[Federal Register Volume 66, Number 220 (Wednesday, November 14, 2001)]
[Rules and Regulations]
[Pages 57252-57261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27586]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[TX-133-1-7543; FRL-7092-3]


Approval and Promulgation of Air Quality State Implementation 
Plans (SIP); Texas Mass Emissions Cap and Trade Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final Rule.

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SUMMARY: The EPA is approving the Texas Mass Emissions Cap and Trade 
(MECT) program as a revision to the Texas State Implementation Plan 
(SIP). The program was submitted on December 22, 2000. The MECT program 
will contribute to attainment of the 1-hour ozone National Ambient Air 
Quality Standard (NAAQS) in the HGA ozone nonattainment area. The EPA 
is approving these revisions to the Texas SIP to regulate emissions of 
NOX in accordance with the requirements of the Federal Clean 
Air Act (the Act).
    The EPA proposed approval of the Texas MECT program on July 23, 
2001 on the condition that Texas resolve eight issues. The State 
revised the MECT rule to adequately address the EPA issues identified 
in the proposed rulemaking and submitted these revisions to EPA as a 
SIP revision which EPA is approving in this action by parallel 
processing. Comments were received on the proposed rulemaking from 
Environmental Defense, Inc. on September 22, 2001, from Baker and Botts 
L.L.P. representing the Business Coalition for Clean Air Appeal Group 
on August 13, 2001, and from Reliant Energy, Inc. on August 13, 2001. 
The major comments regarded the use of credits from other trading 
programs for MECT compliance, inflation of the cap, undermining of the 
attainment demonstration, emissions monitoring and program evaluations. 
After reviewing the comments and the State response to the eight issues 
raised in the proposed rulemaking, EPA has concluded that the Texas 
MECT program fully satisfies all relevant guidance and the Clean Air 
Act.

DATES: This final rule is effective on December 14, 2001.

ADDRESSES: Copies of the documents relevant to this action are 
available for public inspection during normal business hours at the 
following locations. Persons interested in examining these documents 
should make an appointment with the appropriate office at least 24 
hours before the visiting day. Environmental Protection Agency, Region 
6, Air Planning Section (6PD-L), 1445 Ross Avenue, Suite 700, Dallas, 
Texas 75202-2733. Texas Natural Resource Conservation Commission, 12100 
Park 35 Circle, Austin, Texas 78753.

FOR FURTHER INFORMATION CONTACT: Merrit H. Nicewander, Air Planning 
Section (6PD-L), EPA Region 6, 1445 Ross Avenue, Dallas, Texas 75202-
2733, telephone (214) 665-7519. ([email protected])

SUPPLEMENTARY INFORMATION: This supplemental information section is 
organized as follows:

I. What action is EPA taking?
II. What did EPA propose?
III. What comments did EPA receive?
IV. How did Texas respond to prerequisites for approval?
V. What are EPA's responses to comments?
VI. Administrative requirements
    Throughout this document ``we,'' ``us,'' and ``our'' means EPA.

I. What action Is EPA Taking?

    We are granting final approval of the nitrogen oxides ( 
NOX) Mass Emissions Cap and Trade program for the Houston/
Galveston (HGA) one-hour ozone nonattainment area. The rule was adopted 
and submitted as a SIP revision by letters of the Governor dated 
December 22, 2000 and June 15, 2001. We proposed approval of the 
program at 66 FR 38231 on July 23, 2001 through parallel processing. 
Other than changes as referenced in the proposed approval, there were 
no significant changes between the version proposed on July 23, 2001 
and the version submitted on October 4, 2001. On September 26, 2001 the 
State adopted as final rules amendments to 30 TAC Chapter 101 which 
were proposed on May 30, 2001 with certain revisions. On October 4, 
2001 Texas Governor Rick Perry submitted a letter requesting EPA to 
process the September 26, 2001 final rule amendments to 30 TAC, Chapter 
101, as a revision to the MECT SIP. The MECT rule is one element of the 
control strategy for the HGA nonattainment area to comply with the 
requirements of the Clean Air Act (CAA) and achieve attainment for 
ozone.
    The HGA ozone nonattainment area is required to attain the one-hour 
ozone standard of 0.12 parts per million (ppm) by November 15, 2007. 
The area will need to reduce nitrogen oxides ( NOX) to reach 
attainment with the one-hour standard. The MECT emissions banking rule 
was evaluated as an integral component of the HGA control strategy to 
reduce NOX emissions. The rule submitted by the TNRCC is the 
Mass Emission Cap & Trade Program (30 Texas Administrative Code (TAC) 
Chapter 101, Subchapter H, Division 3). The MECT regulation is found at 
sections 101.350 through 101.363. As noted in our proposed approval, we 
are not approving sections 101.353(a)(3)(B) and (D). With the MECT rule 
revisions submitted on October 4, 2001, the State adopted definitions 
found at 30 TAC Section 101.1. These revisions to definitions were 
proposed on June 15, 2001. No comments were received on this section. 
We are also granting final approval of 30 TAC 101.1.
    The MECT program is mandatory for stationary facilities that emit 
NOX in the HGA ozone nonattainment area (at sites that have 
a collective design capacity of 10 tons per year or more) and which are 
subject to the TNRCC NOX rules as found at 30 TAC Chapter 
117. NOX is a precursor gas that reacts with volatile 
organic compounds (VOCs) in the presence of sunlight to form ground-
level ozone. The program sets a cap on NOX emissions 
beginning on January 1, 2002 with a final reduction to the cap 
occurring in 2007. Facilities are required to meet NOX 
allowances on an annual basis. Facilities may purchase, bank or sell 
their allowances. The program has a provision to allow a facility to 
use emission reduction credits (ERCs), discrete emission reduction 
credits (DERCs) and mobile discrete emission reduction credits (MDERCs) 
in lieu of allowances if they are generated in the HGA area.\1\
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    \1\ As discussed subsequently in this notice, we are not acting 
on 30 TAC Chapter 101, Subchapter H, Division 4 and neither DERCs 
nor MDERCs can be utilized in the MECT program prior to our approval 
of the rule unless approved as a site-specific SIP revision.
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II. What Did EPA Propose?

