[Federal Register Volume 67, Number 157 (Wednesday, August 14, 2002)]
[Proposed Rules]
[Pages 52913-52918]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20580]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[TN-238-200112; FRL-7258-9]


Approval and Promulgation of Implementation Plans: Tennessee: 
Nitrogen Oxides Budget and Allowance Trading Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed conditional approval.

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SUMMARY: EPA is proposing to conditionally approve a State 
Implementation Plan (SIP) revision submitted by the State of Tennessee 
on November 7, 2000, with additional material submitted on January 11, 
2001, and October 4, 2001. This revision responds to the EPA's 
regulation entitled, ``Finding of Significant Contribution and 
Rulemaking for Certain States in the Ozone Transport Assessment Group 
Region for Purposes of Reducing Regional Transport of Ozone,'' 
otherwise known as the ``NOX SIP Call.'' This revision 
establishes and requires a nitrogen oxides (NOX) allowance 
trading program for large electric generating and industrial units, and 
reductions for cement kilns, beginning in 2004. The intended effect of 
this SIP revision is to reduce emissions of NOX in order to 
help attain the national ambient air quality standard for ozone. EPA is 
proposing to approve Tennessee's NOX Reduction and Trading 
Program, with one exception, because it meets the requirements of the 
Phase I NOX SIP Call that will significantly reduce ozone 
transport in the eastern United States. The exception refers to Section 
96.40 State trading program budget. Tennessee revised the model rule to 
allow for the allocation of additional allowances to NOX 
budget units that have been generated through NOX emission 
reductions from industrial, mobile, and area source sectors. However, 
Tennessee's rule provides for approval of the allocation of additional 
allowances solely by the permitting authority, without approval by EPA. 
Therefore, EPA is proposing to approve Tennessee's NOX 
Reduction and Trading Program with the condition that Tennessee correct 
the deficiencies in Section 96.40 State trading program budget by 
replacing or revising the unapprovable language.

DATES: Written comments must be received on or before September 13, 
2002.

[[Page 52914]]


ADDRESSES: All comments should be addressed to: Steven M. Scofield at 
the EPA, Region 4 Air Planning Branch, 61 Forsyth Street, SW, Atlanta, 
Georgia 30303-8960.
    Copies of documents relative to this action are available at the 
following addresses for inspection during normal business hours: 
Environmental Protection Agency, Region 4, Air Planning Branch, 61 
Forsyth Street, SW, Atlanta, Georgia 30303-8960. Tennessee Department 
of Environment and Conservation, L & C Annex, 401 Church Street, 
Nashville, Tennessee 37243.

FOR FURTHER INFORMATION CONTACT: Steven M. Scofield, Regulatory 
Development Section, Air Planning Branch, Air, Pesticides and Toxics 
Management Division, Region 4, Environmental Protection Agency, Atlanta 
Federal Center, 61 Forsyth Street, SW, Atlanta, Georgia 30303-8960. The 
telephone number is (404) 562-9034. Mr. Scofield can also be reached 
via electronic mail at [email protected].

SUPPLEMENTARY INFORMATION: On November 7, 2000, the Tennessee 
Department of Environment and Conservation (TDEC) submitted a draft 
NOX emission control rule to the EPA for pre-adoption 
review, requesting parallel processing to the development of the rule 
at the State level and included a schedule for development and adoption 
of the rule by the State. On January 11, 2001, TDEC submitted adopted 
revisions to its SIP to meet the requirements of the Phase I 
NOX SIP Call. After adoption by the Tennessee Air Pollution 
Control Board, all rule revisions in Tennessee must be sent to the 
Secretary of State. Rule revisions become State-effective upon 
certification by the Secretary of State. Tennessee submitted State-
effective rule revisions on October 4, 2001. The revisions comply with 
the requirements of the Phase I NOX SIP Call with one 
exception regarding deficiencies in Section 96.40 State trading program 
budget. Included in this document are new rules 1200-3-27-.04 STANDARDS 
FOR CEMENT KILNS and 1200-3-27-.06 NOX BUDGET TRADING 
PROGRAM FOR STATE IMPLEMENTATION PLANS (40 CFR part 96). The 
information in this proposal is organized as follows:

