[Federal Register Volume 69, Number 20 (Friday, January 30, 2004)]
[Proposed Rules]
[Pages 4566-4650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-808]



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Part III





Environmental Protection Agency





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40 CFR Parts 51, 72, 75, and 96



Rule To Reduce Interstate Transport of Fine Particulate Matter and 
Ozone (Interstate Air Quality Rule); Proposed Rule

  Federal Register / Vol. 69, No. 20 / Friday, January 30, 2004 / 
Proposed Rules  

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 72, 75, and 96

[FRL-7604-3]


Rule To Reduce Interstate Transport of Fine Particulate Matter 
and Ozone (Interstate Air Quality Rule)

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: In today's action, EPA is proposing to find that 29 States and 
the District of Columbia contribute significantly to nonattainment of 
the national ambient air quality standards (NAAQS) for fine particles 
(PM2.5) and/or 8-hour ozone in downwind States. The EPA is 
proposing to require these upwind States to revise their State 
implementation plans (SIPs) to include control measures to reduce 
emissions of sulfur dioxide (SO2) and/or nitrogen oxides 
(NOX). Sulfur dioxide is a precursor to PM2.5 
formation, and NOX is a precursor to both ozone and 
PM2.5 formation. Reducing upwind precursor emissions will 
assist the downwind PM2.5 and 8-hour ozone nonattainment 
areas in achieving the NAAQS. Moreover, attainment would be achieved in 
a more equitable, cost-effective manner than if each nonattainment area 
attempted to achieve attainment by implementing local emissions 
reductions alone.
    Based on State obligations to address interstate transport of 
pollutants under section 110(a)(2)(D) of the Clean Air Act (CAA), EPA 
is proposing statewide emissions reduction requirements for 
SO2 and NOX. The EPA is proposing that the 
emissions reductions be implemented in two phases, with the first phase 
in 2010 and the second phase in 2015. The proposed emissions reduction 
requirements are based on controls that are known to be highly cost 
effective for electric generating units (EGUs).
    Today's action also discusses model multi-State cap and trade 
programs for SO2 and NOX that States could choose 
to adopt to meet the proposed emissions reductions in a flexible and 
cost-effective manner. The EPA intends to propose the model trading 
programs in a future supplemental action.

DATES: The comment period on this proposal ends on March 30, 2004. 
Comments must be postmarked by the last day of the comment period and 
sent directly to the Docket Office listed in ADDRESSES (in duplicate 
form if possible).
    Up to two public hearings will be held prior to the end of the 
comment period. The dates, times and locations will be announced 
separately. Please refer to SUPPLEMENTARY INFORMATION for additional 
information on the comment period and public hearings.

ADDRESSES: Comments may be submitted by mail to: Air Docket, 
Environmental Protection Agency, Mail code: 6102T, 1200 Pennsylvania 
Ave., NW., Washington, DC 20460, Attention Docket ID No. OAR-2003-0053.
    Comments may also be submitted electronically, by facsimile, or 
through hand delivery/courier. Follow the detailed instructions 
provided under SUPPLEMENTARY INFORMATION.
    Documents relevant to this action are available for public 
inspection at the EPA Docket Center, located at 1301 Constitution 
Avenue, NW., Room B102, Washington, DC between 8:30 a.m. and 4:30 p.m., 
Monday through Friday, excluding legal holidays. A reasonable fee may 
be charged for copying.

FOR FURTHER INFORMATION CONTACT: For general questions concerning 
today's action, please contact Scott Mathias, U.S. EPA, Office of Air 
Quality Planning and Standards, Air Quality Strategies and Standards 
Division, C539-01, Research Triangle Park, NC, 27711, telephone (919) 
541-5310, e-mail at [email protected]. For legal questions, please 
contact Howard J. Hoffman, U.S. EPA, Office of General Counsel, Mail 
Code 2344A, 1200 Pennsylvania Avenue, NW., Washington, DC, 20460, 
telephone (202) 564-5582, e-mail at [email protected]. For 
questions regarding air quality analyses, please contact Norm Possiel, 
U.S. EPA, Office of Air Quality Planning and Standards, Emissions 
Modeling and Analysis Division, D243-01, Research Triangle Park, NC, 
27711, telephone (919) 541-5692, e-mail at [email protected]. For 
questions regarding statewide emissions inventories and emissions 
reductions requirements, please contact Ron Ryan, U.S. EPA, Office of 
Air Quality Planning and Standards, Emissions Modeling and Analysis 
Division, Mail Code D205-01, Research Triangle Park, NC, 27711, 
telephone (919) 541-4330, e-mail at [email protected]. For questions 
regarding the EGU cost analyses, emissions inventories and budgets, 
please contact Kevin Culligan, U.S. EPA, Office of Atmospheric 
Programs, Clean Air Markets Division, Mail Code 6204J, 1200 
Pennsylvania Avenue, NW., Washington, DC, 20460, telephone (202) 343-
9172, e-mail at [email protected]. For questions regarding the 
model cap and trade programs, please contact Sam Waltzer, U.S. EPA, 
Office of Atmospheric Programs, Clean Air Markets Division, Mail Code 
6204J, 1200 Pennsylvania Avenue, NW., Washington, DC, 20460, telephone 
(202) 343-9175, e-mail at [email protected]. For questions regarding 
the regulatory impact analyses, please contact Linda Chappell, U.S. 
EPA, Office of Air Quality Planning and Standards, Air Quality 
Strategies and Standards Division, Mail Code C339-01, Research Triangle 
Park, NC, 27711, telephone (919) 541-2864, e-mail at 
[email protected].

SUPPLEMENTARY INFORMATION:

Regulated Entities

    This action does not propose to directly regulate emissions 
sources. Instead, it proposes to require States to revise their SIPs to 
include control measures to reduce emissions of NOX and 
SO2. The proposed emissions reductions requirements that 
would be assigned to the States are based on controls that are known to 
be highly cost effective for EGUs.

Public Hearing

    The EPA will hold up to two public hearings on today's proposal 
during the comment period. The details of the public hearings, 
including the times, dates, and locations will be provided in a future 
Federal Register notice and announced on EPA's Web site for this 
rulemaking at http://www.epa.gov/interstateairquality/.
    The public hearings will provide interested parties the opportunity 
to present data, views, or arguments concerning the proposed rule. The 
EPA may ask clarifying questions during the oral presentations, but 
will not respond to the presentations or comments at that time. Written 
statements and supporting information submitted during the comment 
period will be considered with the same weight as any oral comments and 
supporting information presented at a public hearing.

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

    Docket. The EPA has established an official public docket for this 
action under Docket ID No. OAR-2003-0053. The official public docket 
consists of the documents specifically referenced in this action, any 
public comments received, and other information related to this action. 
Although a part of the official docket, the public docket does not 
include Confidential Business Information (CBI) or other information 
whose disclosure is restricted by statute.

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The official public docket is the collection of materials that is 
available for public viewing at the Air Docket in the EPA Docket 
Center, (EPA/DC) EPA West, Room B102, 1301 Constitution Ave., NW., 
Washington, DC. The EPA Docket Center Public Reading Room is open from 
8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal 
holidays. The telephone number for the Public Reading Room is (202) 
566-1744, and the telephone number for the Air Docket is (202) 566-
1742. A reasonable fee may be charged for copying.
    Electronic Access. You may access this Federal Register document 
electronically through the EPA Internet under the ``Federal Register'' 
listings at http://www.epa.gov/fedrgstr/.
    An electronic version of the public docket is available through 
EPA's electronic public docket and comment system, EPA Dockets. You may 
use EPA Dockets at http://www.epa.gov/edocket/ to submit or view public 
comments, access the index listing of the contents of the official 
public docket, and to access those documents in the public docket that 
are available electronically. Once in the system, select ``search,'' 
then key in the appropriate docket identification number.
    Certain types of information will not be placed in the EPA Dockets. 
Information claimed as CBI and other information whose disclosure is 
restricted by statute, which is not included in the official public 
docket, will not be available for public viewing in EPA's electronic 
public docket. The EPA's policy is that copyrighted material will not 
be placed in EPA's electronic public docket but will be available only 
in printed, paper form in the official public docket. To the extent 
feasible, publicly available docket materials will be made available in 
EPA's electronic public docket. When a document is selected from the 
index list in EPA Dockets, the system will identify whether the 
document is available for viewing in EPA's electronic public docket. 
Although not all docket materials may be available electronically, you 
may still access any of the publicly available docket materials through 
the docket facility identified above. The EPA intends to work towards 
providing electronic access to all of the publicly available docket 
materials through EPA's electronic public docket.
    For public commenters, it is important to note that EPA's policy is 
that public comments, whether submitted electronically or in paper, 
will be made available for public viewing in EPA's electronic public 
docket as EPA receives them and without change, unless the comment 
contains copyrighted material, CBI, or other information whose 
disclosure is restricted by statute. When EPA identifies a comment 
containing copyrighted material, EPA will provide a reference to that 
material in the version of the comment that is placed in EPA's 
electronic public docket. The entire printed comment, including the 
copyrighted material, will be available in the public docket.
    Public comments submitted on computer disks that are mailed or 
delivered to the docket will be transferred to EPA's electronic public 
docket. Public comments that are mailed or delivered to the Docket will 
be scanned and placed in EPA's electronic public docket. Where 
practical, physical objects will be photographed, and the photograph 
will be placed in EPA's electronic public docket along with a brief 
description written by the docket staff.
    For additional information about EPA's electronic public docket, 
visit EPA Dockets online or see 67 FR 38102; May 31, 2002.
    The EPA has also established a Web site for this rulemaking at 
http://www.epa.gov/interstateairquality/ which will include the 
rulemaking actions and certain other related information.

How and to Whom Do I Submit Comments?

    You may submit comments electronically, by mail, by facsimile, or 
through hand delivery/courier. To ensure proper receipt by EPA, 
identify the appropriate docket identification number, OAR-2003-0053, 
in the subject line on the first page of your comment. Please ensure 
that your comments are submitted within the specified comment period. 
Comments received after the close of the comment period will be marked 
``late.'' The EPA is not required to consider these late comments. If 
you wish to submit CBI or information that is otherwise protected by 
statute, please follow the instructions below under, ``How Should I 
submit CBI to the Agency?'' Do not use EPA Dockets or e-mail to submit 
CBI or information protected by statute.
    Electronically. If you submit an electronic comment as prescribed 
below, EPA recommends that you include your name, mailing address, and 
an e-mail address or other contact information in the body of your 
comment. Also include this contact information on the outside of any 
disk or CD ROM you submit, and in any cover letter accompanying the 
disk or CD ROM. This ensures that you can be identified as the 
submitter of the comment and allows EPA to contact you in case EPA 
cannot read your comment due to technical difficulties or needs further 
information on the substance of your comment. The EPA's policy is that 
EPA will not edit your comment, and any identifying or contact 
information provided in the body of a comment will be included as part 
of the comment that is placed in the official public docket, and made 
available in EPA's electronic public docket. If EPA cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, EPA may not be able to consider your comment.
    EPA Dockets. Your use of EPA's electronic public docket to submit 
comments to EPA electronically is EPA's preferred method for receiving 
comments. Go directly to EPA Dockets at http://www.epa.gov/edocket, and 
follow the online instructions for submitting comments. To access EPA's 
electronic public docket from the EPA Internet Home Page, select 
``Information Sources,'' ``Dockets,'' and ``EPA Dockets.'' Once in the 
system, select ``search,'' and then key in Docket ID No. OAR-2003-0053. 
The system is an ``anonymous access'' system, which means EPA will not 
know your identity, e-mail address, or other contact information unless 
you provide it in the body of your comment.
    Electronic mail. Comments may be sent by e-mail to [email protected], Attention Docket ID No. OAR-2003-0053. In contrast to 
EPA's electronic public docket, EPA's e-mail system is not an 
``anonymous access'' system. If you send an e-mail comment directly to 
the Docket without going through EPA's electronic public docket, EPA's 
e-mail system automatically captures your e-mail address. The e-mail 
addresses that are automatically captured by EPA's e-mail system are 
included as part of the comment that is placed in the official public 
docket, and made available in EPA's electronic public docket. 
Electronic submissions will be accepted in WordPerfect or ASCII file 
format. Avoid the use of special characters and any form of encryption.
    Disk or CD ROM. You may submit comments on a disk or CD ROM that 
you mail to the mailing address identified under Docket above. These 
electronic submissions will be accepted in WordPerfect or ASCII file 
format. Avoid the use of special characters and any form of encryption.
    By Mail. Send your comments to Air Docket (in duplicate if 
possible), Environmental Protection Agency, Mail code: 6102T, 1200 
Pennsylvania Ave.,

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NW, Washington, DC, 20460, Attention Docket ID No. OAR-2003-0053.
    By Hand Delivery or Courier. Deliver your comments to: Air Docket, 
Environmental Protection Agency, 1301 Constitution Avenue, NW, Room 
B108, Mail code: 6102T, Washington, DC 20004, Attention Docket ID No. 
OAR-2003-0053. Such deliveries are only accepted during the Docket's 
normal hours of operation as identified above under Docket.
    By Facsimile. Fax your comments to (202) 566-1741, Attention Docket 
ID. No. OAR-2003-0053.

How Should I Submit CBI to the Agency?

    Do not submit information that you consider to be CBI 
electronically through EPA's electronic public docket or by e-mail. 
Send or deliver information identified as CBI only to the following 
address: Roberto Morales, U.S. EPA, Office of Air Quality Planning and 
Standards, Mail Code C404-02, Research Triangle Park, NC 27711, 
telephone (919) 541-0880, e-mail at [email protected], Attention 
Docket ID No. OAR-2003-0053. You may claim information that you submit 
to EPA as CBI by marking any part or all of that information as CBI (if 
you submit CBI on disk or CD ROM, mark the outside of the disk or CD 
ROM as CBI and then identify electronically within the disk or CD ROM 
the specific information that is CBI). Information so marked will not 
be disclosed except in accordance with procedures set forth in 40 CFR 
part 2.
    In addition to one complete version of the comment that includes 
any information claimed as CBI, a copy of the comment that does not 
contain the information claimed as CBI must be submitted for inclusion 
in the public docket and EPA's electronic public docket. If you submit 
the copy that does not contain CBI on disk or CD ROM, mark the outside 
of the disk or CD ROM clearly that it does not contain CBI. Information 
not marked as CBI will be included in the public docket and EPA's 
electronic public docket without prior notice. If you have any 
questions about CBI or the procedures for claiming CBI, please consult 
the person identified in the FOR FURTHER INFORMATION CONTACT section.

What Should I Consider as I Prepare My Comments for EPA?

    You may find the following suggestions helpful for preparing your 
comments:
    1. Explain your views as clearly as possible.
    2. Describe any assumptions that you used.
    3. Provide any technical information and/or data you used that 
support your views.
    4. If you estimate potential burden or costs, explain how you 
arrived at your estimate.
    5. Provide specific examples to illustrate your concerns.
    6. Offer alternatives.
    7. Make sure to submit your comments by the comment period deadline 
identified.
    8. To ensure proper receipt by EPA, identify the appropriate docket 
identification number in the subject line on the first page of your 
response. It would also be helpful if you provided the name, date, and 
Federal Register citation related to your comments.

Outline

I. Background
    A. Summary of Rulemaking and Affected States
    B. General Background on Air Quality Impacts of PM2.5 
and Ozone
    1. What are the Effects of Ambient PM2.5?
    2. What are the Effects of Ambient Ozone?
    3. What Other Environmental Effects Are Associated with 
SO2 and NOX, the Main Precursors to 
PM2.5 and Ozone Addressed in this Proposal?
    C. What is the Ambient Air Quality of PM2.5 and 
Ozone?
    1. What is the PM2.5 Ambient Air Quality?
    2. What is the Ozone Ambient Air Quality?
    D. What is the Statutory and Regulatory Background for Today's 
Action?
    1. What are the CAA Provisions on Attainment of the 
PM2.5 and Ozone NAAQS?
    2. What is the NOX SIP Call?
    3. What is the Acid Rain Program and Its Relationship to this 
Proposal?
    4. What is the Regional Haze Program and Its Relationship to 
this Proposal?
    5. What is the Proposed Utility Control Program for Air Toxics 
and Its Relationship to This Proposal?
II. Characterization of the Origin and Distribution of 8-Hour Ozone 
and PM2.5 Air Quality Problems
    A. Ground-level Ozone
    1. Ozone Formation
    2. Spatial and Temporal Patterns of Ozone
    B. Fine Particles
    1. Characterization and Origins of Fine Particles
    2. Spatial and Temporal Patterns of PM2.5 and Major 
Components
    3. Implications for Control of Transported PM2.5
    4. Air Quality Impacts of Regional SO2 Reductions
III. Overview of Proposed Interstate Air Quality Rule
    A. Purpose of Interstate Air Quality Rule
    B. Summary of EPA's Key Findings and Proposed Remedy for 
Interstate Transport
    C. Coordination of Multiple Air Quality Objectives in Today's 
Rulemakings
    1. Linkages Between Interstate Air Quality and Mercury 
Rulemakings
    2. Linkages Between PM2.5 and 8-Hour Ozone Transport 
Requirements
    3. Linkages Between Interstate Air Quality Rulemaking and 
Section 126 Petitions
    D. Overview of How EPA Assessed Interstate Transport and 
Determined Remedies
    1. Assessment of Current and Future Nonattainment
    2. Prospects for Progress Towards Attainment Through Local 
Reductions
    a. Fine Particles
    b. Eight-hour Ozone
    3. Assessment of Transported Pollutants and Precursors
    a. Fine Particles
    b. Ozone
    4. Role of Interstate Transport in Future Nonattainment
    a. Fine Particles
    b. Eight-hour Ozone
    5. Assessment of Potential Emissions Reductions
    a. Identifying Highly Cost-Effective Emissions Reductions
    b. Timing for Submission of Transport SIPs
    c. Timing for Achieving Emissions Reductions
    d. Compliance Approaches and Statewide Emissions Budgets
    E. Request for Comment on Potential Applicability to Regional 
Haze
    F. How Will the Interstate Air Quality Rule Apply to the 
Federally Recognized Tribes?
IV. Air Quality Modeling to Determine Future 8-Hour Ozone and 
PM2.5 Concentrations
    A. Introduction
    B. Ambient 8-Hour Ozone and Annual Average PM2.5 
Design Values
    1. Eight-Hour Ozone Design Values
    2. Annual Average PM2.5 Design Values
    C. Emissions Inventories
    1. Introduction
    2. Overview of 2001 Base Year Emissions Inventory
    3. Overview of the 2010 and 2015 Base Case Emissions Inventories
    4. Procedures for Development of Emissions Inventories
    a. Development of Emissions Inventories for Electric Generating 
Units
    b. Development of Emissions Inventories for On-Road Vehicles
    c. Development of Emissions Inventories for Non-Road Engines
    d. Development of Emissions Inventories for Other Sectors
    5. Preparation of Emissions for Air Quality Modeling
    D. Ozone Air Quality Modeling
    1. Ozone Modeling Platform
    2. Ozone Model Performance Evaluation
    3. Projection of Future 8-Hour Ozone Nonattainment
    E. The PM2.5 Air Quality Modeling
    1. The PM2.5 Modeling Platform
    2. The PM2.5 Model Performance Evaluation
    3. Projection of Future PM2.5 Nonattainment
    F. Analysis of Locally-Applied Control Measures for Reducing 
PM2.5

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    1. Control Measures and Percentage Reductions
    2. Two Scenarios Analyzed for the Geographic Area Covered by 
Control Measures
    3. Results of the Two Scenarios
    4. Additional Observations on the Results of the Local Measures 
Analyses
V. Air Quality Aspects of Significant Contribution for 8-Hour Ozone 
and Annual Average PM2.5 Before Considering Cost
    A. Introduction
    B. Significant Contribution to 8-Hour Ozone Before Considering 
Cost
    1. Findings from Non-EPA Analyses that Support the Need for 
Reductions in Interstate Ozone Transport
    2. Air Quality Modeling of Interstate Ozone Contributions
    a. Analytical Techniques for Modeling Interstate Contributions 
to 8-Hour Ozone Nonattainment
    b. Zero-Out Metrics
    c. Source Apportionment Metrics
    d. Evaluation of Upwind State Contributions to Downwind 8-Hour 
Ozone Nonattainment
    C. Significant Contribution for Annual Average PM2.5 
Before Considering Cost
    1. Analyses of Air Quality Data that Support the Need to Reduce 
Interstate Transport of PM2.5
    a. Spatial Gradients of Pollutant Concentrations
    b. Urban vs. Rural Concentrations
    c. Inter-site Correlation of PM2.5 Mass and Component 
Species
    d. Ambient Source Apportionment Studies
    2. Non-EPA Air Quality Modeling Analyses Relevant to 
PM2.5 Transport and Mitigation Strategies
    3. Air Quality Modeling of Interstate PM2.5 
Contributions
    a. Analytical Techniques for Modeling Interstate Contributions 
to Annual Average PM2.5 Nonattainment
    b. Evaluation of Upwind State Contributions to Downwind 
PM2.5 Nonattainment
VI. Emissions Control Requirements
    A. Source Categories Used for Budget Determinations
    1. Electric Generation Units
    2. Treatment of Cogenerators
    3. Non-EGU Boilers and Turbines
    4. Other Non-EGUs
    B. Overview of Control Requirements and EGU Budgets
    C. Regional Control Requirements and Budgets Based on a Showing 
of Significant Contribution
    1. Performance and Applicability of Pollution Control 
Technologies for EGUs
    2. Evaluation of Cost Effectiveness
    a. Cost Effectiveness of SO2 Emissions Reductions
    b. Cost Effectiveness of NOX Emissions Reductions
    c. The EPA Cost Modeling Methodology
    3. Timing, Engineering and Financial Factor Impacts
    a. Engineering Assessment to Determine Phase 1 Budgets
    b. Financial and Other Technical Issues Regarding Pollution 
Control Installation
    4. Interactions with Existing Title IV Program
    D. Methodology for Setting SO2 and NOX 
Budgets
    1. Approach for Setting Regionwide SO2 and 
NOX Emissions Reductions Requirements
    a. SO2 Budgets for EGUs
    b. NOX Budgets for EGUs
    2. State-by-State Emissions Reductions Requirements and EGU 
Budgets
    E. Budgets for Use by States Choosing to Control Non-EGU Source 
Categories
    F. Timing and Process for Setting Baseline Inventories and Sub-
inventories
    G. Comment on Emissions Caps and Budget Program
    H. Budgets for Federally-Recognized Tribes
VII. State Implementation Plan Schedules and Requirements
    A. State Implementation Plan Schedules
    1. State Implementation Plan Submission Schedule
    2. Implementation Schedule
    B. State Implementation Plan Requirements
    1. The Budget Approach
    2. The Emissions Reduction Approach
    3. The EPA's Proposed Hybrid Approach
    a. Requirements if States Choose to Control EGUs
    b. Requirements if States Choose to Control Sources Other than 
EGUs
VIII. Model Cap and Trade Program
    A. Application of Cap and Trade Approach
    1. Purpose of the Cap and Trade Programs and Model Rules
    2. Benefits of Participating in a Cap and Trade Program
    a. Advantages of Cap and Trade Over Command-and-Control
    b. Application of the Cap and Trade Approach in Prior 
Rulemakings
     i. Title IV
    ii. Ozone Transport Commission NOX Budget Program
    iii. NOX SIP Call
    c. Regional Environmental Improvements Achieved Using Cap and 
Trade Programs
    B. Considerations and Aspects Unique to the SO2 Cap 
and Trading Program
    1. The SO2 Cap and Trade Program Overview
    2. Interactions with Existing Title IV Acid Rain SO2 
Cap and Trade Program
    a. Initial Analysis
    b. Emissions Increases Prior to Implementation of the Proposed 
Rule
    c. Consideration for Emissions Shifting Outside the Control 
Region
    d. Desired Outcomes in the Design of the Cap and Trade Rule
    e. Discussion of Possible Solutions
    f. Proposed Approach
    i. Using Pre-2010 Banked Title IV Allowances in Proposed 
SO2 Cap and Trade Program
    ii. Proposed Ratios and the Phasing of the Caps
    3. Allowance Allocations
    a. Statewide Cap and Trade Budgets
    b. Determination of SO2 Allowance Allocations for 
EGUs not Receiving Title IV Allowances
    C. Consideration and Aspects Unique to the NOX Cap 
and Trade Program
    1. NOX Cap and Trade Program Overview
    2. Interactions with the NOX SIP Call Cap and Trade 
Program and the Title IV NOX Program
    a. Geographic Scope
    b. Seasonal-to-Annual Compliance Period
    c. Revision of Existing State NOX SIP Call Rules
    d. Retention of Existing Title IV NOX Emission Rate 
Limits
    e. The NOX Allowance Banking
    3. NOX Allocations
    4. Joining Both SO2 and NOX Cap and Trade 
Programs for States Voluntarily Participating
    D. Cap and Trade Program Aspects that are Common to Both the 
SO2 and NOX Programs
    1. Applicability
    a. Core Applicability
    2. Allowance Management System, Compliance, Penalties, and 
Banking
    a. Allowance Management
    b. Compliance
    c. Penalties
    d. Banking
    3. Accountability for Affected Sources
    4. Allowance Allocation Timing
    5. Emissions Monitoring and Reporting
    E. Inter-pollutant Trading
IX. Air Quality Modeling of Emissions Reductions
    A. Introduction
    B. The PM2.5 Air Quality Modeling of the Proposed Regional 
SO2 and NOX Strategy
    C. Ozone Air Quality Modeling of the Regional NOX 
Strategy
X. Benefits of Emissions Reductions in Addition to the PM and Ozone 
NAAQS
    A. Atmospheric Deposition of Sulfur and Nitrogen--Impacts on 
Aquatic, Forest, and Coastal Ecosystems
    1. Acid Deposition and Acidification of Lakes and Streams
    2. Acid Deposition and Forest Ecosystem Impacts
    3. Coastal Ecosystems
    B. Human Health and Welfare Effects Due to Deposition of Mercury
XI. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination with 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children from 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions that Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer Advancement Act
    J. Executive Order 12898: Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations

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I. Background

A. Summary of Rulemaking and Affected States

    The CAA contains a number of requirements to address nonattainment 
of the PM2.5 and the 8-hour ozone national ambient air 
quality standards (NAAQS), including requirements that States address 
interstate transport that contributes to such nonattainment.\1\ Based 
on air quality modeling, ambient air quality data analyses, and cost 
analyses, EPA proposes to conclude that emissions in certain upwind 
States result in amounts of transported fine particles 
(PM2.5), ozone, and their emissions precursors that 
significantly contribute to nonattainment in downwind States. In 
today's action, we are proposing State implementation plan (SIP) 
requirements for the affected upwind States under CAA section 110(a)(1) 
to meet the requirements of section 110(a)(2)(D). Clean Air Act Section 
110(a)(2)(D) requires SIPs to contain adequate provisions to prohibit 
air pollutant emissions from sources or activities in those States from 
``contribut[ing] significantly to nonattainment in,'' a downwind State 
of the PM2.5 and ozone NAAQS. In particular, EPA is 
proposing to require SIP revisions in 29 States and the District of 
Columbia to ensure that SIPs provide for necessary regional reductions 
of emissions of SO2 and/or NOX, which are 
important precursors of PM2.5 (NOX and 
SO2) and ozone (NOX). Achieving these emissions 
reductions will help enable PM2.5 and ozone nonattainment 
areas in the eastern half of the United States to prepare attainment 
demonstrations. Moreover, attainment would ultimately be achieved in a 
more certain, equitable, and cost-effective manner than if each 
nonattainment area attempted to implement local emissions reductions 
alone. We are proposing to require the submission of SIP measures that 
meet the specified SO2 and NOX emissions 
reductions requirements within 18 months after publication of the 
notice of final rulemaking.
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    \1\ In today's proposal, when we use the term ``transport'' we 
mean to include the transport of both fine particles 
(PM2.5) and their precursor emissions and/or transport of 
both ozone and its precursor emissions.
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    The EPA has evaluated current scientific and technical knowledge 
and conducted a number of air quality data and modeling analyses 
regarding the contribution of pollutant emissions to interstate 
transport. These evaluations and modeling analyses are summarized in 
section II, Characterization of the Origin and Distribution of 8-Hour 
Ozone and PM2.5 Air Quality Problems, section IV, Air 
Quality Modeling to Determine Future 8-Hour Ozone and PM2.5 
Concentrations, and section V, Air Quality Aspects of Significant 
Contribution for 8-Hour Ozone and Annual Average PM2.5 
Before Considering Cost. The EPA proposes to find, after considering 
relevant information, that SO2 and NOX emissions 
in the District of Columbia and the following 28 States significantly 
contribute to nonattainment in a downwind State with respect to the 
PM2.5 NAAQS: Alabama, Arkansas, Delaware, Florida, Georgia, 
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, 
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Jersey, 
New York, North Carolina, Ohio, Pennsylvania, South Carolina, 
Tennessee, Texas, Virginia, West Virginia, and Wisconsin. The EPA also 
proposes to find, after considering relevant information, that 
NOX emissions in the District of Columbia and the following 
25 States significantly contribute to nonattainment in a downwind State 
with respect to the 8-hour ozone NAAQS: Alabama, Arkansas, Connecticut, 
Delaware, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, 
Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, 
New York, North Carolina, Ohio, Pennsylvania, South Carolina, 
Tennessee, Virginia, West Virginia, and Wisconsin. In addition to 
proposing findings of significant contribution to nonattainment, EPA is 
proposing to assign emissions reductions requirements for 
SO2 and/or NOX that each of the identified States 
must meet through SIP measures.
    The proposed emissions reductions requirements are based on 
controls that EPA has determined to be highly cost effective for EGUs 
under an optional cap and trade program. However, States have the 
flexibility to choose the measures to adopt to achieve the specified 
emissions reductions. If the State chooses to control EGUs, then it 
must establish a budget--that is, an emissions cap--for those sources. 
Due to feasibility constraints, EPA is proposing that the emissions 
reductions be implemented in two phases, with the first phase in 2010 
and the second phase in 2015. These requirements are described in more 
detail in section VI, Emissions Control Requirements; section VII, 
State Implementation Plan Schedules and Requirements; and section VIII, 
Model Cap and Trade Program.
    Section VIII discusses model multi-State cap and trade programs for 
SO2 and NOX that EPA is developing that States 
could choose to adopt to meet the proposed emissions reductions in a 
flexible and cost-effective way. We intend to propose the model trading 
programs in a future supplemental notice of proposed rulemaking (SNPR) 
to be issued by May 2004. We plan to address several additional issues 
in the SNPR.
    Sulfur dioxide and NOX are not the only emissions that 
contribute to interstate transport and PM2.5 nonattainment. 
However, EPA believes that given current knowledge, it is not 
appropriate at this time to specify emissions reduction requirements 
for direct PM2.5 emissions or organic precursors (e.g. 
volatile organic compounds (VOCs) or ammonia (NH3)). (For 
further discussion of EPA's proposal on which pollutant emissions to 
regulate, see section III.) Therefore, we are not proposing new SIP 
requirements for emissions of these pollutants for the purpose of 
reducing the interstate transport of PM2.5. States may, 
however, need to consider additional reductions in some or all of these 
emissions as they develop SIPs to attain and maintain the 
PM2.5 standards. Similarly, for 8-hour ozone, we continue to 
rely on the conclusion of the Ozone Transport Assessment Group (OTAG) 
that analysis of interstate transport control opportunities should 
focus on NOX, rather than VOCs.\2\
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    \2\ The OTAG was active from 1995-1997 and consisted of 
representatives from the 37 states in that region; the District of 
Columbia; EPA; and interested members of the public, including 
industry and environmental groups. See discussion below under 
NOX SIP Call for further information on OTAG.
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    Section III of this preamble, Overview of Proposed Interstate Air 
Quality Rule, explains in broad overview our assessment of the 
interstate pollution transport problem and our development of this 
proposal to address transport under the CAA.
    The requirements in this proposal are intended to address regional 
interstate transport of air pollution. There are likely more localized 
transport problems that will remain, particularly between contiguous 
urban areas located in two or more States. States that share an 
interstate nonattainment area are expected to work together in 
developing the nonattainment SIP for that area, reducing emissions that 
contribute to local-scale interstate transport problems.
    In this preamble, we generally refer to States as both the sources 
and receptors of interstate transport that contributes to 
nonattainment. We intend to refer to Tribal governments in a similar 
way. Clean Air Act section 301(d) recognizes that American Indian 
Tribal

[[Page 4571]]

governments are generally the appropriate authority to implement the 
CAA in Indian country. The Tribal Authority Rule (TAR) (63 FR 7262; 
February 12, 1998 and 59 FR 43960-43961; August 24, 1994) discusses the 
provisions of the CAA for which it is appropriate to treat Tribes in a 
manner similar to States. Therefore, in this preamble, unless otherwise 
specified, when we discuss the role of the State in implementing the 
Interstate Air Quality Rule, we are also referring to the Tribes. In 
certain parts of this preamble, however, we ask for comments on 
addressing the special needs of the Tribes. Section VI provides a more 
complete discussion of this Tribal issue.
    Our benefit-cost analysis concludes that substantial net economic 
benefits to society are likely to be achieved as a result of the 
emissions reductions associated with this rulemaking. The results 
detailed in section XI show that this rule would be highly beneficial 
to society, with annual net benefits by 2010 of approximately $55 
billion ($58 billion annual benefits compared to annual social cost of 
approximately $3 billion) and net annual benefits by 2015 of $80 
billion ($84 billion in benefits compared to annual social costs of $4 
billion). Therefore, even if the benefits were overestimated by as much 
as a factor of twenty, benefits would still exceed costs.

B. General Background on Air Quality Impacts of PM2.5 and 
Ozone

1. What Are the Effects of Ambient PM2.5?
    On July 18, 1997, we revised the NAAQS for particulate matter (PM) 
to add new standards for fine particles, using as the indicator 
particles with aerodynamic diameters smaller than a nominal 2.5 
micrometers, termed PM2.5. We established health- and 
welfare-based (primary and secondary) annual and 24-hour standards for 
PM2.5 (62 FR 38652). The annual standards are 15 micrograms 
per cubic meter, based on the 3-year average of annual mean 
PM2.5 concentrations. The 24-hour standard is a level of 65 
micrograms per cubic meter, based on the 3-year average of the annual 
98th percentile of 24-hour concentrations.
    Fine particles are associated with a number of serious health 
effects including premature mortality, aggravation of respiratory and 
cardiovascular disease (as indicated by increased hospital admissions, 
emergency room visits, absences from school or work, and restricted 
activity days), lung disease, decreased lung function, asthma attacks, 
and certain cardiovascular problems such as heart attacks and cardiac 
arrhythmia. The EPA has estimated that attainment of the 
PM2.5 standards would prolong tens of thousands of lives and 
prevent tens of thousands of hospital admissions each year, as well as 
hundreds of thousands of doctor visits, absences from work and school, 
and respiratory illnesses in children. Individuals particularly 
sensitive to fine particle exposure include older adults, people with 
heart and lung disease, and children. Health studies have shown that 
there is no clear threshold below which adverse effects are not 
experienced by at least certain segments of the population. Thus, some 
individuals particularly sensitive to fine particle exposure may be 
adversely affected by fine particle concentrations below those for the 
annual and 24-hour standards. More detailed information on health 
effects of fine particles can be found on EPA's Web site at: http://www.epa.gov/ttn/naaqs/standards/pm/s_pm_index.html.
    At the time EPA established the primary standards in 1997, we also 
established welfare-based (secondary) standards identical to the 
primary standards. The secondary standards are designed to protect 
against major environmental effects caused by PM such as visibility 
impairment, soiling, and materials damage.
    The EPA also established the regional haze regulations in 1999 for 
the improvement of visual air quality in Class I areas which include 
national parks and wilderness areas across the country.
    As discussed in other sections of this preamble, EGUs are a major 
source of SO2 and NOX emissions, both of which 
contribute to fine particle concentrations. In addition, EGU 
NOX emissions contribute to ozone problems, described in the 
next section. We believe today's proposal will significantly reduce 
SO2 and NOX emissions that contribute to 
PM2.5 and 8-hour ozone problems described here. The control 
strategies we are proposing are discussed in detail in section III and 
section VI below.
2. What Are the Effects of Ambient Ozone?
    On July 18, 1997, EPA promulgated identical revised ozone primary 
and secondary ozone standards that specified that the 3-year average of 
the fourth highest daily maximum 8-hour average ozone concentration 
could not exceed 0.08 ppm. In general, the revised 8-hour standards are 
more protective of public health and the environment and more stringent 
than the pre-existing 1-hour ozone standards. There are more areas that 
do not meet the 8-hour standard than there are that do not meet the 1-
hour standard. Short-term (1- to 3-hour) and prolonged (6- to 8-hour) 
exposures to ambient ozone have been linked to a number of adverse 
health effects. Short-term exposure to ozone can irritate the 
respiratory system, causing coughing, throat irritation, and chest 
pain. Ozone can reduce lung function and make it more difficult to 
breathe deeply. Breathing may become more rapid and shallow than 
normal, thereby limiting a person's normal activity. Ozone also can 
aggravate asthma, leading to more asthma attacks that require a 
doctor's attention and the use of additional medication. Increased 
hospital admissions and emergency room visits for respiratory problems 
have been associated with ambient ozone exposures. Longer-term ozone 
exposure can inflame and damage the lining of the lungs, which may lead 
to permanent changes in lung tissue and irreversible reductions in lung 
function. A lower quality of life may result if the inflammation occurs 
repeatedly over a long time period (such as months, years, a lifetime).
    People who are particularly susceptible to the effects of ozone 
include children and adults who are active outdoors, people with 
respiratory diseases, such as asthma, and people with unusual 
sensitivity to ozone.
    In addition to causing adverse health effects, ozone affects 
vegetation and ecosystems, leading to reductions in agricultural crop 
and commercial forest yields; reduced growth and survivability of tree 
seedlings; and increased plant susceptibility to disease, pests, and 
other environmental stresses (e.g., harsh weather). In long-lived 
species, these effects may become evident only after several years or 
even decades and thus have the potential for long-term adverse impacts 
on forest ecosystems. Ground-level ozone damage to the foliage of trees 
and other plants can also decrease the aesthetic value of ornamental 
species used in residential landscaping, as well as the natural beauty 
of our national parks and recreation areas. The economic value of some 
welfare losses due to ozone can be calculated, such as crop yield loss 
from both reduced seed production (e.g., soybean) and visible injury to 
some leaf crops (e.g., lettuce, spinach, tobacco) and visible injury to 
ornamental plants (i.e., grass, flowers, shrubs), while other types of 
welfare loss may not be fully quantifiable in economic terms (e.g., 
reduced aesthetic value of trees growing in heavily visited National 
parks). More detailed information on health effects of ozone

[[Page 4572]]

can be found at the following EPA Web site: http://www.epa.gov/ttn/naaqs/standards/ozone/s_o3_index.html.
3. What Other Environmental Effects Are Associated With SO2 
and NOX, the Main Precursors to PM2.5 and Ozone 
Addressed in This Proposal?
    This proposed action will result in benefits in addition to the 
enumerated human health and welfare benefits resulting from reductions 
in ambient levels of PM and ozone. Reductions in NOX and 
SO2 will contribute to substantial visibility improvements 
in many parts of the Eastern U.S. where people live, work, and 
recreate, including Federal Class I areas such as the Great Smoky 
Mountains. Reductions in these pollutants will also reduce 
acidification and eutrophication of water bodies in the region. In 
addition, reduced mercury emissions are anticipated as a result of this 
proposal. Reduced mercury emissions will lessen mercury contamination 
in lakes and thereby potentially decrease both human and wildlife 
exposure.

C. What Is the Ambient Air Quality of PM2.5 and Ozone?

1. What Is the PM2.5 Ambient Air Quality?
    The PM2.5 ambient air quality monitoring for the 2000-
2002 period shows that areas violating the standards are located across 
much of the eastern half of the United States and in parts of 
California. Based on these data, 120 counties have at least one monitor 
that violates either the annual or the 24-hour PM2.5 
standard. Most areas violate only the annual standard; a small number 
of areas violate both the annual and 24-hour standards; and no areas 
violate just the 24-hour standard. The population of these 120 counties 
totals 65 million people.
    Only two States in the western half of the U.S., California and 
Montana, have counties that exceed the PM2.5 standards. On 
the other hand, in the eastern half of the U.S., 175 sites in 106 
counties exceeded the annual PM2.5 standard of 15.0 
micrograms per cubic meter ([mu]g/m\3\) over the 3-year period from 
2000 to 2002 and 395 sites meet the annual standard. No sites in the 
eastern half of the United States exceed the daily PM2.5 
standard of 65 [mu]g/m\3\. The 106 violating counties are located in a 
distinct region made up of 19 States (plus the District of Columbia), 
extending from St. Clair County, Illinois (East St. Louis), the 
western-most violating county, to New Haven, Connecticut, the eastern-
most violating county, and including the following States located in 
between: Illinois, Michigan, Indiana, Ohio, Pennsylvania, New York, New 
Jersey, Kentucky, West Virginia, Virginia, Maryland, Delaware, 
Tennessee, North Carolina, Alabama, Georgia, and South Carolina.
    Because interstate transport is not thought to be a main 
contributor to exceedances of the PM2.5 standards in 
California or Montana, today's proposal is focused only on the 
PM2.5 monitoring sites in the Eastern U.S.
    Speciated ambient data, which measures the major components of 
PM2.5 (sulfate, nitrate, total carbonaceous mass, and 
crustal material) are invaluable in understanding the nature and extent 
of the PM2.5 problem. Speciated data from the Interagency 
Monitoring of Protected Visual Environments (IMPROVE), the Clean Air 
Status and Trends Network (CASTNET), both predominantly rural networks, 
along with EPA's Speciation Network, show that ambient concentrations 
of PM2.5 species have distinctive seasonal and geographic 
patterns within the eastern United States.
    Mass associated with ammonium sulfate concentrations make up a 
significant portion (25 to 50 percent) of the annual average 
PM2.5 mass. The largest sulfate contributions to 
PM2.5 mass occur during the summer season mainly within a 
large multi-State area centered near Tennessee and Southwest Virginia. 
Sulfate concentrations during the winter season are relatively low.
    Concentrations of ammonium nitrate particles typically comprise 
less than 25 percent of the annual average PM2.5 mass. 
Nitrates tend to be highest during the winter months over large 
portions of the Midwest including northern Ohio, Indiana, Michigan, and 
eastern Wisconsin. Relatively higher winter concentrations are also 
reported within and near major urban areas including metropolitan New 
York, Philadelphia, and the Baltimore-Washington, DC area. Nitrate 
concentrations reported in southern States represent a somewhat smaller 
portion of the PM2.5 mass, primarily due to warmer 
temperatures that are less conducive to nitrate formation and chemical 
stability.
    Total carbon also contributes a significant amount of mass to 
annual PM2.5 levels (25 to 50 percent) but does not exhibit 
strong seasonal or regional concentration patterns. As with nitrate, 
total carbon concentrations are higher in and near urban areas.
    Concentrations of the last PM2.5 component, crustal, are 
relatively small (less than 10 percent of PM2.5 mass) and do 
not exhibit strong regional or seasonal trends. (For further discussion 
on the science of PM2.5 formation, see section II; for 
further discussion of EPA's proposal on which pollutant emissions to 
regulate, see section III.)
2. What Is the Ozone Ambient Air Quality?
    Almost all areas of the country have experienced some progress in 
lowering ozone concentrations over the last 20 years. As reported in 
the EPA's report, ``Latest Findings on National Air Quality: 2002 
Status and Trends,'' \3\ national average levels of 1-hour ozone 
improved by 22 percent between 1983 and 2002 while 8-hour levels 
improved by 14 percent over the same time period. The Northeast and 
Pacific Southwest (particularly Los Angeles) have shown the greatest 
20-year improvement. Even so, on balance, ozone has exhibited the 
slowest progress of the six major pollutants tracked nationally. During 
the most recent 10 years, ozone levels have been relatively constant 
reflecting little if any air quality improvement. During the period 
from 1993 to 2002, additional control requirements have reduced 
emissions of the two major ozone precursors, although at different 
rates. Emissions of VOCs were reduced by 25 percent from 1993 levels, 
while emissions of NOX declined by only 11 percent. During 
the same time period, gross domestic product increased by 57 percent 
and vehicle miles traveled increased by 23 percent.
---------------------------------------------------------------------------

    \3\ EPA 454/K-03-001, August 2003.
---------------------------------------------------------------------------

    Despite the progress made nationally since 1970, ozone remains a 
significant public health concern. Presently, wide geographic areas, 
including most of the nation's major population centers, experience 
unhealthy ozone levels--concentrations exceeding the NAAQS for 8-hour 
ozone. These areas include much of the eastern half of the United 
States and large areas of California. More specifically, 297 counties 
with a total population of over 115 million people currently violate 
the 8-hour ozone standard.
    Existing regulatory requirements (e.g., Federal motor vehicle 
standards, EPA's regional NOX rule known as the 
NOX SIP Call, and local measures already adopted under the 
CAA) are expected to reduce over time the geographic extent of the 
nation's 8-hour ozone problem. However, the number of people living in 
areas with unhealthy ozone levels will remain significant for the 
foreseeable future because existing control programs alone will not 
eliminate unhealthy ozone levels in some of the nation's largest 
population centers.

