[Federal Register Volume 68, Number 150 (Tuesday, August 5, 2003)]
[Rules and Regulations]
[Pages 46089-46099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19925]


=======================================================================
-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[OH155-3; FRL-7539-4]


Approval and Promulgation of Air Quality Implementation Plans; 
Ohio; Oxides of Nitrogen Regulations

AGENCY: Environmental Protection Agency (USEPA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This action is the conditional approval of the Ohio oxides of 
nitrogen (NOX) State Implementation Plan (SIP). This 
document also contains USEPA's response to the adverse comment from 
American Electric Power Services Corporation (AEP) sent to USEPA 
following publication of the original direct final approval of the Ohio 
NOX plan on January 16, 2003, which was subsequently 
withdrawn because of receipt of an adverse comment. USEPA is 
conditionally approving the Ohio NOX plan following the 
receipt of a commitment from the Director of Ohio EPA to change the 
flow control date in the State plan from 2006 to 2005. On June 25, 
2003, Ohio sent a letter to USEPA containing a commitment to take 
specific enforceable measures by which the flow control date will be 
changed. These enforceable measures include: timing by which Ohio will 
begin the public process; timing when the amended rule will be filed 
with the Joint Committee on Administrative Rule Review; timing of the 
public hearing; and time span when the amended rule process will be 
complete. Ohio EPA expects the flow control date in the rule to be 
changed approximately six months from the date of the commitment 
letter. USEPA found that the commitment is acceptable and, therefore, 
USEPA is taking action to conditionally approve the Ohio plan based on 
the commitment from Ohio to submit the revised rule by December 26, 
2003. We will populate the compliance accounts of units listed in the 
State's rule after September 4, 2003, so that respective Ohio sources 
can participate in the NOX trading program.

DATES: This rule is effective on September 4, 2003.

ADDRESSES: You may obtain a copy of the State Implementation Plan 
revision request at the address below. Please telephone John Paskevicz 
at (312) 886-6084 if you intend to visit the Region 5 office.
    You may inspect copies of Ohio's NOX submittal and 
subsequent commitment letter at: Regulation Development Section, Air 
Programs Branch (AR-18J), U.S. Environmental Protection Agency, Region 
5, 77 West Jackson Boulevard, Chicago, Illinois 60604.

FOR FURTHER INFORMATION CONTACT: John Paskevicz, Engineer, Regulation 
Development Section, Air Programs Branch (AR-18J), U.S. Environmental 
Protection Agency, Chicago, Illinois, 60604. E-Mail Address: 
epa.gov">paskevicz.john@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document, the terms ``you'' 
refer to the reader of this rule and/or to sources subject to the State 
rule, and the terms ``we'', ``us'', or ``our'' refers to USEPA.

Table of Contents

I. Background
    A. What requirements led to the State's submittal of the 
NOX emission control plan?
    B. What requirements must Ohio meet?
    C. What have been the Court rulings regarding USEPA's 
NOX emission control rule?
II. Summary of the State Submittal
    A. When was the Ohio EPA NOX plan submitted to the 
USEPA?
    B. What are the basic components of the Ohio EPA NOX 
plan?
    C. Does the Ohio EPA NOX plan meet the Federal 
NOX statewide emissions budget?
    D. What public review opportunities were provided?
    E. What guidance did USEPA use to evaluate Ohio's NOX 
control program?
    F. Does the Ohio plan meet Federal NOX SIP Call 
requirements?
    G. What deficiencies were noted in the Ohio EPA NOX 
plan?
    H. What was USEPA's initial action regarding the Ohio plan?
    I. What comments were received on Ohio's plan?
III. Response to Public Comment
IV. USEPA Action
V. Statutory and Executive Order Reviews

I. Background

A. What Requirements Led to the State's Submittal of the NOX 
Emission Control Plan?

    On October 27, 1998, the USEPA promulgated a regulation known as 
the NOX SIP Call for numerous States, including the State of 
Ohio. The NOX SIP Call requires the subject States to 
develop NOX emission control regulations sufficient to 
provide for a prescribed NOX emission budget in 2007.
    Preceding the promulgation of USEPA's NOX SIP Call, 
there had been extensive discussions by federal, state, and local 
environmental agencies, industry, and environmental groups regarding 
the transport of ozone in the Eastern United States. The Environmental 
Council of States (ECOS) recommended the formation of a national 
workgroup to assess the problem and to develop a consensus approach to 
addressing the transport problem. As a result of ECOS' recommendation 
and in response to a March 2, 1995 USEPA memorandum, the Ozone 
Transport Assessment Group (OTAG) was formed to conduct regional ozone 
transport analyses and to develop a recommended ozone transport control 
strategy. OTAG was a partnership among USEPA, the 37 eastern States and 
the District of Columbia, and industrial, academic, and environmental 
groups. OTAG was given the responsibility of conducting the two years 
of analyses envisioned in the March 2, 1995 USEPA memorandum.
    OTAG conducted a number of regional ozone data analyses and 
regional ozone modeling analyses using photochemical grid modeling. In 
July 1997, OTAG completed its work and made recommendations to the 
USEPA concerning the regional emissions reductions needed to reduce 
transported ozone as an obstacle to attainment in downwind areas. OTAG 
recommended a possible range of regional NOX emission 
reductions to support the control of transported ozone. Based on OTAG's 
recommendations and other information, USEPA issued the NOX 
SIP Call rule on October 27, 1998. 63 FR 57356.
    In the NOX SIP Call, USEPA determined that sources and 
emitting activities in 23 jurisdictions \1\ emit NOX in 
amounts that ``significantly contribute'' to ozone nonattainment or

[[Page 46090]]

interfere with maintenance of the 1-hour ozone national ambient air 
quality standards (NAAQS) in one or more downwind areas in violation of 
Clean Air Act (CAA) section 110(a)(2)(D)(I)(I). USEPA identified 
NOX emission reductions by source sector that could be 
achieved using cost-effective measures and set state-wide 
NOX emission budgets for each affected jurisdiction for 2007 
based on the possible cost-effective NOX emission 
reductions.
    The source sectors include nonroad mobile, highway mobile, 
electricity generating units (EGUs), and major non-EGU stationary point 
sources. EGUs include stationary boilers and turbines that generate at 
least some electricity, even if they also generate steam for industrial 
processes. Non-EGUs include other large stationary boilers and 
turbines, typically for the purpose of generating steam for industrial 
processes.
---------------------------------------------------------------------------