I. EPA's Action
    A. What action is EPA proposing today?
    B. Why is EPA proposing this action?
    C. What are the NOX SIP Call general requirements?
    D. What is EPA's NOX budget and allowance trading 
program?
    E. What guidance did EPA use to evaluate Tennessee's submittal?
    F. What is the result of EPA's evaluation of Tennessee's 
program?
II. Tennessee's Control of NOX Emissions
    A. When did Tennessee submit the SIP revision to EPA in response 
to the NOX SIP Call?
    B. What is the Tennessee NOX Budget Trading Program?
    C. What is the Compliance Supplement Pool?
    D. What is the New Source Set-Aside program?
III. Proposed Action
IV. Administrative Requirements

I. EPA's Action

A. What Action Is EPA Proposing Today?

    EPA is proposing to conditionally approve revisions to Tennessee's 
SIP concerning the adoption of its NOX Reduction and Trading 
Program, submitted for parallel processing on November 7, 2000, with 
additional material submitted on January 11, 2001, and State-effective 
rules submitted on October 4, 2001.

B. Why Is EPA Proposing This Action?

    EPA is proposing this action because Tennessee's NOX 
Reduction and Trading Program regulations meet the requirements of the 
Phase I NOX SIP Call with one exception. The exception 
refers to deficiencies in Section 96.40 State trading program budget. 
Tennessee revised the model rule to allow for the allocation of 
additional allowances to NOX budget units that have been 
generated through NOX emission reductions from industrial, 
mobile, and area source sectors. However, Tennessee's rule provides for 
approval of the allocation of additional allowances solely by the 
permitting authority, without approval by EPA. In a letter dated June 
25, 2002, EPA informed Tennessee of the deficiencies in Section 96.40 
and how the State could correct these deficiencies. In the letter EPA 
also required the State to commit to correct the deficiencies within 12 
months. Therefore, EPA is proposing to approve Tennessee's 
NOX Reduction and Trading Program, including a rule for 
cement kilns, with the condition that Tennessee correct the 
deficiencies in Section 96.40 State trading program budget.

C. What Are the NOX SIP Call General Requirements?

    On October 27, 1998, EPA published a final rule entitled, ``Finding 
of Significant Contribution and Rulemaking for Certain States in the 
Ozone Transport Assessment Group Region for Purposes of Reducing 
Regional Transport of Ozone,'' otherwise known as the ``NOX 
SIP Call.'' See 63 FR 57356. The NOX SIP Call requires 22 
States and the District of Columbia to meet statewide NOX 
emission budgets during the five month period from May 1 through 
September 30 in order to reduce the amount of ground level ozone that 
is transported across the eastern United States.
    EPA identified NOX emission reductions by source 
category that could be achieved by using cost-effective measures. The 
source categories included were electric generating units (EGUs) and 
non-electric generating units (non-EGUs), internal combustion engines, 
and cement kilns. EPA determined state-wide NOX emission 
budgets based on the implementation of these cost-effective controls 
for each affected jurisdiction to be met by the year 2007. Internal 
combustion engines are not addressed by Tennessee in this response to 
Phase I, but will be in Phase II. In the NOX SIP Call 
notice, EPA suggested that imposing statewide NOX emissions 
caps on large fossil-fuel fired industrial boilers and EGUs would 
provide a highly cost-effective means for states to meet their 
NOX budgets. In fact, the state-specific budgets were set 
assuming an emission rate of 0.15 pounds NOX per million 
British thermal units (lb. NOX/mmBtu) at EGUs, multiplied by 
the projected heat input (mmBtu) from burning the quantity of fuel 
needed to meet the 2007 forecast for electricity demand. See 63 FR 
57407. The calculation of the 2007 EGU emissions assumed that an 
emissions trading program would be part of an EGU control program. The 
NOX SIP Call state budgets also assumed on average a 30 
percent NOX reduction from cement kilns, and a 60 percent 
reduction from industrial boilers and combustion. The non-EGU control 
assumptions were applied at units where the heat input capacities were 
greater than 250 mmBtu per hour, or in cases where heat input data were 
not available or appropriate, at units with actual emissions greater 
than one ton per day. However, the NOX SIP Call allowed 
states the flexibility to decide which source categories to regulate in 
order to meet the statewide budgets.
    To assist the states in their efforts to meet the SIP Call, the 
NOX SIP Call final rulemaking notice included a model 
NOX allowance trading regulation, called ``NOX 
Budget Trading Program for State Implementation Plans,'' (40 CFR part 
96), that could be used by states to develop their regulations. The 
NOX SIP Call notice explained that if states developed an 
allowance trading regulation consistent with the EPA model rule, they 
could participate in a regional allowance trading program that