[[Page 4573]]

D. What Is the Statutory and Regulatory Background for Today's Action?

1. What are the CAA Provisions on Attainment of the PM2.5 
and Ozone NAAQS?
    The CAA, which was extensively amended by Congress in 1990, 
contains numerous State planning and attainment requirements associated 
with the PM and ozone NAAQS. In 1997, EPA revised the NAAQS for PM to 
add new annual average and 24-hour standards for fine particles, using 
PM2.5 as the indicator (62 FR 38652). At the same time, EPA 
issued its final action to revise the NAAQS for ozone (62 FR 38856) to 
establish new 8-hour standards. These standards were subject to 
litigation, which delayed implementation. The litigation was 
sufficiently resolved in 2001 to permit the EPA and States to begin the 
process of implementing the new PM2.5 and 8-hour ozone 
standards. See Whitman v. American Trucking Ass'n., 121 S.Ct. 903 
(2001).
    Following promulgation of new NAAQS, the CAA requires all areas, 
regardless of their designation as attainment, nonattainment, or 
unclassifiable, to submit SIPs containing provisions specified under 
section 110(a)(2). This includes provisions to address the following 
required SIP elements: emission limits and other control measures; 
provisions for meeting nonattainment requirements; ambient air quality 
monitoring/data system; program for enforcement of control measures; 
measures to address interstate transport; provisions for adequate 
funding, personnel, and legal authority for implementing the SIP; 
stationary source monitoring system; authority to implement the 
emergency episode provisions in their SIPs; provisions for SIP revision 
due to NAAQS changes or findings of inadequacy; consultation 
requirements with local governments and land managers; requirement to 
meet applicable requirements of part C related to prevention of 
significant deterioration and visibility protection; air quality 
modeling/data; stationary source permitting fees; and provisions for 
consultation and participation by affected local entities affected by 
the SIP. In addition, SIPs for nonattainment areas are generally 
required to include additional emissions controls providing for 
attainment of the NAAQS.
    Under subpart 1 of part D, the SIPs must include, but are not 
limited to, the following elements: (1) Reasonably available control 
measures (RACM) and reasonably available control technology (RACT) 
control measures, (2) measures to assure reasonable further progress 
(RFP), (3) an accurate and comprehensive inventory of actual emissions 
for all sources of the relevant pollutant in the nonattainment area, 
(4) enforceable emissions limits for stationary sources, (5) permits 
for new and modified major stationary sources, (6) measures for new 
source review (NSR), and (7) contingency measures which should be ready 
to be implemented without further action from the State or EPA.
    Section 110(a)(2)(D) provides a tool for addressing the problem of 
transported pollution. This provision applies to all SIPs for each 
pollutant covered by a NAAQS and to all areas regardless of their 
attainment designation. Under section 110(a)(2)(D) a SIP must contain 
adequate provisions prohibiting sources in the State from emitting air 
pollutants in amounts that will contribute significantly to 
nonattainment in one or more downwind States.
    The CAA section 110(k)(5) authorizes EPA to find that a SIP is 
substantially inadequate to meet any CAA requirement. If EPA makes such 
a finding, it must require the State to submit, within a specified 
period, a SIP revision to correct the inadequacy. This is generally 
known as a ``SIP call.'' In 1998, EPA used this authority to issue the 
NOx SIP Call, discussed below, to require States to revise 
their SIPs to include measures to reduce NOx emissions that 
were significantly contributing to ozone nonattainment problems in 
downwind States.
2. What Is the NOx SIP Call? \4\
---------------------------------------------------------------------------

    \4\ For a more detailed background discussion, see 67 FR 8396; 
February 22, 2002.
---------------------------------------------------------------------------

    In the early 1990's, EPA recognized that ozone transport played an 
important role in preventing downwind areas from developing attainment 
demonstrations. In response to a recommendation by the Environmental 
Council of States, EPA formed a national work group to assess and 
attempt to develop consensus solutions to the problem of interstate 
transport of ozone and its precursors in the eastern half of the 
country. This work group, the Ozone Transport Assessment Group (OTAG), 
which was active from 1995-1997, consisted of representatives from the 
37 States in that region; the District of Columbia; EPA; and interested 
members of the public, including industry and environmental groups. The 
OTAG completed the most comprehensive analysis of ozone transport that 
had ever been conducted, developing technical data, including up-to-
date inventories and state-of-the-art air quality modeling, to quantify 
and identify the sources of interstate ozone transport. The OTAG 
concluded that regional NOx emissions reductions are 
effective in producing ozone benefits, while VOC controls are effective 
in reducing ozone locally and are most advantageous to urban 
nonattainment areas.
    In 1998, EPA promulgated a rule, based in part on the work by OTAG, 
determining that 22 States \5\ and the District of Columbia in the 
eastern half of the country significantly contribute to 1-hour and 8-
hour ozone nonattainment problems in downwind States.\6\ This rule, 
generally known as the NOx SIP Call, required those 
jurisdictions to revise their SIPs to include NOx control 
measures to mitigate the significant ozone transport. The EPA 
determined the emissions reductions requirements by projecting 
NOx emissions to 2007 for all source categories and then 
reducing those emissions through controls that EPA determined to be 
highly cost effective. The affected States were required to submit SIPs 
providing the resulting amounts of emissions reductions.
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    \5\ The jurisdictions are: 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.
    \6\ See ``Finding of Significant Contribution and Rulemaking for 
Certain States in the Ozone Transport Assessment Group Region for 
Purposes of Reducing Regional Transport of Ozone; Final Rule,'' 63 
FR 57,356 (October 27, 1998). The EPA also published two Technical 
Amendments revising the NOx SIP Call emission reduction 
requirements. (64 FR 26,298; May 14, 1999 and 65 FR 11222; March 2, 
2000).
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    Under the NOx SIP Call, States have the flexibility to 
determine the mix of controls to meet their emissions reductions 
requirements. However, the rule provides that if the SIP controls EGUs, 
then the SIP must establish a budget, or cap, for EGUs. The EPA 
recommended that each State authorize a trading program for 
NOx emissions from EGUs. We developed a model cap and trade 
program that States could voluntarily choose to adopt.
    In response to litigation over EPA's final NOx SIP Call 
rule, the U.S. Court of Appeals for the District of Columbia Circuit 
issued two decisions concerning the NOx SIP Call and its 
technical amendments.\7\ The Court decisions generally upheld the 
NOx SIP Call and technical amendments, including EPA's

[[Page 4574]]

interpretation of the definition of ``contribute significantly'' under 
CAA section 110(a)(2)(D). The litigation over the NOx SIP 
Call coincided with the litigation over the 8-hour NAAQS. Because of 
the uncertainty caused by the litigation on the 8-hour NAAQS, EPA 
stayed the portion of the NOx SIP Call based on the 8-hour 
NAAQS (65 FR 56245, September 18, 2000). Therefore, for the most part, 
the Court did not address NOx SIP Call requirements under 
the 8-hour ozone NAAQS.
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    \7\ See Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000), cert. 
denied, 532 U.S. 904 (2001) (NOx SIP call) and 
Appalachian Power v. EPA, 251 F.3d 1026 (D.C. Cir. 2001) (technical 
amendments).
---------------------------------------------------------------------------

    As in the NOx SIP Call, in today's action EPA is 
exercising its Federal role to ensure States work in a coordinated way 
to solve regional pollution transport problems. Today's action follows 
the NOx SIP Call approach in many ways.
3. What Is the Acid Rain Program and Its Relationship to This Proposal?
    Title IV of the CAA Amendments of 1990 established the Acid Rain 
Program to address the deposition of acidic particles and gases. These 
particles and gases are largely the result of SO2 and 
NOx emissions from power plants that are transported over 
long distances in the atmosphere. In the environment, acid deposition 
causes soils and water bodies to acidify, making the water unsuitable 
for some fish and other wildlife. Acid deposition also damages forest 
soils by stripping soil nutrients, as well as damaging some sensitive 
tree species including maple and pine trees, particularly at high 
elevations. It speeds the decay of buildings, statues, and sculptures 
that are part of our national heritage. The nitrogen portion of acid 
deposition contributes to eutrophication in coastal ecosystems, the 
symptoms of which include algal blooms (some of which may be toxic), 
fish kills, and loss of plant and animal diversity. Finally, 
acidification of lakes and streams can increase the amount of methyl 
mercury available in aquatic systems. Most exposure to mercury results 
from eating contaminated fish.
    The Acid Rain Program requires a phased reduction of SO2 
(and, to a lesser extent, NOX) emissions from power 
generators that sell electricity. Larger EGUs were covered in 1995 with 
additional generators being added in 2000. Acid Rain Program affected 
sources would likely be affected by today's action, which proposes to 
require additional cost-effective SO2 and NOX 
reductions from large EGUs.
    The Acid Rain Program utilizes a market-based cap and trade 
approach to require power plants to reduce SO2 emissions to 
50 percent of the 1980 emission levels. At full implementation after 
2010, emissions will be limited (i.e., ``capped'') to 8.95 million tons 
in the contiguous United States. Individual existing units are directly 
allocated their share of the total emissions allowances--each allowance 
is an authorization to emit a ton of SO2--in perpetuity. New 
units are not allocated allowances. Today's rule builds off of the Acid 
Rain cap and trade program and allows sources to use SO2 
allowances to meet the proposed emissions caps. This effectively 
reduces the national cap on SO2 emissions.
    The Acid Rain Program has achieved major SO2 emissions 
reductions, and associated air quality improvements, quickly and cost 
effectively. In 2002, SO2 emissions from power plants were 
10.2 million tons, 41 percent lower than 1980.\8\ These emissions 
reductions have translated into substantial reductions in acid 
deposition, allowing lakes and streams in the Northeast to begin 
recovering from decades of acid rain. Cap and trade under the Acid Rain 
Program has created financial incentives for electricity generators to 
look for new and low-cost ways to reduce emissions, and improve the 
effectiveness of pollution control equipment, at costs much lower than 
predicted. The Program's cap on emissions, its requirement that excess 
emissions be offset with allowances (with the potential for fines and 
civil prosecution), and its stringent emissions monitoring and 
reporting requirements ensure that environmental goals are achieved and 
sustained, while allowing for flexible compliance strategies which take 
advantage of trading and banking. The level of compliance under the 
Acid Rain Program continues to be uncommonly high with over 99 percent 
of the affected sources holding sufficient allowances by the annual 
compliance deadline. Even this handful of non-compliant sources did not 
compromise the integrity of the cap because each ton emitted in excess 
of allowances must be automatically offset.
---------------------------------------------------------------------------

    \8\ U.S. Environmental Protection Agency, EPA Acid Rain Program: 
2002 Progress Report (EPA 430-R-03-011), November 2003. (Available 
at: http://www.epa.gov/airmarkets/cmprpt/arp02/2002report.pdf)
---------------------------------------------------------------------------

    Title IV also specifies a two-part, rate-based strategy to reduce 
NOX emissions from coal-fired electric power plants. 
Beginning in 1996 with larger units, the Acid Rain Program included 
smaller EGUs and required additional reductions from the larger units 
in 2000. By basing the required levels of NOX reductions on 
commercially available combustion controls, title IV has reduced 
NOX emissions to 2.1 million tons per year beginning in 
2000. Utilities have the flexibility to comply with the rule by: (1) 
Meeting the standard annual emissions limitations; (2) averaging the 
emissions rates of two or more boilers; or (3) if a utility cannot meet 
the standard emission limit, applying for a less stringent alternative 
emission limit (AEL) based upon its unique application of 
NOx emissions control technology on which the rule is based.
4. What Is the Regional Haze Program and Its Relationship to This 
Proposal?
    Regional haze is visibility impairment that is caused by the same 
types of sources likely to be affected by this proposed rule. These 
types of sources emit fine particles and their precursors, and they are 
located across a broad geographic area.\9\ In 1977, in the initial 
visibility protection provisions of the CAA, Congress specifically 
recognized that the ``visibility problem is caused primarily by 
emission into the atmosphere of SO2, oxides of nitrogen, and 
particulate matter, especially fine particulate matter, from 
inadequate[ly] controlled sources.'' \10\ The fine particulate matter, 
or PM2.5, that impairs visibility by scattering and 
absorbing light also causes serious health effects and mortality in 
humans discussed earlier in this section. Data from the existing 
visibility monitoring network show that visibility impairment caused by 
air pollution occurs virtually all of the time at most national park 
and wilderness area monitoring stations.\11\
---------------------------------------------------------------------------

    \9\ See, e.g., U.S. EPA, National Center for Environmental 
Assessment, Office of Research and Development, Research Triangle 
Park, NC, Air Quality Criteria for Particulate Matter, EPA/600/P-95/
001bF, April 1996.
    \10\ H.R. Rep. No. 95-294 at 204 (1977).
    \11\ National Park Service, Air Quality in the National Parks: A 
Summary of Findings from the National Park Service Air Quality 
Research and Monitoring Program. Natural Resources Report 88-1. 
Denver CO, July 1988.
---------------------------------------------------------------------------

    Under the 1999 Regional Haze Rule,\12\ States are required to set 
periodic goals for improving visibility in the 156 Class I areas, and 
to adopt long-term strategies to meet the goal of returning visibility 
in these areas to natural conditions (see 40 CFR part 81, subpart D). 
Today's proposal will reduce SO2 and NOX 
emissions in 29 States, assisting those States and their neighbors in 
making progress toward their visibility goals.
---------------------------------------------------------------------------

    \12\ 64 FR 35714, July 1, 1999.
---------------------------------------------------------------------------

5. What Is the Proposed Utility Control Program for Air Toxics and Its 
Relationship to This Proposal?
    Today's interstate air quality proposal affecting SO2 
and NOX emissions is related to a proposal signed on 
December 15, 2003 to regulate mercury from certain types of EGU's using 
the

[[Page 4575]]

maximum achievable control technology (MACT) provisions of section 112 
of the CAA or using the performance standards provisions under section 
111 of the CAA.
    The EPA believes that a carefully designed multi-pollutant 
approach--a program designed to control NOX, SO2, 
and mercury at the same time--is the most effective way to reduce 
emissions from electric utilities. One key feature of this approach is 
the interrelationship of the timing and cap levels for SO2, 
NOX, and mercury. Today, we know that electric utilities can 
reduce their emissions of all three pollutants by installing flue gas 
desulfurization (FGD) (which controls SO2 and mercury 
emissions) and selective catalytic reduction (SCR) (which controls 
NOX and mercury). We have designed the interstate transport 
proposal and the mercury section 111 proposal to take advantage of the 
combined emissions reductions that these technologies provide. Taken 
together, these proposals would coordinate emissions reductions from 
electric utilities to achieve necessary health protections cost 
effectively.

II. Characterization of the Origin and Distribution of 8-Hour Ozone and 
PM2.5 Air Quality Problems

    This section presents a simplified account of the occurrence, 
formation, and origins of ozone and PM2.5, as well as an 
introduction to certain relevant scientific and technical terms and 
concepts that are used in the remainder of this proposal. It also 
provides scientific and technical insights and experiences relevant to 
formulating control approaches for reducing the contribution of 
transport to these air quality problems.

A. Ground-level Ozone

1. Ozone Formation
    Ozone is formed by natural processes at high altitudes, in the 
stratosphere, where it serves as an effective shield against 
penetration of harmful solar UV-B radiation to the ground. The ozone 
present at ground level as a principal component of photochemical smog 
is formed in sunlit conditions through atmospheric reactions of two 
main classes of precursor compounds: VOCs and NOX (mainly NO 
and NO2). The term ``VOC'' includes many classes of 
compounds that possess a wide range of chemical properties and 
atmospheric lifetimes, which helps determine their relative importance 
in forming ozone. Sources of VOCs include man-made sources such as 
motor vehicles, chemical plants, refineries, and many consumer 
products, but also natural emissions from vegetation. Nitrogen oxides 
are emitted by motor vehicles, power plants, and other combustion 
sources, with lesser amounts from natural processes including lightning 
and soils. Key aspects of current and projected inventories for 
NOX and VOC are summarized in section IV of this proposal 
and EPA Web sites (e.g., http://www.epa.gov/ttn/chief).
    The relative importance of NOX and VOC in ozone 
formation and control varies with location- and time-specific factors, 
including the relative amounts of VOC and NOX present. In 
rural areas with high concentrations of VOC from biogenic sources, 
ozone formation and control is governed by NOX. In some 
urban core situations, NOX concentrations can be high enough 
relative to VOC to suppress ozone formation locally, but still 
contribute to increased ozone downwind from the city. In such 
situations, VOC reductions are most effective at reducing ozone within 
the urban environment and immediately downwind.
    The formation of ozone increases with temperature and sunlight, 
which is one reason ozone levels are higher during the summer. 
Increased temperature increases emissions of volatile man-made and 
biogenic organics and can indirectly increase NOX as well 
(e.g., increased electricity generation for air conditioning). 
Summertime conditions also bring increased episodes of large-scale 
stagnation, which promote the build-up of direct emissions and 
pollutants formed through atmospheric reactions over large regions. The 
most recent authoritative assessments of ozone control 
approaches13 14 have concluded that, for reducing regional 
scale ozone transport, a NOX control strategy would be most 
effective, whereas VOC reductions are most effective in more dense 
urbanized areas.
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    \13\ Ozone Transport Assessment Group, OTAG Final Report, 1997.
    \14\ NARSTO, An Assessment of Tropospheric Ozone Pollution--A 
North American Perspective, July 2000.
---------------------------------------------------------------------------

2. Spatial and Temporal Patterns of Ozone
    Studies conducted in the 1970's established that ozone occurs on a 
regional scale (i.e. 1000's of kilometers) over much of the Eastern 
U.S., with elevated concentrations occurring in rural as well as 
metropolitan areas.15 16 While progress has been made in 
reducing ozone in many urban areas, the Eastern U.S. continues to 
experience elevated regional scale ozone episodes in the extended 
summer ozone season.
---------------------------------------------------------------------------

    \15\ National Research Council, Rethinking the Ozone Problem in 
Urban and Regional Air Pollution, 1991.
    \16\ NARSTO, An Assessment of Tropospheric Ozone Pollution--A 
North American Perspective, July 2000.
---------------------------------------------------------------------------

    Regional 8-hour ozone levels are highest in the Northeast and Mid-
Atlantic areas with peak 2002 (3-year average of the 4th highest value 
for all sites in the region) ranging from 0.097 to 0.099 parts per 
million (ppm).\17\ The Midwest and Southeast States have slightly lower 
peak values (but still above the 8-hour standard in many urban areas) 
with 2002 regional averages ranging from 0.083 to 0.090 ppm. Regional-
scale ozone levels in other regions of the country are generally lower, 
with 2002 regional averages ranging from 0.059 to 0.082 ppm. 
Nevertheless, some of the highest urban 8-hour ozone levels in the 
nation occur in southern and central California and the Houston area.
---------------------------------------------------------------------------

    \17\ U.S. EPA, Latest Findings on National Air Quality, August 
2003.
---------------------------------------------------------------------------

B. Fine Particles

1. Characterization and Origins of Fine Particles
    Particulate matter is a chemically and physically diverse mixture 
of discrete particles and droplets. It exists in the air in a range of 
particle sizes, from submicrometer to well above 30 micrometers 
([mu]m). Most of the mass of particles is distributed in two size modes 
that are termed fine and coarse particles. Although there is some 
overlap at the division of the modes (1 to 3 [mu]m), fine and coarse 
particles generally have different origins, source types, chemical 
composition, and atmospheric transport and removal processes. In 
particular, because of their small size and mechanisms of formation, 
fine particles can be created and transported substantial distances 
(hundreds to over 1000 km) from emission sources.
    As noted above, EPA has established NAAQS for fine particles, which 
are defined as those smaller than a nominal 2.5 [mu]m (aerodynamic 
diameter) or PM2.5. Standards also exist for particles 
smaller than a nominal 10 [mu]m aerodynamic diameter (or 
PM10) which include both fine particles and inhalable coarse 
mode particles. For reasons summarized in section III below, today's 
proposal focuses on reducing significant transport of PM2.5 
as it affects attainment of the annual standards.
    Fine particles can be directly emitted from sources or, like ozone, 
can be formed in the atmosphere from precursor gases. Directly emitted 
particles are often termed ``primary'' particles, while those formed in 
the

[[Page 4576]]

atmosphere are called ``secondary'' particles.\18\ The most common 
source of directly emitted PM2.5 is incomplete combustion of 
fuels containing carbon (fossil or biomass), which produces 
carbonaceous particles consisting of a variety of organic substances 
and black carbon (soot), as well as gaseous carbon monoxide, VOCs and 
NOX. Certain high energy industrial processes also emit 
primary PM2.5. Examples of direct PM2.5 sources 
include diesel and gasoline vehicles, open burning, residential wood 
burning, forest fires, power generation, and industrial metals 
production and processing.
---------------------------------------------------------------------------

    \18\ These terms used in the context of atmospheric science 
should not be confused with similar terms that are used in section 
109 of the CAA to distinguish standards that are intended to protect 
public health (primary) from those that protect public welfare 
(secondary).
---------------------------------------------------------------------------

    The major gaseous precursors of secondary PM2.5 include 
SO2, NOX, certain VOCs and NH3. The 
SO2 and NOX form, respectively, sulfuric and 
nitric acids, which then react with ammonia to form various sulfate and 
nitrate compounds. At typical summertime humidities in the East, these 
substances absorb water and the particles exist as tiny droplets. 
Ammonia generally would not form atmospheric particles in the absence 
of acidic sulfates and nitrates. Certain reactive VOCs of relatively 
high molecular weight (e.g., toluene, xylenes in gasoline) can be 
oxidized to form secondary organic aerosol particles (SOA) in the same 
kinds of photochemical processes that produce ozone.
    The major sources of secondary PM2.5 forming gases 
(SO2, NOX, certain VOCs, NH3) include 
nearly every source category of air pollutants. Major SO2 
sources in the U.S. include coal-fired power plants and industrial 
boilers and smelters. Major NOX sources were summarized in 
subsection 1 (ozone) above. Significant man-made sources of organic PM 
precursors (particularly aromatic compounds \19\) include motor vehicle 
fuels, solvents, petrochemical facilities, diesel and gasoline vehicle 
emissions, and biogenic emissions from trees. Ammonia is emitted from 
numerous livestock and other agricultural activities and natural 
processes in soil, but smaller source categories may be important in 
urban areas.
---------------------------------------------------------------------------

    \19\ Grosjean, D., Seinfeld, J.H., Parameterization of the 
formation potential of secondary organic aerosols, Atmospheric 
Environment 23, 1733-1747, 1989.
---------------------------------------------------------------------------

    Secondary formation of PM2.5 involves complex processes 
that depend on factors such as the amounts of needed precursor gases; 
the concentrations of other reactive species such as ozone 
(O3), hydroxyl radicals (OH-), or hydrogen 
peroxide (H2O2); atmospheric conditions including 
solar radiation, temperature and relative humidity (RH); and the 
interactions of precursors and pre-existing particles with cloud or fog 
droplets or in the liquid film on solid particles. Significantly, these 
processes indicate an important link between PM2.5 and the 
pollutants and sources that form ozone. More complete discussions of 
the formation and characteristics of secondary particles can be found 
in the U.S. EPA Criteria Document,\20\ and in the recent NARSTO Fine 
Particle Assessment.\21\ More complete discussions of the 
characteristics and sources of both primary and secondary particles can 
be found in the U.S. EPA Staff Paper on Review of the National Ambient 
Air Quality Standards for Particulate Matter.\22\
---------------------------------------------------------------------------

    \20\ U.S. EPA, National Center for Environmental Assessment, Air 
Quality Criteria for Particulate Matter, 4th External Review Draft. 
June 2003.
    \21\ NARSTO, Particulate Matter Science for Policy Makers--A 
NARSTO Assessment. February 2003.
    \22\ U.S. EPA, Review of the National Ambient Air Quality 
Standards for Particulate Matter: Policy Assessment of Scientific 
and Technical Information OAQPS Staff Paper--First Draft. August 
2003.
---------------------------------------------------------------------------

2. Spatial and Temporal Patterns of PM2.5 and Major 
Components
    As noted in section I above, the most recent PM2.5 
monitoring data (2000-2002) show numerous counties in violation of the 
annual standards across much of the Eastern U.S., as well as in 
southern and central California. A major reason for the high values in 
eastern urban areas is the regional contributions from sources distant 
to these areas.\23\ This is illustrated by comparing recent 
PM2.5 data from the EPA Speciation Network (urban sites) and 
the IMPROVE Network (non-urban sites). A tabular summary comparing 
these urban and rural ambient data is included in the Air Quality Data 
Analysis Technical Support Document. This comparison suggests that in 
the East, rural regional transport contributes well over half of the 
PM2.5 observed in urban areas.
---------------------------------------------------------------------------

    \23\ NARSTO, Particulate Matter Science for Policy Makers--A 
NARSTO Assessment. February 2003.
---------------------------------------------------------------------------

    The EPA Speciation Network and IMPROVE data also permits comparison 
of the regional contribution of the major components that comprise 
PM2.5. The major chemical compounds/classes typically 
measured or estimated include sulfate, and nitrate, ammonium (estimated 
from sulfate and nitrate in IMPROVE), total carbonaceous materials 
(TCM), including black carbon and estimated organic carbon, and 
crustal-related materials. The crustal materials reflect intrusion of 
the smallest particles originating in the coarse mode as well as a 
number of fine mode metals and other elements present in small amounts.
    Nationally, the most recent urban PM2.5 composition data 
show a significant contribution of carbonaceous material at all sites, 
with sulfates higher in the East and nitrates higher in the West. 
Crustal material is typically less than 5 to 10 percent of the total. 
Focusing on the rural eastern sites representative of the regional 
contribution, sulfates and associated ammonium are the largest 
fraction, followed by carbonaceous material. Nitrates are also a 
significant contributor to PM2.5 in the more northern areas 
of the Eastern U.S., especially in the industrial Midwest (about 20 
percent).
    Rao and Frank \24\ (2003) have compared the concentrations of 
sulfates and carbonaceous particles for specific pairs of urban and 
nearby non-urban sites. In the East, sulfate at urban monitoring 
locations is only slightly higher than at nearby non-urban sites. In 
contrast, carbonaceous material at urban sites is significantly higher 
than at the non-urban sites. The similarity of urban and rural sulfates 
suggests that ambient sulfate is present on a regional scale and that 
most urban sulfate is likely associated with regional transport. On the 
other hand, urban carbonaceous material appears to have both a regional 
and an urban component. The much higher concentrations in urban areas 
indicate the importance of local sources. Detailed source apportionment 
studies discussed in section V below suggest that mobile and other 
combustion sources, which are much more concentrated in urban areas, 
may explain much of the elevated urban carbon concentrations.
---------------------------------------------------------------------------

    \24\ V. Rao, N. Frank, A. Rush, F. Dimmick, Chemical Speciation 
of PM2.5 in Urban and Rural Areas, In the Proceedings of 
the Air & Waste Management Association Symposium on Air Quality 
Measurement Methods and Technology, San Francisco, on November 13-
15, 2002.
---------------------------------------------------------------------------

    Seasonal variations in PM2.5 and components provide 
useful insights into the relative importance of various sources and 
atmospheric processes. In the East, rural PM2.5 
concentrations are usually significantly higher in the summertime than 
in the winter. In large urban areas, however, summer/winter differences 
are smaller, and winter peaks may be higher. More specifically, 
PM2.5 concentrations in urban areas in the Northeast, 
industrial Midwest, and upper Midwest regions peak both in the winter 
and in the summer and are

[[Page 4577]]

lowest in the spring and fall. The concentrations in the peak seasons 
in the Northeast and industrial Midwest are 5 [mu]g/m3 or 
more higher in concentration than the low seasons. The peak seasons in 
the upper Midwest are less than 5 [mu]g/m3 higher than the 
low seasons. In the Southeast, however, the urban areas have just one 
peak that occurs in the summer, and that peak is only 4 to 5 [mu]g/
m3 higher than the lowest season.
    The seasonal pattern of summer PM2.5 peaks in rural 
areas does not vary as much by region as do urban patterns. The 
composition data show that these summer peaks are due to elevated 
regional sulfates and organic carbon. Urban and rural nitrates tend to 
be low in the summer and significantly higher in the winter, when 
sulfates are lowest. Wintertime urban peaks appear to consist of 
increased ammonium nitrate and carbonaceous material of local 
origin.\25\
---------------------------------------------------------------------------

    \25\ NARSTO, Particulate Matter Science for Policy Makers--A 
NARSTO Assessment. February 2003.
---------------------------------------------------------------------------

3. Implications for Control of Transported PM2.5
    The interplay between sulfates and nitrates observed in the 
seasonal data above is of particular importance. The formation of 
ammonium nitrate is favored by availability of ammonia and nitric acid 
vapor, low temperatures, high relative humidity, and the absence of 
acid sulfate particles. At higher summer temperatures when 
photochemical processes and meteorological conditions in the East 
produce high sulfate levels, ammonia and nitric acid vapor tend to 
remain in the gas phase rather than forming ammonium nitrate particles. 
In winter months, with cooler temperatures and lower sulfur-related 
acidity, the presence of sufficient nitric acid and ammonia favors 
formation of nitrate particles.
    The chemistry summarized above has consequences for the 
effectiveness of SO2 reductions in lowering regional and 
urban PM2.5 concentrations. Both observations and modeling 
simulations (see subsection II.B.4 below) suggest that regional 
SO2 reductions are effective at reducing sulfates and 
PM2.5. When SO2 reductions reach a certain point 
in relation to other relevant reactants and conditions, however, the 
ammonia formerly associated with sulfate can react with excess nitric 
acid vapor to form nitrate particles, effectively replacing at least 
part of the PM2.5 reduction due to sulfate. This phenomenon 
is termed ``nitrate replacement.'' Under these conditions, 
SO2 reductions will not be as effective at reducing 
PM2.5. Empirical evidence based on ambient measurements and 
modeling simulations show nitrate replacement changes under differing 
scenarios involving meteorological factors and relative concentrations 
of important components.26, 27 Obviously, sulfate 
reduction approaches (SO2 controls) will be more effective 
at lowering PM2.5 if complemented by strategies that reduce 
nitrates (NOX controls), particularly in the winter.
---------------------------------------------------------------------------

    \26\ NARSTO, Particulate Matter Science for Policy Makers--A 
NARSTO Assessment. February 2003.
    \27\ Blanchard and Hidy. J., Effects of Changes in Sulfate, 
Ammonia, and Nitric Acid on Particulate Nitrate Concentrations in 
the Southeastern United States, Air & Waste Manage. Assoc. 53:283-
290. 2003.
---------------------------------------------------------------------------

    This chemistry also has implications for the role of ammonia 
sources in contributing to regional PM2.5. As noted above, 
ammonia would not be present in particle form were it not for the 
presence of sulfuric and nitric acids. Significant reductions of these 
acids through SO2 and NOX controls would also 
reduce particulate ammonia, without the need for ammonia controls. As 
evidenced in the discussion above, it is clear that any effects of 
ammonia emissions controls on PM2.5 would vary considerably 
with the concentrations of sulfate, total ammonia (gas phase plus 
aerosol), total nitric acid temperature, and location and season. In 
some cases, a decrease in ammonia will have no effect on 
PM2.5, while in other cases, the decrease will reduce total 
nitrate contributions.\28\
---------------------------------------------------------------------------

    \28\ The marginal effectiveness of reducing ammonia on 
PM2.5 is examined in West, J. J., A. S. Ansari, and S. N. 
Pandis, Marginal PM 2.5: nonlinear aerosol mass response 
to sulfate reductions in the eastern U.S., Journal Air & Waste 
Management Assoc., 49(12): 1415-1424, 1999.
---------------------------------------------------------------------------

    In essence, the effect of significant reductions in ammonia on 
PM2.5 is least in conditions with low particulate nitrate 
levels (e.g., warm conditions) or low nitric acid vapor levels (e.g., 
through NOX reductions) in comparison to ammonia levels. The 
most significant effects of ammonia control would occur in conditions 
where there is an abundance of nitric acid, in which ammonia limits 
particulate nitrate formation. Therefore, significant reductions in 
SO2 and NOX emissions would create conditions 
that would reduce the effectiveness of ammonia controls in reducing 
PM2.5.
    In addition to these direct effects of ammonia controls on 
PM2.5, ammonia is a weak base that serves to partially 
neutralize acids that occur in PM2.5. As such, reducing 
ammonia will make PM2.5, clouds, and precipitation more 
acidic, thereby exacerbating acidifying precipitation (acid rain) and 
possibly causing health effects related to PM2.5 acidity. 
Through this increased acidity of clouds and fogs, ammonia reductions 
can slow the conversion of SO2 to particle sulfate.\29\ The 
increased acidity associated with ammonia reductions may also increase 
the formation of secondary organic aerosols, according to recent 
laboratory studies.\30\ In contrast, NOX reductions can both 
slow sulfate formation through oxidant chemistry, while also reducing 
acidity.
---------------------------------------------------------------------------

    \29\ NARSTO, Particulate Matter Science for Policy Makers--A 
NARSTO Assessment. February 2003.
    \30\ Jang, M.; Czoschke, N. M.; Lee, S.; Kamens, R. M., 
Heterogeneous Atmospheric Aerosol Production by Acid-Catalyzed 
Particle Phase Reactions, Science, 2002, 298, 814-817.
---------------------------------------------------------------------------

    A further complication in consideration of ammonia controls is the 
uncertainty regarding the location and temporal variations in ammonia 
emissions, particularly in urban areas. This is an area of active 
research and investigation for EPA and others. It is of note that the 
maximum concentration of ammonium nitrates occurs in the winter, a 
period that is expected to have the lowest ammonia emissions from 
agricultural activities; \31\ by contrast, the potential 
PM2.5 benefit of reducing ammonia emissions in the summer 
when they may be at a peak is limited to the ammonium itself, because 
this is the time of lowest ammonium nitrate particle levels.
---------------------------------------------------------------------------

    \31\ Battye, W., V. P. Aneja, and P. A. Roelle, Evaluation and 
improvement of ammonia emissions inventories, Atmospheric 
Environment, 2003, 37, 3873-3883.
---------------------------------------------------------------------------

    The origins of the carbonaceous component of regional transport are 
even less well characterized. It reflects a complex mixture of hundreds 
or even thousands of organic carbon compounds, most of which have not 
yet been successfully quantified. In addition to directly emitted 
carbonaceous materials from fires and transport from urban areas, a 
varying amount is likely derived from biogenic emissions--which may 
include both primary and transformed secondary materials. Because the 
observed summertime increase in organic particles may be related to 
photochemical activity, it is reasonable to expect that--as for 
regional ozone--NOX reductions might produce some benefits. 
Further, recent work by Jang et al. suggests that acidic aerosols 
(e.g., sulfates) may increase the formation of secondary organic 
aerosols (SOA).\32\
---------------------------------------------------------------------------

    \32\ Jang, M.; Czoschke, N. M.; Lee, S.; Kamens, R. M., 
Heterogeneous Atmospheric Aerosol Production by Acid-Catalyzed 
Particle Phase Reactions, Science, 2002, 298, 814-817.
---------------------------------------------------------------------------

    Despite significant progress that has been made in understanding 
the origins

[[Page 4578]]

and properties of SOA, it remains the least understood component of 
PM2.5. Moreover, the contribution of primary and secondary 
organic aerosol components to measured organic aerosol concentrations 
is thought to be highly variable and is a controversial issue.\33\ The 
relative amounts of primary versus secondary organic compounds in the 
ambient air throughout the U.S., however, appear to vary with location 
and time of year. While carbonaceous material appears to be a 
significant component in regional transport in the East, it is 
currently not possible to determine with certainty the relative 
contribution of primary versus secondary carbonaceous particles, or to 
fully quantify the fraction that might be reduced by control of man-
made sources. The EPA and others have funded substantial research and 
monitoring efforts to clarify these issues. New information from the 
scientific community continues to emerge to improve our understanding 
of the relationship between sources of PM precursors and secondary 
particle formation.
---------------------------------------------------------------------------

    \33\ NARSTO, Particulate Matter Science for Policy Makers--A 
NARSTO Assessment. February 2003.
---------------------------------------------------------------------------

4. Air Quality Impacts of Regional SO2 Reductions
    As noted above, sulfates from SO2 comprise the largest 
component of regional transport in the East. Fortunately, we already 
have significant observational evidence of the effectiveness of 
reducing regional SO2 emissions. By contrast, while small to 
modest NOX emissions reductions from control programs to 
date have resulted in reduced nitrate deposition in some portions of 
the East,\34\ we have no comparable long-term experience in observing 
the expected effects of more substantial regional reductions for 
NOX. Perhaps the best documented example of the results of 
any major regional air pollution control program is reflected in the 
experience of the title IV Acid Rain Program (see section VIII below). 
From 1990 to date, this market-based program reduced SO2 
emissions from electric utilities throughout the country, with most of 
the emissions reductions achieved by sources in the East. The regional 
reductions have resulted in substantial improvements in air quality and 
deposition throughout the East. The spatial and temporal patterns of 
these improvements have been observed at most eastern rural monitoring 
networks.\35\
---------------------------------------------------------------------------

    \34\ Butler, Thomas J., Gene E. Likens, Francoise M. Vermeylen 
and Barbara J. B. Stunder. The relation between NOX 
emissions and precipitation NO3-in the eastern USA, 
Atmospheric Environment, Volume 37, Issue 15, May 2003, Pages 2093-
2104.
    \35\ U.S. EPA, Clean Air Status and Trends Network 2002 Annual 
Report. November 2003.
---------------------------------------------------------------------------

    The signal of regional air quality has been detected by the 
CASTNET. The CASTNET sites in rural areas of the Midwest and East 
measured high average SO2 concentrations prior to the Acid 
Rain Program, particularly in areas of the Ohio River Valley and into 
New York and eastern Pennsylvania where electric utility SO2 
emissions were high. Average concentrations of sulfates throughout this 
area were elevated throughout an even broader region, indicating that 
sulfates were being transported from the SO2 emission 
sources to areas throughout the East.
    Since 1990, SO2 concentrations at CASTNET sites have 
been reduced substantially in the areas where concentrations were high 
before the Acid Rain Program.\36\ A comparison of current mean 
SO2 concentrations (3-year average 2000-2002) to 
SO2 concentrations before the Program (1990-1992) shows that 
all sites decreased. The largest decrease was observed at sites from 
Illinois to northern West Virginia across Pennsylvania to western New 
York.
---------------------------------------------------------------------------

    \36\ U.S. EPA, Acid Rain Progress Report, November 2003.
---------------------------------------------------------------------------

    Rural monitoring networks have also been able to detect temporal 
patterns in SO2 and sulfate concentrations. Temporal trends 
in rural concentrations of these pollutants can be used to determine if 
monitored concentrations responded to changes in emissions trends. The 
most substantial drop in SO2 emissions occurred in 1995 when 
Phase I of the Acid Rain Program began. After 1995, emissions increased 
slightly, as sources began to use allowances that they had banked by 
reducing emissions before the program began, until Phase II of the 
program began in 2000 and emissions declined again.\37\
---------------------------------------------------------------------------

    \37\ U.S. EPA, Clean Air Status and Trends Network 2002 Annual 
Report, November 2003.
---------------------------------------------------------------------------

    Monitored SO2 concentrations, sulfate concentrations at 
eastern CASTNET sites, sulfur concentrations in precipitation at 
eastern National Atmospheric Deposition (NADP) sites, and total (Dry + 
Wet) sulfur deposition at NADP and CASTNET sites closely tracked the 
yearly trends in SO2 emissions from Acid Rain Program 
sources from 1990-2002. Notably, the most significant decline in the 
various pollutants was observed in 1995 immediately after Phase I 
began.\38\
---------------------------------------------------------------------------

    \38\ U.S. EPA, Clean Air Status and Trends Network 2002 Annual 
Report. November 2003.
---------------------------------------------------------------------------

    These trends in air quality and deposition at rural monitoring 
sites show that a large, regional emission reduction program can 
achieve significant, observable environmental improvements throughout a 
broad area, especially where pollution levels are elevated before the 
program is implemented. In addition, the temporal trend in observed 
improvements shows that emissions reductions can lead to immediate 
environmental improvements. Additional discussions of the air quality 
impacts of regional SO2 reductions can be found in the U.S. 
Air Quality and Emission Trends Report,\39\ as well as recent reports 
from IMPROVE \40\ and the National Atmospheric Deposition Program.\41\
---------------------------------------------------------------------------

    \39\ U.S. EPA, National Air Quality and Emissions Trends Report, 
1999. March 2001.
    \40\ Malm, William C., Spatial and Seasonal Patterns and 
Temporal Variability of Haze and its Constituents in the United 
States:'' Report III. May 2000.
    \41\ National Atmospheric Deposition Program, National 
Atmospheric Deposition Program, 2002 Annual Summary. 2003.
---------------------------------------------------------------------------

III. Overview of Proposed Interstate Air Quality Rule

A. Purpose of Interstate Air Quality Rule

    For this rulemaking, EPA has assessed the role of transported 
emissions from upwind States in contributing to unhealthy levels of 
PM2.5 and 8-hour ozone in downwind States. Based on that 
assessment, the EPA is proposing emissions reduction requirements for 
SO2 and NOX that would apply to upwind States.
    Emissions reductions to eliminate transported pollution are 
required by the CAA and supported by sound policy. Clean Air Act 
section 110(a)(2)(D) requires SIP revisions for upwind States to 
eliminate emissions that contribute significantly to nonattainment 
downwind. Under section 110(a)(1), these SIP revisions were required in 
2000 (three years after the 1997 revision of the PM2.5 and 
8-hour ozone NAAQS); EPA proposes that they be submitted as 
expeditiously as practicable, but no later than 18 months after the 
date of promulgation.
    There are also strong policy reasons for addressing interstate 
pollution transport, and for doing so now. First, emissions from upwind 
States can alone, or in combination with local emissions, result in air 
quality levels that exceed the NAAQS and jeopardize the health of 
citizens in downwind communities. Second, interstate pollution 
transport requires some consideration of reasonable balance between 
local and regional controls. If significant contributions of pollution 
from upwind States go unabated, the downwind area must achieve greater

[[Page 4579]]

local emissions reductions, thereby incurring extra clean-up costs in 
the downwind area. Third, requiring reasonable controls for both upwind 
and local emissions sources should result in achieving air quality 
standards at a lesser cost than a strategy that relies solely on local 
controls. For all these reasons, EPA believes it is important to 
address interstate transport as early as possible. Doing so as we are 
today, in advance of the time that States must adopt local 
nonattainment plans, will make it easier for states to develop plans to 
reach attainment of the standards.
    The EPA previously addressed interstate pollution transport for 
ozone in rules published in 1998 and 2000. These rules, known as the 
NOX SIP Call and Section 126 Rule, are substantially 
reducing ozone transport and helping downwind areas meet the 1-hour and 
8-hour ozone standards. However, EPA is reassessing ozone transport in 
this rulemaking for two reasons. First, several years have passed since 
promulgation of the NOX SIP Call and updated data are 
available. Second, in view of the difficulty some areas are expected to 
have meeting the 8-hour ozone standards, EPA believes it is important 
to assess the degree to which ozone transport will remain a problem 
after full implementation of the existing rules, and to determine 
whether further controls are warranted to ensure continued progress 
toward attainment. Today's rulemaking is EPA's first attempt to address 
interstate pollution transport for PM2.5.

B. Summary of EPA's Key Findings and Proposed Remedy for Interstate 
Transport

    Based on a multi-part assessment summarized below, EPA has 
concluded that:
     Without adoption of additional emissions 
controls, a substantial number of urban areas in the central and 
eastern regions of the U.S. will continue to have levels of 
PM2.5 or 8-hour ozone (or both) that do not meet the 
national air quality standards.
     Although States have not yet developed plans for 
meeting the PM2.5 and 8-hour ozone standards, predictive 
analyses by EPA for the year 2010 show that even with implementation of 
substantial local controls, many areas would continue to experience 
unhealthy air quality in that year. Consequently, EPA has concluded 
that small contributions of pollution transport to downwind 
nonattainment areas should be considered significant from an air 
quality standpoint because these contributions could prevent or delay 
downwind areas from achieving the health-based standards.
     Based on our analyses, we have concluded that 
SO2 and NOX are the chief emissions contributing 
to interstate transport of PM2.5. For the 8-hour ozone 
nonattainment, EPA continues to believe, in accordance with the 
conclusion of the Ozone Transport Assessment Group (OTAG), that the 
focus of interstate transport control should be on NOX.
     For both PM2.5 and 8-hour ozone, EPA 
has concluded that interstate transport is a major contributor to the 
projected nonattainment problem in the Eastern U.S. in 2010. In the 
case of PM2.5, the nonattainment areas analyzed are 
estimated to receive a transport contribution attributable to 
SO2 and NOX emissions ranging from 4.22 to 7.36 
[mu]g/m3 on an annual average basis, with an average of 5.47 
[mu]g/m3 across all nonattainment areas. In the case of 8-
hour ozone, the nonattainment areas analyzed receive a transport 
contribution of more than 20 percent of their ambient ozone 
concentrations, and 21 of 47 had a transport contribution of more than 
50 percent.
     Typically, two or more States contribute 
transported pollution to a single downwind area, so that the 
``collective contribution'' is much larger than the contribution of any 
single State.
    Based on these conclusions, EPA is proposing to make several 
findings, and to require the remedy summarized below:
     For PM2.5, we are proposing to find 
that SO2 and NOX emissions in 28 States and the 
District of Columbia will contribute significantly in 2010 to 
PM2.5 levels in downwind nonattainment areas in amounts that 
exceed an air quality significance threshold proposed today.
     For ozone, we are proposing to find that 
NOX emissions in 25 States and the District of Columbia will 
contribute significantly in 2010 to ozone levels in excess of the 8-
hour standards in downwind nonattainment areas in amounts that exceed 
the air quality significance threshold EPA previously established in 
the 1998 NOX SIP Call, and which we propose today to 
continue to use.
     We are also proposing to find that emissions 
reductions from EGUs in the identified upwind States and the District 
of Columbia would be highly cost effective. As in the NOX 
SIP Call, we propose to find that these highly cost-effective 
reductions constitute the significant contributions to downwind 
nonattainment in other States that must be eliminated under the CAA.
     We are proposing that the level of reductions 
that would be highly cost effective corresponds to power sector 
emissions caps in a 28-state plus District of Columbia region of 2.7 
million annual tons for SO2 and 1.3 million annual tons for 
NOX.
     In order to strike a balance between the 
feasibility of achieving a substantial amount of emissions reductions, 
and the need to achieve them as expeditiously as practicable for 
attainment of health standards, we are proposing that the emissions 
caps for the affected States (and the District of Columbia) be 
implemented in two phases, with the first phase in 2010 and the second 
phase in 2015. The first phase caps would be 3.9 million tons for 
SO2 and 1.6 million tons for NOX.
     We estimate that, compared to the emissions that 
would otherwise occur in 2010 and 2015, this proposal would result in 
emissions reductions of 3.6 million tons SO2 (40 percent) 
and 1.5 million tons NOX (49 percent) by 2010, and 3.7 
million tons SO2 (44 percent) and 1.8 million tons 
NOX (58 percent) by 2015.
     Compared to EGU emissions in 2002 in the 
affected States, at full implementation of today's proposal 
SO2 emissions would be reduced about 71 percent. On the same 
basis, NOX emissions would be reduced 65 percent.
     The proposed emissions reductions would be met 
by affected States using one of two options for compliance: (1) 
Participating in an interstate cap and trade system that caps emissions 
from the electric generating sector, thereby reducing the costs of 
emissions reductions while ensuring that the required reductions are 
achieved by the region as a whole (an approach EPA believes is 
preferable); or (2) meeting an individual State emissions budget 
through measures selected by the State in accord with the requirements 
discussed in sections VI and VII below.
    Today's proposal relies on information and analysis relevant to 
determining whether sources in upwind States emit in amounts that 
``contribute significantly to [downwind] nonattainment,'' which the 
upwind States' SIPs are required to prohibit under section 
110(a)(2)(D)(i)(I).

