendix A removing the 4 units and 
their allocations.
    With regard to Appendix B, EPA specifically proposes to increase 
the allocations for all but one of the West Virginia non-EGUs (while 
reducing the allocation for one West Virginia non-EGU) and for the Blue 
Ridge and Michigan State units as discussed above. Errors in the 
reference in Appendix B to the Blue Ridge unit will also be corrected. 
Further, EPA proposes to add the ``stranded'' units, and allocations 
for them, to Appendix B. Moreover, EPA proposes to remove, from 
Appendix B, 27 units previously determined not to be NOX 
Budget units and their allocations. As with the Appendix A units 
determined to be non-NOX Budget units, EPA determined by 
letter that the units' allocations should not be recorded. Since no 
objections to the letters were submitted, the determinations in the 
letters are final. The proposal merely reflects, in regulatory text, 
these determinations.
2. Section 97.42(g) Revisions
    EPA is also proposing revisions to Sec. 97.42 (allocation 
procedures) that will authorize the Administrator to issue orders 
correcting other units' allocations, where correction is warranted, 
using allowances allocated to units determined not to be NOX 
Budget units. Under the proposed revisions, the Administrator may 
determine that the number of allowances actually allocated to an 
existing NOX Budget unit for 2003-2007 in Appendix A or B is 
less than the number of allowances provided under Secs. 97.42(a) 
through (d) and that equitable considerations warrant correction of 
such unit's allocation. The Administrator may also determine that the 
number of allowances actually allocated to a new NOX Budget 
unit for 2003-2007 or to any NOX Budget unit for 2008 or 
thereafter, using procedures in Secs. 97.42(a) through (d), is less 
than the number of allowances provided under Secs. 97.42(a) through (d) 
and that equitable considerations warrant correction of such unit's 
allocation. Moreover, in the order, the Administrator may determine 
that allowances mistakenly allocated to non-NOX Budget units 
located in the same State as the unit will be used to supplement, and 
thereby correct, the unit's actual allocation. EPA proposes that, in 
issuing such order, the Administrator will explain the reasons why the 
allocation should be corrected, will provide an opportunity for 
submission of objections, and may modify the order based on submitted 
objections. EPA intends to provide notice of each order in the Federal 
Register, and any person may submit objections to the order. The use of 
orders--rather than rule revisions--to make unit-specific allocations 
from allocations to non-NOX Budget units (or, as discussed 
below, from the compliance supplement pool) will allow for much more 
expeditious correction of a unit's allocations where correction is 
warranted and still provide opportunity for interested parties to 
submit objections.
3. Section 97.43 Revisions
    For all but one of the units proposed in today's action to receive 
revised allocations, EPA believes that the above-discussed revisions to 
Appendices A and B will provide the full amount of the proposed 
additional allowances. However, for the Birchwood unit (located in 
Virginia), there are insufficient llowances available from

[[Page 80405]]