[[Page 52915]]

would be administered by the EPA. See 63 FR 57458-57459.
    There were several periods during which EPA received comments on 
various aspects of the NOX SIP Call emissions inventories. 
On March 2, 2000, EPA published additional technical amendments to the 
NOX SIP Call in the Federal Register (65 FR 11222). On March 
3, 2000, the D.C. Circuit issued its decision on the NOX SIP 
Call ruling in favor of EPA on all the major issues. Michigan v. EPA, 
213 F.3d 663 (D.C. Cir. 2000). The DC Circuit Court denied petitioners' 
requests for rehearing or rehearing en banc on July 22, 2000. However, 
the Circuit Court remanded four specific elements to EPA for further 
action: The definition of electric generating unit, the level of 
control for stationary internal combustion engines, the geographic 
extent of the NOX SIP Call for Georgia and Missouri, and the 
inclusion of Wisconsin. On March 5, 2001, the U.S. Supreme Court 
declined to hear an appeal by various utilities, industry groups and a 
number of upwind states from the D.C. Circuit's ruling on EPA's 
NOX SIP Call rule.
    EPA published a proposal that addresses the remanded portion of the 
NOX SIP Call Rule on February 22, 2002 (67 FR 8396). Any 
additional emissions reductions required as a result of a final 
rulemaking on that proposal will be reflected in the second phase 
portion (Phase II) of the State's emission budget. On April 11, 2000, 
in response to the Court's decision, EPA notified Tennessee of the 
maximum amount of NOX emissions allowed for the State during 
the ozone season. This emission budget reflected adjustments to 
Tennessee's NOX emission budget to reflect the Court's 
decision regarding internal combustion engines and cogeneration 
facilities. Although the Court did not order EPA to modify Tennessee's 
budget, the EPA believes these adjustments are consistent with the 
Court's decision.

D. What Is EPA's NOX Budget and Allowance Trading Program?

    EPA's model NOX budget and allowance trading rule, 40 
CFR part 96, sets forth a NOX emissions trading program for 
large EGUs and non-EGUs. A state can voluntarily choose to adopt EPA's 
model rule in order to allow sources within its borders to participate 
in regional allowance trading. The October 27, 1998, Federal Register 
notice contains a full description of the EPA's model NOX 
budget trading program. See 63 FR 57514-57538 and 40 CFR part 96.
    Air emissions trading, in general, uses market forces to reduce the 
overall cost of compliance for pollution sources, such as power plants, 
while maintaining emission reductions and environmental benefits. One 
type of market-based program is an emissions budget and allowance 
trading program, commonly referred to as a ``cap and trade'' program.
    In an emissions budget and allowance trading program, the state or 
EPA sets a regulatory limit, or emissions budget, in mass emissions 
from a specific group of sources. The budget limits the total number of 
allowances for each source covered by the program during a particular 
control period. When the budget is set at a level lower than the 
current emissions, the effect is to reduce the total amount of 
emissions during the control period. After setting the budget, the 
state or EPA then assigns, or allocates, allowances to the 
participating entities up to the level of the budget. Each allowance 
authorizes the emission of a quantity of pollutant, e.g., one ton of 
airborne NOX.
    At the end of the control period, each source must demonstrate that 
its actual emissions during the control period were less than or equal 
to the number of available allowances it holds. Sources that reduce 
their emissions below their allocated allowance level may sell their 
extra allowances. Sources that emit more than the amount of their 
allocated allowance level may buy allowances from the sources with 
extra reductions. In this way, the budget is met in the most cost-
effective manner.

