[Federal Register Volume 68, Number 108 (Thursday, June 5, 2003)]
[Rules and Regulations]
[Pages 33764-33791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-13255]



[[Page 33763]]

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Part II





Environmental Protection Agency





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40 CFR Part 51



Revisions to Regional Haze Rule To Incorporate Sulfur Dioxide 
Milestones and Backstop Emissions Trading Program for Nine Western 
States and Eligible Indian Tribes Within That Geographic Area; Final 
Rule

  Federal Register / Vol. 68, No. 108 / Thursday, June 5, 2003 / Rules 
and Regulations  

[[Page 33764]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[FRL-7504-4]


Revisions to Regional Haze Rule To Incorporate Sulfur Dioxide 
Milestones and Backstop Emissions Trading Program for Nine Western 
States and Eligible Indian Tribes Within That Geographic Area

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The purpose of this rule is to revise EPA's regional haze rule 
to incorporate certain provisions for Western States and eligible 
Indian Tribes.
    The Western Regional Air Partnership (WRAP) submitted an Annex to 
the 1996 report of the Grand Canyon Visibility Transport Commission 
(GCVTC) to EPA on September 29, 2000. This submittal was required under 
the regional haze rule in order for nine Western States (and Indian 
Tribes within the same geographic region) to have the option of 
submitting plans implementing the GCVTC recommendations. The Annex 
contains recommendations for implementing the regional haze rule in 
nine Western States, including a set of recommended regional emissions 
milestones. The milestones address, for the time period between 2003 
and 2018, emissions of sulfur dioxide (SO2), a key precursor 
to the formation of fine particles and regional haze.

DATES: The regulatory amendments announced herein take effect on August 
4, 2003.

ADDRESSES: The EPA has established an official public docket for this 
action under Docket No. OAR-2002-0076. The official public docket is 
the collection of materials that is available for public viewing at the 
Air Docket in the EPA Docket Center, Room B102, 1301 Constitution Ave., 
NW., Washington, DC. The EPA Docket Center Public Reading Room is open 
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal 
holidays.

FOR FURTHER INFORMATION CONTACT: Tim Smith (telephone 919-541-4718), 
Environmental Protection Agency, Air Quality Strategies and Standards 
Division, C504-02, Research Triangle Park, NC 27711 or Thomas Webb 
(telephone 415-947-4139), EPA Region 9 (AIR-5), 75 Hawthorne Street, 
San Francisco, CA 94105. Internet addresses: [email protected] and 
[email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. General Information
    A. Regulated Entities
    B. How can I get copies of this document and other related 
information?
II. Overview of the Stationary Source SO2 Reduction 
Program Covered by this Rule
    A. What is the regional haze rule?
    B. What are the special provisions for Western States and 
eligible Indian Tribes in 40 CFR 51.309 of the regional haze rule?
    C. What was required to be included in the Annex to the GCVTC 
report?
    D. What are the next steps in implementing this program?
    E. What topics were covered in EPA's May 6, 2002 proposal?
    F. What public comments were received on the proposal?
    G. What topics are covered in this preamble?
III. Discussion of Issues Raised in Comments on the May 6, 2002 
Proposal
    A. General and Overarching Issues
    B. Milestones
    C. Annual Process for Determining Whether a Trading Program is 
Triggered
    D. Requirements for the Backstop Trading Program
    E. Provisions Related to Time Period After 2018
    F. Provisions Related to Indian Tribes
IV. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination with 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children from 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions that Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer Advancement Act
    J. Executive Order 12898: Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act

I. General Information

A. Regulated Entities

    Entities potentially regulated by this action are nine States in 
the Western United States (Arizona, California, Colorado, Idaho, 
Nevada, New Mexico, Oregon, Utah and Wyoming) and Indian Tribes within 
that same geographic area. This action, and an earlier action taken by 
EPA in 1999, provides these States and Tribes with an optional program 
to protect visibility in Federally protected scenic areas. The portion 
of the program addressed by today's action is a program for stationary 
sources of SO2, involving a set of regional annual emissions 
milestones for the years between 2003 and 2018 that would apply to the 
total SO2 emissions from all stationary sources emitting 
more than 100 tons of SO2 per year. Examples of potentially 
affected sources currently emitting at this level are listed in the 
following table.

Examples of Regulated Entities

Coal-fired power plants
Industrial boilers
Petroleum refineries
Natural gas processing facilities with sulfur recovery plants
Cement kilns
Paper mills

B. How Can I Get Copies of This Document and Other Related Information?

    1. Docket. The EPA has established an official public docket for 
this action under Docket No. OAR-2002-0076. The official public docket 
consists of the documents specifically referenced in this action, any 
public comments received, and other information related to this action. 
Although a part of the official docket, the public docket does not 
include confidential business information (CBI) or other information 
whose disclosure is restricted by statute. The official public docket 
is the collection of materials that is available for public viewing at 
the Air Docket in the EPA Docket Center, Room B102, 1301 Constitution 
Ave., NW., Washington, DC. The EPA Docket Center Public Reading Room is 
open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding 
legal holidays. The telephone number for the Reading Room is (202) 566-
1744, and the telephone number for the Air Docket is (202) 566-1742. A 
reasonable fee may be charged for copying.
    2. Electronic Access. You may access this Federal Register document 
electronically through the EPA Internet under the ``Federal Register'' 
listings at http://www.epa.gov/fedrgstr/. An electronic version of the 
public docket is available through EPA's electronic public docket and 
comment system, EPA Dockets. You may use EPA Dockets at http://www.epa.gov/edocket/ to view public comments, access the index listing 
of the contents of the official public docket, and to access those 
documents in the public docket that are available electronically. 
Although not all docket materials may be available electronically, you 
may still access any of the publicly available docket materials through 
the docket facility identified above. Once in the system, select 
``search,'' then key in the

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appropriate docket identification number.

II. Overview of the Stationary Source SO2 Reduction Program 
Covered by This Rule

    The purpose of this rule is to revise 40 CFR 51.309 of the regional 
haze rule to incorporate additional provisions to address visibility 
impairment in 16 Class I areas on the Colorado Plateau.

A. What Is the Regional Haze Rule?

    Section 169A of the CAA establishes a national goal for protecting 
visibility in Federally-protected scenic areas. These ``Class I'' areas 
include national parks and wilderness areas. The national visibility 
goal is to remedy existing impairment and prevent future impairment in 
these Class I areas, consistent with the requirements of sections 169A 
and 169B of the CAA.
    Regional haze is a type of visibility impairment caused by air 
pollutants emitted by numerous sources across a broad region. The EPA 
uses the term regional haze to distinguish this type of visibility 
problem from those which are more local in nature. In 1999, EPA issued 
a regional haze rule requiring States to develop implementation plans 
that will make ``reasonable progress'' toward the national visibility 
goal, (64 FR 35714, July 1, 1999). The first State plans for regional 
haze are due between 2003 and 2008. The regional haze rule provisions 
appear at 40 CFR 51.308 and 40 CFR 51.309.

B. What Are the Special Provisions for Western States and Eligible 
Indian Tribes in 40 CFR 51.309 of the Regional Haze Rule?

    The regional haze rule at 40 CFR 51.308 sets forth the requirements 
for State implementation plans (SIPs) under the regional haze program. 
The rule requires State plans to include visibility progress goals for 
each Class I area, as well as emissions reductions strategies and other 
measures needed to meet these goals. The rule also provides an optional 
approach, described in 40 CFR 51.309, that may be followed by the nine 
Western States (Arizona, California, Colorado, Idaho, Nevada, New 
Mexico, Oregon, Utah, and Wyoming) that comprise the transport region 
analyzed by the GCVTC during the 1990's. This optional approach is also 
available to eligible Indian Tribes within this geographic region. The 
regulatory provisions at 40 CFR 51.309 are based on the final report 
issued by the GCVTC in 1996,\1\ which included a number of recommended 
emissions reductions strategies designed to improve visibility in the 
16 Class I areas on the Colorado Plateau.
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    \1\ Recommendations for Improving Western Vistas. GCVTC, June 
10, 1996.
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    In developing the regional haze rule, EPA received a number of 
comments on the proposed rule encouraging the Agency to recognize 
explicitly the work of the GCVTC. In addition, in June 1998, Governor 
Leavitt of Utah provided comments to EPA on behalf of the Western 
Governors Association (WGA), further emphasizing the commitment of 
Western States to implementing the GCVTC recommendations. The WGA's 
comments also suggested the translation of the GCVTC's recommendations 
into specific regulatory language. The EPA issued a Notice of 
Availability during the fall of 1998 requesting further comment on the 
WGA proposal and regulatory language based upon the WGA's 
recommendations. Based on the comments received on this Federal 
Register notice, EPA developed the provisions set forth in 40 CFR 
51.309 that allow the nine Transport Region States and eligible Tribes 
within that geographic area to implement many of the GCVTC 
recommendations within the framework of the national regional haze 
rule.
    The provisions in 40 CFR 51.309 comprise a comprehensive long-term 
strategy for addressing sources that contribute to visibility 
impairment within this geographic region. The strategy addresses the 
time period between the year 2003,\2\ when the implementation plans are 
due, and the year 2018. The provisions address emissions from 
stationary sources, mobile sources, and area sources such as emissions 
from fires and windblown dust.
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    \2\ Indian Tribes are given the flexibility under EPA 
regulations to submit implementation plans and opt into the program 
after the 2003 deadline.
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    One element of the GCVTC's strategy to address regional haze is a 
program to reduce stationary source emissions of SO2. This 
program calls for setting a series of declining caps on emissions of 
SO2. These declining caps on emissions are referred to as 
emissions milestones and provide for a reduction in SO2 
emissions over time. In designing this program, the GCVTC intended for 
these milestones to be reduced through voluntary measures, but also 
included provisions for an enforceable market-based program that would 
serve as a ``backstop'' if voluntary measures did not succeed. At the 
time the regional haze rule was published, however, it was broadly 
recognized that the specific emission milestones, and the details of 
how both the voluntary and enforceable phases of the program would be 
implemented, were necessary elements of a regulatory program. 
Accordingly, the regional haze rule, in 40 CFR 51.309(f), required the 
development of an ``Annex'' to the report of the GCVTC that would fill 
in these details. The regional haze rule provided that the option 
afforded by 40 CFR 51.309 would only be available if an Annex, 
addressing the specific requirements of 40 CFR 51.309(f), were 
submitted to EPA by October 1, 2000. The EPA required the submission of 
an Annex by this date to ensure that EPA would be able to act on it 
before the December 31, 2003 deadline for SIPs under 40 CFR 51.309(c).

C. What Was Required To Be Included in the Annex to the GCVTC Report?

    The regional haze rule required the GCVTC (or a regional planning 
body formed to implement the Commission recommendations, such as the 
Western Regional Air Partnership (WRAP) to provide recommendations to 
fill in the details for two main aspects of the program:

--Emissions reductions milestones for stationary source 
SO2 emissions for the years 2003, 2008, 2013, and 2018. 
The milestones must provide for ``steady and continuing emissions 
reductions'' for the 2003-2018 time period. In addition, the 
milestones must ensure greater reasonable progress than would be 
achieved by application of best available retrofit technology (BART) 
pursuant to Sec. 51.308(e)(2).
--Documentation setting forth the details for how a market trading 
program would be implemented in the event that voluntary measures 
are not sufficient to meet the required milestones. This 
documentation must include model rules, memoranda of understanding, 
and other documentation describing in detail how emissions 
reductions progress will be monitored, what conditions will result 
in the activation of the market trading program, how allocations 
will be performed, and how the program will operate.

    The EPA received the Annex from the WRAP in a timely manner, on 
September 29, 2000. The EPA recognizes the significant amount of work 
that was devoted to developing the Annex and we commend the WRAP 
participants for their efforts. Under 40 CFR 51.309(f)(3), if EPA finds 
that the Annex meets the requirements of the regional haze rule, EPA 
committed to revise the regional haze rule based on the Annex to 
incorporate provisions requiring compliance with the milestones and 
backstop trading program. Along with the existing elements of 40 CFR 
51.309, these new

[[Page 33766]]

provisions would also be addressed in the 2003 SIPs by the 9 Western 
States.

D. What Are the Next Steps in Implementing This Program?

    Today's rule modifies the requirements in 40 CFR 51.309 of the 
regional haze rule. As a result, 40 CFR 51.309 provides a complete 
regulatory framework to be used by Western States and Tribes in 
developing regional haze implementation plans. The EPA will continue to 
work closely with the States and Tribes to support their efforts to 
develop plans that meet the applicable requirements of the regional 
haze rule. Once State and tribal plans that meet the applicable 
requirements of the regional haze rule are reviewed and approved by 
EPA, they will be federally enforceable.

E. What Topics Were Covered in EPA's May 6, 2002 Proposal?

    The May 6, 2002 proposal addressed the following topics:
    [sbull] The proposed regional SO2 milestones and WRAP's 
determination that the milestones meet the criteria for approval in the 
regional haze rule. The EPA reviewed the WRAP's methodology for 
developing specific milestones for SO2 for the years between 
2003 and 2018. The EPA proposed to approve the milestones as satisfying 
the requirements of the regional haze rule. The EPA noted its 
conclusion that the milestones provide for ``steady and continuing 
emissions reductions.'' The EPA also proposed to conclude that the 
milestones provide for ``greater reasonable progress'' than the BART 
emission limits that would otherwise be required by the regional haze 
rule.
    [sbull] Ways in which the milestones may be adjusted in the future. 
The proposal discusses the limited circumstances under which the 
milestones may be adjusted in the future and the proposed 
administrative process for making those changes.
    [sbull] The stationary sources of SO2 that are included 
in the program. The proposal discussed the stationary sources of 
SO2 that would be required to participate in the program, 
and whose cumulative emissions would be compared to the milestones.
    [sbull] The annual process for determining whether a milestone is 
exceeded, thereby triggering the trading program. The proposal 
described the steps to be followed in evaluating emissions data at the 
State, tribal and regional levels. It also described a mechanism by 
which States and Tribes can activate the trading program in 2013 if 
evidence indicates that the 2018 milestone will not be reached without 
such action.
    [sbull] Key trading program elements that are required in SIPs and 
tribal implementation plans (TIPs). The preamble discussed proposed 
requirements regarding the backstop trading program, and discussed 
trading program elements such as: Issuance of and compliance with 
allowances; emissions quantification protocols and tracking system; the 
annual reconciliation process; and penalty provisions.
    [sbull] Status of the program after 2018. The proposal discussed 
EPA's understanding of what happens to the milestones and backstop 
trading program at the completion of the first implementation period, 
in 2018.

The preamble to the May 6, 2002 proposal described each of these 
programmatic areas in detail, including EPA's review of the relevant 
portion of the WRAP submittal.

F. What Public Comments Were Received on the Proposal?

    On May 6, 2002 (67 FR 30418), the proposed rule was published in 
the Federal Register. The EPA requested written comments on the 
proposal and held a public hearing. The public hearing was held in 
Phoenix, Arizona on June 4, 2002. A transcript for this public hearing 
is available in the public docket for the regulation (Docket OAR-2002-
0076). The EPA received eleven written comments on the package, 
primarily from Western stakeholder groups.

G. What Topics Are Covered in This Preamble?

    The EPA has made a number of changes to the proposed rule in 
response to the comments we received. The comments on the proposal were 
limited to a relatively small subset of the broad range of topics 
discussed in detail in the proposal. Accordingly, EPA believes that it 
is not necessary to repeat the comprehensive discussion contained in 
the preamble to the proposal. Instead, EPA has limited the discussion 
in this preamble to issues raised by commenters, and changes made to 
the final rule based on those issues.

III. Discussion of Issues Raised in Comments on the May 6, 2002 
Proposal

A. General and Overarching Issues

1. Impact of May 24, 2002 American Corn Growers Decision
    On May 24, 2002, the U.S. Court of Appeals for the D.C. Circuit 
issued a decision in American Corn Growers et al. v. EPA, 291 F.3d 1 
(D.C. Cir., 2002) that invalidated part of EPA's regional haze rule. 
Because the WRAP Annex would be incorporated into the regional haze 
rule, a number of commenters asked whether the court's decision would 
have an impact on this rulemaking regarding the Annex. Some commenters 
recommended that EPA not proceed with the final rule until EPA has 
addressed the issues raised by the court regarding the regional haze 
rule in general. In contrast, a number of commenters agreed with the 
position that EPA took in a June 7 letter \3\ that the Annex is fully 
consistent with the court's ruling. A number of commenters requested 
that EPA clarify its position and rationale on this issue. The EPA 
continues to believe that the decision in American Corn Growers does 
not in any way affect the WRAP Annex or EPA's ability to incorporate 
the Annex into its regional haze rule.
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    \3\ June 7, 2002 letter from Lydia Wegman, EPA, to Rick Sprott 
and Julie Simpson, co-chairs, WRAP Initiatives Oversight Committee.
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    In order to better understand EPA's conclusion regarding the Annex, 
EPA believes it is helpful to review the history of the GCVTC and the 
WRAP. In its 1996 report to EPA, the GCVTC recommended a wide range of 
control strategies to address regional haze, including strategies to 
reduce emissions of SO2 from large stationary sources. Thus, 
the GCVTC specifically recognized that stationary sources would need to 
be an important part of an overall visibility strategy and, in 
particular, that controlling sulfates from these sources was a key 
strategy for addressing haze. As part of this overall strategy, the 
GCVTC also concluded that interim targets that provided for ``steady 
and continuing emission reductions'' over the entirety of the planning 
period might also be needed.
    In 1997, EPA proposed the regional haze rule, and in 1998, the WGA 
submitted comments to EPA requesting the addition of specific language 
to the rule to address the recommendations of the GCVTC. In these 
comments, the WGA reemphasized the commitment of the Western governors 
to the GCVTC recommendations. Following public notice and an 
opportunity to comment on the WGA's proposal, EPA issued the final 
regional haze rule (64 FR 35714, July 1, 1999). In 40 CFR 51.309 of the 
rule, EPA established a specific set of SIP requirements for the States 
and Tribes that participated in the GCVTC. As EPA noted in the preamble 
to the rule, these requirements acknowledged and gave effect to the 
substantial body of work already completed by the GCVTC and the WRAP.