C. Coordination of Multiple Air Quality Objectives in Today's 
Rulemakings

1. Linkages Between Interstate Air Quality and Mercury Rulemakings
    As noted above, today's proposal for reducing the transport of 
pollutants that contribute significantly to violations of the 
PM2.5 and 8-hour ozone air quality standards is accompanied 
by separate

[[Page 4580]]

actions proposing EPA's approach for addressing mercury from power 
plants. The EPA has endeavored to recognize and integrate the pollution 
reduction requirements incorporated in today's proposed rules so as to 
provide benefits for public health and the environment in a manner that 
has proven effective in other programs. In so doing, we were guided by 
our experience and success in implementing the title IV Acid Rain 
Program for reducing some of the same pollutants. We have also fully 
considered the extensive analyses and assessment of options that EPA 
has conducted over the last eight years in developing proposals that 
would establish an integrated multi-pollutant program for addressing 
the power sector, including the President's Clear Skies Act.
    Our experience with title IV and the assessments leading to the 
proposed Clear Skies Act have suggested that we can achieve substantial 
benefits at reduced costs by expanding the market-based mechanisms of 
title IV to achieve substantial reductions in SO2, 
NOX, and mercury, and by recognizing the interactions 
inherent in designing control strategies in an integrated rather than 
sequential manner. This approach has the added advantage of providing 
regulatory certainty, both for the States, which are charged with 
developing attainment strategies for areas that are affected by 
interstate transport, and for sources that would be affected by today's 
proposed rules for addressing transport and mercury emissions.
    While EPA still hopes that Congress will adopt the Administration's 
Clear Skies multi-pollutant legislation, the outcome of that process is 
not certain. Accordingly, we believe it is our responsibility to move 
forward to achieve these reductions as expeditiously as possible under 
existing regulatory authorities. We believe today's proposals reflect 
the best regulatory approach for making expeditious progress towards 
meeting air quality standards and other health and environmental goals, 
while providing flexibility that will minimize the cost of compliance. 
We have incorporated ambitious emissions reduction schedules to ensure 
the combined reductions of all pollutants occur as quickly as is 
feasible. We are proposing to offer, as an option for implementing the 
SO2 and NOX reductions, emissions cap and trade 
programs that would provide a seamless transition from the current 
title IV and NOX SIP Call programs.
2. Linkages Between PM2.5 and 8-hour Ozone Transport 
Requirements
    Although PM2.5 and ozone are distinct NAAQS with 
separate implementation requirements, in reality they are closely 
linked in many ways. Because of these linkages, we have considered 
PM2.5 and ozone in an integrated manner in developing this 
proposal. The linkages between PM2.5 and ozone arise from 
their interactions in atmospheric chemistry, the overlap in the 
pollutants and emission sources that contribute to elevated ambient 
levels, and similarities in their implementation schedules. Emissions 
of NOX and SO2 contribute to PM2.5 
nonattainment, and NOX emissions also contribute to 8-hour 
ozone nonattainment. Moreover, because the power generation sector and 
other source types are major emitters of both NOX and 
SO2, and because control actions for these pollutants may 
reinforce or compete with each other, it is also appropriate to address 
NOX and SO2 control requirements in an integrated 
manner, keeping in mind that the relevant provisions of the CAA must, 
in the end, be met for each NAAQS and its associated pollutant 
precursors.
3. Linkages Between Interstate Air Quality Rulemaking and Section 126 
Petitions
    Recent history of how EPA and the States have relied on certain CAA 
transport provisions indicates that a brief discussion of these 
provisions may be useful. In the NOX SIP Call rule, we 
determined that under section 110(a)(2)(D), the SIP for each affected 
State (and the District of Columbia) must be revised to eliminate the 
amount of emissions that contribute significantly to nonattainment in 
downwind States. We further determined that amount, for each State, as 
the quantity of emissions that could be eliminated by the application 
of highly cost-effective controls on specified sources in that State.
    During July-August, 1997, EPA received petitions under CAA section 
126 from eight northeastern states. The petitions asked EPA to find 
that specified sources in specified upwind States were contributing 
significantly to nonattainment in the petitioning States. Shortly after 
promulgation of the NOX SIP Call, in May, 1999, EPA 
promulgated a rule making affirmative technical determinations for 
certain of the section 126 petitions. Relying on essentially the same 
record as we had for the NOX SIP Call rulemaking, we made 
the affirmative technical determinations with respect to the same 
sources in certain of the same States covered under the NOX 
SIP Call. Moreover, we approved a section 126 remedy based on the same 
set of highly cost-effective controls. However, EPA withheld granting 
the findings for the petitions. Instead, we stated that because we had 
promulgated the NOX SIP Call--a transport rule under section 
110(a)(2)(D)--as long as an upwind State remained on track to comply 
with that rule, EPA would defer making the section 126 finding. 64 FR 
28250 (May 25, 1999) (``May 1999 Rule'').
    Following promulgation of the May 1999 Rule, however, the U.S. 
Court of Appeals for the D.C. Circuit stayed the NOX SIP 
Call. We then promulgated a revised section 126 rule, in January 2000. 
65 FR 2674 (January 18, 2000) (``January 2000 Rule''). We stated that 
because upwind States were no longer obliged to adhere to the 
requirements of the NOX SIP Call, we would go ahead and make 
the section 126 findings.
    Even so, in the January 2000 Rule, we further indicated that we 
were considering rescinding the section 126 finding with respect to an 
affected State if, in general, we approved a SIP revision submitted by 
the affected State as fully achieving the amount of reductions required 
under the NOX SIP Call. The reason for this rescission would 
be the fact that the affected State's SIP revision would fulfill the 
section 110(a)(2)(D) requirements, so that there would no longer be any 
basis for the section 126 finding with respect to that State. In this 
manner, the NOX SIP Call and the Section 126 Rules would be 
harmonized.
    Today, we are similarly proposing a remedy under section 
110(a)(2)(D) to eliminate the significant contribution of emissions, in 
this case both SO2 and NOX, from upwind States to 
downwind States' nonattainment of the fine particle and 8-hour ozone 
standards. We believe it would be appropriate to apply the same 
approach to any section 126 petitions submitted in the future, should 
there be any, as we used under the NOX SIP Call and the 
related section 126 rules. Thus, we expect that the remedy we would 
provide in response to a section 126 petition concerning reductions in 
EGU emissions of SO2 or NOX by 2010 would be 
identical to that provided in this rulemaking under section 
110(a)(2)(D), assuming that the petition relies on essentially the same 
record. Thus, we would expect to take the same position we took in the 
May 1999 Rule--that as long as EPA has promulgated a transport rule 
under section 110(a)(2)(D), the transport rule and the section 126 
timeframes are roughly comparable, and a State is on

[[Page 4581]]

track to comply with the transport rule, then EPA is not required to 
approve section 126 petitions targeting sources in that State if those 
petitions rely on essentially the same record.
    If a section 126 petition is submitted, we would obviously need to 
set out in more detail our approach to the interaction between section 
110(a)(2)(D) and section 126 in our response to that petition. Today, 
we are setting forth our general view of the relationship between these 
two sections and seeking comment on this view and on the issues raised 
by the interaction between these sections.

D. Overview of How EPA Assessed Interstate Transport and Determined 
Remedies

    This section provides a conceptual overview of the EPA's technical 
and legal analyses of the problem of interstate pollution transport as 
it affects attainment of the PM2.5 and 8-hour ozone 
standards. It is intended to provide an overall context for the more 
detailed discussions below. In general, EPA has taken a two-step 
approach in interpreting section 110(a)(2)(D). In the first step, EPA 
conducted an air quality assessment to identify upwind States which 
contribute significantly (before considering cost) to downwind 
nonattainment. In the second step, EPA conducted a control cost 
assessment to determine the amount of emissions in each upwind State 
that should be reduced in order to eliminate each upwind State's 
significant contribution to downwind nonattainment.
    This two-step approach involved multiple technical assessments, 
which are listed below in brief, and explained in further detail in the 
subsections that follow. The EPA addressed:
    (1) The degree and geographic extent of current and expected future 
nonattainment with the PM2.5 and 8-hour ozone NAAQS;
    (2) The potential impact of local controls on future nonattainment;
    (3) The potential for individual pollutants to be transported 
between States;
    (4) The extent to which pollution transport across State boundaries 
will contribute to future PM2.5 and 8-hour ozone 
nonattainment; and
    (5) The availability and timing of emissions reduction measures 
that can achieve highly cost-effective reductions in pollutants that 
contribute to excessive PM2.5 and 8-hour ozone levels in 
downwind nonattainment areas.
1. Assessment of Current and Future Nonattainment
    The EPA assessed the degree and geographic extent of current 
nonattainment of the PM2.5 and 8-hour ozone NAAQS. For the 
3-year period 2000-2002, 120 counties with monitors exceed the annual 
PM2.5 NAAQS and 297 counties with monitor readings exceed 
the 8-hour ozone NAAQS.\42\ Nonattainment of the PM2.5 
standards exists throughout the Eastern U.S.--from western Illinois and 
Tennessee eastward--and in California. Nonattainment of the 8-hour 
ozone standards also exists widely east of the continental divide--from 
eastern Texas and Oklahoma to the Atlantic coast--as well as in 
California and Arizona.
---------------------------------------------------------------------------

    \42\ See ``Air Quality Data Analysis Technical Support Document 
for the Proposed Interstate Air Quality Rule (January 2004).'' We 
expect that the actual designation of PM2.5 and 8-hour 
ozone nonattainment areas will be based on 2001-2003 data. We plan 
to update our assessment to reflect the most recent data available 
at the time we issue the final rule.
---------------------------------------------------------------------------

    In analyzing significant contribution to nonattainment, we 
determined it was reasonable to exclude the Western U.S., including the 
States of Washington, Idaho, Oregon, California, Nevada, Utah, and 
Arizona from further analysis due to geography, meteorology, and 
topography. Based on these factors, we concluded that the 
PM2.5 and 8-hour ozone nonattainment problems are not likely 
to be affected significantly by pollution transported across these 
States' boundaries. Therefore, for the purpose of assessing States' 
contributions to nonattainment in other States, we have only analyzed 
the nonattainment counties located in the rest of the U.S.
    We assessed the prospects for future attainment and nonattainment 
in 2010 and 2015 with the 8-hour ozone NAAQS using the Comprehensive 
Air Quality Model with Extensions (CAMX), and with the 
PM2.5 NAAQS using the Regional Modeling System for Aerosols 
and Deposition (REMSAD).\43\ These two forecasting years were chosen 
because they include the range of expected attainment dates for many 
PM2.5 nonattainment areas, and under our proposed 8-hour 
implementation rule, the range of expected attainment dates for many 8-
hour ozone nonattainment areas. In addition, considering the likely 
schedule for this rulemaking and the implementation steps that would 
follow it (see section VII), we believe that 2010 would be the first 
year in which sizable emission reductions could confidently be expected 
as a result of this rulemaking.
---------------------------------------------------------------------------

    \43\ See section IV, Air Quality Modeling to Determine Future 8-
hour Ozone and PM2.5 Concentrations, for more detail on 
the approach summarized in this subsection.
---------------------------------------------------------------------------

    In modeling the 2010 and 2015 ``base cases,'' we took into account 
adopted State and Federal regulations (e.g., mobile source rules, the 
NOX SIP Call) as well as regulations that have been proposed 
and that we expect will be promulgated before today's proposal is 
finalized.
    Based on this approach we predicted that, in the absence of 
additional control measures, 47 counties with air quality monitors 
would violate the 8-hour ozone NAAQS in 2010, and 34 counties would 
violate in 2015. For PM2.5 we predicted that 61 counties 
would violate the standards in 2010, and 41 counties would violate in 
2015.\44\ These counties are listed in Tables IV-3 and IV-4. The 
counties with predicted nonattainment are widely distributed throughout 
the central and eastern regions of the U.S. The degree of predicted 
nonattainment in both years spans a range of values from close to the 
NAAQS level to well above the NAAQS level. Given the number and 
geographic extent of predicted future nonattainment problems, we 
continued the assessment to quantify the role of interstate 
contributions to nonattainment.
2. Prospects for Progress Towards Attainment Through Local Reductions
---------------------------------------------------------------------------

    \44\ The EPA also considered the current and likely future 
nonattainment of the PM10 NAAQS and the 24-hour average 
PM2.5 NAAQS. Only a small number of areas are presently 
experiencing PM10 exceedances, and all have approved SIPs 
that are expected to result in attainment through local control 
measures. Accordingly, we do not believe that interstate transport 
will be an important consideration for PM10 
implementation in the period from 2010, or beyond, and therefore 
PM10 is not a subject of today's proposal. Few areas, all 
in the western U.S., presently have violations of the 24-hour 
average PM2.5 NAAQS, and all of these are also violating 
the annual PM2.5 NAAQS. We believe that to the extent 
interstate transport is contributing to nonattainment of the 24-hour 
PM2.5 NAAQS, actions aimed at the broader problem of 
PM2.5 nonattainment will correct any transport affecting 
24-hour PM2.5 also. The 24-hour PM2.5 standard 
was not further assessed in our analysis for today's proposal.
---------------------------------------------------------------------------

    The assessments of future nonattainment presented above considered 
only the effect of emission reduction measures already adopted or that 
are specifically required and that we expect will be adopted by the 
time this rule is promulgated. Once designated, States containing 
PM2.5 and 8-hour ozone nonattainment areas will be required 
to submit SIPs that may include additional local emission reduction 
measures designed to achieve attainment. Accordingly, we assessed, to 
the extent feasible with available methods, whether it would be 
possible for nonattainment areas to attain the annual PM2.5 
and 8-hour ozone NAAQS through local emissions reductions with 
reasonably available control measures, or whether the amount of 
transport from

[[Page 4582]]

upwind States would make this difficult or impossible. This information 
could then be used to determine whether upwind States should be 
expected to reduce their emissions.
a. Fine Particles
    We conducted an assessment of the emissions reductions that States 
may need to include in nonattainment SIPs, and identified measures that 
could provide those emission reductions. We focused on the counties 
predicted to be nonattainment in the 2010 base case.
    For our analysis of States' ability to attain the PM2.5 
standards, we developed a group of emissions reduction measures for 
SO2, NOX, direct PM2.5, and volatile 
organic compounds (VOC) as a surrogate for measures that States would 
potentially implement prior to 2009 in an effort to reach attainment. 
The measures address a broad range of source types.\45\ We analyzed the 
effect of applying this group of local controls in two different ways. 
First, we analyzed the impact of the emission controls on the immediate 
area in which they were applied. We applied the local control measures 
in three sample cities: Philadelphia, Birmingham, and Chicago. The 
group of local emissions controls was estimated to achieve ambient 
annual average PM2.5 reductions ranging from about 0.5 
[mu]g/m3 to about 0.9 [mu]g/m3, which was less 
than the amount needed to bring any of the three cities into attainment 
in 2010. The detailed results of this three-city analysis are provided 
in section IV.
---------------------------------------------------------------------------

    \45\ See section IV and Tables IV-5, IV-6, and IV-7 for details 
on the analyses of local control measures.
---------------------------------------------------------------------------

    Second, we analyzed the impact of applying the group of local 
controls to all 290 counties that are located in metropolitan areas in 
the eastern and central U.S. and that contain one or more of the 
counties projected to be nonattainment in 2010. This analysis was 
designed to assess whether applying local controls in upwind 
nonattainment areas, as States are expected to do, would significantly 
reduce transport to downwind States.
    Based on this analysis, we concluded that for many PM2.5 
nonattainment areas it would be difficult, if not impossible, to reach 
attainment unless transport is reduced to a much greater degree and 
over a much broader regional area than by the simultaneous adoption of 
local controls within specific nonattainment areas. In addition, we 
found that much of the air quality improvement that did occur in 
downwind areas with this strategy was due to reductions in transported 
sulfate attributable to upwind SO2 emissions. This indicates 
in particular that broader reductions in regionwide emissions of 
SO2, from sources located both inside and outside potential 
nonattainment areas, would lead to sizable reductions in 
PM2.5 concentrations.\46\
---------------------------------------------------------------------------

    \46\ This particular type of analysis is not able to similarly 
distinguish the separate effects of upwind and local NOX 
emissions reductions, but other types of analysis described in 
section V show the usefulness of upwind NOX reductions in 
reducing PM2.5 concentrations in nonattainment areas. 0. 
The detailed results of this three-city analysis are provided in 
section IV.
---------------------------------------------------------------------------

b. Eight-Hour Ozone
    Our analyses suggest that NOX emissions in upwind States 
will contribute a sizable fraction of the projected 8-hour ozone 
nonattainment problem in most nonattainment areas east of the 
continental divide in 2010 (even after the substantial improvements 
expected from implementing the NOX SIP Call).\47\ Our 
analysis also shows that additional highly cost-effective reductions of 
NOX from power plants are available. Given continued 
widespread ozone nonattainment, we believe it is appropriate to require 
additional reductions in NOX emissions that contribute to 
future nonattainment due to interstate transport.
---------------------------------------------------------------------------

    \47\ Emissions reductions required under section 110(a)(2)(D) 
alone will not eliminate all transported ozone. Because areas with 
the highest interstate transport contributions tend to be located 
relatively close to major nonattainment areas in adjoining states, 
we expect that controls adopted for attainment purposes in upwind 
nonattainment areas will also reduce interstate ozone transport.
---------------------------------------------------------------------------

    Although numerous areas will attain the 8-hour ozone standards in 
the near term with existing controls, EPA believes that 15-20 areas 
east of the continental divide will need further emissions reductions 
(in some cases, large reductions) to attain the 8-hour standard. These 
areas have already adopted numerous measures to reduce 1-hour ozone 
levels.
    We analyzed the effect of local measures on 8-hour ozone 
attainment. We conducted a preliminary scoping analysis in which 
hypothetical total NOX and VOC emissions reductions of 25 
percent were applied in all projected nonattainment areas east of the 
continental divide in 2010. Despite these substantial reductions, 
approximately eight areas were projected to have ozone levels exceeding 
the 8-hour standard. We believe that this hypothetical local control 
scenario is an indication that attaining the 8-hour standard will 
entail substantial cost in a number of areas, and that further regional 
reductions are warranted.
3. Assessment of Transported Pollutants and Precursors
a. Fine Particles
    Section II provides a summary of our knowledge concerning the 
nature of PM2.5 and its precursors. We have reviewed several 
studies that confirm the presence of interstate transport and identify 
many States as either sources or receptors. We have also conducted new 
analyses based on comparisons of newly available urban and rural 
ambient air quality data, source-receptor relationships, satellite 
observations, and wind trajectories. The details of these most recent 
analyses are contained in section V. These analyses show a wide range 
of transport patterns for PM2.5. On different days in a 
year, transport follows a variety of paths, suggesting that to some 
extent emissions originating in one upwind State make some contribution 
to annual average PM2.5 in many downwind States, even if the 
upwind State is a considerable distance from the downwind States.
    These analyses further conclude that sources of SO2 and 
NOX emissions continue to play a strong role in transported 
PM2.5. They suggest that nearly all the particulate sulfate 
in the cities we examined appears to result from transport from upwind 
sources outside the local urban area, while upwind and local 
contributions for the particle nitrate and carbonaceous components of 
PM2.5 are likely to come from both upwind and local sources. 
These findings are consistent with what is known about the location of 
emissions sources for these pollutants and their atmospheric formation 
and transport mechanisms.
    Based on a consideration of these findings regarding the origin and 
relative contribution of the major components to transported 
PM2.5 in rural areas of the U.S. (see section II), as well 
as the results of modeling the air quality improvements of adopting 
highly cost-effective controls on SO2 and NOX 
emissions from EGUs in certain states east of the continental divide 
(see section IX), EPA proposes to base the PM2.5 
requirements on man-made SO2 and NOX emissions, 
and not other pollutants. As summarized below, current information 
related to sources and controls for the other components identified in 
transported PM2.5 (carbonaceous particles, ammonium, and 
crustal materials) does not, at this time, provide an adequate basis 
for regulating the regional transport of emissions responsible for 
these PM2.5 components.
    Carbonaceous substances (organic compounds and soot) form a large

[[Page 4583]]

component of PM2.5 in rural and urban areas of the East. As 
discussed in section II, the origins and effectiveness of alternative 
controls in reducing transported carbonaceous materials are 
particularly uncertain, and our ability to identify and quantify 
appropriate measures is quite limited. Some significant fraction may be 
of natural origin, including biogenic emissions and wildfires. The EPA 
has already issued national rules to reduce the most significant direct 
man-made source category of carbonaceous materials, the mobile source 
sector. These rules will provide some reduction of transported 
carbonaceous material, as well as significant reductions in urban 
areas. For other sources, the primary emissions of carbonaceous 
materials are not currently quantified with certainty. While controls 
for other man-made sources (e.g., prescribed fires, home heating) may 
be of significance in developing local control approaches for 
PM2.5 (e.g., as in the analysis summarized in section 
III.D.2), their relative effectiveness in addressing regional transport 
is not well enough understood at this time. Substantial uncertainty 
also exists in attempting to model the formation processes and regional 
transport of secondary organic particles deriving from biogenic or man-
made emissions of organic precursors. To the extent that the production 
of regional secondary organic particles is related to ozone formation 
processes, regional NOX reductions could provide some 
additional benefit. Measures adopted to reduce man-made VOC emissions 
should also tend to reduce secondary organic PM2.5.
    We also do not feel it is necessary or appropriate at this time to 
attempt to reduce the ammonium portion of PM2.5 through 
regional ammonium controls. As indicated in section II, it is 
reasonable to expect that simultaneous significant reductions in 
regional SO2 and NOX emissions will also result 
in a decrease in particulate phase ammonium, while reducing the 
relative effectiveness of additional ammonia reductions. The 
alternative of reducing regional ammonia loadings in place of 
SO2 and NOX controls is unattractive because it 
increases the acidity of PM2.5 and of deposition, and is 
less effective at reducing total loadings of fine particles. Further, 
while local ammonia reductions might reduce nitrates in some locations, 
the peak nitrate concentrations in the East come in the wintertime, 
when ammonia emissions are lowest. As noted in section II, in such 
circumstances, reductions in NOX are likely to be effective 
in reducing nitrates. Finally, the strength and location of ammonia 
emissions sources, including agricultural operations, are uncertain, 
and the costs and net effectiveness of alternative regional-scale 
ammonia controls from a variety of rural and urban sources cannot be 
adequately quantified. The EPA continues to support research on ammonia 
emissions, controls and atmospheric processes, which should inform 
State and local control agency decisions on ammonia controls in the 
future.
    We are proposing not to address direct emissions of crustal 
material because, among other things, the amount of crustal material is 
generally a small fraction of total PM2.5 in nonattainment 
areas, crustal material does not appear to be much involved in 
regional-scale transport on an annual basis, and we face uncertainties 
in inventories and control costs for crustal material. While most 
crustal material on a regional scale is likely derived from soils, a 
small but uncertain fraction of certain components of combustion 
emissions are classified as ``crustal'' or ``soil derived.'' As a 
practical matter, we expect that implementation of today's proposed 
controls to reduce SO2 and NOX from coal-fired 
EGUs would have co-benefits in reducing those direct emissions of 
PM2.5 that are now classified as crustal material.
    The proposed decisions to focus on SO2 and 
NOX reductions for addressing interstate pollution transport 
should not preclude controls related to carbonaceous particles, 
ammonium, or other significant PM2.5 sources on a local 
basis, where these can be adopted cost effectively in local 
PM2.5 control plans. We welcome comment on the choice to not 
regulate the above components of transported PM2.5, 
including further information regarding the cost effectiveness of 
controls.
b. Ozone
    Section II summarizes our knowledge regarding ozone and its 
precursors. We continue to rely on the assessment of ozone transport 
made in great depth by the OTAG in the mid-1990s. As indicated in the 
NOX SIP Call proposal, the OTAG Regional and Urban Scale 
Modeling and Air Quality Analysis Work Groups reached the following 
conclusions:
     Regional NOX emissions reductions are 
effective in producing ozone benefits; the more NOX reduced, 
the greater the benefit.
     Controls for VOC are effective in reducing ozone 
locally and are most advantageous to urban nonattainment areas. (62 FR 
60320, November 7, 1997)
    We reaffirm this conclusion in this rulemaking, and propose to 
address only NOX emissions for the purpose of reducing 
interstate ozone transport.
4. Role of Interstate Transport in Future Nonattainment
a. Fine Particles
    For PM2.5, we used a ``zero-out'' approach to assess 
PM2.5 transport coming from each of the 41 States that lie 
at least partly east of the continental divide, i.e., New Mexico 
northwards to Montana and all States east of those. Our zero-out 
approach consisted of air quality model runs for each State, both with 
and without each State's man-made SO2 and NOX 
emissions. We then compared the predicted downwind concentrations in 
the 2010 base case, which included the State's SO2 and 
NOX emissions, to the ``zero-out'' case which excluded all 
of the State's man-made SO2 and NOX emissions. 
From these results, we were able to evaluate the impact of, for 
example, Ohio's total man-made SO2 and NOX 
emissions on each projected downwind nonattainment county in 2010. 
Using the results of this modeling, we identified States as 
significantly contributing (before considering costs) to downwind 
nonattainment based on the predicted change in the PM2.5 
concentration in the downwind nonattainment area which receives the 
largest impact.
    As detailed in section VI below, EPA's modeling indicates a wide 
range of maximum downwind nonattainment impacts from the 41 States. The 
largest contribution is from Ohio on Hancock County, WV where the 
annual PM2.5 impact is 1.90 [mu]g/m\3\. Rhode Island has the 
lowest maximum contribution to a downwind nonattainment area, 
registering a maximum impact of 0.01 [mu]g/m\3\ on New Haven, 
Connecticut.
    We have considered what level of air quality impact should be 
regarded as significant (without taking costs into account), and 
believe that the level should be a small fraction of the annual 
PM2.5 NAAQS of 15.0 [mu]g/m\3\. Our reasoning is based on 
two factors. First, as EPA determined in 1997 when we established the 
PM2.5 NAAQS, there are significant public health impacts 
associated with ambient PM2.5, even at relatively low 
levels. By the same token, as summarized earlier, EPA's modeling 
indicates that at least some nonattainment areas will find it difficult 
or impossible to attain the standards without reductions in upwind 
emissions. In combination, these factors suggest a relatively low value 
for the

[[Page 4584]]

PM2.5 transport contribution threshold is appropriate.
    Second, our analysis of ``base case'' PM2.5 transport 
shows that many upwind States contribute to concentrations in each of 
the areas predicted to be nonattainment in 2010. This ``collective 
contribution'' is a feature of the PM2.5 transport problem, 
in part because the annual nature of the NAAQS means that wind patterns 
throughout the year--rather than wind patterns during one season of the 
year or on a few worst days during the year--play a role in determining 
how States contribute to each other. The implication is that to address 
the transport affecting a given nonattainment area, many upwind States 
must reduce their emissions, even though their individual contributions 
may be relatively small. By the same token, as summarized earlier, 
EPA's modeling indicates that at least some nonattainment areas will 
find it difficult or impossible to attain the standards without 
reductions in upwind emissions. In combination, these factors suggest a 
relatively low value for the PM2.5 transport contribution 
threshold is appropriate.
    We adopted a similar approach for determining the significance 
level for ozone transport in the NOX SIP Call rulemaking, 
and the D.C. Circuit viewed this approach as reasonable when the Court 
generally upheld the NOX SIP Call. The Court acknowledged 
that EPA had set a relatively low hurdle for States to pass the air 
quality component (and thus be considered to contribute significantly, 
depending on costs): ``EPA's design was to have a lot of States make 
what it considered modest NOX reductions. * * * '' See 
Michigan v. EPA, 213 F.3d 663(D.C. Cir. 2000), cert. denied, 532 U.S. 
904 (2001). Indeed, the Court intimated that EPA could have established 
an even lower hurdle for States to pass the air quality component:

    EPA has determined that ozone has some adverse health effects--
however slight--at every level [citing National Ambient Air Quality 
Standards for Ozone, 62 FR 38856 (1997)]. Without consideration of 
cost it is hard to see why any ozone-creating emissions should not 
be regarded as fatally ``significant'' under section 
110(a)(2)(D)(i)(I).'' 213 F.3d at 678 (emphasis in original).

We believe the same approach should apply in the case of 
PM2.5 transport.
    In applying this approach, we first considered a significance level 
of 0.10 [mu]g/m\3\. This is a small level, which is consistent with the 
factors described. Further, an increment of this size in the annual 
average PM2.5 concentration is the smallest one that can 
make the difference between compliance and violation of the NAAQS for 
an area very near the NAAQS, due to the treatment of significant digits 
and rounding in the definition of the NAAQS. Because the 
PM2.5 NAAQS is 15.0 [mu]g/m\3\ (three significant figures), 
a concentration after rounding of 15.1 [mu]g/m\3\ would be a 
violation.\48\
---------------------------------------------------------------------------

    \48\ An area with a reported rounded concentration of 15.0 
[mu]g/m\3\ would have actual air quality somewhere in the range of 
14.95 to 15.04 [mu]g/m\3\. An increase of 0.10 [mu]g/m\3\ would make 
the rounded concentration equal 15.1 [mu]g/m\3\, which would 
constitute an exceedance, no matter where in the 14.95 to 15.04 
[mu]g/m\3\ range the concentration fell originally. This is not the 
case with any increase less than 0.10 [mu]g/m\3\. For example, an 
increase of 0.09 [mu]g/m\3\ when added to 14.95 [mu]g/m\3\ and then 
rounded would result in a NAAQS compliance value of 15.0 [mu]g/m\3\, 
a passing result.
---------------------------------------------------------------------------

    On the other hand, we then considered that the air quality 
forecasts we have conducted in assessing future air quality impacts 
have, of necessity, been based on modeling, not monitoring data. In 
evaluating such results, we believe it is, on balance, more appropriate 
to adopt a small percentage value of the standard level, rather than 
absolute number derived from monitoring considerations. A percentage 
amount that is close to the value derived from the monitoring level 
described above is 1 percent. We therefore propose to adopt an annual 
PM2.5 significance level equal to 1 percent of the standard. 
We believe that contributions equal to or greater than 0.15 [mu]g/m\3\ 
would reflect a reasonable threshold for determining significant levels 
of interstate transport.
    Applying the proposed cutoff of 0.15 [mu]g/m\3\ or higher to the 
results of the transport impact assessment identifies SO2 
and NOX emissions in 28 States and the District of Columbia 
as contributing significantly (before considering costs) to 
nonattainment in another State. These States, with their maximum 
downwind PM2.5 contributions, are listed in section V, Table 
V-5.
    Although we are proposing to use 0.15 [mu]g/m\3\ as the air quality 
criteria, we have also analyzed the effects of using 0.10 [mu]g/m\3\. 
Based on our current modeling, two additional states, Oklahoma and 
North Dakota, would be included if we were to adopt 0.10 [mu]g/m\3\ as 
the air quality criterion. Thus, today's proposal includes the State 
EGU budgets that would apply if these two states were included under 
the final rule. The EPA requests comments on the appropriate geographic 
scope of this proposal and the merits of the proposed 0.15 [mu]g/m\3\ 
threshold level as indicating a potentially significant effect of air 
quality in nonattainment areas in neighboring states. We request 
comments on the use of higher and lower thresholds for this purpose.
b. Eight-Hour Ozone
    In assessing the role of interstate transport to 8-hour ozone 
nonattainment, we have followed the approach used in the NOX 
SIP Call, but have used an updated model and updated inputs that 
reflect current requirements (including the NOX SIP Call 
itself).\49\ Using updated contribution results, we rely on the same 
contribution indicators, or metrics, that were used to make findings in 
the NOX SIP Call. Section V and the air quality technical 
support document present the 8-hour ozone transport analysis and 
findings in detail.
---------------------------------------------------------------------------

    \49\ The modeling for today's proposal, and the proposal itself 
fulfills EPA's commitment in the 1998 NOX SIP Call final 
rule to reevaluate by 2007. See 63 FR 57399; October 27, 1998.
---------------------------------------------------------------------------

    In general, we found a range in how much transport from each upwind 
State contributes to 2010 nonattainment in downwind States. The EPA's 
modeling indicates from 22 to 96 percent of the ozone problem is due to 
transport, depending on the area.
    Based on the same metrics employed in the NOX SIP Call, 
we have concluded that, even with reductions from the NOX 
SIP Call and other control measures that will reduce NOX and 
VOC emissions, interstate transport of NOX from 25 States 
and the District of Columbia will contribute significantly to downwind 
8-hour ozone nonattainment in 2010. These States are listed in Table V-
2. We are deferring findings for Texas, Oklahoma, Kansas, Nebraska, 
South Dakota, and North Dakota, which at this time cannot be assessed 
on the same basis as States to the east because they are only partially 
included in the modeling domain. We intend to conduct additional 
modeling for these six States using a larger modeling domain, and may 
propose action on them based on that modeling in a supplemental 
proposal.
5. Assessment of Potential Emissions Reductions
    Today's proposal generally follows the statutory interpretation and 
approach under section 110(a)(2)(D) developed in the NOX SIP 
Call rulemaking. Under this interpretation, the emissions in each 
upwind State that contribute significantly to nonattainment are 
identified as being those emissions which can be eliminated through 
highly cost-effective controls.
    Section 110(a) requires upwind States to eliminate emissions that 
contribute significantly to nonattainment

[[Page 4585]]

downwind, and to do so through a SIP revision that must be submitted to 
EPA within 3 years of issuance of revised NAAQS. In addition, States 
are required to submit SIPs that provide for attainment in 
nonattainment areas no later than 3 years after designation.
    Through these provisions, the CAA places the responsibility for 
controls needed to assure attainment on both upwind States and their 
sources, and on local sources of emissions. The CAA does not specify 
the relative shares of the burden that each should carry, but section 
110(a)(2)(D) clearly mandates that upwind States reduce those emissions 
that contribute significantly to downwind nonattainment. Moreover, as a 
matter of broad policy, even if an area could attain the NAAQS through 
technically feasible, but costly, local controls alone, some 
consideration needs to be given to a reasonable balance between 
regional and local controls to reach attainment. In the absence of 
regional controls on upwind sources, downwind States would be forced to 
obtain greater emissions reductions, and incur greater costs, to offset 
the transported pollution from upwind sources.
    For the PM2.5 and 8-hour ozone NAAQS, our air quality 
modeling shows attainment with local controls alone would be difficult 
or impossible for many areas. Our analysis in section VI shows that 
substantial regional reductions in SO2 and NOX 
emissions from EGUs are available at costs that are well within the 
levels of historically adopted measures. An attainment strategy that 
relies on a combination of local controls and regional EGU controls is 
a more equitable and therefore a more reasonable approach than a 
strategy that relies solely on local controls.
a. Identifying Highly Cost-Effective Emissions Reductions
    As the second step in the two-step process for determining the 
amount of significant contribution, we must determine the amount of 
emissions that may be eliminated through highly cost-effective 
controls. Today we are proposing to retain the concept of highly cost-
effective controls as developed and used in the NOX SIP 
Call, in which we determined such controls by comparing the cost of 
recently required controls, and to apply it to the SO2 and 
NOX precursors of PM2.5 and 8-hour ozone 
nonattainment.
    For today's proposal, EPA independently evaluated the cost 
effectiveness of strategies to reduce SO2 and NOX 
to address PM2.5 and ozone nonattainment. We developed 
criteria for highly cost-effective amounts through: (1) comparison to 
the average cost effectiveness of other regulatory actions and (2) 
comparison to the marginal cost effectiveness of other regulatory 
actions. These ranges indicate cost-effective controls. The EPA 
believes that controls with costs towards the low end of the range may 
be considered to be highly cost effective because they are self-
evidently more cost effective than most other controls in the range. We 
also considered other factors. Our approach to the cost-effectiveness 
element of significant contribution and the results of our analysis are 
presented in section VI.
    The other factors we have considered include the applicability, 
performance, and reliability of different types of pollution control 
technologies for different types of sources; the downwind impacts of 
the level of control that is identified as highly cost effective; and 
other implementation costs of a regulatory program for any particular 
group of sources. We also consider some of these same factors in 
determining the time period over which controls should be installed. 
Depending on the type of controls we view as cost effective, we must 
take into account the time it would take to design, engineer, and 
install the controls, as well as the time period that a source would 
need to obtain the necessary financing. These various factors, 
including engineering and financial factors, are discussed in section 
VI. We may also consider whether emissions from a particular source 
category will be controlled under an upcoming regulation (a MACT 
standard, for example).
    Today's action proposes emissions reductions requirements based on 
highly cost-effective emissions reductions obtainable from EGUs. 
Section VI explains the proposed requirements.
b. Timing for Submission of Transport SIPs
    We are proposing today to require that PM2.5 and 8-hour 
ozone transport SIPs be submitted, under CAA section 110(a)(1), as soon 
as practicable, but not later than 18 months from the date of 
promulgation of this rule. Based on the experience of States in 
developing plans to respond to the NOX SIP Call, we believe 
this is a reasonable amount of time. The NOX SIP Call 
required States to submit SIPs within 12 months of the final rule, a 
period within the maximum 18 months allowed under section 110(k)(5) 
governing States' responses to SIP calls. The 12-month period was 
reasonable for the NOX SIP Call given the focus on a single 
pollutant, NOX, and the attainment deadlines facing downwind 
1-hour ozone nonattainment areas. Since today's proposal requires 
affected States to control both SO2 and NOX 
emissions, and to do so for the purpose of addressing both the 
PM2.5 and 8-hour ozone NAAQS, we believe it is reasonable to 
allow affected States more time than was allotted in the NOX 
SIP Call to develop and submit transport SIPs. Since we plan to 
finalize this rule no later than mid-2005, SIP submittals would be due 
no later than the end of 2006. Under this schedule, upwind States' 
transport SIPs would be due before the downwind States' 
PM2.5 and 8-hour ozone nonattainment SIPs, under CAA section 
172(b). We expect that the downwind States' 8-hour ozone nonattainment 
area SIPs will be due by May 2007, and their nonattainment SIPs for 
PM2.5 by January 2008.\50\ As explained in section VII 
below, today's proposed requirement that the upwind States submit the 
transport SIP revisions even before the downwind States submit 
nonattainment SIPs is consistent with the CAA SIP submittal sequence, 
will provide health and environmental benefits, and will assist the 
downwind States in their attainment demonstration planning.
---------------------------------------------------------------------------

    \50\ The actual dates will be determined by relevant provisions 
in the CAA and EPA's interpretation of these provisions published in 
upcoming implementation rules for the PM2.5 and 8-hour 
ozone NAAQS.
---------------------------------------------------------------------------

c. Timing for Achieving Emissions Reductions
    As discussed in section VI, engineering and financial factors 
suggest that only a portion of the emissions reductions that EPA 
considers highly cost effective can be achieved by January 1, 2010. To 
ensure timely protection of public health, while taking into account 
these considerations, we are proposing to implement highly cost-
effective reductions in two phases, with a Phase I compliance date of 
January 1, 2010, and a Phase II compliance date of January 1, 2015.
    Based on EPA's analysis, we believe that a regional emissions cap 
on SO2 of 3.9 million tons together with a NOX 
emissions cap of 1.6 million tons is achievable by January 1, 2010, and 
therefore we are proposing these limits as the Phase I 
requirements.\51\ The EPA believes the remaining highly cost-effective 
SO2 and NOX emissions reductions can be achieved 
by January 1, 2015, and will be helpful to areas with PM2.5 
or 8-hour ozone attainment dates approaching 2015. The EGU caps

[[Page 4586]]

in the proposed control region would be lowered in the second phase to 
2.7 million tons for SO2 and 1.3 million tons for 
NOX. The current 28-state\52\ emissions, baseline emissions 
in 2010 and 2015 and proposed regional emissions caps are shown in 
Table III-1.
---------------------------------------------------------------------------

    \51\ Because Connecticut is affected only by the 8-hour ozone 
findings, NOX emissions reductions are not necessary 
until the ozone season. Therefore, for Connecticut only, EPA is 
proposing a Phase I NOX reduction compliance date of May 
1, 2010.
    \52\ Excludes emissions from Connecticut.

                  Table III-1.--SO2 and NOX Regionwide Emissions Reductions and Emissions Caps
----------------------------------------------------------------------------------------------------------------
                                                                 2010  (tons)                2015  (tons)
                                                2002     -------------------------------------------------------
                                              Emissions     Baseline                    Baseline
                                               (tons)       emissions        Cap        emissions        Cap
----------------------------------------------------------------------------------------------------------------
SO2.......................................         9.4M          9.0M          3.9M          8.3M          2.7M
NOX.......................................         3.7M          3.1M          1.6M          3.2M          1.3M
----------------------------------------------------------------------------------------------------------------

    We derived these amounts as follows: The SO2 emissions 
limitations correspond to 65 percent of the affected States' title IV 
allowances in 2015, and 50 percent in 2010. The NOX 
emissions limitations correspond to the sum of the affected States' 
historic heat input amounts, multiplied by an emission rate of 0.125 
mmBtu for 2015 and 0.15 mmBtu for 2010. Historic heat input is derived 
as the highest annual heat input during 1999-2002. We are proposing 
that these regionwide limits correspond to costs that meet the highly 
cost-effective criteria.
    Further, EPA proposes to apportion these regionwide amounts to the 
individual States in the region as follows: For SO2, EPA 
proposes to apportion the regionwide amounts to the individual States 
in the region in proportion to their title IV allocations. This would 
amount to requiring reductions in the amount of 65 percent of each 
affected State's title IV allocations for 2015, and 50 percent for 
2010. The EPA is considering requiring an adjustment to these amounts 
to account for the fact that the utility industry has changed since the 
title IV allocation formulae were developed. For NOX, EPA 
proposes to apportion the regionwide amounts to the individual States 
in the region in proportion to their historic heat input, determined as 
the average of several years of heat input.
d. Compliance Approaches and Statewide Emissions Budgets
    Today's proposal affects 28 upwind States and the District of 
Columbia for the purpose of addressing PM2.5 transport, and 
25 States and the District of Columbia for the purpose of addressing 
ozone transport. For States required to reduce NOX emissions 
to address 8-hour ozone transport, the NOX reductions must 
be implemented at least during the ozone season. For States required to 
reduce SO2 and NOX emissions to address 
PM2.5 transport, the NOX and SO2 
reductions must be achieved annually. For States affected for both 
PM2.5 and ozone, EPA is proposing that compliance with the 
PM2.5-related annual emissions reduction requirement be 
deemed sufficient for compliance with the seasonal ozone-related 
emissions reduction requirement.
    The EPA also wants to streamline potentially overlapping compliance 
requirements between the existing NOX SIP Call and today's 
proposed action, while ensuring that the ozone benefits of the 
NOX SIP Call are not jeopardized. The EPA is proposing that 
States may choose to recognize compliance with the more stringent 
annual NOX reduction requirements contained in today's 
rulemaking as satisfying the original NOX SIP Call seasonal 
reduction requirements for sources that States cover under both the 
NOX SIP Call and today's proposal.
    We are proposing to calculate the amount of required reductions on 
the basis of controls available for EGUs. We believe these EGU 
reductions represent the most cost-effective reductions available. In 
2010, considering other controls that will be in place, but not 
assuming a rule to address transported pollution is implemented, EGUs 
are projected to emit approximately one-quarter of the total man-made 
NOX emissions in 2010 and two-thirds of the man-made 
SO2 emissions in the region proposed for reductions in 
today's rulemaking. Extensive information exists indicating that highly 
cost-effective controls are available for achieving significant 
reductions in NOX and SO2 emissions from the EGU 
sector.
    We are proposing that (as under the NOX SIP Call) States 
obtaining reductions from EGUs to comply with today's proposal must cap 
their EGUs at levels that will assure the required reductions. In 
addition, today's action proposes an approach which permits the use of 
title IV SO2 allowances at discounted levels that provide 
for a planned transition toward accomplishing the objectives of the 
interstate air quality rule.
    Based on our experience in the NOX SIP Call, we 
anticipate that States will choose to require EGUs to participate in 
the cap and trade programs administered by EPA. If States choose to 
participate in the cap and trade programs, States must adopt the model 
cap and trade programs, described in section VIII. The cap and trade 
programs will create incentives for EGUs to reduce SO2 and 
NOX emissions starting no later than 2010, and probably 
somewhat earlier, and continuing to 2015 and beyond. The model cap and 
trade programs are designed to satisfy all the SO2 and 
NOX emissions reduction requirements proposed in today's 
rule.
    If a State imposes the full amount of SO2 and 
NOX emissions reductions on EGUs that EPA has deemed highly 
cost effective, we are taking comment on whether this approach to 
compliance with the interstate air quality rule by affected EGUs in 
affected States would satisfy for those sources the Best Available 
Retrofit Technology (BART) requirements of the CAA. We are further 
soliciting comment, for the circumstances just described, on whether 
compliance through participation in a regionwide or statewide cap and 
trade program, rather than source-specific emissions limits, could 
satisfy the BART requirements for those sources.
    States that choose to obtain some of the required SO2 or 
NOX reductions from non-EGU sources must adopt control 
measures for those other sources. To assure accurate accounting of 
emissions reductions, these States will have to establish sector-
specific baseline emission inventories for 2010 and 2015. These States 
will also have to measure projected emissions reductions from adopted 
measures from these baselines. The sector-specific baseline inventory 
minus the amount of

[[Page 4587]]

reduction the State chooses to obtain from that sector is the sector 
budget for those sources. The SIP must contain a projection showing 
that compliance with the adopted measure(s) for that sector will ensure 
that emissions from the sector will meet the sector budget.