E. What Guidance Did EPA Use To Evaluate Tennessee's Submittal?

    The final NOX SIP Call rule included a model 
NOX budget trading program regulation. See 40 CFR part 96. 
EPA used the model rule and 40 CFR 51.121-51.122 to evaluate 
Tennessee's NOX reduction and trading program.

F. What Is the Result of EPA's Evaluation of Tennessee's Program?

    EPA has evaluated Tennessee's October 4, 2001, SIP submittal and 
finds it approvable with conditions. The Tennessee NOX 
reduction and trading program is consistent with EPA's guidance and 
meets the requirements of the Phase I NOX SIP Call with one 
exception regarding deficiencies in Section 96.40 State trading program 
budget. EPA finds the NOX control measures in Tennessee's 
NOX reduction and trading program, including the cement kiln 
rule, approvable.
    The October 4, 2001, submittal will strengthen Tennessee's SIP for 
reducing ground level ozone by providing NOX reductions 
beginning in 2004. Also, EPA finds that the submittal contained the 
information necessary to demonstrate that Tennessee has the legal 
authority to implement and enforce the control measures, and to 
demonstrate their appropriate distribution of the compliance supplement 
pool. Furthermore, EPA proposes to find that the submittal demonstrates 
that the compliance dates and schedules, and the monitoring, 
recordkeeping and emission reporting requirements will be met.

II. Tennessee's Control of NOX Emissions

A. When Did Tennessee Submit the SIP Revision to EPA in Response to the 
NOX SIP Call?

    On November 7, 2000, the Tennessee Department of Environment and 
Conservation submitted a draft NOX emission control rule to 
the EPA for pre-adoption review, requesting parallel processing to the 
development of the rule at the State level and included a schedule for 
development and adoption of the rule by the State. On January 11, 2001, 
TDEC submitted adopted revisions to its SIP to meet the requirements of 
the Phase I NOX SIP Call. After adoption by the Tennessee 
Air Pollution Control Board, all rule revisions in Tennessee must be 
sent to the Secretary of State. Rule revisions become State-effective 
upon certification by the Secretary of State. Tennessee submitted 
State-effective rule revisions on October 4, 2001.

B. What Is Tennessee's NOX Budget Trading Program?

    Tennessee's rule, as in the model rule, allows the large EGUs, 
boilers and turbines to participate in the multi-state cap and trade 
program. Cement kilns are not included in the trading program, but will 
be required to install low NOX burners, mid-kiln system 
firings or technology that achieves the same emission decreases. 
Tennessee's SIP revision to meet the requirements of the NOX 
SIP Call consists of new rules 1200-3-27-.04 STANDARDS FOR CEMENT KILNS 
and 1200-3-27-.06 NOX BUDGET TRADING PROGRAM FOR STATE 
IMPLEMENTATION PLANS (40 CFR 96). The regulations under 1200-3-27-.06 
affect EGUs and non-EGUs. Rule 1200-3-27-.06 NOX BUDGET 
TRADING PROGRAM FOR STATE IMPLEMENTATION PLANS (40 CFR 96) added 10 new 
subparts: Subpart A--NOX Budget Trading Program General 
Provisions; Subpart B--Authorized Account Representative for 
NOX Budget Sources; Subpart C--