allocations in Appendix A or B to non- NOX Budget units in 
Virginia to provide to the Birchwood unit the full amount of allowances 
in the proposed revised allocation. EPA is therefore proposing to 
revise Sec. 97.43 to add a new paragraph (c)(9) that will specifically 
allocate to the Birchwood unit in Virginia 725 allowances from the 
Virginia compliance supplement pool. The new provisions also address 
the interaction of this unit-specific allocation with other provisions 
of the rule concerning compliance supplement pool allowances. For 
example, the new provision addresses the recording of such allowances 
and the ability to use the allowances for compliance, and the effect of 
the unit-specific allocation on the number of allowances available in 
the Virginia compliance supplement pool for allocation to other units.
    In addition, EPA proposes to revise Sec. 97.43 to add a new 
paragraph (d) that will authorize the Administrator to issue orders 
determining that the number of allowances allocated in Appendix A or B 
(or using Secs. 97.42(a) through (d) procedures) for a unit is less 
than the number of allowances provided under Secs. 97.42(a) through (d) 
and that equitable considerations warrant correction of such 
allocation. The Administrator may further determine in the order that 
allowances in the compliance supplement pool of the State where the 
unit is located will be used to supplement, and thereby correct, the 
unit's allocation. EPA also proposes that, in issuing such order, the 
Administrator will explain the reasons why the allocation should be 
corrected and provide an opportunity for submission of objections and 
may modify the order based on submitted objections. EPA intends to 
provide notice of each order in the Federal Register, and any person 
may submit objections to the order. In addition, EPA proposes to 
provide notice in the Federal Register of any resulting reduction in 
the amount of allowances in the State compliance supplement pool that 
remain available for allocation for early reductions or for banked 
allowances from the Ozone Transport Commission NOX Trading 
Program.
    While the above-described proposed revisions adding a new 
Sec. 97.43(d) are aimed at providing general authority to issue orders 
using the compliance supplement pool to correct a unit's allocations, 
EPA requests comment on using this general provision to issue such an 
order to the Birchwood unit, instead of using the proposed, unit-
specific revisions in new Sec. 97.43(c)(9) (discussed above) that add 
to the rule itself the allocation from the Virginia compliance 
supplement pool to the Birchwood unit. It may be preferable to avoid 
adding a permanent rule provision dealing only with the Birchwood unit 
and instead to accomplish the allocation by order under the proposed 
general authority proposed to be added in Sec. 97.43(d).
    In order to provide for this alternative approach to allocating 
Virginia compliance supplement pool allowances to the Birchwood unit, 
EPA is including, in a separate portion of the docket of today's 
proceeding, a draft order proposing to allocate 725 allowances from the 
Virginia compliance supplement pool to the Birchwood unit. EPA requests 
comment on the draft order and will provide upon request an opportunity 
for a conference on the draft order. If, after considering public 
comment on the proposed general authority provision in Sec. 97.43(d) 
and on the draft order for the Birchwood unit, EPA decides to issue a 
final rule establishing such general authority, the Agency may also 
issue a final order allocating allowances from the Virginia compliance 
supplement pool to the Birchwood unit, instead of adopting the unit-
specific revisions of Sec. 97.43(c)(9). In light of the opportunity for 
comment on the draft letter in today's proceeding, EPA may issue the 
final order without further opportunity to submit objections. EPA also 
requests comment on this alternative approach to implementing the 
additional allocation for the Birchwood unit.
III. Administrative Requirements
    A. Executive Order 12866: Regulatory Impacts Analysis
    Under Executive Order 12866 (58 FR 51735 (October 4, 1993)), the 
Agency must determine whether a 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.
    It has been determined that today's proposed rule is not a 
``significant regulatory action'' under the terms of Executive Order 
12866 and, therefore, is not subject to OMB review.

B. Regulatory Flexibility Act: Small Entity Impacts

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq., as 
amended by the Small Business Regulatory Enforcement Fairness Act 
(SBREFA), Pub. L. No. 104-121, generally requires the Agency to prepare 
a regulatory flexibility analysis of any rule subject to notice and 
comment rulemaking requirements under the Administrative Procedure Act 
or any other statute unless the Agency certifies that the rule will not 
have a significant, economic impact on a substantial number of small 
entities. Such entities include small businesses, small organizations, 
and small governmental jurisdictions.
    In determining whether a rule has a significant, economic impact on 
a substantial number of small entities, the impact of concern is any 
significant, adverse, economic impact on small entities since the 
primary purpose of the regulatory flexibility analysis is to identify 
and address regulatory alternatives ``which minimize any significant, 
economic impact of the proposed rule on small entities.'' 5 U.S.C. 603 
and 604.
    Today's proposed rule revision is not significant enough to change 
the regulatory burden or economic impact of the existing Federal 
NOX Budget Trading Program rule. Moreover, for virtually all 
NOX Budget units addressed in the proposal, the proposed 
rule either will increase the number of allowances allocated and thus 
will reduce the burden of the program or will not change the number of 
allowances allocated and thus will not change the program burden. To 
the extent the proposed rule will remove certain units from the 
allocation tables, EPA has already issued final orders removing the 
allocations for these units, and the proposed rule has no effect other 
than to update the allocation tables to make them consistent with those 
orders. Only one unit's allocation is reduced by the proposed rule, and 
the owners of that unit, agreeing that the unit's original allocation 
was erroneously overstated, requested EPA to make the reduction. With 
regard to the reduction in the number of allowances in the compliance 
supplement pool available for early

[[Page 80406]]

reductions, the identity of the entities that may qualify in the future 
for early reduction credits is speculative, and there is no reason to 
believe that such entities will include a substantial number of small 
entities.
    For these reasons, I certify that today's proposed rule would not 
have a significant, economic impact on a substantial number of small 
entities.

C. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), P.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, 2 
U.S.C. 1532, the Agency generally must prepare a written statement, 
including a cost-benefit analysis, for any proposed or final rule with 
``Federal mandates'' that may result in the expenditure by State, 
local, and tribal governments, in the aggregate, or by the private 
sector, of $100 million or more in any one year. Section 205 of the 
UMRA generally requires that, before promulgating a rule for which a 
written statement is needed, 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 publishes with the final rule an explanation why that 
alternative was not adopted. Before EPA establishes any regulatory 
requirements that may significantly or uniquely affect small 
governments, including tribal governments, it must have developed under 
section 203 of the UMRA a small government agency plan. The plan must 
provide for notifying potentially affected small governments, 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 regulatory requirements.
    EPA has determined that today's proposed rule does not include a 
Federal mandate that may result in estimated costs of $100 million or 
more to either State, local, or tribal governments in the aggregate, or 
to the private sector in any one year. For the reasons discussed above, 
today's proposed rule revision is not significant enough to change the 
overall regulatory burden or economic impact of the Federal 
NOX Budget Trading Program rule on any parties, including 
State, local or tribal governments. Accordingly, little or no 
additional costs to State, local, or tribal governments in aggregate, 
or to the private sector, will result from the rule as proposed. 
Similarly, EPA has determined that today's rule contains no regulatory 
requirements that might significantly or uniquely affect small 
governments. Thus, today's proposed rule is not subject to the 
requirements of sections 202, 203, or 205 of the UMRA.

D. Paperwork Reduction Act

    Today's proposed revisions to part 97 will not impose any new 
information collection burden subject to the Paperwork Reduction Act 
(44 U.S.C. 3501, et seq.). Today's proposed rule does not change either 
the scope of the units covered by, or the information requirements for 
units under, the Federal NOX Budget Trading Program.
    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 submitted Information Collection Request 
concerning the Federal NOX Budget Trading Program 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.

E. Executive Order 13045: Protection of Children From Environmental 
Health Risks and Safety Risks

    The Executive Order 13045 (62 FR 19885 (April 23, 1997)) applies to 
any rule that the Agency determines: (1) Is ``economically 
significant'' as defined under Executive Order 12866; and (2) concerns 
an environmental health or safety risk that EPA has reason to believe 
may have 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.
    Today's proposed rule is not subject to Executive Order 13045 
because it is not ``economically significant'' as defined under 
Executive Order 12866. Further, EPA does not have reason to believe 
that the environmental health risks or safety risks addressed by this 
action present a disproportionate risk to children.

F. Executive Order 12898: Environmental Justice

    Executive Order 12898 requires that each Federal agency make 
achieving environmental justice part of its mission by identifying and 
addressing, as appropriate, disproportionately high and adverse human 
health or environmental effects of its programs, policies, and 
activities on minorities and low-income populations.
    The proposed rule does not have a disproportionately high and 
adverse human health or environmental effects on minorities and low-
income populations.

G. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255 (August 
10, 1999), requires the Agency to develop an accountable process to 
ensure ``meaningful and timely input by State and local officials in 
the development of regulatory policies that have federalism 
implications.'' ``Policies that have federalism implications'' is 
defined in the Executive Order to include regulations that 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.''
    This proposed rule does not have federalism implications. It 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. Thus, Executive Order 13132 does 
not apply to this rule.
    In the spirit of Executive Order 13132, and consistent with EPA 
policy to promote communications between EPA and State and local 
governments, EPA specifically solicits comment on this proposed rule 
from State and local officials.