[[Page 33767]]

    One of the requirements in 40 CFR 51.309 addressed the GCVTC's 
recommendation that the States establish a cap on regional emissions of 
SO2 from stationary sources. Under 40 CFR 51.309(f) of the 
regional haze rule, the WRAP was required to submit an annex to the 
GCVTC Report that would contain specific emission reduction milestones 
for the years 2003, 2008, 2013, and 2018. This provision explicitly 
references the recommendations of the GCVTC for ``steady and continuing 
emissions reductions * * * consistent with the Commission's definition 
of reasonable progress'' and its goal of 50 to 70 percent reduction in 
emissions of SO2 between 1990 and 2040. In the preamble to 
the final regional haze rule, EPA explained that the WRAP would have to 
take into account four specific factors in setting these milestones. 
The preamble specifically noted that ``[t]he first factor affecting the 
selection of interim milestones is the GCVTC's definition of reasonable 
progress.'' (64 FR 35756). The other factors listed in the rule are: 
(1) The ultimate target in 2040 of a 50 to 70 percent reduction in 
emissions of SO2 from stationary sources; (2) the 
requirement that the emissions cap provide for greater progress than 
would be achieved through source-specific BART requirements; and (3) 
the timing of progress assessment and the identification of mechanisms 
to address the cases where emissions exceed milestones.
    In the regional haze rule, EPA concluded that the specific SIP 
requirements in 40 CFR 51.309 provide for reasonable progress toward 
the national visibility goal. The WRAP's plan for capping 
SO2 emissions from stationary sources is a part of the 
Western States' and Tribes' long-term strategy for achieving reasonable 
progress. As described above, the SO2 program grew out of 
the GCVTC's recommendations for measures to remedy adverse impacts on 
visibility.
    Some commenters expressed concerns that the WRAP's program for 
controlling SO2 emissions in the West, as further defined by 
the Annex to the GCVTC's Report, is a ``BART provision'' subject to the 
American Corn Growers court remand. For several reasons, EPA believes 
that this is not the case.
    Under the CAA, the BART provisions require the installation of 
control technology on specific sources that were built between 1962 and 
1977. Nothing in the Annex requires specific controls on any individual 
source. A key component of the Annex's SO2 program is the 
goal that all reductions called for by the program remain voluntary. If 
the reductions are achieved through voluntary measures, then there will 
be no requirements of any kind. Even if the SO2 milestones 
are not achieved through voluntary actions, the Annex does not provide 
for source-specific controls. Rather, the failure to achieve these 
milestones would trigger a ``backstop'' emissions trading program. Such 
a program, by its very nature, does not dictate that any particular 
source install control technology or otherwise reduce its emissions.
    The EPA also notes that the Annex covers all stationary sources 
that emit more than 100 tons per year of SO2--not just 
sources built between 1962 and 1977--and thus goes well beyond the 
scope of the statutory BART provisions. For this reason (and others 
noted above), EPA believes that the SO2 program is a 
component of the WRAP's strategy for ensuring reasonable progress, an 
aspect of the regional haze program that was not addressed by the 
American Corn Growers decision.
    The EPA approved the WRAP's long-term strategy for addressing 
visibility consistent with the broad discretion afforded States by 
section 169A and title I of the CAA in developing strategies to meet 
reasonable progress goals and national standards. See Union Electric 
Co. v. EPA, 427 U.S. 246 (1976); Train v. NRDC, 421 U.S. 60 (1975). The 
SO2 program, which caps emissions of SO2 from all 
large stationary sources, reflects the WRAP States' and Tribes' 
judgement as to one appropriate means for addressing haze and ensuring 
reasonable progress. The decision to limit emissions from this category 
of sources is well within the discretion of the States and Tribes. The 
court's decision in American Corn Growers, which addresses only the 
BART provisions, does not in any way limit the general authority of the 
States to choose appropriate control measures to ensure reasonable 
progress. Any suggestion that the decision requires States to undertake 
a source specific analysis of a source's contribution to the problem of 
regional haze before the State can subject a source to regulation would 
go far beyond the actual holding in the case.
    As discussed above, 40 CFR 51.309 does not require participating 
States to assess and impose BART on individual sources. Best available 
retrofit technology is only relevant as one of four factors that the 
WRAP must consider in establishing the appropriate emission reduction 
milestones for SO2--i.e., the level of the cap. The regional 
haze rule requires that the milestones in the Annex to the GCVTC Report 
``must be shown to provide for greater reasonable progress than would 
be achieved by application of best available retrofit technology (BART) 
pursuant to Sec.  51.308(e)(2).'' 40 CFR 51.309(f)(1)(i). This is not a 
requirement for BART. The requirement that the milestones ``provide for 
greater reasonable progress'' than BART is based on the decision by EPA 
to provide States with the flexibility to adopt alternative measures in 
lieu of the BART requirements set forth in statute so long as these 
alternative measures were ``better than BART.'' See 40 CFR 
51.308(e)(2). In short, the SO2 program described in the 
regional haze rule, as further defined by the Annex, does not impose 
controls on specific sources but rather ensures that greater reasonable 
progress is made than would be through installation of source specific 
controls on the BART sources. The regional haze rule accordingly 
authorizes States to achieve improvements in visibility through the 
most cost-effective measures available.
    The American Corn Growers court decision did not address the 
provisions in the regional haze rule allowing States to adopt a trading 
program or other alternative measures in place of source specific 
control measures for BART sources. The EPA finds nothing in the court's 
decision that would invalidate the trading program alternative to BART, 
as provided for in 40 CFR 51.308(e)(2). In the preamble to the regional 
haze rule, EPA sets forth the basis for its decision to allow States 
this flexibility and describes the process for States to make a showing 
that the alternative measures provide for greater reasonable progress. 
Significantly, nothing in the D.C. Circuit's opinion suggests that such 
an alternative is in conflict with the requirements of the visibility 
provisions of the CAA. An approach that allows States to adopt 
alternative measures in lieu of BART fully comports with the court's 
view of the States' broad authority in this area. Accordingly, the 
Annex meets the requirements set out in 40 CFR 51.309(f), and EPA 
believes that it may approve the proposed revisions to the regional 
haze rule incorporating the emission reduction milestones and other 
measures set forth in the Annex.
2. Whether the December 31, 2003 SIP Deadline Should Be Extended
    Under 40 CFR 51.309 of the regional haze rule, SIPs for the 
optional program for the nine Western States are due by December 31, 
2003. The EPA received a number of comments on the proposed rule with 
respect to this deadline. Four commenters, including the State of 
Colorado and three industry trade

[[Page 33768]]

groups, requested that EPA extend the deadline for SIPs under 40 CFR 
51.309. One commenter, representing an environmental organization, 
recommended that this deadline should not change.
    The primary argument of those recommending an extension of the 
December 31, 2003 deadline, is that the American Corn Growers decision 
creates additional uncertainty for States deciding whether to submit 
regional haze SIPs under 40 CFR 51.309 or 40 CFR 51.308. Some 
commenters requested that EPA extend the deadline by the amount of time 
it takes to resolve the remanded portions of the regional haze rule. 
The environmental group commenter opposed to the extension stated that 
there is no legal or policy basis for an extension because the deadline 
is required by the rule. In addition, this commenter noted that States 
have had several years to prepare SIPs under 40 CFR 51.309, and that 
the market-based alternative to BART is unaffected by the court 
decision. Finally, this commenter believed that delays in the SIP 
submittals could undermine EPA's finding that the 40 CFR 51.309 program 
constitutes greater reasonable progress than BART.
    In the final rule, EPA retains the December 31, 2003 deadline for a 
number of reasons. First, as noted above, EPA does not believe that the 
American Corn Growers decision affects the WRAP States' ability to move 
forward in implementing 40 CFR 51.309. While the court decision may 
affect a State's decision on whether to pursue the optional program 
under 40 CFR 51.309, EPA does not believe that this is an adequate 
justification for delaying the program. Second, EPA believes that the 
2003 deadline is a fundamental element of the overall optional strategy 
provided by 40 CFR 51.309. The strategy was supportable under the 
regional haze rule in large part because it was an early strategy that 
would be in place well before SIPs under 40 CFR 51.308. The fact that 
it was received early and contained comprehensive strategies was an 
important part of the rationale for its acceptance. The EPA believes 
that the longer the strategy is delayed in its implementation, the less 
valid this rationale becomes.
3. Procedural Issues
    One commenter stated that EPA cannot approve the Annex because of 
procedural flaws related to 40 CFR 51.309(f)(1) of the regional haze 
rule. The commenter asserted that EPA's rulemaking to approve the Annex 
is procedurally flawed because EPA did not publish the Annex upon its 
receipt. Additionally, the commenter notes that EPA did not amend the 
regional haze rule within 1 year after receipt of the Annex.
    The EPA disagrees with the assertions that this rulemaking is 
procedurally flawed. The EPA published a Notice of Availability in the 
Federal Register for the Annex on November 15, 2000 (65 FR 68999), 
indicating where the Annex could be found on EPA's Web site. The 
commenter is correct that EPA established a deadline for itself of 1 
year for the Agency to incorporate the provisions of the Annex if EPA 
found that the Annex met the requirements of the rule. Although the 
statement that EPA ``will act'' within 1 year signaled EPA's intentions 
to act within that time period, nothing in the regional haze rule 
precludes EPA from acting after this self-imposed deadline. In 
particular, action within the 1-year deadline should not be interpreted 
as a prerequisite for approving the Annex or for incorporating the 
Annex into the regional haze rule. It is clear from the commenter's 
statements, however, that the statement that EPA will act within 1 year 
has created confusion as to the meaning of the provision. The EPA is 
clarifying this provision by removing the phrase ``1 year'' from 
section 309(f)(3).

B. Milestones

    A central feature of the program in the WRAP annex, and in EPA's 
proposed rule, is a set of emissions milestones for SO2 from stationary 
sources for the time period between 2003 and 2018. In the proposed 
rule, EPA included the Annex milestones. In the final rule, EPA 
includes the same milestones as proposed.
    In addition, the proposed rule included specific language to allow 
for future adjustments to the milestones. In the Annex, the WRAP 
described a limited set of future circumstances that would necessitate 
adjustments to the milestones. For each of these circumstances, the 
Annex included a detailed description of how the milestone would be 
adjusted, including a discussion of the administrative process for 
making each adjustment. In the proposed rule, EPA included regulatory 
language for each adjustment, closely following the provisions of the 
Annex. In the final rule, EPA has made a few changes to the adjustments 
based upon comments received.
    In this unit of the preamble, we discuss comments received related 
to the milestones and the adjustments.
1. Whether Milestones Satisfy Requirements in the Regional Haze Rule
    Proposed rule. In the proposal, EPA indicated its agreement with 
the WRAP's conclusion that the emissions milestones meet the 
requirements of the CAA and the regional haze rule. The EPA devoted a 
significant portion of the preamble of the proposed rule to a 
discussion of its rationale for this proposed finding, (67 FR 30420-
30426). In this discussion, EPA concluded that the WRAP's program for 
SO2 was appropriate in lieu of source specific BART limits because the 
milestone for the year 2018 provided for ``greater reasonable 
progress'' in visibility improvement than WRAP States would obtain by 
implementing the requirement for source-specific BART. In addition, the 
preamble to the proposal discusses EPA's finding that the milestones 
for the years between 2003 and 2017 provide for ``steady and 
continuing'' progress.
    With respect to EPA's findings on BART, the preamble discussion for 
the proposed rule focused largely on the demonstration provided by the 
WRAP in Attachment C of the Annex. The EPA noted the WRAP used the 
following procedure to identify the year 2018 milestone:
    [sbull] Developed an estimate of baseline SO2 emissions for the 
year 2018, (i.e., the predicted SO2 emissions in the year 2018 in the 
absence of a program to reduce SO2 emissions);
    [sbull] Developed a list of BART-eligible sources in the region;
    [sbull] Developed an estimate of the emissions reductions that BART 
sources could achieve, and
    [sbull] Selected a year 2018 milestone that reduces the baseline 
emissions by an amount that would achieve greater reasonable progress 
in improving visibility than by requiring each BART-eligible source to 
install BART.
    In the proposal, EPA discussed the data and methods relied on by 
the WRAP for each of these steps. The EPA agreed with the conclusion 
reached by the WRAP that the 2018 milestone meets the requirements of 
the regional haze rule, taking into account the uncertainties inherent 
in the calculations of predicted emissions in 2018.
    Public Comments. Public comments, with one exception, were 
supportive of EPA's finding that the year 2018 milestone represented 
``greater reasonable progress'' than BART. One commenter, representing 
the trucking industry, disagreed with this finding, citing a number of 
areas where it believed that the demonstration was lacking or 
inadequate.

[[Page 33769]]

    The WRAP commented that EPA's preamble discussion did not 
completely capture the scope and methodology of the year 2018 milestone 
decision. In their comments, the WRAP agreed that EPA had correctly 
described the method the WRAP used to determine that the program 
achieved greater reasonable progress than BART. However, the WRAP's 
comments stress that while the milestones were informed by these 
calculations, the milestones were negotiated numbers reflecting a 
broader view of the backstop trading program and the relevant factors 
in the CAA. In addition, the WRAP notes that individual elements of the 
calculations do not represent a consensus position in isolation from 
the balanced package in the Annex.
    The commenter from the trucking industry was critical of EPA's 
acceptance of the year 2018 milestones. The commenter noted that in the 
preamble EPA appeared to have concerns with: (1) How the WRAP 
identified BART-eligible sources, (2) how the WRAP calculated emissions 
reductions from those sources, and (3) the WRAP's inclusion of the 
35,000 tons for ``headroom and uncertainty.'' This commenter believed 
that taken overall, EPA should have considered the WRAP's milestone for 
year 2018 to be deficient. The commenter was also critical of the 
provision for a backstop trading program, arguing that such a program 
would allow for emissions reductions far away from the Colorado Plateau 
to be substituted for more effective reductions at a closer distance.
    The comments, with one exception, supported EPA's proposed 
conclusion that the milestones for the years 2003 through 2017 
represented ``steady and continuing'' progress. Comments from the 
trucking industry were critical of this finding. In their view, the 
milestones do not provide for steady and continuing progress because 
some of the early year milestones exceed year 2000 actual emissions 
levels.
    Final rule. The final rule retains the milestones contained in the 
proposed rule. The EPA continues to believe that the milestones provide 
for ``greater reasonable progress than BART'' and for ``steady and 
continuing progress.'' The EPA disagrees with comments that the 
milestones are deficient in this regard. The EPA agrees with 
stakeholders that it is a critical consideration that the WRAP's 
milestones provide a ``cap'' on emissions which may not be exceeded. 
Any program providing for case-by-case controls on a specific set of 
sources does not establish such a ``cap'' for the region. Moreover, 
this cap applies to a population of sources that includes all sources 
in the region emitting more than 100 tons of SO2, which is a 
much broader population than if only the BART-eligible sources were 
included. The EPA continues to conclude that the WRAP milestones are 
reasonable in light of the inherent uncertainties that exist in any 
forecast to the year 2018. Modeling results showed predicted visibility 
improvements equivalent to, or greater than, those that would result 
from a ``command and control'' scenario.
    The EPA disagrees with comments that the milestones cannot be 
considered to provide for ``steady and continuing'' reductions if 
actual emissions were allowed to increase in the early years. As noted 
in the proposal, EPA believes that the WRAP appropriately used the 
GCVTC goal of a 13 percent reduction in emissions between 1990 and 2000 
as a starting point or frame of reference, rather than an estimate of 
actual emissions for the year 2000. Given that a greater than expected 
degree of reduction has already occurred, EPA agrees that the region 
should not be effectively penalized for achieving early reductions in 
emissions.
2. Adjustments for States and Tribes That Choose Not To Participate
    Proposed rule. When developing the Annex, the WRAP understood that 
some States and Tribes may choose not to participate in the optional 
program provided by 40 CFR 51.309. Thus, the WRAP provided to EPA 
individual opt-out amounts for each State and Tribe and for each year 
from 2003 to 2018. These opt-out amounts represented the amount of 
emissions that would be deducted from the milestones for each State and 
Tribe that does not participate. The EPA included a table in the 
proposed rule (67 FR 30446, May 6, 2002) that shows these opt-out 
amounts for each State and Tribe. The proposed rule noted, as the WRAP 
recommended, that the emissions amounts budgeted in this table are only 
for the purpose of determining the milestones at the beginning of the 
program if some States and Tribes choose not to participate. The EPA 
cautioned that the amounts budgeted to each State and Tribe in this 
table are not necessarily the amounts that will be allocated to sources 
within the relevant State's or Tribe's jurisdiction if a trading 
program is triggered.
    The proposal described the process by which the milestones would be 
adjusted to take into account the individual State and tribal opt-out 
amounts. For States, SIPs for all participating States are due by the 
December 31, 2003 deadline. Accordingly, EPA assumed in the proposal 
that after this deadline has passed it will be known which States are 
participating and which are not. Thus, the proposal called for SIPs to 
provide for deducting the State-specific amounts in Table 2 (67 FR 
30446, May 6, 2002) for ``opt-out States'' from the amounts in Table 1 
(67 FR 30425, May 6, 2002) at the outset of the program. For Tribes, 
the proposed rule provides flexibility for opting into the program 
after the 2003 SIP submission deadline. Under the proposal, for Tribes 
that have not opted into the program by the 2003 deadline, the amounts 
in Table 2 (67 FR 30446, May 6, 2002) would be deducted from the 
amounts in Table 1 at the outset of the program. For Tribes that opt 
into the program at a later date, the proposal required these amounts 
to be automatically added to the amounts in Table 1 (67 FR 30425, May 
6, 2002), beginning with the first year after a TIP implementing 40 CFR 
51.309 is approved by EPA.
    In the proposal, EPA stated that for the program under 40 CFR 
51.309 to achieve the WRAP and GCVTC objectives, a sufficient number of 
States must participate in the program. The EPA proposed to defer to 
the WRAP's judgment on the issue of how many States would constitute a 
``critical mass'' for the program, and we requested comment on this 
issue.
    Public Comments. A few comments were received on issues related to 
the proposed opt-out amounts and discussion.
    Two commenters agreed with EPA's clarification that the opt-out 
amounts did not necessarily represent the amount of allocations that a 
State's or Tribe's sources would receive if the backstop trading 
program were triggered. One commenter recommended that the State opt-
out amounts should be treated as the amount of allocations for a given 
State, because: (1) The opt-out amounts represent the best estimate of 
emissions reductions for the BART-eligible sources in each State or 
Tribe, and (2) inclusion of the tables may create a perception that any 
State that issues fewer allocations than the opt-out amounts is 
treating the sources within the State inequitably.
    Several commenters agreed with EPA's recommendation to defer 
judgments on ``critical mass'' issues to the WRAP. One environmental 
group commenter recommended that, in evaluating whether there are 
enough States and Tribes participating in 40 CFR 51.309, EPA must 
thoroughly consider the extent to which the SO2 declining 
cap will effectively prevent

[[Page 33770]]

degradation from the visibility impairing emissions from new source 
growth across the region.
    Subsequent to the comment period, the Western States Air Resources 
Council (WESTAR) Model Rule/MOU Working Group noted \4\ that as States 
and Tribes follow their process for adopting SIPs and TIPs under 40 CFR 
51.309, the States and Tribes will not necessarily be aware of which 
other States and Tribes will choose to participate in the program. 
Accordingly, the WESTAR Working Group believed that States and Tribes 
would need to include all of Table 2 and calculation procedures in 
their SIP/TIP submittals, such that the SIP/TIP submittal could account 
for all possibilities of participation by other States and Tribes. 
Further, the WESTAR Working Group noted that in the initial years of 
the program, EPA may not have approved the SIP for all participating 
States before the date of the annual determination of whether the 
milestone is exceeded. Lastly, Tribes are not required to submit a TIP 
by 2003 and can choose to participate in the program at anytime. 
Accordingly, the WESTAR Working Group recommended that EPA clarify 
whether the comparison of emissions to the milestones would take into 
account all States that have submitted SIPs, or only those with 
approved SIPs as of the date of the determination.
---------------------------------------------------------------------------

    \4\ See memorandum from Lily Wong, EPA Region 9, to Docket OAR-
2002-0076. March 2003.
---------------------------------------------------------------------------

