[Federal Register Volume 68, Number 130 (Tuesday, July 8, 2003)]
[Rules and Regulations]
[Pages 40520-40528]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17100]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[VA127-5064; FRL-7523-2]


Approval and Promulgation of Air Quality Implementation Plans; 
Virginia Nitrogen Oxides Budget Trading Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is approving a State Implementation Plan (SIP) revision 
submitted by the Commonwealth of Virginia which consists of its 
nitrogen oxides (NOX) allowance trading program for large 
electric generating and industrial units, with the exception of the 
programs's NOX allowance banking provisions, which EPA is 
conditionally approving. The effect of this action is to approve the 
Virginia NOX Budget Trading Program, with conditions on the 
approval of its allowance banking provisions, because the program 
substantively addresses the requirements of Phase I of the 
NOX SIP Call which will significantly reduce ozone transport 
in the eastern United States.

EFFECTIVE DATE: This final rule is effective on August 7, 2003.

[[Page 40521]]


ADDRESSES: Copies of the documents relevant to this action are 
available for public inspection during normal business hours at the Air 
Protection Division, U.S. Environmental Protection Agency, Region III, 
1650 Arch Street, Philadelphia, Pennsylvania 19103; the Air and 
Radiation Docket and Information Center, U.S. Environmental Protection 
Agency, 1301 Constitution Avenue, NW., Room B108, Washington, DC 20460; 
and the Virginia Department of Environmental Quality, 629 East Main 
Street, Richmond, Virginia 23219.

FOR FURTHER INFORMATION CONTACT: Marilyn Powers, (215) 814-2308, or by 
e-mail at [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    On November 12, 2002 (67 FR 68542), EPA published a notice of 
proposed rulemaking (NPR) for the Commonwealth of Virginia. The NPR 
proposed approval of Virginia's NOX Budget Trading Program, 
with the exception of its NOX allowance banking provisions, 
for which EPA proposed conditional approval. The formal SIP revision 
was submitted by the Virginia Department of Environmental Quality 
(VADEQ) on June 25, 2002 to address the requirements of the 
NOX SIP Call Phase I. Virginia's SIP revision to address the 
NOX SIP Call Phase I consists of the addition of 9 VAC 
Chapter 140, part I--NOX Budget Trading Program. Detailed 
descriptions of this SIP revision, the general NOX SIP Call 
requirements, and EPA's rationale for approving Virginia's 
NOX Budget Trading Program while conditionally approving the 
program's allowance banking provisions were provided in the November 
12, 2002 NPR and will not be restated here. The terms of the 
conditional approval require that Virginia revise its banking provision 
to amend the flow control trigger date from 2006 to 2005, and submit 
the amendment as a SIP revision within one year from the effective date 
of today's final rulemaking action.
    On May 13, 2003, the VADEQ submitted a letter to EPA committing to 
adopt the necessary regulatory amendment to 9 VAC 5 Chapter 140 to 
change the flow control date from 2006 to 2005. In the May 13, 2003 
letter, the VADEQ also commits to submit this regulatory amendment as a 
SIP revision as expeditiously as possible but no later than one year 
from the effective date of EPA's final conditional approval of its 
NOX Budget Trading Program's allowance banking provisions. 
The May 13, 2003 letter from the Commonwealth has been included in the 
administrative record (docket) of this final rulemaking.
    Six comment letters were received; all comments pertained to EPA's 
proposed conditional approval of Virginia's NOX allowance 
banking provisions. The comments opposed EPA's requirement that full 
approval of these provisions is conditioned upon Virginia revising the 
flow control trigger date from 2006 to 2005. A summary of the comments 
and EPA's responses is provided in Section II below.