    \1\ Alabama, Connecticut, Delaware, District of Columbia, 
Georgia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, 
Michigan, Missouri, New Jersey, New York, North Carolina, Ohio, 
Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, 
West Virginia, and Wisconsin.
---------------------------------------------------------------------------

    USEPA established recommended NOX emissions caps for 
large EGUs (serving a generator whose nameplate capacity exceeds 25 
megawatts) and for large non-EGUs (maximum design heat input exceeding 
250 mmBTU per hour). USEPA determined that significant NOX 
reductions using cost-effective measures could be obtained as follows: 
application of a 0.15 pounds NOX/mmBtu heat input emission 
rate limit for large EGUs; a 60 percent reduction of NOX 
emissions from large non-EGUs; a 30 percent reduction of NOX 
emissions from large cement kilns; and a 90 percent reduction of 
NOX emissions from large stationary internal combustion 
engines. The 2007 state-wide NOX emission budgets 
established by jurisdiction were based, in part, by assuming these 
levels of NOX emission controls coupled with NOX 
emissions projected by source sector to 2007.
    Although the state-wide NOX emission budgets were based 
on the levels of reduction achievable through cost-effective emission 
control measures, the NOX SIP Call allows each State to 
determine what measures it will choose to meet the state-wide 
NOX emission budgets. It does not require the States to 
adopt the specific NOX emission rates assumed by the USEPA 
in establishing the NOX emission budgets. The NOX 
SIP Call merely requires States to submit SIPs, which, when 
implemented, will require controls that meet the NOX state-
wide emission budget. The NOX SIP Call encourages the States 
to adopt a NOX cap and trade program for large EGUs and 
large non-EGUs as a cost-effective strategy and provides an interstate 
NOX trading program that the USEPA will administer for the 
States. If States choose to participate in the national trading 
program, the States must submit SIPs that conform to the trading 
program requirements in the NOX SIP Call.

B. What Requirements Must Ohio Meet?

    The State of Ohio has the primary responsibility under the Clean 
Air Act for ensuring that Ohio meets the ozone air quality standards 
and is required to submit a SIP that specifies emission limitations, 
control measures, and other measures necessary for meeting the 
NOX emissions budget. The SIP for ozone must meet the ozone 
transport SIP Call requirements, must be adopted pursuant to notice and 
comment rulemaking, and must be submitted to the USEPA for approval.
    These NOX emission reductions will address ozone 
transport in the area of the country primarily east of the Mississippi 
River. USEPA promulgated the NOX SIP Call pursuant to the 
requirements of CAA section 110(a)(2)(D) and our authority under CAA 
section 110(k). Section 110(a)(2)(D) applies to all SIPs for each 
pollutant covered by a NAAQS and for all areas regardless of their 
attainment designation. It requires a SIP to contain adequate 
provisions that prohibit any source or type of source or other types of 
emissions within a State from emitting any air pollutants in amounts 
which will contribute significantly to nonattainment in, or interfere 
with maintenance of attainment of a standard by any other State with 
respect to any NAAQS.
    Pursuant to its authority under section 110(k)(5), USEPA concluded 
that the SIPs for Ohio and other states were substantially inadequate 
to prohibit NOX emissions that significantly contribute to 
ozone nonattainment. As a result, Ohio was required to submit SIP 
revisions that addressed this inadequacy.
    USEPA has published a model rule for control of NOX 
emissions from boilers and turbines. This model rule, codified at Title 
40 of the Code of Federal Regulations Part 96 (40 CFR part 96), 
reflects USEPA's recommendations for the general design of the 
necessary NOX emission control programs as well as detailed 
recommendations for specific program features. Similarly, at 63 FR 
56393 (October 21, 1998), USEPA has published a proposed Federal 
implementation plan including rules regulating cement kilns, which 
serve as sample rules for this source type. USEPA recommends the cost-
effective levels of control noted above. The budget that USEPA 
established for states reflects these control levels. USEPA further 
recommends that states take the necessary steps to allow their sources 
to participate in a multi-state NOX emissions trading 
program that USEPA will run. While USEPA offers flexibility to states 
on various elements of program design, particularly in the distribution 
of projected emission reductions, USEPA can offer more streamlined 
approval of programs that more closely follow USEPA's model rule. (See 
63 FR 57365)

C. What Have Been the Court Rulings Regarding USEPA's NOX 
Emission Control Rule?

    When the USEPA published the NOX SIP Call on October 27, 
1998, a number of States and industry groups filed petitions 
challenging the rulemaking before the United States Court of Appeals 
for the District of Columbia. The court, on May 25, 1999, stayed the 
States' obligation to submit SIPs in response to the NOX SIP 
Call rule. Subsequently, on March 3, 2000, the court upheld most of 
USEPA's NOX SIP Call rule. The court, however, vacated the 
rule as it applied to Missouri and Georgia, and remanded for further 
consideration the inclusion of portions of Missouri and Georgia in the 
rule. The court also vacated the rule as it applied to Wisconsin 
because the court believed that USEPA had not made a showing that 
sources in Wisconsin significantly contributed to nonattainment or 
interfered with maintenance of the ozone NAAQS in any other State. 
Finally, the court remanded to USEPA two issues concerning a limited 
portion of the NOX emission budgets. See Michigan et al. v. 
EPA, 213 F.3d 663 (DC Cir. 2000). On April 11, 2000, based on the 
remanded issues, USEPA initiated a two phase approach to implement the 
NOX SIP Call. Phase I of this approach addressed the portion 
of the NOX SIP Call upheld by the court. Phase I will 
achieve the majority of the reductions in the NOX SIP Call. 
The Phase I plan was due from Ohio on October 30, 2000.
    Phase II will address the few narrow issues that the DC Circuit 
court remanded to USEPA, including: how a small subclass of facilities 
that generate electricity (cogeneration units) should be included in 
the rule; and what control levels should be assumed for large, 
stationary internal combustion engines. Phase II of the NOX 
SIP Call will not require a submittal from the States until USEPA has 
proposed and finalized rules in response to the court's remand.
    On June 22, 2000, the court removed the stay of the state's 
obligation to submit SIPs in response to the NOX SIP