    Final Rule. The final rule retains the opt-out tables from the 
proposal. The EPA continues to agree with the WRAP that the opt-out 
tables do not necessarily represent the amounts that would be allocated 
to a given State or Tribe under a trading program. The WRAP has 
developed a detailed methodology for determining and establishing 
trading program allocations for each source. This methodology is 
described in detail in sections II.D and III.D.7 of the Annex. It is 
this methodology that will result in allocations should the trading 
program be needed. The EPA believes that establishing the amounts in 
the opt-out tables as the amounts for trading program allocations would 
unnecessarily constrain the WRAP from implementing its methodology.
    The EPA continues to believe, as discussed in the proposal, that 
judgments on the issue of ``critical mass'' are best left to the WRAP. 
Regarding the comment that the SO2 declining cap may not 
effectively prevent degradation of visibility from new sources 
throughout the region if not enough States and Tribes participate, EPA 
notes that visibility progress issues as a general matter will need to 
be addressed in SIPs submitted under 40 CFR 51.308. Accordingly, EPA 
does not believe that this comment warrants any change to the proposed 
rule language.
    The EPA agrees with the WESTAR Working Group that States and Tribes 
submitting their SIPs and TIPs under 40 CFR 51.309 should include Table 
2 and the calculation procedures in their SIP or TIP regulations in 
order to account for all possibilities of participation by other States 
and Tribes. The EPA also agrees with the WESTAR Working Group 
recommendation to add to the final rule clarification that the opt-out 
adjustment under 40 CFR 51.309(h)(1)(i) will include the States and 
Tribes for which SIPs and TIPs have not been approved by EPA as of the 
date of the determination.
3. Adjustments for Smelter Operations
    Proposed rule. At the time the WRAP was submitted to EPA, two 
copper smelters in the region, the Phelps Dodge Hidalgo smelter and the 
BHP San Manuel smelter, had suspended operations. In the Annex, the 
WRAP recommended that the program specifically account for the 
possibility that these smelters could come back on line should economic 
conditions change. Accordingly, the Annex contained a specific set of 
complex decision criteria to adjust the milestones in the future for a 
number of specific scenarios related to the two smelters. The EPA in 
the proposal attempted to clarify the WRAP's adjustments with a series 
of ``if-then'' tables, and we requested comment on whether these tables 
accurately reflect the decision criteria in the Annex.
    Public comments. Commenters agreed that the EPA's proposed table 
accurately reflected the Annex. Two commenters noted that subsequent to 
the development of the Annex, a third smelter, the Phelps Dodge Chino 
smelter, suspended operations. These two commenters recommended that 
the regional haze rule should recognize this without reopening the 
negotiated agreement on the milestones. Further, the commenters 
recommended that the regional haze rule should provide some assurance 
that when the Chino Smelter comes back on line again, its 16,000 
allowances will be available to it without prematurely triggering the 
program.
    Final rule. The final rule retains the smelter adjustment tables as 
proposed. The EPA considered whether the final rule should contain 
contingencies for the Chino Smelter similar to those for Hidalgo and 
San Manuel. For example, one approach would be to deduct the amount 
from the Chino smelter from the milestones and to develop a series of 
adjustments to account for the possibility that it may come back on 
line, similar to the approach for the other two smelters. The EPA has 
not taken this approach, because of the complexity that would be added 
to the adjustments, and because this scenario was not specifically 
discussed as the WRAP was negotiating the Annex.
4. Adjustments for Utility Boilers Opting To Use More Refined Flow Rate 
Methods
    Proposed rule. The proposed rule requested comment on the specific 
method and process for adjusting the milestones for sources using a 
refined method for measuring stack flow rates. This was seen as a 
significant issue, because the flow rate affects the determination of 
emissions rate from a continuous emissions monitoring system (CEMS).
    In 1999, EPA adopted revisions to EPA's Reference Method 2, the 
standard method for measuring stack flow rates (64 FR 26484, May 14, 
1999). The revisions provided three new procedures: Methods 2F, 2G, and 
2H. The new procedures, if used for a given source, allow for a more 
detailed assessment of the stack flow rates to provide more accurate 
flow rate results. The changes addressed concerns raised by utilities 
that Reference Method 2 may over-estimate flow in certain cases, such 
as when the flow is not going straight up the stack. If the flow rate 
is over-estimated, this would also lead to the overestimation of 
SO2 emissions because the facility's continuous flow rate 
monitor is calibrated to correspond to the flow test method. Facilities 
subject to the acid rain program under title IV of the CAA must perform 
these flow tests at least once a year to determine the accuracy of 
their continuous flow monitors. Facilities have an option to use either 
the old Method 2, or one or more of the new methods.
    When the WRAP made its emission projections for purposes of 
developing the milestones, the new methods were not yet in place. 
Accordingly, if a source owner chooses to use the new flow methods, and 
if as expected it results in a reduced flow rate for the same level of 
operation, then there will be a corresponding decrease in the measured 
emissions. In the preamble to the proposal, EPA agreed with the WRAP 
that this would create the possibility of a ``paper'' decrease relative 
to the milestone if the milestone reflects the old method. As discussed 
in section III.A.5 of the Annex, the WRAP notes

[[Page 33771]]

that a protocol is needed for adjusting the milestones to reflect 
changes in the baseline emission for utility boilers any time that a 
source opts to change its CEMs method. The WRAP addressed this issue in 
greater detail in a supplemental paper entitled ``Emissions Tracking 
Prior to Triggering the Backstop Trading Program,'' which was submitted 
to EPA on June 1, 2001.
    The WRAP has identified three possible technical procedures for 
developing an ``adjustment factor'' for the new flow method. The EPA 
agrees that any of these three procedures would be acceptable. Under 
the first procedure, there would be a side-by-side comparison of flow 
rates using both the new and the old flow reference methods. For 
example, if the new method measured 760,000 cubic feet per minute, and 
the old method measured 800,000 cubic feet per minute, the adjustment 
factor would be (760,000/800,000), or 0.95. The second method would use 
annual average heat rate, which is reported to the Energy Information 
Administration (EIA), as a surrogate for the flow rate. Under this 
method, the flow adjustment factor would be calculated using the annual 
average heat rate using acid rain heat input data (MMBtu) and total 
generation (MWHrs)reported to EIA, calculated as the following ratio:

[GRAPHIC] [TIFF OMITTED] TR05JN03.004


The third method would use data reported to EPA's acid rain program. 
Under this method, there would be a comparison of the standard cubic 
feet per minute (CFM) per megawatt(MW) before and after the new flow 
reference method based on CEMs data, calculated as the following ratio:

[GRAPHIC] [TIFF OMITTED] TR05JN03.005


    In the supplemental information paper, the WRAP identified three 
possible approaches for using the adjustment factors for making a 
correct comparison of emissions to the milestones. The WRAP did not 
indicate a preference for any single approach. The three options are as 
follows:
    (a) Using one of the options described above for determining the 
flow adjustment factor, revise the source's baseline emissions forecast 
for 2003, 2008 and 2013. For each year following the adoption of the 
new flow reference method through 2017, reduce the interim milestone by 
the corresponding amount. To illustrate how this approach would work, 
the proposal used an example where the adjustment factor for a given 
stack is 0.95. As discussed above, this means that the emissions with 
the new method is deemed to be 0.95 times the emissions with the old 
method. For this example, for option (a) this means that the previous 
baseline emissions for that source would be multiplied by 0.95. The 
annual compliance check would then be done by comparing regional 
SO2 emissions (unadjusted, as reported to EPA's acid rain 
program) to the revised milestone.
    (b) Using one of the options described above for determining the 
flow adjustment factor, revise the source's reported emissions on an 
annual basis, and do not adjust the milestone. For the example noted 
above, under option (b) the emissions reported to EPA's acid rain 
program would be adjusted upward by multiplying the amount times (1/
0.95). For each year following the adoption of the new flow reference 
method through 2017, the annual compliance check would be done by 
comparing the adjusted regional SO2 emissions to the 
unadjusted milestones.
    (c) Use a combination of the two approaches. Under this approach, 
interim milestones would be adjusted only every 5 years (using option 
(a) above) and the reported emissions for additional sources making the 
change in the intervening years are adjusted for comparison to the 
milestones (using option (b) above).
    In the proposal, EPA stated that any one of these three approaches 
would be acceptable, but that a specific approach needs to be selected 
for the final rule. The EPA also noted its view that these adjustments 
to the milestone or to the reported emissions would not necessarily 
require SIP or TIP revisions, because the precise method for making the 
adjustment, and the publicly available data elements that will be used 
for making the adjustment, could be specifically identified in the 
final rule.
    Public comments. Commenters generally agreed with EPA's assessment 
that any of the three approaches for determining an adjustment factor 
would be acceptable.
    The WRAP noted in its comments that the 2018 milestone already 
included assumptions about the effect of this flow rate adjustment. The 
WRAP recognized that the preamble to the rule implies this distinction 
but the WRAP recommended that this be reflected in the regulatory text 
as well.
    Regarding the three options related to the process for using the 
adjustment factors, the WRAP recommended option (c) in its comments. 
That is, the milestones would be adjusted every 5 years with the 
periodic SIP revisions, and adjustments would be made to the reported 
emissions for the interim period. Other commenters, while supporting 
the concept of adjusting the milestones with the SIP revisions, did not 
address whether the reported emissions should be adjusted in the 
interim period. The EPA infers from these comments that these 
commenters are likely recommending that emission adjustments need not 
be made in the interim period.
    Final rule. The final rule includes regulatory language agreeing 
with the WRAP's recommendations regarding the flow rate adjustment. 
States are required in the SIPs to provide for reporting of 
``adjusted'' emission rates pending an update to the milestones, which 
would occur at the time of the plan revisions required under 40 CFR 
51.309(d)(10).
5. Adjustments for Enforcement Actions
    Proposed rule. The proposed rule included a provision in the Annex 
for adjustments to the milestones for ``illegal emissions.'' In 
developing the milestones, the WRAP identified the baseline emissions 
for each source during the base year, and ``forecasted'' emissions for 
the source during the 2003 to 2018 time period, taking into 
consideration growth, utilization, retirement, and the absence of any 
additional requirements. The

[[Page 33772]]

compilation of these source-specific baseline emissions resulted in the 
baseline emission inventory totals, which serve as a ``starting point'' 
for measuring progress from the program. The WRAP recognized in the 
Annex that if a source was in violation of applicable requirements 
during the base year when its emissions were determined, the baseline 
emissions during 2003-2018 would be overestimated.
    In the proposal, EPA included this provision with general 
regulatory language providing for the adjustment of baseline emissions 
for illegal emissions, and we requested comment on possible ways of 
clarifying the provision in the final rule. The EPA noted in the 
preamble to the proposal that there are instances where it may be 
unclear whether under the approach in the Annex, emissions would be 
considered as ``illegal,'' for example where:

--Disputing parties resolve their differences through (1) A consent 
decree that is either entered through Federal or State courts, or (2) 
an administrative enforcement proceeding by either a State, Tribe, or 
EPA; or
--A State disagrees with EPA or a citizens' group over whether or not a 
particular alleged violation occurred.

    The EPA requested comment on how these situations should affect the 
milestones. Specifically, EPA requested comment on the following 
possible options:
    Option 1. Under this option, the rule would require that if there 
is any resolution \5\ to alleged illegal SO2 emissions, then 
all of the reductions resulting from the resolution would be considered 
as ``illegal emissions.'' Taking into account these reductions, the 
State or Tribe would then ``re-forecast'' the source's emissions and 
its effect on the milestone. ``Re-forecast'' means to re-apply the 
forecasting process, that is the process the WRAP originally used to 
project future emissions and develop the milestones, using the 
corrected baseline SO2 emissions for the affected source. A 
comparison of this re-forecast of emissions with the previous forecast 
of emissions would determine the amount of the adjustment for each year 
up through 2018.
---------------------------------------------------------------------------

    \5\ For option 1, the proposal used the broad term 
``resolution'' to refer to all types of emissions reductions 
resulting from enforcement actions.
---------------------------------------------------------------------------

    Option 2. Under this option, the rule would allow for case-by-case 
judgments on the appropriateness of adjusting baseline emissions 
following resolution of allegations of illegal SO2 
emissions. The rule would, however, clarify the entity responsible for 
deciding whether a case involves illegal emissions warranting an 
adjustment to the milestones. Under this option, we requested comment 
on which entity should be responsible for this determination, that is, 
whether the rule should clarify whether the parties entering into a 
settlement, the States, the Tribes, the WRAP, or EPA would determine 
the settlement's impact on the milestones.
    The EPA noted that under any of the proposed options, adjustments 
to the milestone would occur only after the source in the enforcement 
case has achieved the requisite reduction of SO2 emissions. 
Consequently, adjustments to the milestones would have no effect on any 
other facility's operation because all of the reductions would be 
achieved by the source subject to the enforcement action.
    The EPA also solicited comments in the proposal on how to treat any 
extra SO2 emissions reductions that a facility might achieve 
as a result of a settlement. The EPA will often allow a company that is 
settling through a consent decree or settlement agreement to perform a 
supplementary environmental project and allow the expenditures on this 
project to partially offset penalties that the company would otherwise 
be assessed. The EPA noted in the preamble to the proposal that if the 
milestones are not reduced by the amount of extra emissions reductions 
from this type of project, then the environment may see little benefit, 
since another company would be allowed more SO2 emissions. 
Thus, in the proposal, EPA sought input on whether these ``extra'' 
emissions reductions should be considered part of this ``illegal 
emission'' adjustment and factored into a recalculation of the 
milestone.
    Public Comments. The EPA received a number of comments on this 
provision.
    A few commenters recommended that this provision be deleted from 
the rule entirely. Some commenters criticized this provision because it 
would lower the milestones and reduce the potential pool of allowances 
under the backstop trading program. Accordingly, these commenters 
believed that the provision would serve to punish the ``non-violators'' 
in the program at large. Another commenter believed that any adjustment 
for ``illegal emissions'' is not appropriate unless it has been 
demonstrated that the provision would improve visibility.
    Other commenters supported the provision but recommended that the 
term ``adjustments for illegal emissions'' be replaced with the term 
``adjustments due to enforcement actions.'' Some commenters requested 
clarification on whether these adjustments would only apply to 
enforcement actions that would have affected the assumptions used in 
baseline emissions projections. One commenter recommended that the 
proposed adjustment for illegal emissions should apply only to 
emissions reductions resulting from consent decrees or administrative 
orders where the EPA or authorized State has commenced the enforcement 
action, and not where emissions reductions arise out of ``voluntary 
settlements'' initiated by the company.
    Regarding the two options for clarifying this provision, the WRAP 
and other commenters recommended the second option. These commenters 
noted that case-by-case judgments will be needed to determine whether 
and the degree to which the milestones should be adjusted. Responding 
to EPA's request to clarify the entity responsible for calculating the 
adjustment, the WRAP recommended that the entity responsible should be 
the parties entering into a settlement, in conjunction with the 
relevant State or Tribe. The commenters envisioned that EPA would have 
an oversight role in the SIP approval process to determine that the 
adjustment agreed to through the enforcement process is properly 
reflected in the milestone adjustment.
    The WRAP comments recommended that specific language be added to 
the final rule requiring States and Tribes to document, and include in 
the administrative record,\6\ a discussion of whether any adjustments 
to the milestones are appropriate based upon administrative or judicial 
enforcement actions, and to include an explanation of the basis for the 
State's or Tribe's decision.
---------------------------------------------------------------------------

    \6\ The EPA interprets the term ``administrative record'' in the 
WRAP's comments to refer to information made available in support of 
the State's or Tribe's implementation plan submittal to EPA under 40 
CFR 51.309(d)(10).
---------------------------------------------------------------------------

    Regarding EPA's request for comment on how ``extra'' emissions 
reductions in enforcement actions should be treated, the WRAP and other 
commenters believed that these extra emissions reductions should also 
be treated on a case-by-case basis. The WRAP commenters recommended 
that EPA include a provision in the rule requiring States or Tribes to 
address in the periodic SIP revision whether SO2 allowances 
should be retired or confiscated \7\ as a result of an

[[Page 33773]]

administrative or judicial enforcement action and the rationale for the 
State's or Tribe's decision.
---------------------------------------------------------------------------

    \7\ This comment responded to EPA's question on how the 
milestones should be adjusted with a recommendation on whether 
allowances should be retired or confiscated. The EPA interprets this 
comment as addressing both the milestones and the allowances, which 
add up to the milestones.
---------------------------------------------------------------------------

    Final rule. The EPA has retained this provision in the final rule. 
The EPA agrees with the WRAP that this provision is necessary to ensure 
that the ``baseline,'' the starting point for the milestone 
calculations, reflects compliance with regulations. So long as the 
reductions to the milestones do not occur before the date a source 
comes back into compliance, EPA does not believe that this adjustment 
has the effect of ``penalizing'' the other sources. Regarding the 
comment that this provision is deficient due to a lack of demonstrated 
visibility improvements, EPA believes that the WRAP was not required to 
make a demonstration of the visibility improvements of this specific 
provision, which is part of the WRAP's overall program for 
SO2 reductions from stationary sources.
    The final rule reflects EPA's agreement with recommendations of 
commenters to replace the term ``adjustments for illegal emissions'' 
with the term ``adjustments due to enforcement actions.'' The EPA 
agrees that this terminology better encompasses the types of situations 
that the provision would address. The EPA interprets the term 
``enforcement action'' in these comments to be used broadly to include 
any type of enforcement action including administrative orders, 
settlements, consent decrees, court orders, and compliance schedules in 
title V permits.
    As recommended by some commenters, we have added language 
consistent with Option 2. The EPA agrees with commenters that there 
will be case-by-case considerations in enforcement actions that could 
affect whether an adjustment to the milestones is appropriate. The EPA 
generally agrees with comments suggesting that the entity responsible 
for calculating the amount of the adjustment should be the parties 
entering into the settlement, and that where those parties do not 
include the State or Tribe, the State or Tribe should be consulted to 
assure that correct assumptions are used for the adjustment. Further, 
EPA believes that if the parties involved in the action are responsible 
for recommending the amount of the adjustment, or whether an adjustment 
is appropriate, this would allow a source entering a voluntary 
settlement to negotiate whether or not an adjustment should be made.
    The EPA believes it is useful to clarify a few points regarding 
actions where EPA or a citizens' group is the plaintiff in the 
enforcement action. Such cases would be brought to the U.S. District 
Court. Pursuant to longstanding Department of Justice policy, in any 
such case members of the public, including an interested State or 
Tribe, would have an opportunity to review and comment on the proposed 
consent decree settling the enforcement case. See 28 CFR 50.7. For any 
such case before the U.S. District Court, EPA intends to provide the 
State or Tribe an opportunity to review and comment on the proposed 
settlement. If a settlement or order from the U.S. District Court is 
issued and contains an adjustment to the milestones, such a settlement 
or order from the court is binding and the State and Tribe would be 
required to adjust the milestones as directed by the court. For 
instances where such court actions are silent on reforecasting the 
baseline emissions and adjusting the milestones, EPA believes the State 
or Tribe must determine whether such a reforecast and adjustment is 
appropriate.
    The EPA agrees with the WRAP's recommendations that the State or 
Tribe should provide documentation of these adjustments for enforcement 
cases in the administrative record for the 5-year SIP or TIP revision. 
Specifically, the rule requires the following documentation:

--Identification of each source that has reduced SO2 
emissions under an administrative or judicial enforcement action,
--Whether the milestones were adjusted in response to the reduction in 
SO2 emissions under the enforcement action,
--The rationale for the State's or Tribe's decision on the milestone 
adjustment,
--If extra SO2 emissions reductions (over and above those 
reductions needed for compliance) were part of the settlement, whether 
those reductions resulted in any adjustment to the milestones or 
allowance allocations.