[[Page 80407]]

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

    Under Executive Order 13084, the Agency 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 EPA consults 
with those governments. If EPA complies by consulting, Executive Order 
13084 requires EPA to provide to OMB, 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 officials 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 proposed rule will not significantly or uniquely affect the 
communities of Indian tribal governments or impose any direct 
compliance costs on those communities. Accordingly, the requirements of 
section 3(b) of Executive Order 13084 do not apply to this action.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), Pub. L. No. 104-113, section 12(d), 15 U.S.C. 272 
note, directs the Agency 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, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. The NTTAA directs EPA 
to provide Congress, through OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    Today's proposed rule does not involve any technical standards. 
Therefore, EPA is not considering the use of any voluntary consensus 
standards.

List of Subjects in 40 CFR Part 97

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Emissions trading, Intergovernmental relations, 
Nitrogen oxides, Ozone, Ozone transport, Reporting and recordkeeping 
requirements.

    Dated: December 14, 2000.
Carol M. Browner,
Administrator.
    For the reasons set out in the preamble, title 40, chapter I of the 
Code of Federal Regulations is proposed to be amended as follows:

PART 97--FEDERAL NOX BUDGET TRAINING PROGRAM

    1. The authority citation for part 97 continues to read as follows:


    Authority: 42 U.S.C. 7401, 7403, 7426, and 7601.

    2. Section 97.42 is amended by adding two sentences to the end of 
paragraph (g)(2) to read as follows:


Sec. 97.42   NOX allowance allocations.

* * * * *
    (g) * * *
    (2) * * * Notwithstanding the prior sentence, the Administrator may 
instead issue an order allocating such NOX allowances to a 
NOX Budget unit to the extent that he or she determines that 
the number of allowances actually allocated in appendix A or B of this 
part, or under paragraph (b), (c), or (d) of this section, to such unit 
is less than the number of allowances provided under paragraphs (a) 
through (d) of this section and that equitable considerations warrant 
correction of such allocation. In issuing such order, the Administrator 
will explain the reasons why the allocation should be corrected, will 
provide notice and opportunity for submission of objections to the 
order, and may modify the order based on submitted objections.
    3. Section 97.43 is amended by adding paragraphs(c)(9) and (d) to 
read as follows:


Sec. 97.43  Compliance supplement pool.

* * * * *
    (c) * * *
    (9) Notwithstanding paragraphs (c)(3) through (8) of this section
    (i) SEI Birchwood, plant 12, unit 1 in Virginia is allocated 725 
allowances from the Virginia compliance supplement pool;
    (ii) The Administrator will record the allocation under paragraph 
(c)(9)(i) of this section when allocations are recorded under 
Sec. 97.53(a); and
    (iii) The deduction of allowances allocated under paragraph 
(c)(9)(i) of this section and the treatment of such allowances as 
banked allowances shall be governed by paragraphs (d)(4) and (5) of 
this section.
    (d)(1) The Administrator may issue an order allocating 
NOX allowances in the compliance supplement pool that are 
otherwise available for allocations under paragraph (c)(3) or (4) of 
this section to a NOX Budget unit under the following 
circumstances. The Administrator may issue such an order if he or she 
determines that the number of allowances actually allocated in appendix 
A or B of this part, or under Sec. 97.42(b), (c), or (d), to such unit 
is less than the number of allowances provided under Secs. 97.42(a) 
through (d) and that equitable considerations warrant correction of 
such allocation. In issuing such order, the Administrator will explain 
the reasons why the allocation should be corrected, will provide notice 
and opportunity for submission of objections to the order, and may 
modify the order based on submitted objections.
    (2) Notwithstanding paragraph (c)(3) or (4) of this section, the 
number of allowances in the compliance supplement pool for a State 
shall be treated under paragraph (c)(3) or (4) of this section as 
equaling the amount set forth in appendix D of this part for the State 
less the number of allowances allocated from the compliance supplement 
pool for the State to a unit in the State under paragraph (c)(9)(i) of 
this section or in an order under paragraph (d)(1) of this section. 
After issuance of an order under paragraph (d)(1) of this section, the 
Administrator will provide notice in the Federal Register of the 
reduction in the number of NOX allowances in the compliance 
supplement pool for the State that are available for allocation under 
paragraph (c)(3) or (4) of this section.
    (3) The Administrator will record an allocation in an order under 
paragraph (d)(1) of this section as soon as practicable after the 
issuance of the order, taking into account the period for submission of 
objections to the order and any subsequent modifications of the order.
    (4) NOX allowances allocated under paragraph (c)(9)(i) 
of this section or in an order under paragraph (d)(1) of this section 
may be deducted for compliance under Sec. 97.54 for the control period 
in 2003 or 2004. Notwithstanding Sec. 97.55(a), the Administrator will 
deduct as retired any NOX allowance allocated under 
paragraph (c)(9)(i) of this section or in an order under paragraph 
(d)(1) of this section that is not deducted for compliance under