II. Public Comments and EPA Responses

    Comment: All commenters disagreed with EPA's proposed approval of 
Virginia's NOX SIP Rule conditioned on adoption of a 2005 
flow control date. The commenters expressed support for the 2006 flow 
control date currently in Virginia's rule.
    EPA's Response: The NOX SIP Call includes a limitation 
(referred to as ``flow control'') on the use of banked allowances for 
compliance with the requirement to hold allowances covering emissions. 
EPA rejects the commenters' claims and maintains that approval of 
Virginia's NOX SIP Call rule should be conditioned on 
establishing 2005 as the earliest ozone season (referred to as the 
``flow control date'') for which the limitation on use of banked 
allowances may be triggered.
    First, allowing 2006 to be the flow control date in Virginia could 
result in an unfair advantage for units in the Commonwealth over units 
in other states with an earlier flow control date. EPA has approved 
NOX Budget Trading Program rules under the NOX 
SIP Call for 15 other states and the District of Columbia. None of the 
approved rules provide for a flow control date later than 2005.\1\ The 
flow control limitation on use of banked allowances is triggered for an 
upcoming ozone season if the total amount of banked allowances held in 
allowance accounts as of the allowance transfer deadline (November 30 
or, if it is not a business day, the next business day) for the prior 
ozone season exceeds 10 percent of the total trading budgets for all 
state programs for the upcoming ozone season. For the 2005 ozone 
season, banked allowances held for Virginia's units or by Virginia 
companies as of November 30, 2004 could be a contributing factor for 
triggering flow control in 2005 for all states with trading programs 
that are in effect. If Virginia units were to be a factor in triggering 
flow control in 2005, but would not be subject to the flow control 
limitation on use of banked allowances in 2005, those Virginia units 
would have an unfair advantage over units in the other states with a 
flow control date earlier than 2006.\2\
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    \1\ In approving trading program rules for Connecticut, 
Delaware, the District of Columbia, Maryland, Massachusetts, New 
Jersey, New York, and Rhode Island, EPA approved flow control dates 
of 2004. The NOX SIP Call established May 1, 2003 as the 
commencement date for the NOX Budget Trading Program and 
required the flow control provisions to apply starting in the second 
year (2004) of the program. 40 CFR 51.121(b)(1)(ii) and 
(b)(2)(ii)(E). EPA's approval of the 2004 flow control date was 
based on the NOX SIP Call. (EPA notes that it erroneously 
approved 2005 as the flow control date for Pennsylvania, whose 
program also begins in 2003.) Subsequently, the United States Court 
of Appeals for the District of Columbia Circuit established May 31, 
2004 as the commencement date for the NOX Budget Trading 
Program, and so 2005 became the second year of the program, and the 
mandated flow control date, for state trading programs starting in 
2004. While Sec.  51.121 and Part 96 were not revised, EPA has 
implemented the new flow control date through the notice and comment 
rulemakings for approval of the SIPs. EPA approved 2005 as the flow 
control date for states (i.e., Alabama, Illinois, Indiana, Kentucky, 
North Carolina, South Carolina, and West Virginia) whose programs 
begin in 2004. EPA also has outstanding a proposed approval of a 
2005 flow control date for Tennessee and a proposed approval for 
Ohio with the understanding that a 2005 flow control date will be 
adopted.
    \2\ Although EPA approved several state trading programs with a 
2004 flow control date (see n.1), those states will not be 
disadvantaged by the fact that the other states have a 2005 flow 
control date. This is because 2005 is the earliest year that flow 
control is likely to be triggered for states with a 2004 flow 
control date. For 2004, the calculation for triggering flow control 
is the total number of banked allowances in accounts as of December 
1, 2003 (i.e., only the unused allowances allocated for 2003 plus 
the compliance supplement pool allowances for those states with 
trading programs beginning in 2003) divided by the total trading 
budgets for the states with programs in effect in 2004 (i.e., 
virtually all states in the NOX SIP Call region). 
Because, for this calculation for 2004, the number of states 
reflected in the numerator is so much smaller than the number of 
states reflected in the denominator, 2005 is effectively the flow 
control date for all states whose programs begin in 2003.
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    Further, should a 2006 flow control date be approved for Virginia, 
this would allow some companies to circumvent the earlier flow control 
dates established by other states. A company with affected units in 
both Virginia and a state with an earlier flow control date would be 
particularly advantaged in this regard. Such a company could circumvent 
the earlier flow control date by exchanging banked allowances held for 
its units in the state with the earlier flow control date for 2005 
allowances held for its units in Virginia. All of these banked 
allowances could be used in Virginia in 2005 without application of 
flow control. However, a company with only units in states with earlier 
flow control dates could also circumvent, to some extent, the flow 
control provisions of those states. To the extent that the latter 
company could purchase 2005

[[Page 40522]]