    EPA proposed to approve the Texas Mass Emission Cap and Trade 
program provided that TNRCC took eight specific steps. The EPA proposed 
approval of the MECT program was based upon the prerequisites that 
TNRCC must: (1) Specify the number of days of violation if an annual 
cap is exceeded, (2) revise the rule to require that deviation from 
monitoring protocols be approved by both the TNRCC Executive Director 
and EPA, (3) provide public access to production data necessary to 
calculate emissions, (4) provide for missing data provisions when 
monitoring equipment is not functioning properly, (5) clarify that 
allowances used for offsets will be obtained for the life of the new 
source, (6) commit to require notification of the

[[Page 57253]]

Metropolitan Planning Organization (MPO) when MDERCs are used in the 
MECT program, (7) demonstrate that Alternative Emission Limitations 
(AELs) will not increase the allowances for a facility, and (8) revise 
the rule relating to the executive director discretion to deviate from 
allocation procedures in ``extenuating circumstances'' by either 
demonstrating that the allocations would not be inconsistent with the 
attainment demonstration and would comply with the Act, or by modifying 
the rule to eliminate executive director discretion or require EPA 
approval of allocations issued pursuant to the subsection.

III. What Comments Did EPA Receive?

    EPA received one comment letter during the public comment period 
that closed on August 22, 2001. Environmental Defense submitted seven 
comments in a letter dated August 22, 2001. Two respondents to the HGA 
attainment demonstration SIP stated that their comments made on 
September 25, 2000 to TNRCC during the public comment period for the 
final State MECT rule were to be included by reference. The two 
respondents were Reliant Energy, Inc. (REI) and Baker and Botts L.L.P. 
on behalf of The Business Coalition for Clean Air Appeal Group (BCCA). 
BCCA and REI both in comments on our proposed approval of the 
attainment demonstration SIP incorporated by reference their comments 
submitted in response to the State's proposed MECT rule.
    Environmental Defense commented that EPA must not defer action on 
the use of DERCs and MDERCs for MECT compliance. ED commented that EPA 
should not approve the MECT program as long as it allows the use of 
MDERCs in lieu of allowances. ED further stated that EPA may not 
approve the MECT without squarely addressing the issue of whether 
MDERCs can be used for MECT compliance.
    ED questioned EPA's deferral of the decision to separately act on 
the MDERC rules (30 TAC 101 Subchapter H Division 4). However, they did 
indicate that it is an entirely separate question whether the MDERC 
portions of TNRCC's rules are approvable on their own (and used for 
purposes other than MECT compliance). ED questioned if EPA ultimately 
decides at some future date that it cannot approve the use of MDERCs 
for MECT compliance, after having approved the MECT program in this 
rulemaking, what the effect would be on the approval of the MECT, 
whether the approval of the MECT would become a disapproval, what the 
effect of disapproval would be on the proposed approval of the 
attainment demonstration, and whether a final approval of the 
attainment demonstration SIP would become a disapproval.
    ED further commented that the use of DERCs and MDERCs will 
undermine the MECT program by allowing sources in the MECT program to 
use MDERCs, whereby actual emissions during any given control period 
could exceed the overall MECT cap without contemporaneous reductions 
having occurred to offset the excess emissions. ED further felt that 
allowing the use of MDERCs for MECT compliance was improper as there is 
a lack of a credible baseline to establish whether a reduction that 
might have been surplus at the time an MDERC was generated continues to 
be surplus at the time of use. ED commented that predicting results in 
the integrity element of quantifiable is compromised because it is 
impossible to predict for any control period what the balance between 
the generation and use of MDERCs for MECT compliance, and there is an 
issue of uncertainty in the integrity element of quantifiable by using 
reductions from one type of source at another type of source. Using 
emission reductions that generated MDERCs are not permanent ED 
commented because they took place at some point in the past. Finally, 
trading between economic incentive programs (EIPs) by allowing sources 
subject to the requirements of the mass cap and trade program to use 
credits generated by sources outside of the cap as a compliance option 
should not be allowed.
    ED also commented that the method for determining the allocation of 
allowances to new sources creates an opportunity to inflate the cap and 
that additional allowances will further undermine the attainment 
demonstration. It further commented that requirements for emissions 
monitoring are inadequate, initial program evaluations should occur 
earlier than three years after program inception, and there appears to 
be a discrepancy in the amount of emissions that constitute an 
allowance.
    Comments on the MECT rule were made in commenting on the attainment 
demonstration SIP by the BCCA and REI by reference to their comments to 
the TNRCC during the public comment period for the final State MECT 
rule.
    BCCA commented that the MECT program should be strengthened by 
feasible reduction levels, and a five-year phase-in period. It 
additionally commented that the cap allocation methodology should be 
strengthened in a number of respects. The NOX reductions 
required by the MECT rule are not technically or economically feasible, 
the phase-in time-frame should be for five years, the baseline activity 
level should be derived from a 12-month average, cap reductions should 
be weighted toward the target year, there is no reasoned justification 
for the rate of emission reductions, allowances should be allocated for 
30 future years, not year-by-year, the additional definitions 
``Account'' and ``NOX Cap Plant'' should be incorporated, 
allocations should be fixed despite equipment shutdowns or changes, an 
opt-in mechanism should be incorporated for non-emission standards for 
the attainment demonstration (ESAD) sources, modified, as well as new, 
sources should be granted allocations at permitted levels, and the 
allocation methodology should be simplified. They feel that open-market 
credits should be fully incorporated, that ERCs should be creditable to 
allowances, and the 10% assessment should be dropped for credit use in 
the program. Further comments indicated that daily and 30-day limits 
should be dropped for sources participating in the MECT program, and an 
emission cap should be employed to meet new source review requirements. 
They commented that the true-up period should be extended to April 1, 
allowances should be divisible in tenth tons, enhanced monitoring 
should await the target year, VOC credits should be creditable against 
NOX allocations upon an appropriate demonstration, and the 
Economic Incentive Program should be expanded and strengthened.
    REI comments indicated generally that it supports a market-based 
cap and trade program as achieving overall NOX reductions at 
the least cost. It contends that a viable cap and trade program depends 
on feasible reduction levels and that allowances should be allocated 
for a stream of years, not every year. Open Market Credits should be 
fully incorporated to preserve investments made to achieve early 
reductions, it commented. The cap and trade program should incorporate 
Plant-wide Applicability Limits to satisfy New Source Review 
requirements for changes in NOX emissions. In addition, REI 
commented that the true-up date for the annual cap compliance should be 
extended to conform to the annual inventory deadline, daily and 30-day 
limits should be dropped for sources participating in the cap and 
trade, and VOC reductions should be creditable against NOX 
allocations upon an appropriate demonstration.
    Our response to these comments is included in Section V of this 
notice.