[[Page 46091]]

Call and denied petitioner's motions for rehearing and rehearing en 
banc. In removing the stay, the court provided that USEPA should allow 
128 days for States to submit SIPs to the USEPA, i.e., by October 30, 
2000. Shortly after removing the stay, petitioners requested that the 
court adjust the NOX SIP Call compliance date. In an action 
related to Michigan v. EPA, 213 F.3d 663 (D.C. Cir 2000) the court then 
determined that the compliance date for the SIP Call would be May 31, 
2004. Although the court's action affected only the compliance 
deadline, other dates in the rule for related requirements (such as 
flow control) were also extended because they were established relative 
to the original compliance deadline.

II. Summary of the State Submittal

A. When Was the Ohio EPA NOX Plan Submitted to the USEPA?

    Ohio EPA submitted the NOX plan on July 11, 2002. USEPA 
had an opportunity to review and comment on earlier draft versions of 
the rules during the stakeholder review process. USEPA made both formal 
and informal comments, and these comments are available in the Docket. 
The plan was submitted in sufficient time for the USEPA to make a 
finding of completeness, which terminated the imposition of sanctions 
which were scheduled to go into effect on July 25, 2002, due to Ohio's 
failure to submit a plan. The Region 5 Regional Administrator signed 
the completeness finding on July 24, 2002. (see 67 FR 50600)

B. What Are the Basic Components of the Ohio EPA NOX Plan?

    The Ohio EPA plan includes the following documents: (1) A letter 
from the Director of Ohio EPA requesting a revision to the Ohio EPA 
plan; (2) A copy of the rules containing the provisions and 
requirements to implement a NOX budget trading program to 
control and reduce emissions of NOX in Ohio; (3) A copy of 
the Ohio code indicating the authority of the Ohio EPA Director to 
develop and submit the revision; (4) A notice of the proposed 
rulemaking and public hearing; (5) A transcript of the public hearing 
on the rules containing comments and testimony; (6) The Ohio Director's 
Findings and Orders announcing the adoption of rules controlling 
NOX from sources in Ohio; (7) A list of Ohio's ``interested 
parties'' or stakeholders to whom draft rules were distributed for 
comment; (8) Summary of comments submitted into Ohio's formal hearing 
record regarding the proposed rules which establish a NOX 
budget trading program in Ohio; and, (9) Ohio's budget demonstration 
including a list of units (operating or under construction) subject to 
the State's NOX rules.
    Ohio's NOX plan and rules apply to, and establish, a 
trading program for EGUs, non-EGUs, and portland cement kilns. The 
rules contained in Chapter 3745-14, establish the provisions and 
requirements to implement a NOX budget trading program in 
Ohio. The net effect of the rules is to cap emissions from major 
emitters and provide allowances to units to operate within the State's 
budget during the control period. Allowance allocations are made for 
five year periods with the exception of the first period, which is for 
a four-year period.
    The State's market-based program which follows the model 
NOX budget trading rule is the method selected by Ohio to 
meet its NOX emissions reduction obligations under the 
NOX SIP Call. The trading program caps total emissions in 
order to ensure that emissions reductions are achieved and maintained. 
Also, the flexibility in the State's program allows sources to reduce 
emissions and where possible, and if desired, generate allowances for 
trading.
    The Ohio EPA plan includes Ohio Rule 3745-14. This trading rule 
contains eleven separate rule elements, listed in Table 1, which 
correspond with part 96 model rule of the NOX SIP Call.

            Table 1.--Comparison of State Rule to Model Rule
------------------------------------------------------------------------
                                         Corresponds with USEPA rule . .
          Ohio rule 3745-14--                           .
------------------------------------------------------------------------
01, General provisions.................  Subpart A, Sections 96.1, 96.2,
                                          and 96.3 Purpose, Definitions
                                          and Abbreviations. 96.4,
                                          Applicability. 96.5, Retired
                                          unit exemptions. 96.6,
                                          Standard requirements. 96.7,
                                          Computation of time.
02, NOX authorized account               Subpart B, Section 96.10 . . .
 representative.                          the NOX authorized account
                                          representative. 96.11,
                                          Alternate NOX authorized
                                          account representative. 96.12,
                                          Changing the account
                                          representative. 96.13, Account
                                          certificate of representation.
                                          96.14, Objections re: NOX
                                          account representative.
03, NOX budget permit..................  Subpart C, Section 96.20, NOX
                                          budget permit requirements.
                                          96.21, Submission of NOX
                                          budget permit application.
                                          96.22, Information
                                          requirements for NOX budget
                                          permit applications. 96.23,
                                          content. 96.25, revisions.
04, Compliance certification...........  Subpart D, Section 96.30,
                                          Compliance certification
                                          report. 96.31, State and
                                          USEPA's action on compliance
                                          certification.
05, NOX allowance allocations (and       Subpart E, Section 96.40, NOX
 Appendix A and B, for EGUs and non-      allowance allocations. 96.41,
 EGUs, for the period from 2004 through   Timing requirements. 96.42 NOX
 2007).                                   allowance allocations. 96.55
                                          Banking (Early reduction
                                          credit and non-portion of this
                                          section).
06, NOX allowance tracking system......  Subpart F, Section 96.50, NOX
                                          allowance tracking system
                                          (ATS) accounts. 96.51,
                                          Establishment of accounts.
                                          96.52, NOX ATS
                                          responsibilities of NOX
                                          authorized account rep. 96.53,
                                          Recordation of NOX allowance
                                          allocations. 96.54,
                                          Compliance. 96.55, Banking.
                                          96.56, Account error. 96.57,
                                          Closing of general accounts.
07, NOX allowance transfers............  Subpart G, Section 96.60,
                                          Submission of NOX allowance
                                          transfers. 96.61, EPA
                                          recordation. 96.62,
                                          Notification.
08, Monitoring and reporting...........  Subpart H, Monitoring and
                                          Reporting. 96.70, General
                                          requirements. 96.71, Initial
                                          certification and
                                          recertification procedures.
                                          96.72, Out of control periods.
                                          96.73, Notifications. 96.74,
                                          Recordkeeping and reporting.
                                          96.75, Petitions. 96.76,
                                          Additional requirements to
                                          provide heat input data for
                                          allocations.