allowances and sell banked allowances, it could also avoid the 
application of the flow control limitation in 2005. In short, allowing 
a 2006 flow control date for Virginia would allow erosion of the 
effectiveness of flow control for states with a flow control date 
before 2006 and would provide for an unfair advantage to some 
companies.\3\
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    \3\ Companies in states with a 2004 flow control date are not 
similarly disadvantaged by the 2005 flow control date for the 
remaining states. See n. 2.
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    Comment: A number of commenters asserted that the 2006 flow control 
date adopted by Virginia is supported by the rationale in the preamble 
of the January 18, 2000 Section 126 rule (Part 97), the accompanying 
December 1999 response-to-comments document, and the preamble of the 
April 30, 2002 revision of Part 97 for extension of the flow control 
date. Commenters also stated that the possibility of different dates 
under different programs would not affect the trading program and that 
Part 96 should not be relied on for determination of approvability of 
the flow control date.
    EPA's Response: EPA first notes that, at the time Part 97 was 
promulgated, the potential existed that a number of states would be 
subject to the trading program under Section 126 as well as that a 
number of states would be subject to the trading program under the 
NOX SIP Call. This was due to uncertainty as to whether all 
states would be able to establish SIP approved programs under the 
NOX SIP Call. While the NOX SIP Call established 
statewide NOX emissions budgets, it allowed states the 
flexibility to adopt whatever NOX control measures were 
shown to meet their respective budgets (including the option of 
participating in the NOX Budget Trading Program based on the 
model rule in Part 96). The states in the NOX SIP Call 
region chose to adopt, or are in the process of adopting, trading 
programs based on Part 96. As long as a state fully meets its 
obligations under the NOX SIP Call, EPA does not intend to 
apply the Section 126 rule to units in that state. The existing rule 
provision withdrawing the Section 126 findings for any state is keyed 
to the NOX SIP Call compliance date of 2003. EPA has already 
withdrawn the Section 126 findings for Connecticut, Maryland, New 
Jersey, and New York on that basis. EPA has proposed to revise the 
Section 126 rule to withdraw the Section 126 findings for states with a 
May 31, 2004 compliance date. 65 FR 16644 (Apr. 2, 2003). In short, 
Part 97 (including the later flow control date of 2006) will likely no 
longer apply to any states in the NOX SIP Call region.\4\ 
Only the NOX SIP Call and Part 96 will likely be applicable.
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    \4\ EPA has proposed, but not finalized, revisions to the 
NOX SIP Call concerning its application to Georgia and 
Missouri. All other states in the NOX SIP Call region 
either have approved programs or are in the process of developing 
programs meeting NOX SIP Call requirements. It seems 
likely that all states that are subject to the NOX SIP 
Call will meet its requirements. In any event, Part 97 does not 
apply to Georgia and Missouri.
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    Moreover, in light of this change in circumstances and upon 
reconsideration of the discussion in the January 18, 2000 and April 30, 
2002 preambles for Part 97 (and echoed in the December 1999 response-
to-comments document) concerning the flow control date, EPA concludes 
that such discussion is not complete and is no longer applicable. In 
the January 18, 2000 Part 97 preamble, EPA stated that it was extending 
the flow control date to 2005 in response to some sources' concern 
``regarding the feasibility of installing the NOX control 
equipment required . . . without any risk to electricity reliability'' 
and their resulting concern that ``there would not be enough allowances 
for compliance in the initial years of the Federal NOX 
Budget Trading Program'' under Part 97. See 65 FR 2674, 2717 (Jan. 18, 
2000). That preamble explained that those concerns had been 
``heightened'' by the triggering of an analogous flow control 
requirement in the second year of the Ozone Transport Commission (OTC) 
NOX trading program, the predecessor program in the Ozone 
Transport Region. Id.
    However, the basis for any potential need for allowances to 
supplement the trading budget in the initial years of the 
NOX SIP Call and Section 126 trading programs is that some 
units might experience difficulties in installing NOX 
emission controls (e.g., selective catalytic reduction (SCR) before the 
commencement of the programs and might need to use additional 
allowances to cover their emissions in the initial years of the 
programs until the installations are completed. [See 63 FR 57356, 
57428-32 (Oct. 27, 1998) explaining that EPA addressed these concerns 
in establishing the compliance deadline, banking as limited by flow 
control, and the compliance supplement pool of 200,000 additional 
allowances]. The triggering of flow control in the second year (2000) 
of the OTC program provides no basis for ``heightened'' concern that 
units under the Section 126 program or the NOX SIP Call 
program might have difficulties in installing NOX controls 
and thus in meeting the compliance deadline. The OTC flow control was 
triggered in 2000 because of the presence of extra allowances (in 
addition to the amount allocated for 1999) awarded in 1999 for early 
reductions and because OTC units were able to install sufficient 
NOX controls to meet the OTC program's 1999 compliance 
deadline. This is demonstrated by the fact that without the 24,635 
early reduction allowances, the bank would not have exceeded 10% of the 
total trading budget and so would not have triggered flow control; \5\ 
and the fact that, in 1999, total emissions for units participating in 
the OTC program were less than the total number of regular allowances 
allocated by states participating in that program.\6\ Thus, contrary to 
the January 18, 2000 Part 97 preamble, the triggering of flow control 
in 2000 in the OTC program does not provide a logical basis for 
concluding that there will be a greater level of control-installation 
difficulties than already addressed in the NOX SIP Call 
(which has a 2005 flow control date) and that the flow control date 
should therefore be extended to 2006.\7\
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    \5\ The allowance bank as of November 30, 1999 equaled 43,585 
allowances. If the 24,635 early reduction allowances had not been 
provided, the bank would have been 18,950 allowances, which would 
have been less than the flow control trigger level of 10% of the 
2000 trading budget (i.e., 10% of 195,401 allowances or 19,540 
allowances). See 1999 and 2000 OTC NOX Budget Program 
Compliance Reports (March 27, 2000 and May 9, 2001).
    \6\ Total emissions in 1999 for participating units in the OTC 
program were 174,843 tons, as compared to a total trading budget in 
1999 of 194,103 allowances for participating states. Id.
    \7\ The January 18, 2000 Part 97 preamble also stated that the 
2006 flow control date ``gives sources greater assurance that they 
will be able to use compliance supplement pool allowances for 
compliance and before such allowances expire.'' 65 FR 2717. As 
discussed in a subsequent comment, it is unlikely that compliance 
supplement pool allowances will expire before being used for 
compliance. Units in states with a 2005 flow control date can use 
all such allowances in 2004, before flow control applies.
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    Further, there is an additional factor that was not considered in 
the January 18, 2000 and April 30, 2002 Part 97 preambles and that 
affects the applicability of the preamble rationale for the flow-
control-date extension to the NOX SIP Call. The likelihood 
of there being insufficient allowances in the initial years of the 
NOX SIP Call trading program has been reduced because, in 
addition to the compliance supplement pool (which was considered in the 
January 18, 2000 Part 97 preamble and represents about 1/3 of the 
trading budget), the availability of allowances in those years has been 
effectively augmented by U.S. Court of Appeal's extension of the 
commencement of the program from May 1, 2003 to May 31, 2004. See 
Michigan v. EPA, 213 F.3d