[[Page 57254]]

IV. How Did Texas Respond to Prerequisites for Approval?

    As indicated by the responses below, Texas has satisfied all of 
EPA's prerequisites to approval.
    Prerequisite: Our proposed approval requested the State to clarify 
in response to comments that the State has authority to impose 
penalties where every day of a long term violation is a separate 
violation.
    Response: The State in the preamble to the final MECT rule 
responded that EPA's interpretation of these statutes is correct; each 
day of noncompliance is a separate violation. Thus, every day that the 
annual cap is exceeded may be considered as a separate violation.
    Prerequisite: Our proposed approval requested the State amend the 
rules to provide that any use of monitoring protocols other than those 
specified in Chapter 117 will be approved by EPA.
    Response: The State amended section 101.354(a) by adding language 
clarifying that established protocols in 30 TAC Chapter 117 must be 
used when quantifying actual emissions for facilities subject to the 
cap and trade program. The authority of the Executive Director to 
approve monitoring protocols other than those specified has been 
eliminated. The authority to quantify actual emissions by means other 
than those specified in 30 TAC 117 is now limited by section 101.353(b) 
to circumstances where required monitoring and testing data is missing 
or unavailable. (See subsequent response relating to missing data.)
    Prerequisite: Our proposed approval requested the State to clarify 
in response to comments that the confidentiality provisions will not 
prevent public disclosure of activity level data necessary to determine 
emissions under the cap program. We also requested that any exemptions 
from disclosure be noted in the annual compliance report.
    Response: The State clarified that emissions data cannot be held 
confidential. The State clarification indicated that the Office of the 
Attorney General makes such a determination in specific cases. Attorney 
General Opinion No. H-539 (February 26, 1975) ruled that emissions data 
supplied to the state may not be treated as confidential. Emissions 
data has been interpreted to include information on the nature and 
amount of emissions from a facility. The State agreed to include any 
notice of exemptions from disclosure in the annual report.
    Prerequisite: Our proposed approval requested the State amend the 
rules to specify missing data provisions as described in EIP guidance 
Sec. 5.2(c).
    Response: The State added a new section 101.354(b) that provides a 
procedure which may be followed to determine actual emissions in the 
event the data required under section 101.354(a) is missing or 
unavailable. The procedure establishes the order of missing data 
methods that must be used as follows: continuous monitoring; periodic 
monitoring; stack or vent testing data; manufacturer's emissions data; 
and EPA Compilation of Air Emission Factors (AP-42). These methods must 
be demonstrated to most accurately represent actual emissions.
    Prerequisite: Our proposed approval requested the State to clarify 
that emissions offsets must be obtained for the life of the NSR source.
    Response: The State agreed in the preamble to the final MECT rule 
that offsets must be provided by the owner or operator of a facility 
for the life of that facility. The State also agreed in the preamble 
that, in order for reductions from a facility which is subject to the 
cap and trade program to be used as offsets, the owner or operator must 
permanently retire the rights to the allowances associated with that 
facility. This, in effect, generates ongoing credits which can be used 
as offsets for the life of a facility. The State wished to clarify that 
Chapter 101 does not address permitting, and NSR permits issued under 
Chapter 116 that involve offsets must be issued with the requirement 
that offsets be obtained for the life of the permitted facility. This 
requirement is found in Sec. 116.150, New Major Source or Major 
Modification in Ozone Nonattainment Areas. The banking rules do not 
modify or supersede that requirement. Chapter 101 does require that new 
facilities which are subject to Division 3 obtain allowances on an 
annual basis equal to their actual NOX emissions in addition 
to obtaining offsets for the ratio portion of their allowable 
emissions. The State also wished to clarify that allowances which are 
obtained by these new facilities are not issued by the State, but are 
obtained from the existing number of allowances available to existing 
facilities. The total number of allowances under the cap would remain 
finite.
    Prerequisite: Our proposed approval requested the State to provide 
notification of MDERC generation to the metropolitan planning 
organization (MPO).
    Response: The State agreed in the preamble to the final MECT rule 
that MPOs should be made aware of MERC and MDERC generation projects 
because of the necessity to avoid double counting reductions that may 
be banked and also used for SIP credit under other programs.
    Prerequisite: Our proposed approval requested the State to 
demonstrate how existing rule provisions will prevent the issuance of 
Alternate Emission Limits (AELs) that could increase a NOX 
emissions cap.
    Response: The State responded in the preamble to the final MECT 
rule that the cap and trade program uses ESADs as listed in sections 
117.106 and 117.206, Emissions Specifications for Attainment 
Demonstrations, and 117.475, Emissions Specifications, when calculating 
the number of allowances to allocate. AELs may not be used or requested 
in lieu of ESADs as specified in 117.106(e) (3)-(4) and 117.206(f)(4). 
There is no provision in the State rules to allow for a variance from 
the Chapter 117 requirements. The State recognizes that facilities with 
a capacity factor of 0.0383 have an ESAD of 0.060 lb NOX/
MMBtu regardless of facility type, as allowed in sections 
117.106(c)(4), 117.206(c)(17), or 117.475(c)(6). This ESAD is not an 
``AEL'' but simply an assigned ESAD for facilities that are rarely 
utilized.
    Prerequisite: Our proposed approval requested the State to modify, 
or make demonstrations relating to, subsection 101.353(g), stated that 
in ``extenuating circumstances'' the TNRCC executive director may 
deviate from the requirements for determining the amount of allowances 
to be issued to a facility. The FR notice said the state must either 
(1) demonstrate that the allocations that could be issued pursuant to 
that subsection would not be inconsistent with the attainment 
demonstration and would comply with the CAA, or (2) modify the rule to 
eliminate executive director discretion or require EPA approval of 
allocations issued pursuant to the subsection.
    Response: The State revised section 101.353 of the rule by stating 
that the owner or operator of a facility may, due to extenuating 
circumstances, request up to two additional calendar years to establish 
a baseline period more representative of normal operation as determined 
by the executive director. The State response is consistent with the 
NSR definition of actual emissions which allows for an alternate period 
when the baseline period does not reflect normal operations. EPA's 
objection relating to Executive Director discretion has been resolved.