[[Page 80408]]

Sec. 97.54 for the control period in 2003 or 2004.
    (5) NOX allowances allocated under paragraph (c)(9)(i) 
of this section or in an order under paragraph (d)(1) of this section 
are treated as banked allowances in 2004 for purposes of Secs. 97.54(f) 
and 97.55(b).

Appendix A to Part 97 [Amended]

    4. Appendix A to part 97 is amended by:
    a. Removing all entries for ``MI, 491 E. 48TH STREET'', ``MI, JB 
SIMS'', ``NC, CRAVEN COUNTY WOOD ENERGY'', and ``VA, STONE CONTAINER''; 
and
    b. Removing two entries for ``VA, SEI BIRCHWOOD'' and adding in 
their place one entry for ``VA, SEI BIRCHWOOD''.
    The revisions read as follows:

                    Appendix A to Part 97--Final Section 126 Rule: EGU Allocations, 2003-2007
----------------------------------------------------------------------------------------------------------------
                                                                                                  NOX allocation
                 State                            Plant            Plant ____ id   Point ____ id     for EGUs
----------------------------------------------------------------------------------------------------------------
 
*                  *                  *                  *                  *                  *
                                                        *
VA....................................  SEI BIRCHWOOD...........              12               1             160
 
*                  *                  *                  *                  *                  *
                                                        *
----------------------------------------------------------------------------------------------------------------

Appendix B to Part 97 [Amended]

    5. Appendix B to part 97 is amended by:
    a. Removing all entries for ``IN, Allen, MICHELIN NORTH AMERICA, 
INC'', ``IN, Elkhart, SUPERIOR LAMINATING, INC'', ``IN, Kosciusko, THE 
DALTON FOUNDRIES INC'', ``KY, Carroll, DOW CORNING CORP'', ``KY, 
Shelby, ICHIKOH MANUFACTURING'', ``KY, Scott, TOYOTA MOTOR MFG USA 
INC'', and ``KY, Hardin, USAARMC & FORT KNOX''; removing the first 
entry for ``MI, Midland, DOW CHEMICAL USA''; removing all entries for 
``MI, Wayne, NATIONAL STEEL CORP'', ``MI, Wayne, ROUGE STEEL CO'', 
``NC, Gaston, FMC CORP-LITHIUM DIV. HWY 161'', ``NJ, Middlesex, FORD 
MOTOR COMPANY'', ``NJ, Bergen, GARDEN STATE PAPER CO'', ``NJ, Passiac, 
HOFFMAN LAROUCHE INC. C/O ENVIR''; ``WV, Grant, NORTH BRANCH POWER 
STATION'', and ``WV, Brooke, WHEELING-PITTSBURGH STEEL'';
    b. Removing the fourth entry for ``MI, Ingham, MICHIGAN STATE 
UNIVERSITY'' and adding in its place an entry for ``MI, Ingham, 
MICHIGAN STATE UNIVERSITY'';
    c. Removing the second entry for ``NC, Martin, WEYERHAEUSER PAPER 
CO. PLYMOUTH'' and adding in its place an entry for ``NC, Martin, 
WEYERHAEUSER PAPER CO. PLYMOUTH'';
    d. Removing the entry for ``WV, Kanawha, DUPONT-BELLE'' and adding 
in its place an entry for ``WV, Kanawha, DUPONT-BELLE''; removing the 
entry for ``WV, Fayette, ELKEM METALS COMPANY L.P.-ALLOY PLANT'' and 
adding in its place an entry for ``WV, Fayette, ELKEM METALS COMPANY 
L.P.-ALLOY PLANT''; removing two entries for ``WV, Marshall, PPG 
INDUSTRIES, INC'' and adding in their place two entries for ``WV, 
Marshall, PPG INDUSTRIES, INC''; removing six entries for ``WV, 
Kanawha, RHONE-POLUENC'' and adding in their place three entries for 
``WV, Kanawha, AVENTIS CROPSCIENCE''; removing the entry for ``WV, 
Kanawha, UNION CARBIDE-SOUTH CHARLESTON PLANT'' and adding in its place 
two entries for ``WV, Kanawha, UNION CARBIDE-SOUTH CHARLESTON PLANT'', 
removing seven entries for ``WV, Hancock, WEIRTON STEEL CORPORATION'' 
and adding in their place seven entries ``WV, Hancock, WEIRTON STEEL 
CORPORATION''; and
    e. Adding in alphabetical order by State by plant and numerical 
order by point entries for ``NC, Haywood, BLUE RIDGE PAPER PRODUCTS'', 
and ``NC, Craven, WEYERHAEUSER COMPANY NEW BERN MILL''.
    The revisions and additions read as follows:

           Appendix B to Part 97--Final Section 126 Rule: Non-EGU Allocations, Allocations, 2003-2007
----------------------------------------------------------------------------------------------------------------
                                                                                                  NOX allocation
        State                 County                Plant            Plant ID        Point ID      for non-EGUs
----------------------------------------------------------------------------------------------------------------
 
*                  *                  *                  *                  *                  *
                                                        *
MI...................  Ingham..............  MICHIGAN STATE                K3249            0056              73
                                              UNIVERSITY.
 
*                  *                  *                  *                  *                  *
                                                        *
NC...................  Haywood.............  BLUE RIDGE PAPER               0159             005              87
                                              PRODUCTS INC.
 
*                  *                  *                  *                  *                  *
                                                        *
NC...................  Martin..............  WEYERHAEUSER PAPER             0069             XXX              25
                                              CO. PLYMOUTH.
NC...................  Craven..............  WEYERHAEUSER                   0104             XXX              72
                                              COMPANY NEW BERN
                                              MILL.
 
*                  *                  *                  *                  *                  *
                                                        *
WV...................  Kanawha.............  DUPONT-BELLE.......           00001             612              54
WV...................  Fayette.............  ELKEM METALS                  00001             006             116
                                              COMPANY L.P.--
                                              ALLOY PLANT.
WV...................  Marshall............  PPG INDUSTRIES, INC           00002             001             195
WV...................  Marshall............  PPG INDUSTRIES, INC           00002             003             419

[[Page 80409]]

 
WV...................  Kanawha.............  AVENTIS CROPSCIENCE           00007             010             113
WV...................  Kanawha.............  AVENTIS CROPSCIENCE           00007             011             102
WV...................  Kanawha.............  AVENTIS CROPSCIENCE           00007             012             105
WV...................  Kanawha.............  UNION CARBIDE-SOUTH           00003             0B6              92
                                              CHARLESTON PLANT.
WV...................  Kanawha.............  UNION CARBIDE-SOUTH           00003             0B7              45
                                              CHARLESTON PLANT.
WV...................  Hancock.............  WEIRTON STEEL                 00001             030              31
                                              CORPORATION.
WV...................  Hancock.............  WEIRTON STEEL                 00001             088              30
                                              CORPORATION.
WV...................  Hancock.............  WEIRTON STEEL                 00001             089               2
                                              CORPORATION.
WV...................  Hancock.............  WEIRTON STEEL                 00001             090             110
                                              CORPORATION.
WV...................  Hancock.............  WEIRTON STEEL                 00001             091             253
                                              CORPORATION.
WV...................  Hancock.............  WEIRTON STEEL                 00001             092             208
                                              CORPORATION.
WV...................  Hancock.............  WEIRTON STEEL                 00001             093             200
                                              CORPORATION.
----------------------------------------------------------------------------------------------------------------


[FR Doc. 00-32396 Filed 12-20-00; 8:45 am]
BILLING CODE 6560-50-P