[[Page 46092]]

 
09, NOX budget opt-in units............  Subpart I, Individual Unit Opt-
                                          ins. Section 96.80,
                                          Applicability. 96.81, General.
                                          96.82, NOX authorized account
                                          representative. 96.83,
                                          Applying for NOX budget opt-in
                                          permit. 96.84, Opt-in process.
                                          96.85, NOX budget opt-in
                                          permit contents. 96.86,
                                          Withdrawal from NOX budget
                                          trading program. 96.87, Change
                                          in regulatory status. 96.88,
                                          NOX allowance allocations to
                                          opt-in units.
10, Alternative compliance plans.......  This rule allows a source to
                                          participate in alternate multi-
                                          pollutant reduction schemes
                                          such as the President's Clear
                                          Skies proposal.
11, Portland cement kilns..............  Part 98, subpart B, Emissions
                                          from cement manufacturing,
                                          proposed rules, October 21,
                                          1998.
------------------------------------------------------------------------

    Ohio's plan includes opportunities for sources to obtain, beginning 
in 2006, an allocation for energy efficiency/renewable energy projects. 
The Ohio rule contains a provision which sets aside one percent of the 
tons of NOX emissions in the State trading budget. This set-
aside is for units that during the control period reduce end-use demand 
for electricity or displace electrical energy utilization by use of 
wind power, solar power, biomass or landfill methane gas generation.
    Ohio's plan also sets aside one percent of the trading budget 
beginning in 2006 for innovative technology projects. This means that 
an industry can compete for a set-aside, using stationary or mobile 
source technology which has not yet been adequately demonstrated in 
practice but where there is a likelihood that the technology will 
reduce NOX emissions and increase energy efficiency.

C. Does the Ohio EPA NOX Plan Meet the Federal 
NOX Statewide Emissions Budget?

    Yes, on July 11, 2002, Ohio submitted a plan containing rules in 
OAC Chapter 3745-14 to respond to USEPA's NOX SIP Call 
published in the Federal Register on October 27, 1998. We reviewed the 
plan and found it complete on July 23, 2002. (See 67 FR 50600, dated 
August 5, 2002)
    USEPA's NOX SIP Call affected sources of NOX 
in 22 states (including Ohio) and the District of Columbia. The 
NOX SIP Call rulemaking established statewide budgets for 
NOX emissions beginning in the 2003 ozone season (May 1 to 
September 30). Each state was required to submit a State Implementation 
Plan (SIP) containing rules necessary to reduce NOX 
emissions to the NOX budget levels.
    On March 2, 2000, USEPA published a final rule amending state 
NOX budgets (65 FR 11222). Ohio used the information from 
this final rule to develop its budget. Further, Ohio describes the 
process it used to develop the budget in the budget demonstration 
contained in its plan submittal. A summary of the base and budget 
NOX emissions contained in this rule for Ohio are provided 
in table 2.

                                Table 2.--NOX Emissions Budget by Source Category
                                                     [tons]
----------------------------------------------------------------------------------------------------------------
                                                 Source Category
-----------------------------------------------------------------------------------------------------------------
                                                                         Area     Non-Road   Highway
                  2007 Final                       EGU      Non-EGU     source     mobile     mobile     Total
----------------------------------------------------------------------------------------------------------------
Base..........................................    163,132     50,001     21,860     43,380     94,850    373,223
Budget........................................     48,990     40,194     21,860     43,380     94,850    249,274
Reduction.....................................    114,142      9,807          0          0          0    123,949
----------------------------------------------------------------------------------------------------------------

    On November 15, 2000, Ohio informally provided draft rules for 
preliminary review to stakeholders and USEPA to start the rulemaking 
process. Ohio received comments on these draft rules from USEPA and 
twenty-two other interested parties. Ohio's draft rules were revised to 
take into account the comments received, and the revised draft rules 
were distributed to interested parties on November 19, 2001. Ohio EPA, 
again, received comments on these draft rules from USEPA and thirty-
eight other interested parties. The rules, to be submitted to Ohio's 
Joint Committee for Administrative Rule Review (JCARR), were revised 
again taking into consideration the comments. Ohio believes that these 
rules will achieve the NOX reductions required by USEPA's 
NOX SIP Call, and has finalized them for inclusion in its 
submitted NOX plan.
    The budget projections used to prepare Ohio's submission are the 
same as the State budget established by USEPA in the final rule 
published in the Federal Register on March 2, 2000 (65 FR 11222). A 
minor change was made by Ohio EPA and is addressed in the State's 
submittal. This change corresponds with a technical correction to the 
Ohio inventory made by USEPA on October 31, 2001 (66 FR 54992).
    Ohio's budgets for Area Sources, Mobile Sources and Non-Mobile 
sources reflect emissions during the ozone control period from May 1 
through September 30 for each year. The original USEPA budgets that 
Ohio used in it's analysis can be found on the electronic file entitled 
``OH.zip'' on USEPA's Web site ftp://ftp.epa.gov/EmisInventory/
NOXSIPCall--Mar2--2000. Ohio submitted similar budgets for 
area, mobile and non-mobile source categories on a compact disk (CD) 
along with the Budget Demonstration. The CD is available in the Region 
5 Docket. Table 3 identifies the 2007 base budgets for these sources 
and the name of the attached file in which they are found. No 
NOX reductions from these source categories (mobile, area, 
and non-mobile) are projected for Ohio's budget demonstration. 
Furthermore, Ohio does not believe it is necessary to develop 
additional NOX emission reduction

[[Page 46093]]

measures to meet the statewide budget during the 5-month ozone season.