E. Request for Comment on Potential Applicability to Regional Haze

    We believe that the emissions reductions that would result from 
today's proposed rulemaking would help the States in making substantial 
progress towards meeting the goals and requirements of the Regional 
Haze rule in the Eastern U.S. As a result of the predicted emissions 
reductions, we anticipate that visibility would improve in Class I 
areas in this region, including in areas such as the Great Smoky and 
Shenandoah National Parks. We request comment on the extent to which 
the reductions achieved by these rules would, for States covered by the 
IAQR, satisfy the first long term strategy for regional haze, which is 
required to achieve reasonable progress towards the national visibility 
goal by 2018.
    We also request comment on whether the cap and trade approach 
proposed in this rulemaking is a suitable mechanism that could be 
expanded to help other States meet their regional haze obligations 
under the CAA. If we were to propose this approach, we would address 
this further in a supplemental notice and we would need to amend our 
Regional Haze rule to specify that, in establishing a reasonable 
progress goal for any Class I area as required by CAA section 169A and 
our rule, the State would need to submit a SIP revision that, at a 
minimum, would enable the State to participate in a cap and trade 
program that reflects a rate of progress based on specified levels of 
SO2 and NOX reductions that we find are 
reasonable in light of the natural visibility goal that Congress 
established in 1977. Such an approach could be proposed to apply to 
areas identified in our final Regional Haze rule (64 FR 35714, July 1, 
1999) as having emissions that may reasonably be anticipated to cause 
or contribute to an impairment of visibility in at least one Class I 
area, to reduce those emissions. We note that, under such an approach, 
we could consider two separate NOX emission levels and two 
separate cap and trade zones for NOX. States included on the 
basis of their contribution to either ozone or PM2.5 
nonattainment would be in one zone and would need to meet the 
NOX emission reduction requirements discussed elsewhere in 
this action. States included only on the basis of needing to achieve 
reasonable progress goals would be in a separate zone and would need to 
meet a level specifically designed to address that issue. We request 
comment on what emissions levels should be considered for 
SO2 and NOX if we were to pursue such an 
approach. We also request comment on how such an approach could be 
integrated with and combine the efforts of Regional Planning 
Organizations that are working to address regional haze.

F. How Will the Interstate Air Quality Rule Apply to the Federally 
Recognized Tribes?

    The Tribal Authority Rule (TAR) (40 CFR part 49), which implements 
section 301(d) of the CAA, gives Tribes the option of developing CAA 
programs, including Tribal Implementation Plans (TIPs). However, unlike 
States, Tribes are not required to develop implementation plans. 
Specifically, the TAR, adopted in 1998, provides for the Tribes to be 
treated in the same manner as a State in implementing sections of the 
CAA. The EPA determined in the TAR that it was appropriate to treat 
Tribes in a manner similar to a State in all aspects except specific 
plan submittal and implementation deadlines for NAAQS-related 
requirements, including, but not limited to, such deadlines in CAA 
sections 110(a)(1), 172(a)(2), 182, 187, and 191.\53\
---------------------------------------------------------------------------

    \53\ See 40 CFR 49.4(a).
---------------------------------------------------------------------------

    In addition, the TAR also indicates that section 110(a)(2)(d) 
applies to the Tribes. This provision of the Act requires EPA to ensure 
that SIPs and TIPs ensure that their sources do not contribute 
significantly to nonattainment downwind. In fact, Tribes generally have 
few emissions sources and thus air quality problems in Indian country 
are generally created by transport into Tribal lands. Specifically, in 
the February 12, 1998 preamble to the Tribal Air Rule we stated:

    EPA notes that several provisions of the CAA are designed to 
address cross-boundary air impacts. EPA is finalizing its proposed 
approach that the CAA protections against interstate pollutant 
transport apply with equal force to States and Tribes. Thus EPA is 
taking the position that the prohibitions and authority contained in 
sections 110(a)(2)(D) and 126 of the CAA apply to Tribes in the same 
manner as States. As EPA noted in the preamble to its proposed rule, 
section 110(a)(2)(D), among other things, requires States to include 
provisions in their SIPs that prohibit any emissions activity within 
the State from significantly contributing to nonattainment * * * In 
addition, section 126 authorizes any State or Tribe to petition EPA 
to enforce these prohibitions against a State containing an 
allegedly offending source or group of sources. See 63 FR 7262, 59 
FR 43960-43961.

    Because the Tribes, like the States are our regulatory partners, in 
developing the interstate air quality rule we want to ensure that the 
Tribes' air quality and sovereignty are protected. Thus, we are 
exploring areas in the rule development where Tribes will be impacted. 
One area, in particular, is in the establishment of emissions reduction 
requirements and budgets. We are not aware of the presence of any EGUs 
on tribal lands located in the States for which EPA has conducted air 
quality modeling for today's proposal. Although, it is possible that 
EGUs may locate in Indian country in the future. We are requesting 
comment on whether and how to apply any emissions reductions or budget 
requirements to the Tribes, as well as comments on other areas of the 
rule that will impact the Tribes.

IV. Air Quality Modeling To Determine Future 8-Hour Ozone and 
PM2.5 Concentrations

A. Introduction

    In this section, we describe the air quality modeling performed to 
support today's proposal. We used air quality modeling primarily to 
quantify the impacts of SO2 and NOx emissions 
from upwind States on downwind annual average PM2.5 
concentrations, and the impacts of NOx emissions from upwind 
States on downwind 8-hour ozone concentrations.
    This section includes information on the air quality models applied 
in support of the proposed rule, the meteorological and emissions 
inputs to these models, the evaluation of the air quality models 
compared to measured concentrations, and the procedures for projecting 
ozone and PM2.5 concentrations for future year scenarios. We 
also present the results of modeling locally applied control measures 
designed to reduce concentrations of PM2.5 in projected 
nonattainment areas. The Air Quality Modeling Technical Support 
Document (AQMTSD) contains more detailed information on the air quality 
modeling aspects of this rule.\54\ Updates made between the proposed 
rule and the final rule to components of the ozone and PM modeling 
platform will be made public in a Notice of Data Availability.
---------------------------------------------------------------------------

    \54\ ``Air Quality Modeling Technical Support Document for the 
Proposed Interstate Air Quality Rule (January 2004)'' can be 
obtained from the docket for today's proposed rule: OAR-2003-0053.

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

[[Page 4588]]

B. Ambient 8-Hour Ozone and Annual Average PM2.5 Design 
Values

1. 8-Hour Ozone Design Values
    Future year levels of air quality are estimated by applying 
relative changes in model-predicted ozone to current measurements of 
ambient ozone data. Current measurements of ambient ozone data come 
from monitoring networks consisting of more than one thousand monitors 
located across the country. The monitors are sited according to the 
spatial and temporal nature of ozone, and to best represent the actual 
air quality in the United States. More information on the monitoring 
network used to collect current measurements of ambient ozone is in the 
Air Quality Data Analysis Technical Support Document.\55\
---------------------------------------------------------------------------

    \55\ ``Air Quality Data Analysis Technical Support Document for 
the Proposed Interstate Air Quality Rule (January 2004)'' can be 
obtained from the docket for today's proposed rule: OAR-2003-0053.
---------------------------------------------------------------------------

    In analyzing the ozone across the United States, the raw monitoring 
data must be processed into a form pertinent for useful 
interpretations. For this action, the ozone data have been processed 
consistent with the formats associated with the NAAQS for ozone. The 
resulting estimates are used to indicate the level of air quality 
relative to the NAAQS. For ozone air quality indicators, we developed 
estimates for the 8-hour ozone standard. The level of the 8-hour ozone 
NAAQS is 0.08 ppm. The 8-hour ozone standard is not met if the 3-year 
average of the annual 4th highest daily maximum 8-hour ozone 
concentration is greater than 0.08 ppm (0.085 is rounded up). This 3-
year average is called the annual standard design value. As described 
below, the approach for forecasting future ozone design values involved 
the projection of 2000-2002 ambient design values to the various future 
year emissions scenarios analyzed for today's proposed rule. These data 
were obtained from EPA's Air Quality System (AQS) on August 11, 2003. A 
more detailed description of design values is in the Air Quality Data 
Analysis Technical Support Document. A list of the 2000-2002 Design 
Values is available at http://www.epa.gov/airtrends/values.html.
2. Annual Average PM2.5 Design Values
    Future year levels of air quality are estimated by applying 
relative changes in model predicted PM2.5 to current 
measurements of ambient PM2.5 data. Current measurements of 
ambient PM2.5 data come from monitoring networks consisting 
of more than one thousand monitors located across the country. The 
monitors are sited according to the spatial and temporal nature of 
PM2.5, and to best represent the actual air quality in the 
United States. More information on the monitoring network used to 
collect current measurements of ambient PM2.5 is in the Air 
Quality Data Analysis Technical Support Document.
    In analyzing the PM2.5 data across the United States, 
the raw monitoring data must be processed into a form pertinent for 
useful interpretations. For this action, the PM2.5 data have 
been processed consistent with the formats associated with the NAAQS 
for PM2.5. The resulting estimates are used to indicate the 
level of air quality relative to the NAAQS. For PM2.5, the 
annual standard is met when the 3-year average of the annual mean 
concentration is 15.0 [mu]g/m \3\ or less. The 3-year average annual 
mean concentration is computed at each site by averaging the daily 
Federal Reference Method (FRM) samples taken each quarter, averaging 
these quarterly averages to obtain an annual average, and then 
averaging the three annual averages. The 3-year average annual mean 
concentration is also called the annual standard design value. As 
described below, the approach for forecasting future PM2.5 
design values involved the projection of 1999-2001 and 2000-2002 
ambient design values to the various future year emissions scenarios 
analyzed for today's proposed rule. These data were obtained from EPA's 
Air Quality System (AQS) on July 9, 2003. A more detailed description 
of design values is in the Air Quality Data Analysis Technical Support 
Document. A list of the 1999-2001 and 2000-2002 Design Values is 
available at http://www.epa.gov/airtrends/values.html.

C. Emissions Inventories

1. Introduction
    In order to support the air quality modeling analyses for the 
proposed rule, emission inventories were developed for the 48 
contiguous States and the District of Columbia. These inventories were 
developed for a 2001 base year to reflect current emissions and for 
future baseline scenarios for years 2010 and 2015. The 2001 base year 
and 2010 and 2015 future base case inventories were in large part 
derived from a 1996 base year inventory and projections of that 
inventory to 2007 and 2020 as developed for previous EPA rulemakings 
for Heavy Duty Diesel Engines (HDDE) (http://www.epa.gov/otaq/models/hd2007/r00020.pdf) and Land-based Non-road Diesel Engines (LNDE) 
(http://www.epa.gov/nonroad/454r03009.pdf). The inventories were 
prepared at the county level for on-road vehicles, non-road engines, 
and area sources. Emissions for EGUs and industrial and commercial 
sources (non-EGUs) were prepared as individual point sources. The 
inventories contain both annual and typical summer season day emissions 
for the following pollutants: oxides of nitrogen (NOX); 
volatile organic compounds (VOC); carbon monoxide (CO); sulfur dioxide 
(SO2); direct particulate matter with an aerodynamic 
diameter less than 10 micrometers (PM10) and less than 2.5 
micrometers (PM2.5); and ammonia (NH3). 
Additional information on the development of the emissions inventories 
for air quality modeling and State total emissions by sector and by 
pollutant for each scenario are provided in the AQMTSD.
2. Overview of 2001 Base Year Emissions Inventory
    Emissions inventory inputs representing the year 2001 were 
developed to provide a base year for forecasting future air quality, as 
described below in section IV.D. for ozone and section IV.E. for 
PM2.5. Because the complete 2001 National Emissions 
Inventory (NEI) and future year projections consistent with that NEI 
were not available in a form suitable for air quality modeling when 
needed for this analysis, the following approach was used to develop a 
reasonably representative ``proxy'' inventory for 2001 in model-ready 
form that retained the same consistency with the existing future year 
projected inventories as the 1996 model-ready inventory that was used 
as the basis for those projected inventories.
    The EPA had available model-ready emissions input files for a 1996 
Base Year and a 2010 Base Case from a previous analysis. In addition, 
robust NEI estimates were available for 2001 for three of the six man-
made emissions sectors: EGUs; on-road vehicles; and non-road engines. 
For the EGU sector, State-level emissions totals from the NEI 2001 were 
divided by similar totals from the 1996 modeling inventory to create a 
set of 1996 to 2001 adjustment ratios. Ratios were developed for each 
State and pollutant. These ratios were applied to the model-ready 1996 
EGU emissions file to produce the 2001 EGU emissions file.
    The NEI 2001 emissions estimates for the on-road vehicles and non-
road engines sectors were available from the MOBILE6 and NONROAD2002 
models, respectively. Because both of these models were updates of the 
versions used to produce the existing 1996 model-ready emissions files 
and their associated projection year files, a

[[Page 4589]]

slightly different approach than that used for the EGUs was used to 
adjust the 1996 model-ready files to produce files for 2001.
    The updated MOBILE6 and NONROAD2002 models were used to develop 
1996 emissions estimates that were consistent with the 2001 NEI 
estimates. A set of 1996-to-2001 adjustment ratios were then created by 
dividing State-level total emissions for each pollutant for 2001 by the 
corresponding consistent 1996 emissions. These adjustment ratios were 
then multiplied by the gridded model-ready 1996 emissions for these two 
sectors to produce model-ready files for 2001. These model-ready 2001 
files, therefore, maintain consistency with the future year projection 
files that were based on the older emission model versions but also 
capture the effects of the 1996 to 2001 emission changes as indicated 
by the latest versions of the two emissions models.
    Consistent estimates of emissions for the 2001 Base Year were not 
available at the time modeling was begun for two other emission 
sectors: non-EGU point sources and area sources. For these two sectors, 
linear interpolations were performed between the gridded 1996 emissions 
and the gridded 2010 Base Case emissions to produce 2001 gridded 
emissions files. These interpolations were done separately for each of 
the two sectors, for each grid cell, for each pollutant. As the 2010 
Base Case inventory was itself a projection from the 1996 inventory, 
this approach maintained consistency of methods and assumptions between 
the 2001 and 2010 emissions files.
3. Overview of the 2010 and 2015 Base Case Emissions Inventories
    The future base case scenarios generally represent predicted 
emissions in the absence of any further controls beyond those State, 
local, and Federal measures already promulgated plus other significant 
measures expected to be promulgated before the final rule from today's 
proposal. Any additional local control programs which may be necessary 
for areas to attain the annual PM2.5 NAAQS and the ozone 
NAAQS are not included in the future base case projections. The future 
base case scenarios do reflect projected economic growth, as described 
in the AQMTSD.
    Specifically, the future base case scenarios include the effects of 
the LNDE as proposed, the HDDE standards, the Tier 2 tailpipe 
standards, the NOX SIP Call as remanded (excludes controls 
in Georgia and Missouri), and Reasonably Available Control Techniques 
(RACT) for NOX in 1-hour ozone nonattainment areas. 
Adjustments were also made to the non-road sector inventories to 
include the effects of the Large Spark Ignition and Recreational 
Vehicle rules; and to the non-EGU sector inventories to include the 
SO2 and particulate matter co-benefit effects of the 
proposed Maximum Achievable Control Technology (MACT) standard for 
Industrial Boilers and Process Heaters. The future base case scenarios 
do not include the NOX co-benefit effects of proposed MACT 
regulations for Gas Turbines or stationary Reciprocating Internal 
Combustion Engines, which we estimate to be small compared to the 
overall inventory; or the effects of NOX RACT in 8-hour 
ozone nonattainment areas, because these areas have not yet been 
designated.
4. Procedures for Development of Emission Inventories
a. Development of Emissions Inventories for Electric Generating Units
    As stated above, the 2001 Base Year inventory for the EGU sector 
was developed by applying State-level adjustment ratios of 2001 NEI 
\56\ emissions to 1996 emissions for the EGU sector to the existing 
model-ready 1996 EGU file. Adjustments were thus made in the modeling 
file to account for emissions reductions that had occurred between 1996 
and 2001, but at an aggregated State-level, rather than for each 
individual source. Future year 2010 and 2015 Base Case EGU emissions 
used for the air quality modeling runs that predicted ozone and 
PM2.5 nonattainment status were obtained from version 2.1.6 
of the Integrated Planning Model (IPM) (http://www.epa.gov/airmarkets/epa-ipm/index.html). However, results from this version of the IPM 
model were not available at the time that the air quality model runs to 
determine interstate contributions (``zero-out runs'') were started. 
Therefore, we used EGU emissions from the previous IPM version (v2.1) 
for the zero-out air quality model runs and associated 2010 Base Case. 
Updates applied to the IPM model between versions 2.1 and 2.1.6 include 
the update of coal and natural gas supply curves and the incorporation 
of several State-mandated emission caps and New Source Review (NSR) 
settlements.
---------------------------------------------------------------------------

    \56\ The 2001 NEI emissions for EGUs includes emissions for 
units reporting to EPA under title IV.
---------------------------------------------------------------------------

    Tables IV-1 and IV-2 provide State-level emissions totals for the 
2010 Base Case for SO and NOX, respectively, for each of the 
five sectors. These tables are helpful in understanding the relative 
magnitude of each sector to the total inventory. In addition, these 
tables include, for comparison, a column showing the EGU emissions from 
the older version 2.1 IPM outputs that were used for the zero-out 
modeling analysis. Our examination indicates that the EGU differences 
between the two IPM outputs are generally minor and have not affected 
the content of this proposal.

                                           Table IV-1.--State SO2 Emissions by Sector in the 2010 Base Case 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                              ST                                 EGU v21      EGU v216     Non-EGU      On-road      Non-road       Area        Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
AL...........................................................      494,700      473,000      121,300          600        1,600       51,900      648,400
AZ...........................................................       47,800       47,800      120,800          600          700        4,300      174,200
AR...........................................................      119,300      122,700       17,500          300          500       21,200      162,100
CA...........................................................       17,300       17,300       44,000        3,400       13,000       10,700       88,400
CO...........................................................       90,400       73,100       15,900          500          800        4,700       94,900
CT...........................................................        6,600        6,300        7,600          300          400          500       15,000
DE...........................................................       36,800       46,400       38,400          100          300       10,200       95,400
DC...........................................................            0            0        2,100            0          100        5,800        8,000
FL...........................................................      230,300      233,200       90,400        1,700       15,100       44,700      385,300
GA...........................................................      610,000      609,200       92,800        1,100        2,600        6,700      712,300
ID...........................................................            0            0       26,800          200          300        8,800       36,000
IL...........................................................      591,500      600,800      277,200        1,100        1,700       36,400      917,300
IN...........................................................      599,000      670,400      152,200          800        1,100        2,200      826,700
IA...........................................................      186,200      169,900       84,000          300          600       14,600      269,400

[[Page 4590]]

 
KS...........................................................       71,500       63,500       16,000          300          800        3,500       84,100
KY...........................................................      393,300      363,100       42,900          500        1,800       58,000      466,400
LA...........................................................       96,300      112,500      193,600          400       21,100       94,000      421,700
ME...........................................................        4,700        3,200       22,200          200          200       10,800       36,600
MD...........................................................      261,400      232,200       22,500          600        8,100          900      264,300
MA...........................................................       17,700       15,600       15,300          600        1,200       61,300       94,000
MI...........................................................      375,800      387,600      135,000        1,000        1,300       32,700      557,600
MN...........................................................       94,200       91,600       41,200          500        1,100        5,700      140,000
MS...........................................................       84,600       73,500       77,500          400        2,000       82,700      236,100
MO...........................................................      261,000      293,100      128,600          700          900       31,900      455,200
MT...........................................................       17,700       17,900       34,700          100          300        1,400       54,400
NE...........................................................       97,200       97,600        7,300          200          600       10,100      115,800
NV...........................................................       56,700       16,400        3,500          200          400        3,900       24,300
NH...........................................................        7,300        7,300        7,900          100          200       90,800      106,300
NJ...........................................................       85,300       41,300       70,800          700       53,500       42,600      208,900
NM...........................................................       48,300       48,600      115,200          300          200        9,400      173,700
NY...........................................................      211,400      214,100      168,600        1,300        2,200      122,100      508,200
NC...........................................................      221,500      219,400       95,400        1,000        1,200       33,800      350,800
ND...........................................................      172,200      160,900       56,100          100          400       64,100      281,600
OH...........................................................      979,300    1,258,700      337,600        1,200        5,700       63,300     1,666,40
OK...........................................................      133,000      133,000       41,200          500          600        5,500      180,800
OR...........................................................       15,200       15,200        6,600          400          800       20,900       43,800
PA...........................................................      670,200      853,400      141,000        1,100        3,300       80,900     1,079,80
RI...........................................................            0            0        2,400          100        2,900        4,100        9,500
SC...........................................................      191,500      199,700       63,900          500        1,200       15,600      280,900
SD...........................................................       42,100       36,300        1,400          100          200       23,800       61,800
TN...........................................................      317,300      306,100      134,300          700        2,800       47,800      491,700
TX...........................................................      539,900      487,700      318,600        2,300       33,400        9,600      851,700
UT...........................................................       31,200       31,500       30,300          300          400       13,100       75,600
VT...........................................................            0            0        2,000          100          100       13,000       15,100
VA...........................................................      180,600      187,800      112,700          900        4,600        9,500      315,400
WA...........................................................        6,000        6,000       51,600          600        9,500        3,700       71,400
WV...........................................................      456,800      550,600       62,200          200       33,600       11,300      658,000
WI...........................................................      217,200      214,100       88,500          600          800       45,900      349,800
WY...........................................................       47,100       47,300       59,700          100          200       17,300      124,600
                                                              --------------
                                                                 9,435,400    9,856,900    3,799,200       29,800      236,400    1,367,600     15,290,0
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 All values rounded to nearest 100 tons. EGU v216 emissions are latest version and are included in totals. EGU v21 emissions were used for the zero-out
  analysis.


                                           Table IV-2.--State NOX Emissions by Sector in the 2010 Base Case 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                              ST                                 EGU v21      EGU v216     Non-EGU      On-road      Non-road       Area        Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
AL...........................................................      129,500      134,100       83,400      110,200       55,800       69,400      453,000
AZ...........................................................       88,200       84,600      118,200       91,300       43,600       78,100      415,700
AR...........................................................       52,600       52,500       23,500       64,900       35,400       44,800      221,100
CA...........................................................       18,200       17,700      137,300      401,900      276,100      129,300      962,300
CO...........................................................       87,000       82,700       44,900       80,600       57,000       59,900      325,100
CT...........................................................        6,700        5,200       11,300       48,500       17,300        9,300       91,600
DE...........................................................       11,500       10,300        8,500       17,400       16,800        6,900       59,900
DC...........................................................          100            0          800        4,800        5,400        1,900       13,000
FL...........................................................      162,900      161,800       59,000      293,900      147,900       53,200      716,000
GA...........................................................      152,500      150,600       71,400      189,200       66,400       74,700      552,300
ID...........................................................        1,400        1,200        6,600       32,700       17,300       29,400       87,200
IL...........................................................      194,200      171,400      134,900      177,700      150,200      115,800      750,100
IN...........................................................      223,300      239,700       45,400      142,900       90,400       37,900      556,300
IA...........................................................       95,400       86,100       26,500       61,600       57,600       31,100      262,900
KS...........................................................      101,400      100,900      108,800       59,100       79,500       74,300      422,600
KY...........................................................      186,300      195,900       34,800       95,700       73,100       76,900      476,400
LA...........................................................       64,700       49,800      297,100       89,300      205,000      103,500      744,700
ME...........................................................        6,000        2,100       15,600       30,600        8,800        4,900       62,000
MD...........................................................       60,500       60,600       19,100       73,100       38,900       15,900      207,700
MA...........................................................       27,800       10,400       18,200       74,400       70,000       24,900      197,800
MI...........................................................      126,200      125,400      161,000      171,400       63,200      115,600      636,500
MN...........................................................      109,700      104,500       83,800      103,400       64,800       24,800      381,500
MS...........................................................       49,700       43,200       74,400       68,800       44,800       56,700      287,800
MO...........................................................      144,700      137,000       29,700      117,800       64,200       14,800      363,600
MT...........................................................       38,500       38,500       20,800       24,800       34,000       18,400      136,400
NE...........................................................       58,100       57,800       14,500       37,700       57,400       15,400      182,800
NV...........................................................       44,800       37,400        6,000       36,300       25,400        8,500      113,500

[[Page 4591]]

 
NH...........................................................        3,000        3,600        4,200       25,700        6,200       13,900       53,700
NJ...........................................................       40,000       29,300       51,000       93,100       86,400       79,800      339,600
NM...........................................................       77,300       76,400       68,700       54,500       10,700       32,400      242,800
NY...........................................................       58,700       68,400       36,700      181,500       90,900       88,100      465,600
NC...........................................................       64,700       62,100       63,300      150,000       60,100       37,000      372,400
ND...........................................................       81,100       77,900        7,200       16,400       41,800       21,200      164,600
OH...........................................................      249,100      266,800       77,500      201,300      116,900       82,200      744,700
OK...........................................................       97,700       82,100      121,000       86,800       40,000       33,200      363,100
OR...........................................................       18,000       13,300       16,800       67,400       52,600       39,900      190,000
PA...........................................................      212,100      209,800      173,000      200,600       80,600      114,300      778,300
RI...........................................................        1,300        1,400          900       12,300        5,600        2,800       23,000
SC...........................................................       67,500       64,700       46,000       94,200       29,900       26,100      260,900
SD...........................................................       13,800       11,700        4,700       20,200       24,400        7,900       69,000
TN...........................................................      106,700      102,800       78,000      132,900      138,900       52,300      505,000
TX...........................................................      246,200      200,900      523,800      399,600      432,100       43,100     1,599,50
UT...........................................................       68,400       69,400       31,600       49,000       31,500       23,500      205,100
VT...........................................................            0            0          800       16,000        3,900       11,500       32,100
VA...........................................................       55,800       55,500       66,500      147,000       76,600       45,700      391,300
WA...........................................................       26,600       28,400       47,000      114,600       78,800       23,000      291,800
WV...........................................................      142,500      155,200       50,100       40,400       57,000       21,300      324,000
WI...........................................................      116,200      111,500       54,300      109,600       51,000       58,700      385,100
WY...........................................................       90,300       90,500       49,500       18,600       22,900       71,700      253,200
                                                              --------------
                                                                 4,079,200    3,943,400    3,228,200    4,931,900    3,405,000    2,225,900    17,734,4
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 All values rounded to nearest 100 tons. EGU v216 emissions are latest version and are included in totals. EGU v21 emissions were used for the zero-out
  analysis.

b. Development of Emissions Inventories for On-road Vehicles
    The 2001 base year inventory for the on-Road vehicle sector was 
developed by applying State and pollutant specific adjustment ratios to 
each grid cell's emissions as found in the existing 1996 model-ready 
file for on-road sources. The adjustment ratios were created by 
dividing State-level emissions for each pollutant as estimated for the 
2001 NEI using the MOBILE6 model by the State-level emissions for 1996 
as estimated using the same MOBILE6 model.
    The 1996 model-ready file, along with consistent files for 2007 and 
2020 emissions, had been developed for previous EPA rulemakings using a 
version of the MOBILE5b model which had been adjusted to simulate the 
MOBILE6 model that was under development at that time. The 1996 and 
2007 emissions files had been developed for the HDDE rule (http://www.epa.gov/otaq/models/hd2007/r00020.pdf) and the 2020 emissions file 
had been developed for the LNDE rule (http://www.epa.gov/nonroad/454r03009.pdf). Note that the 2020 on-road vehicle emissions file 
developed for the LNDE rule includes the reductions expected from 
implementation of the HDDE rule.
    Application of the MOBILE6-based adjustment ratios to the 1996 
MOBILE5b-based emission file allowed the resulting 2001 model-ready 
file to remain consistent in methodology with the existing 2007 and 
2020 files. The 2010 and 2015 base case emissions files used for this 
proposal were then developed as straight-line interpolations between 
those 2007 and 2020 files, and they are therefore also consistent with 
the 2001 file.
c. Development of Emissions Inventories for Non-Road Engines
    For the non-road sector, the 2001 model-ready emissions file was 
developed in a manner similar to that described above for the on-road 
vehicle sector. State-level 2001 NEI emissions developed from the 
NONROAD2002 model were divided by a consistent set of emissions for 
1996, also developed using the NONROAD2002 model, to produce a set of 
adjustment ratios for each State and pollutant. These adjustment ratios 
were applied to the existing 1996 model-ready emissions for each grid 
cell to produce a 2001 model-ready file that remains consistent with 
the 1996 file and the existing future projections that were based on 
that 1996 file.
    For the future scenarios, the 2010 and 2020 emissions files 
developed for EPA's analysis of the preliminary controls of the LNDE 
rule were modified to reflect that rule as finally proposed (68 FR 
28327, May 23, 2003) and to incorporate the effects of the Large Spark 
Ignition and Recreational Vehicle rules. These modifications were done 
using adjustment ratios developed from national-level estimates of the 
benefits of these two rules. A 2015 emissions file for this sector was 
then developed as a straight-line interpolation between the modified 
2010 and 2020 files.
d. Development of Emissions Inventories for Other Sectors
    The NEI estimates for 2001 were not available at the time modeling 
was begun for the remaining two man-made emission sectors: non-EGU 
point sources and area sources. For these two sectors, linear 
interpolations were performed between gridded 1996 emissions and 
gridded projected 2010 base case emissions to produce gridded 2001 
emissions files. The gridded emissions input files for 1996 and 2010 
were available from previous EPA analyses. The interpolations were done 
separately for each of the two sectors, for each grid cell, and for 
each pollutant. The 2010 and 2015 emissions files for these sectors 
that were used as part of this interpolation to 2001 were themselves 
developed as straight-line interpolations between the 2007 and 2020 
inventories described above for the on-road vehicle sector. The 
interpolated 2010 and 2015 emissions were adjusted to reflect the 
SO2, PM10, and PM2.5 co-control 
benefits of the proposed Industrial Boiler and Process Heater MACT (68 
FR 1660, January 13, 2003). The 2007 and 2020 projection inventories 
had been developed by applying State- and 2-digit SIC-specific economic 
growth ratios to the 1996 NEI, followed by application of any emissions 
control regulations.

[[Page 4592]]

5. Preparation of Emissions for Air Quality Modeling
    The annual and summer day emissions inventory files were processed 
through the Sparse Matrix Operator Kernel Emissions (SMOKE) Modeling 
System version 1.4 to produce 36-km gridded input files for annual 
PM2.5 air quality modeling and 12-km input files for 
episodic ozone air quality modeling. In addition to the U.S. man-made 
emission sources described above, hourly biogenic emissions were 
estimated for individual modeling days using the BEIS model version 
3.09 (ftp.epa.gov/amd/asmd/beis3v09/). Emissions inventories for Canada 
and for U.S. offshore oil platforms were merged in using SMOKE to 
provide a more complete modeling data set. The single set of biogenic, 
Canadian, and offshore U.S. emissions was used in all scenarios 
modeled. That is, the emissions for these sources were not varied from 
run to run. Additional information on the development of the emissions 
data sets for modeling is provided in the AQMTSD.

D. Ozone Air Quality Modeling

1. Ozone Modeling Platform
    The CAMX was used to assess 8-hour ozone concentrations 
as part of this rulemaking. The CAMX is a publicly available 
Eulerian model that accounts for the processes that are involved in the 
production, transport, and destruction of ozone over a specified three-
dimensional domain and time period. Version 3.10 of the CAMX 
model was employed for this analyses. More information on the 
CAMX model can be found in the model user's guide.\57\ The 
model simulations were performed for a domain covering the Eastern U.S. 
and adjacent portions of Canada.
---------------------------------------------------------------------------

    \57\ Environ, 2002: User's Guide to the Comprehensive Air 
Quality Model with Extensions (CAMX), Novato, CA.
---------------------------------------------------------------------------

    Three episodes during the summer of 1995 were used for modeling 
ozone and precursor pollutants: June 12-24, July 5-15, and August 10-
21. The start of each episode was chosen to correspond to a day with no 
ozone exceedances (an exceedance is an 8-hour daily maximum ozone 
concentration of 85 ppb or more). The first three days of each episode 
are considered ramp-up days and were discarded from analysis to 
minimize effects of the clean initial concentrations used at the start 
of each episode. In total, thirty episode days were used for analyzing 
interstate transport. As described in the AQMTSD, these episodes 
contain meteorological conditions that reflect various ozone transport 
wind patterns across the East. In general, ambient ozone concentrations 
during these episodes span the range of 2000-2002 8-hour ozone design 
values at monitoring sites in the East.
    In order to solve for the change in pollutant concentrations over 
time and space, the CAMX model requires certain 
meteorological inputs for the episodes being modeled, including: winds, 
temperature, water vapor mixing ratio, atmospheric air pressure, cloud 
cover, rainfall, and vertical diffusion coefficient. Most of the 
gridded meteorological data for the three historical 1995 episodes were 
developed by the New York Department of Environment and Conservation 
using the Regional Atmospheric Modeling System (RAMS), version 3b. A 
model performance evaluation \58\ was completed for a portion of the 
1995 meteorological modeling (July 12-15). Observed data not used in 
the assimilation procedure were compared against modeled data at the 
surface and aloft. This evaluation concluded there were no widespread 
biases in the RAMS meteorological data. The remaining meteorological 
inputs (cloud fractions and rainfall rates) were developed based on 
observed data.
---------------------------------------------------------------------------

    \58\ Hogrefe, C., S.T. Rao, P. Kasibhatla, G. Kallos, C. 
Tremback, W. Hao, D. Olerud, A. Xiu, J. McHenry, K. Alapaty, 2001. 
``Evaluating the performance of regional-scale photochemical 
modeling systems: Part-I meteorological predictions.'' Atmospheric 
Environment, vol. 35, No. 34, 4159-4174.
---------------------------------------------------------------------------

2. Ozone Model Performance Evaluation
    The CAMX model was run with Base Year emissions in order 
to evaluate the performance of the modeling platform for replicating 
observed concentrations. This evaluation was comprised principally of 
statistical assessments of paired model/observed data. The results 
indicate that, on average, the predicted patterns and day-to-day 
variations in regional ozone levels are similar to what was observed 
with measured data. When all hourly observed ozone values (greater than 
60 ppb) are compared to their model counterparts for the 30 days 
modeled (paired in time and space), the mean normalized bias is -1.1 
percent and the mean normalized gross error is 20.5 percent. As 
described in the AQMTSD, the performance for individual episodes 
indicates variations in the degree of model performance with a tendency 
for underprediction during the June and July episodes and 
overprediction during the August episode.
    At present, there are no generally accepted statistical criteria by 
which one can judge the adequacy of model performance for regional 
scale ozone model applications. However, as documented in the AQMTSD, 
the base year modeling for today's rule represents an improvement in 
terms of statistical model performance when compared to prior regional 
modeling analyses (e.g., model performance analyses for OTAG, the Tier-
2/Low Sulfur Rule, and the Heavy Duty Engine Rule).
3. Projection of Future 8-Hour Ozone Nonattainment
    Ozone modeling was performed for 2001 emissions and for the 2010 
and 2015 Base Cases as part of the approach for forecasting which 
counties are expected to be nonattainment in these 2 future years. In 
general, the approach involves using the model in a relative sense to 
estimate the change in ozone between 2001 and each future base case. 
Concentrations of ozone in 2010 were estimated by applying the relative 
change in model predicted ozone from 2001 to 2010 with present-day 8-
hour ozone design values (2000-2002). The procedures for calculating 
future case ozone design values are consistent with EPA's draft 
modeling guidance \59\ for 8-hour ozone attainment demonstrations, 
``Draft Guidance on the Use of Models and Other Analyses in Attainment 
Demonstrations for the 8-Hour Ozone NAAQS.'' The draft guidance 
specifies the use of the higher of the design values from (a) the 
period that straddles the emissions inventory Base Year or (b) the 
design value period which was used to designate the area under the 
ozone NAAQS. In this case, 2000-2002 is the design value period which 
straddles the 2001 Base Year inventory and is also the latest period 
which is available for determining designation compliance with the 
NAAQS. Therefore, 2000-2002 was the only period used as the basis for 
projections to the future years of 2010 and 2015.
---------------------------------------------------------------------------

    \59\ U.S. EPA, 1999: Draft Guidance on the Use of Models and 
Other Analyses in Attainment Demonstrations for the 8-Hour Ozone 
NAAQS, Office of Air Quality Planning and Standards, Research 
Triangle Park, NC.
---------------------------------------------------------------------------

    The procedures in the guidance for projecting future 8-hour ozone 
nonattainment are as follows:
    Step 1: Hourly model predictions are processed to determine daily 
maximum 8-hour concentrations for each episode day modeled. A relative 
reduction factor (RRF) is then determined for each monitoring site. 
First, the multi-day mean (excluding ramp-up days) of the 8-hour daily 
maximum predictions in the nine grid cells that include or surround the 
site is calculated using only those

[[Page 4593]]

predictions greater than or equal to 70 ppb, as recommended in the 
guidance. This calculation is performed for the base year 2001 scenario 
and the future-year scenario. The RRF for a site is the ratio of the 
mean prediction in the future-year scenario (e.g., 2010) to the mean 
prediction in the 2001 base year scenario. The RRFs were calculated on 
a site-by-site basis.
    Step 2: The RRF for each site is then multiplied by the 2000-2002 
ambient design value for that site, yielding an estimate of the future 
design value at that particular monitoring location.
    Step 3: For counties with only one monitoring site, the value at 
that site was selected as the value for that county. For counties with 
more than one monitor, the highest value in the county was selected as 
the value for that county. Counties with projected 8-hour ozone design 
values of 85 ppb or more are projected to be nonattainment.
    As an example, consider Clay County, Alabama which has one ozone 
monitor. The 2000-2002 8-hour ambient ozone design value is 82 ppb. In 
the 2001 base year simulation, 24 of the 30 episode modeling days have 
CAMx values of 70 ppb or more in one of the nine grid cells that 
include or surround the monitor location. The average of these 
predicted ozone values is 88.62 ppb. In 2010, the average of the 
predicted values for these same grid cells was 70.32 ppb. Therefore, 
the RRF for this location is 0.79, and the projected 2010 design value 
is 82 multiplied by 0.79 equals 65.07 ppb. All projected future case 
design values are truncated to the nearest ppb (e.g., 65.07 becomes 
65). Since there are no other monitoring locations in Clay County, 
Alabama, the projected 2010 8-hour design value for this county is 65 
ppb.
    The RRF approach described above was applied for the 2010 and 2015 
Base Case scenarios. The resulting 2010 and 2015 Base Case design 
values are provided in the AQMTSD. Of the 287 counties that were 
nonattainment based on 2000-2002 design values, 47 are forecast to be 
nonattainment in 2010 and 34 in 2015. None of the counties that were 
measuring attainment in the period 2000-2002 are forecast to become 
nonattainment in the future. Those counties projected to be 
nonattainment for the 2010 and 2015 Base Cases are listed in Table IV-
3.

 Table IV-3.--Counties Projected To Be Nonattainment for the 8-Hour Ozone NAAQS in the 2010 and 2015 Base Cases
----------------------------------------------------------------------------------------------------------------
                                              2010 Base case projected            2015 Base case porojected
                 State                         nonattainment counties               nonattainment counties
----------------------------------------------------------------------------------------------------------------
AR....................................  Crittenden.........................  Crittenden.
CT....................................  Fairfield, Middlesex, New Haven....  Fairfield, Middlesex, New Haven.
DC....................................  Washington, DC.....................  Washington, DC.
DE....................................  New Castle.........................  None.
GA....................................  Fulton.............................  None.
IL....................................  None...............................  Cook.
IN....................................  Lake...............................  Lake.
MD....................................  Anne Arundel, Baltimore, Cecil,      Anne Arundel, Cecil, Harford.
                                         Harford, Kent, Prince Georges.
MI....................................  None...............................  Macomb.
NJ....................................  Bergen, Camden, Cumberland,          Bergen, Camden, Gloucester,
                                         Gloucester, Hudson, Hunterdon,       Hunterdon, Mercer, Middlesex,
                                         Mercer, Middlesex, Monmouth,         Monmouth, Morris, Ocean.
                                         Morris, Ocean.
NY....................................  Erie, Putnam, Richmond, Suffolk,     Erie, Richmond, Suffolk,
                                         Westchester.                         Westchester.
NC....................................  Mecklenburg........................  None.
OH....................................  Geauga, Summit.....................  Geauga.
PA....................................  Allegheny, Bucks, Delaware,          Bucks, Montgomery, Philadelphia.
                                         Montgomery, Philadelphia.
RI....................................  Kent...............................  Kent.
TX....................................  Denton, Harris, Tarrant............  Harris.
VA....................................  Arlington, Fairfax.................  Arlington, Fairfax.
WI....................................  Kenosha, Racine, Sheboygan.........  Kenosha, Sheboygan.
----------------------------------------------------------------------------------------------------------------

    The counties projected to be nonattainment for the 2010 Base Case 
are the nonattainment receptors used for assessing the contribution of 
emissions in upwind States to downwind nonattainment as part of today's 
proposal. It should be noted that the approach used to identify these 
nonattainment receptors differed from that used in the NOX 
SIP Call where we aggregated on a State-by-State basis all grid cells 
which were both (a) associated with counties that violated the 8-hour 
NAAQS (based on 1994-1996 data), and (b) had future base case 
predictions of 85 ppb or more. For this proposal, we have treated each 
individual county projected to be nonattainment in the future as a 
downwind nonattainment receptor.