V. What Are EPA's Responses to Comments?

Environmental Defense Comment 1

    Comment: EPA must not defer action on the use of DERCs and MDERCs 
for

[[Page 57255]]

MECT compliance. EPA should not approve the MECT program as long as it 
allows the use of MDERCs in lieu of allowances. EPA may not approve the 
MECT without squarely addressing the issue of whether MDERCs can be 
used for MECT compliance.
    Response: The Clean Air Act does not prohibit EPA from determining 
at a later date whether or not DERCS or MDERCs may be utilized in the 
MECT program. The DERC and MDERC rules (30 TAC Chapter 101 Division 4) 
are separate and independent from the MECT rules since, unlike the MECT 
rules, the DERC and MDERC rules were not submitted by the state for 
emission credit in the attainment demonstration. In addition, the use 
of DERCs or MDERCs in the MECT program is not necessary for that 
program to achieve emission reductions needed for attainment, or for 
that program to comply with other applicable Clean Air Act 
requirements. The purpose of utilizing DERCs or MDERCs in the MECT 
program is to provide sources with a voluntary compliance option.
    As we stated in the Federal Register Notice proposing action on the 
MECT rules, DERCS and MDERCs may not be used for compliance with the 
MECT rules unless the DERC and MDERC rules are approved by EPA for 
inclusion into the SIP. In addition, a source-specific SIP revision may 
be utilized to seek EPA approval for the use of DERCs or MDERCs in the 
MECT program on a case-by-case basis.
    The DERC and MDERC rules, and any individual trades, will be fully 
evaluated for approvability as a SIP revision when EPA proposes action 
on them. This evaluation will determine whether or not those rules or 
trades comply with all applicable Clean Air Act requirements, 
considering the interaction of the use of DERCs or MDERCs with existing 
SIP provisions, including the MECT program. The public will be provided 
an opportunity to comment on the approvability of the DERC and MDERC 
rules and any individual trades as a SIP revision at the time EPA 
proposes action on those rules or trades.
    If at some future date, EPA determines that the DERC or MDERC rules 
or an individual trade cannot be approved, MECT facilities would not 
have the flexibility of using such credits for compliance. Such 
facilities would, however, still have to achieve all emission 
reductions required by the MECT program, all other provisions of the 
MECT program would continue to function, and approval of the MECT 
program--and the SIP--would remain in effect.
    Comment: If EPA ultimately decides at some future date that it can 
not approve the use of MDERCs for MECT compliance, after having 
approved the MECT program in this rulemaking, what would be the effect 
on the approval of the MECT?
    Response: As stated above, if at some future date, the MDERC rule 
cannot be approved, the MECT program could not use MDERCs for 
compliance with the allowance cap. The use of MDERCs for MECT 
compliance is for source flexibility. Should the MDERC program be 
determined to not be approveable at some point in the future, the MECT 
facilities would no longer have the flexibility of using MDERCs for 
compliance. All other provisions of the MECT program would continue to 
function as they were designed, and the approval of the MECT program 
would not be affected.
    Comment: Would the approval become a disapproval?
    Response: As stated above, the approval of the MECT program and the 
SIP would remain in effect.
    Comment: What would be the effect of converting the MECT approval 
to a disapproval on the proposed approval of the attainment 
demonstration?
    Response: Since there would be no conversion of the MECT approval 
to a disapproval, there would be no effect on the proposed approval of 
the attainment demonstration. As indicated above, should the MDERC 
program be disapproved, the MECT program would be required to achieve 
the required compliance with the allowance cap, but without source 
flexibility of using MDERCs for cap compliance.
    Comment: Since EPA has already stated that it cannot finalize 
approval of the attainment demonstration SIP until (among other things) 
it has finalized action on the NOX MECT program since it is 
relied upon in the attainment demonstration, then would a final 
approval of the attainment demonstration SIP thus become a disapproval 
if EPA later disapproves the MECT program?
    Response: Again, as stated above, once the MECT program and the 
attainment demonstration are SIP approved, a subsequent disapproval of 
the MDERC program would not change the approval status of the 
attainment demonstration. The emission reductions relied upon by the 
implementation of the control technology measures contained in the MECT 
would be achieved without the source flexibility of MDERC use as 
provided for in the MDERC rule.

Environmental Defense Comment 2

    Comment: ED made a number of comments specific to the DERC and 
MDERC rules as they relate to the MECT. Generally, ED commented that 
the use of DERCs and MDERCs will undermine the MECT program by allowing 
sources in the MECT program to use MDERCs, whereby actual emissions 
during any given control period could exceed the overall MECT cap 
without contemporaneous reductions having occurred to offset the excess 
emissions. ED further felt that allowing the use of MDERCs for MECT 
compliance was improper as there is a lack of a credible baseline to 
establish whether a reduction that might have been surplus at the time 
an MDERC was generated continues to be surplus at the time of use. ED 
commented that predicting results in the integrity element of 
quantifiable is compromised because it is impossible to predict for any 
control period what the balance will be between the generation and use 
of MDERCs for MECT compliance, and there is an issue of uncertainty in 
the integrity element of quantifiable by using reductions from one type 
of source at another type of source. Using emission reductions that 
generated MDERCs are not permanent, ED commented, because they took 
place at some point in the past. Finally, trading between economic 
incentive programs (EIPs) by allowing sources subject to the 
requirements of the mass cap and trade program to use credits generated 
by sources outside of the cap as a compliance option should not be 
allowed.
    Response: These issues do not arise unless EPA approves a SIP 
revision allowing the use of DERCs or MDERCs in the MECT program. EPA 
is not at this time taking action on the DERC or MDERC rules, or any 
individual DERC or MDERC trades.
    As we stated in the Federal Register Notice proposing action on the 
MECT rules, DERCS and MDERCs may not be used for compliance with the 
MECT rules unless the DERC and MDERC rules are approved by EPA for 
inclusion into the SIP. In addition, a source-specific SIP revision may 
be utilized to seek EPA approval for the use of DERCs or MDERCs in the 
MECT program on a case-by-case basis.
    The DERC and MDERC rules, and any individual trades, will be fully 
evaluated for approvability as a SIP revision when EPA proposes action 
on them. This evaluation will determine whether those rules or trades 
comply with all applicable Clean Air Act requirements, considering the

[[Page 57256]]

interaction of the use of DERCs or MDERCs with existing SIP provisions, 
including the MECT program. The public will be provided an opportunity 
to comment on the approvability of the DERC and MDERC rules and any 
individual trades as a SIP revision at the time EPA purposes action on 
those rules or trades.
    EPA will respond to these comments at the time the agency acts on a 
SIP revision including the DERC and MDERC rules, or any individual 
trades, if they are submitted in connection with such action.
    Until EPA completes its evaluation of the DERC and MDERC rules or 
an individual trade, the agency has no basis to take final action 
disapproving the use of DERCs or MDERCs in the MECT program. The 
acquisition and use of credits generated under one (EIP) to meet the 
requirements of another EIP is not prohibited by the Clean Air Act, and 
is specifically contemplated by the EPA EIP guidance document, 
Improving Air Quality with Economic Incentive Programs (EPA-452/R-01-
001) January 2001, as long as certain criteria are met.