                 Table 3.--Unaffected Source Categories
                                 [tons]
------------------------------------------------------------------------
                                       2007 base
          Source category               budget           File name
------------------------------------------------------------------------
Area Sources.......................        21,860  OH--ar.wb3
Mobile Sources.....................        94,850  OH--mb.wb3
Non-Road Mobile Sources............        43,380  OH--nr.wb3
------------------------------------------------------------------------

    Table 4 contains the base and final NOX budget for EGUs. 
Ohio obtained these data from USEPA Clean Air Markets Division. The 
file was not part of the technical amendment to the NOX SIP 
Call of March 2, 2000 (see 65 FR 11222). The files for EGUs on USEPA's 
Web site ``ftp:\\ftp.epa.gov\EmisInventory\NOX SIPCall--
Mar2--2000'' did not contain 2007 base or budget numbers. This file 
contains information which includes the base and final budgets for 
EGUs. Ohio submitted this file (along with other files referenced here) 
on a CD with the Budget Demonstration. The CD is available in the 
Region 5 Docket.

                                        Table 4.--Base and Final Budgets
                                                     [tons]
----------------------------------------------------------------------------------------------------------------
                                                2007  base      2007  final
               Source category                    budget          budget                   File name
----------------------------------------------------------------------------------------------------------------
EGU.........................................        163,132          48,990   UT--budget.wb3
----------------------------------------------------------------------------------------------------------------

    Table 5 contains the original budget that USEPA calculated for 
large industrial boilers (non-EGUs) located in Ohio. The information in 
Table 5 can be found on USEPA's Web site at ``ftp:\\ftp. epa.gov\EmisIn 
ventory\NOXSIPCall--Mar2--2000,'' in the file entitled 
``OH--pt.wb3.'' USEPA modified the original non-EGU budget because on 
October 31, 2001, we made a determination (66 FR 54992) that Marathon 
Ashland Petroleum LLC's Plant 1576000301, emissions unit B015 was not a 
NOX budget unit. USEPA's original non-EGU budget was 
modified to remove eighteen NOX allowances initially 
designated for B015 and to add thirty-six tons of uncontrolled 
NOX emissions from B015 to the total budget for this source 
category. The budget submitted by Ohio EPA reflects these changes and 
the electronic file reflecting these changes is located on the CD 
submitted by Ohio in the file entitled ``NonEGU Adjusted.wb3.''

                                   Table 5.--Sources Regulated by State Rules
----------------------------------------------------------------------------------------------------------------
                                                2007  base      2007  final
                   Source                         budget          budget                   File name
----------------------------------------------------------------------------------------------------------------
Non-EGUs....................................         50,001          40,194   OH--pt.wb3
----------------------------------------------------------------------------------------------------------------

    The information in Table 6, presents the components of Ohio's 
NOX budget for EGUs and non-EGUs.

                                            Table 6.--Ohio NOX Budget
                                                     [tons]
----------------------------------------------------------------------------------------------------------------
                                                                                EGU                   Non-EGU
                                                                 -----------------------------------------------
                                                                    2004, 2005    2006 and after  2004 and after
----------------------------------------------------------------------------------------------------------------
Total for source categories.....................................          48,990          48,990          40,194
Non-Regulated Units.............................................           3,558           3,558          36,127
Set-Asides......................................................          *2,272         **3,181            *203
Allowances available for existing units.........................          43,160          42,251           3,846
----------------------------------------------------------------------------------------------------------------
*In each year, 5% of the Regulated Units' budget will be set aside to be allocated to new units.
**After 2005, an additional 2% of the EGU Regulated Units' budget will be set aside to fund two set-asides: 1%
  for Energy Efficiency/Renewable Energy Projects and 1% for Innovative Technology Projects.


[[Page 46094]]

    USEPA believes the Ohio NOX sources addressed here, 
which includes a cap and an allowance trading program, will be 
adequately controlled to ensure the sources in the State will meet the 
statewide NOX budget established by USEPA.

D. What Public Review Opportunities Were Provided?

    The Director of the Ohio Environmental Protection Agency ``* * * 
may conduct public hearings on any plans for the prevention, control, 
and abatement of air pollution that the director is required to submit 
to the federal government.'' (Ohio Revised Code Chapter 3704.03, Powers 
of the director of environmental protections.) Ohio's Director held 
several meetings early on in the rule development process, shortly 
after the USEPA promulgated the Finding of Significant Contribution and 
Rulemaking for the Purpose of Reducing Regional Transportation of Ozone 
Rule (see 63 FR 57356, dated October 27, 1998). During the course of 
development, Ohio sent draft rules to stakeholders for review and 
comment. This process was repeated several times until the State was 
satisfied it had developed an adequate set of rules and fulfilled the 
public process. Stakeholders included affected utilities, major heavy 
industry, environmental groups (both local and national), consultants, 
industry and manufacturing associations, planning commissions and 
councils of government, and one university.
    A public hearing was held in Columbus, Ohio, on April 11, 2002, and 
Ohio accepted written comments until April 26, 2002. The transcript of 
the public hearing is included as part of the State's submittal and can 
be found in the Docket at Region 5. On January 16, 2003, USEPA 
published a direct final rule approving the Ohio NOX plan. 
An adverse comment was made regarding that publication and USEPA 
announced to the public the withdrawal of the rule on March 17, 2003. 
See 68 FR 12590.
    On June 25, 2003, Ohio sent to USEPA a letter committing to revise 
the flow control date. This letter was prompted by discussions between 
USEPA and Ohio EPA that we would conditionally approve the Ohio plan if 
the State made a commitment to change the flow control date from 2006 
to 2005. Ohio submitted the letter and, therefore, we are taking action 
to conditionally approve the Ohio NOX plan.

E. What Guidance Did USEPA Use To Evaluate Ohio's NOX 
Control Program?

    USEPA used the final NOX SIP Call rule at 40 CFR part 96 
for review of portions of the Ohio submittal. We also used 40 CFR 
51.121 and 51.122 to evaluate Ohio's rules and the plan. The Ohio rules 
also apply to portland cement kilns. To see USEPA's current position on 
these types of sources the public can consult USEPA's proposed part 98, 
dated October 21, 1998 (See 63 FR 56394), which USEPA expects to 
finalize shortly.