[[Page 40523]]

663 (D.C. Cir. 2000), cert. den., 121 S. Ct. 1225 (2001) (August 30, 
2000 order amending June 22, 2000 order lifting stay of state's SIP 
submission deadline). Under the Court's decision, the first year for 
state trading programs commencing in 2004 includes only 4 months (May 
31-September 30, 2004). Despite this, EPA retained the full ozone 
season trading budget for 2004 reflecting 5 months of emissions, an 
effective increase of about 20%.
    Finally, one utility claimed that the 2005 flow control date will 
``seriously impair the construction schedules to which * * * sources 
have already committed'' and ``could compromise their ability to 
achieve compliance during 2005.'' The commenter alleged that 
``[u]tilities * * * have been planning outages and related construction 
activities based on the submittals by the state * * *'' However, the 
commenter failed to provide any support for these speculative claims, 
for example, by discussing any specific unit's NOX control 
construction schedule, showing that such schedule requires reliance by 
the owner or operator on the use of banked allowances for compliance 
for 2005, and showing that such schedule and such reliance were based 
on there being a 2006 flow control date.
    Moreover, it is difficult to see how companies could have 
reasonably relied on a 2006 flow control date in scheduling 
installation of controls. First, since 1998, the NOX SIP 
Call has called for a 2004 (or 2005, after the Court-mandated 
compliance date delay) flow control date and every state has been 
developing, through a public notice and comment procedure, 
NOX SIP Call rules aimed at avoiding application of the 
Section 126 rule with a later flow control date. Second, the January 
18, 2000 Part 97 preamble reiterated that the NOX SIP Call 
continued to have a 2005 flow control date. See 65 FR 2718. Third, 
except for Virginia and Ohio, no state's NOX SIP Call rule 
used a 2006 flow control date, and the Virginia and Ohio NOX 
SIP Call rules with a 2006 flow control date were not promulgated until 
mid-2002. In short, commenters fail to show that the rationale for 
extending the flow control date stated in the January 18, 2000 Part 97 
preamble is applicable here or that utilities reasonably relied on such 
an extension in the NOX SIP Call in setting compliance 
schedules.
    Commenters also noted that, in the January 18, 2000 Part 97 
preamble, EPA stated that a ``one-year difference'' in flow control 
dates for sources subject to the NOX SIP Call and Section 
126 trading programs ``will not interfere with the trading of 
NOX allowances'' and that there is ``no need to restrict 
trading between'' sources in the two programs. 65 FR 2718; see also 67 
FR 21522, 21526 (April 30, 2002). However, neither the January 18, 2000 
nor the April 30, 2002 Part 97 preamble considered the problems 
discussed above that can result from some States having a later flow 
control date than other States. See response to comment concerning the 
potential for unfair advantage for some companies and the potential for 
erosion of the earlier flow control date provisions. The Part 97 
preambles also did not address the issue of consistency with the 
general objective under the Clean Air Act of expeditious as practicable 
achievement of attainment. See response to comment concerning 
availability of 2006 date for any of the NOX SIP Call 
states.
    Comment: A number of commenters stated that revision of the 
Virginia rule to require a 2005 flow control date could have the effect 
of ``deeply discounting'' the compliance supplement pool should flow 
control be triggered in 2005.
    EPA's Response: The compliance supplement pool may be used in the 
first two years of a state NOX SIP Call trading program, and 
the compliance supplement pool allowances are treated as banked 
allowances for purposes of triggering and applying flow control. 40 CFR 
51.121(b)(2)(iii)(D) and (E). While compliance supplement pool 
allowances in states with trading programs beginning in 2003 or 2004 
may be subject to flow control in 2005, a unit has the flexibility to 
use those allowances for compliance before 2005 in lieu of regular 
allowances and thereby to avoid application of flow control to the 
compliance supplement pool allowances. EPA recognizes, of course, that 
such a strategy may result in regular allowances (i.e., those allocated 
for 2003, in states with programs beginning in 2003, and for 2004) 
being banked and subject to flow control. However, whether compliance 
supplement pool or regular allowances are subject to flow control, that 
result was intended under the NOX SIP Call.
    In the NOX SIP Call, EPA noted that banking of 
allowances may ``inhibit or prohibit achievement of the desired 
emissions budget in a given [ozone] season'' since the use of banked 
allowances for compliance for a specific ozone season may result in 
total emissions for affected units exceeding the trading budget for 
that ozone season. See 63 FR 25902, 25935 (May 11, 1998). The trading 
budget reflects the emission reductions mandated, and found to be 
highly cost effective, under the NOX SIP Call in order to 
prevent significant contribution to nonattainment in downwind states. 
Flow control addresses the potential problem caused by banking by 
continuing to allow banking but discouraging the ``excessive use'' of 
banked allowances for compliance. Id.; see also 63 FR 57473. Excessive 
use of banked allowances is discouraged by requiring that banked 
allowances above a certain amount be used on a 2-allowances-for-1-ton-
of-emissions basis. All other allowances are used for compliance on a 
1-for-1 basis. Because of this difference in use for compliance, 
commenters apparently are claiming that application of flow control 
``discounts'' the allowances subject to flow control.
    However, the NOX SIP Call not only required SIPs to 
include the flow control provisions, but also required that these 
provisions apply starting in the second year of the program, which was 
2004 in the NOX SIP Call and which became 2005 for many 
states after the Court's order delaying the commencement of the trading 
program. In short, the ``deep discount'' claimed by the commenters 
results from the intentional curbing under the NOX SIP Call 
of excessive use of banked allowances and so that claim is not a basis 
for allowing a 2006 flow control date.\8\
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    \8\ Some commenters made a related claim that a 2005 flow 
control date will discourage early reductions as compared to a 2006 
flow control date. However, in establishing flow control in the 
NOX SIP Call, EPA balanced the considerations for and 
against flow control, including the impact on early reductions, and 
determined a 2005 flow control date should be established. As 
discussed above, EPA maintains that the determination (and the 
underlying balancing of these considerations and the underlying 
rationale) in the Section 126 rule to set a later flow control date 
are not applicable here. Further, even with the possibility of 
triggering flow control in 2005, there is still an incentive to make 
early reductions and obtain compliance supplement pool allowances 
since, under flow control, the use of banked allowances for 
compliance is not barred but rather is on a 2-for-1 basis.
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    Comment: A number of commenters believe that the 2006 date should 
be available to any of the NOX SIP Call states.
    EPA's Response: EPA disagrees. First, allowing all states to use 
2006 as the flow control date would be contrary to the NOX 
SIP Call, which, as discussed above, requires the flow control 
provisions to apply starting in the second year of the program.
    Second, the Clean Air Act rests on an ``overarching'' principle 
that the national ambient air quality standards (NAAQS) be achieved as 
expeditiously as possible. See 63 FR 57449. For example, under section 
181 of the Clean Air Act, the ``primary standard