E. The PM2.5 Air Quality Modeling

1. The PM2.5 Modeling Platform
    The REMSAD model version 7 was used as the tool for simulating base 
year and future concentrations of PM2.5 in support of 
today's proposed rule. The REMSAD is a publicly available model. An 
overview of the scientific aspects of this model is provided below. 
More detailed information can be found in the REMSAD User's Guide.\60\ 
The basis for REMSAD is the atmospheric diffusion equation (also called 
the species continuity or advection/diffusion equation). This equation 
represents a mass balance in which all of the relevant emissions, 
transport, diffusion, chemical reactions, and removal processes are 
expressed in mathematical terms.
---------------------------------------------------------------------------

    \60\ ICF Kaiser, 2002: User's Guide to the Regional Modeling 
System for Aerosols and Deposition (REMSAD) Version 7, San Rafael, 
CA.
---------------------------------------------------------------------------

    The REMSAD simulates both gas phase and aerosol chemistry. The gas 
phase chemistry uses a reduced-form version of Carbon Bond (CB4) 
chemical mechanism termed ``micro-CB4'' (mCB4). Formation of secondary 
PM species, such as sulfate \61\ and nitrate, is simulated through 
chemical reactions within the model. Aerosol sulfate is formed in both 
the gas phase and the aqueous phase. The REMSAD also accounts for the 
production of secondary organic aerosols through atmospheric chemistry 
processes. Direct PM emissions in REMSAD are treated as inert species 
which are advected and

[[Page 4594]]

deposited without any chemical interaction with other species.
---------------------------------------------------------------------------

    \61\ Ammonium sulfates are referred to as ``sulfate'' in 
sections IV and V of today's proposed rule.
---------------------------------------------------------------------------

    The REMSAD was run using a latitude/longitude horizontal grid 
structure in which the horizontal grids are generally divided into 
areas of equal latitude and longitude. The grid cell size was 
approximately 36 km by 36 km. The REMSAD was run with 12 vertical 
layers extending up to 16,000 meters, with a first layer thickness of 
approximately 38 meters. The REMSAD modeling domain used for this 
analysis covers the entire continental United States.
    The REMSAD requires input of winds, temperatures, surface pressure, 
specific humidity, vertical diffusion coefficients, and rainfall rates. 
The meteorological input files were developed from a 1996 annual MM5 
model run that was developed for previous projects. The MM5 is a 
numerical meteorological model that solves the full set of physical and 
thermodynamic equations which govern atmospheric motions. The MM5 was 
run in a nested-grid mode with 2 levels of resolution: 108 km, and 36km 
with 23 vertical layers extending from the surface to the 100 mb 
pressure level.\62\ All of the PM2.5 model simulations were 
performed for a full year using the 1996 meteorological inputs.
---------------------------------------------------------------------------

    \62\ Olerud, D., K. Alapaty, and N. Wheeler, 2000: 
Meteorological Modeling of 1996 for the United States with MM5. 
MCNC-Environmental Programs, Research Triangle Park, NC.
---------------------------------------------------------------------------

2. The PM2.5 Model Performance Evaluation
    An annual simulation of REMSAD was performed for 1996 using the 
meteorological data and emissions data for that year. The predictions 
from the 1996 Base Year modeling were used to evaluate model 
performance for predicting concentrations of PM2.5 and its 
related speciated components (e.g., sulfate, nitrate, elemental carbon, 
organic carbon). The evaluation was comprised principally of 
statistical assessments of model versus observed pairs.
    The evaluation used data from the IMPROVE,\63\ CASTNet \64\ dry 
deposition, and NADP \65\ monitoring networks. The IMPROVE and NADP 
networks were in full operation during 1996. The CASTNet dry deposition 
network was partially shutdown during the first half of the year. There 
were 65 CASTNet sites with at least one season of complete data. There 
were 16 sites which had complete annual data. The largest available 
ambient data base for 1996 comes from the IMPROVE network. The IMPROVE 
network is a cooperative visibility monitoring effort between EPA, 
Federal land management agencies, and State air agencies. Data is 
collected at Class I areas across the United States mostly at national 
parks, national wilderness areas, and other protected pristine areas. 
There were approximately 60 IMPROVE sites that had complete annual 
PM2.5 mass and/or PM2.5 species data for 1996. 
Forty-two sites were in the West \66\ and 18 sites were in the East. 
The following is a brief summary of the model performance for 
PM2.5 and deposition. Additional details on model 
performance are provided in the AQMTSD.
---------------------------------------------------------------------------

    \63\ IMPROVE, 2000. Spatial and Seasonal Patterns and Temporal 
Variability of Haze and its Constituents in the United States: 
Report III. Cooperative Institute for Research in the Atmosphere, 
ISSN: 0737-5352-47.
    \64\ U.S. EPA, Clean Air Status and Trends Network (CASTNet), 
2001 Annual Report.
    \65\ NADP, 2002: National Acid Deposition Program 2002 Annual 
Summary.
    \66\ The dividing line between the West and East was defined as 
the 100th meridian (e.g., monitoring sites to the east of this 
meridian are included in aggregate performance statistics for the 
East).
---------------------------------------------------------------------------

    Considering the ratio of the annual mean predictions to the annual 
mean observations (e.g., predicted divided by observed) at the IMPROVE 
monitoring sites REMSAD underpredicted fine particulate mass 
(PM2.5), by 18 percent. Specifically, PM2.5 in 
the East was underpredicted by 2 percent, while PM2.5 in the 
West was underpredicted by 33 percent. Sulfate in the East is slightly 
underpredicted and nitrate and largely crustal material are 
overestimated. Elemental carbon is neither overpredicted nor 
underpredicted in the East. Organic aerosols are slightly overpredicted 
in the East. All PM2.5 component species were underpredicted 
in the West.
    The comparisons to the CASTNet data show generally good model 
performance for sulfate. Comparison of total nitrate indicate an 
overestimate, possibly due to overpredictions of nitric acid in the 
model.
    Performance at the NADP sites for wet deposition of ammonium, 
sulfate, and nitrate was reasonably good. However, the nitrate and 
sulfate wet deposition were each underestimated compared to the 
corresponding observed values.
    Given the state of the science relative to PM modeling, it is 
inappropriate to judge PM model performance using criteria derived for 
other pollutants, like ozone. The overall model performance results may 
be limited by our current knowledge of PM science and chemistry, by the 
emissions inventories for direct PM and secondary PM precursor 
pollutants, by the relatively sparse ambient data available for 
comparisons to model output, and by uncertainties in monitoring 
techniques. The model performance for sulfate in the East is quite 
reasonable, which is key since sulfate compounds comprise a large 
portion of PM2.5 in the East.
    Negative effects of relatively poor model performance for some of 
the smaller (i.e., lower concentration) components of PM2.5, 
such as crustal mass, are mitigated to some extent by the way we use 
the modeling results in projecting future year nonattainment and 
downwind contributions. As described in more detail below, each 
measured component of PM2.5 is adjusted upward or downward 
based on the percent change in that component, as determined by the 
ratio of future year to base year model predictions. Thus, we are using 
the model predictions in a relative way, rather than relying on the 
absolute model predictions for the future year scenarios. By using the 
modeling in this way, we are reducing the risk that large 
overprediction or underprediction will unduly affect our projection of 
future year concentrations. For example, REMSAD may overpredict the 
crustal component at a particular location by a factor of 2, but since 
measured crustal concentrations are generally a small fraction of 
ambient PM2.5, the future crustal concentration will remain 
as a small fraction of PM2.5.
    A number of factors need to be considered when interpreting the 
results of this performance analysis. First, simulating the formation 
and fate of particles, especially secondary organic aerosols and 
nitrates is part of an evolving science. In this regard, the science in 
air quality models is continually being reviewed and updated as new 
research results become available. Also, there are a number of issues 
associated with the emissions and meteorological inputs, as well as 
ambient air quality measurements and how these should be paired to 
model predictions that are currently under investigation by EPA and 
others. The process of building consensus within the scientific 
community on ways for doing PM model performance evaluations has not 
yet progressed to the point of having a defined set of common 
approaches or criteria for judging model performance. Unlike ozone, 
there is a limited data base of past performance statistics against 
which to measure the performance of regional/national PM modeling. 
Thus, the approach used for this analysis may be modified or expanded 
in future evaluation analyses.

[[Page 4595]]

3. Projection of Future PM2.5 Nonattainment
    As with ozone, the approach for identifying areas expected to be 
nonattainment for PM2.5 in the future involves using the 
model predictions in a relative way to forecast current 
PM2.5 design values to 2010 and 2015. The modeling portion 
of this approach includes annual simulations for 2001 emissions and for 
the 2010 and 2015 Base Case emissions scenarios. As described below, 
the predictions from these runs were used to calculate RRFs which were 
then applied to current PM2.5 design values. The approach we 
followed is consistent with the procedures in the draft 
PM2.5 air quality modeling guidance,\67\ ``Guidance for 
Demonstrating Attainment of Air Quality Goals for PM2.5 and 
Regional Haze.'' It should be noted that the approach for 
PM2.5 differs from the approach recommended for projecting 
future year 8-hour ozone design values in terms of the base period for 
design values. The approach for ozone uses the higher of the ambient 
design values for two 3-year periods, as described above. In contrast, 
the PM2.5 guidance recommends selecting the highest design 
value from among the three periods that straddle the base emissions 
year (i.e., 2001). The three periods that straddle this year are 1999-
2001, 2000-2002, and 2001-2003. The data from the first two design 
value periods are readily available, but the data from the 2001-2003 
period could not be used since the 2003 data were not yet available. 
Thus, we have relied on the data for the two periods 1999-2001 and 
2000-2002. The design values from the period 2000-2002, which is the 
most recent period with available data, were used to identify which 
monitors are currently measuring nonattainment (i.e., annual average 
PM2.5 of 15.05 [mu]g/m\3\ or more). To be consistent with 
procedures in the modeling guideline, we selected the higher of the 
1999-2001 or 2000-2002 design value from each nonattainment monitor for 
use in projecting future design values. The recommendation in the 
guidance for selecting the highest values from among 3 periods is 
applicable for nonattainment counties, but not necessarily for 
attainment counties. Thus, for monitors that are measuring attainment 
(i.e., PM2.5 less than 15.05 [mu]g/m\3\) using the most 
recent 3 years of data, we used the 2000-2002 design values as the 
starting point for projecting future year design values. Note that none 
of the counties that are attainment for the period 2000-2002 are 
forecast to become nonattainment in 2010 or 2015.
---------------------------------------------------------------------------

    \67\ U.S. EPA, 2000: Draft Guidance for Demonstrating Attainment 
of Air Quality Goals for PM2.5 and Regional Haze; Draft 1.1, Office 
of Air Quality Planning and Standards, Research Triangle Park, NC.
---------------------------------------------------------------------------

    The modeling guidance recommends that model predictions be used in 
a relative sense to estimate changes expected to occur in each major 
PM2.5 species. These species are sulfate, nitrate, organic 
carbon, elemental carbon, crustal and un-attributed mass. Un-attributed 
mass is defined as the difference between FRM PM2.5 and the 
sum of the other five components. The procedure for calculating future 
year PM2.5 design values is called the Speciated Modeled 
Attainment Test (SMAT). The following is a brief summary of those 
steps. Additional details are provided in the AQMTSD.
    Step 1: Calculate quarterly mean concentrations (averaged over 3 
years) for each of the six major components of PM2.5. This 
is done by multiplying the monitored quarterly mean concentration of 
FRM-derived PM2.5 by the monitored fractional composition of 
PM2.5 species for each quarter in 3 consecutive years (e.g., 
20 percent sulfate multiplied by 15 [mu]g/m\3\ PM2.5 equals 
3 [mu]g/m\3\ sulfate).
    Step 2: For each quarter, calculate the ratio of future (e.g., 
2010) to current (i.e., 2001) predictions for each component specie. 
The result is a component-specific RRF (e.g., assume that 2001 
predicted sulfate for a particular location is 10 [mu]g/m\3\ and the 
2010 Base concentration is 8 [mu]g/m\3\, then RRF for sulfate is 0.8).
    Step 3: For each quarter and each component specie, multiply the 
current quarterly mean component concentration (Step 1) by the 
component-specific RRF obtained in Step 2. This produces an estimated 
future quarterly mean concentration for each component (e.g., 3 [mu]g/
m\3\ sulfate multiplied by 0.8 equals future sulfate of 2.4 [mu]g/
m\3\).
    Step 4: Average the four quarterly mean future concentrations to 
get an estimated future annual mean concentration for each component 
specie. Sum the annual mean concentrations of the 6 components to 
obtain an estimated future annual average concentration for 
PM2.5.
    We are using the FRM data for projecting future design values since 
these data will be used for nonattainment designations. In order to 
apply SMAT to the FRM data, information on PM2.5 speciation 
is needed for the location of each FRM monitoring site. Only a small 
number of the FRM sites have measured species information. Therefore, 
spatial interpolation techniques were applied to the speciated 
component averages from the IMPROVE and Speciation Trends Network (STN) 
data to estimate concentrations of species mass at all FRM 
PM2.5 monitoring sites. Details on the procedures and 
assumptions used in mapping the IMPROVE and STN data to the locations 
of the FRM sites are described in the AQMTSD.
    The preceding procedures for determining future year 
PM2.5 concentrations were applied for each FRM site. For 
counties with only one FRM site, the forecast design value for that 
site was used to determine whether or not the county will be 
nonattainment in the future. For counties with multiple monitoring 
sites, the site with the highest future concentration was selected for 
that county. Those counties with future year design values of 15.05 
[mu]g/m\3\ or more are predicted to be nonattainment. The result is 
that 61 counties in the East are forecast to be nonattainment for the 
2010 Base Case. Of these, 41 are forecast to remain nonattainment for 
the 2015 Base Case. The PM2.5 nonattainment counties for the 
2010 and 2015 Base Cases are listed in Table IV-4. These counties were 
used as receptors for quantifying the impacts of the SO2 and 
NOX emissions reductions in today's proposal, as presented 
in section IX.

Table IV-4. Counties Projected To Be Nonattainment for the Annual Average PM2.5 NAAQS for the 2010 and 2015 Base
                                                      Cases
----------------------------------------------------------------------------------------------------------------
                                              2010 Base case projected             2015 Base case projected
                 State                         nonattainment counties               nonattainment counties
----------------------------------------------------------------------------------------------------------------
AL....................................  DeKalb, Jefferson, Montgomery,       Jefferson, Montgomery, Russell,
                                         Russell, Talladaga.                  Talladaga.
CT....................................  New Haven..........................  New Haven.
DC....................................  Washington, DC.....................  None.
DE....................................  New Castle.........................  None.

[[Page 4596]]

 
GA....................................  Clarke, Clayton, Cobb, DeKalb,       Clarke, Clayton, Cobb, DeKalb,
                                         Floyd, Fulton, Hall, Muscogee,       Floyd, Fulton, Hall, Muscogee,
                                         Paulding, Richmond, Wilkinson.       Richmond, Wilkinson.
IL....................................  Cook, Madison, St. Clair, Will.....  Cook, Madison, St. Clair.
IN....................................  Clark, Marion......................  Clark, Marion.
KY....................................  Fayette, Jefferson.................  Jefferson.
MD....................................  Baltimore City.....................  Baltimore City.
MI....................................  Wayne..............................  Wayne.
MO....................................  St. Louis..........................  None.
NY....................................  New York (Manhattan)...............  New York (Manhattan).
NC....................................  Catawba, Davidson, Mecklenburg.....  None.
OH....................................  Butler, Cuyahoga, Franklin,          Butler, Cuyahoga, Franklin,
                                         Hamilton, Jefferson, Lawrence,       Hamilton, Jefferson, Scioto,
                                         Mahoning, Scioto, Stark, Summit,     Stark, Summit.
                                         Trumbull.
PA....................................  Allegheny, Bucks, Lancaster, York..  Allegheny, York.
SC....................................  Greenville.........................  None.
TN....................................  Davidson, Hamilton, Knox, Roane,     Hamilton, Knox.
                                         Sullivan.
WV....................................  Brooke, Cabell, Hancock, Kanawha,    Brooke, Cabell, Hancock, Kanawha,
                                         Marshal, Wood.                       Wood.
----------------------------------------------------------------------------------------------------------------

    As noted above in section IV.C.4, the 2010 Base Case used for the 
zero-out PM2.5 modeling included EGU emissions from an 
earlier simulation of the Integrated Planning Model. Of the 61 2010 
Base Case nonattainment counties listed in Table IV-4, 4 counties 
(i.e., Catawba Co., NC, Trumbull Co., OH, Greenville Co., SC, and 
Marshall Co., WV) were projected to be in attainment in the 2010 Base 
Case used for the zero-out modeling. Thus, 57 nonattainment counties 
(i.e., the 61 counties in Table IV-4 less these 4 counties) were used 
as downwind receptors in the air quality modeling assessment of 
interstate PM2.5 contributions described in section V.C.3.

F. Analysis of Locally-Applied Control Measures for Reducing 
PM2.5

    We conducted two air quality modeling analyses to assess the 
probability that attainment of the PM standard could be reached with 
local measures only. The results of these analyses, discussed in detail 
in the AQMTSD, support the need for today's rulemaking requiring 
reductions of transport pollutants. Both analysis were conducted by:
     Identifying a list of local control measures 
that could be applied in addition to those measures already in place or 
required to be in place in the near future;
     Determining the emissions inventory categories 
that would be affected by those measures, and the estimated percentage 
reduction;
     Applying those percentage reductions to sources 
within a selected geographic area; and
     Conducting regional large-scale air quality 
modeling using REMSAD to determine the ambient impacts those measures 
would have, and the degree to which those measures would reduce the 
expected number of nonattainment areas.
1. Control Measures and Percentage Reductions
    For our analysis of PM2.5 attainment prospects, we 
developed a list of emissions reductions measures as a surrogate for 
measures that State, local and Tribal air quality agencies might 
include in their PM2.5 implementation plans. The list 
includes measures that such agencies might be able to implement to 
reach attainment in 2009 or as soon thereafter as possible. The 
measures address a broad range of man-made point, area, and mobile 
sources. In general, the measures represent what we consider to be a 
highly ambitious but achievable level of control.\68\ We identified 
measures for direct PM2.5 and also for the following 
PM2.5 precursors: SO2, NOX, and 
VOC.\69\ We did not attempt to address ammonia emissions, in part due 
to relatively low emissions of ammonia in urban areas and the 
likelihood of fewer controllable sources within the urban areas 
targeted for the analysis.
---------------------------------------------------------------------------

    \68\ Our assumptions regarding the measures for this analysis 
are not intended as a statement regarding the measures that 
represent RACT or RACM for PM2.5 nonattainment areas.
    \69\ Some VOCs are precursors to the secondary organic aerosol 
component of PM2.5.
---------------------------------------------------------------------------

    The percentage reductions were developed in two ways. First, we 
developed percentage reduction estimates for specific technologies when 
available. The available estimates were based on both the percentage 
control that might be achieved for sources applying that technology, 
and the percentage of the inventory the measures might be applicable 
to. For example, if a given technology would reduce a source's 
emissions by 90 percent where it was installed, but would be reasonable 
to install for only 30 percent of sources in the category, that 
technology would be assigned a percentage reduction of 90 times 30, or 
27 percent.
    Second, there were some groups of control measures where data and 
resources were not available to develop technology-specific estimates 
in this manner. For these, we felt it preferable to make broad 
judgments on the level of control that might be achieved rather than to 
leave these control measures out of the analysis entirely. For example, 
the analysis reflects a reduction of 3 percent from on-road mobile 
source emissions relative to a 2010 and 2015 baseline. We judged this 3 
percent estimate to represent a reasonable upper bound on the degree to 
which transportation control measures and other measures for reducing 
mobile source emissions could reduce the overall inventory of mobile 
source emissions in a given area.
    Additionally, we believe that it may be possible for point source 
owners to improve the performance of emissions control devices such as 
baghouses and electrostatic precipitators, and in some cases to upgrade 
to a more effective control device. In our current emissions 
inventories, we have incomplete data on control equipment currently in 
use. As a result, data are not available to calculate for each source 
the degree to which the control effectiveness could be improved. 
Nonetheless, we believed it important to include reasonable assumptions 
concerning controls for this category for direct PM2.5. For 
this analysis, we assumed across the board that all point sources of PM 
could reduce emissions by 25 percent.

[[Page 4597]]

    Table IV-5 shows the control measures selected for the analysis, 
the pollutants reduced and the percentage reduction estimates.
2. Two Scenarios Analyzed for the Geographic Area Covered by Control 
Measures
    We developed two scenarios for identifying the geographic area to 
which the control measures were applied. These two scenarios were 
intended to address two separate issues related to the effects of 
urban-based control measures.
    The first scenario was intended to illustrate the effect of the 
selected local control measures within the geographic area to which 
controls were applied. For this, we applied the control measures and 
associated emissions reductions to the inventories for three cities--
Birmingham, Chicago, and Philadelphia. We selected these three urban 
areas because each area was predicted to exceed the PM2.5 
standard in 2010, albeit to varying degrees. Additionally, the three 
urban areas were selected because they are widely separated. 
Accordingly, we were able to conduct a single air quality analysis with 
less concerns for overlapping impacts due to transport than if less 
separated cities were selected.
    The control measures were applied to the projected 2010 baseline 
emission inventories for all counties within those Primary Metropolitan 
Statistical Areas (PMSAs).\70\ Thus, for Chicago, measures were applied 
to the 10 counties in Illinois, but were not applied in northwest 
Indiana or Wisconsin. For Philadelphia, measures were applied to the 
New Jersey and Pennsylvania counties within the Philadelphia urban 
area. For Birmingham, measures were applied to four Alabama counties.
---------------------------------------------------------------------------

    \70\ For the three-city study, we chose the PMSA counties rather 
than the larger list of counties in the consolidated metropolitan 
statistical area (CMSA). Both the PMSA and the CMSA classifications 
for metrololitan areas are created by the Office of Management and 
Budget (OMB). For this study, we used the classifications of 
counties in place as of spring 2003, rather than the revised 
classifications released by OMB on June 6, 2003.
---------------------------------------------------------------------------

    The second scenario was intended to address the cumulative impact 
of local control measures applied within nonattainment areas. 
Recognizing that PM2.5 nonattainment areas may be near 
enough to each other to have transport effects between them, we applied 
the control measures identified in Table IV-5, with some modifications 
discussed below, to all 290 counties of the metropolitan areas we 
projected to contain any nonattainment county in 2010 in the baseline 
scenario. Specifically, the control measures were applied to all 
counties in Consolidated Metropolitan Statistical Areas (CMSAs) for 
which any county in the CMSA contained a nonattainment monitor.
3. Results of the Two Scenarios
    Table IV-6 shows the results of applying the control measures in 
each of the three urban areas addressed in the first scenario. The 
emissions reductions were estimated to achieve ambient PM2.5 
reductions of about 0.5 [mu]g/m\3\ to about 0.9 [mu]g/m\3\, less than 
needed to bring any of the cities into attainment in 2010.
    The SO2 reductions in Birmingham were large--80 percent-
-because of the assumption that scrubbers would be installed for two 
large-emitting power plants within the Birmingham-area counties. 
Reductions of other pollutants in Birmingham, and of all pollutants in 
the two other cities, were 33 percent or lower. We note that despite 
the large reduction assumed for SO2 emissions in the 
Birmingham area, ambient sulfate in Birmingham declined only 7 percent, 
indicating that the large majority of sulfate in Birmingham is 
attributable to SO2 sources outside the metropolitan area.

                          Table IV-5.--Control Measures, Pollutants, and Percentage Reductions for the Local Measures Analysis
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          SO2             NOX                     PM2.5                Tol+Xyl (VOC)
            Source Description                   Control Measure       ---------------------------------------------------------------------------------
                                                                          Eff     Eff     App     Red      Eff     App     Red      Eff     App    % Red
--------------------------------------------------------------------------------------------------------------------------------------------------------
Utility boilers..........................  FGD scrubber for some or      (\1\)  ......  ......  .......  ......  ......  .......  ......  ......  ......
                                            all unscrubbed units.
Coal-fired industrial boilers   Coal switching.............      50  ......  ......  .......  ......  ......  .......  ......  ......  ......
 250 mmBtu/hr.
Petroleum fluid catalytic cracking units.  Wet gas scrubber...........      50  ......  ......  .......  ......  ......  .......  ......  ......  ......
Refinery process heaters--oil-fired......  Switch to natural gas......      50  ......  ......  .......  ......  ......  .......  ......  ......  ......
Sulfuric acid plants.....................  Meet NSPS level............   42-96  ......  ......  .......  ......  ......  .......  ......  ......  ......
Coal-fired industrial boilers............  SNCR.......................  ......      50      20     10    ......  ......  .......  ......  ......  ......
Gas-fired industrial boilers (large &      SNCR.......................  ......      45      20      9    ......  ......  .......  ......  ......  ......
 medium).
Gas-fired industrial boilers (small).....  Low NOX burner.............  ......      50      20     10    ......  ......  .......  ......  ......  ......
Gas-fired IC Engines (reciprocating).....  NSCR.......................  ......      94      10      9.4  ......  ......  .......  ......  ......  ......
Gas-fired turbine & cogeneration.........  SCR........................  ......      90      10      9    ......  ......  .......  ......  ......  ......
Asphalt Concrete, Lime Manufacture.......  Low NoX burner.............  ......      27      50     14    ......  ......  .......  ......  ......  ......
Cement Manufacturing.....................  Tire derived fuel & mid-     ......      34      50     18    ......  ......  .......  ......  ......  ......
                                            kiln firing.
Petroleum Refinery Gas-fired Process       Ultra-low NoX burner & SNCR  ......      93      50     46.5  ......  ......  .......  ......  ......  ......
 Heaters.
All direct PM2.5 points sources..........  Improve existing controls    ......  ......  ......  .......  ......  ......     25    ......  ......  ......
                                            (baghouses, ESPs).
Wood fireplaces \2\......................  Natural gas inserts........  ......  ......  ......  .......      80      30     24    ......  ......  ......
                                           Replace with certified       ......  ......  ......  .......      71      30     21.4  ......  ......  ......
                                            noncatalytic woodstove.

[[Page 4598]]

 
HDDV including buses.....................  Engine Modifications,        ......      40       5      2    ......  ......  .......  ......  ......  ......
                                            Diesel oxidation catalyst.
                                           Particulate filter.........  ......  ......  ......  .......      90      30     27    ......  ......  ......
                                           Idling reduction...........  ......  ......  ......      1.7  ......  ......      1.7  ......  ......     1.7
Off-highway diesel construction and        Engine modifcations, diesel  ......      40      73     29    ......  ......  .......  ......  ......  ......
 mining equipment.                          oxidation catalyst.
                                           particulate filter.........  ......  ......  ......  .......      25      73     18    ......  ......  ......
Diesel Marine Vessels....................  SCR........................  ......      75       5      4    ......  ......  .......  ......  ......  ......
                                           Particulate filter.........  ......  ......  ......  .......      90      30     27    ......  ......  ......
Diesel locomotives.......................  SCR........................  ......      72       5      4    ......  ......  .......  ......  ......  ......
                                           Electrification of yard....     2.5     2.5       6      0.2     2.5       6      0.2     2.5       6     0.2
Unpaved roads............................  Gravel covering............  ......  ......  ......  .......      60      30     18    ......  ......  ......
Construction road........................  Watering...................  ......  ......  ......  .......  ......      50     30        15
Open burning.............................  Ban........................  ......     100      75     75       100      75     75       100      75      75
Agricultural tilling.....................  Soil conservation measures,  ......  ......  ......  .......      20      30      6    ......  ......  ......
                                            unspecified.
LDGV and LDGT1...........................  Combination of unspecified   ......  ......  ......      3    ......  ......      3    ......  ......      3
                                            measures to reduce highway
                                            vehicle miles and
                                            emissions.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For the three-city study, we assumed controls to an emission rate of 0.15 lb/mmBtu on all currently unscrubbed coal-fired utility boilers within the
  three metropolitan areas. For the second scenario, we applied a 50 percent reduction to all unscrubbed utility units within the 290 counties, as a
  surrogate for a strategy that applied FGD scrubbers to enough units to achieve a 50 percent reduction overall.
\2\ For the 1996 inventory, woodstoves and fireplaces are combined into one SCC category. We assumed for the purpose of this analysis, that woodstoves
  and fireplaces each comprise half of the total wood burned for the category overall. Thus, the total percentage reduction is (24+21.4)/2 = 22.7
  percent.


     Table IV-6.--Modeled PM2.5 Reductions From Application of Hypothetical Local Controls in 3 Urban Areas
----------------------------------------------------------------------------------------------------------------
                                               2010 base       PM2.5
                Metro area                  PM2.5  ([mu]g/   reduction   Final PM2.5     Attainment achieved?
                                                  m3)        ([mu]g/m3)   ([mu]g/m3)
----------------------------------------------------------------------------------------------------------------
Birmingham, AL............................           20.07        -0.84        19.23  No.
Chicago, IL...............................           18.01        -0.94        17.07  No.
Philadelphia, PA..........................           15.6         -0.52        15.08  No.
----------------------------------------------------------------------------------------------------------------

    Table IV-7 shows the results for the second scenario which, again, 
applied the same list of controls to 290 counties, resulting in local 
and transport reductions. These results show that some of the 2010 
nonattainment areas would be projected to attain, but many are not. 
Accordingly, we concluded that for a sizable number of PM2.5 
nonattainment areas it will be difficult if not impossible to reach 
attainment unless transport is reduced to a much greater degree than by 
the simultaneous adoption of controls within only the nonattainment 
areas.

 Table IV-7.--Modeled PM2.5 Reductions From Application of Hypothetical
    Local Controls in All Areas Predicted to Exceed the NAAQS in 2010
------------------------------------------------------------------------
                                                              With local
                                            Baseline           controls
------------------------------------------------------------------------
Part A--Full Modeling Results Considering All Pollutants and Species....
------------------------------------------------------------------------
Number of nonattainment counties...  61....................           26
Average Reduction in PM2.5 Design    Not Applicable........         1.26
 Value ([mu]g/m3).
------------------------------------
Part B--Results Not Counting Reductions in Sulfate Component of PM2.5...
------------------------------------------------------------------------
Number of nonattainment counties...  61....................           48
Average Reduction in PM2.5 Design    Not Applicable........         0.37
 Value ([mu]g/m3).
------------------------------------------------------------------------

    We were interested in what part of the PM2.5 improvement 
seen in this modeling run was attributable to SO2 reductions 
both locally and upwind. Part B of Table IV-7 shows a re-analysis of 
the modeling results in which the observed sulfate reductions were not 
considered in calculating the PM2.5 effects of the control 
package. If, as we

[[Page 4599]]

expect, the observation from the earlier described modeling of 
Birmingham and two other cities that local SO2 reductions 
have relatively small local effects on sulfate applies more generally, 
then the difference between parts A and B of Table IV-7 would generally 
represent the effect of upwind reductions in SO2 from power 
plants and other sources in other urban areas.
    The results of the two scenarios show that much of the difference 
between the baseline case and the local control case is due to the 
sulfate component.
4. Additional Observations on the Results of the Local Measures 
Analyses
    The application of control measures for the local measures analyses 
(with the exception of sulfur dioxide for Birmingham as noted 
previously) results in somewhat modest percentage and overall tons/year 
reductions. This is because a substantial part of local emissions is 
attributable to mobile sources, small business, and household 
activities for which practical, large-reduction, and quick-acting 
emissions reductions measures could not be identified at this time. A 
list of the control measures and their reduction potential is contained 
in the AQMTSD.
    Preliminary analysis indicates that the reductions in 
SO2 and NOX required by today's proposed rule, if 
achieved through controls on EGUs, will have a lower cost per ton than 
most of the measures applied in the local measures study.
    The EPA recognizes that the above analysis of the possible results 
of local control efforts is uncertain. It is not feasible at this time 
to identify with certainty the levels of emissions reductions from 
sources of regional transport and reductions from local measures that 
will lead to attainment of the PM standards. Much technical work 
remains as States develop their SIPs, including improvements in local 
emissions inventories, local area and subregional air quality analyses, 
and impact analysis of the effects and costs of local controls. At the 
same time, EPA believes that all of the available analyses of the 
effects of local measures support the reductions in transported 
pollutants that are addressed by today's proposal. Taken as a whole, 
the studies described above strongly support the need for the 
substantial reductions in transported pollutants that EPA is proposing.
    At the same time, EPA believes that nothing in the local measures 
analysis should be interpreted as discouraging the development of 
urban-based control measures. Clearly, for many areas, attaining the 
PM2.5 standard will require measures to address both local 
and regional transport. We encourage the development of early reduction 
measures, and specifically we note that the CAA requires States to 
analyze the control measures necessary to attain the standard as soon 
as possible.
    We also note that the baseline emissions inventory used for this 
analysis has some known gaps. For example, direct PM2.5 and 
VOXC commercial cooking (e.g., charbroiling) are not included because 
no robust estimates were available for the 1996 base year used for this 
analysis. Also, excess PM2.5 due to deterioration of engines 
in service, and emissions from open burning of refuse, may not be well 
represented. The effect of these omissions on our estimates of the 
number of areas reaching attainment is uncertain, but we do not believe 
the omissions affect our preliminary conclusions that transport 
controls are less expensive on a per ton basis, and are beneficial for 
attainment.

V. Air Quality Aspects of Significant Contribution for 8-Hour Ozone and 
Annual Average PM2.5 Before Considering Cost

A. Introduction

    In this section, we present the analyses of ambient data and 
modeling which support the findings in today's proposal on the air 
quality aspects of significant contribution (before considering cost) 
for 8-hour ozone and annual average PM2.5. The analyses for 
ozone are presented first, followed by the analyses for 
PM2.5. For both pollutants, we summarize information from 
non-EPA studies then present the procedures and findings from EPA's air 
quality modeling analyses of interstate transport for ozone and 
PM2.5.

B. Significant Contribution to 8-Hour Ozone Before Considering Cost

1. Findings From Non-EPA Analyses That Support the Need for Reductions 
in Interstate Ozone Transport
    As discussed in section II, it is a long-held scientific view that 
ground-level ozone is a regional, and not merely a local, air quality 
problem. Ozone and its precursors are often transported long distances 
across State boundaries exacerbating the downwind ozone problem. This 
transport of ozone can make it difficult--or impossible--for some 
States to meet their attainment deadlines solely by regulating sources 
within their own boundaries.
    The EPA participated with States in the Eastern U.S. as well as 
industry representatives and environmental groups in the Ozone 
Transport Assessment Group (OTAG), which documented that long-distance 
transport of NOX (a primary ozone precursor) across much of 
the OTAG study area contributed to high levels of ozone. For background 
on OTAG and the results from the study, see the following Web site: 
http://www.epa.gov/ttn/naaqs/ozone/rto/otag/index.html.
    The air quality and modeling analyses by OTAG yielded the following 
major findings and technical conclusions relevant to today's proposed 
rulemaking:
     Air quality data indicate that ozone is 
pervasive, that ozone is transported, and that ozone aloft is carried 
over and transported from 1 day to the next.
     Regional NOX reductions are effective 
in producing ozone benefits; the more NOX reduced, the 
greater the benefit.
     Ozone benefits are greatest where emissions 
reductions are made; benefits decrease with distance.
     Elevated and low-level NOX reductions 
are both effective.
     Volatile organic compounds (VOC) controls are 
effective in reducing ozone locally and are most advantageous to urban 
nonattainment areas. The OTAG report also recognized that VOC emissions 
reductions do not play much of a role in long-range transport, and 
concluded that VOC reductions are effective in reducing ozone locally 
and are most advantageous to urban nonattainment areas.
    These OTAG findings provide technical evidence that transport 
within portions of the OTAG region results in large contributions from 
upwind States to ozone in downwind areas, and that a regional approach 
to reduce NOX emissions is an effective means of addressing 
interstate ozone transport.
2. Air Quality Modeling of Interstate Ozone Contributions
    This section documents the procedures used by EPA to quantify the 
impact of emissions in specific upwind States on air quality 
concentrations in projected downwind nonattainment areas for 8-hour 
ozone. These procedures are the first of the two-step approach for 
determining significant contribution, as described in section III, 
above.
    The analytic approach for modeling the contribution of upwind 
States to ozone in downwind nonattainment areas is described in 
subsection (a), the methodology for analyzing the modeling results is 
presented in subsection (b), and the findings as to whether individual 
States make a significant contribution (before considering cost) to 8-
hour ozone nonattainment is provided in subsection (c).

[[Page 4600]]

    The air quality modeling for the interstate ozone contribution 
analysis was performed for those counties predicted to be nonattainment 
for 8-hour ozone in the 2010 Base Case, as described above in section 
IV.D. The procedures used by EPA to determine the air quality component 
of whether emissions in specific upwind States make a significant 
contribution (before considering cost) to projected downwind 
nonattainment for 8-hour ozone are the same as those used by EPA for 
the State-by-State determination in the NOX SIP Call.

a. Analytical Techniques for Modeling Interstate Contributions to 8-
Hour Ozone Nonattainment

    The modeling approach used by EPA to quantify the impact of 
emissions in specific upwind States on projected downwind nonattainment 
areas for 8-hour ozone includes two different techniques, zero-out and 
source apportionment. The outputs of the two modeling techniques were 
used to calculate ``metrics'' or measures of contribution. The metrics 
were evaluated in terms of three key contribution factors to determine 
which States make a significant contribution (before considering cost) 
to downwind ozone nonattainment. Details of the modeling techniques and 
metrics are described in this section.
    The zero-out and source apportionment modeling techniques provide 
different technical approaches to quantifying the downwind impact of 
emissions in upwind States. The zero-out modeling analysis provides an 
estimate of downwind impacts by comparing the model predictions from a 
base case run to the predictions from a run in which the base case man-
made emissions are removed from a specific State. Zero-out modeling was 
performed by removing all man-made emissions of NOX and VOC 
in the State.
    In contrast to the zero-out approach, the source apportionment 
modeling quantifies downwind impacts by tracking the impacts of ozone 
formed from emissions in an upwind source area. For this analysis, the 
source apportionment technique was implemented to provide the 
contributions from all man-made sources of NOX and VOC in 
each State. Additional information on the source apportionment 
technique can be found in the CAMX User's Guide.\71\ There 
is currently no technical evidence showing that one technique is 
clearly superior to the other for evaluating contributions to ozone 
from various emission sources; therefore, both approaches were given 
equal consideration in this analysis.
---------------------------------------------------------------------------

    \71\ Environ, 2002: User's Guide to the Comprehensive Air 
Quality Model with Extensions (CAMX), Novato, CA.
---------------------------------------------------------------------------

    The EPA performed State-by-State zero-out modeling and source 
apportionment modeling for 31 States in the East. These States are as 
follows: Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, 
Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, 
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New 
Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, 
Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West 
Virginia, and Wisconsin. In both types of modeling, emissions from the 
District of Columbia were combined with those from Maryland. For the 
source apportionment modeling, North Dakota and South Dakota were 
aggregated into a single source region. Because large portions of the 
six States along the western border of the modeling domain (i.e., 
Kansas, Nebraska, North Dakota, Oklahoma, South Dakota, and Texas) are 
outside the domain, EPA has deferred analyzing the contributions to 
downwind ozone nonattainment for these States.
    The EPA selected several metrics to quantify the projected downwind 
contributions from emissions in upwind States. The metrics were 
designed to provide information on three fundamental factors for 
evaluating whether emissions in an upwind State make large and/or 
frequent contributions to downwind nonattainment. These factors are:
     The magnitude of the contribution,
     The frequency of the contribution, and
     The relative amount of the contribution.
    The magnitude of contribution factor refers to the actual amount of 
ozone contributed by emissions in the upwind State to nonattainment in 
the downwind area. The frequency of the contribution refers to how 
often contributions above certain thresholds occur. The relative amount 
of the contribution is used to compare the total ozone contributed by 
the upwind State to the total amount of nonattainment ozone in the 
downwind area. The factors are the basis for several metrics that can 
be used to assess a particular impact. The metrics used in this 
analysis are the same as those used in the NOX SIP Call. 
These metrics are described below for the zero-out modeling and for the 
source apportionment modeling. Table V-1 lists the metrics for each 
factor. Additional details with examples of the procedures for 
calculating the metrics are provided in the AQMTSD. We solicit comment 
on other metrics including whether it would be appropriate to develop a 
metric based on annualized costs for each State per ambient impact on 
each downwind nonattainment receptor.

           Table V-1.--Ozone Contribution Factors and Metrics
------------------------------------------------------------------------
           Factor                   Zero-out        Source apportionment
------------------------------------------------------------------------
Magnitude of contribution...  Maximum contribution  Maximum
                                                     contribution; and
                                                    Highest daily
                                                     average
                                                     contribution (ppb
                                                     and percent).
Frequency of contribution...  Number and percent    Number and percent
                               of exceedances with   of exceedances with
                               contributions in      contributions in
                               various               various
                               concentration         concentration
                               ranges.               ranges.
Relative amount of            Total contribution    Total average
 contribution.                 relative to the       contribution to
                               total exceedance      exceedance hours in
                               ozone in the          the downwind area.
                               downwind area and.
                              Population-weighted   ....................
                               total contribution
                               relative to the
                               total population-
                               weighted exceedance
                               ozone in the
                               downwind area.
------------------------------------------------------------------------


[[Page 4601]]

    The values for each metric were calculated using only those periods 
during which model-predicted 8-hour average ozone concentration were of 
85 ppb or more in at least one of the model grid cells that are 
associated with the receptor county. That is, we only analyzed 
interstate ozone contributions for the nonattainment receptor counties 
when the model predicted an exceedance in the 2010 Base Case. The 
procedures for assigning model grid cells to each nonattainment county 
are described in the AQMTSD.
    As in the NOX SIP Call, the ozone contribution metrics 
are calculated and evaluated for each upwind State to each downwind 
nonattainment receptor. These source-receptor pairs are referred to as 
``linkages.''
b. Zero-Out Metrics
    A central component of several of the metrics is the number of 
predicted exceedances in the 2010 Base Case for each nonattainment 
receptor. The number of exceedances in a particular nonattainment 
receptor is determined by the total number of daily predicted peak 8-
hour concentrations of 85 ppb or more across all the episode days for 
the model grid cells assigned to the receptor.
    The Maximum Contribution Metric for a particular upwind State to an 
individual downwind nonattainment receptor linkage is determined by 
first calculating the concentration differences between the 2010 Base 
Case and the zero-out simulation for that upwind State. This 
calculation is performed for all 2010 Base Case exceedances predicted 
for the downwind receptor. The largest difference (i.e., contribution) 
for the linkage across all of the exceedances at the downwind receptor 
is the maximum contribution.
    The Frequency of Contribution Metric for a particular linkage is 
determined by first sorting the contributions by concentration range 
(e.g., 2 to 5 ppb, 5 to 10 ppb, etc.). The number of impacts in each 
range is used to assess the frequency of contribution.
    Determining the Total Ozone Contribution Relative to the Base Case 
Exceedance Metric for a particular linkage involves first calculating 
the total ozone of 85 ppb or more in the 2010 Base Case and in the 
upwind State's zero-out run. The calculation is performed by summing 
the amount of ozone above the NAAQS for each predicted exceedance at 
the downwind receptor area. Finally, the amount of ozone above the 
NAAQS from the zero-out run is divided by the amount of ozone above the 
NAAQS from the 2010 Base simulation to form this metric.
    The Population-Weighted Relative Contribution Metric is similar to 
the total ozone contribution metric described in the preceding 
paragraph, except that during the calculation the amount of ozone above 
the NAAQS in both the base case and the zero-out simulation is weighted 
by (i.e., multiplied by) the 2000 population in the receptor county.
c. Source Apportionment Metrics
    Despite the fundamental differences between the zero-out and source 
apportionment techniques, the definitions of the source apportionment 
contribution metrics are generally similar to the zero-out metrics. One 
exception is that all periods during the day with predicted 8-hour 
averages of 85 ppb or more are included in the calculation of source 
apportionment metrics, as opposed to just the daily peak 8-hour 
predicted values which are used for the zero-out metrics. Additional 
information on differences between the zero-out and source 
apportionment metrics calculations can be found in the AQMTSD.
    The outputs from the source apportionment modeling provide 
estimates of the contribution to each predicted exceedance for each 
linkage. For a given upwind State to downwind nonattainment receptor 
linkage, the Maximum Contribution Metric is the highest contribution 
from among the contributions to all exceedances at the downwind 
receptor. The Frequency of Contribution Metric for the source 
apportionment technique is determined in a similar way to which this 
metric is calculated for the zero-out modeling.
    The Highest Daily Average Contribution Metric is determined for 
each day with predicted exceedances at the downwind receptor. The 
metric is calculated by first summing the contributions for that 
linkage over all exceedances on a particular day, then dividing by the 
number of exceedances on that day to produce a daily average 
contribution to nonattainment. The daily average contribution values 
across all days with exceedances are examined to identify the highest 
value which is then selected for use in the determination of 
significance (before considering cost). We also express this metric as 
a percent by dividing the highest daily average contribution by the 
corresponding ozone exceedance concentration on the same day.
    The Percent of Total Nonattainment Metric is determined for each of 
the three episodes individually as well as for all 30 days (i.e., all 
three episodes) combined. This metric is calculated by first summing 
the contributions to all exceedances for a particular linkage to 
produce an estimate of the total contribution. Second, the total 
contribution is divided by the total ozone for periods above the NAAQS.
d. Evaluation of Upwind State Contributions to Downwind 8-Hour Ozone 
Nonattainment
    The EPA compiled the 8-hour metrics by downwind area in order to 
evaluate the contributions to downwind nonattainment. The contribution 
data were reviewed to determine how large of a contribution a 
particular upwind State makes to nonattainment in each downwind area in 
terms of both the magnitude of the contribution, and the relative 
amount of the total contribution. The data were also examined to 
determine how frequently the contributions occur.
    The first step in evaluating this information was to screen out 
linkages for which the contributions were very low. This initial 
screening was based on: (1) A maximum contribution of less than 2 ppb 
from either of the two modeling techniques and/or, (2) a percent of 
total nonattainment of less than 1 percent. Any upwind State that did 
not pass both of these screening criteria for a particular downwind 
area was considered not to make a significant contribution to that 
downwind area.
    The finding of meeting the air quality component of significance 
(i.e., before considering cost) for linkages that passed the initial 
screening criteria was based on EPA's technical assessment of the 
values for the three factors. Each upwind State that had large and/or 
frequent contributions to the downwind area, based on these factors, is 
considered as contributing significantly (before considering cost) to 
nonattainment in the downwind area. For each upwind State, the modeling 
disclosed a linkage in which all three factors--high magnitude of 
contribution, high frequency of contribution, high relative percentage 
of nonattainment--are met. In addition, each upwind State contributed 
to nonattainment problems in at least two downwind States (except for 
Louisiana and Arkansas which contributed to nonattainment in only 
Texas).\72\ There have to be at least two different factors that 
indicate large and/or frequent contributions in order for the linkage 
to be significant (before considering cost).

[[Page 4602]]

In this regard, the finding of a significant contribution (before 
considering cost) for an individual linkage was not based on any single 
factor. For most of the individual linkages, the factors yield a 
consistent result (i.e., either large and frequent contributions and 
high relative contributions or small and infrequent contributions and 
low relative contributions). In some linkages, however, not all of the 
factors are consistent. The EPA believes that each of the factors 
provides an independent, legitimate measure of contribution.
---------------------------------------------------------------------------

    \72\ In some cases, we determined the contribution of some 
States to downwind problems as significant (before considering cost) 
because it passed two, but not all three, factors.
---------------------------------------------------------------------------

    The EPA applied the evaluation methodology described above to each 
upwind-downwind linkage to determine which States contribute 
significantly (before considering cost) to nonattainment in the 47 
specific downwind counties. The analysis of the metrics for each 
linkage is presented in the AQMTSD. Of the 31 States included in the 
assessment of interstate ozone contributions, 25 States were found to 
have emissions which make a significant contribution (before 
considering cost) to downwind 8-hour ozone nonattainment. These States 
are listed in Tables V-2 and V-3. The linkages which EPA found to be 
significant (before considering cost) are listed in Tables V-2 (by 
upwind State) and V-3 (by downwind nonattainment county) for the 8-hour 
NAAQS. Of the 31 States included in the assessment of interstate ozone 
transport, the following six States are found to not make a significant 
contribution to downwind nonattainment: Florida, Maine, Minnesota, New 
Hampshire, Rhode Island, and Vermont.