C. Annual Process for Determining Whether a Trading Program Is 
Triggered

    The proposed rule describes an annual process to determine whether 
the emissions from participating States exceed the milestones and thus 
trigger the backstop trading program. This proposed process contained a 
number of deadlines for steps in the annual process, and contained 
special provisions for certain years. Only a few comments were received 
on these provisions.
1. Date for the Annual Determination
    Proposed rule. The proposed rule contained annual deadlines for 
determining whether the milestone is exceeded. This proposed schedule 
called for a draft determination not later than December 31 of each 
year, beginning with a draft determination for the year 2003 by 
December 31, 2004. The proposed schedule called for a final 
determination, taking into account public comments, by the end of the 
following March, beginning with a final determination by March 31, 2005 
for calendar year 2003.
    Public comments. In their comments on the proposal, the WRAP 
recommended that this annual deadline be extended by 1 year. For 
example, pursuant to this recommendation, EPA would extend the deadline 
for the final determination for calendar year 2003 from March 31, 2005 
to March 31, 2006. Because certain States or Tribes may have more 
numerous or complex sources, the WRAP believed that additional time may 
be needed to collect, validate, and analyze emissions data. In support 
of this request for additional time, the WRAP notes that adding time 
for the annual determination would not affect the timing for 
implementing the backstop trading program. For example, even if the 
annual determination for calendar year 2003 were not made until 2006, 
this would not affect the date for the onset of the trading program. If 
the calendar year 2003 milestone were triggered, sources would still 
need to hold allowances for emissions in calendar year 2009.
    Final rule. In the final rule, EPA has retained the deadline for 
the annual determination as proposed. The EPA recognizes that some 
States within the region may have more complex technical and 
administrative procedures for collecting annual emissions inventory 
data. The EPA's current judgment is that for States who have indicated 
possible participation in the program under 40 CFR 51.309, these 
obstacles do not exist. The EPA believes that it is not desirable to 
move the deadline forward in time unless it is absolutely necessary. 
While, as the WRAP correctly notes, this would not affect the deadlines 
for implementation of the backstop trading program, it would have the 
effect of reducing the amount of time for planning and implementation 
if the trading program were triggered. If the States needing more time 
do, in fact, decide to participate in the program, EPA believes that 
the regional haze rule could be

[[Page 33774]]

revised at a later date to reflect this need.
2. Option for Triggering the Trading Program in the Year 2013
    Proposed rule. The proposed rule provided States and Tribes with 
the option at a specific point in time to consider emission projections 
for the year 2018, in addition to actual emissions inventory reports 
for previous years in deciding whether or not to trigger the backstop 
market trading program. For this option, if States and Tribes so 
choose, the emissions inventory reports for the year 2012--which are 
collected in calendar year 2013--may also contain emissions projections 
for the year 2018. If the projections indicate that the year 2018 
milestone will be exceeded, then under the proposal, States and Tribes 
may choose to implement the market trading program beginning in the 
year 2018.
    Public comments. One commenter representing Western business 
interests recommended that the WRAP develop, and the final rule 
contain, specific criteria for the option of triggering the trading 
program in 2013. The commenter recommended that, for example, the final 
rule should contain criteria for a specific emissions level in 2013, or 
a specific level of emissions reductions yet to be achieved between 
2013 and 2018.
    Final rule. In the final rule, EPA has retained the 2013 option as 
proposed. The EPA believes that the intent of this provision in the 
Annex is to provide broad flexibility to the States and Tribes for 
deciding whether this 2013 option should be exercised. The EPA does not 
believe that it is desirable or feasible to develop specific decision 
criteria for this purpose in the final rule.
3. Requirements for Recordkeeping
    Proposed rule. The proposal, in 40 CFR 51.309(h)(iii), included a 
requirement for the retention of records relevant to the annual 
comparison of SO2 emissions to the milestones for at least 5 
years from the establishment of the record. For records that provided 
the basis for an adjustment to the milestone, the proposed rule 
required retention of records for at least 5 years after the date of 
the SIP revision.
    Final rule. No public comments were received on this issue during 
the comment period. Following the close of the comment period, however, 
the WESTAR model rule working group \8\ questioned whether this 
recordkeeping requirement would be adequate in all cases, if EPA's 
intent were to retain the records for 5 years after they are relevant 
to the annual determination. Given the design of the program, 4 and \1/
4\ years can elapse between the creation of a record and the use of the 
record in the annual comparison of regional SO2 emissions 
against the milestone. This is because for all except the first 2 years 
of the program, the annual determination is based on a 3-year average 
of the regional SO2 emissions for the preceding 3-year 
period. Additionally, the formal comparison with the milestone is not 
accomplished until 15 months after the end of this 3-year period. Thus, 
close to 5 years can pass from the establishment of a record to its 
use. The working group believed that the intent of the recordkeeping 
requirement was to maintain relevant records for 5 years after the 
determination of whether the milestone was exceeded for a given year, 
which could mean that some records relevant to the determination would 
be needed for approximately 10 years from the date they were generated. 
The EPA agrees that this was the intent of the recordkeeping 
requirement in 40 CFR 51.309(h)(iii) of the proposed rule; accordingly, 
the final rule extends the time period for the retention of records 
from 5 to 10 years.
---------------------------------------------------------------------------

    \8\ See note from Lily Wong, EPA Region 9, to docket OAR-2002-
0076, March 2003.
---------------------------------------------------------------------------

D. Requirements for the Backstop Trading Program

    A fundamental feature of the Annex is a backstop market trading 
program that would be triggered if any annual milestone is exceeded. 
The Annex, as required by 40 CFR 51.309(f) of the regional haze rule, 
provided documentation and details for the backstop trading program. 
Attachment A to the annex was a draft model rule for use by States in 
implementing the backstop trading program. In the proposal, EPA 
included ten fundamental elements that SIPs under 40 CFR 51.309 must 
contain, and the basic requirements for those elements to help guide 
EPA's review of the SIPs. The fundamental elements described in the 
proposed rule were as follows:
    (1) Provisions for the allocation of allowances to each source in 
the program;
    (2) Emissions quantification protocols;
    (3) Provisions for the monitoring, recordkeeping and reporting of 
emissions;
    (4) Provisions for a centralized system to track allowances and 
emissions;
    (5) Provisions requiring the identification of an authorized 
account representative for each source in the program;
    (6) Provisions requiring the account representative to demonstrate 
annual compliance with allowances;
    (7) Provisions for the process of transferring allowances between 
parties;
    (8) Provisions describing the ``banking'' of extra emissions 
reductions for use in future years, if the implementation plan allows 
for banked allowances;
    (9) Provisions establishing enforcement penalties for noncompliance 
with the trading program; and
    (10) Provisions for periodic evaluation of the trading program.

    In the proposed rule, EPA included basic requirements for each of 
these 10 provisions, and we requested comment on whether we had 
addressed each requirement in an appropriate level of detail, and on 
whether the substance of the requirement was sufficient to ensure the 
integrity of the trading program.
    The EPA did not receive any adverse comments regarding the level of 
detail of the proposed requirements for the trading program. We did 
receive comment on the substance of a few of the provisions that we 
discuss in this section of the preamble.
1. Allowances
    Proposed rule. The proposed rule required the backstop trading 
program to include allowances. An allowance authorizes a source 
included within a market trading program to emit one ton of 
SO2 during a given year. At the end of the compliance 
period, which is a 12-month period ending with each calendar year, a 
source owner's allowances must exceed or equal its annual emissions.
    The proposed rule would require States and Tribes to include 
initial source-specific allowances for each source included within the 
program. Under the proposal, these initial allocations must specify the 
tons per year allocated for each source for each year between 2009 and 
2018. The Annex contains a detailed discussion of the methodology for 
distributing allowances to sources. The EPA proposed, however, that the 
details of this methodology were not needed in EPA's rule. If those 
allowances add up to the appropriate regional total, EPA proposed that 
the objectives of the program would be met. The EPA proposed one 
exception to this approach, a requirement that 20,000 tons of 
allowances be reserved as a ``set-aside'' for use by Tribes.
    Public comments. The EPA received comments on three issues related 
to allowances. First, the WRAP and one electric utility commenter

[[Page 33775]]

recommended that the proposed rule be modified such that initial SIPs 
would not be required to have source-specific amounts for each source. 
Instead, these commenters recommended that EPA allow the initial SIPs 
to include a formula that will be used to calculate the allowances when 
the program is triggered.
    Second, the WRAP and one environmental group commenter recommended 
specific regulatory language for reserving a portion of allowances for 
renewable energy resources such as wind, solar photovoltaic and solar 
thermal technologies, geothermal, landfill gas and biomass 
technologies, and hydropower projects meeting Low-impact Hydropower 
Institute criteria. This regulatory language consisted of a regulatory 
definition of ``eligible energy resource.'' In addition, the 
recommendation included specific regulatory language for inclusion in 
40 CFR 51.309(h)(4)(i) that would provide ``eligible energy resources'' 
with 2.5 tons of SO2 allowances per megawatt of installed 
nameplate capacity per year.
    Final rule. The EPA has amended the proposed rule as requested by 
the WRAP and other commenters. The EPA agrees that a clear and 
definitive formula for issuing source-specific allowances is an 
acceptable approach. The approach to distributing allowances described 
in the Annex provides for adjustments of the allocations over time, for 
example providing ``bonus'' allocations for early reductions. Because 
the allocations provide for adjustments over time, it is likely that 
individual source allocations could change between the date of the 2003 
SIPs and the date a trading program would be triggered. Accordingly, 
EPA believes that re-calculation of the source-specific allowances when 
the program is triggered would be likely in any case. If the program is 
triggered, the subsequent SIP revision must include the source-specific 
allocations.
    The EPA has also incorporated the WRAP's recommended provision 
regarding renewable energy credits. Given the WRAP's desire that this 
provision be a feature of the backstop trading program, EPA agrees that 
regulatory language is needed to ensure that this feature is included 
in SIPs. The EPA has incorporated the regulatory language recommended 
by the WRAP with two modifications. First, EPA includes only the first 
sentence of the WRAP's recommended definition (``Eligible renewable 
energy resource, for purposes of 40 CFR 51.309, means electricity 
generated by non-nuclear and non-fossil low or no air emission 
technologies''). The EPA believes that it is not necessary to include, 
and would be difficult to interpret, the WRAP's recommended additional 
language limiting the definition to only those technologies ``using 
resources that are virtually inexhaustible, reduce haze, and are 
environmentally beneficial.'' The EPA agrees with the WRAP that it is 
useful to clarify that this definition specifically includes:

--Electricity generated by wind energy technologies;
--Solar photovoltaic and solar thermal technologies;
--Geothermal technologies;
--Technologies based on landfill gas and biomass sources; and
--New low-impacts hydropower that meets the Low-Impact Hydropower 
Institute criteria.

Similarly, EPA agrees with the WRAP that it is useful to clarify that 
``biomass'' includes agricultural, food and wood wastes, but does not 
include biomass from municipal solid waste, black liquor, or treated 
wood, and that for purposes of this definition, low-impacts hydropower 
does not include pumped storage. At the same time, EPA has concerns 
that the various lists in the WRAP's proposed definition may not be 
exhaustive, and that it would be preferable that the list be able to 
change without necessitating a change to 40 CFR 51.309.
    The EPA has also included an amendment to 40 CFR 51.309(h)(4)(i) 
which requires that the backstop market trading program include the 
WRAP's recommended provision for renewable energy credits. This 
amendment requires SIPs under 40 CFR 51.309 to include a provision that 
eligible renewable energy resources that begin operation after October 
1, 2000 will receive 2.5 tons of SO2 allowances per megawatt 
of installed nameplate capacity per year. The rule also includes 
language consistent with the WRAP's recommendation that allowance 
allocations for renewable energy resources that begin operation prior 
to the program trigger will be retroactive to the time of initial 
operation. The EPA believes, however, that it is important for States 
to preserve flexibility over time with respect to implementing this 
provision. Accordingly, the final rule allows, but does not require, 
that implementation plans may provide for an upper limit on the number 
of allowances provided for eligible renewable energy resources.
2. Emissions Quantification Protocols
    Proposed rule. The proposed rule required that implementation plans 
under 40 CFR 51.309 must include specific emissions quantification 
protocols, that is, procedures for determining actual emissions. These 
procedures will be used to measure, or determine, annual emissions from 
each source in the trading program if the trading program is triggered. 
The proposed rule also required that States include the necessary 
monitoring, recordkeeping, and reporting provisions to measure and 
track results.
    In the Annex, the WRAP recognized the need to have detailed and 
prescribed emission quantification protocols and recommended that the 
participating States and Tribes establish such provisions in the SIPs 
submitted under 40 CFR 51.309. The Annex describes the WRAP's approach 
to monitoring in section II, pages 39-41, in section III, item III.D.3 
on page 64, and in Attachment A, Draft Model Rule section C.2.3 
Monitoring Requirements, and section C9 Emissions Monitoring. In 
particular, the WRAP recognized the need for emission monitoring 
protocols which ensure that emissions estimates are accurate and 
comparable for participating sources. For the trading program, the 
emissions become a tradeable, fungible commodity. Accordingly, it is 
important to the integrity of the program to ensure that one ton of 
emissions from one source is equivalent to one ton of emissions from 
another source.
    In the Annex, the WRAP proposed that sources subject to the acid 
rain program under title IV of the CAA would continue to follow the 
continuous emissions monitoring procedures in the acid rain program, 
which appear in 40 CFR part 75. Because continuous emissions monitoring 
represents the best available method for determining emissions, EPA 
would not require separate emission protocols for these sources as part 
of implementing 40 CFR 51.309.
    For other categories of sources not covered by part 75, the WRAP in 
the Annex recognized the need to develop protocols based upon ``best 
available'' monitoring techniques for each source category. In the 
proposed rule, for source categories with sources in more than one 
State submitting an implementation plan under 40 CFR 51.309, EPA 
required each State to use the same protocol. Further, in the proposal, 
EPA included criteria for determining the acceptability of these 
protocols in the implementation plans. These criteria are the same 
criteria listed in section 5.2 and 5.3 of EPA's Economic Incentive 
Program (EIP) guidelines. These guidelines state that emission 
quantification protocols:


[[Page 33776]]


--Must ensure reliable results, and that they must ensure that repeated 
application of the protocol obtains results equivalent to EPA-approved 
test methods;
--Must be replicable, that is, the protocol ensures that different 
users will obtain the same or equivalent results in calculating the 
amount of emissions and/or emissions reductions.

These EIP guidelines also specify that trading programs need to include 
monitoring, recordkeeping, and reporting provisions to provide adequate 
information for determining a source's compliance with the program. 
Adequate monitoring, recordkeeping and reporting procedures have 
several key attributes, including representativeness (characteristic of 
the source category and available monitoring techniques), reliability, 
replicability, frequency (that is, the monitoring is sufficiently 
repeated within the compliance period), enforceability (that is, the 
monitoring is independently verifiable), and timeliness.
    Public comments. Comments on this provision were generally 
supportive of the notion that stringent protocols are needed to ensure 
the integrity of the ``currency'' for the trading program. Consistent 
with this view, one commenter representing electric utilities 
recommended that non-utility sources need to employ emissions 
quantification protocols that are equivalent to those of electric 
utilities. In the WRAP's comments, a few changes to the regulatory 
language were recommended. Some comments expressed concerns that the 
proposal did not provide enough flexibility in the use of 
quantification protocols.
    The WRAP comments recommended that the proposal be modified to 
state:

    For source categories with sources in more than one State 
submitting an implementation plan under this section, each State 
must use protocols that are ``sufficiently rigorous and comparable 
to ensure that emissions in the region are measured in a reliable 
and a consistent manner.

The WRAP believed that the terms ``sufficiently rigorous and 
comparable'' were preferable to the word requirement of the ``same'' 
methodology for each State. The WRAP also sought clarification that the 
proposed language in 40 CFR 51.309(h)(4)(iii) requiring that ``the 
protocols must provide consistent approaches for all sources within a 
given source category'' would not limit the WRAP States' and Tribes' 
ability to establish different monitoring requirements within source 
categories based on established criteria such as the size of an 
emission unit. For example, the WRAP comments noted that it may be 
appropriate to require the use of a CEMS on a large industrial boiler 
while using emission factors for a smaller boiler that is used as a 
backup unit.
    Finally, the WRAP expressed concerns that this provision should 
provide for the use of flexible monitoring options that make sense for 
this particular trading program. Because smaller sources are 
anticipated to have greater difficulty meeting stringent monitoring 
requirements, the WRAP's market trading forum (MTF) is considering 
adopting more flexible monitoring provisions for these smaller sources. 
For smaller sources, the MTF goals are:

--To provide assurances that the milestone goals will still be met,
--To ensure that data are sound and reliable,
--To obtain data that are consistent with the assumptions of the Annex, 
and
--To ensure the integrity of the trading program.

While these MTF discussions are still in the preliminary stages, the 
WRAP comments seek assurance from EPA that the final rule will allow 
consideration of different approaches.
    Another commenter noted that emission quantification protocols are 
continually evolving and becoming more refined. This commenter 
expressed concerns that if improved protocols, different from those 
used to establish the baseline, are used to determine steady and 
continuing progress and if the program is triggered, this could have 
the effect of penalizing sources for developing and using improved 
protocols. This commenter noted that EPA should not create a 
disincentive to such innovation. The commenter believed that if the 
quantification protocols remain static for SO2 measurements 
until the program is triggered, at which time sources will be required 
to implement different reduction programs, then sources will be better 
able to adapt to the more precise measurements resulting from new 
quantification protocols. This commenter also believed that as a 
result, the sources will be able to factor in the need, if any, for 
greater reductions resulting from improved quantification protocols.
    Final rule. The EPA has retained the language as proposed. The EPA 
believes that it is important to retain the requirement that sources in 
similar categories use the same method for determining emissions under 
the trading program. The EPA wishes to clarify that this does not 
preclude the MTF from making distinctions within a given category 
regarding the appropriate technique for determining emissions. However, 
we believe that it is important that any such distinctions be done 
consistently to ensure that the same methods are being used for similar 
sources.
    The EPA does not believe that the proposed rule discourages 
innovation in the development of monitoring techniques. For the ``pre-
trigger'' portion of the program, that is, the time period before a 
trading program, the program specifically provides for adjustments to 
the milestones to ensure that changes in monitoring techniques are 
appropriately considered.
3. Enforcement Penalties
    Proposed rule. The proposed rule required that the backstop trading 
program include specific enforcement penalties to be applied if the 
emissions from a source exceed the allowances held by the source. In 
the preamble, EPA noted that the Annex provides for two types of 
automatic penalties when excess emissions occur:

--The automatic surrender of two future-year allowances for every ton 
of excess emissions, and
--A financial penalty ($5000 per ton, indexed to inflation from the 
year 2000) deemed to exceed the expected cost of allowances by a factor 
of three to four.

    In addition, the proposed rule required that in establishing 
enforcement penalties, the State or Tribes must ensure that:

--When emissions from a source in the program exceed the allowances 
held by the source, each day of the year is a separate violation, and
--Each ton of excess emissions is a separate violation.

    Public comments. The WRAP and a number of industry group commenters 
objected to the proposed requirements that when emissions from a source 
in the program exceed the allowances held by the source, each day of 
the year be considered a separate violation and that each ton of excess 
emissions be considered a separate violation. First, the WRAP and some 
industry comments asserted that the maximum penalty is punitive, and 
cannot be justified for a program that has been established to meet a 
welfare-based regional goal. Second, commenters believed that because 
this provision involved greater case-by-case judgments than the 
penalties in the Annex, the provision could lead to inconsistencies 
between the various State and tribal agencies.