[[Page 52916]]

Permits; Subpart D--Compliance Certification; Subpart E--NOX 
Allowance Allocations; Subpart F--NOX Allowance Tracking 
System; Subpart G--NOX Allowance Transfers; Subpart H--
Monitoring and Reporting; Subpart I--Individual Unit Opt-ins; and 
Subpart J--Mobile and Area Sources [Reserved].
    Tennessee's NOX Budget Trading Program establishes and 
requires a NOX allowance trading program for large EGUs and 
non-EGUs. The regulations under 1200-3-27-.06 establish a 
NOX cap and allowance trading program for the ozone control 
seasons beginning May 31, 2004.
    The State of Tennessee voluntarily chose to follow EPA's model 
NOX budget and allowance trading rule, 40 CFR part 96, that 
sets forth a NOX emissions trading program for large EGUs 
and non-EGUs. Tennessee's NOX Budget Trading Program is 
based upon EPA's model rule, therefore, Tennessee sources are allowed 
to participate in the interstate NOX allowance trading 
program that EPA will administer for the participating states. The 
State of Tennessee has adopted regulations that are substantively 
identical to 40 CFR part 96, with the exceptions of the allocation 
period and the State trading program budget. Tennessee chose to use a 
15-year allocation period (2004-2018) for NOX allowance 
allocations, with the NOX allowance allocations, in 
accordance with Sec. 96.42, being submitted by April 1, 2016 (15 years 
after initial allocation), and April 1st of each year thereafter, to 
the Administrator for the control period in the year that is three 
years after the year of the applicable deadline. Tennessee's 
NOX allocations do not exceed the values allowed to meet the 
State cap. Therefore, pursuant to 40 CFR 51.121(p)(1), Tennessee's SIP 
revision is approvable as satisfying the State's NOX 
emission reduction obligations. Under 1200-3-27-.06, Tennessee 
allocates NOX allowances to the EGU and non-EGU units that 
are affected by these requirements. The NOX trading program 
applies to all Phase I units that are fossil fuel-fired EGUs with a 
nameplate capacity greater than 25 MW or more and selling any amount of 
electricity to the grid, or that are fossil fuel-fired non-EGUs that 
have a heat input capacity equal to or greater than 250 mmBtu per hour. 
Each NOX allowance permits a source to emit one ton of 
NOX during the seasonal control period. NOX 
allowances may be bought or sold. Unused NOX allowances may 
also be banked for future use, with certain limitations.
    Tennessee also chose to revise Section 96.40 (State trading program 
budget) from the model rule at 1200-3-27-.06(1)(f) to allow for the 
allocation of additional allowances to NOX budget units that 
have been generated through NOX emission reductions from 
industrial, mobile, and area source sectors. However, Tennessee's rule 
provides for approval of the allocation of additional allowances solely 
by the permitting authority, without approval by EPA. Therefore, EPA is 
proposing to approve Tennessee's NOX Reduction and Trading 
Program with the condition that Tennessee correct the deficiencies in 
Section 96.40 State trading program budget by removing or making 
specific revisions to the unapprovable language. By letter dated June 
25, 2002, EPA explained in detail the problems with this language and 
stated that the language should be deleted or replaced with specified, 
revised language.
    Source owners will monitor their NOX emissions by using 
systems that meet the requirements of 40 CFR part 75, subpart H, and 
report resulting data to EPA electronically. Each budget source 
complies with the program by demonstrating at the end of each control 
period that actual emissions do not exceed the amount of allowances 
held for that period. However, regardless of the number of allowances a 
source holds, it cannot emit at levels that would violate other federal 
or state limits, for example, reasonably available control technology 
(RACT), new source performance standards, or Title IV (the Federal Acid 
Rain program).
    Tennessee's Rule 1200-3-27-.04 STANDARDS FOR CEMENT KILNS 
establishes requirements for cement manufacturing facilities, however, 
these sources are subject to NOX reduction requirements but 
do not participate in the NOX trading program. Cement kilns 
are not included in the trading program, but will be required to 
install low NOX burners, mid-kiln system firings or 
technology that achieves the same emission decreases. Tennessee's 
submittal does not rely on any additional reductions beyond the 
anticipated Federal measures in the mobile and area source categories. 
However, Tennessee revised the model rule to allow for the allocation 
of additional allowances to NOX budget units that have been 
generated through NOX emission reductions from industrial, 
mobile, and area source sectors in the future. It is expected that 
Tennessee will revise this provision to be consistent with EPA 
requirements. Therefore, Tennessee may comply in the future using 
measures beyond the measures anticipated by the Federal rule.
    Tennessee's submittal demonstrates that the Phase I NOX 
emission budgets established by EPA will be met as follows:

------------------------------------------------------------------------
                                     EPA 2007 NOX     Tennessee 2007 NOX
         Source category           budget emissions    budget emissions
                                     (tons/season)       (tons/season)
------------------------------------------------------------------------
EGUs............................              25,814              25,814
Non-EGUs........................               5,519               5,519
Area Sources....................              13,333              13,333
Non-road Sources................              52,920              52,920
Highway Sources.................              66,342              66,342
    Total.......................             163,928             163,928
------------------------------------------------------------------------

C. What Is the Compliance Supplement Pool?

    To provide additional flexibility for complying with emission 
control requirements associated with the NOX SIP Call, the 
final NOX SIP Call rule provided each affected state with a 
``compliance supplement pool.'' The compliance supplement pool is a 
quantity of NOX allowances that may be used to cover excess 
emissions from sources that are unable to meet control requirements 
during the 2004 and 2005 ozone seasons. Allowances from the compliance 
supplement pool will not be valid for compliance past the 2005 ozone 
season. The NOX SIP Call included these voluntary provisions 
in order to address commenters' concerns about the possible adverse 
effect that the control requirements might have on the reliability of 
the electricity supply or on other industries required to install 
controls as the result of a state's response to the NOX SIP 
Call.

[[Page 52917]]

    A state may issue some or all of the compliance supplement pool via 
two mechanisms.
    First, a state may issue some or all of the pool to sources with 
credits from implementing NOX reductions beyond all 
applicable requirements in the ozone season during 2000-2003 (i.e., 
early reductions). This allows sources that cannot install controls 
prior to May 31, 2004, to purchase other sources' early reduction 
credits in order to comply. Second, a state may issue some or all of 
the pool to sources that demonstrate a need for an extension of the May 
31, 2004, compliance deadline due to undue risk to the electricity 
supply or other industrial sectors, and where early reductions are not 
available. See 40 CFR 51.121(e)(3). In Tennessee's rule, each 
NOX Budget unit for which the owner or operator requests any 
early reduction credits shall reduce its NOX emission rate, 
for each control period in 2001, 2002, and 2003 for which early 
reduction credits are requested, to less than both 0.25 lb/mmBtu and 80 
percent of the unit's NOX emission rate in the 2000 control 
period for EGUs, and for non-EGUs, to less than 95 percent of the 
unit's NOX emission rate in the 2000 control period. In 
order to qualify for early reduction credits, a source will have had to 
been monitoring according to part 75, subpart H, in the 2000 ozone 
season to establish a baseline against which the subsequent reductions 
may be demonstrated. Further, all reductions must be above and beyond 
any requirement under the Clean Air Act.