Environmental Defense Comment 3

    Comment: Environmental Defense's third comment was that the method 
for determining the allocation of allowances to new sources creates an 
opportunity to inflate the cap. ED commented that the number of 
allowances issued to certain new sources lacking a historic emissions 
baseline will be based on allowable emissions for two years, but only 
until an actual emission baseline is established. ED contended that 
these new sources have the incentive to maximize production and/or 
emissions to establish a baseline that is close to the allowable 
emissions limit. ED commented that once the artificially high baseline 
is established, the source can return to normal production and/or 
emission levels and be left with a windfall of surplus allowances that 
it would then be free to trade to other sources in the MECT program. ED 
contended that EPA's review of the MECT program fails to address this 
possibility.
    ED commented that new sources without an established, actual 
baseline can be viewed as sources that are not covered, because their 
emissions baselines have not yet been established. ED was concerned 
that the increment between actual emissions during normal operating 
conditions and the permit allowables represents a pool of excess 
allowances that can be captured by these new sources. If new sources 
can successfully capture this windfall, the overall emissions budget 
for the MECT program will end up higher than it otherwise would have 
been.
    Response: The attainment demonstration modeling inventory for new 
sources without a historical baseline consisted of the allowable 
emissions for these sources. These sources were included in the 
allowance cap at their allowable level. The State's attainment 
demonstration for HGA used this level of emissions. Accordingly. we 
have no basis to challenge this part of the method for allocating 
allowances. Further, the establishment of a baseline for these sources 
at actual emission levels below their allowables will reduce or shrink 
the cap.

Environmental Defense Comment 4

    Comment: Environmental Defense's fourth comment was that additional 
allowances issued under MECT section 101.353(g) will further undermine 
the attainment demonstration. ED contended that the TNRCC issuance of 
additional allowances would further undermine the SIP. ED states that 
they are uncertain how TNRCC can demonstrate that additional 
allocations ``are not inconsistent with the attainment demonstration.'' 
Section 101.353(g) in the December 2000 regulation stated that ``in 
extenuating circumstances, the executive director may deviate from the 
requirements of this section to determine the amount of allowances 
allocated to a facility.''
    Response: The State revised section 101.353(g) in the October 4, 
2001 submittal. The final rule states that ``(t)he owner or operator of 
a facility may, due to extenuating circumstances, request up to two 
additional calendar years to establish a baseline period more 
representative of normal operation as determined by the executive 
director.'' This revision of the regulation for determination of 
baseline emissions is consistent with the new source review definition 
of actual emissions and actual baseline emissions used to determine 
surplus emission reductions from other trading programs.

Environmental Defense Comment 5

    Comment: Environmental Defense's fifth comment was that the 
requirements for emissions monitoring are inadequate. ED commented that 
EPA fails to provide any factual basis for its conclusion that TNRCC's 
selection of emission measurement protocols are adequate. ED stated 
that they can find no evidence of the TNRCC's adoption of specific 
monitoring requirements in Chapter 117 to ensure compliance with the 
MECT. Instead, it appears to ED that monitoring consists of whatever 
methods were already in place prior to the adoption of ESADs in Chapter 
117. ED commented that the creation of a cap and trade program should 
be accompanied by additional monitoring requirements to ensure the 
program's success. ED commented that the TNRCC should require 
monitoring requirements no less stringent than those of the Acid Rain 
Program and the NOX SIP Call.
    The MECT rules at section 101.354(a) describe the method for 
determining how many allowances will be deducted from a compliance 
account. This deduction should be based, to the maximum extent 
possible, on the measured mass of NOX emissions and should 
require Texas to measure and track mass emissions instead of emissions 
rates and activity levels, the product of which is only a surrogate for 
mass emissions. Measuring mass emissions will improve the transparency 
and environmental integrity of the MECT program.
    Response: The State submitted the monitoring requirements of 
Chapter 117 to fulfill the monitoring protocol requirements of the 
MECT. For electric utility facilities the Chapter 117 monitoring 
requirements consist of the continuous emission monitoring requirements 
of the Acid Rain program at 40 CFR part 75 and 40 CFR part 60 Appendix 
A. Thus the MECT monitoring requirements are the same as those in the 
Acid Rain program and NOX SIP Call. The State has estimated 
that approximately 90% of the total allowances in the MECT program are 
allocated to sources that are required to have CEMs. EPA can find no 
basis for the ED statement that the MECT monitoring requirements are 
less stringent than those of the Acid Rain Program and the 
NOX SIP Call.

Environmental Defense Comment 6

    Comment: Environmental Defense's sixth comment was that the initial 
program evaluations should occur earlier than three years after program 
inception. ED was pleased that the TNRCC included an explicit 
requirement to perform an audit of the program after three years to 
ensure that it is achieving the target NOX emission 
reduction throughout the control period. The EPA and TNRCC should 
emphasize that this audit may result in the imposition of additional 
restrictions (weekly or monthly caps, geographic trading restrictions, 
e.g.) to ensure the program's integrity. This would encourage capped 
sources to account for this possibility up front when making 
investments, trading, or banking decisions. The FR notice refers to the 
EIP guidance expectation that annual

[[Page 57257]]

evaluation of the program is appropriate for at least two years, until 
the projected emissions have been adequately confirmed (66 FR 38237). 
Despite this expectation, EPA concluded that MECT program meets the 
expectations of the EIP guidance, even though TNRCC's audit will only 
occur triennially. This conclusion is unjustified.
    Response: Although the MECT audit will occur triennially as 
required by the MECT regulation, a review will be conducted in 2002 as 
a result of the settlement reached in BCCA Appeal Group v. Texas 
Natural Resource Conservation Commission, No. GN1-00210 (250th Dist. 
Ct.)(filed on January 19, 2001). The attainment demonstration SIP 
requires a mid course correction evaluation in 2004. The degree of 
control technology and implementation schedules are an integral part of 
both of these audits. EPA believes that with these two audits in 2002 
and 2004 plus the triennial MECT audits, the audit frequency is 
adequate to help assure that the reductions will lead to attainment. 
The EPA EIP guidance, which in any event is not binding, did not assume 
the additional audits requested above.