   Table V-2.--Projected Downwind Counties to Which Sources in Upwind
States Contribute Significantly (Before Considering Cost) for the 8-hour
                                 NAAQS.
------------------------------------------------------------------------
     Upwind state             Downwind 2010 nonattainment counties
------------------------------------------------------------------------
AL....................  Crittenden AR, Fulton GA, Harris TX.
AR....................  Harris TX, Tarrant TX.
CT....................  Kent RI, Suffolk NY.
DE....................  Bucks PA, Camden NJ, Cumberland NJ, Delaware PA,
                         Gloucester NJ, Hunterdon NJ, Mercer NJ,
                         Middlesex NJ, Monmouth NJ, Montgomery PA,
                         Morris NJ, Ocean NJ, Philadelphia PA, Richmond
                         NY, Suffolk NY.
GA....................  Crittenden AR, Mecklenburg NC.
IA....................  Kenosha WI, Lake IN, Racine WI.
IL....................  Allegheny PA, Crittenden AR, Erie NY, Geauga OH,
                         Kenosha WI, Lake IN, Racine WI, Sheboygan WI,
                         Summit OH.
IN....................  Allegheny PA, Crittenden AR, Geauga OH, Kenosha
                         WI, Racine WI, Sheboygan WI, Summit OH.
KY....................  Allegheny PA, Crittenden AR, Fulton GA, Geauga
                         OH.
LA....................  Harris TX, Tarrant TX.
MA....................  Kent RI, Middlesex CT.
MD....................  Arlington VA, Bergen NJ, Bucks PA, Camden NJ,
                         Cumberland NJ, Delaware PA, Erie NY, Fairfax
                         VA, Fairfield CT, Gloucester NJ, Hudson NJ,
                         Hunterdon NJ, Mecklenburg NC, Mercer NJ,
                         Middlesex CT, Middlesex NJ, Monmouth NJ,
                         Montgomery PA, Morris NJ, New Haven CT,
                         Newcastle DE, Ocean NJ, Philadelphia PA, Putnam
                         NY, Richmond NY, Suffolk NY, Summit OH,
                         Washington DC, Westchester NY.
MI....................  Allegheny PA, Anne Arundel MD, Baltimore MD,
                         Bergen NJ, Bucks PA, Camden NJ, Cecil MD,
                         Cumberland NJ, Delaware PA, Erie NY, Geauga OH,
                         Gloucester NJ, Harford MD, Hudson NJ, Hunterdon
                         NJ, Kenosha WI, Kent MD, Lake IN, Mercer NJ,
                         Middlesex NJ, Monmouth NJ, Montgomery PA,
                         Morris NJ, Newcastle DE, Ocean NJ, Philadelphia
                         PA, Prince Georges MD, Racine WI, Richmond NY,
                         Suffolk NY, Summit OH.
MO....................  Crittenden AR, Geauga OH, Kenosha WI, Lake IN,
                         Racine WI, Sheboygan WI.
MS....................  Crittenden AR, Harris TX.
NC....................  Anne Arundel MD, Baltimore MD, Camden NJ, Cecil
                         MD, Cumberland NJ, Fulton GA, Gloucester NJ,
                         Harford MD, Kent MD, Newcastle DE, Ocean NJ,
                         Philadelphia PA, Suffolk NY.
NJ....................  Bucks PA, Delaware PA, Erie NY, Fairfax VA,
                         Fairfield CT, Kent RI, Middlesex CT, Montgomery
                         PA, New Haven CT, Philadelphia PA, Putnam NY,
                         Richmond NY, Suffolk NY, Westchester NY.
NY....................  Fairfield CT, Hudson NJ, Kent RI, Mercer NJ,
                         Middlesex CT, Middlesex NJ, Monmouth NJ, Morris
                         NJ, New Haven CT.
OH....................  Allegheny PA, Anne Arundel MD, Arlington VA,
                         Baltimore MD, Bergen NJ, Bucks PA, Camden NJ,
                         Cecil MD, Cumberland NJ, Delaware PA, Fairfax
                         VA, Fairfield CT, Gloucester NJ, Harford MD,
                         Hudson NJ, Hunterdon NJ, Kenosha WI, Kent MD,
                         Kent RI, Lake IN, Mercer NJ, Middlesex CT,
                         Middlesex NJ, Monmouth NJ, Montgomery PA,
                         Morris NJ, New Haven CT, Newcastle DE, Ocean
                         NJ, Philadelphia PA, Prince Georges MD, Racine
                         WI, Richmond NY, Suffolk NY, Washington DC,
                         Westchester NY.
PA....................  Anne Arundel MD, Arlington VA, Baltimore MD,
                         Bergen NJ, Camden NJ, Cecil MD, Cumberland NJ,
                         Erie NY, Fairfax VA, Fairfield CT, Gloucester
                         NJ, Harford MD, Hudson NJ, Hunterdon NJ,
                         Kenosha WI, Kent MD, Kent RI, Lake IN,
                         Mecklenburg NC, Mercer NJ, Middlesex CT,
                         Middlesex NJ, Monmouth NJ, Morris NJ, New Haven
                         CT, Newcastle DE, Ocean NJ, Prince Georges MD,
                         Putnam NY, Racine WI, Richmond NY, Suffolk NY,
                         Summit OH, Washington DC, Westchester NY.
SC....................  Fulton GA, Mecklenburg NC.
TN....................  Crittenden AR, Fulton GA, Lake IN, Mecklenburg
                         NC, Tarrant TX.
VA....................  Anne Arundel MD, Baltimore MD, Bergen NJ, Bucks
                         PA, Camden NJ, Cecil MD, Cumberland NJ,
                         Delaware PA, Erie NY, Fairfield CT, Gloucester
                         NJ, Harford MD, Hudson NJ, Hunterdon NJ, Kent
                         MD, Kent RI, Lake IN, Mecklenburg NC, Mercer
                         NJ, Middlesex CT, Middlesex NJ, Monmouth NJ,
                         Montgomery PA, Morris NJ, New Haven CT,
                         Newcastle DE, Ocean NJ, Philadelphia PA, Prince
                         Georges MD, Putnam NY, Richmond NY, Suffolk NY,
                         Summit OH, Washington DC, Westchester NY.
WI....................  Erie NY, Lake IN.
WV....................  Allegheny PA, Anne Arundel MD, Baltimore MD,
                         Bucks PA, Camden NJ, Cecil MD, Cumberland NJ,
                         Delaware PA, Fairfax VA, Fairfield CT, Fulton
                         GA, Gloucester NJ, Harford MD, Hunterdon NJ,
                         Kent MD, Mercer NJ, Middlesex NJ, Monmouth NJ,
                         Montgomery PA, Morris NJ, New Haven CT,
                         Newcastle DE, Ocean NJ, Philadelphia PA, Prince
                         Georges MD, Suffolk NY, Summit OH, Washington
                         DC, Westchester NY.
------------------------------------------------------------------------


[[Page 4603]]


Table V-3.--Upwind States That Contain Emissions Sources That Contribute Significantly (Before Considering Cost)
                              to Projected 8-hour Nonattainment in Downwind States.
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
    Downwind nonattainment                                       Upwind States
           counties
------------------------------
Crittenden AR................  AL       GA       IL       IN      KY      MO      MS      TN
Fairfield CT.................  MD       NJ       NY       OH      PA      VA      WV
Middlesex CT.................  MA       MD       NJ       NY      OH      PA      VA
New Haven CT.................  MD       NJ       NY       OH      PA      VA      WV
Washington DC................  MD       OH       PA       VA      WV
Newcastle DE.................  MD       MI       NC       OH      PA      VA      WV
Fulton GA....................  AL       KY       NC       SC      TN      WV
Lake IN......................  IA       IL       MI       MO      OH      PA      TN      VA      WI
Anne Arundel MD..............  MI       NC       OH       PA      VA      WV
Baltimore MD.................  MI       NC       OH       PA      VA      WV
Cecil MD.....................  MI       NC       OH       PA      VA
Harford MD...................  MI       NC       OH       PA      VA      WV
Kent MD......................  MI       NC       OH       PA      VA      WV
Prince Georges MD............  MI       OH       PA       VA      WV
Mecklenburg NC...............  GA       MD       SC       TN      VA
Bergen NJ....................  MD       MI       OH       PA      VA
Camden NJ....................  DE       MD       MI       NC      OH      PA      VA      WV
Cumberland NJ................  DE       MD       MI       NC      OH      PA      VA      WV
Gloucester NJ................  DE       MD       MI       NC      OH      PA      VA      WV
Hudson NJ....................  MD       MI       NY       OH      PA      VA
Hunterdon NJ.................  DE       MD       MI       OH      PA      VA      WV
Mercer NJ....................  DE       MD       MI       NY      OH      PA      VA      WV
Middlesex NJ.................  DE       MD       MI       NY      OH      PA      VA      WV
Monmouth NJ..................  DE       MD       MI       NY      OH      PA      VA      WV
Morris NJ....................  DE       MD       MI       NY      OH      PA      VA      WV
Ocean NJ.....................  DE       MD       MI       NC      OH      PA      VA      WV
Erie NY......................  IL       MD       MI       NJ      PA      VA      WI
Putnam NY....................  MD       NJ       PA       VA
Richmond NY..................  DE       MD       MI       NJ      OH      PA      VA
Suffolk NY...................  CT       DE       MD       MI      NC      NJ      OH      PA      VA      WV
Westchester NY...............  MD       NJ       OH       PA      VA      WV
Geauga OH....................  IL       IN       KY       MI      MO
Summit OH....................  IL       IN       MD       MI      PA      VA      WV
Allegheny PA.................  IL       IN       KY       MI      OH      WV
Bucks PA.....................  DE       MD       MI       NJ      OH      VA      WV
Delaware PA..................  DE       MD       MI       NJ      OH      VA      WV
Montgomery PA................  DE       MD       MI       NJ      OH      VA      WV
Philadelphia PA..............  DE       MD       MI       NC      NJ      OH      VA      WV
Kent RI......................  CT       MA       NJ       NY      OH      PA      VA
Denton TX....................       None of the upwind States examined in this analysis were found to make a
                                    significant contribution (before considering cost) to this nonattainment
                                                                    receptor.
Harris TX....................  AL       AR       LA       MS
Tarrant TX...................  AR       LA       TN
Arlington VA.................  MD       OH       PA
Fairfax VA...................  MD       NJ       OH       PA      WV
Kenosha WI...................  IA       IL       IN       MI      MO      OH      PA
Racine WI....................  IA       IL       IN       MI      MO      OH      PA
Sheboygan WI.................  IL       IN       MO
----------------------------------------------------------------------------------------------------------------

C. Significant Contribution for Annual Average PM2.5 Before Considering 
Cost

1. Analyses of Air Quality Data That Support the Need To Reduce 
Interstate Transport of PM2.5
a. Spatial Gradients of Pollutant Concentrations
    Daily maps of PM2.5 mass concentrations from EPA's 
national monitoring network show large areas of elevated 
PM2.5 occurring over monitoring locations in urban areas as 
well as rural areas. The fact that many of the rural monitors are not 
located near emissions sources, or at least not near large emission 
sources, and yet the rural concentrations are elevated like the 
neighboring urban concentrations, provides evidence that 
PM2.5 is being transported to the rural areas.
    When the daily maps of PM2.5 mass concentrations are 
viewed in sequence, they show the large areas of elevated 
PM2.5 moving from one area to another, suggesting that 
PM2.5 is being transported not just from urban areas to 
neighboring rural areas, but also from one State to another and from 
one part of the country to another. The smoke from wildfires in 
southeastern Ontario reaching all of the New England States in July of 
2002 is but one well-publicized example of transported 
PM2.5.
    It may be suggested that it is not PM2.5 that is being 
transported; rather, it is meteorological conditions conducive to 
PM2.5 formation that are being transported. However, the 
fact that the monitors located far from emission sources often report 
elevated PM2.5 just after the upwind monitors record high 
levels and just before the downwind monitors record high levels 
indicates strongly that it is PM2.5 that is being 
transported.
    Episodes of movement of elevated PM2.5 have been seen in 
almost every

[[Page 4604]]

direction in the Eastern United States, including in the west to east 
direction along the lower Great Lakes, in the south to north direction 
along the East Coast, in the south to north direction across the 
Midwestern States, in the north to south direction across the 
Midwestern States, and in the north to south direction along the East 
Coast. More information on episodes of movement of PM2.5 is 
contained in the Air Quality Data Analysis Technical Support Document.
    Satellite data from Moderate Resolution Imaging Spectroradiometer 
(MODIS) sensors, designed to retrieve aerosol properties over both land 
and ocean, are strongly correlated with the ground-based monitors that 
measure PM2.5 concentrations below. The MODIS data provide a 
visual corroboration for the above described regional transport. Three 
examples follow:\73\
---------------------------------------------------------------------------

    \73\ Battelle, Satellite Data for Air Quality Analysis. July 
2003.
---------------------------------------------------------------------------

Midwest-Northeast Haze Event: June 20-28, 2002
    During late June 2002, the Central and Eastern United States 
experienced a haze event from a combination of man-made air pollutants 
combined with some smoke. The MODIS images document the buildup of 
aerosols in the Midwest from June 20-22, then the transport of aerosols 
across the Northeast from June 23-26. Images from June 27 and 28 show 
the beginning of smoke transported from fires in Canada into the 
Northern Midwest. This series from June 20-26 qualitatively documents a 
haze transport event from the Midwest into the Northeast. The imagery 
also documents the geographical scale of the smoke transport on June 
27-28.
Northeast Fire Event: July 4-9, 2002
    In early July 2002, the MODIS imagery captured two events: an 
episodic widespread haze event in the East, Southeast, and Midwest; and 
an event directly related to major forest fires in Canada. On July 4 
and 5, MODIS images show urban haze in the East, Southeast, and 
Midwest. This haze event persists in the Southeast and southern Midwest 
throughout the remaining days, July 7-9. At the same time, MODIS images 
for July 6 through July 8 document how the Northeast and mid-Atlantic 
become dominated by smoke transported into the region from Canada 
fires. On July 9, MODIS images show the smoke and the southern haze has 
moved towards the east while dissipating over the Atlantic. This series 
from July 6-8 qualitatively documents the smoke transport event from 
major fires in Canada. The imagery also documents the widespread 
geographical scale of haze, particularly from July 4-8, as well as the 
movement of the haze (along with smoke) across large distances.
Midwest-Southeast Haze Event: September 8-14, 2002
    This imagery during September 2002 reveals the formation of a 
large-scale haze event over the lower Ohio River Valley that eventually 
transports over large portions of Southcentral and Southeastern United 
States. The MODIS images document the buildup of aerosols in the 
Midwest over September 8 and 9. Influenced by a strong low-pressure 
system off the mid-Atlantic seaboard on September 10, the haze plume 
divides, with the majority traveling south and west toward Texas and a 
small remnant moving northeast. On September 11 and 12, the Midwest 
plume, combined with additional pollutants from Texas and the 
Southeast, is transported to the East. September 13 has another low 
pressure system, forcing collection of pollutants in Texas and 
Louisiana, which are obscured by cloud cover on September 14. This 
series reveals the geographic extent and the complexities that are 
possible with the transfer of pollutants. More information on the use 
of satellite data to observe the movement of PM2.5 is 
contained in the Air Quality Data Analysis Technical Support Document.
b. Urban vs. Rural Concentrations
    Differences between concentrations at urban areas and nearby rural 
locations help indicate the general magnitudes of regional and local 
contributions to PM2.5 and PM2.5 species.\74\ The 
differences indicate that in the Eastern United States, the regional 
contributions to the annual average concentrations at urban locations 
is 50 to 80 percent which, in terms of mass, is generally between 10 
and 13 [mu]g/m3. For many rural areas, average 
PM2.5 concentrations exceed 10 [mu]g/m3 and are 
often not much below the annual PM2.5 NAAQS of 15 [mu]g/
m3. These results are consistent with those found in the 
NARSTO Fine Particle Assessment.\75\ More information on comparisons of 
urban and rural concentrations of PM2.5 is contained in the 
Air Quality Data Analysis Technical Support Document.
---------------------------------------------------------------------------

    \74\ Rao, Tesh, Chemical Speciation of PM2.5 in Urban 
and Rural Areas, Published in the Proceedings of the Air and Waste 
Management Symposium on Air Quality Measurement Methods and 
Technology--2002, November 2002.
    \75\ North American Research Strategy for Tropospheric Ozone and 
Particulate Matter, Particulate Matter Science for Policy Makers--A 
NARSTO Assessment. February 2003.
---------------------------------------------------------------------------

    For the most part, sulfate is regionwide, as indicated by the rural 
sulfate concentrations being 80 to 90 percent of the urban sulfate 
concentrations. Total carbon is less of a regional phenomenon than 
sulfate, as evidenced by the rural total carbon concentrations being 
about 50 percent of the urban total carbon concentrations. Last, 
nitrate has a regional component; however, the local component can be 
as large as 2.0 [mu]g/m3.
c. Inter-Site Correlation of PM2.5 Mass and Component 
Species
    Correlation analysis provides further evidence for the transport of 
PM2.5 and its constituents. Analysis of the time series 
history of PM2.5 among different monitoring locations 
indicates a strong tendency for PM2.5 concentrations to rise 
and fall in unison. Correlations of PM2.5 daily 
concentrations among stations separated by over 300 to 500 kilometers 
frequently have correlation coefficients that exceed 0.7. The 
correlation coefficient is a measure of the degree of linear 
association between two variables, and the square of the correlation 
coefficient, denoted R\2\, measures how much of the total variability 
in the data is explained by a simple linear model. For example, in the 
preceding case, approximately 50 percent, (0.7)\2\, of the variability 
in PM2.5 concentrations at one site frequently can be 
explained by PM2.5 concentrations at a site over 300 
kilometers away. These high correlations occur both in warm and cool 
seasons suggesting that large scale transport phenomenon in conjunction 
with large and small scale meteorological conditions play a major role 
in particle concentration changes over large geographic areas.
    Correlation of major PM2.5 constituents among monitoring 
stations show differing patterns as distance separating monitors 
increases. For sulfate, the correlation among daily average 
concentrations remains strong (above 0.7) at distances exceeding 300 
kilometers. Correlation of nitrates among monitoring stations tends to 
be lower than for sulfate and also varies somewhat among seasons. Warm 
season correlations, when nitrates are lowest, tend to be relatively 
low (about 0.4) for stations separated by 300 kilometers or more. Cool 
season correlations for nitrates are larger than warm season 
correlations and range from about 0.5 to above 0.6 for stations near 
urban areas and separated by 300 kilometers or more. Correlation 
coefficients for organic carbon typically range from about 0.4 to above 
0.6 for separation

[[Page 4605]]

distances above 300 kilometers but appear to decrease more rapidly 
during the summer season compared with the other three seasons. For 
elemental carbon and crustal material, correlation with distance drops 
very rapidly to values below 0.2 or 0.3 for separation distances above 
50 to 100 kilometers.
    The formation rate and relative stability for the major 
PM2.5 species help explain the observed correlation 
patterns. For sulfate, conversion of SO2 to sulfate occurs 
slowly over relatively large distances downwind of major emission 
sources of SO2. Slow conversion of SO2 to sulfate 
over large travel distances promotes greater spatial homogeneity and 
thus large correlation among distant monitoring stations. For nitrates, 
evidence suggests that higher inter-station correlations in winter are 
associated with increased stability of nitrate (longer travel 
distances) when conditions are cool compared with warm seasons when 
nitrates are much less stable. The formation of secondary organic 
carbon from natural sources helps maintain a relatively homogeneous 
regional component (higher correlation) that is offset somewhat by 
higher organic carbon in urban areas associated with local carbon 
sources. For elemental carbon and crustal material, almost all of the 
contributions come from nearby sources and hence the relatively low 
correlation among stations that are separated by even small distances. 
More information on inter-site correlation of PM2.5 and 
species is contained in the Air Quality Data Analysis Technical Support 
Document.
d. Ambient Source Apportionment Studies
    Generally, sources emitting particulate matter, or precursors that 
later form particulate matter, emit multiple species of particulate 
matter simultaneously. Often, the proportions of the species are 
sufficiently different from one source type to another that it is 
possible to determine how much each source type contributes to the 
PM2.5 mass observed at a monitoring location. This technique 
is called source apportionment or receptor modeling.
    A review of nearly 20 recently published articles using source 
apportionment modeling at over 35 locations in the Eastern United 
States was conducted to understand commonalities and differences in 
source apportionment results.\76\ A large sulfate dominated source was 
identified as the largest or one of the largest source types in nearly 
every study. Some studies labeled this source coal combustion, while 
others labeled it secondary sulfate and did not attribute it to an 
emission source. For many of the locations, over 50 percent of the 
PM2.5 mass is apportioned to this source type during some 
seasons. Summer is typically the season with the largest contributions. 
Most of the studies, by using back trajectory analysis, indicated that 
the probable location of the sulfate/coal combustion sources is in the 
Midwest. Also, studies with multiple years of data tended to identify a 
winter and summer signature of the sulfate source type, with more mass 
being apportioned to the summer version. Reasons cited in these studies 
for the two signatures included different types of coal being burned 
during the summer versus the winter or different atmospheric chemistry 
leading to different proportions of species at the monitoring location 
by season.
---------------------------------------------------------------------------

    \76\ Battelle, Compilation of Existing Studies of Source 
Apportionment for PM2.5. August 2003.
---------------------------------------------------------------------------

    A nitrate-dominated source type was identified at approximately 
half the sites and contributes to between 10 and 30 percent of the 
annual PM2.5 mass. The source has seasonal variation with 
maxima in the cold seasons. The back trajectories sometimes point to 
areas with high ammonia emissions. However, the interpretation of this 
nitrate-dominated source type is not consistent from study to study. 
Some authors associate this source type with NOX point 
sources and motor vehicles from major cities that are sufficiently far 
from the receptor for the NOX to oxidize and react with 
ammonia. Other authors associate this source type with mobile emissions 
from nearby highways. One author does not interpret the source type 
since he believes it is artificially created by the meteorological 
conditions and atmospheric chemistry required for formation of ammonium 
nitrate.
    Another major source type identified at nearly all the sites is one 
dominated by secondary organic matter. Some studies labeled this source 
motor vehicles, while other studies labeled it secondary organic matter 
and did not attribute it to an emission source. For several sites, this 
source type contributes more than 20 percent of the annual 
PM2.5 mass. Only a few studies separated the source type 
into the combustion of gasoline and diesel fuel, and this separation 
was generally accomplished by using the four organic carbon fractions 
and the three elemental carbon fractions available from the IMPROVE 
network. In Washington, DC, over 85 percent of the mobile source type 
contribution is associated with gasoline vehicles and less than 15 
percent with diesel. This contrasts with Atlanta, where only 33 to 55 
percent (depending on the study) of the mobile source type contribution 
is associated with gasoline vehicles.
    Wood smoke and forest fires were identified as a significant source 
type at several sites. The magnitude of their contributions varies from 
site to site. For a rural site in Vermont, the magnitude of the 
contribution of this source type is approximately 1 [mu]g/m\3\, which 
is approximately 15 percent of the total PM2.5 mass. For 
Atlanta, the magnitude of contribution ranged from 0.5 to 2.0 [mu]g/
m\3\ depending on the study, which is approximately 3 to 11 percent of 
the total PM2.5 mass.
    A crustal source category is identified for all sites and usually 
comprises 1 to 3 percent of the total PM2.5 mass.
    In addition to reviewing the source apportionment results in the 
published literature, EPA conducted receptor modeling using the data 
from the EPA speciation network to identify and quantify major 
contributors to PM2.5 in eight urban areas: Houston, 
Birmingham, Charlotte, St. Louis, Indianapolis, Washington, DC, 
Milwaukee, and New York City.\77\ The ``8 city report'' contains 2 
general types of findings that provide evidence to support that 
interstate transport of fine particles occurs. First, the source 
apportionment analyses at the eight cities provides evidence of the 
types of sources that are most likely the major contributors to fine 
particle mass in each city. Second, linking wind trajectories with the 
source apportionment analyses provides evidence of the most likely 
locations of the source types that are the major contributors to fine 
particle mass in each city.
---------------------------------------------------------------------------

    \77\ Battelle, Eight Site Source Apportionment of PM2.5 
Specification Trends Data. September 2003.
---------------------------------------------------------------------------

    The source apportionment results identify the largest source type 
at each site to be coal combustion. The source type contains a large 
amount of sulfate and is a major source of selenium, a trace particle 
normally associated with the combustion of coal. The mass apportioned 
to this source type ranged from a low of 1 to 3 [mu]g/m\3\ in the 
lowest season to more than 10 [mu]g/m\3\ in the high seasons at 5 of 
the sites. The source type accounted for 30 to 50 percent of the 
overall mass, consistent with the proportions found in the published 
literature. The consistency in the relative and absolute magnitude in 
the contributions from the coal combustion source type in these eight 
cities, combined with the fact that the distance of major coal 
combustion sources from each city varies widely, indicates that it

[[Page 4606]]

is most likely a regional source rather than a local source.
    The second and third largest source types are an ammonium nitrate 
source type and mobile sources. As the name implies, the ammonium 
nitrate source type contains a large amount of both ammonium and 
nitrate. Association of actual emission sources with this source type 
is less definitive, as was the case in the published literature. It is 
most likely that the source type originates from both coal combustion 
and mobile emissions. The mass apportioned to this source type ranged 
from 1 to 5 [mu]g/m\3\, which is 8 to 30 percent of the overall mass. 
This source type was identified in each city except Houston.
    The absolute and relative magnitude of contribution from this 
source type showed much more variation than the coal combustion source 
type. It was highest in the Midwest in the winter, contributing between 
7 and 10 [mu]g/m\3\, where the temperatures are cooler and there are 
more ammonia emissions. The summertime contributions of this source 
type are generally low, near 1 [mu]g/m\3\.
    The mobile source type contains a large amount of organic carbon, 
some elemental carbon, very little sulfate and some metals 
(particularly barium from brake pads). The mass apportioned to this 
source type ranged from a low of 2.5 [mu]g/m\3\ at Milwaukee to a high 
of 6.5 [mu]g/m\3\ at Birmingham. This source type has the least 
seasonal variability of the largest source types. Contributions for the 
highest season, which varies from site to site but is generally fall or 
summer, are only 1.5 or 2 times higher than the contributions for the 
lowest season. As a percentage of mass, the mobile source type accounts 
for 15 to 40 percent of the total mass. It is assumed that most of the 
mass apportioned to the mobile source type is associated with local 
sources.
    Linking the wind trajectories with the source apportionment results 
allows us to develop source regions (i.e., geographic regions with a 
high probability of being the origin of the mass associated with a 
source profile). These source regions provide evidence that at least 
some of the particles associated with the source profiles are likely 
transported over long distances. For example, the highest probability 
source region for the coal combustion source profile for Birmingham 
includes parts of the following States: Missouri, Illinois, Indiana, 
Ohio, Kentucky, Virginia, North Carolina, South Carolina, Alabama, and 
Mississippi. Table V-4 lists the States included in the highest 
probability source regions for each of the three largest source 
profiles at each of the 8 sites.
    The EPA compared the source regions for the coal combustion source 
(the largest source in each city) with the results from the zero-out 
modeling (described below) at the six cities in the 8 City Source 
Apportionment Study that were projected to violate the PM2.5 
standard in 2010. To perform these comparisons, for each city, the 
States in the highest probability source regions were compared to the 
States with a maximum contribution of 0.10 [mu]g/m\3\ or greater at the 
monitor in that city. These comparisons were generally good. At the 
Bronx site for instance, 8 of the 9 States with a maximum contribution 
of 0.10 [mu]g/m\3\ or greater were included in the highest probability 
source region for the coal combustion source. In 5 of the 6 cities for 
which the comparison was performed, at least two thirds of the States 
with a maximum contribution of 0.10 [mu]g/m\3\ were also in the highest 
probability source region for the coal combustion source. In the 6th 
city, St. Louis, 7 of the 13 States with a maximum contribution of 0.10 
[mu]g/m\3\ were the highest probability source region for the coal 
combustion source. In summary, the general agreement between these two 
independent methods (source apportionment linked with wind trajectories 
and zero-out modeling) produce similar results in determining what 
States impact downwind receptors.
    Sulfate is generally formed in the atmosphere from SO2 
(which is why the source is often referred to as secondary sulfate). 
Since the major sources of SO2 emissions are utility plants, 
which are fairly well inventoried, the sulfate source locations have 
been compared to the utility plant SO2 emissions as a check 
on the source identifications. Similarly, much of the nitrate is formed 
from NOX reactions in the atmosphere with utility plants 
being a major source of NOX. Hence, the nitrate source 
locations have also been compared with utility plant NOX 
emissions inventories (although we do not expect the correlation to be 
as good because (a) nitrate is semi-volatile, (b) there are other 
significant sources of NOX, and (c) the nitrate formation is 
also dependent on NH3 emissions).
    The comparisons of the sulfate source regions with the utility 
SO2 emissions were good for some of the sites. At the Bronx 
site for instance, the back trajectories do yield the expected source 
region associations with large utility emissions of SO2, 
namely the Ohio River Valley and the borders of Ohio, West Virginia, 
and Pennsylvania.
    Comparisons of the contour maps of the various non-marine nitrate 
sources show a common pattern, namely Midwest farming regions. 
Illinois, in particular, stands out. It has both NOX utility 
emissions and the farming regions for sources of ammonia.
    More information on ambient source apportionment studies is 
contained in the Air Quality Data Analysis Technical Support Document.

   Table V-4.--Eight City Source Apportionment Study States in Highest Probability Regions for Largest Sources
----------------------------------------------------------------------------------------------------------------
         Eight city source apportionment study states in highest probability regions for largest sources
-----------------------------------------------------------------------------------------------------------------
                 City                   Coal combustion source       Mobile sources      Ammonium nitrate source
----------------------------------------------------------------------------------------------------------------
Bronx................................  NY, PA, MD, VA, NC, WV,  VT, MA, NY, NJ, PA, MD,  NY, NJ, DE, MD, VA, NC,
                                        OH, KY, IN, MI, IL, WI.  VA, OH, IN, IL, WI, MN.  PA, OH, IL, WI, MN.
Washington, DC.......................  NY, PA, VA, NC, SC, GA,  MD, DE, VA, NC, SC, WV,  NY, PA, MD, DE, KY, TN,
                                        OH, KY, TN, IN, IL, AR.  OH, KY, TN.              IL.
Charlotte............................  NY, CT, NJ, PA, MD, VA,  NC, SC, GA, TN AR......  PA, MD, VA, NC, SC, GA,
                                        NC, SC, GA, FL, WV,                               FL, KY, TN, AR, MO,
                                        OH, KY, MI, IN, AL, MS.                           KS.
Birmingham...........................  VA, NC< SC, GA, FL, OH,  NC, SC, GA, AL, MS, AR.  IN, KY, TN, IL, MS, MN,
                                        KY, TN, AL, IN, IL, MO.                           IA, AR, LA, NE, OK,
                                                                                          TX.
Milwaukee............................  OH, MI, IN, KY, TN, AL,  AL, WI, TN, MS, MN, MO.  MI, OH, IN, WI, IL, MN,
                                        MS, IL, WI, IA, MO,                               IA, MO, AR, ND, KS,
                                        AR, LA, SD, NE, KS, OK.                           OK.

[[Page 4607]]

 
Indianapolis.........................  NC, KY, TN, AL, FL, IN,  OH, KY, TN, NC, GA, IN,  MI, OH, IN, WI, IL, MN,
                                        IL, IA, MO, AR, LA,      MI, WI, AR, LA.          IA, MO, AR, ND, KS,
                                        TX, NE, KS.                                       OK.
St. Louis............................  WV, MI, KY, TN, IL, MO,  MO, LA, NE, KS.........  OH, IN, KY, TN, IL, IA,
                                        AR, LA, TX.                                       KS.
Houston 1............................  SC, GA, FL, AL, MS, LA,  KY, TN, AL, MS, IN, IL,  .......................
                                        TX, IN.                  AR, LA, TX.
----------------------------------------------------------------------------------------------------------------
1 No ammonium nitrate source was identified in Houston.

2. Non-EPA Air Quality Modeling Analyses Relevant to PM2.5 
Transport and Mitigation Strategies
    Air quality modeling was performed as part of the Southern 
Appalachian Mountains Initiative (SAMI) to support an assessment of the 
impacts of aerosols, ozone, and acid deposition in Class I areas within 
an eight-State portion of the Southeast.\78\ The results of the SAMI 
modeling \79\ provide the following technical information on transport 
relevant to today's proposal:
---------------------------------------------------------------------------

    \78\ The eight States of the Southern Appalachians covered by 
SAMI are: Alabama, Georgia, Kentucky, North Carolina, South 
Carolina, Tennessee, Virginia, and West Virginia.
    \79\ Southern Appalachian Mountains Initiative Final Report, 
August 2002.
---------------------------------------------------------------------------

     Emissions reductions strategies produce the 
largest changes in fine particle mass on days with the highest mass.
     Most of the reductions in fine particle mass are 
due to reductions in sulfate particles.
     Particle mass in Class I areas of the SAMI 
region are influenced most by SO2 emissions within the State 
and within adjacent States.
     SO2 emissions in other regions 
outside SAMI also contribute to particle mass at Class I areas in the 
SAMI States.
     Specifically, in a 2010 baseline scenario, 
SO2 emissions reductions in States outside the SAMI region 
accounted for approximately 20 percent to as much as 60 percent of the 
modeled sulfate reduction in the 10 Class 1 areas in the SAMI region.
     The relative sensitivity of nitrate fine 
particle mass at the SAMI Class I areas to changes in NOX 
emissions from SAMI States and from other regions is similar to the 
above findings for sulfate fine particle mass.
     For SAMI to accomplish its mission, emissions 
reductions are essential both inside and outside the SAMI region.
     Formation of nitrate particles is currently 
limited in the rural southeastern U.S. by the availability of ammonia. 
As sulfate particles are reduced, more ammonia will be available to 
react with nitric acid vapor and form nitrate particles.
    The findings of the air quality modeling performed by SAMI are very 
consistent and supportive of EPA's zero-out modeling, as described 
below. The findings indicate that interstate transport results in non-
trivial contributions to PM2.5 in downwind locations. High 
concentrations of PM2.5 at sensitive downwind receptors are 
not only influenced by emissions within that State, but are also 
heavily influenced by emissions in adjacent States as well as emissions 
from States in other regions. The SAMI results support a regional 
control approach involving SO2 emissions reductions in order 
to sufficiently reduce PM2.5 to meet environmental 
objectives. The SAMI also found that SO2 emissions 
reductions can lead to an increase in particle nitrate (i.e., nitrate 
replacement). As described in section II.B.3, any such increases could 
be mitigated through reductions in emissions of NOX.
3. Air Quality Modeling of Interstate PM2.5 Contributions
    This section documents the procedures used by EPA to quantify the 
impact of emissions in specific upwind States on projected downwind 
nonattainment for annual average PM2.5. These procedures are 
part of the two-step approach for determining significant contribution, 
as described in section III, above.
    The analytic approach for modeling the contribution of upwind 
States to PM2.5 in downwind nonattainment areas and the 
methodology for analyzing the modeling results are described in 
subsection (a) and the findings as to whether individual States meet 
the air quality prong of the significant contribution test is provided 
in subsection (b). The air quality modeling for the interstate 
PM2.5 contribution analysis was performed for those counties 
predicted to be nonattainment for annual average PM2.5 in 
the 2010 Base Case, as described above in section IV.E.
a. Analytical Techniques for Modeling Interstate Contributions to 
Annual Average PM2.5 Nonattainment
    The EPA performed State-by-State zero-out modeling to quantify the 
contribution from emissions in each State to future PM2.5 
nonattainment in other States and to determine whether that 
contribution meets the air quality prong (i.e., before considering 
cost) of the ``contribute significantly'' test. As part of the zero-out 
modeling technique we removed the 2010 Base Case man-made emissions of 
SO2 and NOX for 41 States on a State-by-State 
basis in different model runs. The States EPA analyzed using zero-out 
modeling are: Alabama, Arkansas, Colorado, Connecticut, Delaware, 
Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, 
Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, 
Missouri, Montana, Nebraska, New Hampshire, New Mexico, New Jersey, New 
York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode 
Island, South Carolina, South Dakota, Tennessee, Texas, Vermont, 
Virginia, West Virginia, Wisconsin, and Wyoming. Emissions from the 
District of Columbia were combined with those from Maryland.
    The contribution from each State to PM2.5 at 
nonattainment receptors in other States was determined in the following 
manner:
    Step 1: The PM2.5 species predictions from the zero-out 
run were applied using the SMAT to calculate PM2.5 at the 57 
2010 Base Case nonattainment receptor counties. These receptors are 
identified in section IV.E.3, above.
    Step 2: For each of the 57 receptors, we calculated the difference 
in PM2.5 between the 2010 Base Case and the zero-out run. 
This difference is the

[[Page 4608]]

contribution from the particular State to the downwind nonattainment 
receptor.
    As described above in section V.B.2., EPA used three fundamental 
factors for evaluating the contribution of upwind States to downwind 8-
hour ozone nonattainment, i.e., the magnitude, frequency, and relative 
amount of contribution. One of these factors, the frequency of 
contribution, is not relevant for an annual average NAAQS and thus, 
frequency was not considered in the evaluation of interstate 
contributions to nonattainment of the PM2.5 NAAQS.
    The EPA considered a number of metrics to quantify the magnitude 
and relative amount of the PM2.5 contributions. All of the 
metrics are described in the AQMTSD. As discussed in section III, 
above, EPA is proposing to use the maximum downwind contribution metric 
as the means for evaluating the significance (before considering cost) 
of interstate PM2.5 transport. We solicit comment on other 
metrics including population-weighted metrics and whether it would be 
appropriate to develop a metric based on annualized costs for each 
State per ambient impact on each downwind nonattainment receptor.
    The procedures for calculating the maximum contribution metric are 
as follows:
    Step 1: Determine the contribution from each upwind State to 
PM2.5 at each downwind receptor;
    Step 2: The highest contribution from among those determined in 
Step 1 is the maximum downwind contribution.
b. Evaluation of Upwind State Contributions to Downwind 
PM2.5 Nonattainment
    The EPA is proposing to use a criterion of 0.15 [mu]g/m\3\ for 
determining whether emissions in a State make a significant 
contribution (before considering cost) to PM2.5 
nonattainment in another State. The rationale for choosing this 
criterion is described in section III, above. The maximum downwind 
contribution from each upwind State to a downwind nonattainment county 
is provided in Table V-5. Of the States analyzed for this proposal, 28 
States and the District of Columbia contribute 0.15 [mu]g/m\3\ or more 
to nonattainment in other States and therefore are found to make a 
significant contribution (before considering cost) to PM2.5. 
Although we are proposing to use 0.15 [mu]g/m\3\ as the air quality 
criterion, we have also analyzed the impacts of using 0.10 [mu]g/m\3\. 
Based on our current modeling, two additional States, Oklahoma and 
North Dakota, would be included if we were to adopt 0.10 [mu]g/m\3\ as 
the air quality criterion. The contributions to PM2.5 from 
each of the 41 upwind States to each of the downwind nonattainment 
counties are provided in the AQMTSD. Table V-6 provides a count of the 
number of downwind counties that received contributions of 0.15 [mu]g/
m\3\ or more from each upwind State. This table also provides the 
number of downwind counties that received contributions of 0.10 [mu]g/
m\3\ or more from each upwind State.

            Table V-5.--Maximum Downwind PM2.5 Contribution ([mu]g/m\3\) for Each of 41 Upwind States
----------------------------------------------------------------------------------------------------------------
                                                   Maximum
                 Upwind state                     downwind          Downwind nonattainment county of maximum
                                                contribution                      contribution
----------------------------------------------------------------------------------------------------------------
Alabama......................................            1.17  Floyd, GA.
Arkansas.....................................            0.29  St. Clair, IL.
Connecticut..................................            0.07  New York, NY.
Colorado.....................................            0.04  Madison, IL.
Delaware.....................................            0.17  Berks, PA.
Florida......................................            0.52  Russell, AL.
Georgia......................................            1.52  Russell, AL.
Illinois.....................................            1.50  St. Louis, MO.
Indiana......................................            1.06  Hamilton, OH.
Iowa.........................................            0.43  Madison, IL.
Kansas.......................................            0.15  Madison, IL.
Kentucky.....................................            1.10  Clark, IN.
Louisiana....................................            0.25  Jefferson, AL.
Maryland/District of Columbia................            0.85  York, PA.
Maine........................................            0.03  New Haven, CT.
Massachusetts................................            0.21  New Haven, CT.
Michigan.....................................            0.88  Cuyahoga, OH.
Minnesota....................................            0.39  Cook, IL.
Mississippi..................................            0.30  Jefferson, AL.
Missouri.....................................            0.89  Madison, IL.
Montana......................................            0.03  Cook, IL.
Nebraska.....................................            0.08  Madison, IL.
New Hampshire................................            0.06  New Haven, CT.
New Jersey...................................            0.45  New York, NY.
New Mexico...................................            0.03  Knox, TN.
New York.....................................            0.85  New Haven, CT.
North Carolina...............................            0.41  Sullivan, TN.
North Dakota.................................            0.12  Cook, IL.
Ohio.........................................            1.90  Hancock, WV.
Oklahoma.....................................            0.14  Madison, IL.
Pennsylvania.................................            1.17  New Castle, DE.
Rhode Island.................................            0.01  New Haven, CT.
South Carolina...............................            0.72  Richmond, GA.
South Dakota.................................            0.04  Madison, IL.
Tennessee....................................            0.57  Floyd, GA.
Texas........................................            0.37  St. Clair, IL.
Vermont......................................            0.06  New Haven, CT.
Virginia.....................................            0.67  Washington, DC.
West Virginia................................            0.89  Allegheny, PA.

[[Page 4609]]

 
Wisconsin....................................            1.00  Cook, IL.
Wyoming......................................            0.05  Madison, IL.
----------------------------------------------------------------------------------------------------------------


Table V-6.--Number of Downwind PM2.5 Nonattainment Counties That Receive
 Contributions 0.15 [mu]g/m\3\ or More and 0.10 [mu]g/m\3\ or More From
                            Each Upwind State
------------------------------------------------------------------------
                                             Number of       Number of
                                             downwind        downwind
                                           nonattainment   nonattainment
              Upwind state                 counties with   counties with
                                           contributions   contributions
                                          of 0.10 [mu]g/  of 0.15 [mu]g/
                                           m\3\ or more    m\3\ or more
------------------------------------------------------------------------
Alabama.................................              43              32
Arkansas................................              27               4
Delaware................................               4               1
Florida.................................              23              19
Georgia.................................              38              27
Illinois................................              53              53
Indiana.................................              54              53
Iowa....................................              30              13
Kansas..................................               4               2
Kentucky................................              52              50
Louisiana...............................              33              25
Maryland/District of Columbia...........               9               7
Massachusetts...........................               2               1
Michigan................................              55              39
Minnesota...............................              18               8
Mississippi.............................              28              18
Missouri................................              47              31
New Jersey..............................               8               7
New York................................              16              12
North Carolina..........................              35              28
North Dakota............................               4               0
Ohio....................................              47              47
Oklahoma................................               3               0
Pennsylvania............................              52              46
South Carolina..........................              23              19
Tennessee...............................              50              43
Texas...................................              48              36
Virginia................................              35              17
West Virginia...........................              46              32
Wisconsin...............................              48              29
------------------------------------------------------------------------

VI. Emissions Control Requirements

    This section describes the proposed criteria EPA used to establish 
these new SO2 and NOX control requirements, for 
the States with emissions sources contributing to nonattainment as 
described in section V. This section also explains how information on 
EGUs was used in proposing emissions control requirements for 
SO2 and NOX to address interstate pollution 
transport, and what source categories were also considered by the 
Agency. This includes consideration of the technologies available for 
reducing SO2 and NOX emissions and the methods 
that we used to evaluate the cost effectiveness of these emissions 
reductions. This section also discusses interactions of today's 
proposed action with the existing Acid Rain Program under title IV of 
the CAA. This section discusses the emission source categories that EPA 
considered for today's action, and explains that we assumed control on 
EGUs in developing this proposal. This section also describes the 
methodology used for developing State budgets from the proposed control 
requirements, with a step in the methodology based on regionwide 
targets. Further, this section presents the proposed State budgets for 
NOX and SO2 for EGUs. (More details regarding 
requirements related to budget demonstrations can be found in section 
VII.) This section also discusses baseline inventories.