[[Page 40524]]

attainment date for ozone shall be as expeditiously as practicable but 
not later than [certain statutorily prescribed attainment dates].'' 42 
U.S.C. 7511; see also 42 U.S.C. 7502(a)(2)(A). As discussed above, the 
state trading budgets under the NOX SIP Call reflect the 
emission reductions mandated under the NOX SIP Call in order 
to prevent significant contribution to nonattainment in downwind 
states. Flow control reduces the likelihood of total emissions in any 
given ozone season in the NOX SIP Call region exceeding the 
total of the state trading budgets by more than 10% and in that way 
promotes achievement of attainment as expeditiously as practicable. The 
later the flow control date, the greater the number of ozone seasons 
that lack this provision preventing, or at least minimizing, excessive 
use of banked allowances and total emissions in excess of the state 
budgets. Moreover, emission reductions in 2005 and 2006 may both help 
some nonattainment areas achieve attainment and help some areas achieve 
reasonable further progress toward attainment. See 63 FR 57449-50.\9\ 
The NOX SIP Call balanced various factors, including the 
potential benefits of banking and the potential problems from excessive 
banking, and determined that flow control protection should begin in 
the second year of the trading program. See 63 FR 25934-44; and 40 CFR 
51.121(b)(2)(iii)(D) and (E).\10\ Allowing a later flow control date 
would run contrary to the overarching objective of expeditious as 
practicable attainment.\11\
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    \9\ EPA notes that the NOX SIP Call covers a larger 
number of states, and its emission limitations are aimed at 
preventing significant contribution to a larger number of states 
with nonattainment areas, than the Section 126 rule.
    \10\ In the January 18, 2000 Part 97 preamble, EPA stated that 
adoption of the third year of the program as the flow control date 
``strikes an appropriate balance'' between concerns over the 
feasibility of installing controls by May 1, 2003 and the 
environmental goal of the program. 65 FR 2717. This is echoed in the 
December 1999 response-to-comments document (at 71), which stated 
that a 2006 flow control date will not ``jeopardize the 
environmental goal'' of this program. As discussed above, EPA 
maintains that the determination (and the underlying balancing of 
these considerations and the underlying rationale) in the Section 
126 rule to set a later flow control date are not applicable here. 
See, e.g., n.8.
    \11\ Commenters' claim that, since EPA does not expect flow 
control to be triggered in 2005, the potential effect of a 2006 flow 
control date on expeditious attainment should be ignored. This claim 
is without merit. Despite EPA's expectations, there is the potential 
for flow control to be triggered in 2005. In fact, commenters stated 
that they believe that such triggering in 2005 is ``relatively 
likely'; indeed, if they did not believe it might occur, they would 
not be objecting to a 2005 flow control date.
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    Comment: A number of commenters suggested that if EPA continues to 
apply the NOX SIP Call to Georgia and Missouri, and sets 
dates for the commencement of their emission control requirements (such 
as a trading program based on Part 96), those states will have flow 
control dates later than 2005 and that this supports allowing Virginia 
to have a flow control date later than 2005.
    EPA's Response: EPA rejects this claim as entirely speculative. In 
addressing whether and, if so, how to apply the NOX SIP Call 
to Georgia and Missouri, EPA will address how to handle the flow 
control requirements and will take into account the problems discussed 
above that would result from some states having later flow control 
dates than other states.