F. Does the Ohio Plan Meet Federal NOX SIP Call 
Requirements?

    USEPA is satisfied that the Ohio plan meets the requirements of the 
NOX SIP Call. Ohio's rules are patterned directly from the 
USEPA model rule and Ohio EPA included in the rules all of the 
requirements needed for approval by USEPA. The plan includes a budget 
trading program, and addresses all of the components of the emissions 
budget listed in the USEPA technical amendment. Ohio's analysis 
indicates that additional NOX control strategies will not be 
necessary to meet the NOX budget for the State. USEPA has 
previously determined, on August 5, 2002, (67 FR 50600) that Ohio had 
satisfied the requirements for submittal of a complete plan to address 
NOX controls on major sources of emission.

G. What Deficiencies Were Noted in the Ohio EPA NOX Plan?

    USEPA found a deficiency in Ohio's submittal regarding the flow 
control date. In reviewing Ohio's July 11, 2002, NOX SIP 
Call submittal, USEPA found that the State's rule requires flow control 
to apply in 2006. (See OAC Chapter 3745-14-06(E)(6)) The NOX 
SIP Call model rule requires flow control to apply in the second year 
of the program. This means Ohio's rule which like the neighboring 
States implements the NOX plan in 2004, should require flow 
control in 2005, the second year of the NOX program.
    Ohio used the model rule (63 FR 57356, dated October 27, 1998) to 
develop its plan. The State also used language from elements of the 
Section 126 rule (65 FR 2674, dated January 18, 2000) in place of some 
of the language from the model rule. An amendment to the Section 126 
rule dated April 30, 2002, (see 67 FR 21522) extended the flow control 
date to 2006. This one year extension corresponds to the extension of 
the compliance date noted earlier. While the extension by one year of 
flow control date to 2006 is appropriate for Section 126, it is not 
appropriate for Ohio's rule in the NOX SIP Call. A detailed 
discussion regarding the difference in the dates for flow control 
between Section 126 program and the NOX SIP Call can be 
found in 65 FR 2674, dated January 18, 2000. We do not expect there 
will be any States subject to Section 126. All affected States are 
expected to implement an NOX SIP Call plan by the compliance 
date of May 2004. In order for flow control to be universally applied 
to all sources in the NOX SIP Call region, the flow control 
date must be established as no later than 2005 (the second year of the 
NOX program) for all of the States in the ozone transport 
region whose programs begin no later than 2004.
    USEPA believes the 2006 date in the Ohio rule is a deficiency which 
can be addressed by Ohio through the submittal of a letter of 
commitment to revise the flow control date at the soonest possible time 
before the NOX compliance date. Therefore, we are 
conditioning the approval of the Ohio NOX plan based on Ohio 
EPA's submittal of the June 25, 2003 letter committing to change the 
flow control date from 2006 to 2005. The letter included a list of 
steps and approximate schedule by which the change to the flow control 
date will occur.
    USEPA also found a deficiency in OAC Chapter 3745-14-09(G)(7) 
entitled NOX Budget Opt-in Units. The Ohio rule states that 
opt-in units that have withdrawn from the program can re-apply for a 
permit after 2 years. A previous version of the Ohio rule had this time 
period as 4 years, which is the time period found in both the 
NOX SIP Call model rule and the Section 126 rule. The 
purpose of the 4 year period in the model rule is to discourage these 
opt-in sources from coming in and out of the budget trading program at 
a frequency that would be disruptive to the operation of the trading 
program. USEPA recommends Ohio change this time period from 2 years to 
4 years.

H. What Was USEPA's Initial Action Regarding the Ohio Plan?

    On January 16, 2003, USEPA published a direct final approval of the 
Ohio NOX plan. This approval was made with the understanding 
that Ohio would change the flow control date to 2005. We also noted 
that if there were no adverse comments received within the 30-day 
comment period the rule would be effective within 60 days from the date 
of publication of the Federal Register and USEPA would at that time 
populate the compliance accounts and sources would be able to 
participate in the trading process.

I. What Comments Were Received on Ohio's Plan?

    AEP submitted a comment which, upon review, USEPA determined to be 
adverse. We then published a

[[Page 46095]]

withdrawal of the January 16, 2003 direct final approval noting that an 
adverse comment was received and that USEPA would address the concerns 
and the comments from AEP. The withdrawal was published on March 17, 
2003, (68 FR 12590).
    The comments from AEP included a letter and an attachment which 
detailed the following: USEPA's Section 126 rule establishes 2006 as 
the flow control date for sources subject to that rule and AEP does not 
believe the change (of the flow control date in the Ohio rule to 2005) 
is required by any provision of federal law; different flow control 
dates will exist in different States; and USEPA should make a very 
limited change to the model budget trading rule to revise the flow 
control date to 2006. The attachment to the letter addressed the 
proposed rules for the State of Virginia but, the issue of flow control 
date is shared by both Virginia and Ohio. The AEP letter also states 
that it prefers to see the Ohio rule retain the 2006 flow control date 
in order to retain the value of early reduction credits. AEP noted that 
it anticipates that the issue can be fully explored in any subsequent 
rulemaking procedure by Ohio EPA.