A. Source Categories Used for Budget Determinations

    Today's action proposes requirements based on emissions reductions 
for EGUs. The EPA is examining potential pollution control approaches 
and the cost effectiveness of emissions reductions for other source 
categories. Today, EPA solicits comments on those other source 
categories, but is not proposing action on them.
1. Electric Generation Units
    In developing today's proposal, we investigated various source 
categories to see which may be candidates for additional controls. Our 
attention focused on emission reductions from EGUs for several reasons. 
Electric Generating Units are the most

[[Page 4610]]

significant source of SO2 emissions and a very substantial 
source of NOX in the affected region. For example, EGU 
emissions are projected to represent approximately one-quarter (23 
percent) of the total NOX emissions in 2010 and over two-
thirds (67 percent) of the total SO2 emissions in 2010 in 
the 28-State plus DC region that is being controlled for both 
SO2 and NOX after application of current CAA 
controls. Furthermore, control technologies available for reducing 
NOX and SO2 from EGUs are considered highly cost 
effective and able to achieve significant emissions reductions.
    The methodology for setting SO2 and NOX 
budgets described below under sections VI.B, VI.C, and VI.D applies to 
EGUs only. Electric Generating Units are defined as fossil-fuel fired 
boilers and turbines serving an electric generator with a nameplate 
capacity of greater than 25 megawatts (MW) producing electricity for 
sale. Fossil fuel is defined as natural gas, petroleum, coal, or any 
form of solid, liquid, or gaseous fuel derived from such material. The 
term ``fossil fuel-fired'' with regard to a unit means combusting 
fossil fuel, alone or in combination with any amount of other fuel or 
material. These definitions are the same as those used under the title 
IV Acid Rain program.
2. Treatment of Cogenerators
    The EPA is proposing that the determination of whether a boiler or 
turbine that is used for cogeneration should be considered an EGU is 
dependent upon the amount of electricity that the unit sells.\80\
---------------------------------------------------------------------------

    \80\ The NOX SIP Call, as finalized in 1998, moved 
beyond the ``utility unit'' definition in the Acid Rain Program and 
treated as ``ECUs'' all fossil- fuel-fired units serving generators 
with a nameplate capacity exceeding 25 MW and producing any 
electricity for sale. This EGU definition, as applied to 
cogeneration units, was remanded to EPA as a result of litigation. 
Subsequently, EPA proposed to retain the approach in the 1998 rule, 
but in response to comments EPA received on that proposal, EPA is 
preparing to finalize a response to the court remand in which EPA 
will change the definition of EGU originally finalized in the 
NOX SIP Call to be very similar to the existing title IV 
definition.
---------------------------------------------------------------------------

    We propose to treat a cogeneration unit as an EGU in this proposed 
rule if it serves a generator with a nameplate capacity of greater than 
25 MW and supplies more than one-third of its potential electric output 
capacity and sells more than 25 MW electrical output to any utility 
power distribution system for sale in any of the years 1999 through 
2002. If one-third or less of the potential electric output capacity or 
25 MW or less is sold during all of those years, the cogeneration unit 
would be classified as a non-EGU. The definition of potential 
electrical output capacity proposed for this rule is the definition 
under part 72, appendix D of the Acid Rain regulations.
    The definition of a cogeneration facility under the title IV Acid 
Rain program and the NOX SIP Call was based on the Federal 
Energy Regulatory Commission Qualifying Facility definition. We propose 
to use this same definition with one change. We propose to apply the 
efficiency standards under title 18, section 292.205 to coal, oil, and 
gas-fired units instead of applying the efficiency standards only to 
oil and gas-fired units. The EPA believes this change would be more 
consistent with its fuel-neutral approach throughout this proposed 
rule. In addition, not applying an efficiency standard to coal-fired 
units would be counter productive to EPA's efforts to reduce 
SO2 and NOX emissions under this proposed rule 
because of the relatively high SO2 and NOX 
emissions from coal-fired units.
    We solicit comment on use of this definition of cogeneration 
facility for purposes of developing emission budgets.
3. Non-EGU Boilers and Turbines
    For several reasons, the approach we are proposing today would not 
require or assume additional emissions reductions from non-EGU boilers 
and turbines. First, compared to the information we have about 
emissions from EGUs and the costs of controlling those emissions, we 
have relatively little information about non-EGU boilers and 
turbines.\81\ In particular, we have limited information both about 
SO2 controls and the integration of NOX and 
SO2 controls. As a result, we are not able to determine that 
further emissions reductions from these sources would be highly cost 
effective. Second, based on the information we do have, projected 
emissions of NOX and SO2 from these sources in 
2010 are much lower than those projected from EGUs. However, we invite 
information and comment on these source categories. In particular, we 
request comments on sources of emissions and cost information.
---------------------------------------------------------------------------

    \81\ See ``Identification and Discussion of Sources of Regional 
Point Source NOX and SO2 Emissions Other Than EGUs 
(January 2004)''.
---------------------------------------------------------------------------

    We recognize, for example, that some industrial boiler owners may 
prefer the certainty and flexibility of being included in a regional 
trading program, rather than facing the uncertainty of the SIP 
development process. In addition, many non-EGU boilers and turbines 
already are regulated under the NOX SIP Call and thus are 
part of a NOX trading program with EGUs. It is EPA's intent 
that, for EGUs, compliance with the more stringent annual 
NOX reduction requirement in today's proposed rule will be 
able to serve as compliance with the seasonal NOX SIP Call 
limits. Therefore since EGUs will no longer be participating in the 
seasonal NOX SIP Call Trading Program, the cost of 
compliance for non-EGUs will likely increase.
4. Other Non-EGUs
    We also evaluated the available information on SO2 and 
NOX emissions and control measures for source categories 
other than EGUs and large industrial boilers and turbines, in order to 
identify highly cost effective emission reductions. Our approach to 
considering these source categories is discussed in a technical support 
document available in the docket, entitled ``Identification and 
Discussion of Sources of Regional Point Source NOX and 
SO2 Emissions Other Than EGUs (January 2004)''. Based on 
this evaluation, we are not proposing to consider reductions from any 
of these source categories because we are unable to identify specific 
quantities of SO2 or NOX emissions reductions 
that would be highly cost effective. However, we invite information and 
comment on these sources categories. In particular, we request comment 
on sources of emissions and cost information.
    The EPA did not identify highly cost-effective controls on mobile 
or area sources that would achieve broad-scale regional emissions 
reductions relative to baseline conditions and fit well with the 
regulatory authority available under section 110(a)(2)(D). We observe 
that Federal requirements for new on-road and off-road engines and 
motor vehicles will substantially reduce emissions as the inventory of 
vehicles and engines turns over.

B. Overview of Control Requirements and EGU Budgets

    This section explains how EPA developed State emissions reduction 
requirements for NOX and SO2 emissions that will 
lead to reductions of emissions associated with the interstate 
transport of fine particles and ozone. We seek to implement the section 
110(a)(2)(D) requirement that upwind States act as ``good neighbors'' 
by eliminating the amount of their emissions that contribute 
significantly to the downwind nonattainment areas. The proposed 
requirements would apply to 29 Eastern States (and DC) that 
significantly contribute to fine particle and/or ozone nonattainment.
    We propose to establish these emissions reduction requirements, for 
both SO2 and NOX purposes, based on

[[Page 4611]]

assuming the application of highly cost-effective controls to large 
EGUs. The approach of identifying highly cost-effective controls was 
the basis for developing the emissions budgets in the NOX 
SIP Call, and is the basis for developing the emissions budgets in 
today's action. Today's proposal bases its reduction and control 
requirements solely on controls for EGUs.
    The States have full flexibility in choosing the sources that must 
reduce emissions. If the States choose to require EGUs to reduce their 
emissions, then the States must impose a cap on EGU emissions, which 
would, in effect, be an emissions budget. If a State chooses to control 
EGUs and elects to allow them to participate in the interstate cap and 
trade program, the State must follow EPA rules for allocating 
allowances to the individual EGUs. If a State wants to control EGUs but 
does not want to allow EGUs to participate in the interstate cap and 
trade program, the State has flexibility in allocating, but it must cap 
EGUs. The State must also assure that EGUs meet title IV requirements.
    In 2010, the proposed requirements would effectively establish 
emissions caps for SO2 and NOX of 3.9 million 
tons and 1.6 million tons, respectively. The budgets would be lowered 
in 2015 to provide SO2 and NOX emissions caps of 
2.7 million tons and 1.3 million tons, respectively, in the proposed 
control region. An SO2 emissions cap of 2.7 million tons in 
28 States will lead to nationwide emissions of approximately 3.5 
million tons when the cap is fully implemented. This is significantly 
lower than the 8.95 million tons of SO2 emissions allowed 
from EGUs under the current title IV Acid Rain SO2 Trading 
Program. EPA expects that States will elect to join a regional cap and 
trade program for these pollutants that the Agency will administer 
similar to the NOX SIP Call. This is discussed in section 
VIII of this proposal.
    If the States choose to control other sources, then they must 
employ methods to assure that those other sources implement controls 
that will yield the appropriate amount of reductions. This is discussed 
further in section VII, below.
    The EPA believes that it will take substantial time (more than 3 
years from completion of SIPs) to install all of the equipment 
necessary to meet the proposed control requirements. Thus, EPA is 
proposing that the required reductions be made in two phases, with 
annual emissions caps for NOX and SO2 taking 
effect in 2010 and 2015.
    Today's approach is similar to that of the NOX SIP Call. 
In that case, EPA required States that controlled emissions from large 
boilers (either EGUs or non-EGUs) to cap emissions from those source 
categories. In addition, EPA allowed States to meet part of their 
emissions budget requirements by participating in an interstate 
emissions cap and trade program. The cap and trade program in effect 
meant that the total amount of NOX emissions from EGUs and 
non-EGU boilers and turbines was limited on a regionwide basis, rather 
than on a State-specific basis. For other source categories, EPA did 
not require the State to cap emissions, as long as it demonstrated that 
it had enforceable measures that achieved the necessary emission 
reductions. We are proposing to take a similar approach in today's 
rulemaking.
    For convenience, we use specific terminology to refer to certain 
concepts. ``State budget'' refers to the statewide emissions that may 
be used as an accounting technique to determine the amount of emissions 
reductions that controls may yield. It does not imply that there is a 
legally enforceable statewide cap on emissions from all SO2 
or NOX sources. ``Regionwide budget'' refers to the amount 
of emissions, computed on a regionwide basis, which may be used to 
determine State-by-State requirements. It does not imply that there is 
a legally enforceable regionwide cap on emissions from all 
SO2 or NOX sources. ``State EGU budget'' refers 
to the legally enforceable cap on EGUs a State would apply should it 
decide to control EGUs.

C. Regional Control Requirements and Budgets Based on a Showing of 
Significant Contribution

    In determining States' emissions reduction requirements, EPA 
considered both the level and timing of the emissions budgets for the 
electric power industry at a regional level and State level. The EPA 
wants to assist the States to attain the NAAQS for PM2.5 and 
8-hour ozone in a way that is timely, practical, and cost effective.
    For purposes of the PM2.5 and 8-hour ozone transport 
requirements, CAA section 110(a)(2)(D) requires that States submit SIPs 
than prohibit emissions in the amount that contributes significantly to 
nonattainment downwind. Our interpretation of the ``contribute 
significantly'' determination includes an air quality component and a 
cost-effectiveness component. The air quality component is discussed in 
sections IV, V, and IX. As to the cost-effectiveness component, in the 
NOX SIP Call, we applied this component by employing 
``highly cost-effective'' controls as the benchmark. We adopt that 
benchmark for today's proposal.
    In determining the States' obligations under this rule, EPA 
considers a variety of factors. These include:
     The availability of information,
     The identification of source categories emitting 
relatively large amounts of the relevant emissions,
     The performance and applicability of control 
measures,
     The cost effectiveness of control measures, and
     Engineering and financial factors that affect 
the availability of control measures.
    We have relatively complete information with respect to these 
factors for the electric power industry. We do not have information to 
this degree of completeness for other sources.
    The electric power industry emits relatively large amounts of the 
relevant emissions. This factor is particularly important in a case 
such as this when the Federal government is proposing a multistate 
regional approach to reducing transported pollution.
    We request comment on how to determine what constitutes ``a 
relatively large amount'' of the relevant emissions. One approach would 
be to consider the percent contribution the source category makes to 
the total inventory (e.g., 1 to 10 percent). Another approach, which 
some have suggested, would be to consider the contribution of a source 
category to the total NAAQS exceedance level. For example, this 
approach might consider a source category's contribution to ambient 
concentrations above the attainment level in all nonattainment areas in 
affected downwind States for PM2.5. We request comment on 
both of these approaches as well as what the appropriate percent 
contribution under each approach might be.
    Under the cost effectiveness component, we also take into account 
available information about the applicability, performance, and 
reliability of different types of pollution control technologies for 
different types of sources. Based on engineering judgement, we consider 
how many sources in a particular source category can install control 
technology, and whether such technology is compatible with the typical 
configuration of sources in that category. As was done in the 
NOX SIP Call, and as proposed in today's rule we also 
evaluate the downwind impacts of the level of control that is 
identified as highly cost effective. The fact that a particular control 
level has a substantial downwind impact affirms the selection of that 
level as ``highly cost effective.''

[[Page 4612]]

However, as noted above, we are requesting comment on an approach that 
would incorporate the effect on downwind States as part of the cost 
effectiveness component of significant contribution.
    There are other practical considerations that we may also consider. 
For example, if we are aware that emissions from a particular source 
category will be controlled under an upcoming regulation (a MACT 
standard, for example), we would also take that fact into account.
    We considered several additional factors, including the engineering 
factors concerning construction and installation of the controls when 
evaluating the time period needed to implement the controls. This 
analysis also involves consideration of the time period needed by 
sources to obtain the financing needed for the controls. Engineering 
and financial factors are discussed in this section.
    The EPA's approach to controls factored in the air quality 
improvements that could occur. Air quality modeling that is covered in 
section IX indicates that today's proposed transport reductions will 
bring many fine particle nonattainment areas and some ozone 
nonattainment areas into attainment by 2010 or 2015, and improve air 
quality in many downwind PM2.5 and ozone nonattainment 
areas. The modeling also shows more reductions will be needed for some 
areas to attain. We are striving in this proposal to set up a 
reasonable balance of regional and local controls to provide a cost 
effective and equitable governmental approach to attainment with the 
NAAQS for fine particles and ozone.
1. Performance and Applicability of Pollution Control Technologies for 
EGUs
    In developing today's proposal, EPA focused on the utility industry 
as a potential source of highly cost effective reductions of both 
SO2 and NOX emissions. We began by reviewing the 
reliability, capability and applicability of today's SO2 and 
NOX pollution controls for this industry.
    Both wet and dry flue gas desulfurization (FGD) technologies for 
SO2 control, and the selective catalytic reduction (SCR) 
technology for NOX control on coal-fired boilers, are fully 
demonstrated and available pollution control technologies. The design 
and performance levels for these technologies were based on proven 
industry experience.\82\
---------------------------------------------------------------------------

    \82\ References for this dicussion are provided in the docket 
for today's rulemaking.
---------------------------------------------------------------------------

    For SO2 control, EPA has considered two wet FGD 
technologies, consisting of the limestone forced oxidation system 
(LSFO) with dibasic acid injection and the magnesium enhanced lime 
(MEL) system. In addition, a dry FGD technology, lime spray dryer (LSD) 
system, has also been considered. Of these, the LSFO system is 
generally used for installations firing high-sulfur (2 percent and 
higher) coals, LSD for low-sulfur (less than 2 percent) coals, and MEL 
for both low- and high-sulfur coals, depending on the overall economics 
of each application.
    In EPA's analyses, the SO2 reduction capabilities 
considered are 95 percent for the LSFO system, 96 percent for the MEL 
system, and 90 percent for the LSD system. A significant amount of 
industry information is available on the use of these technologies. One 
reference shows over 30 years of operating experience in U.S. 
electrical utility plants. The three FGD systems considered by EPA have 
been used in the majority of these plants. A significant number of the 
wet FGD systems, especially those installed in the last 10 years, have 
design SO2 removal efficiencies ranging from 95 to 99 
percent. Also, there are several LSD installations designed for 90 
percent or higher SO2 removal, supporting the performance 
levels selected by EPA.
    The EPA has also identified several other references that support 
its FGD technology selections. These references report long-term 
operating experience with wet FGD systems, with and without dibasic 
acids, at SO2 removal rates of 95 to 99 percent. We also 
performed a study that lists in a greater detail the criteria and the 
references for selection of all three FGD technologies considered.
    The NOX reduction capability considered by EPA for the 
SCR technology is 90 percent, with the minimum NOX emission 
rate limited to 0.05 lb/mmBtu. Because of this 0.05 lb/mmBtu limit, the 
actual NOX reduction requirement for SCR systems on the 
boilers with existing or future combustion controls is expected to be 
less than 90 percent. For example, the baseline NOX 
emissions on a large number of boilers with existing combustion 
controls are below 0.3 lb/mmBtu, requiring SCRs with NOX 
removal rates of approximately 83 percent or lower.
    The first SCR application in the U.S. on a coal-fired boiler 
started operating in 1993. At the end of 2002, the number of operating 
SCR installations on U.S. boilers stood at 56. Another 85 SCR units are 
scheduled to go into operation in 2003. The design NOX 
reduction efficiencies of these SCR systems vary, but many of them are 
designed for 90 percent reduction. Operating data available from many 
plants indicate that the 90 percent NOX removal rate has 
been met or exceeded at these plants.
    There is more long-term experience with coal-fired SCR applications 
in Europe and Japan. This experience includes high- and medium-sulfur 
coal applications and is directly applicable to the U.S. installations. 
The overall SCR experience both in the U.S. and abroad, therefore, 
supports the criteria EPA has used for this technology.
    SCRs and scrubbers have been used in combination on most new coal-
fired powered plants built in the U.S. since the early 1990s. The 
combination has also been retrofit on a number of existing coal-fired 
units.
2. Evaluation of Cost Effectiveness
    With effective, well-established controls available for both 
SO2 and NOX emissions from EGUs, EPA must 
determine what is the appropriate level of costs for these controls. In 
the NOX SIP Call rule, EPA defined the cost component of the 
``contribute significantly'' test in terms of a level of cost 
effectiveness, that is, dollars spent per ton of emissions reductions. 
Specifically, in the NOX SIP Call, EPA defined the cost 
component in terms of ``highly cost-effective'' controls, a definition 
upheld by the D.C. Circuit in the Michigan case. Today, EPA proposes to 
use this approach.
    We want to provide an emissions reductions program for 
SO2 and NOX that complements State efforts to 
attain the PM2.5 and ozone standards in the most cost-
effective, equitable and practical manner possible. The objective of 
the analysis is to select from the spectrum of possible pollution 
controls the least expensive approaches available at the time the 
controls are selected.
    To ensure that EPA's overarching goal of achieving the NAAQS in the 
most cost effective, equitable and practical manner possible is met by 
Federal and State actions, the Agency has decided to pursue emissions 
reductions that it considers are highly cost effective now before State 
plans for nonattainment are due. Proposing highly cost-effective 
controls also provides greater certainty that transport controls are 
not being overemphasized relative to local controls.
    For today's proposal, EPA independently evaluated the cost 
effectiveness of strategies to reduce SO2 and NOX 
to address PM2.5 and ozone nonattainment. The results of 
EPA's analysis are summarized below. (All costs in this summary are 
rounded to

[[Page 4613]]

the nearest hundred dollars, and are presented in 1999$.) It should be 
noted that the results of these analyses for SO2 controls 
are not relevant to NOX controls, and vice versa. Each 
pollutant has a different history of cost of controls, which makes 
cross-pollutant comparison inappropriate.
    We note that comparisons of the cost per ton of pollutant reduced 
from various control measures should be viewed carefully. Cost per ton 
of pollutant reduction is a convenient way to measure cost 
effectiveness, but it does not take into account the fact that any 
given ton of pollutant reduction may have different impacts on ambient 
concentration and human exposure, depending on factors such as the 
relative locations of the emissions sources and receptor areas. Thus, 
for example, an alternative approach might adopt the effect of emission 
reductions on ambient concentrations in downwind nonattainment areas as 
the measure of effectiveness of further control. The EPA solicits 
comment on whether to take such considerations into account and what, 
if any, scientifically defensible methods may be available to do so.
a. Cost Effectiveness of SO2 Emission Reductions
    The EPA developed criteria for highly cost-effective amounts 
through: (1) Comparison to the average cost effectiveness of other 
regulatory actions and (2) comparison to the marginal cost 
effectiveness of other regulatory actions. These ranges indicate cost-
effective controls. EPA believes that controls with costs towards the 
low end of the range may be considered to be highly cost effective 
because they are self-evidently more cost effective than most other 
controls in the range. Moreover, this level of cost is consistent with 
SO2 and NOX emissions reductions that yield 
substantial ambient benefits in downwind nonattainment areas, as 
discussed in section IX. For these reasons, EPA proposes today the 
costs identified below as highly cost-effective levels, and the 
associated set of SO2 and NOX emissions 
reductions and emissions budgets, as the basis for the SIP 
requirements.
    Table VI-1 provides the average and marginal costs of annual 
SO2 reductions under EPA proposed controls for 2010 and 
2015. Also, EPA considered the sensitivity of the marginal cost results 
to assumptions of higher electric growth and future natural gas prices 
than it used in its base case. These assumptions in the sensitivity 
analysis were based on the Energy Information Agency's Annual Energy 
Outlook for 2003.
    Table VI-2 provides the average cost per ton of recent EPA, State, 
and local Best Available Control Technology (BACT) permitting decisions 
for SO2. These decisions reflect the application of BACT for 
SO2 to new sources and major modifications at existing 
sources. These decisions, which include consideration of average and 
incremental cost effectiveness, reflect the application of best 
available controls in attainment and unclassified areas. These 
decisions do not reflect the application of lowest achievable emission 
rate, which is required in nonattainment areas and which does not 
directly consider cost in any form. The BACT decisions are relevant for 
present purposes because they comprise cost effective controls that 
have been demonstrated.
    Table VI-3 provides the marginal cost per ton of recent State 
decisions for annual SO2 controls where marginal cost 
information was available. These include the WRAP Regional 
SO2 Trading Program and statewide rules that have required 
significant reductions of SO2 in North Carolina and 
Wisconsin.
    The results of the sensitivity analysis of the marginal cost in 
Table VI-1 when compared to Table VI-3 results further supports that 
the SO2 controls are highly cost effective.
    Additionally, the Agency further considered the cost effectiveness 
of alternative stringency levels for this regulatory proposal 
(examining changes in the marginal cost curve at varying levels of 
emissions reductions). Figure VI-1 shows that the ``knee'' in the 
marginal cost effectiveness curve--the point where the cost of control 
is increasing at a higher rate than the amount of SO2 
removal for EGUs--appears to start above $1,200 per ton. The selected 
approach was well below the point at which there would be significant 
diminishing returns on the dollars spent for pollution control. The EPA 
used the Technology Retrofitting Updating Model (TRUM), a spreadsheet 
model based on the Integrated Planning Model (IPM), for this analysis. 
Details of this analysis can be found in ``An Analysis of the Marginal 
Cost of SO2 and NOX Reductions'' (January 2004) 
in the docket for today's rulemaking.

  Table VI-1.--Predicted Costs Per Ton of SO2 Controlled Under Proposed
                    Control Strategy (1999$)/Ton \1\
------------------------------------------------------------------------
                                                    2010         2015
------------------------------------------------------------------------
Average Cost..................................         $700         $800
Marginal Cost.................................          700        1,000
Sensitivity Analysis: Marginal Cost, Assuming           900       1,100
 High Electric Demand and Natural Gas Price...
------------------------------------------------------------------------
\1\ EPA IPM modeling; available in the docket.


        Table VI-2.--Average Costs Per Ton of Annual SO2 Controls
------------------------------------------------------------------------
           SO2 control action                Average cost (1999$)/ton
------------------------------------------------------------------------
Best Available Control Technology        $500-$2,100 \1\
 (BACT) determinations.
------------------------------------------------------------------------
\1\ These numbers reflect a range of cost effectiveness data entered
  into EPA's RACT/BACT/LAER Clearinghouse (RBLC) for add-on SO2
  controls.


    Table VI-3.--Marginal Costs Per Ton of Annual SO2 Control Actions
------------------------------------------------------------------------
           SO2 control action               Marginal cost (1999$)/ton
------------------------------------------------------------------------
Wisconsin Multi-pollutant rule.........  $1,400 \1\
North Carolina Multi-pollutant rule....  $800 \2\
WRAP Regional SO2 Trading Program......  $1,100-$2,200 \3\
------------------------------------------------------------------------
\1\ EPA's IPM Base Case run, available in the docket.
\2\ EPA's IPM Base Case run, available in the docket.
\3\ ``An Assessment of Critical Mass for the Regional SO2 Trading
  Program,'' Prepared for Western Regional Air Partnership Market
  Trading Forum by ICF Consulting Group, September 27, 2002, available
  in the docket and at http://www.wrapair.org/forums/mtf/critical_mass.html. This analysis looked at the implications of one or more
  States choosing to opt-out of the WRAP regional SO2 trading program.


[[Page 4614]]

[GRAPHIC] [TIFF OMITTED] TP30JA04.000

b. Cost Effectiveness of NOX Emission Reductions
    In developing the NOX SIP Call, EPA determined that an 
average cost effectiveness of $2,500/ton (in 1999$, from original 
$2,000/ton in 1990$), or less, was highly cost effective for 
NOX reductions during the ozone season. This was based on 
review of other relevant actions EPA and others had recently taken. An 
updated summary of average costs of NOX control actions is 
in Table VI-4. Each of the programs in Table VI-4 cover annual 
NOX reductions, which makes comparison of these estimates to 
ozone season reductions a conservative comparison, as was done in the 
NOX SIP Call. The table's results are very similar to what 
EPA found in 1998 and reaffirm the Agency's earlier determination of 
what a highly cost-effective reduction of NOX emissions is.
    Table VI-5 provides the results of EPA's analysis of the cost 
effectiveness of the proposed NOX control requirements for 
States contributing to downwind ozone nonattainment. The average costs 
are well below $2,500/ton. The marginal costs in 2010 are much lower 
than the benchmark, but in 2015 are above it by a modest amount. 
Notably, if the controls during the ozone season are then used for the 
remaining months of the year, their costs are very low. Table VI-6 
provides these results. These reductions are among the lowest cost EPA 
has ever observed in NOX control actions and are obviously 
highly cost effective.
    Table VI-7 shows the average and marginal costs of year-round 
controls for EPA's proposed approach. When these costs are compared to 
the costs in Table VI-8, it is clear that in the States that control 
NOX for PM2.5 only, the controls are highly cost 
effective.
    The Agency further considered the cost effectiveness of alternative 
stringency levels for this regulatory proposal (examining changes in 
the marginal cost curve at varying levels of emission reductions). 
Figure VI-2 shows that the knee in the marginal cost effectiveness 
curve for NOX appears to start above $2,000 per ton. The 
selected approach was well below the point at which there would be 
significant diminishing returns on the dollars spent for pollution 
control.

  Table VI-4.--Average Cost Per Ton of Existing and Proposed Annual NOX
                                  Rules
------------------------------------------------------------------------
               NOX rule \1\                     Average cost (1999$)
------------------------------------------------------------------------
Tier 2 Vehicle Gasoline Sulfur \2\.......  $1,300-$2,300
2004 Highway HD Diesel \2\...............  $200-$400
Off-highway Diesel Engine \2\............  $400-$700
Tier 1 Vehicle Standards \2\.............  $2,100-$2,800
National Low Emission Vehicle \2\........  $1,900
Marine SI Engines \2\....................  $1,200-$1,800
2007 Highway HD Diesel Stds \2\..........  $1,600-$2,100
On-board Diagnostics \2\.................  $2,300
Marine CI Engines \2\....................  Up to $200
Revision of NSPS for New EGUs............  $2,100
------------------------------------------------------------------------
\1\ Costs for rules affecting mobile sources presented here include a
  VOC component.
\2\ Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine
  and Vehicle Standards and Highway Diesel Fuel Sulfur Control
  Requirements; Final Rule (66 FR 5102; January 18, 2001). The values
  shown for 2007 Highway HD Diesel Stds are discounted costs.


Table VI-5.--Predicted Costs Per Ton of Ozone Season-Only NOX Controlled
             Under Proposed Control Strategy (1999$)/ton \1\
------------------------------------------------------------------------
                                                       2010       2015
------------------------------------------------------------------------
Average Cost......................................     $1,000     $1,500
Marginal Cost.....................................      2,200     2,600
------------------------------------------------------------------------
\1\ EPA IPM modeling; available in the docket.


  Table VI-6.--Predicted Costs Per Ton of Winter Season NOX Controlled
             Under Proposed Control Strategy (1999$)/ton \1\
------------------------------------------------------------------------
                                                       2010       2015
------------------------------------------------------------------------
Average Cost......................................       $700      $500
------------------------------------------------------------------------
\1\ EPA IPM modeling; available in the docket.


[[Page 4615]]


   Table VI-7.--Predicted Costs Per Ton of Annual NOX Controlled Under
                Proposed Control Strategy (1999$)/ton \1\
------------------------------------------------------------------------
                                                       2010       2015
------------------------------------------------------------------------
Average Cost......................................       $800       $700
Marginal Cost.....................................      1,300      1,500
Sensitivity Analysis: of Marginal Cost, Assuming        1,300      1,600
 High Electricity Demand and Natural Gas Price....
Sensitivity Analysis: of Marginal Cost, Assuming        2,200     2,000
 High Electricity Demand, Natural Gas Price and
 SCR Costs........................................
------------------------------------------------------------------------
\1\ EPA IPM modeling; available in the docket.


    Table VI-8.--Marginal Cost Per Ton of Reduction Recent NOX Rules
------------------------------------------------------------------------
                NOX action                 Marginal cost per ton (1999$)
------------------------------------------------------------------------
Wisconsin Rules--Annual Controls.........  $1,800 \1\
Texas Rules--Annual Controls.............  $1,400-$3,000 \1\
------------------------------------------------------------------------
\1\ EPA's IPM Base Case run, available in the docket. NOX control
  requirements in Texas vary regionally; the range of marginal costs
  here reflects the various requirements in the State.

  [GRAPHIC] [TIFF OMITTED] TP30JA04.001
  
c. EPA Cost Modeling Methodology
    The EPA conducted analysis through the Integrated Planning Model 
(IPM) that indicates that its proposed SO2 and 
NOX control strategies are consistent with the level of 
controls proposed as highly cost effective. We use IPM to examine costs 
and, more broadly, analyze the projected impact of environmental 
policies on the electric power sector in the 48 contiguous States and 
the District of Columbia. The IPM is a multi-regional, dynamic, 
deterministic linear programming model of the U.S. electric power 
sector. It provides forecasts of least-cost capacity expansion, 
electricity dispatch, and emission control strategies for meeting 
energy demand and environmental, transmission, dispatch, and 
reliability constraints. We used IPM to evaluate the cost and emissions 
impacts of the policies to limit emissions of SO2 and 
NOX from the electric power sector that are proposed in 
today's rulemaking. The National Electric Energy Data System (NEEDS) 
contains the generation unit records used to construct model plants 
that represent existing and planned/committed units in EPA modeling 
applications of IPM. The NEEDS includes basic geographic, operating, 
air emissions, and other data on all the generation units that are 
represented by model plants in EPA's v. 2.1.6 update of IPM.
    We used the IPM to conduct the cost effectiveness analysis for the 
emissions control program proposed in this action. The model was also 
used to derive the marginal cost of several State programs that EPA 
considers as part of its base case.
    For the purpose of preliminarily evaluating today's proposal, EPA 
modeled a strategy that assumes SO2 controls in the 48 
contiguous States in a manner that largely leads to a cap on Eastern 
States without leakage of emissions to nearby States. The modeled 48-
State cap simulates a control program that is very similar to the 
program we are now proposing to control SO2 in only the 28-
State and DC region. Most of the SO2 emissions and 
reductions would occur in the 28-State and DC control region and 
therefore a very similar result is expected. Based on IPM modeling, the 
SO2 emissions in 2015 from the proposed 28-State and DC 
region would be 92 percent of national emissions under base case 
conditions (i.e., without implementation of today's proposed program). 
In addition, emissions reductions in the 28-State and DC region would 
be 96 percent of total national reductions, under the 48 State cap that 
was modeled. Thus, the 48-

[[Page 4616]]

State cap that was modeled very closely represents the proposed 28-
State and DC cap.
    We modeled NOX controls in a 31 and one-half State 
region that includes Minnesota, Iowa, Missouri, Arkansas, Louisiana, 
Eastern Texas and all of the States to the east, and DC. The 
NOX control region proposed in today's action (28-States and 
the District of Columbia, plus ozone season only control in 
Connecticut) is very similar to this region used for modeling.
    Because the regions used for modeling SO2 and 
NOX controls encompass a significant amount of the 
electricity generation in the country, they provide information that 
could be applied to somewhat smaller or larger regions. We believe that 
costs (both marginal and average) in a somewhat smaller or larger 
region would be similar.\83\
---------------------------------------------------------------------------

    \83\ We began our emissions and economic analysis for today's 
proposal before the air quality analysis, which affects the States 
we are proposing for control requirements, was completed. Thus, we 
modeled emissions and economic effects on regions that are similar 
but not identical to the region proposed today. We intend to publish 
revised emissions and economic modeling in a supplemental action.
---------------------------------------------------------------------------

    In this modeling case, EPA assumes interstate emissions trading. 
While EPA is not requiring States to participate in an interstate 
trading program for EGUs, EPA believes it is reasonable to evaluate 
control costs assuming States choose to participate in such a program 
since the program will result in less expensive reductions.
    The modeled case discussed below assumes a phased program, with the 
first set of reductions occurring in 2010 and the second phase 
occurring in 2015. For SO2 in particular, it should be noted 
that the regional reductions or budget levels are not actually achieved 
in the year that they are implemented. This is because of the existence 
of an SO2 emission bank. The availability of the 
SO2 emission bank allows sources to make emission reductions 
earlier and then use the allowances that are saved at a later date. 
Banking has less of an effect on NOX emissions because in 
the existing ozone-season only program, NOX allowances are 
more expensive than they are expected to be in an annual program. Thus, 
there is not an incentive to make early NOX emission 
reductions to create allowances to be used in the future.
3. Timing, Engineering and Financial Factor Impacts
    While cost considerations are one of the primary components in 
establishing emission reduction requirements, another important 
consideration is the time by which the emission reductions may be 
achieved. The EPA has determined that for engineering and financial 
reasons, it would take substantial time to install the projected 
controls that would be necessary to reach the ultimate control levels 
proposed. We seek to require implementation of the reductions on a 
schedule that will provide air quality benefits as soon as feasible to 
as many nonattainment areas as possible. Therefore, we propose to 
require the implementation of as much of the reductions as possible by 
an early date and to set a later date for the remaining amount of 
reductions.
    Specifically, EPA proposes that the first phase must be implemented 
by January 1, 2010. This date is based upon the following schedule: EPA 
finalizes today's proposed rule by mid-2005; States submit SIPs by the 
end of 2006; and sources install the first phase of required controls 
by January 1, 2010, and the second phase by January 1, 2015.
    EPA recognizes that this two-phase approach assumes that States 
will achieve the reduction requirements imposed by the rules proposed 
today through controls on EGUs. Of course, States may choose to control 
different sources, and if so, the specific engineering constraints 
applicable to EGU compliance may not apply to these other sources.\84\ 
Nevertheless, EPA believes it appropriate to authorize a two-phase 
approach for all States, regardless of how they choose to achieve the 
reduction requirements. This approach is consistent with the fact that 
EPA calculated the amount of reductions required on the basis of 
assumed controls on EGUs, as well as the fact that as a practical 
matter, most (if not all) States are likely to adopt EGU controls as 
their primary (if not exclusive) way to achieve the required 
reductions.
---------------------------------------------------------------------------

    \84\ Other sources may face similar or other timing constraints 
for implementation purposes.
---------------------------------------------------------------------------

a. Engineering Assessment To Determine Phase 1 Budgets
    When designing an emissions reductions program such as EPA is 
proposing in today's action, the Agency must consider the effect that 
the timing and reduction stringency of the program will have on the 
quantity of resources required to complete the control technology 
installation and the ability of markets to adjust and to provide more 
resources where needed. We used IPM to predict the number and size of 
facilities that would install new emissions control equipment to meet 
the implementation dates and emissions reductions in today's proposed 
rule. Then, we estimated the resources required for the installation of 
those control technologies.
    Today's proposed rule does not require the imposition of controls 
on any particular source and instead leaves that matter to the affected 
States. However, the cost effectiveness of EGU controls makes it likely 
that many States will achieve reductions through EGU controls. 
Accordingly, EPA considers it appropriate to evaluate the timing of the 
reduction requirements with reference to the EGU control implementation 
schedule. Therefore, today's proposed rule assumes the installation of 
significant numbers of SO2 and NOX controls on 
EGUs. To meet the existing Federal title IV program and NOX 
SIP Call requirements, there has been a reliance on low sulfur coal and 
limited use of scrubbers (also called FGD) for SO2 
reductions and low NOX burners and post-combustion controls 
(e.g., SCR) for NOX reductions, as well as shifting of 
dispatch to more efficient and less polluting units for each air 
pollutant. However, to meet the future requirements proposed in today's 
rule, for SO2 control we predict there will be heavy 
reliance on scrubbers in the decade following finalization of today's 
rule. For NOX control, we predict there will be heavy 
reliance on SCR and, to a much lesser degree, selective non-catalytic 
reduction (SNCR) and gas reburn.
    The installation of the advanced post-combustion controls required 
under today's proposal will take significant resources and time. 
Installation of these controls are large-scale construction projects 
that can span several years, especially if multiple units are being 
installed at a single power plant. If EPA were to allow sources all of 
the time they needed to install controls to meet the ultimate cap 
levels without the imposition of intermediate caps, the consequences 
for SO2 and NOX would be different. For 
SO2, the existence of the title IV program and the ability 
to bank would likely encourage sources to run their SO2 
emission controls as soon as they were installed. While these early 
reductions would be environmentally beneficial, they would also allow 
sources to continue to increase their SO2 banks. By creating 
an intermediate cap, the ability to bank would be limited. For 
NOX, there would be little incentive to turn on controls and 
achieve additional reductions, particularly in the non-ozone season and 
in the States not affected by the NOX SIP Call. Therefore, 
in order to get any additional NOX reductions--either during 
the winter

[[Page 4617]]

months from already installed SCRs or year-round from newly installed 
SCRs outside of the SIP Call region--it is necessary to impose an 
intermediate cap.
    We believe that 3 years is a reasonable amount of time to allow 
companies to install emission controls that could be used to comply 
with the first phase reduction requirements of today's proposed rule. 
In certain circumstances, some individual units could install emissions 
reduction equipment in considerably less time than 3 years.\85\ In the 
report, ``Engineering and Economic Factors Affecting the Installation 
of Control Technologies for Multi-pollutant Strategies' (October 2002), 
EPA projected that it would take on average about 21 months to install 
a SCR on one unit and about 27 months to install a scrubber on one 
unit. However, many times, companies must install controls on units at 
the same plant. To do so, companies will often stagger installations to 
minimize operational disruptions, thereby taking more time. We project 
that seven SCRs could be installed at a single facility in 3 years. 
Also, we project that three scrubber modules (scrubbing a total of six 
units) could be installed in 3 years. Since we believe that 3 years is 
enough time to install controls on all the units required at a large 
power plant, EPA believes that 3 years is a reasonable amount of time 
to allow for the first phase of compliance.
---------------------------------------------------------------------------

    \85\ For instance, a SCR was installed on a 675 MW unit in about 
13 months (Engineering and Economic Factors, p.21).
---------------------------------------------------------------------------

    The availability of skilled labor--specifically, boilermakers--is 
an important constraint for the installation of significant amounts of 
emission controls. Boilermakers are skilled steel workers who are 
specially trained to install both NOX controls such as SCR 
and SO2 controls such as scrubbers.
    Since the availability of boilermaker labor affects the 
installation of both SO2 controls and NOX 
controls, it is also necessary to decide what mix of pollution 
reductions is desired in the first phase. In today's rulemaking, EPA is 
proposing to require similar percentage reductions of both 
SO2 and NOX in the first phase. In developing the 
first phase control levels, we intended to maximize the total control 
installations possible (and thus total reductions) considering the 
constraint on boilermaker labor, while getting similar reductions for 
both pollutants. This results in predicted reductions of between 40 and 
50 percent for both pollutants, in the first phase.
    Based on all of these constraints, EPA is proposing a two-phase 
reduction requirement, with a first phase cap on SO2 in 2010 
based on a 50 percent reduction from title IV levels. This represents 
about a 40 percent reduction in emissions from the Base Case. This 
strategy would require about 63 GW of scrubbers to be installed by 
2010. Of these, 49 GW of scrubbers would be incremental to the Base 
Case. (We based this analysis on the assumption that States choose to 
control EGUs.)
    The EPA's proposed NOX reduction requirement would also 
be implemented in two phases, with a first phase cap based, in a 
comparable manner, on about a 49 percent decrease in emissions from the 
Base Case. (The calculation of this first phase cap is discussed more 
below.) This cap would require installation of about 39 GW of SCR 
between 2005 and 2010. Of this, 24 GW are incremental to the Base Case. 
(We based this analysis on the assumption that States choose to control 
EGUs.)
    Since the NOX SIP Call experience showed that many power 
companies are averse to committing money to install controls until 
after State rules are finalized, EPA analyzed availability of 
boilermakers assuming companies did not begin installing controls until 
after the State rules were finalized. While boilermakers are one of the 
key components in building SCRs and scrubbers, most of their work 
cannot begin until well into the construction project. First, the power 
company must do preliminary studies to determine which controls to 
install, then jobs must be bid and design must begin. After the 
installation is designed, foundations must be poured and pieces of the 
control equipment must be built in machine shops. It is only after all 
of this activity has taken place that the boilermakers can erect the 
control equipment.
    We assumed, therefore, that most of the demand for boilermakers 
came in the last 21 months of the 3 year period to install controls. 
Furthermore, in order to have controls fully operational in time for 
the compliance deadline, companies would likely complete installation 
well before the deadline to allow for testing of the controls. Assuming 
that most companies would try to complete controls in time to provide 
for a 3-month testing period, most of the demand for boilermaker labor 
will come in an 18-month window.
    It is EPA's projection that approximately 12,700 boilermaker years 
would be needed to install all of the required equipment for the first 
phase of compliance. We project that approximately 14,700 boilermaker 
years would be available during the time when first phase controls 
would be installed. This projected number of boilermakers is based on 
the assumption that all the boilermakers that EPA projects are 
available for work on power sector environmental retrofit projects 
would be fully utilized (e.g., 40 hours a week for 50 weeks of the 
year). In reality, it would be difficult to achieve this full 
utilization of boilermakers. For instance, boilermakers will be unable 
to work when moving from job-site to job-site, during inclement 
weather, etc. We believe that the availability of approximately 15 
percent more boilermaker years than are required assures that there are 
enough boilermakers available to construct all of the required 
retrofits.
b. Financial and Other Technical Issues Regarding Pollution Control 
Installation
    The EPA recognizes that the power sector will need to devote large 
amounts of capital to meet the control requirements of the first phase. 
Controls installed by 2010 will generally be the largest and easiest to 
install. Subsequent controls will need to be installed at more plants 
and under more challenging circumstances. We believe that deferring the 
second phase to 2015 will provide enough time for companies to overcome 
these technical challenges and raise additional, reasonably-priced 
capital needed to install controls.
4. Interactions With Existing Title IV Program
    As EPA developed this regulatory action, great consideration was 
given to interactions between the existing title IV program and today's 
proposed rule designed to achieve significant reductions in 
SO2 emissions beyond title IV. Requiring sources to reduce 
emissions beyond what title IV mandates has both environmental and 
economic implications for the existing title IV SO2 trading 
program. In the absence of a method for accounting for the statutory 
requirements of title IV, a new program that imposes a tighter cap on 
SO2 emissions for a particular region of the country would 
likely result in an excess supply of title IV allowances and the 
potential for increased emissions in the area not subject to the more 
stringent emission cap. The potential for increased emissions exists in 
the entire country for the years prior to the proposed implementation 
deadline and would continue after implementation for any areas not 
affected by the proposed rule. These excess emissions could negatively 
affect air quality,

[[Page 4618]]

disrupt allowance markets, and erode confidence in cap and trade 
programs.
    In view of the significant reductions in SO2 emissions 
under title IV of the CAA, the large investments in pollution controls 
that firms have made under title IV that enable companies to sell 
excess emissions reductions, and the potential for emissions increases, 
it is necessary to consider ways to preserve the environmental benefits 
achieved through title IV and maintain the integrity of the title IV 
market for SO2 allowances. The EPA does not have authority 
to address this issue by tightening the requirements of title IV. In 
any event, title IV has successfully reduced emissions of 
SO2 using the cap and trade approach, eliminating millions 
of tons of SO2 from the environment. Building on this 
existing program to further improve air quality by requiring additional 
reductions of SO2 emissions is appropriate.
    We have developed an approach to incorporate the title IV 
SO2 market to ensure that the desired reductions under 
today's action are achieved in a manner consistent with the previously 
stated environmental goals. Our proposed approach effectively reduces 
the title IV cap for SO2 and allows title IV allowances for 
compliance with this rule at a ratio greater than one-to-one. Section 
VIII provides more detail on our initial analysis of the interactions 
between the title IV Acid Rain program and today's proposed cap and 
trade program and outlines a solution for creating a new rule that 
builds off of title IV.