[[Page 33777]]

The WRAP and other commenters recommended that EPA replace the penalty 
provisions in the proposal with the provisions that were recommended in 
the Annex, which were, in turn, based upon the acid rain program.
    Final rule. The EPA has made a few changes to the final rule based 
upon public comments received. First, EPA has decided to include in the 
final rule the two specific types of automatic penalties listed in the 
Annex for excess emissions. The EPA believes that by including a 
requirement for these penalty provisions in the final rule, EPA can 
remove any ambiguity that may exist over whether the types of 
provisions envisioned by the WRAP would be acceptable to EPA for SIPs 
submitted under 40 CFR 51.309. The EPA agrees with the commenters that 
the program should establish sufficient penalties to deter non-
compliance. The final rule includes a requirement to forfeit two 
allowances for each ton of excess emissions, and a requirement for 
monetary penalties. The EPA uses the WRAP's specific $5000 per ton 
amount in the final rule. At the same time, EPA believes that because 
it will be a number of years before the onset of any backstop trading 
program, it is possible that the appropriate $/ton figure could change 
over this time period, and that there may be additional factors that 
may need to be taken into account. The final rule provides for the 
development of an alternative to this amount, if the value is 
consistent across States and Tribes and the value substantially exceeds 
the expected costs of allowances, in order to provide a strong 
incentive for sources to hold allowances at least equal to their 
emissions.
    The EPA believes that many commenters may have misunderstood the 
proposed regulatory language requiring that each day of the year be 
considered a separate violation and that each ton of excess emissions 
be considered a separate violation. The EPA wishes to clarify that we 
view these provisions as clarifying the liabilities that exist for 
violations under the CAA, and that these penalties are not automatic. 
The EPA believes that it is important to recognize that while the 
penalty structure devised by the WRAP will represent the principle way 
to deter violations, EPA believes that it is useful to clarify that the 
additional liabilities exist under the CAA. We believe this is 
consistent with the acid rain program. For example, under 40 CFR 
77.1(b), EPA clarifies that the automatic penalties in the acid rain 
program do not negate other penalties under the CAA, as follows:

    (b) Nothing in this part shall limit or otherwise affect the 
application of sections 112(r)(9), 113, 114, 120, 303, 304, or 306 
of the Act, as amended. Any allowance deduction, excess emission 
penalty, or interest required under this part shall not affect the 
liability of the affected unit's and affected source's owners and 
operators for any additional fine, penalty, or assessment, or their 
obligation to comply with any other remedy, for the same violation, 
as ordered under the Act.

While EPA agrees with the WRAP that the penalty structure contained in 
the backstop trading program, which is patterned after the acid rain 
program, should be effective and should constitute the principal way 
penalties would be imposed, it is nonetheless useful and important to 
clarify that sources are potentially liable for other penalties under 
the CAA.
    The EPA also clarifies in the final rule language, as noted on page 
46 of the Annex (Annex section II.D.6.f.), that in addition to excess 
emissions, violations are possible with respect to other program 
requirements (such as monitoring and reporting requirements). We agree 
with the WRAP that CAA civil and criminal penalties would apply to such 
violations, including liability for each day as an individual 
violation.
4. Requirements for Periodic Evaluation
    Proposed rule. The proposed rule required the backstop trading 
program to include a provision for periodic evaluations of the program. 
Such periodic evaluations are required as a means of determining 
whether the program, in its actual implementation, would need any mid-
course corrections. The proposal included a list of nine questions that 
the program evaluations should address. These proposed questions, which 
were derived from EPA's guidance for EIP, section 5.3(b), were as 
follows:
    (A) Whether the total actual emissions could exceed the milestones, 
even though sources comply with their allowances;
    (B) Whether the program achieved the overall emission milestone it 
was intended to reach, and a discussion of the actions that have been 
necessary to reach the milestone;
    (C) The effectiveness of the compliance, enforcement and penalty 
provisions;
    (D) The administrative costs of the program to sources and to State 
and tribal regulators, including a discussion of whether States and 
Tribes have enough resources to implement the trading program;
    (E) Whether the market trading program has likely led to decreased 
costs for reaching the milestone relative to a non-market based 
approach, including a discussion of the market price of allowances 
relative to control costs that might have otherwise been incurred;
    (F) Whether the trading program resulted in any unexpected 
beneficial effects, or any unintended detrimental effects;
    (G) Whether the actions taken to reduce SO2 have led to 
any unintended increases in other pollutants;
    (H) Whether there are any changes needed in emissions monitoring 
and reporting protocols, or in the administrative procedures for 
program administration and tracking;
    (I) The effectiveness of the provisions for interstate trading, and 
whether there are any procedural changes needed to make the interstate 
nature of the program more effective.
    Public comments. The only comments on the periodic evaluation 
provision were from the WRAP. The WRAP, while supporting items (A), 
(C), (H) and (I) without changes, recommended changes to items (B) and 
(D) and recommended deletion of items (E), (F) and (G).
    The WRAP's comments recommended deleting the phrase ``and a 
discussion of the actions that have been necessary to reach the 
milestones'' from the end of item (B). The WRAP noted that the backstop 
trading program is intended to provide incentives for long-term 
business planning. The program also allows other concerns, such as the 
need to meet the PM2.5 NAAQS, to bring about some of the 
emissions reductions needed to meet the regional haze goals. The WRAP 
stated that it could be difficult to determine what actions were 
required to achieve all of the emissions reductions in the region, 
because most of the reductions would follow from individual business 
decisions. Accordingly, in its comments, the WRAP recommended that this 
provision not be mandated by the rule.
    The WRAP comments recommended deletion of the phrase ``the 
administrative costs of the program to sources and to State and tribal 
regulators'' from item (D), such that this item would be modified to 
read ``a discussion of whether States and Tribes have enough resources 
to implement the trading program.'' The WRAP stated that States and 
Tribes will be monitoring the costs of the program as part of their on-
going internal program review, but that this should not be mandated by 
EPA. Rather, the WRAP recommended that the rule should be focused on 
what is needed to meet the visibility improvement goals, and that the 
development of the most cost-effective

[[Page 33778]]

strategies to meet those goals should be left to the States and Tribes.
    The WRAP's comments recommended deletion of item (E) from the rule. 
The WRAP indicated that while States and Tribes may choose to perform 
an analysis of the cost effectiveness of the program, this should not 
be mandated by EPA. The WRAP also recommended deletion of items (F) and 
(G) from the rule. In its comments, the WRAP explained its view that it 
could be very difficult to determine what changes in emissions in the 
region are due to the milestones because so many different factors will 
come into play in a backstop trading program. Moreover, the WRAP 
comments noted that the regional haze rule already includes provisions 
for a 5-year SIP review of the entire program under 40 CFR 51.309, and 
that new SIPS will be developed every 10 years. The WRAP stated that it 
believes that existing requirements in the rule are adequate to ensure 
that there are not any unintended consequences due to implementation of 
the backstop trading program, and that the additional audit 
requirements in (F) and (G) could prove to be difficult and expensive 
to analyze.
    Final rule. The final rule incorporates the WRAP's recommended 
changes to items (B) and (D), and accepts the WRAP's recommendation to 
delete item (E). The EPA has, however, retained items (F) and (G). The 
EPA believes that it is important that a program evaluation of the 
trading program determine whether the trading program resulted in any 
unexpected beneficial effects, or any unintended detrimental effects 
and whether the actions taken to reduce SO2 have led to any 
unintended increases in other pollutants. While the WRAP correctly 
notes that there are SIP reviews every 5 years, and new SIPS every 10 
years, EPA believes that the program evaluations should be designed to 
provide information that indicate whether these SIP reviews should 
contain any mid-course corrections. The EPA does not believe that it 
will require a burdensome or exhaustive analysis to determine whether, 
qualitatively, such effects have occurred. If it is known that these 
detrimental effects have occurred, EPA believes that WRAP States should 
take this into account in the SIP revisions.

E. Provisions Related to Time Period After 2018

    Proposed rule. In the proposal, EPA noted that the Annex did not 
attempt to address the fate of this program beyond calendar year 2018. 
In the proposal, EPA believed that it is reasonable for WRAP States and 
Tribes to defer until a later date any judgment on the specific levels 
of SO2 that can be achieved. Finally, in the proposal, EPA 
noted its belief that any actions that occur after 2018 should not be 
allowed to increase SO2 emissions beyond the 2018 milestone. 
Accordingly, EPA proposed to indicate in the language in Table 1 of the 
proposed rule that any milestone developed for years after 2018 must 
not allow increases over and above those for the year 2018.
    Public comments. One commenter, supported by two other commenters, 
believed that, because the WRAP Annex covers the period from 2003 to 
2018, EPA's approval of the Annex should not be dependent on what 
occurs after 2018. The EPA interprets this comment as requesting that 
the final rule be silent on the time period after 2018. The WRAP's 
comments recommended that the language in Table 1 of the proposed rule 
be modified to read ``no more than 510,000 tons (480,000 tons if 
suspended smelters do not resume operation) unless the milestones are 
replaced with a different program that meets any BART and `reasonable 
progress' requirements established in this rule.''
    Final rule. The EPA has incorporated language similar to that 
requested by the WRAP into Table 1. This ensures that the progress made 
by participating States and Tribes in addressing the visibility 
impairment will not be eroded in the event that the SIP revisions due 
in 2018 are not in place at the beginning of 2019. At the same time, 
this provision clearly indicates that this SIP revision is the expected 
means of addressing visibility after that date.

F. Provisions Related to Indian Tribes

    Proposed Rule. Western Indian Tribes have been directly involved 
during the development of the GCVTC report and the subsequent 
development of the WRAP Annex report. Through this involvement, they 
have been able to ensure that unique issues of importance to Tribes 
have been carefully considered by all stakeholders. The Annex addresses 
issues of tribal interest, including a specific provision of the 
program for Tribes in the market trading program. The EPA believes that 
tribal participation is important for the success of the visibility 
protection program in the Western United States and reflected this in 
the proposed rule.
    When developing the backstop trading program, the WRAP established 
a 20,000 ton allowance amount (called the ``set-aside'') to be 
allocated to Tribes. In the event that the backstop market trading 
program is triggered, the set-aside would be available to Tribes to 
either (1) allow for new source growth over and above the amounts 
allocated for new sources by the Annex; (2) sell for revenue; or (3) 
retire. Note that this set-aside amount is in addition to any 
allocations to individual sources within Indian Country. For example, 
if the Navajo Nation participates in the program, there would be an 
allocation for the Four Corners Power Plant and for the Navajo Power 
Plant, which are located on the Navajo Reservation. The WRAP's backstop 
trading program includes within the overall milestones an amount for 
each such existing source in addition to the tribal set-aside. For more 
discussion of this issue, see 67 FR 30438, May 6, 2002.
    In the proposal, EPA included the 20,000 ton tribal set-aside as a 
requirement of the backstop trading program. In addition, EPA discussed 
in the preamble its views of EPA's role with respect to allocation of 
the 20,000 ton set-aside. In this discussion, EPA stated its view that 
allocation of the 20,000 ton amount was not a critical short-term need, 
because the backstop trading program would be triggered, at the 
earliest, in the year 2009. The EPA indicated its expectation that 
Tribes will develop the method for allocating the 20,000 tons, but that 
EPA will seek to provide assistance as necessary to facilitate the 
process.
    In the proposed rule, EPA reiterated its position that it will 
``pursue the principle of tribal `self government' and will work with 
tribal governments on a `government-to-government' basis.'' The CAA 
Amendments of 1990 added section 301(d) which authorizes EPA to ``treat 
Tribes as States'' for the purposes of administering CAA programs. The 
EPA promulgated regulations implementing section 301(d) in the Tribal 
Authority Rule, which elaborates on EPA's tribal policies, on February 
12, 1998, (63 FR 7254). For a more detailed discussion of EPA's tribal 
policies, see the Tribal Authority Rule (63 FR 7254) and the proposed 
rule (67 FR 30418).
    Public Comments. The EPA received several comments relating to 
tribal issues, including the set-aside for Tribes in the market trading 
program and the need for providing assistance (such as developing a 
model TIP) to Indian Tribes.
    The WRAP's comments agreed with the proposed language in Sec.  
51.309(h)(4)(i) regarding the set-aside and added that the final rule 
should say that tribal participation in the market trading program 
would not be affected by States that do not choose to participate in 
the market trading program. The WRAP comments included an example: ``if 
California opts out of the backstop trading program, all Tribes that 
are located in California may

[[Page 33779]]

still participate in the distribution of the tribal set-aside.'' The 
WRAP also suggested that EPA make assistance in developing a TIP a high 
priority, and that EPA should develop a model implementation plan which 
could be appropriately modified and used by any Tribe choosing to 
participate in the market trading program.
    One commenter representing industrial sources located in Indian 
country expressed the concern that participation by Tribes with large 
stationary sources was important for the program to reach ``critical 
mass.'' Additionally, this commenter believed that EPA should work to 
serve the interests of sources located in Indian country by assisting 
the Tribes in developing a program under 40 CFR 51.309.
    The WRAP's comments agreed with EPA's assessment that allocation of 
the 20,000 ton tribal set-aside does not need to be completed in the 
near-term, and strongly agreed that the distribution of the set-aside 
should be determined by the Tribes and not EPA or the WRAP. However, 
the WRAP recommended that the final rule contain a provision that will 
require the determination of a method to allocate or manage the set-
aside by no later than 1 year after the market trading program is 
triggered.
    Final Rule. The EPA agrees with commenters regarding participation 
of Indian Tribes in the regional SO2 emissions reductions 
program. The EPA agrees that Tribes should be allowed to participate in 
the program and their participation is not dependent on the 
participation of the States that surround them. As stated in the Tribal 
Authority Rule (63 FR 7271)

[t]ribes * * * shall be treated in the same manner as states with 
respect to all provisions of the Clean Air Act and implementing 
regulations, except for those provisions identified in section 49.4 
and the regulations that implement those provisions. (63 FR 7271).

Because the CAA provisions for the regional haze rule are not listed in 
section 49.4, Tribes should have the opportunity to be treated in the 
same manner as States for purposes of implementing 40 CFR 51.309. 
Accordingly, eligible Tribes may submit a plan regardless of the 
participation of neighboring States.
    The EPA concurs with the comments regarding the importance of 
assisting Tribes in developing TIPs. As stated in the proposal, ``For 
Tribes which choose to implement 40 CFR 51.309, EPA believes there are 
a number of ways that EPA can provide assistance.'' The EPA will help 
those Tribes with major SO2 sources to comply with the pre-
trigger emissions tracking requirements, and to assist Tribes 
interested in participating in the backstop trading program. To this 
end, EPA has met, or plans to meet, with all Tribes that have major 
SO2 sources. In these meetings, EPA is explaining the 
regional haze rules and options for participating in the SO2 
reduction program.
    The EPA agrees with the WRAP's comments that a model TIP could 
serve to facilitate implementation of the program in Indian country. 
The EPA will work with Tribes to further assess the needs for such a 
model TIP. The EPA also agrees with the WRAP's recommendation to 
establish a 1-year deadline for allocation of the 20,000 ton set-aside, 
and we have added this language to the final rule.
    EPA is committed to protecting tribal air resources, building 
tribal air program capacity, and working with Tribes on a government-
to-government basis.

IV. Statutory and Executive Order Reviews

    In preparing any final rule, EPA must meet the administrative 
requirements contained in a number of statutes and executive orders. In 
this section of the preamble, we discuss how the final rule addresses 
these administrative requirements. Except where EPA committed in the 
proposal to further efforts, these discussions reflect EPA's 
assessments for the proposed rule. No public comments were received 
regarding EPA's proposed treatment of these administrative 
requirements.

A. Executive Order 12866: Regulatory Planning and Review

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), EPA 
must determine whether the regulatory action is ``significant'' and, 
therefore, subject to Office of Management and Budget (OMB) review and 
the requirements of the Executive Order. The Order defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Pursuant to the terms of Executive Order 12866, it has been 
determined that this rule is a ``significant regulatory action.'' As 
such, this action was submitted to OMB for review. Changes made in 
response to OMB suggestions or recommendations are documented in the 
public record.
    Today's final rulemaking amends the regional haze rule by 
incorporating a specific set of SO2 emission targets for 
regionwide stationary sources of SO2 emissions for a nine-
State region in the Western United States. The emission targets would 
affect and have potential economic impacts only for States choosing to 
participate in the optional program provided by 40 CFR 51.309 of the 
regional haze rule. The emissions reductions resulting from the program 
vary over the 2003 to 2018 time period. If all nine States participate 
in the program, the WRAP estimates that for the year 2018, 
SO2 emissions would be reduced from a projected baseline of 
612,000--642,200 tons to an enforceable milestone of 480,000--510,000 
tons. If the milestones are not achieved through voluntary emissions 
reductions by the affected sources, then they will be achieved through 
an enforceable backstop market trading program.
    In order to understand the possible regulatory impacts of this 
rule, it is necessary to review the previous analysis that EPA 
completed for the entire regional haze program. In 1999, EPA prepared a 
Regulatory Impact Analysis (RIA) for the regional haze rule (see 
regional haze rule docket (A-95-38)). In that RIA, EPA assessed the 
costs, economic impacts, and benefits for four illustrative progress 
goals, two sets of control strategies, two sets of assumptions for 
estimating benefits, and systems of nationally uniform progress goals 
versus regional varying progress goals (64 FR 35760, July 1, 1999). 
Because we had no way of predicting the visibility goals each State 
would pick under the regional haze rule requirements, we conducted an 
extensive analysis of eight ``what if'' scenarios. For each scenario, 
the RIA determined the control measures needed to achieve the given 
degree of visibility improvement and the associated costs. The RIA also 
presented results for six specific sub-regions, such as ``Rocky 
Mountain,'' ``West,'' and others. These emission reduction scenarios 
are provided in the RIA in Tables 6-7 and 6-8.
    The EPA believes that some of the emissions reductions from the 
Annex provisions for stationary source SO2, assuming States 
choose this optional 40

[[Page 33780]]

CFR 51.309 approach, may result from environmental obligations under 
the CAA. To the extent this is the case, the emissions reductions 
required the WRAP's SO2 milestones and backstop trading 
program may have already been addressed in other regulatory impact 
analyses for those programs.
    The remainder of the emissions reductions resulting from the WRAP's 
program for stationary source SO2 would be over and above 
those required to meet other environmental obligations. Where this is 
the case, we believe that the control costs and other potential 
economic consequences of achieving the reductions are reflected in the 
RIA for the 1999 regional haze rule. The range of results for the eight 
scenarios analyzed in the RIA resulted in predicted SO2 
emissions reductions that are within the range of emissions reductions 
included in the Annex. Two of the eight scenarios resulted in 284,000 
tons of stationary source reductions in regions containing one or more 
of the WRAP Annex States. Five other scenarios include SO2 
emissions reductions ranging from 95,000 to 128,000 tons per year. 
Hence, the costs and benefits associated with the WRAP's program are 
captured in the RIA for the 1999 final regional haze rule.
    The EPA received no public comments regarding Executive Order 
12866.