III. Response to Public Comment

    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 from affected 
units. The NOX SIP Call requires that second year of the 
program be the earliest year (referred to as the ``flow control date'') 
for which flow control may be triggered. Specifically, 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). 40 
CFR 51.121(b)(1)(ii) and (2)(ii)(E). 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 the second year of the program--and the mandated flow 
control date for state trading programs starting in 2004--became 2005. 
While Sec.  51.121 and Part 96 were not revised, USEPA has implemented 
the new flow control date through the notice and comment rulemakings 
for approval of the SIPs.
    Allowing the use of 2006 as the flow control date (as in the 
version of Ohio's rule reviewed here) would be contrary to the 
NOX SIP Call. The SIP Call requires the flow control 
provisions to apply starting in the second year of the program. USEPA 
will not approve this 2006 date and is conditioning approval of Ohio's 
rule on the change of the flow control date to 2005, the second year of 
the Ohio NOX trading program. USEPA is taking this position 
for several reasons.
    1. Allowing 2006 to be the flow control date in Ohio could result 
in an unfair advantage for units in that state over units in other 
states with an earlier flow control date. USEPA 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 provides for a flow control date later than 2005.\2\ 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 Ohio's units or by Ohio 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 Ohio units were to help trigger flow control in 2005 but 
would not be subject to the flow control limitation on use of banked 
allowances in 2005, this would give Ohio units an unfair advantage over 
units in the other states with a flow control date earlier than 
2006.\3\
---------------------------------------------------------------------------

    \2\ In approving trading program rules for Connecticut, 
Delaware, the District of Columbia, Maryland, Massachusetts, New 
Jersey, New York, and Rhode Island, USEPA 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. USEPA's approval of the 2004 flow control date 
was based on the NOX SIP Call. (USEPA notes that it 
erroneously approved 2005 as the flow control date for Pennsylvania, 
whose program also begins in 2003.) When the United States Court of 
Appeals made May 31, 2004 the commencement date for the 
NOX Budget Trading Program, 2005 became the second year 
for state trading programs beginning in 2004. USEPA 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. In addressing whether and, if so, how to 
apply the NOX SIP Call to the remaining states in the 
NOX SIP Call region, USEPA will address how to handle the 
flow control requirements and will take into account the problems 
discussed in this section that would result from some states having 
later flow control dates than other states.
    \3\ Although USEPA 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.
---------------------------------------------------------------------------

    Further, should a 2006 flow control date be approved for Ohio, this 
would allow some companies to circumvent the earlier flow control dates 
established by other states. A company with affected units in both Ohio 
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 Ohio. All of these banked allowances could be used in 
Ohio 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 
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 Ohio would allow erosion of the 
effectiveness of flow control for states with a flow control date 
before 2006 and would give an unfair advantage to some companies.\4\
---------------------------------------------------------------------------

    \4\ 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.
---------------------------------------------------------------------------

    2. The fact that Part 97 in the Section 126 program established 
2006 as the flow control date does not support allowing 2006 as the 
flow control date in Ohio's NOX SIP Call rule. USEPA first 
notes that, at the time Part 97 was promulgated, there existed the 
potential for a number of states to have their units subject to the 
trading program under Section 126 as well as a number of states to have 
their units governed by trading programs under the NOX SIP 
Call. This was due to uncertainty as to whether all states would be 
able to establish an approved program 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 (including the option of 
participating in the NOX Budget Trading Program based on the 
model rule in Part 96) were shown to meet their respective budgets. The 
states in

[[Page 46096]]

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, 
USEPA 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. USEPA has already withdrawn the Section 126 findings for 
Connecticut, Maryland, New Jersey, and New York on that basis. USEPA 
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. Only the NOX SIP Call and 
Part 96 will likely be applicable.
    Moreover, in light of this change in circumstances and upon 
reconsideration of the discussion in the January 18, 2000 and April 30, 
2002 preambles (and echoed in the December 1999 response-to-comments 
document) for Part 97 concerning the flow control date, USEPA concludes 
that such discussion is not complete and is no longer applicable. In 
the January 18, 2000 Part 97 preamble, USEPA 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. 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 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 USEPA 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. 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 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 were 
less than the total number of regular allowances allocated by states 
participating in the OTC.\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 in the Section 126 trading program (or for that matter the 
NOX SIP Call trading program).
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 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, USEPA retained 
the full ozone season trading budget for 2004 reflecting 5 months of 
emissions, an effective increase of about 20%.
    EPA finds it 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 Ohio and Virginia, no state's 
NOX SIP Call rule used a 2006 flow control date, and the 
Ohio and Virginia NOX SIP Call rules with a 2006 flow 
control date were not promulgated until mid-2002.
    Finally, in the January 18, 2000 Part 97 preamble, USEPA 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 discussion in section 1 above. The Part 97 preambles also 
did not address the issue of consistency with the general objective 
under the Clean Air Act for expeditious as practicable achievement of 
attainment. See discussion in section 4, below. In short, the rationale 
for extending the flow control date stated in the January 18, 2000 Part 
97 preamble is not applicable here.
    3. Although a 2005 flow control date may have the effect of 
reducing the value of some allowances in the

[[Page 46097]]

compliance supplement pool if flow control is triggered in 2005, this 
does not support allowing the Ohio NOX SIP rule to have 2006 
as the flow control date. At the outset, USEPA notes that 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. USEPA 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, USEPA 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. 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.
    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, any reduction in the value of allowances in the 
compliance supplement pool resulting from a 2005 flow control date 
results from the intentional curbing under the NOX SIP Call 
of excessive use of banked allowances and is not a basis for allowing a 
2006 flow control date.\7\
---------------------------------------------------------------------------

    \7\ USEPA notes that, 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. Further, in 
establishing flow control in the NOX SIP Call, USEPA 
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, USEPA 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.
---------------------------------------------------------------------------

    4. USEPA maintains that allowing all states to use 2006 as the flow 
control date would be inconsistent with the Clean Air Act. The Clean 
Air Act rests on an ``overarching'' principle that the national ambient 
air quality standards (NAAQS) be achieved as expeditiously as possible. 
63 FR 57449. For example, under section 181 of the Clean Air Act, the 
``primary standard 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. 63 FR 57449-50.\8\ 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).\9\ Allowing a later flow control date 
would run contrary to the overarching objective of expeditious as 
practicable attainment.
---------------------------------------------------------------------------

    \8\ USEPA 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.
    \9\ In the January 18, 2000 Part 97 preamble, USEPA 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, USEPA 
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.7.
---------------------------------------------------------------------------

    5. If Ohio provides EPA a written commitment to meet the condition 
for approval of the state's NOX SIP Call rule, i.e., to 
adopt a 2005 flow control date within one year of issuance of EPA's 
conditional approval, EPA will record--as soon as practicable after 
EPA's conditional approval becomes effective--the allowance allocations 
provided under Ohio's rule. If it becomes necessary to disapprove the 
state's rule, EPA will have the options of (1) Applying the Section 126 
trading program or (2) adopting a trading program through a federal 
implementation plan. While the Section 126 trading program currently 
includes a 2006 flow control date, EPA could establish a 2005 flow 
control date under a federal implementation plan.