Environmental Defense Comment 7

    Comment: Environmental Defense's seventh comment was that there 
appears to be a discrepancy in the amount of emissions that constitute 
an allowance. According to section 101.352(g) allowances will be 
allocated, transferred, or used in tenths of tons. On the other hand, 
the equations for calculating the number of allowances to be deposited 
into an account at section 101.353(a) and the allowances to be deducted 
from an account at section 101.354(a) appear to yield allowances in 
tons. There is thus an error of a factor of ten in the calculations 
that needs to be corrected.
    Response: The MECT rule defines one MECT allowance to equal one ton 
of NOX emissions. The level of accuracy in section 
101.352(g) for allocation, transfer or use is in tenths of tons which 
is consistent with the requirements of sections 101.353(a) and 
101.354(a). As in a bank account, the currency denomination is in 
dollars but the account itself is debited and credited in dollar 
amounts with an accuracy of two decimal places, i.e. dollars and cents. 
Thus, there is not an error of a factor of ten but rather an accuracy 
of allowances to one decimal place.
    EPA responses to BCCA and REI comments made on September 25, 2000, 
are as follows:
    Comment: BCCA commented that the proposed NOX reductions 
intended to be implemented under MECT rule are not technologically or 
economically feasible and will not result in an economic incentive 
under the cap and trade rule because there will be insufficient surplus 
allowances. The cap and trade system should be based on current 
California point source controls, which are the most stringent achieved 
in practice.
    Response: This comment is not relevant to our decision whether to 
approve the MECT rule. We are not authorized to review control 
requirements for their economic or technological feasibility. In any 
event, the State made no changes to the MECT rule in response to these 
comments. EPA notes, however, that combined use of combustion 
modification and flue gas controls on the majority of large combustion 
units result in point source NOX reductions in the range of 
90%. Combustion modification capabilities and flue gas controls are 
well documented in the EPA Alternative Control Technology (ACT) 
documents, the NOX control literature, and papers presented 
at numerous meetings of research and trade organizations for industry, 
NOX control vendors, constructors, and the government. These 
documents report combustion-based reductions from minimal to over 90%, 
and flue gas controls in the range of 75% to 95%. We agree with the 
State that both combustion modifications and flue gas cleanup are 
established technologies. We agree with the State that the market-based 
approach embodied in the adopted rules give nearly complete freedom on 
how to achieve the goals and based on experience from California, will 
stimulate the development of new and innovative reduction technologies 
and strategies.
    Comment: BCCA commented that the rule should afford a five-year 
phase-in period. In the proposed rule the final, target allocations 
would be issued in 2005 and remain fixed thereafter. In other words, 
the necessary controls must be in place by year-end 2004 in order to 
meet the target allocations under the Proposal. This timeframe is 
neither practical nor feasible. The Proposal should be amended to 
incorporate a five-year phase-in period, beginning in 2002 and ending 
in 2007.
    Response: The State revised the rules submitted on December 22, 
2000 and October 4, 2001 based on these comments. The State accepted 
the notion that phasing in compliance with these rules is critical to 
the success of the program for many reasons including availability of 
equipment needed to make reductions as well as the need to satisfy the 
SIP requirement that reductions are made as soon as practicable. The 
new schedule contained in section 101.353 will ensure that 
NOX emission from stationary facilities will be reduced to a 
level necessary to reach attainment.
    Comment: BCCA commented that a consecutive 12-month period would 
more accurately reflect activity levels and would reduce requests for 
case-by-case reviews. The TNRCC had proposed the use of an entire 3-
year average (1997-1999) to determine baseline activity level. BCCA 
believes that a 12 month baseline activity period will dramatically 
reduce the number and complexity of petitions for case-by-case review.
    Response: We recognize that the baseline period utilized to 
establish the cap should be representative of normal source operations. 
The State took the view that the 1997, 1998, and 1999 period is the 
most recent and should best represent the emissions of facilities 
currently in operation. The State did not revise the rule based upon 
this comment. The State's view is reasonable and we see no basis to 
disapprove based on the commenter's concerns.
    Comment: Both BCCA and REI commented that there is no reasoned 
justification for the rate of NOX emission reductions in 
one-third increments and this rate of reduction is not needed to meet 
rate-of-progress requirements.
    Response: The State revised the rules submitted on December 22, 
2000 and October 4, 2001 based on these comments. Phasing in compliance 
with these rules is critical to the success of the program. 
Availability of equipment needed to make reductions must be balanced 
with the SIP requirement that reductions are made as soon as 
practicable. We concluded that a less rapid reduction of NOX 
from affected facilities influenced by equipment availability can be 
phased in between 2002 and 2007. The State revised the rule with a new 
schedule contained in section 101.353. We agree with the State that the 
new schedule will ensure that NOX emission from stationary 
facilities will be reduced on the appropriate time frame to a level 
necessary to reach attainment.
    Comment: Both REI and BCCA commented that allowances should be 
allocated for a stream of 30 years or more rather than allocated yearly 
to allow for more fluid trading and a defined period, greater than one 
year, of over-control or under-control for participating sites. This 
methodology would also simplify allocations.

[[Page 57258]]