III. Final Action

    EPA is approving the Commonwealth of Virginia's Regulation for 
Emissions Trading, 9 VAC Chapter 140, part I--NOX Budget 
Trading Program submitted as a SIP revision on June 25, 2002, with the 
following exception: the provisions of Virginia's NOX 
allowance banking regulation set forth in 9 VAC 5-140-550 are 
conditionally approved. Except as noted, EPA is approving Virginia's 
NOX Budget Trading Program because it substantively 
satisfies the requirements of the NOX SIP Call Phase I. For 
Virginia's NOX allowance banking provisions to become fully 
approvable, Virginia must correct the deficiency identified in this 
action and submit the change as a SIP revision within one year from the 
effective date of today's action. Because the VADEQ has begun the 
regulatory process to change the flow control trigger date from 2006 to 
2005, and has provided a written commitment to EPA that the so revised 
regulation will be submitted as a SIP revision within the one year 
deadline, EPA will record, as soon as practicable after EPA's 
conditional approval becomes effective, the allowance allocations 
provided under Virginia's rule. If Virginia fails to fulfil its 
commitment, the conditional approval of the allowance banking 
provisions will convert to a disapproval, and EPA will, at that time, 
address the effect of that disapproval on the Commonwealth's 
NOX Budget Trading Program.

IV. General Information Pertaining to SIP Submittals From the 
Commonwealth of Virginia

    In 1995, Virginia adopted legislation that provides, subject to 
certain conditions, for an environmental assessment (audit) 
``privilege'' for voluntary compliance evaluations performed by a 
regulated entity. The legislation further addresses the relative burden 
of proof for parties either asserting the privilege or seeking 
disclosure of documents for which the privilege is claimed. Virginia's 
legislation also provides, subject to certain conditions, for a penalty 
waiver for violations of environmental laws when a regulated entity 
discovers such violations pursuant to a voluntary compliance evaluation 
and voluntarily discloses such violations to the Commonwealth and takes 
prompt and appropriate measures to remedy the violations. Virginia's 
Voluntary Environmental Assessment Privilege Law, Va. Code Sec. 10.1-
1198, provides a privilege that protects from disclosure documents and 
information about the content of those documents that are the product 
of a voluntary environmental assessment. The Privilege Law does not 
extend to documents or information (1) that are generated or developed 
before the commencement of a voluntary environmental assessment; (2) 
that are prepared independently of the assessment process; (3) that 
demonstrate a clear, imminent and substantial danger to the public 
health or environment; or (4) that are required by law.
    On January 12, 1997, the Commonwealth of Virginia Office of the 
Attorney General provided a legal opinion that states that the 
Privilege law, Va. Code Sec. 10.1-1198, precludes granting a privilege 
to documents and information ``required by law,'' including documents 
and information ``required by Federal law to maintain program 
delegation, authorization or approval,'' since Virginia must ``enforce 
Federally authorized environmental programs in a manner that is no less 
stringent than their Federal counterparts. * * *'' The opinion 
concludes that ``[r]egarding Sec.  10.1-1198, therefore, documents or 
other information needed for civil or criminal enforcement under one of 
these programs could not be privileged because such documents and 
information are essential to pursuing enforcement in a manner required 
by Federal law to maintain program delegation, authorization or 
approval.''
    Virginia's Immunity law, Va. Code Sec. 10.1-1199, provides that 
``[t]o the extent consistent with requirements imposed by Federal 
law,'' any person making a voluntary disclosure of information to a 
state agency regarding a violation of an environmental statute, 
regulation, permit, or administrative order is granted immunity from 
administrative or civil penalty. The Attorney General's January 12, 
1997 opinion states that the quoted language renders this statute 
inapplicable to

[[Page 40525]]

enforcement of any Federally authorized programs, since ``no immunity 
could be afforded from administrative, civil, or criminal penalties 
because granting such immunity would not be consistent with Federal 
law, which is one of the criteria for immunity.''
    Therefore, EPA has determined that Virginia's Privilege and 
Immunity statutes will not preclude the Commonwealth from enforcing its 
[*] program consistent with the Federal requirements. In any event, 
because EPA has also determined that a state audit privilege and 
immunity law can affect only state enforcement and cannot have any 
impact on Federal enforcement authorities, EPA may at any time invoke 
its authority under the Clean Air Act, including, for example, sections 
113, 167, 205, 211 or 213, to enforce the requirements or prohibitions 
of the state plan, independently of any state enforcement effort. In 
addition, citizen enforcement under section 304 of the Clean Air Act is 
likewise unaffected by this, or any, state audit privilege or immunity 
law.