IV. USEPA Action

    We are giving conditional approval to the Ohio NOX SIP 
because it meets the requirements of the USEPA NOX trading 
program by meeting Ohio's NOX budget. Ohio's rule mirrors 
the USEPA model rule for the NOX SIP Call and the State 
adequately responded to all of the concerns of stakeholders during the 
public process. Ohio's plan is approved with the condition that Ohio 
EPA will take action to change the date (the flow control date) in OAC 
3745-14-06(E)(6) from 2006 to 2005 and submit the change to USEPA for 
approval by December 26, 2003. If the flow control date is not changed 
from 2006 to 2005, and Ohio fails to submit the change as a revision to 
its plan by December 26, 2003, USEPA will remove the approval of Ohio's 
NOX SIP and take subsequent rulemaking action, as necessary. 
USEPA is publishing this action as a final rule in response to the 
comment received as a result of the January 16, 2003 final rule which 
received one comment and the proposed rule (published as a proposal in 
the event an adverse

[[Page 46098]]

comment was filed) published in the Federal Register. The public is 
advised that this action will be effective September 4, 2003.
    Ohio EPA submitted a letter to USEPA on June 25, 2003, which 
commits to revising the State rule (3745-14-06(E)(6)) which addresses 
the flow control date. The State committed to change this rule to 
reflect the year 2005 for flow control. USEPA is, therefore, 
conditionally approving the NOX SIP for the State of Ohio. 
As soon as practicable after September 4, 2003, compliance accounts for 
the sources subject to the rule will be populated and allowance trading 
may commence. Within one year of the effective date of the conditional 
approval Ohio must submit an approved State rule which establishes the 
flow control date as 2005.
    If the State fails to submit the required rule and any supporting 
documents to USEPA by December 26, 2003, the final conditional approval 
will automatically convert to a disapproval and USEPA will notify the 
State to this effect. If the SIP is disapproved, this commitment will 
no longer be a part of the NOX SIP. The USEPA will 
subsequently publish a notice in the notice section of the Federal 
Register indicating that the commitment has been disapproved and 
removed from the SIP. If the State adopts and submits the final rule 
amendment as a SIP revision to USEPA, within the six-month period it 
committed to in the commitment letter (and by December 26, 2003, as 
noted in this rule), the conditionally approved commitments will remain 
part of the SIP until USEPA takes final action approving or 
disapproving the new submittal. If USEPA approves the subsequent 
submittal, the newly approved rule and supporting documentation will 
become part of the Ohio NOX SIP.
    If after considering the comments on the subsequent submittal, the 
USEPA issues a final disapproval or if the conditional approval portion 
is converted to a disapproval, the sanctions clock under section 179(a) 
will begin. If the State does not submit and USEPA does not approve the 
rule on which the disapproval is based within 18-months of the 
disapproval, the USEPA must impose one of the sanctions under 179(b)--
highway funding restrictions or the offset sanction. In addition any 
final disapproval would start the 24-month clock for the imposition of 
section 110(c) Federal Implementation Plan.
    USEPA is making this conditional approval effective September 4, 
2003 and source compliance accounts will be populated shortly 
thereafter in order to allow sources subject to the Ohio plan to begin 
to participate in the trading program.

V. Statutory and Executive Order Reviews

Executive Order 12866: Regulatory Planning and Review

    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.

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

    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).

Regulatory Flexibility Act

    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.).

Unfunded Mandates Reform Act

    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).

Executive Order 13175: Coordination With Indian Tribal Governments

    This rule also does 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).

Executive Order 13132: Federalism

    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.

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

    This rule is not subject to Executive Order 13045 (62 FR 19885, 
April 23, 1997), because it is not economically significant.

National Technology Transfer and Advancement Act

    In reviewing SIP submissions, USEPA'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 USEPA, 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.

Paperwork Reduction Act

    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.).

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 
United States. USEPA 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. A major rule cannot 
take effect until 60 days after it is published in the Federal 
Register. This action is not a ``major rule'' as defined by 5 U.S.C. 
804(2). This rule will be effective September 4, 2003.

Petitions for Judicial Review

    Under section 307(b)(1) of the Clean Air Act, petitions for 
judicial review of

[[Page 46099]]

this action must be filed in the United States Court of Appeals for the 
appropriate circuit by October 6, 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 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, Incorporation by 
reference, Intergovernmental relations, Nitrogen oxides, Ozone, 
Reporting and recordkeeping requirements.

    Dated: July 25, 2003.
Bharat Mathur,
Acting Regional Administrator, Region 5.

0
For the reasons stated in the preamble, part 52, chapter I, title 40 of 
the Code of Federal Regulations 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 KK--Ohio

0
2. Section 52.1870 is amended by adding paragraph (c)(128) to read as 
follows:


Sec.  52.1870  Identification of plan.

* * * * *
    (c)* * *
    (128) On July 11, 2002, the Ohio Environmental Protection Agency 
submitted revisions to Chapter 3745-14-(1 through 11) of the Ohio 
Administrative Code (OAC), an oxides of nitrogen (NOX) 
budget trading program in Ohio, with a request that the Ohio State 
Implementation Plan be revised to include these NOX rules.
    (i) Incorporation by reference.
    (A) Ohio NOX rules: 3745-14-01, 3745-14-02, 3745-14-03, 
3745-14-04, 3745-14-05, 3745-14-06, 3745-14-07, 3745-14-08, 3745-14-09, 
3745-14-10, 3745-14-11 in the OAC all with an effective date of July 
18, 2002.
    (ii) On June 25, 2003, the Ohio Environmental Protection Agency 
submitted a letter committing to change the flow control date, in rule 
3745-14-06(E)(6) from 2006 to 2005, within approximately 6 months of 
the effective date of the submittal date.

[FR Doc. 03-19925 Filed 8-4-03; 8:45 am]
BILLING CODE 6560-50-P