B. Paperwork Reduction Act

    The information collection requirements in today's rule have been 
submitted to OMB under the Paperwork Reduction Act, 44 U.S.C. 3501 et 
seq. An Information Collection Request (ICR) document has been prepared 
by EPA (ICR No. 1813.05) and a copy may be obtained from Susan Auby, by 
mail at Office of Environmental Information--Information Strategies 
Branch, U.S. EPA (2822T), 1200 Pennsylvania Avenue, NW., Washington, DC 
20460, by e-mail at [email protected], or by calling (202) 566-1672. A 
copy may also be downloaded off the Internet at http://www.epa.gov/icr.
    The EPA has prepared burden estimates for the specific burden 
impacts of today's rule. These burden estimates are calculated using 
the assumption that seven eligible States and four tribes would 
participate in the program. The results of the calculations indicate 
16,100 hours to 19,990 hours for affected sources, 14,010 to 14,430 
hours for States, 2,520 to 2,600 hours for Tribes, 1,305 to 1,375 hours 
for the Federal government, and 240 hours for regional planning 
organizations.
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time 
needed to review instructions; develop, acquire, install, and use 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources; complete and review the collection of information; 
and transmit or otherwise disclose the information. An agency may not 
conduct or sponsor, and a person is not required to respond to a 
collection of information unless it displays a currently valid OMB 
control number. The OMB control numbers for EPA's regulations are 
listed in 40 CFR part 9 and 48 CFR chapter 15.
    The EPA sought comments on EPA's need for this information, the 
accuracy of the provided burden estimates, and any suggested methods 
for minimizing respondent burden. The EPA received no comments 
regarding the burden or the Paperwork Reduction Act as it applies to 
today's rulemaking.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to prepare a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements under the Administrative 
Procedures Act or any other statute unless the agency certifies that 
the rule will not have a significant economic impact on a substantial 
number of small entities. Small entities include small businesses, 
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of today's rulemaking on 
small entities, small entity is defined as: (1) A small business that 
is a small industrial entity as defined in the U.S. Small Business 
Administration (SBA) size standards (as discussed on the SBA Web site 
at http://www.sba.gov/size/indextableofsize.html); (2) a small 
governmental jurisdiction that is a government of a city, county, town, 
school district or special district with a population of less than 
50,000; and (3) a small organization that is any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.
    After considering the potential for economic impacts of today's 
rule on small entities, I certify that today's rule will not have a 
significant economic impact on a substantial number of small entities. 
Today's rule amends the requirements of the regional haze program to 
provide nine Western States and a number of Tribes with an optional 
method for complying with the requirements of the CAA. No State or 
Tribe is required to submit an implementation plan meeting its 
requirements. For States or Tribes that choose to submit an 
implementation plan under this optional program, however, today's rule 
requires those States and/or Tribes to meet a series of regional 
SO2 emission milestones. The EPA will determine whether 
these milestones are met based on the actual emissions from stationary 
sources with SO2 emissions of more than 100 tons per year. 
From data EPA obtained from the WRAP's Web site, it appears that there 
are 194 establishments meeting the 100 tons per year of SO2 
criterion for this program, including 39 utility power plants, and 155 
non-utility sources.\9\ The vast majority of these establishments--
which include sources such as power plant boilers, copper smelters, 
chemical plants, petroleum refineries, natural gas production plants, 
large manufacturing operations, mills--are not small entities. The EPA 
estimates that 12 facilities are likely to be owned by small entities, 
and 164 are owned by entities that are not small. The EPA has been 
unable to determine the size of 16 entities that own 18 of the 
establishments.\10\ Even if all 18 were determined to be owned by small 
entities, and all nine States and those Tribes with covered sources 
adopted the optional approach to complying with the visibility 
requirements of the CAA, less than 30 small entities would be 
potentially affected by this rule.
---------------------------------------------------------------------------

    \9\ The number of power plants was obtained from ``Data 
Worksheets from ICF Consulting Detailing Utility Emissions 
Projections,'' Item 3 in supplemental information transmitted to Tim 
Smith, EPA, from Patrick Cummins, WRAP. June 29, 2001. The non-
utility estimate was obtained from: Technical Support Documentation. 
Voluntary Emissions Reduction Program for Major Industrial Sources 
of Sulfur Dioxide in Nine Western States and a Backstop Market 
Trading Program. Section 2.A. Revised Appendix A for the Pechan 
Report, table A-1.
    \10\ The EPA provides documentation of these estimates in a 
technical memorandum, ``Size of Potentially Affected Entities Should 
the Western Regional Air Partnership States Choose to Adopt 
Regulations in Accordance with the Draft Proposed Rule Revising 
Sec.  51.309(h).'' Allen Basala, EPA, October 17, 2001. This 
memorandum is included in the docket for today's final rule.
---------------------------------------------------------------------------

    The goal of the WRAP is for the regional SO2 milestones 
established by the rule to be met through voluntary measures and EPA 
believes that

[[Page 33781]]

participating States and Tribes may be able to meet the milestones 
through such measures. However, as a backstop in the event the 
milestones are not met in this manner, today's rule requires the 
implementation of a market trading program to ensure that emissions in 
the relevant region do not exceed the milestones. Today's rule gives 
the States and Tribes the discretion to allocate emissions credits to 
sources, as the States and Tribes determine appropriate. Ultimately, 
the impact on small entities will not be determined by this rule, but 
rather by how the relevant State or Tribe exercises its discretion in 
adopting the optional program and allocating emissions credits. We 
encourage States and Tribes to consider the impact of its market 
trading program on small entities. Nonetheless, EPA believes that no 
more than 28 small entities will be affected by this rule, and most 
likely less, given that EPA does not anticipate that all nine States 
with the option to participate in this program will do so. We did not 
receive any public comments regarding the RFA or the Small Business 
Regulatory Enforcement Fairness Act of 1996. The EPA continues to 
believe that today's rulemaking will not have a significant economic 
impact on a substantial number of small entities.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) (UMRA), establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, 2 
U.S.C. 1532, EPA generally must prepare a written statement, including 
a cost-benefit analysis, for any proposed or final rule that ``includes 
any Federal mandate that may result in the expenditure by State, local, 
and tribal governments, in the aggregate, or by the private sector, of 
$100,000,000 or more * * * in any one year.'' A ``Federal mandate'' is 
defined under section 421(6), 2 U.S.C. 658(6), to include a ``Federal 
intergovernmental mandate'' and a ``Federal private sector mandate.'' A 
``Federal intergovernmental mandate,'' in turn, is defined to include a 
regulation that ``would impose an enforceable duty upon State, local, 
or tribal governments,'' section 421(5)(A)(i), 2 U.S.C. 658(5)(A)(i), 
except for, among other things, a duty that is ``a condition of Federal 
assistance,'' section 421(5)(A)(i)(I). A ``Federal private sector 
mandate'' includes a regulation that ``would impose an enforceable duty 
upon the private sector,'' with certain exceptions, section 421(7)(A), 
2 U.S.C. 658(7)(A).
    Before promulgating an EPA rule for which a written statement is 
needed under section 202 of the UMRA, section 205, 2 U.S.C. 1535, of 
the UMRA generally requires EPA to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, most 
cost-effective, or least burdensome alternative that achieves the 
objectives of the rule.
    By incorporating into the regional haze rule the provisions of the 
Annex for a voluntary emissions reductions program and backstop trading 
program, EPA is not directly establishing any regulatory requirements 
that may significantly or uniquely affect small governments, including 
tribal governments. The entire program under 40 CFR 51.309, including 
today's amendments, is an option that each of the States may choose to 
exercise. The program is not required and thus is clearly not a 
``mandate.'' Thus, EPA is not obligated to develop a small government 
agency plan, as required under section 203 of UMRA.
    The EPA also believes that because today's rule provides those 
States potentially subject to the rule with substantial flexibility, 
today's rule meets the UMRA requirement in section 205 to select the 
least costly and burdensome alternative in light of the statutory 
mandate for SIPs for visibility protection that address BART. Today's 
rule provides States and sources with the flexibility to achieve 
regional SO2 reductions in a way that is both cost and 
administratively effective. Sources are given the opportunity to 
achieve voluntary reductions. If such reductions do not occur, then the 
rule provides for the establishment of a trading program to achieve 
targeted emissions reductions. If a trading program is implemented, 
sources have the flexibility to buy and sell allowances in order to 
reach emissions reductions milestones in the most cost-effective way. 
Today's rule, therefore, inherently provides for adoption of the least 
costly, most-cost effective, and least-burdensome alternative that 
achieves the objective of this rule.
    The EPA believes that this rulemaking is not subject to the 
requirements of UMRA. For regional haze SIPs overall, it is 
questionable whether a requirement to submit a SIP revision constitutes 
a Federal mandate, as discussed in the preamble to the regional haze 
rule, (64 FR 35761, July 1, 1999). However, today's rule contains no 
Federal mandates (under the regulatory provisions of title II of the 
UMRA) for States, local, or tribal governments or the private sector. 
The program contained in 40 CFR 51.309, including today's rule, is an 
optional program.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 
1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    Under section 6(b) of Executive Order 13132, EPA may not issue a 
regulation that has federalism implications, that imposes substantial 
direct compliance costs, and that is not required by statute, unless 
the Federal government provides the funds necessary to pay the direct 
compliance costs incurred by State and local governments, or EPA 
consults with State and local officials early in the process of 
developing a regulation. Under section 6(c) of Executive Order 13132, 
EPA may not issue a regulation that has federalism implications and 
that preempts State law, unless EPA consults with State and local 
officials early in the process of developing the regulation.
    Today's rule does not have federalism implications. It will not 
have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. As an optional program, today's 
rule will not directly impose significant new requirements on State and 
local governments. In addition, even if today's rule did have 
federalism implications, it will not impose substantial direct 
compliance costs on State or local governments, nor will it preempt 
State law.
    Consistent with EPA policy, we nonetheless consulted with State and 
local officials early in the process of developing this regulation, to 
provide them with an opportunity for meaningful and timely input into 
its development. These consultations included a working meeting with 
State and local officials and numerous discussions with committees and 
forums of the WRAP. In the spirit of Executive Order 13132 and 
consistent with EPA policy to promote

[[Page 33782]]

communications between EPA and State and local governments, EPA 
specifically solicited comment on today's rule from State and local 
officials. We received no comments regarding this executive order from 
State and local officials or any other public commenters.
    As required by section 8(a) of Executive Order 13132, EPA included 
a certification from its Federalism Official stating that EPA had met 
the Executive Order's requirements in a meaningful and timely manner, 
when it sent the draft of this final rule to OMB for review pursuant to 
Executive Order 12866. A copy of this certification has been included 
in the public version of the official record for this final rule.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 6, 2000), 
requires EPA to, among other things, ensure ``meaningful and timely 
input by tribal officials in the development of regulatory policies 
that have tribal implications.'' ``Policies that have tribal 
implications'' is defined in the executive order to include regulations 
that have ``substantial direct effects 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.''
    Under section 5(b) of Executive Order 13175, EPA may not issue a 
regulation that has tribal implications, that imposes substantial 
direct compliance costs, and that is not required by statute, unless 
the Federal government provides the funds necessary to pay the direct 
compliance costs incurred by tribal governments, or EPA consults tribal 
officials early in the process of developing today's regulation. Under 
section 5(c) of the Executive Order, EPA may not issue a regulation 
that has tribal implications and that preempts tribal law, unless EPA 
consults with tribal officials early in the process of developing 
today's regulation.
    Today's rule may have tribal implications, but we believe that it 
will neither impose substantial direct compliance costs on the Tribes 
nor preempt tribal law. The EPA sought input from potentially affected 
Tribes before reaching a conclusion on whether this rule will have 
tribal implications. This was due, in a large part, to the voluntary 
nature of this program and the uncertainty of potential impacts on 
Tribes in the event a State or Tribe chooses to participate in the 
program. Possible impacts on Tribes choosing to opt into this program 
are discussed above in unit III of this preamble.
    The EPA notes that the WRAP consulted extensively with tribal 
representatives in the development of the Annex, the document which 
provided the basis for today's rulemaking. The Annex provides 
recognition of Tribes throughout the document and there is a specific 
discussion of tribal issues in Attachment F of the Annex. Today's 
rulemaking closely mirrors the recommendations of the WRAP and 
therefore reflects discussions between the WRAP and Western Tribes.
    In keeping with EPA policies regarding Tribes and Executive Order 
13175, prior to the issuance of the final rule, EPA provided additional 
opportunities for consultation with tribal officials or authorized 
representatives of tribal governments on the potential impacts of 
today's rule on Tribes. After consulting with a tribal representative, 
EPA provided Tribes with several opportunities to provide comments on 
today's rulemaking. During the public comment period, EPA met with 
tribal environmental staff at tribal environmental forums in Portland, 
Oregon and Sparks, Nevada. Also, during the public comment period, EPA 
sent letters to all Western Tribes describing the regional haze rules 
and, in particular, today's rule, alerting them to the public comment 
period and seeking their opinions on the rulemaking. Finally, EPA staff 
met with Tribes in the Western United States, that have sources located 
on their tribal lands, with sources potentially subject to BART 
requirements. Although EPA did receive public comments on Tribal 
issues, we did not receive any public comments specific to this 
executive order.

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

    Executive Order 13045, ``Protection of Children from Environmental 
Health and Safety Risks'' (62 FR 19885, April 23, 1997), applies to any 
rule that: (1) Is determined to be ``economically significant'' as 
defined under Executive Order 12866, and (2) concerns an environmental 
health or safety risk that EPA has reason to believe may have a 
disproportionate effect on children. If the regulatory action meets 
both criteria, the EPA must evaluate the environmental health or safety 
effects of the planned rule on children, and explain why the planned 
regulation is preferable to other potentially effective and reasonably 
feasible alternatives considered by EPA. The EPA interprets Executive 
Order 13045 as applying only to those regulatory actions that are based 
on health or safety risks, such that the analysis required under 5-501 
of the Order has the potential to influence the regulation. Today's 
rule to codify the SO2 emission reduction program is not 
subject to Executive Order 13045 because it does not establish an 
environmental standard intended to mitigate health or safety risk. 
There were no public comments received pertaining to this executive 
order.

H. Executive Order 13211: Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    Executive Order 13211, ``Actions That Significantly Affect Energy 
Supply, Distribution, or Use,'' (66 FR 28355, May 22, 2001), provides 
that agencies shall prepare and submit to the Administrator of the 
Office of Information and Regulatory Affairs, OMB, a Statement of 
Energy Effects for certain actions identified as ``significant energy 
actions.'' Section 4(b) of Executive Order 13211 defines ``significant 
energy actions'' as ``any action by an agency (normally published in 
the Federal Register) that promulgates or is expected to lead to the 
promulgation of a final rule or regulation, including notices of 
inquiry, advance notices of proposed rulemaking, and notices of 
proposed rulemaking: (1)(i) That is a significant regulatory action 
under Executive Order 12866 or any successor order, and (ii) is likely 
to have a significant adverse effect on the supply, distribution, or 
use of energy; or (2) that is designated by the Administrator of the 
Office of Information and Regulatory Affairs as a significant energy 
action.'' Under Executive Order 13211, a Statement of Energy Effects is 
a detailed statement by the agency responsible for the significant 
energy action relating to: (i) Any adverse effects on energy supply, 
distribution, or use including a shortfall in supply, price increases, 
and increased use of foreign supplies should the proposal or rule be 
implemented, and (ii) reasonable alternatives to the action with 
adverse energy effects and the expected effects of such alternatives on 
energy supply, distribution, and use.
    While this rulemaking is a ``significant regulatory action'' under 
Executive Order 12866, EPA has determined that this rulemaking is not a 
significant energy action because it is not likely to have a 
significant adverse effect on the supply, distribution, or use of 
energy. In today's rule, if States chose to implement the option 
provided by 40

[[Page 33783]]

CFR 51.309, this would lead to a regional reduction in SO2 
emissions in order to meet the WRAP's SO2 milestones for the 
2003-2018 time period. The WRAP's analysis of the program's 
requirements results in the following projections: \11\
---------------------------------------------------------------------------

    \11\ ICF consulting, Final Report on Regional Economic Impacts 
of Annex. Transmitted to Tim Smith, EPA/OAQPS by Patrick Cummins, 
WRAP Co-Project Manager, June 29, 2001.
---------------------------------------------------------------------------

    [sbull] No reduction in crude oil supply;
    [sbull] No reduction in fuel production;
    [sbull] 0.0 percent to 0.2 percent increase in wholesale 
electricity prices in 2018;
    [sbull] Production cuts in coal in the Western States balanced by 
increases in coal production in the Appalachian region;
    [sbull] No increase in energy distribution costs;
    [sbull] No significantly increased dependence on foreign supplies 
of energy;
    [sbull] Adverse impacts on employment, gross regional product, and 
real disposable incomes in the affected Western States of less than 
0.05 percent in 2018;
    [sbull] Room for new sources of electrical generating capacity 
within the target SO2 emission levels.
    Given the particular concern in the West regarding needed 
electrical generating capacity, EPA believes it important to note the 
WGA statement that ``the conclusion [* * * of their analysis * * *] is 
that sulfur dioxide emissions reductions milestones should in no way 
impede the construction of new coal-fired power plants in the West \12\ 
* * *''
---------------------------------------------------------------------------

    \12\ Memorandum from Jim Souby to Staff Council, State 
Environmental Directors and State Air Directors, ``Energy and Air 
Quality Issues.'' February 23, 2001.
---------------------------------------------------------------------------

    Furthermore, an assessment by WGA of the effects of the WRAP Annex 
indicates that it is possible to build 7000 megawatts or more of new 
coal-fired generation at any time between 2001 and 2018 without 
exceeding the SO2 emission milestones in the Annex.\13\ 
However, the amount of megawatts that could be built is affected by 
analytical assumptions regarding fuel mix and quality, capacity 
utilization, control levels, and the demarcation of fuel use regions. 
Additional scenarios included in the WGA analysis show that there could 
be room for 19,000 megawatts of generation capacity.
---------------------------------------------------------------------------

    \13\ Technical Memorandum, ``Analysis of New Coal-Fired Power 
Plants Under the Proposed Sulfur Dioxide Emission Reduction 
Milestones for the Nine-State Grand Canyon Visibility Transport 
Region.'' February 22, 2001.
---------------------------------------------------------------------------

    The EPA believes that the program contained in the Annex and in 
today's rule will not result in energy reduction of 500 or more 
megawatts installed production capacity. Under this program, 
considerable flexibility is afforded to electricity generators on how 
to comply with the program. Even if the trading program is triggered 
and sources must comply with allowances, we believe that the least-cost 
solutions afforded by the trading program, and the ability to secure 
emissions reductions from other sources, will make it very unlikely 
that the program would lead to plant shutdowns. The EPA did not receive 
any public comments specifically addressing this executive order or 
EPA's findings.

I. National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer Advancement Act 
of 1995 (``NTTAA''), Public Law 104-113, section 12(d) (15 U.S.C. 272 
note) directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. The NTTAA directs EPA 
to provide Congress, through OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    However, today's rule does not incorporate any requirements to use 
any particular technical standards, such as specific measurement or 
monitoring techniques. Therefore, EPA is not considering the use of any 
voluntary consensus standards in this rulemaking. Today's rule does 
require States to develop emissions quantification protocols and 
monitoring procedures for their SIPs as part of the market trading 
program. However, EPA generally defers to the choices the States make 
in their SIPs when the CAA does not prescribe requirements, so EPA is 
not requiring the use of specific, prescribed techniques, or methods in 
those SIPs. Nevertheless, while EPA believes that it is not necessary 
to consider the use of any voluntary consensus standards for this 
proposal, we will encourage States and Tribes to consider the use of 
such standards in the development of these protocols. The EPA did not 
receive any public comments concerning this executive order.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    Executive Order 12898 requires that each Federal agency make 
achieving environmental justice part of its mission by identifying and 
addressing, as appropriate, disproportionately high and adverse human 
health or environmental effects of its programs, policies, and 
activities on minorities and low-income populations.
    The EPA believes that today's rule should not raise any 
environmental justice issues. The overall result of the program is 
regional reductions in SO2. Because this program would 
likely reduce regional and local SO2 levels in the air and 
because there are separate programs under the CAA to ensure that 
SO2 levels do not exceed national ambient air quality 
standards, it appears unlikely that this program would permit any 
adverse affects on local populations. The EPA did not receive any 
public comments regarding this executive order.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
U.S. The EPA will submit a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the U.S. prior to 
publication of the rule in the Federal Register. A ``major rule'' 
cannot take effect until 60 days after it is published in the Federal 
Register. This action is a ``major rule'' as defined by 5 U.S.C. 
804(2). This rule will be effective on August 4, 2003.

List of Subjects in 40 CFR Part 51

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Carbon monoxide, Nitrogen oxides, Particulate 
matter, Sulfur dioxide, Volatile organic compounds.

    Dated: May 21, 2003.
Christine Todd Whitman,
Administrator.

0
For the reasons set forth in the preamble, part 51 of chapter I of 
title 40 of the Code of Federal Regulations is amended as follows:

[[Page 33784]]

PART 51--REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF 
IMPLEMENTATION PLANS

Subpart P--Protection of Visibility

0
1. The authority citation for part 51 continues to read as follows:

    Authority: 42 U.S.C. 7410-7671q.