V. Statutory and Executive Order Reviews

A. General Requirements

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
action is not a ``significant regulatory action'' and therefore is not 
subject to review by the Office of Management and Budget. For this 
reason, this action is also not subject to Executive Order 13211, 
``Actions Concerning Regulations That Significantly Affect Energy 
Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001). This action 
merely approves state law as meeting Federal requirements and imposes 
no additional requirements beyond those imposed by state law. 
Accordingly, the Administrator certifies that this rule will not have a 
significant economic impact on a substantial number of small entities 
under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because 
this rule approves pre-existing requirements under state law and does 
not impose any additional enforceable duty beyond that required by 
state law, it does not contain any unfunded mandate or significantly or 
uniquely affect small governments, as described in the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4). This rule also does not 
have tribal implications because it will not have a substantial direct 
effect on one or more Indian tribes, on the relationship between the 
Federal Government and Indian tribes, or on the distribution of power 
and responsibilities between the Federal Government and Indian tribes, 
as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). 
This action also does not have Federalism implications because it does 
not have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). 
This action merely approves a state rule implementing a Federal 
standard, and does not alter the relationship or the distribution of 
power and responsibilities established in the Clean Air Act. This rule 
also is not subject to Executive Order 13045 ``Protection of Children 
from Environmental Health Risks and Safety Risks'' (62 FR 19885, April 
23, 1997), because it is not economically significant.
    In reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the Clean Air Act. In 
this context, in the absence of a prior existing requirement for the 
State to use voluntary consensus standards (VCS), EPA has no authority 
to disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission that otherwise 
satisfies the provisions of the Clean Air Act. Thus, the requirements 
of section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not 
impose an information collection burden under the provisions of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

B. Submission to Congress and the Comptroller General

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

C. Petitions for Judicial Review

    Under section 307(b)(1) of the Clean Air Act, petitions for 
judicial review of this action must be filed in the United States Court 
of Appeals for the appropriate circuit by September 8, 2003. Filing a 
petition for reconsideration by the Administrator of this final rule 
does not affect the finality of this rule for the purposes of judicial 
review nor does it extend the time within which a petition for judicial 
review may be filed, and shall not postpone the effectiveness of such 
rule or action. This action approving Virginia's NOX Trading 
Program, but conditionally approving its banking provisions, may not be 
challenged later in proceedings to enforce its requirements. (See 
section 307(b)(2).)

List of Subjects in 40 CFR part 52

    Environmental protection, Air pollution control, Nitrogen dioxide, 
Ozone, Reporting and recordkeeping requirements.

    Dated: June 26, 2003.
Donald S. Welsh,
Regional Administrator, Region III.

0
40 CFR part 52 is amended as follows:

PART 52--[AMENDED]

0
1. The authority citation for part 52 continues to read as follows:

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

Subpart VV--Virginia

0
2. In Section 52.2420, the table in paragraph (c) is amended by adding 
the entry Chapter 140 to 9 VAC 5, to read as follows:


Sec.  52.2420  Identification of plan.

* * * * *
    (c) EPA approved regulations.

[[Page 40526]]



                                  EPA-Approved Regulations in the Virginia SIP
----------------------------------------------------------------------------------------------------------------
                                                            State
    State citation (9 VAC 5)          Title/Subject       effective   EPA approval date  Explanation (former SIP
                                                             date                                section)
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
Chapter 140....................                        NOx Budget Trading Program [Part I]
--------------------------------
                                           Part I.--Emission Standards
--------------------------------
Article 1......................                   NOx Budget Trading Program General Provisions
5-140-10.......................  Purpose...............      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-20.......................  Definitions...........      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-30.......................  Measurements,               7/17/02  7/08/03 and
                                  abbreviations, and                   Federal Register
                                  acronyms.                            page citation]
5-140-31.......................  Federal Regulations         7/17/02  7/08/03 and
                                  Incorporated by                      Federal Register
                                  reference.                           page citation]
5-140-40.......................  Applicability.........      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-50.......................  Retired unit exemption      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-60.......................  Standard requirements.      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-70.......................  Computation of time...      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-100......................  Authorization and           7/17/02  7/08/03 and
                                  responsibilities of                  Federal Register
                                  the NOX authorized                   page citation]
                                  representative.
5-140-110......................  Alternate NOX               7/17/02  7/08/03 and
                                  authorized account                   Federal Register
                                  representative.                      page citation]
5-140-120......................  Changing the NOX            7/17/02  7/08/03 and
                                  authorized account                   Federal Register
                                  representative and                   page citation]
                                  alternate NOX
                                  authorized account
                                  Register
                                  representative; page
                                  changes in the owners
                                  and operators.
5-140-130......................  Account certificate of      7/17/02  7/08/03 and
                                  representation.                      Federal Register
                                                                       page citation]
5-140-140......................  Objections concerning       7/17/02  7/08/03 and
                                  the NOX authorized                   Federal Register
                                  account and                          page citation]
                                  representative.
Article 3......................                                      Permits
5-140-200......................  General NOX Budget          7/17/02  7/08/03 and
                                  permit requirements.                 Federal Register
                                                                       page citation]
5-140-210......................  Submission of NOX           7/17/02  7/08/03 and
                                  Budget permit                        Federal Register
                                  applications.                        page citation]
5-140-220......................  Information                 7/17/02  7/08/03 and
                                  requirements for NOX                 Federal Register
                                  Budget permit                        page citation]
                                  applications.
5-140-230......................  NOX Budget permit           7/17/02  7/08/03 and
                                  contents.                            Federal Register
                                                                       page citation]
5-140-240......................  Effective date of           7/17/02  7/08/03 and
                                  initial NOX Budget                   Federal Register
                                  permit.                              page citation]
5-140-250......................  NOX Budget permit           7/17/02  7/08/03 and
                                  revisions.                           Federal Register
                                                                       page citation]
Article 4......................                              Compliance Certification
5-140-300......................  Compliance                  7/17/02  7/08/03 and
                                  certification report.                Federal Register
                                                                       page citation]
5-140-310......................  Permitting authority's      7/17/02  7/08/03 and
                                  and administrator's                  Federal Register
                                  and action on                        page citation]
                                  compliance
                                  certifications.
Article 5......................                             NOX Allowance Allocations
5-140-400......................  State trading program       7/17/02  7/08/03 and
                                  budget.                              Federal Register
                                                                       page citation]
5-140-410......................  Timing requirements         7/17/02  7/08/03 and
                                  for NOX allowance                    Federal Register
                                  allocations.                         page citation]
5-140-420......................  NOX allowance               7/17/02  7/08/03 and
                                  allocations.                         Federal Register
                                                                       page citation]
5-140-430......................  Compliance Supplement       7/17/02  7/08/03 and
                                  Pool.                                Federal Register
                                                                       page citation]
Article 6......................                           NOX Allowance Tracking System
5-140-500......................  NOX Allowance Tracking      7/17/02  7/08/03 and
                                  System accounts.                     Federal Register
                                                                       page citation]
5-140-510......................  Establishment of            7/17/02  7/08/03 and
                                  accounts.                            Federal Register
                                                                       page citation]
5-140-520......................  NOX Allowance Tracking      7/17/02  7/08/03 and
                                  System                               Federal Register
                                  responsibilities of                  page citation]
                                  NOX authorized
                                  account
                                  representative.