D. What Is the New Source Set-Aside?

    40 CFR Part 96 requires that new sources hold allowances to cover 
their emissions. EPA maintains that as much as possible within the 
context of the overall trading budget, allocations should be provided 
to new sources on the same basis as that used for existing units until 
the time when the new sources receive an allocation as part of an 
updating allocation system. In order to provide NOX 
allowances to new NOX Budget units, Sec. 96.42(d) 
establishes an allocation set-aside account equaling 5 percent of the 
State trading program budget in 2004 and 2005, and 2 percent 
thereafter. (However, a state may have any size set-aside, may allocate 
the set-aside in whatever manner it chooses, and may carry over from 
one year to the next any amount of allowances.) Authorized account 
representatives from a new source may request NOX allowances 
from the State on a first-come, first-served basis, at an emission rate 
(0.15 lb/mmBtu for EGUs and 0.17 lb/mmBtu for non-EGUs) multiplied by a 
budget unit's maximum design heat input and by the hours in the control 
period starting with the first hour of operation. After the control 
period, EPA will deduct NOX allowance based on the unit's 
actual utilization during the control period. As a result of the 
deduction, the allocation for the new unit from the set-aside will 
effectively equal the product of the emission rate and the unit's 
actual heat input for the control period season. Allowances not issued 
to new sources in the applicable control period will be returned to the 
existing sources in the State on a pro-rata basis to guard against the 
possibility of a disproportionately large set-aside.
    Tennessee's SIP provides for New Source Set-asides. For EGUs the 
allocation set-aside will be allocated NOX allowances equal 
to 4.3 percent of the tons of NOX emissions in the State 
trading program budget apportioned to EGUs under section 96.40, rounded 
to the nearest whole NOX allowance as appropriate. The 
allocation set-aside for new source growth will be the NOX 
allowances remaining in the state trading program budget for non-EGUs 
after allocations are set for all NOX budget units. This 
approach to allocations for new units is acceptable because it falls 
within the flexibility of the NOX SIP Call requirements for 
a state's allocation to new sources.

III. Proposed Action

    EPA is proposing to conditionally approve the Tennessee's SIP 
revision consisting of its draft NOX Budget Trading Program, 
which was submitted on November 7, 2000, with additional material 
submitted on January 11, 2001, and State-effective rules submitted on 
October 4, 2001. EPA finds that Tennessee's submittal is approvable 
with one exception because it meets the requirements of the Phase I 
NOX SIP Call.
    The exception refers to Section 96.40 State trading program budget. 
Tennessee revised the model rule at 1200-3-27-.06(1)(f) to allow for 
the allocation of additional allowances to NOX budget units 
that have been generated through NOX emission reductions 
from industrial, mobile, and area source sectors. However, Tennessee's 
rule provides for approval of the allocation of additional allowances 
solely by the permitting authority, without approval by EPA. Therefore, 
EPA is proposing to approve Tennessee's NOX Reduction and 
Trading Program, including a rule for cement kilns, with the condition 
that Tennessee correct the deficiencies in Section 96.40 State trading 
program budget by removing or revising the unapprovable language.

IV. Administrative Requirements

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
proposed 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 
proposed action merely proposes to approve state law as meeting Federal 
requirements and imposes no additional requirements beyond those 
imposed by state law. Accordingly, the Administrator certifies that 
this proposed 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 proposes to approve 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).
    This proposed rule also does not have tribal implications because 
it will not have a substantial direct effect on one or more Indian 
tribes, on the relationship between the Federal Government and Indian 
tribes, or on the distribution of power and responsibilities between 
the Federal Government and Indian tribes, as specified by Executive 
Order 13175 (65 FR 67249, November 9, 2000). This action also does not 
have Federalism implications because it does 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). This action 
merely proposes to approve 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 
proposed rule also is not subject to Executive Order 13045 ``Protection 
of Children from Environmental Health Risks and Safety Risks'' (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

[[Page 52918]]

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. This 
proposed 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, Carbon monoxide, 
Intergovernmental relations, Lead, Nitrogen dioxide, Ozone, Particulate 
matter, Reporting and recordkeeping requirements, Sulfur oxides, 
Volatile organic compounds.

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

    Dated: July 30, 2002.
A. Stanley Meiburg,
Acting Regional Administrator, Region 4.
[FR Doc. 02-20580 Filed 8-13-02; 8:45 am]
BILLING CODE 6560-50-P