0
2. Section 51.309 is amended by:
0
a. Revising paragraph (b)(5).
0
b. Adding paragraphs (b)(8), (b)(9), (b)(10), (b)(11), (b)(12) and 
(b)(13).
0
c. Revising paragraph (c).
0
d. Revising paragraphs (d)(4)(i)through(d)(4)(iv).
0
e. Revising paragraph (f)(1)(i) and (f)(3).
0
f. Adding paragraph (h).
    The revisions and additions read as follows:


Sec.  51.309  Requirements related to the Grand Canyon Visibility 
Transport Commission.

* * * * *
    (b) * * *
    (5) Milestone means the maximum level of annual regional sulfur 
dioxide emissions for a given year, assessed annually consistent with 
paragraph (h)(2) of this section beginning in the year 2003.
* * * * *
    (8) Base year means the year, generally a year between 1996 and 
1998, for which data for a source included within the program were used 
by the WRAP to calculate base year emissions as a starting point for 
development of the Annex required by paragraph (f) of this section.
    (9) Forecast means the process used by the WRAP to predict future 
emissions for purposes of developing the milestones required by 
paragraph (f) of this section.
    (10) Reforecast means a corrected forecast, based upon 
reapplication of the forecasting process after correction of base year 
emissions estimates.
    (11) BHP San Manuel means:
    (i) the copper smelter located in San Manuel, Arizona which 
operated during 1990, but whose operations were suspended during the 
year 2000,
    (ii) The same smelter in the event of a change of name or 
ownership.
    (12) Phelps Dodge Hidalgo means:
    (i) The copper smelter located in Hidalgo, New Mexico which 
operated during 1990, but whose operations were suspended during the 
year 2000,
    (ii) the same smelter in the event of a change of name or 
ownership.
    (13) Eligible renewable energy resource, for purposes of 40 CFR 
51.309, means electricity generated by non-nuclear and non-fossil low 
or no air emission technologies.
    (c) Implementation Plan Schedule. Each Transport Region State may 
meet the requirements of Sec.  51.308(b) through (e) by submitting an 
implementation plan that complies with the requirements of this 
section. Each Transport Region State must submit an implementation plan 
addressing regional haze visibility impairment in the 16 Class I areas 
no later than December 31, 2003. Indian Tribes may submit 
implementation plans after the December 31, 2003 deadline. A Transport 
Region State that does not submit an implementation plan that complies 
with the requirements of this section (or whose plan does not comply 
with all of the requirements of this section) is subject to the 
requirements of Sec.  51.308 in the same manner and to the same extent 
as any State not included within the Transport Region.
* * * * *
    (d) * * *
    (4) * * *
    (i) Sulfur dioxide milestones consistent with paragraph (h)(1) of 
this section.
    (ii) Monitoring and reporting of sulfur dioxide emissions. The plan 
submission must include provisions requiring the annual monitoring and 
reporting of actual stationary source sulfur dioxide emissions within 
the State. The monitoring and reporting data must be sufficient to 
determine whether a 13 percent reduction in actual emissions has 
occurred between the years 1990 and 2000, and for determining annually 
whether the milestone for each year between 2003 and 2018 is exceeded, 
consistent with paragraph (h) (2) of this section. The plan submission 
must provide for reporting of these data by the State to the 
Administrator and to the regional planning organization consistent with 
paragraph (h)(2) of this section.
    (iii) Criteria and Procedures for a Market Trading Program. The 
plan must include the criteria and procedures for activating a market 
trading program consistent with paragraphs (h)(3) and (h)(4) of this 
section. The plan must also provide for implementation plan assessments 
of the program in the years 2008, 2013, and 2018.
    (iv) Provisions for market trading program compliance reporting 
consistent with paragraph (h)(4) of this section.
* * * * *
    (f) * * *
    (1) * * *
    (i) The annex must contain quantitative emissions milestones for 
stationary source sulfur dioxide emissions for the reporting years 
2003, 2008, 2013 and 2018. The milestones must provide for steady and 
continuing emissions reductions for the 2003-2018 time period 
consistent with the Commission's definition of reasonable progress, its 
goal of 50 to 70 percent reduction in sulfur dioxide emissions from 
1990 actual emission levels by 2040, applicable requirements under the 
CAA, and the timing of implementation plan assessments of progress and 
identification of deficiencies which will be due in the years 2008, 
2013, and 2018. The milestones must be shown to provide for greater 
reasonable progress than would be achieved by application of best 
available retrofit technology (BART) pursuant to Sec.  51.308(e)(2) and 
would be approvable in lieu of BART.
    (2) * * *
    (3) The EPA will publish the annex upon receipt. If EPA finds that 
the annex meets the requirements of paragraph (f)(1) of this section 
and assures reasonable progress, then, after public notice and comment, 
EPA will amend the requirements of this section to incorporate the 
provisions of the annex. If EPA finds that the annex does not meet the 
requirements of paragraph (f)(1) of this section, or does not assure 
reasonable progress, or if EPA finds that the annex is not received, 
then each Transport Region State must submit an implementation plan for 
regional haze meeting all of the requirements of Sec.  51.308.
* * * * *
    (h) Emissions Reduction Program for Major Industrial Sources of 
Sulfur Dioxide. The first implementation plan submission must include a 
stationary source emissions reductions program for major industrial 
sources of sulfur dioxide that meets the following requirements:
    (1) Regional sulfur dioxide milestones. The plan must include the 
milestones in Table 1, and provide for the adjustments in paragraphs 
(h)(1)(i) through (iv) of this section. Table 1 follows:

[[Page 33785]]



                                  Table 1.--Sulfur Dioxide Emissions Milestones
----------------------------------------------------------------------------------------------------------------
               Column 1                        Column 2                 Column 3                 Column 4
----------------------------------------------------------------------------------------------------------------
                                       . . . if BHP San Manuel    . . . if neither BHP    . . . and the emission
                                           and Phelps Dodge      San Manuel nor Phelps    inventories for these
                                            Hidalgo resume       Dodge Hidalgo resumes     years will determine
          For the year . . .            operation, the maximum   operation, the minimum   whether emissions are
                                       regional sulfur dioxide  regional sulfur dioxide    greater than or less
                                          milestone is . . .       milestone is . . .      than the milestone:
----------------------------------------------------------------------------------------------------------------
2003.................................  720,000 tons...........  682,000 tons...........  2003.
2004.................................  720,000 tons...........  682,000 tons...........  Average of 2003 and
                                                                                          2004.
2005.................................  720,000 tons...........  682,000 tons...........  Average of 2003, 2004
                                                                                          and 2005.
2006.................................  720,000 tons...........  682,000 tons...........  Average of 2004, 2005
                                                                                          and 2006.
2007.................................  720,000 tons...........  682,000 tons...........  Average of 2005, 2006
                                                                                          and 2007.
2008.................................  718,333 tons...........  680,333 tons...........  Average of 2006, 2007
                                                                                          and 2008.
2009.................................  716,667 tons...........  678,667 tons...........  Average of 2007, 2008
                                                                                          and 2009.
2010.................................  715,000 tons...........  677,000 tons...........  Average of 2008, 2009
                                                                                          and 2010.
2011.................................  715,000 tons...........  677,000 tons...........  Average of 2009, 2010
                                                                                          and 2011.
2012.................................  715,000 tons...........  677,000 tons...........  Average of 2010, 2011
                                                                                          and 2012.
2013.................................  695,000 tons...........  659,667 tons...........  Average of 2011, 2012
                                                                                          and 2013.
2014.................................  675,000 tons...........  642,333 tons...........  Average of 2012, 2013
                                                                                          and 2014.
2015.................................  655,000 tons...........  625,000 tons...........  Average of 2013, 2014
                                                                                          and 2015.
2016.................................  655,000 tons...........  625,000 tons...........  Average of 2014, 2015
                                                                                          and 2016.
2017.................................  655,000 tons...........  625,000 tons...........  Average of 2015, 2016
                                                                                          and 2017.
2018.................................  510,000 tons...........  480,000 tons...........  Year 2018 only.
Each year after 2018.................  no more than 510,000     no more than 480,000     3-year average of the
                                        tons unless the          tons unless the          year and the two
                                        milestones are           milestones are           previous years, or any
                                        replaced with a          replaced with a          alternative provided
                                        different program that   different program that   in any future plan
                                        meets any BART and       meets any BART and       revisions under Sec.
                                        reasonable progress      reasonable progress      51.308(f).
                                        requirements             requirements
                                        established in Sec.      established in Sec.
                                        51.309.                  51.309.
----------------------------------------------------------------------------------------------------------------

    (i) Adjustment for States and Tribes Which Choose Not to 
Participate in the Program, and for Tribes that opt into the program 
after the 2003 deadline. If a State or Tribe chooses not to submit an 
implementation plan under the option provided in Sec.  51.309, or if 
EPA has not approved a State or Tribe's implementation plan by the date 
of the draft determination required by Sec.  51.309(h)(3)(ii), the 
amounts for that State or Tribe which are listed in Table 2 must be 
subtracted from the milestones that are included in the implementation 
plans for the remaining States and Tribes. For Tribes that opt into the 
program after 2003, the amounts in Table 2 or 4 will be automatically 
added to the milestones that are included in the implementation plans 
for the participating States and Tribes, beginning with the first year 
after the tribal implementation plan implementing Sec.  51.309 is 
approved by the Administrator. The amounts listed in Table 2 are for 
purposes of adjusting the milestones only, and they do not represent 
amounts that must be allocated under any future trading program. Table 
2 follows:

            Table 2.--Amounts Subtracted From the Milestones for States and Tribes Which Do Not Exercise the Option Provided by Sec.   51.309
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 State or tribe                       2003         2004         2005         2006         2007         2008         2009         2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Arizona......................................      117,372      117,372      117,372      117,372      117,372      117,941      118,511      119,080
2. California...................................       37,343       37,343       37,343       37,784       37,343       36,363       35,382       34,402
3. Colorado.....................................       98,897       98,897       98,897       98,897       98,897       98,443       97,991       97,537
4. Idaho........................................       18,016       18,016       18,016       18,016       18,016       17,482       16,948       16,414
5. Nevada.......................................       20,187       20,187       20,187       20,187       20,187       20,282       20,379       20,474
6. New Mexico...................................       84,624       84,624       84,624       84,624       84,624       84,143       83,663       83,182
7. Oregon.......................................       26,268       26,268       26,268       26,268       26,268       26,284       26,300       26,316
8. Utah.........................................       42,782       42,782       42,782       42,782       42,782       42,795       42,806       42,819
9. Wyoming......................................      155,858      155,858      155,858      155,858      155,858      155,851      155,843      155,836
10. Navajo Nation...............................       53,147       53,147       53,147       53,147       53,147       53,240       53,334       53,427
11. Shoshone-Bannock Tribe of the Fort Hall             4,994        4,994        4,994        4,994        4,994        4,994        4,994        4,994
 Reservation....................................
12. Ute Indian Tribe of the Uintahand Ouray             1,129        1,129        1,129        1,129        1,129        1,131        1,133        1,135
 Reservation....................................
13. Wind River Reservation......................        1,384        1,384        1,384        1,384        1,384        1,384        1,384        1,384


--------------------------------------------------------------------------------------------------------------------------------------------------------
                 State or tribe                       2011         2012         2013         2014         2015         2016         2017         2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Arizona......................................      119,080      119,080      116,053      113,025      109,998      109,998      109,998       82,302
2. California...................................       34,402       34,402       33,265       32,128       30,991       30,991       30,991       27,491
3. Colorado.....................................       97,537       97,537       94,456       91,375       88,294       88,294       88,294       57,675
4. Idaho........................................       16,414       16,414       15,805       15,197       14,588       14,588       14,588       13,227

[[Page 33786]]

 
5. Nevada.......................................       20,474       20,474       20,466       20,457       20,449       20,449       20,449       20,232
6. New Mexico...................................       83,182       83,182       81,682       80,182       78,682       78,682       78,682       70,000
7. Oregon.......................................       26,316       26,316       24,796       23,277       21,757       21,757       21,757        8,281
8. Utah.........................................       42,819       42,819       41,692       40,563       39,436       39,436       39,436       30,746
9. Wyoming......................................      155,836      155,836      151,232      146,629      142,025      142,025      142,025       97,758
10. Navajo Nation...............................       53,427       53,427       52,707       51,986       51,266       51,266       51,266       44,772
11. Shoshone-Bannock Tribe of the Fort Hall             4,994        4,994        4,994        4,994        4,994        4,994        4,994        4,994
 Reservation....................................
12. Ute Indian Tribe of the Uintahand Ouray             1,135        1,135        1,135        1,135        1,135        1,135        1,135        1,135
 Reservation....................................
13. Northern Arapaho and Shoshone Tribes of the         1,384        1,384        1,384        1,384        1,384        1,384        1,384        1,384
 Wind River Reservation.........................
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (ii) Adjustment for Future Operation of Copper Smelters.
    (A) The plan must provide for adjustments to the milestones in the 
event that Phelps Dodge Hidalgo and/or BHP San Manuel resume operations 
or that other smelters increase their operations.
    (B) The plan must provide for adjustments to the milestones 
according to Tables 3a and 3b except that if either the Hidalgo or San 
Manuel smelters resumes operation and is required to obtain a permit 
under 40 CFR 52.21 or 40 CFR 51.166, the adjustment to the milestone 
must be based upon the levels allowed by the permit. In no instance may 
the adjustment to the milestone be greater than 22,000 tons for the 
Phelps Dodge Hidalgo, greater than 16,000 tons for BHP San Manuel, or 
more than 30,000 tons for the combination of the Phelps Dodge Hidalgo 
and BHP San Manuel smelters for the years 2013 through 2018. Tables 3a 
and 3b follow:

Table 3a.--Adjustments to the Milestones for Future Operations of Copper
                                Smelters
------------------------------------------------------------------------
                                                          . . . then you
                                                          calculate the
                                                           milestone by
      Scenario        If this happens  and this happens    adding this
                           . . .             . . .        amount to the
                                                         value in column
                                                           3 of Table 1
------------------------------------------------------------------------
1..................  Phelps Dodge      Phelps Dodge      A. Beginning
                      Hidalgo resumes   Hidalgo resumes   with the year
                      operation, but    production        that
                      BHP San Manuel    consistent with   production
                      does not.         past operations   resumes, and
                                        and emissions.    for each year
                                                          up to the year
                                                          2012, the
                                                          milestone
                                                          increases by:
                                                         (1) 22,000 tons
                                                          PLUS
                                                         (2) Any amounts
                                                          identified in
                                                          Table 3b.
                                                         B. For the
                                                          years 2013
                                                          through 2018,
                                                          the milestone
                                                          increases by
                                                          this amount or
                                                          by 30,000
                                                          tons,
                                                          whichever is
                                                          less.
2..................  Phelps Dodge      Phelps Dodge      A. Beginning
                      Hidalgo resumes   Hidalgo resumes   with the year
                      operation, but    operation in a    that
                      BHP San Manuel    substantially     production
                      does not.         different         resumes, and
                                        manner such       for each year
                                        that emissions    up to the year
                                        will be less      2012, the
                                        than for past     milestone
                                        operations (an    increases by:
                                        example would    (1) Expected
                                        be running only   emissions for
                                        one portion of    Phelps Dodge
                                        the plant to      Hidalgo (not
                                        produce sulfur    to exceed
                                        acid only).       22,000 tons),
                                                          PLUS
                                                         (2) Any amounts
                                                          identified in
                                                          Table 3b.
                                                         B. For the
                                                          years 2013
                                                          through 2018,
                                                          the milestone
                                                          increases by
                                                          this amount or
                                                          by 30,000
                                                          tons,
                                                          whichever is
                                                          less.
3..................  BHP San Manuel    BHP San Manuel    A. 16,000 tons
                      Manuel resumes    resumes           PLUS
                      operation, but    production       B. Any amounts
                      Phelps Dodge      consistent with   identified in
                      Hidalgo does      past operations   Table 3b.
                      not.              and emissions.
4..................  BHP San Manuel    BHP San Manuel    A. Expected
                      resumes           resumes           emissions for
                      operation, but    operations in a   BHP (not to
                      Phelps Dodge      substantially     exceed 16,000
                      Hidalgo does      different         tons) PLUS
                      not.              manner such      B. Any amounts
                                        that emissions    identified in
                                        will be less      Table 3b.
                                        than for past
                                        operations (an
                                        example would
                                        be running only
                                        one portion of
                                        the plant to
                                        produce sulfur
                                        acid only).
5..................  Both Phelps       Both smelters     A. Beginning
                      Dodge Hidalgo     resume            with the year
                      and BHP San       production        that
                      Manuel resume     consistent with   production
                      operations.       past operations   resumes, and
                                        and emissions.    for each year
                                                          up to the year
                                                          2012, the
                                                          milestone
                                                          increase by
                                                          38,000 tons.
                                                         B. For the
                                                          years 2013
                                                          through 2018,
                                                          the milestone
                                                          increases by
                                                          30,000 tons.

[[Page 33787]]

 
6..................  Both Phelps       Phelps Dodge      A. For the year
                      Dodge Hidalgo     Hidalgo resumes   that
                      and BHP San       production        production
                      Manuel resume     consistent with   resumes, and
                      operations.       past operations   for each year
                                        and emissions,    up to the year
                                        but BHP San       2012, the
                                        Manuel resumes    milestone
                                        operations in a   increases by:
                                        substantially    (1) 22,000 PLUS
                                        different        (2) Expected
                                        manner such       emissions for
                                        that emissions    San Manuel
                                        will be less      (not to exceed
                                        than for past     16,000 tons).
                                        operations (an   B. For the
                                        example would     years 2013
                                        be running only   though 2018,
                                        one portion of    the milestone
                                        the plant to      increases by
                                        produce sulfur    this same
                                        acid only).       amount, or by
                                                          30,000 tons,
                                                          whichever is
                                                          less.
7..................  Both Phelps       BHP San Manuel    A. For the year
                      Dodge Hidalgo     resume            that
                      and BHP San       production        production
                      Manuel resumes    consistent with   resumes, and
                      operations.       the past          for each year
                                        operations and    up to the year
                                        emissions, but    2012,
                                        Phelps Dodge      milestone
                                        Hidalgo resumes   increases by:
                                        operations in a  (1) 16,000 PLUS
                                        substantially    (2) Expected
                                        different         Hidalgo
                                        manner such       emissions (not
                                        that emissions    to exceed
                                        will be less      22,000 tons).
                                        than for past    B. For the
                                        operations (an    years 2013
                                        example would     though 2018,
                                        be running only   the milestone
                                        one portion of    increases by
                                        the plant to      this same
                                        produce sulfur    amount, or by
                                        acid only).       30,000 tons,
                                                          whichever is
                                                          less.
8..................  Both Phelps       ................  A. Any amounts
                      Dodge Hidalgo                       identified in
                      and BHP San                         Table 3b.
                      Manuel do not
                      resume
                      operations.
------------------------------------------------------------------------


 Table 3b.--Adjustments for Certain Copper Smelters Which Operate Above
                             Baseline Levels
                                [In tons]
------------------------------------------------------------------------
                                                             . . . the
                                           complies with     milestone
                                             existing      increases by
                                            permits but   the difference
                                            has actual    between actual
  Where it applies in table 3a, if the        annual       emissions and
         following smelter . . .          emissions that   the baseline
                                            exceed the     level, or the
                                             following       following
                                          baseline level      amount,
                                               . . .       whichever is
                                                               less
------------------------------------------------------------------------
Asarco Hayden...........................          23,000           3,000
BHP San Manuel..........................          16,000           1,500
Kennecott Salt Lake.....................           1,000             100
Phelps Dodge Chino......................          16,000           3,000
Phelps Dodge Hidalgo....................          22,000           4,000
Phelps Dodge Miami......................           8,000           2,000
------------------------------------------------------------------------

    (iii) Adjustments for changes in emission monitoring or calculation 
methods. The plan must provide for adjustments to the milestones to 
reflect changes in sulfur dioxide emission monitoring or measurement 
methods for a source that is included in the program, including changes 
identified under paragraph (h)(2)(iii)(D) of this section. Any such 
adjustment based upon changes to emissions monitoring or measurement 
methods must be made in the form of an implementation plan revision 
that complies with the procedural requirements of Sec.  51.102 and 
Sec.  51.103. The implementation plan revision must be submitted to the 
Administrator no later than the first due date for a periodic report 
under paragraph (d)(10) of this section following the change in 
emission monitoring or measurement method.
    (iv) Adjustments for changes in flow rate measurement methods for 
affected sources under 40 CFR 72.1. For the years between 2003 and 
2017, the implementation plan must provide for adjustments to the 
milestones for sources using the methods contained in 40 CFR part 60, 
appendix A, Methods 2F, 2G, and 2H. For any year for which such an 
adjustment has not yet been made to the milestone, the implementation 
plan must provide for an adjustment to the emissions reporting to 
ensure consistency. The implementation plan must provide for 
adjustments to the milestones by no later than the date of the periodic 
plan revision required under Sec.  51.309(d)(10).
    (v) Adjustments due to enforcement actions arising from 
settlements. The implementation plan must provide for adjustments to 
the milestones, as specified in paragraph (h)(1)(vii) and (viii) of 
this section, if:
    (A) an agreement to settle an action, arising from allegations of a 
failure of an owner or operator of an emissions unit at a source in the 
program to comply with applicable regulations which were in effect 
during the base year, is reached between the parties to the action;
    (B) the alleged failure to comply with applicable regulations 
affects the assumptions that were used in calculating the source's base 
year and forecasted sulfur dioxide emissions; and
    (C) the settlement includes or recommends an adjustment to the 
milestones.