[[Page 40527]]

 
5-140-530......................  Recordation of NOX          7/17/02  7/08/03 and
                                  allowance allocations.               Federal Register
                                                                       page citation]
5-140-540......................  Compliance............      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-550......................  Banking...............      7/17/02  7/08/03 and        Conditionally Approved
                                                                       Federal Register
                                                                       page citation]
5-140-560......................  Account error.........      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-570......................  Closing of general          7/17/02  7/08/03 and
                                  accounts.                            Federal Register
                                                                       page citation]
Article 7......................                              NOX Allowance Transfers
5-140-600......................  Scope and submission        7/17/02  7/08/03 and
                                  of NOX allowance                     Federal Register
                                  transfers.                           page citation]
5-140-610......................  EPA recordation.......      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-620......................  Notification..........       7/17/0  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
Article 8......................                              Monitoring and Reporting
5-140-700......................  General Requirements..      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-710......................  Initial certification       7/17/02  7/08/03 and
                                  and recertification                  Federal Register
                                  procedures.                          page citation]
5-140-720......................  Out of control periods      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-730......................  Notifications.........      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-740......................  Recordkeeping and           7/17/02  7/08/03 and
                                  reporting.                           Federal Register
                                                                       page citation]
5-140-750......................  Petitions.............      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-760......................  Additional                  7/17/02  7/08/03 and
                                  requirements to                      Federal Register
                                  provide heat input                   page citation]
                                  data for allocation
                                  purposes.
Article 9......................                               Individual Unit Opt-ins
5-140-800......................  Applicability.........      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-810......................  General...............      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-820......................  NOX authorized account      7/17/02  7/08/03 and
                                  representative.                      Federal Register
                                                                       page citation]
5-140-830......................  Applying for NOX            7/17/02  7/08/03 and
                                  Budget opt-in permit.                Federal Register
                                                                       page citation]
5-140-840......................  Opt-in process........      7/17/02  7/08/03 and
                                                                       Federal Register
                                                                       page citation]
5-140-850......................  NOX Budget opt-in           7/17/02  7/08/03 and
                                  permit contents.                     Federal Register
                                                                       page citation]
5-140-860......................  Withdrawal from NOX         7/17/02  7/08/03 and
                                  Budget Trading                       Federal Register
                                  Program.                             page citation]
5-140-870......................  Change in regulatory        7/17/02  7/08/03 and
                                  status.                              Federal Register
                                                                       page citation]
5-140-880......................  NOX allowance               7/17/02  7/08/03 and
                                  allocations to opt-in                Federal Register
                                  units.                               page citation]
Article 10.....................                  State Trading Program Budget and Compliance Pool
5-140-900......................  State trading program       7/17/02  7/08/03 and
                                  budget.                              Federal Register
                                                                       page citation]
5-140-910......................  Compliance supplement       7/17/02  7/08/03 and
                                  pool budget.                         Federal Register
                                                                       page citation]
5-140-920......................  Total electric              7/17/02  7/08/03 and
                                  generating unit                      Federal Register
                                  allocations.                         page citation]
5-140-930......................  Total non-electric          7/17/02  7/08/03 and
                                  generating unit                      Federal Register
                                  allocations.                         page citation]
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------

* * * * *

0
3. Section 52.2450 is amended by adding paragraph (c) to read as 
follows:


Sec.  52.2450  Conditional approval.

* * * * *
    (c) Virginia's banking provision set forth in 9 VAC 5-140-550 under 
its NOX SIP Trading program is approved with the following 
contingency: Virginia must correct the flow control trigger date from 
2006 to 2005 and submit the

[[Page 40528]]

change as a SIP revision within one year from August 7, 2003.
[FR Doc. 03-17100 Filed 7-7-03; 8:45 am]
BILLING CODE 6560-50-P