    Response: The State made no revisions to the rule based upon this 
comment. The State seemed to adopt the view that the allocation of 
allowances on an annual basis, with an annual compliance report by the 
State to EPA and the public, is necessary to record and track a 
successful cap and trade program. The provision for audits and 
necessary corrective action every three years can best be accomplished 
by the annual allocation of allowances. The State responded that 
allocation of allowances on a yearly basis enhances the ability to plan 
and anticipate effects on air quality and that it also provides an 
enforcement mechanism for facilities whose actual emissions exceed the 
allowances in their compliance account through the reduction of 
subsequent yearly allocations. As the State noted, nothing would 
prohibit facilities from entering private agreements for the sale of 
future allocations or rights to allocations. We see no basis to 
disapprove based on the commentor's concerns.
    Comment: BCCA commented that the term ``source'' is used to denote 
an overall site over the ten-ton applicability trigger but is also used 
to denote a single emitting unit. BCCA and REI commented that sources 
not subject to emission specification for attainment demonstration 
(ESAD) rates under the SIP that can make cost effective reductions 
should have the option to participate in the cap and trade program and 
its allowances allocated in the same manner for current ESAD sources.
    Response: The State adopted a rule revision on May 23, 2001 which 
clarified that the applicability of the cap and trade program is 
determined by the collective emissions at a site and that the ten-ton 
per year applicability requirement does not apply to individual 
facilities. The rule revision was effective on June 13, 2001. The State 
did not create a new definition of `` NOX Cap Plant'' as 
requested by this comment. We agree with the State that facilities not 
subject to the cap and trade program may eventually be able to trade 
with MECT facilities under the current rule without compromising the 
attainment demonstration.
    Comment: BCCA commented that the State should clarify that target 
allocation based on 1997-1999 activity will not change despite 
shutdowns, replacements or changes to equipment.
    Response: The State revised the rules submitted on October 4, 2001 
by adding section 101.353(h) which clarifies that allowances will not 
change despite subsequent reductions in activity levels assuming the 
allowances are based on historical activity levels. These subsequent 
reductions in activity levels could result from shutdowns, 
replacements, or changes to equipment. We believe that the 
clarification by the State in response to this comment maintains the 
integrity of the program.
    Comment: BCCA commented that an opt-in mechanism should be 
incorporated for non-ESAD sources. An opt-in provision for sources not 
subject to ESAD rates under the SIP would provide an effective 
incentive to accomplish surplus reductions.
    Response: The rule provides for surplus reductions accomplished by 
non-ESAD sources to be traded for allowances for each compliance 
period. Such trades would provide the non-ESAD source with the same 
economic incentive to obtain surplus emission reductions as if the 
source had the ability to elect to be in the program. Any such trades 
would require reductions beyond what was relied upon in the attainment 
demonstration and could contain DERCs or MDERCs after we act on the 
DERC and MDERC rules.
    Comment: BCCA and REI commented that the rule allows sources newly 
authorized by permit application or permit by rule to receive 
allowances based on their permitted or actual activity levels. BCCA and 
REI support this concept but commented that newly modified sources 
should be treated identically.
    Response: The State revised the rules submitted on December 22, 
2000 based on this comment at section 101.353(a) to refer to new and 
modified facilities. By ``modified facilities'' the State referred to 
the modification itself. For example if an existing facility is 
modified to double its capacity in 1998, the emissions from the 
original facility will be allocated in the same way as facilities 
existing before 1997. The increase in emission allowable associated 
with the modification will be treated as a facility which did not exist 
before 1997. We agree with the State approach to the extent that the 
attainment demonstration modeling included the actual emissions for the 
facility, and that for modified facilities that have not begun normal 
operations, the emissions relied upon in the attainment demonstration 
are the allowable emissions.
    Comment: BCCA commented that the allocation methodology should be 
simplified. The allocation methodology language in proposed Section 
101.353 is overly complicated and confusing. The methodology is based 
on a complete re-allocation in each of the initial four years, and is 
structured to revisit allocations for new sources several times. As 
noted in an earlier comment, the methodology should allow all 
allocations for 2002 through 2032 to be issued in a single action 
before program commencement.
    Response: The State made no revisions to the rule based upon this 
comment. The State appeared to accept the view that the allocation of 
allowances on an annual basis, with an annual compliance report by the 
State to EPA and the public, is necessary to record and track a 
successful cap and trade program. The provision for audits and 
necessary corrective action every three years can best be accomplished 
by the annual allocation of allowances. The ability to plan and 
anticipate effects on air quality and to provide an enforcement 
mechanism for facilities whose actual emissions exceed the allowances 
in their compliance account through the reduction of subsequent yearly 
allocations are necessary elements of the program. We see no basis to 
disapprove based on the commentor's concerns. The allocation 
methodology is sufficient to achieve the program objectives and we are 
concerned that any further simplification could lead to a compromise of 
the program objectives.
    Comment: BCCA and REI commented that emission reduction credits 
should be convertible to allowances and the rule lacks reasoned 
justification why this is not allowed. By definition all recognized 
emission credits are real, quantifiable, and surplus to the SIP.
    Response: The State revised the rule submitted on October 4, 2001 
by adding a new section 101.356(h) which provides that ERCs may be 
converted into a yearly allocation of allowances if the ERCs were 
generated prior to December 1, 2000 and were evaluated and included in 
the HGA attainment demonstration. We proposed to approve and are in 
this action approving this revision to the rule. We agree that these 
ERCs, if converted into a stream of allowances would not increase 
emissions beyond those levels modeled that demonstrated compliance with 
the NAAQS for ozone.
    Comment: REI and BCCA commented that the existing discrete emission 
reduction credit trading rules require a 10% environmental contribution 
and a 5% compliance margin. This requirement has been extended to the 
use of DERCs in lieu of allowances. They stated that there is not a 
reasoned justification for this requirement and that it is not 
necessary to meet a region wide cap.
    Response: The State revised section 101.356 of the rule submitted 
on October 4, 2001 based on this comment. Although EPA has not yet 
acted on

[[Page 57259]]

those rules, we note that the requirement of retiring an additional 10% 
of DERCs and MDERCs for an environmental contribution and an additional 
5% for a compliance margin is not required when using DERCs and MDERCs 
in lieu of allowances under the HGA cap and trade program. In any 
event, in today's action, we are not taking action on the DERC/MDERC 
rules.
    Comment: REI and BCCA objected to the daily and monthly 
NOX limits for utility sources in addition to the annual 
MECT cap. These limits render the cap and trade flexibility 
meaningless.
    Response: The 30-day average system cap emission limit functions as 
a flexible but controlling limit which ensures that a specified 
emission level is achieved during a typical peak ozone season day. The 
State's actions are consistent with the view that the much less 
stringent daily maximum limit ensures that the 30-day average is not 
manipulated to allow higher NOX emissions on a single day 
when ozone may be a problem. We see no basis to disapprove based on the 
commentor's concerns.
    Comment: REI and BCCA commented that the rule should be modified to 
allow compliance with an emission cap to satisfy both nonattainment new 
source review and prevention of significant deterioration.
    Response: The nonattainment new source review and prevention of 
significant deterioration permitting are requirements of the Act. We 
agree with the State that any facility having major increases of 
NOX should undergo a nonattainment/prevention of significant 
deterioration review to ensure it is meeting BACT or LAER as 
applicable, regardless of whether the facility operates under the cap.
    Comment: REI and BCCA believe that one month is an inadequate 
period to calculate a control period's emissions and compare those 
emissions to cap and trade activity for the control period to balance 
the account. They recommend April 1 of the succeeding year as the 
deadline for reconciling accounts.
    Response: The facilities have one month for trading allowances 
after December 31 of the compliance year. Allowance trades must be 
approved by the State within thirty days. Section 359 of the rule 
requires a facility to submit the allowance compliance report by March 
31. This reporting parallels the State's emission inventory reporting 
guidelines and we agree with the State that the rule need not be 
revised. We see no basis to disapprove based on the commentor's 
concerns.
    Comment: REI and BCCA commented that the requirement to trade 
allowances in whole tons lacks reasoned justification. The number of 
allowances is rounded up or down whichever provides the holder or buyer 
less credit. Some credits have been traded with a value of $80,000 per 
ton and rounding can result in the taking of considerable value. They 
recommend that trading occur in one-tenth tons. This is consistent with 
ERC trading. During the years of target allowances, rounding down can 
result in zero allowances.
    Response: The State revised section 101.350(1) by the submission of 
October 4, 2001 to divide allowances into tenths of a ton. The rounding 
methodology was not changed from the normal mathematical rounding 
procedures. However, by allocating, transferring, and using allowances 
in tenths of tons, the impact of rounding will be reduced. We agree 
with the State that the incorporation of rounding allowances to a tenth 
of a ton will provide a more realistic and workable program.
    Comment: REI and BCCA commented that the installation of enhanced 
monitoring equipment should be delayed until the cap and trade target 
allocation year of 2005, and there is no reasoned justification for 
advancing the monitoring requirement to 2001, well ahead of the 
substantive reductions needed for attainment.
    Response: The State revised the rules submitted on December 22, 
2000 in response to this comment to take into account the 
practicalities identified by the comments. Both PEMS and CEMS vendors 
indicated that the number of monitors required in one year would strain 
their abilities to provide the equipment. The owners identified clear 
benefits of installing the monitors in conjunction with the control 
equipment. We agree with the State that since the rules have been 
revised to require that the monitors will be phased over a four-year 
period, at the earlier of installing emission controls or December 31, 
2004, this phase-in will achieve the end result benefits of specified 
emissions reduction by 2005. Because the first reduction period has 
been extended to 2004, the greater uncertainty about NOX 
emissions in the first two years of the program (compared to monitors 
in place by 2002) will be of less consequence. Phasing in CEMS/PEMS 
with the emission control equipment is a more rational and cost 
effective approach and remains consistent with attainment needs.
    Comment: REI and BCCA commented that the rule should contain a 
provision allowing volatile organic compound reductions in the place of 
NOX allowances where the VOC reductions are demonstrated to 
reduce ozone an equal amount.
    Response: The State modified section 101.356 of the rule submitted 
on December 22, 2001 based on the comment. EPA is not taking action on 
the DERC or MDERC rules. Generally, however, EPA agrees that if a 
demonstration has been made and approved by the executive director and 
the EPA to show that the use of VOC DERCs or MDERCs is equivalent to 
the use of NOX allowances in reducing ozone then we support 
the State allowing VOC use in place of a NOX reduction.
    Comment: BCCA supports an additional incentive program that would 
provide funds for use by a wide range of source categories to assist 
compliance with SIP required reductions. Such a fund would be 
competitive and, if funded by private sources, would provide 
appropriate credit or benefit to the parties providing the funding. The 
plan should incorporate broad executive director authority to approve 
credits on a case-by-case basis.
    Response: The State's actions are consistent with the view that the 
establishment of a private fund for pollution control projects is 
outside the scope of the adopted rules and will be left to the 
discretion of affected industries. This comment is not relevant for 
EPA's action on this SIP submittal.