[[Page 33788]]

    (vi) Adjustments due to enforcement actions arising from 
administrative or judicial orders. The implementation plan must also 
provide for adjustments to the milestones as directed by any final 
administrative or judicial order, as specified in paragraph (h)(1)(vii) 
and
    (viii) of this section. Where the final administrative or judicial 
order does not include a reforecast of the source's baseline, the State 
or Tribe shall evaluate whether a reforecast of the source's baseline 
emissions is appropriate.
    (vii) Adjustments for enforcement actions. The plan must provide 
that, based on paragraph (h)(1)(v) and (vi) of this section, the 
milestone must be decreased by an appropriate amount based on a 
reforecast of the source's decreased sulfur dioxide emissions. The 
adjustments do not become effective until after the source has reduced 
its sulfur dioxide emissions as required in the settlement agreement, 
or administrative or judicial order. All adjustments based upon 
enforcement actions must be made in the form of an implementation plan 
revision that complies with the procedural requirements of Sec. Sec.  
51.102 and 51.103.
    (viii) Documentation of adjustments for enforcement actions. In the 
periodic plan revision required under 51.309(d)(10), the State or Tribe 
shall include the following documentation of any adjustment due to an 
enforcement action:
    (A) identification of each source under the State or Tribe's 
jurisdiction which has reduced sulfur dioxide emissions pursuant to a 
settlement agreement, or an administrative or judicial order;
    (B) for each source identified, a statement indicating whether the 
milestones were adjusted in response to the enforcement action;
    (C) discussion of the rationale for the State or Tribe's decision 
to adjust or not to adjust the milestones; and
    (D) if extra SO2 emissions reductions (over and above 
those reductions needed for compliance with the applicable regulations) 
were part of an agreement to settle an action, a statement indicating 
whether such reductions resulted in any adjustment to the milestones or 
allowance allocations, and a discussion of the rationale for the State 
or Tribe's decision on any such adjustment.
    (ix) Adjustment based upon program audits. The plan must provide 
for appropriate adjustments to the milestones based upon the results of 
program audits. Any such adjustment based upon audits must be made in 
the form of an implementation plan revision that complies with the 
procedural requirements of Sec. Sec.  51.102 and 51.103. The 
implementation plan revision must be submitted to the Administrator no 
later than the first due date after the audit for a periodic report 
under paragraph (d)(10) of this section.
    (x) Adjustment for individual sources opting into the program. The 
plan may provide for adjustments to the milestones for any source 
choosing to participate in the program even though the source does not 
meet the 100 tons per year criterion for inclusion. Any such 
adjustments must be made in the form of an implementation plan revision 
that complies with the procedural requirements of Sec. Sec.  51.102 and 
51.103.
    (2) Requirements for monitoring, recordkeeping and reporting of 
actual annual emissions of sulfur dioxide.
    (i) Sources included in the program. The implementation plan must 
provide for annual emission monitoring and reporting, beginning with 
calendar year 2003, for all sources with actual emissions of sulfur 
dioxide of 100 tons per year or more as of 2003, and all sources with 
actual emissions of 100 tons or more per year in any subsequent year. 
States and Tribes may include other sources in the program, if the 
implementation plan provides for the same procedures and monitoring as 
for other sources in a way that is federally enforceable.
    (ii) Documentation of emissions calculation methods. The 
implementation plan must provide documentation of the specific 
methodology used to calculate emissions for each emitting unit included 
in the program during the base year. The implementation plan must also 
provide for documentation of any change to the specific methodology 
used to calculate emissions at any emitting unit for any year after the 
base year.
    (iii) Recordkeeping. The implementation plan must provide for the 
retention of records for at least 10 years from the establishment of 
the record. If a record will be the basis for an adjustment to the 
milestone as provided for in paragraph (h)(1) of this section, that 
record must be retained for at least 10 years from the establishment of 
the record, or 5 years after the date of the implementation plan 
revision which reflects the adjustment, whichever is longer.
    (iv) Completion and submission of emissions reports. The 
implementation plan must provide for the annual collection of emissions 
data for sources included within the program, quality assurance of the 
data, public review of the data, and submission of emissions reports to 
the Administrator and to each State and Tribe which has submitted an 
implementation plan under this section. The implementation plan must 
provide for submission of the emission reports by no later than 
September 30 of each year, beginning with reports due September 30, 
2004 for emissions from calendar year 2003. For sources for which 
changes in emission quantification methods require adjustments under 
paragraph (h)(1)(iii) of this section, the emissions reports must 
reflect the method in place before the change, for each year until the 
milestone has been adjusted. If each of the States which have submitted 
an implementation plan under this section have identified a regional 
planning organization to coordinate the annual comparison of regional 
SO2 emissions against the appropriate milestone, the 
implementation plan must provide for reporting of this information to 
the regional planning body.
    (v) Exceptions reports. The emissions report submitted by each 
State and Tribe under paragraph (h)(2)(ii) of this section must provide 
for exceptions reports containing the following:
    (A) identification of any new or additional sulfur dioxide sources 
greater than 100 tons per year that were not contained in the previous 
year emissions report;
    (B) identification of sources shut down or removed from the 
previous year emissions report;
    (C) explanation for emissions variations at any covered source that 
exceed plus or minus 20 percent from the previous year's emissions 
report;
    (D) identification and explanation of changed emissions monitoring 
and reporting methods at any source. The use of any changed emission 
monitoring or reporting methods requires an adjustment to the 
milestones according to paragraph (h)(1)(iii) of this section.
    (vi) Reporting of emissions for the Mohave Generating Station for 
the years 2003 through 2006. For the years 2003, 2004, 2005, and for 
any part of the year 2006 before installation and operation of sulfur 
dioxide controls at the Mohave Generating Station, emissions from the 
Mohave Generating Station will be calculated using a sulfur dioxide 
emission factor of 0.15 pounds per million BTU.
    (vii) Special provision for the year 2013. The implementation plan 
must provide that in the emissions report for calendar year 2012, which 
is due by September 30, 2013 under paragraph (h)(2)(iv) of this 
section, each State has the option of including calendar year 2018 
emission projections for each source, in addition to the actual

[[Page 33789]]

emissions for each source for calendar year 2012.
    (3) Annual comparison of emissions to the milestone.
    (i) The implementation plan must provide for a comparison each year 
of annual SO2 emissions for the region against the 
appropriate milestone. In making this comparison, the State or Tribe 
must make the comparison, using its annual emissions report and 
emissions reports from other States and Tribes reported under paragraph 
(h)(2)(iv) of this section.
    (ii) The implementation plan must provide for the State or Tribe to 
make available to the public a draft report comparing annual emissions 
to the milestone by December 31 of each year. The first draft report, 
comparing annual emissions in 2003 to the year 2003 milestone will be 
due December 31, 2004.
    (iii) The implementation plan must provide for the State or Tribe 
to submit to the Administrator a final determination of annual 
emissions by March 31 of the following year. The final determination 
must state whether or not the annual emissions for the year exceed the 
appropriate milestone.
    (iv) A State or Tribe may delegate its responsibilities to prepare 
draft reports and reports supporting the final determinations under 
paragraphs (h)(3)(i) through (iii) of this section to a regional 
planning organization designated by each State or Tribe submitting an 
approvable plan under this section.
    (v) Special considerations for year 2012 report. If each State or 
Tribe submitting an approvable plan under this section has included 
calendar year 2018 emission projections under paragraph (h)(2)(vii) of 
this section, then the report for the year 2012 milestone which is due 
by December 31, 2013 under paragraph (h)(3)(ii) of this section may 
also include a comparison of the regional year 2018 emissions 
projection with the milestone for calendar year 2018. If the report 
indicates that the year 2018 milestone will be exceeded, then the State 
or Tribe may choose to implement the market trading program beginning 
in the year 2018, if each State or Tribe submitting an approvable plan 
under this section agrees.
    (vi) Independent review. The implementation plan must provide for 
reviews of the annual emissions reporting program by an independent 
third party. This independent review is not required if a determination 
has been made under paragraph (h)(3)(iii) of this section to implement 
the market trading program. The independent review shall be completed 
by the end of 2006, and every 5 years thereafter, and shall include an 
analysis of:
    (A) the uncertainty of the reported emissions data;
    (B) whether the uncertainty of the reported emissions data is 
likely to have an adverse impact on the annual determination of 
emissions relative to the milestone; and,
    (C) whether there are any necessary improvements for the annual 
administrative process for collecting the emissions data, reporting the 
data, and obtaining public review of the data.
    (4) Market trading program. The implementation plan must provide 
for implementation of a market trading program if the determination 
required by paragraph (h)(3)(iii) of this section indicates that a 
milestone has been exceeded. The implementation plan must provide for 
the option of implementation of a market trading program if a report 
under paragraph (h)(3)(v) of this section indicates that projected 
emissions for the year 2018 will exceed the year 2018 milestone. The 
implementation plan must provide for a market trading program whose 
provisions are substantively the same for each State or Tribe 
submitting an approvable plan under this section. The implementation 
plan must include the following market trading program provisions:
    (i) Allowances. For each source in the program, the implementation 
plan must either identify the specific allocation of allowances, on a 
tons per year basis, for each calendar year from 2009 to 2018 or the 
formula or methodology that will be used to calculate the allowances if 
the program is triggered. The implementation plan must provide that 
eligible renewable energy resources that begin operation after October 
1, 2000 will receive 2.5 tons of SO2 allowances per megawatt 
of installed nameplate capacity per year. Allowance allocations for 
renewable energy resources that begin operation prior to the program 
trigger will be retroactive to the time of initial operation. The 
implementation plan may provide for an upper limit on the number of 
allowances provided for eligible renewable energy resources. The total 
of the tons per year allowances across all participating States and 
Tribes, including the renewable energy allowances, may not exceed the 
amounts in Table 4 of this paragraph, less a 20,000 ton amount that 
must be set aside for use by Tribes. The implementation plan may 
include procedures for redistributing the allowances in future years, 
if as the amounts in Table 4 of this paragraph, less a 20,000 ton 
amount, are not exceeded. The implementation plan must provide that any 
adjustment for a calendar year applied to the milestones under 
paragraphs (h)(1)(i) through (vii) of this section must also be applied 
to the amounts in Table 4. Table 4 follows:

              Table 4.--Total Amount of Allowances by Year
------------------------------------------------------------------------
                                            If the two      If the two
                                             smelters       smelters do
                                              resume        not resume
                                            operations,     operations,
                                             the total       the total
                                             number of       number of
             For this year:                 allowances      allowances
                                             issued by       issued by
                                            States and      States and
                                          Tribes may not  Tribes may not
                                            exceed this     exceed this
                                              amount:         amount:
------------------------------------------------------------------------
2009....................................         715,000         677,000
2010....................................         715,000         677,000
2011....................................         715,000         677,000
2012....................................         715,000         677,000
2013....................................         655,000         625,000
2014....................................         655,000         625,000
2015....................................         655,000         625,000
2016....................................         655,000         625,000
2017....................................         655,000         625,000

[[Page 33790]]

 
2018....................................         510,000         480,000
------------------------------------------------------------------------

    (ii) Compliance with allowances. The implementation plan must 
provide that, beginning with the compliance period 6 years following 
the calendar year for which emissions exceeded the milestone and for 
each compliance period thereafter, the owner or operator of each source 
in the program must hold allowances for each ton of sulfur dioxide 
emitted by the source.
    (iii) Emissions quantification protocols. The implementation plan 
must include specific emissions quantification protocols for each 
source category included within the program, including the 
identification of sources subject to part 75 of this chapter. For 
sources subject to part 75 of this chapter, the implementation plan may 
rely on the emissions quantification protocol in part 75. For source 
categories with sources in more than one State or tribal area 
submitting an implementation plan under this section, each State or 
Tribe should use the same protocol to quantify emissions for sources in 
the source category. The protocols must provide for reliability 
(repeated application obtains results equivalent to EPA-approved test 
methods), and replicability (different users obtain the same or 
equivalent results that are independently verifiable). The protocols 
must include procedures for addressing missing data, which provide for 
conservative calculations of emissions and provide sufficient 
incentives for sources to comply with the monitoring provisions. If the 
protocols are not the same for sources within a given source category, 
and where the protocols are not based upon part 75 or equivalent 
methods, the State or Tribes must provide a demonstration that each 
such protocol meets all of the criteria of this paragraph.
    (iv) Monitoring and Recordkeeping. The implementation plan must 
include monitoring provisions which are consistent with the emissions 
quantification protocol. Monitoring required by these provisions must 
be timely and of sufficient frequency to ensure the enforceability of 
the program. The implementation plan must also include requirements 
that the owner or operator of each source in the program keep records 
consistent with the emissions quantification protocols, and keep all 
records used to determine compliance for at least 5 years. For source 
owners or operators which use banked allowances, all records relating 
to the banked allowance must be kept for at least 5 years after the 
banked allowances are used.
    (v) Tracking system. The implementation plan must provide for 
submitting data to a centralized system for the tracking of allowances 
and emissions. The implementation plan must provide that all necessary 
information regarding emissions, allowances, and transactions is 
publicly available in a secure, centralized data base. In the system, 
each allowance must be uniquely identified. The system must allow for 
frequent updates and include enforceable procedures for recording data.
    (vi) Authorized account representative. The implementation plan 
must include provisions requiring the owner or operator of each source 
in the program to identify an authorized account representative. The 
implementation plan must provide that all matters pertaining to the 
account, including, but not limited to, the deduction and transfer of 
allowances in the account, and certifications of the completeness and 
accuracy of emissions and allowances transactions required in the 
annual report under paragraph (h)(4)(vii) of this section shall be 
undertaken only by the authorized account representative.
    (vii) Annual report. The implementation plan must include 
provisions requiring the authorized account representative for each 
source in the program to demonstrate and report within a specified time 
period following the end of each calendar year that the source holds 
allowances for each ton per year of SO2 emitted in that 
year. The implementation plan must require the authorized account 
representative to submit the report within 60 days after the end of 
each calendar year, unless an alternative deadline is specified 
consistent with emission monitoring and reporting procedures.
    (viii) Allowance transfers. The implementation plan must include 
provisions detailing the process for transferring allowances between 
parties.
    (ix) Emissions banking. The implementation plan may provide for the 
banking of unused allowances. Any such provisions must state whether 
unused allowances may be kept for use in future years and describe any 
restrictions on the use of any such allowances. Allowances kept for use 
in future years may be used in calendar year 2018 only if the 
implementation plan ensures that such allowances would not interfere 
with the achievement of the year 2018 amount in Table 4 in paragraph 
(c)(4)(i) of this section.
    (x) Penalties. The implementation plan must:
    (A) provide that if emissions from a source in the program exceed 
the allowances held by the source, the source's allowances will be 
reduced by an amount equal to two times the source's tons of excess 
emissions,
    (B) provide for appropriate financial penalties for excess 
emissions, either $5000 per ton (year 2000 dollars) or an alternative 
amount that is the same for each participating State and Tribe and that 
substantially exceeds the expected cost of allowances,
    (C) ensure that failure to comply with any program requirements 
(including monitoring, recordkeeping, and reporting requirements) are 
violations which are subject to civil and criminal remedies provided 
under applicable State or tribal law and the Clean Air Act, that each 
day of the control period is a separate violation, and that each ton of 
excess emissions is a separate violation. Any allowance reduction or

[[Page 33791]]

penalty assessment required under paragraphs (h)(4)(x)(A) and (B) of 
this section shall not affect the liability of the source for remedies 
under this paragraph.
    (xi) Provisions for periodic evaluation of the trading program. The 
implementation plan must provide for an evaluation of the trading 
program no later than 3 years following the first full year of the 
trading program, and at least every 5 years thereafter. Any changes 
warranted by the evaluation should be incorporated into the next 
periodic implementation plan revision required under paragraph (d)(10) 
of this section. The evaluation must be conducted by an independent 
third party and must include an analysis of:
    (A) Whether the total actual emissions could exceed the values in 
Sec.  51.309(h)(4)(i), even though sources comply with their 
allowances;
    (B) Whether the program achieved the overall emission milestone it 
was intended to reach;
    (C) The effectiveness of the compliance, enforcement and penalty 
provisions;
    (D) A discussion of whether States and Tribes have enough resources 
to implement the trading program;
    (E) Whether the trading program resulted in any unexpected 
beneficial effects, or any unintended detrimental effects;
    (F) Whether the actions taken to reduce sulfur dioxide have led to 
any unintended increases in other pollutants;
    (G) Whether there are any changes needed in emissions monitoring 
and reporting protocols, or in the administrative procedures for 
program administration and tracking; and
    (H) The effectiveness of the provisions for interstate trading, and 
whether there are any procedural changes needed to make the interstate 
nature of the program more effective.
    (5) Other provisions.
    (i) Permitting of affected sources. The implementation plan must 
provide that for sources subject to part 70 or part 71 of this chapter, 
the implementation plan requirements for emissions reporting and for 
the trading program under paragraph (h) of this section must be 
incorporated into the part 70 or part 71 permit. For sources not 
subject to part 70 or part 71 of this chapter, the requirements must be 
incorporated into a permit that is enforceable as a practical matter by 
the Administrator, and by citizens to the extent permitted under the 
Clean Air Act.
    (ii) Integration with other programs. The implementation plan must 
provide that in addition to the requirements of paragraph (h) of this 
section, any applicable restrictions of Federal, State, and tribal law 
remain in place. No provision of paragraph (h) of this section should 
be interpreted as exempting any source from compliance with any other 
provision of Federal, State, tribal or local law, including an approved 
implementation plan, a Federally enforceable permit, or any other 
Federal regulations.

[FR Doc. 03-13255 Filed 6-4-03; 8:45 am]
BILLING CODE 6560-50-P