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. For this 
reason, this action is also not subject to Executive Order 13211, 
``Actions Concerning Regulations That Significantly Affect Energy 
Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001). 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

[[Page 57260]]

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 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. The rule does not 
involve special consideration of environmental justice related issues 
as required by Executive Order 12898 (59 FR 7629, February 16, 1994). 
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. The 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.'' 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.).

List of Subjects in 40 CFR Part 52

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

    Dated: October 15, 2001.
Gregg A. Cooke,
Regional Administrator, Region 6.

    Part 52, 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 SS--Texas

    2. In Sec. 52.2270 the table in paragraph (c) is amended under 
Chapter 101 by:
    a. Revising the heading immediately above the entry for section 
101.1 to read ``Chapter 101--General Air Quality Rules'' followed on a 
separate line by the heading ``Subchapter A--General Rules.''
    b. Revising the entry for section 101.1.
    c. At the end of Chapter 101 following the entry for ``Section 101. 
Rule 19'' by adding new heading ``Subchapter H--Emissions Banking and 
Trading'' followed on a separate line by the heading ``Division 3--Mass 
Emissions Cap and Trade Program'' followed by individual entries for 
Sections 101.350, 101.351, 101.352, 101.353, 101.354, 101.356, 101.358, 
101.359, 101.360, and 101.363.
    The revisions and additions read as follows:


Sec. 52.2270  Identification of plan.

* * * * *
    (c) * * *

                                    EPA Approved Regulations in the Texas SIP
----------------------------------------------------------------------------------------------------------------
                                                               State
                                                             approval/       EPA
           State citation                Title/Subject       submittal     approval           Explanation
                                                                date         date
----------------------------------------------------------------------------------------------------------------
                                     Chapter 101--General Air Quality Rules,
----------------------------------------------------------------------------------------------------------------
                                           Subchapter A--General Rules
----------------------------------------------------------------------------------------------------------------
Section 101.1......................  Definitions..........   09/26/2001     11/14/01
                                                                             [Insert
                                                                            [Federal
                                                                            Register
                                                                           citation]
 
*                  *                  *                  *                  *                  *
                                                        *
----------------------------------------------------------------------------------------------------------------
                                   Subchapter H--Emissions Banking and Trading
----------------------------------------------------------------------------------------------------------------
                                Division 3--Mass Emissions Cap and Trade Program
----------------------------------------------------------------------------------------------------------------
Section 101.350....................  Definitions..........   09/26/2001   11/14/2001
                                                                             [Insert
                                                                             Federal
                                                                            Register
                                                                          citation.]
Section 101.351....................  Applicability........   05/23/2001   11/14/2001
                                                                             [Insert
                                                                             Federal
                                                                            Register
                                                                          citation.]
Section 101.352....................  General Provisions...   09/26/2001   11/14/2001

[[Page 57261]]

 
Section 101.353....................  Allocation of           09/26/2001   11/14/2001  Subsections
                                      allowances.                            [Insert   101.353(a)(3)(B)
                                                                             Federal   101.353(a)(3)(D) NOT IN
                                                                            Register   SIP.
                                                                          citation.]
Section 101.354....................  Allowance deductions.   09/26/2001   11/14/2001
                                                                             [Insert
                                                                             Federal
                                                                            Register
                                                                          citation.]
Section 101.356....................  Allowance Banking and   09/26/2001   11/14/2001
                                      Trading.                               [Insert
                                                                             Federal
                                                                            Register
                                                                          citation.]
Section 101.358....................  Emissions Monitoring    12/09/2000   11/14/2001
                                      and Compliance                         [Insert
                                      Demonstration.                         Federal
                                                                            Register
                                                                          citation.]
Section 101.359....................  Reporting............   12/09/2000   11/14/2001
                                                                             [Insert
                                                                             Federal
                                                                            Register
                                                                          citation.]
Section 101.360....................  Level of activity       09/26/2001   11/14/2001
                                      certification.                         [Insert
                                                                             Federal
                                                                            Register
                                                                          citation.]
Section 101.363....................  Program audits and      09/26/2001   11/04/2001
                                      reports.                               [Insert
                                                                             Federal
                                                                            Register
                                                                          citation.]
 
*                  *                  *                  *                  *                  *
                                                        *
----------------------------------------------------------------------------------------------------------------

[FR Doc. 01-27586 Filed 11-13-01; 8:45 am]
BILLING CODE 6560-50-P