D. Methodology for Setting SO2 and NOX Budgets

    In section D, EPA describes in detail how it proposes to establish 
the reduction requirements and, to the extent applicable, budget 
requirements for EGUs. The first step for both SO2 and 
NOX was determining the total amount of emissions reductions 
that would be achievable based on the control strategy determined to be 
highly cost effective. Our evaluation of cost effectiveness for the 
proposed 2010 and 2015 emissions caps was explained in the preceding 
subsection as was the need to split these budget requirements into two 
phases to assure that emission reductions were achieved expeditiously 
considering factors that could limit the amount of emission controls 
that could be installed in a given time period.
    There were then two more steps that followed. In the second step, 
EPA determined the amount of emissions reductions that were needed 
across the region covered by this proposal and, for EGUs, set annual 
emissions caps accordingly in 2010 and 2015. These caps remain at the 
2015 levels thereafter, to maintain air quality in the downwind areas. 
In the third step, EPA partitioned the cap levels into State emissions 
budgets that they may use for granting allowances for SO2 
and NOX emissions.
1. Approach for Setting Regionwide SO2 and NOX 
Emission Reductions Requirements
a. SO2 Budgets for EGUs
    The EPA is proposing a two-phase SO2 reduction program. 
The first phase, in 2010, would reduce SO2 emissions in the 
28-State and DC region by the amount that results from making a 50 
percent reduction from title IV Phase II allowance levels. The second 
phase, in 2015, would further reduce SO2 emissions by the 
amount that results from making a 65 percent reduction from the title 
IV Phase II allowance level.
    These amounts may be calculated in terms of regionwide EGU caps for 
the first and second phases, assuming that all the affected States 
control only EGUs. Similarly, it is necessary to calculate the amount 
of regionwide SO2 reductions for the first and second phase, 
for States that choose to control sources other than (or in addition 
to) EGUs. This calculation of the amount of the regionwide cap or 
emissions reductions is a useful step because this amount may then be 
apportioned to individual State. In addition, the methodology for 
calculating regionwide amounts should accommodate revisions in the 
universe of States in the region--adding or subtracting individual 
States--based on refinement to the air quality modeling that EPA 
expects to complete and publish in the SNPR.
    The EPA proposes that the regionwide SO2 budgets may be 
calculated by adding together the title IV Phase II allowances for all 
of the States in the control region, and making a 50 percent reduction 
for the 2010 cap and a 65 percent reduction for the 2015 cap. This 
results in a first phase SO2 cap of about 3.9 million tons 
and a second phase cap of about 2.7 million tons, in the 28-State and 
DC control region.
    Modeling predicts nationwide SO2 emissions of about 5.4 
million tons in 2015 with today's proposed controls. (This compares to 
approximately 9.1 million tons without today's proposed controls.) 
Predicted emissions in the 28-State and DC region that EPA is proposing 
to find significantly contribute to PM2.5 nonattainment are 
about 4.6 million tons in 2015. (These emission estimates are from 
modeling using the 48-State region as described above.) The projected 
SO2 emissions are higher than the caps due to use of banked 
allowances resulting from the incentive for early reductions. 
Accordingly, the 2015 annual SO2 emissions reductions amount 
to about 3.7 million tons, and the 2010 annual SO2 emissions 
reductions amount to about 3.6 million tons.
b. NOX Budgets for EGUs
    The EPA is proposing a two-phased annual NOX control 
program, with a first phase in 2010 and a second phase in 2015, which 
would apply to the same control region as the SO2 
requirements, that is, 28-States and DC. In addition, Connecticut would 
be required to control NOX during the ozone season.
    On a regionwide basis, the control requirements EPA is proposing 
would result in a total EGU NOX budget of about 1.6 million 
tons in 2010 and 1.3 million tons in 2015, in the 28-State and DC 
region that would be affected by today's rulemaking (assuming each 
State controlled only EGUs and thereby subjected themselves to the 
proposed caps). In addition, the control requirements would lead to 
2015 annual NOX emissions reductions of about 1.8 million 
tons from the base case, and 2010 annual NOX emissions 
reductions of about 1.5 million tons from the base case.
    Calculating the regionwide budget and emissions reductions 
requirements serve the same purposes as in the case of SO2, 
described above. Our methodology proposed today determines historical 
annual heat input data for Acid Rain Program units in the applicable 
States and multiplies by 0.15 lb/mmBtu (for 2010) and 0.125 lb/mmBtu 
(for 2015) to determine total annual NOX mass. For the 
annual heat input values to use in this formula, EPA proposes to take 
the highest annual heat input for any year from 1999 through 2002 for 
each applicable State. This proposed approach provides a regionwide 
budget for 2010 that is approximately 37,500 tons more than the budget 
that would result from using the highest annual regional heat input for 
any of the 4 years, and about 60,700 tons more than using the average 
regional heat input for the 4-year period. We believe that this cushion 
provides for a reasonable adjustment to reflect that there are some 
non-Acid Rain units that operate in these States that will be subject 
to the proposed budgets.
    Note that EPA proposes today that Connecticut contributes 
significantly to downwind ozone nonattainment, but not to fine particle 
nonattainment. Thus, Connecticut would not be subject to an

[[Page 4619]]

annual NOX control requirement, and is not included in the 
28-State and DC region we are proposing for annual controls. 
Connecticut would be subject to an ozone season-only NOX 
cap.\86\ Because Connecticut is required to make reductions only during 
the ozone season, compliance for sources would not be required to begin 
until May 1, 2010. If Connecticut chooses to participate in the 
regional trading program on an annual basis, compliance would begin on 
January 1, 2010.
---------------------------------------------------------------------------

    \86\ If Connecticut, or any State subject to an existing 
NOX ozone season-only budget program, chooses to 
participate in the interstate NOX trading program 
proposed today, that State would need to operate under an annual 
NOX cap rather than ozone season only. Interstate trading 
is discussed in more detail in section VIII, below.
---------------------------------------------------------------------------

    Although EPA proposes to determine the regionwide amount of EGU 
NOX emissions by using historic heat input and emission 
rates of 0.15 lb/mmBtu and 0.125 lb/mmBtu, we take comment on using, 
instead, heat input projected to the implementation years of 2010 and 
2015 and/or different emission rates. Under this approach, we take 
comment on whether to use the same method for projecting heat input as 
used in the NOX SIP Call, or a different method. The 
NOX SIP Call method is described in 67 FR 21868 (May 1, 
2002).
2. State-by-State Emissions Reductions Requirements and EGU Budgets
    This section describes the methodologies used for apportioning 
regionwide emission reduction requirements or budgets to the individual 
States. State budgets may be set with a methodology different from that 
used in setting the regionwide budgets, for reasons described in this 
section.
    In practice, if States control EGUs and participate in the regional 
trading program, the choice of method used to impose State-by-State 
reduction requirements makes little difference in terms of total 
regionwide SO2 and NOX emissions. The cap and 
trade framework would encourage least-cost compliance over the region, 
an outcome that does not depend on the individual State budgets.
    However, the distribution of budgets to the States is important in 
that it can have economic impacts on the State's sources. Should a 
State receive a disproportionate share of the regionwide budget, there 
would be fewer allowances to allocate to its sources. This may 
adversely affect compliance costs for sources within that State as they 
are forced to increase their level of emission control or became net 
buyers from sources in States that may have received a greater share of 
regionwide cap.
    For SO2, we propose determining State SO2 
budgets for EGUs on the basis of title IV allowances, which is in line 
with the planned interactions of this rule with title IV of the CAA 
Amendments. See section VIII for a more detailed discussion of 
interactions with title IV. Such budgets would be easy to understand, 
would be straightforward to set, would reflect previously implemented 
allocations and would allow for the smoothest transition to the new 
program proposed today.
    For the proposed 28 State SO2 control region, the 
proposed annual State EGU SO2 budgets are presented in Table 
VI-9, below.

 Table VI-9.--28-States and District of Columbia Annual EGU SO2 Budgets
------------------------------------------------------------------------
                                           28-State SO2    28-State SO2
                  State                     budget 2010     Budget 2015
                                              (tons)          (tons)
------------------------------------------------------------------------
Alabama.................................         157,629         110,340
Arkansas................................          48,716          34,101
Delaware................................          22,417          15,692
District of Columbia....................             708             495
Florida.................................         253,525         177,468
Georgia.................................         213,120         149,184
Illinois................................         192,728         134,909
Indiana.................................         254,674         178,272
Iowa....................................          64,114          44,879
Kansas..................................          58,321          40,825
Kentucky................................         188,829         132,180
Louisiana...............................          59,965          41,976
Maryland................................          70,718          49,502
Massachusetts...........................          82,585          57,810
Michigan................................         178,658         125,061
Minnesota...............................          50,002          35,001
Mississippi.............................          33,773          23,641
Missouri................................         137,255          96,078
New Jersey..............................          32,401          22,681
New York................................         135,179          94,625
North Carolina..........................         137,383          96,168
Ohio....................................         333,619         233,533
Pennsylvania............................         276,072         193,250
South Carolina..........................          57,288          40,101
Tennessee...............................         137,256          96,079
Texas...................................         321,041         224,729
Virginia................................          63,497          44,448
West Virginia...........................         215,945         151,162
Wisconsin...............................          87,290          61,103
                                         -----------------
    Total...............................       3,864,708       2,705,293
------------------------------------------------------------------------


[[Page 4620]]

    If alternatively, EPA were to adopt an 0.10 [mu]g/m\3\ as the air 
quality criterion, Oklahoma and North Dakota would also receive 
SO2 budgets. Oklahoma's 2010 State SO2 budget 
would be 63,328 tons and its 2015 SO2 budget would be 44,330 
tons. North Dakota's 2010 SO2 budget would be 82,510 tons 
and its 2015 SO2 budget would be 57,757 tons.
    If the State EGU SO2 budget is entirely based on the 
title IV retirement ratio, then the budget would equal the title IV 
allowances multiplied by the retirement ratio (as discussed earlier in 
this section). However, under the CAA, the title IV SO2 
allowances are allocated on the basis of activity as of 1985, and as a 
result, they do not take into account any of the significant changes 
and growth in the sectors since that time.
    An alternate method of determining State SO2 EGU budgets 
would consist of two parts:
    (1) The first part of the budget would be based on title IV 
allocations--but with a tighter title IV retirement ratio than that 
proposed for the region.
    (2) The tighter retirement ratio would result in some un-allocated 
EGU allowances (reflecting the difference between the regionwide budget 
and State budgets calculated based on part (1)). These could be 
allocated to States' budgets for their non-title IV EGUs, or as a way 
to redistribute or update allowances to the title IV EGUs. This 
allocation could be done on the basis of methods discussed in more 
detail below. Such a two-part EGU budget would recognize the fact that 
the sector has grown and changed since title IV allocations were 
initially made.
    For NOX, we propose determining State NOX 
budgets for EGUs on the basis of current/historic heat input rates. 
Regionwide budgets would be distributed to States based on an average 
of several years of historical data. We are proposing to use data from 
1999 to 2002.
    A similar approach was taken by the SO2 program under 
title IV of the CAA. As a result, States with significant projected 
increases in growth were required to either: (1) Reduce their emissions 
further, or (2) burn fuel more efficiently in order to compensate. (For 
such States, the ability to trade emissions regionwide was particularly 
attractive because States with low increases or decreases in 
utilization could trade emissions with States having significantly 
increased utilization).
    Most of the States within the proposed control region are part of 
the NOX SIP Call, with a regionwide budget that on a 
seasonal basis constrains increases in NOX emissions for the 
region as a whole. States with high growth (measured from a historic 
baseline to the start of the new program) would already be provided 
incentives to control NOX emissions as they would need to 
use additional NOX SIP Call allowances to emit during the 
ozone season. Consequently, growth in generation in the years after the 
proposed State budgets have been set would not necessarily lead to 
increased emissions. Furthermore, the majority of the growth (of heat 
input, or output) through 2010 is expected to be met by recently built 
natural gas units, with no SO2 and very low NOX 
emissions.
    Such an option is also appropriate to consider if it is decided 
that SO2 budgets for non-title IV sources should be 
developed as explained below.
    Among the advantages of a budget methodology based on historic/
current activity is that it is relatively simple to implement and would 
not need to be changed as a result of future data.
    For the proposed 28 State Annual NOX control region, the 
proposed annual State EGU NOX budgets based on this 
methodology are presented in Table VI-10, below.

 Table VI-10.--28-States and District of Columbia Annual EGU NOX Budgets
------------------------------------------------------------------------
                                           28-State NOX    28-State NOX
                  State                     Budget 2010     Budget 2015
                                              (tons)          (tons)
------------------------------------------------------------------------
Alabama.................................          67,414          56,178
Arkansas................................          24,916          20,763
Delaware................................           5,039           4,199
District of Columbia....................             215             179
Florida.................................         115,489          96,241
Georgia.................................          63,567          52,973
Illinois................................          73,613          61,344
Indiana.................................         102,283          85,235
Iowa....................................          30,454          25,378
Kansas..................................          32,433          27,027
Kentucky................................          77,929          64,940
Louisiana...............................          47,333          39,444
Maryland................................          26,604          22,170
Massachusetts...........................          19,624          16,353
Michigan................................          60,199          50,165
Minnesota...............................          29,300          24,417
Mississippi.............................          21,930          18,275
Missouri................................          56,564          47,137
New Jersey..............................           9,893           8,245
New York................................          52,448          43,707
North Carolina..........................          55,756          46,463
Ohio....................................         101,692          84,743
Pennsylvania............................          84,542          70,452
South Carolina..........................          30,892          25,743
Tennessee...............................          47,734          39,778
Texas...................................         224,181         186,818
Virginia................................          31,083          25,903
West Virginia...........................          68,227          56,856
Wisconsin...............................          39,039          32,533
                                         -----------------
    Total...............................       1,600,392       1,333,660
------------------------------------------------------------------------


[[Page 4621]]

    If alternatively, EPA were to adopt an 0.10 [mu]g/m\3\ as the air 
quality criterion, Oklahoma and North Dakota would also receive annual 
NOX budgets. The proposed annual State EGU NOX 
budgets for all 30 States based on the proposed methodology are 
presented in Table VI-11 below.

 Table VI-11.--30-State and District of Columbia Annual EGU NOX Budgets
------------------------------------------------------------------------
                                           30-State NOX    30-State NOX
                  State                     budget 2010     budget 2015
                                              (tons)          (tons)
------------------------------------------------------------------------
Alabama.................................          67,415          56,179
Arkansas................................          24,916          20,763
Delaware................................           5,039           4,199
District of Columbia....................             215             179
Florida.................................         115,490          96,242
Georgia.................................          63,568          52,973
Illinois................................          73,614          61,345
Indiana.................................         102,283          85,236
Iowa....................................          30,454          25,378
Kansas..................................          32,433          27,027
Kentucky................................          77,929          64,941
Louisiana...............................          47,333          39,445
Maryland................................          26,604          22,170
Massachusetts...........................          19,624          16,353
Michigan................................          60,199          50,166
Minnesota...............................          29,300          24,417
Mississippi.............................          21,930          18,275
Missouri................................          56,565          47,137
New Jersey..............................           9,894           8,245
New York................................          52,448          43,707
North Carolina..........................          55,756          46,463
North Dakota............................          26,570          22,141
Ohio....................................         101,693          84,744
Oklahoma................................          41,293          34,411
Pennsylvania............................          84,543          70,452
South Carolina..........................          30,892          25,744
Tennessee...............................          47,734          39,778
Texas...................................         224,183         186,819
Virginia................................          31,083          25,903
West Virginia...........................          68,227          56,856
Wisconsin...............................          39,040          32,533
                                         -----------------
    Total...............................       1,668,268       1,390,223
------------------------------------------------------------------------

    There are two different metrics that EPA could use for determining 
alternate State EGU NOX budgets. These metrics include:
    (1) Pro-rated emissions levels (budgets based on reductions in 
emissions levels),
    (2) Pro-rated share of Output (kwh) (budgets based on their output 
(same lb/kwh rate)).

We solicit comment on the use of these different methods.
    There are options for implementing the heat input-based budget and 
the two different metrics in determining actual State budgets. Budgets 
could be based on projected levels (calculated by taking historical 
level and applying growth rates, or directly taking levels projected by 
IPM).
    The methodology used in the NOX SIP Call (setting State 
budgets by applying State-specific growth rates for heat input) is an 
example of this approach. (67 FR 21868; May 1, 2002) Alternatively, it 
would be possible to use heat input or output as projected directly by 
IPM in the setting of budgets. This would have the benefit of being 
consistent with the methodology for determining cost. We would also 
have projections for relevant years, and there would be little 
disconnect between the years used to develop growth rates and the years 
to which growth rates are applied. However, under such a methodology, 
it would be difficult to adjust budgets if we receive comments about 
missing units. We solicit comment on these options.
    As noted above, EPA proposes that Connecticut contributes 
significantly to ozone nonattainment areas, but not to fine particle 
nonattainment areas. Thus, Connecticut would not be subject to proposed 
annual SO2 and NOX controls, but would be subject 
to ozone season-only NOX control requirements. We propose an 
ozone-season EGU NOX control level of 4,360 tons in 2010 and 
about 3,633 tons in 2015.
    If Connecticut (or any State subject to an existing NOX 
ozone season-only budget program) chooses to participate in the 
interstate trading program proposed today, that State would need to 
operate under an annual NOX cap rather than ozone season 
only. Interstate trading is discussed in more detail in section VIII of 
this preamble. The EPA proposes an annual NOX control level 
of about 9,283 tons in 2010 and 7,735 tons in 2015, if Connecticut were 
to participate in today's proposed interstate trading program on an 
annual basis.
    The EPA calculated these proposed levels using the 1999 Acid Rain 
Program reported heat inputs for Connecticut. The ozone-season level 
was calculated by multiplying the reported ozone-season heat inputs by 
0.15 lb/mmBtu for 2010 and 0.125 lb/mmBtu for 2015. The proposed annual 
level was determined by multiplying the reported annual heat input by 
0.15 lb/mmBtu for 2010 and 0.125 lb/mmBtu for 2015. We reviewed 
reported Acid Rain Program heat inputs for the years 1999 through 2002, 
and selected 1999 data for calculating these proposed levels because 
the 1999

[[Page 4622]]

Connecticut heat input was higher than the other 3 years considered, 
and this is similar to the way the regionwide proposed control levels 
were calculated.
    The EPA also takes comment on an alternate way to calculate a 
NOX budget for Connecticut that would be entirely consistent 
with the way that the budgets were calculated for other States. Under 
this methodology, EPA would calculate region wide NOX 
budgets for both the ozone season and non ozone season using State by 
State heat input data for the highest year between 1999 and 2002 and 
multiplying it by 0.15 lbs/mmBtu for 2010 and 0.125 lbs/mmBtu for 2015. 
Both ozone season and non-ozone season State budgets would be 
calculated by giving States their pro-rated share of the budget based 
on annual heat input from the years 1999 to 2002. For States required 
to make year-round reductions, their budgets would be based on the sum 
of their ozone-season and non-ozone season heat input. For a State such 
as Connecticut that was only required to make ozone-season reductions, 
its ozone-season budget would be based upon its share of the ozone-
season budget. If Connecticut decided to participate on an annual 
basis, its budget would be calculated like all other States.

E. Budgets for Use by States Choosing To Control Non-EGU Source 
Categories

    While EPA is not proposing to assume any emissions reductions from 
other source categories (e.g., non-EGU stationary sources, area sources 
and mobile sources), States may elect to obtain some or all of the 
required emissions reductions from other source categories. In this 
case, EGUs within the State would not be able to participate in the cap 
and trade programs.
    If a State chooses to obtain some but not all of its required 
reductions from EGUs, it would set an EGU SO2 budget and/or 
an EGU NOX budget, at some level higher than shown in Tables 
VI-9 and VI-10. The State must also (1) develop baseline emissions sub-
inventories for all non-EGU sectors for 2010 and 2015, (2) divide the 
portion of the required emissions reductions that it will not obtain 
from EGUs (i.e., the difference between its selected EGU budget for 
SO2 or NOX and the budget listed in Tables VI-9 
or VI-10) among the non-EGU source sectors in any manner it chooses, 
(3) subtract these emissions reductions from the corresponding 
emissions sub-inventories to arrive at the emissions budget for each 
sector, and (4) adopt measures that are projected to achieve those 
budgets. Compliance with all of these control measures would be 
enforceable. Section VII explains the role of emission budgets for non-
EGU sectors in more detail. We plan to propose in the SNPR requirements 
to ensure the accuracy of the baseline emission sub-inventories.
    We believe it is unlikely that any State will choose to obtain all 
or part of the required SO2 and NOX emission 
reductions from sources other than EGUs, but we do wish to offer States 
this alternative if equal reductions can be obtained. The SNPR will 
propose specific emission reductions for this purpose, or provisions 
for determining these emission reduction quantities. Once these are 
determined, the four steps described in the previous paragraph will 
apply.

F. Timing and Process for Setting Baseline Inventories and Sub-
Inventories

    In the NOX SIP Call, EPA promulgated a NOX 
emission reduction requirement for each State (as we propose here for 
SO2 and NOX). We also promulgated baseline sub-
inventories for each State for five sectors (EGU, non-EGU, area, non-
road, and highway) which summed to an overall baseline inventory. 
Finally, the NOX SIP Call rule contained a table of State-
by-State NOX emissions budgets, developed by subtracting the 
required NOX emission reduction from the overall baseline 
NOX inventory.
    Today, we are proposing specific EGU budgets for affected States 
for the purposes of the model trading program, but we are not proposing 
any baseline sub-inventories. There is no need for baseline sub-
inventories to be established by rule for States choosing to 
participate in the model trading programs. As explained in section VI.E 
above, we propose that if a State chooses to obtain some of the 
required emission reductions from non-EGU sources, the baseline sub-
inventories and the sector budgets should be developed by the State 
itself and be subject to EPA approval as part of the transport SIP. In 
this way, baseline sub-inventories and sector budgets will reflect 
updates to newer emission estimation methods, more recent data on 
current emissions, and updated projection methods. This will increase 
the certainty that the required emission reductions will be achieved in 
practice.
    We invite comment at this time on what assumptions and methods for 
establishing sector inventories should be specified in the supplemental 
proposal and final rule. In the NOX SIP Call, for example, 
we said that emissions reductions from subsequent Federal rules must be 
incorporated into the baseline sector inventories. Clear rules 
regarding determination of historical emissions, development of growth 
factors, estimation of rule effectiveness, and credibility of State-
adopted measures may also be needed.
    Section IV, above, presents the baseline emission projections that 
have been used in the air quality modeling that supports today's 
proposal. We will be updating these baseline inventories for the final 
rule to incorporate newer data and methods.

G. Comment on Emissions Caps and Budget Program

    While EPA's analysis indicates that the availability of boilermaker 
labor will be a limiting factor in first phase scrubber installations, 
the Agency is soliciting comment on this analysis. In particular, we're 
asking for comment on whether there might be alternative post-
combustion technologies that could reduce SO2 emissions in a 
manner equally cost-effective as scrubbers, but that wouldn't require 
as much boilermaker labor. Examples might include multi-pollutant 
technologies (boilermaker labor might be less constrained if single 
technologies can be installed to reduce both SO2 and 
NOX). We also solicit comment on whether advanced coal 
preparation processes might provide highly cost effective emission 
reductions. We solicit comment on whether such alternative technologies 
will be commercialized by 2010, and what the costs will be.
    In addition, EPA seeks comment on whether other factors such as 
other EPA regulatory actions will create an increase in boilermaker 
demand earlier than today's proposal (pre-2007), resulting in growth in 
the number of boilermakers that could be used to install controls 
required under this program in 2007 and beyond. We solicit comments on 
whether other factors might increase demand for boilermakers in advance 
of 2007, and what these factors would be.
    As noted above, EPA is proposing to require SO2 and 
NOX to be reduced by similar percentages in the first phase 
of today's proposed rule, given the limited supply of labor to install 
controls at electric generating units. An alternative would be to give 
priority to SO2 control in the first phase, and postpone 
summertime NOX reductions for a couple of years. This would 
focus limited labor resources on SO2 control to reduce the 
sulfate component of PM2.5 as quickly as possible. This 
approach could achieve more early PM2.5 reductions and might 
help some PM2.5 nonattainment areas attain earlier. On the 
one hand, based on the analysis

[[Page 4623]]

of section XI, the quantified benefits from PM2.5 control 
are generally larger than those for ozone. Nevertheless, the tradeoff 
would be that ozone reductions under the interstate air quality rule 
would be postponed. Because many ozone areas will be required to attain 
in 2010, fewer projected ozone nonattainment areas would be helped by 
the interstate air quality rule. A number of areas required to attain 
in 2010 (and perhaps some 2013 areas as well) would incur greater local 
control costs to attain on time, or achieve less improvement in ozone 
levels. We request comment on the relative merits of the proposed 
approach and this alternative, considering public health, costs, and 
equity. More generally, EPA seeks comment on the mix of first phase 
SO2 and NOX reductions that represents the proper 
balance between the goals of reducing PM2.5 transport and 
ozone transport in the near term.
    Additionally, EPA seeks comment on the level of the second phase 
caps and the resulting division of responsibility between local and 
interstate transport sources. Would a less stringent or more stringent 
level of transport control lower total costs of attainment, or better 
address equity issues? Has EPA identified the appropriate level of 
control as highly cost effective? Should the Agency reduce the second-
phase reductions (or raise the second-phase caps) for NOX 
and SO2, and thereby leave more of the emissions reductions 
burden to the individual States preparing plans for meeting air quality 
standards in each nonattainment area? Or should the second-phase 
emissions reductions be increased (or the caps be made lower) in an 
effort to give more help to States through regional controls that 
achieve greater reductions and benefits while remaining cost effective? 
For example, rather than basing the 2015 caps on a 65 percent reduction 
from title IV levels, should they be based on a 55 percent reduction or 
a 75 percent reduction?
    The EPA also requests comment on the timing of each phase of the 
cap and trade program. Regarding the first phase, EPA notes that the 
January 1, 2010 NOX compliance date occurs after the last 
ozone season that influences the attainment status of the ``moderate'' 
8-hour ozone nonattainment areas that will receive an attainment date 
no later than April 2010. We also note that its analysis indicates that 
the level of control in the first phase is constrained by the amount of 
control equipment that can be installed by a limited labor force, and 
providing an earlier compliance deadline might reduce the reductions 
feasible in the first phase. We request comment on whether the first 
phase deadline should be as proposed, or adjusted earlier or later, in 
light of these competing factors.
    For SO2, if States choose to control EGUs through the 
model cap and trade program, emissions banking provides incentives that 
lead to steadily declining emissions and thus results in additional 
benefits before the 2010 and 2015 reductions. However, it appears that 
it would help several States to reach attainment by CAA deadlines if 
the second phase emissions cap went into effect earlier, especially for 
NOX. This needs to be balanced against the ability of the 
power industry to do substantially more at that time. The EPA is 
soliciting comment on the timing of the second phase.
    The EPA strongly encourages each State to consider reserving a 
portion of its allowance budget for an auction. Proceeds from the 
auction would be fully retained by the State to be used as they see 
fit. Some possible suggestions for auction revenue that States may want 
to choose will be further explored in a supplemental notice. For 
example, a State could develop a program that uses the revenue to 
provide incentives for additional local reductions within nonattainment 
areas.
    The EPA sees benefits in requiring States to reserve a portion of 
their budgets for auction, but has concerns about whether such a 
requirement would intrude on State prerogatives.\87\ We solicit comment 
on this issue.
---------------------------------------------------------------------------

    \8\ See Virginia v. EPA, 108 F.3d 1397 (D.C. Cir. 1997).
---------------------------------------------------------------------------

H. Budgets for Federally-Recognized Tribes

    In the 1990 CAA amendments, Congress recognized our obligation to 
treat Tribes in a manner similar to States. Currently, we are not aware 
of any EGUs in Indian country in the eastern and central U.S. that 
could potentially be affected by the interstate air quality rule.
    The Tribal air programs are relatively new and Tribes are just now 
establishing their capacity to develop air quality management plans and 
beginning to participate in national policy setting processes such as 
this rulemaking. In addition, past Federal policy limited the economic 
development and thus the number of emissions sources that might 
otherwise have been built on Tribal lands. However, many Tribes are 
currently encouraging economic development on their lands, particularly 
in the area of energy generation.
    In the NOX SIP Call, EPA did not explicitly consider the 
issue of Tribal lands and we made no specific provisions for them. One 
consequence is that Tribal implementation plans--even ones that cover 
new or existing sources on Tribal lands--apparently are not subject to 
any of the requirements of the NOX SIP Call rule. We now 
realize that we should adopt specific provisions for Tribal lands in 
today's proposed rulemaking. For States, which have substantial 
emissions now and corresponding impacts on nonattainment in other 
States, we have focused in this proposal on what emissions reductions 
are needed to eliminate existing significant contributions to 
nonattainment. For Tribes, since there are few sources on Tribal lands 
now and no EGUs, we should consider what increases are possible without 
causing significant contributions to nonattainment in State lands and 
other Tribal lands.
    Title IV SO2 allowances have been provided to EGUs. 
Because there are no EGUs on Tribal lands, title IV allowances have not 
been awarded to any EGUs on Tribal lands. Additionally, without EGUs 
there is no historical heat input for use in calculating an allowance 
budget for NOX for Tribal lands. In our discussions prior to 
this proposal, Tribal representatives have expressed concern that 
budgets based on existing emissions effectively exclude them from the 
program unless Tribes buy allowances from the surrounding States. If 
Tribes do buy allowances, they will be effectively subsidizing the 
development and inadequate environmental planning of surrounding 
States. In this rulemaking, we are taking into consideration the past 
inequities created by Federal policy and traditionally depressed 
development in Indian country, as well as the need to make progress in 
air quality.
    We are not proposing specific provisions for Tribal lands today. We 
invite comment generally and on the following specific questions 
regarding allowance allocation to Tribes:
    (1) Should allowance budgets for Tribes be created by the rule 
separately from State allowance budgets, or be deducted from the 
proposed State budgets? On what basis or criteria should either 
approach be implemented?
    (2) Alternatively, should the rule set an allowance pool for Tribes 
in the aggregate with some further process by EPA or by the Tribes 
collectively to allocate the allowances to specific Tribes? Should the 
allowance allocation issues be deferred entirely to separate action(s) 
later? Should any immediate or

[[Page 4624]]

eventual allocations to individual Tribes be based on current 
emissions, existing contracts for new sources, population, land base, 
or some other factor(s)? Some Tribes may have concerns that deferral of 
allowance allocations to individual Tribes does not adequately 
recognize the sovereignty of individual Tribal nations. There may also 
be concern that continued uncertainty in the allowances available to 
the individual Tribes may discourage planning for development.
    (3) Should allowances be tradeable among Tribes once allocated? 
Should they be bankable?
    (4) Because the SIPs do not generally apply in Indian country, the 
system for regulating sources on Tribal land for purposes of limiting 
transport will need to be implemented through either a Tribal 
implementation plan or a Federal implementation plan. We invite comment 
on the best mechanism to implement the budgets.
    We recognize that information on economic development and potential 
for growth may be sensitive for the Tribes to share with EPA or a 
public docket. We request input from the Tribes on how to determine the 
allowance needs for the Tribes.

VII. State Implementation Plan Schedules and Requirements

    This section describes the dates for submittal and implementation 
of the interstate transport SIPs that today we propose to require, and 
discusses those dates in the context of the attainment dates and SIP 
submittal requirements for the downwind nonattainment areas. In 
addition, this section describes the required SIP elements that we 
propose today.

A. State Implementation Plan Schedules

1. State Implementation Plan Submission Schedule
    Clean Air Act section 110(a)(1) requires each State to submit a SIP 
to EPA ``within 3 years * * * after the promulgation of a [NAAQS] (or 
any revision thereof).'' Section 110(a)(2) makes clear that this SIP 
must include, among other things, the ``good neighbor'' provisions 
required under section 110(a)(2)(D). These provisions may be read 
together to require that each upwind State submit, within three years 
of a NAAQS revision, SIPs that address the section 110(a)(2)(D) 
requirement.
    The PM2.5 and 8-hour ozone NAAQS revisions were issued 
in July 1997. More than 3 years have already elapsed since promulgation 
of the NAAQS, and States have not submitted SIPs to address their 
section 110(a)(2)(D) obligations under the new NAAQS. We further 
recognize that until recently, there was substantial uncertainty as to 
whether each NAAQS would be remanded to EPA, and that this uncertainty 
would, as a practical matter, render more complex the upwind States' 
task of developing transport SIPs.
    In addition, today's proposal makes available a great deal of data 
and analysis concerning air quality and control costs, as well as 
policy judgments from EPA concerning the appropriate criteria for 
determining whether upwind sources contribute significantly to downwind 
nonattainment under section 110(a)(2)(D). We recognize that States 
would face great difficulties in developing transport SIPs without 
these data and policies. In light of these factors and the fact that 
States can no longer meet the original three-year submittal date, we 
are proposing that SIPs to reduce interstate transport, as required by 
this proposal, be submitted as expeditiously as practicable, but no 
later than 18 months from the date of promulgation. The EPA intends to 
promulgate today's proposed rule between approximately December 2004 
and June 2005. In this case, the SIPs required today would be due 
between approximately July and December 2006.
    By comparison, in the NOX SIP Call rulemaking, EPA 
provided 12 months for the affected States to submit their SIP 
revisions. One of the factors that we considered in setting that 12-
month period was that upwind States had already, as part of the Ozone 
Transport Assessment Group process begun three years before the 
NOX SIP Call rulemaking, been given the opportunity to 
consider available control options.
    Since today's proposal requires affected States to control both 
SO2 and NOX emissions, and to do so for the 
purpose of addressing both the PM2.5 and 8-hour ozone NAAQS, 
we believe it is reasonable to allow affected States more time than was 
allotted in the NOX SIP Call to develop and submit transport 
SIPs. Since we plan to finalize this rule no later than mid-2005, SIP 
submittals would be due no later than the end of 2006. Under this 
schedule, upwind States' transport SIPs would be due before the 
downwind States' PM2.5 and 8-hour ozone nonattainment SIPs, 
under CAA section 172(b). We expect that the downwind States' 8-hour 
ozone nonattainment area SIPs will be due by May 2007, and their 
nonattainment SIPs for PM2.5 by January 2008.\88\
---------------------------------------------------------------------------

    \88\ The actual dates will be determined by relevant provisions 
in the CAA and EPA's interpretation of these provisions published in 
upcoming implementation rules for the PM2.5 and 8-hour 
ozone NAAQS.
---------------------------------------------------------------------------

    The SIP submittal date proposed today should be considered in the 
context of the downwind nonattainment area SIP submittal schedules and 
attainment dates. Under CAA section 172(b), the downwind nonattainment 
SIPs are due no later than three years after the designations. The EPA 
expects to designate PM2.5 areas by December 31, 2004, and 
to require the nonattainment area SIPs by three years of the 
designation. The EPA is required to designate 8-hour ozone areas by 
April 15, 2004, with an effective date of May 2004, and to require the 
nonattainment area SIPs by three years of the designation.
    Accordingly, today's proposal requires the submittal of the upwind 
transport SIPs before the downwind nonattainment area SIPs will be due. 
This sequence is consistent with the provisions of both section 
110(a)(1)-(2), which provides that the submittal period for the 
transport SIPs runs from the earlier date of the NAAQS revision; and 
section 172(b), which provides that the submittal period for the 
nonattainment area SIPs runs from the later date of designation.
    The earlier submittal date for transport SIPs is also consistent 
with sound policy considerations. The upwind reductions required today 
will facilitate attainment planning by the downwind States. Further, 
most of the downwind States that will benefit by today's rulemaking are 
themselves upwind contributors to problems further downwind, and, thus, 
are subject to the same requirements as the States further upwind. The 
reductions these downwind States must implement due to their additional 
role as upwind States will help reduce their own PM2.5 and 
8-hour ozone problems on the same schedule as emissions reductions for 
the upwind States.
2. Implementation Schedule
    Section 110(a)(2)(D) requires SIPs to ``contain adequate provisions 
* * * prohibiting * * * [emissions that] will * * * contribute 
significantly to nonattainment in * * * any other State. * * *'' The 
phrase ``will * * * contribute significantly'' suggests that EPA should 
establish the significance of the emissions' contribution, and require 
their prohibition, as of a time in the future. However, the provision 
does not, by its terms, indicate the applicable date in the future; nor 
does it address the future period of time.
    For today's proposal, EPA believes that determining significant

[[Page 4625]]

contribution as of 2010, and requiring implementation of the reductions 
by January 1, 2010, is a reasonable application of the statutory 
provisions. As discussed in section VI, emissions controls for EGUs may 
be feasibly implemented by that time. As a result, January 1, 2010 is 
the date by which we can confidently predict that highly cost-effective 
emission reductions from EGUs can begin, considering cost broadly to 
encompass many factors, including engineering feasibility and 
electricity supply reliability risks.
    Emissions reductions by this date will also provide significant air 
quality benefits to the downwind nonattainment areas. We expect that 
the attainment date for numerous downwind areas will be 2010 or later, 
so that these reductions will facilitate attainment. For ozone 
nonattainment areas, the reductions will reduce the amount of 
nonattainment. For PM2.5 nonattainment areas, the reductions 
will have the same effect, and help bring those areas into attainment. 
Indeed, we believe that the anticipation of the optional trading 
program beginning in 2010 will create incentives for reductions in 
SO2 emissions prior to that date. Therefore, today's 
proposal will have benefits for progress towards attainment with the 
PM2.5 NAAQS in the years between finalization of this rule 
and 2010. Further discussion of these air quality benefits is included 
in section IX.
    As discussed in section VI, feasibility considerations warrant 
deferring a portion of the emissions reductions to 2015. As discussed 
in section IX, these reductions will provide air quality benefits at 
that time, as well, and, as in the case with the 2010 emission 
reductions, we expect that the anticipation of tighter controls will 
likely lead to SO2 emissions reductions prior to 2015.

B. State Implementation Plan Requirements

    Today's proposal requires States to submit SIPs that contain 
controls sufficient to eliminate specified amounts of emissions. The 
EPA determined these amounts through the application of highly cost-
effective controls to the EGU source category. The amount of the 
emissions reduction is determined by comparing the amount of EGU 
emissions in the base case--that is, in the absence of controls--to the 
amount of emissions after implementation of the controls. Section VI 
contains a more detailed discussion of the process for determining the 
amounts of emissions in the base case.
    As noted elsewhere, EPA is gathering information concerning certain 
other source categories. However, EPA does not, at present, have 
information upon which to propose a determination that any other source 
categories may achieve specific emissions reductions at a cost that 
could be considered highly cost effective.
    To achieve the required amount of emissions reductions, States may 
impose emission limits on other sources--in addition to EGUs--if they 
choose. The EPA is considering what additional requirements are needed 
to ensure that these limits are met. Overarching considerations include 
whether the requirements (i) provide certainty that all emissions that 
EPA determined to contribute significantly will be eliminated both at 
the State and regional level; (ii) ensure that contributions will 
continue to be eliminated in future years; and (iii) ensure that the 
control requirements can be feasibly implemented.
    The EPA considered two main approaches to the SIP requirements: a 
budget (i.e., cap) approach, and an emission reduction approach. The 
EPA is proposing a hybrid approach that we believe incorporates the 
best elements of both approaches while minimizing the shortfalls of 
both approaches.
1. The Budget Approach
    In its most rigorous form, a budget approach would require a 
statewide cap, that is, the capping of aggregate emissions from all 
source categories in each State. Mechanisms would be set up to ensure 
that the overall budget was not exceeded. These mechanisms could 
require individual source categories to meet sub-budgets or could 
provide for emission shifting between source categories. Subjecting 
each State throughout the region to aggregate emissions budgets would 
provide great certainty that the amount of emissions identified as 
contributing significantly to nonattainment had been eliminated. This 
approach would also assure that the significant contribution was fully 
addressed for future years because any increase in activity across all 
emission sources would have to occur within the budget, that is, 
without generating additional emissions. If all States applied such an 
approach, it would also assure that emissions from a source within a 
given source category would be permanently reduced and not merely 
shifted to another source within the region, as could occur if sources 
in one State were controlled under a budget but similar sources in 
another State were not.
    A less rigorous approach would require enforceable budgets for only 
some source categories, namely, those that were required to make the 
emissions reductions. Under this approach, there would be less 
certainty that all States will continue to not contribute significantly 
(in terms of the air quality component) in future years because growth 
in overall emissions may still occur.
    The U.S. EPA and State environmental agencies have successfully 
applied budget approaches to certain source categories and groups of 
source categories. For instance, the title IV requirements of the CAA 
applied a SO2 budget to most large EGUs. The Ozone Transport 
Commission (OTC) NOX budget trading program applied an ozone 
season NOX budget to large EGUs and non-EGU boilers and 
turbines, and many States have adopted the same approach to meet the 
requirements of the NOX SIP Call.\89\ These successes 
demonstrate that budget programs can work for large stationary sources. 
These types of sources can accurately monitor emissions at the unit 
level, and these sources are manageable in number, so that overall 
emissions can be determined using this unit level data.
---------------------------------------------------------------------------

    \89\ These budget approaches authorize trading among sources, 
but other control methodologies, such as emission rate controls, may 
also authorize trading. See U.S. EPA, ``Improving Air Quality with 
Economic Incentive Programs,'' (January 2001).
---------------------------------------------------------------------------

    On the other hand, there has been virtually no experience with 
budget programs for mobile and area sources, due to challenges in 
accounting for emissions from these types of sources. Emissions from 
these sources are typically estimated using emission factors and 
estimated emission data, so that there is much less certainty about the 
accuracy of these amounts of emissions. Additionally, monitoring at the 
unit level and tracking unit level emissions would be much more 
difficult because of the large number of small sources involved.
    As noted above, EPA believes that there are benefits from requiring 
a State to impose a cap on EGUs. We also believe that there would be 
benefits from requiring a State to impose a cap on any source category 
on which the State imposes controls. One benefit would be a permanent 
limit on the amount of emissions from that category to assure the 
reductions in emissions that significantly contribute to nonattainment 
in affected downwind States. We solicit comment on the approach of 
requiring States to impose caps on any source categories which the 
State chooses to regulate under the rule proposed today.

[[Page 4626]]

2. The Emissions Reduction Approach
    Under the emissions reduction approach, SIPs must impose control 
requirements that typically consist of an emission rate limit or, 
possibly, application of a specified type of technology, but not an 
emissions cap. These control requirements, when implemented by the 
affected sources in the implementation years, must result in the amount 
of emission reductions that EPA required through the highly cost-
effective calculations described in section VI.
    This approach is most useful when a State chooses to apply the 
control requirements to a source category for which current source-
monitoring methods do not permit specific emissions quantification for 
each source, and for which shifts in emissions-generating activity are 
unlikely to result from the control program. This limitation in the 
methodology may result because, among other possible reasons, (i) the 
source's emissions generating activities are of a type for which no 
accurate quantification methodology exists; (ii) such a methodology 
would be unreasonably expensive to apply to the source; or (iii) the 
sources are too numerous.
    Even so, to ensure that the desired emissions reductions are 
achieved, this methodology requires accurate baseline emission 
estimates, which, as a practical matter, may be difficult to develop in 
light of the uncertainties in estimating emissions from the affected 
source types. If the baseline estimates are high, States may achieve 
credit for emissions reductions they will not in fact achieve (by 
reducing emissions to a certain emission rate from the incorrectly high 
baseline emission rate). Additionally, while this approach may assure 
similar emissions reductions to the budget approach in the early years 
following implementation, growth in activity levels in the controlled 
source categories would likely lead to growth in emissions in later 
years, which in turn may adversely affect downwind nonattainment areas.
    Although the emissions reduction approach has limitations, EPA 
believes it is the most workable approach for some source categories, 
such as mobile and area sources, for which there is little or no 
experience in using the budget approach and for which the available 
emissions quantification techniques are too imprecise to support the 
budget approach.
3. The EPA's Proposed Hybrid Approach
    The EPA proposes today to require each affected State to submit a 
SIP containing control requirements that will assure a specified amount 
of emissions reductions. These amounts would be computed with reference 
to specified control levels for EGUs, which EPA has determined to be 
highly cost effective.
    States may meet their emissions reduction requirements by imposing 
controls on any source category they choose. If they choose the EGU 
source category, they must impose a cap because this category may 
feasibly implement a cap. If States choose to get emissions reductions 
from other source categories, they may implement the emissions 
reduction approach, that is, they need not implement caps, but rather 
may implement other forms of controls. Even so, EPA strongly encourages 
States to control source categories for which workable budget programs 
can be developed, and to require the budget approach for those sources 
to which it can feasibly be applied.\90\
---------------------------------------------------------------------------

    \90\ It should be noted that even if a State uses a budget 
approach for a source category within the State, it is possible that 
production may shift to another part of the transport region, so 
that the State's claimed emission reductions may in fact simply 
represent emissions shifted to another part of the transport region.
---------------------------------------------------------------------------

    The EPA is proposing specific requirements that States must meet, 
depending on which source categories they choose to control. These 
requirements are intended to provide as much certainty as possible that 
the controls will eliminate the amounts of significant contributions.
a. Requirements if States Choose To Control EGUs
    As explained above, States must apply the budget approach if they 
choose to control EGUs. That is, they must cap EGUs at the level that 
assures the appropriate amount of reductions. We believe that this is 
the preferable approach for complying with today's proposed rule.
    Moreover, as discussed in sections VI and VIII, States that choose 
to allow their EGUs to participate in EPA-administered interstate 
SO2 and NOX emissions trading program must adhere 
to EPA's model trading rules, which we intend to propose in the SNPR. 
For SO2 sources, these rules will require the States to 
allocate control obligations to sources in a manner that mirrors the 
sources' title IV allowance allocations, although EPA is considering 
certain variations that are described in section VI.
    With respect to monitoring, recordkeeping, and reporting 
requirements, most EGUs are already subject to the requirements of 40 
CFR part 75 to demonstrate compliance with the title IV SO2 
provisions. In addition, many EGUs are also subject to part 75 due to 
SIP requirements under the NOX SIP Call. The EPA believes 
that part 75 provides accurate and transparent accounting of emissions 
from this source category. Therefore, EPA proposes to require States, 
if they apply controls to EGUs, to subject EGUs to the requirements of 
part 75.
    As explained in sections VI and VIII, today's proposed 
SO2 emissions reductions requirement, when applied to EGUs 
subject to the title IV allowance programs, would result in a cap that, 
in turn, would create surplus title IV allowances. These surplus 
allowances, if allowed to be traded, may have adverse impacts in and 
outside of the States directly affected by today's proposal. In 
particular, the large number of these allowances that become available 
may depress their price, which may lead to even more of them being 
purchased and used in States not affected by today's proposed rule.
    To prevent these impacts, EPA is proposing that SIPs assure that 
the State's title IV allowances exceeding the emissions that the 
State's EGUs may emit under the rule proposed today are not used in a 
manner that undermines the rule proposed today. As a practical matter, 
SIPs may need to require the retirement or elimination of certain of 
the title IV allowances. The number of retired or eliminated allowances 
may well equal the difference between the number of title IV allowances 
allocated to a State and the SO2 budget that the State sets 
for EGUs under today's proposed rule. For example, assume that a 
State's EGUs are allocated a total 5,000 SO2 allowances 
under title IV (each allowance authorizes one ton of SO2 
emissions). Assume further that today's proposed rule requires the 
State to reduce its SO2 emissions by 2,500 tons. Assume even 
further that the State chooses to achieve all of the required 
reductions from EGUs, beginning January 1, 2010. Under these 
circumstances, the SIP must include a mechanism to retire or eliminate 
the remaining 2,500 allowances.
    The EPA believes that this proposed requirement to retire or 
eliminate surplus allowances applies regardless of whether or not a 
State participates in the EPA-managed trading system. If the State does 
not participate in the EPA-managed trading system, it may choose

[[Page 4627]]

the specific method to retire or eliminate surplus allowances from its 
sources. If it chooses the EPA-managed trading system, it must adhere 
to the provisions of the model trading rule, which are broadly outlined 
in section VIII.
    States may allow EGUs to demonstrate compliance with the State EGU 
SO2 emission budget by using (i) allowances that were banked 
(that is, issued for years earlier than the year in which the source is 
demonstrating compliance), or (ii) title IV allowances from the same 
year purchased from sources in other States.
b. Requirements if States Choose To Control Sources Other Than EGUs
    If a State chooses to require emissions reductions from only EGUs, 
then its SIP revision submitted under the rule proposed today need 
contain only provisions related to EGUs, as described above. The State 
need not adopt or submit, under the rule proposed today, any other 
provisions concerning any other source categories.\91\
---------------------------------------------------------------------------

    \91\ Of course, the State may be obligated to submit SIP 
revisions covering other source categories under applicable CAA 
provisions other than section 110(a)(2)(D).
---------------------------------------------------------------------------

    On the other hand, if a State chooses to require emissions 
reductions from sources other than EGUs, the State must adopt and 
submit SIP revisions, and supporting documentation, designed to 
quantify the amount of reductions from the sources and to assure that 
the controls will achieve that amount of reductions. The EPA is not 
proposing today that the State be required to cap those sources. 
However, EPA solicits comment on whether to require States that choose 
to control sources other than EGUs to cap those sources.
    To demonstrate the amount of emissions reductions from the 
controlled sources, the State must take into account the amount of 
emissions attributable to the source category both (i) in the base 
case--that is, in the implementation year (2010 and 2015) without 
assuming SIP-required reductions from that source category under 
today's proposed rule--and (ii) in the control case. Both scenarios 
(base case and control case) are necessary to determine the amount of 
emissions reductions that will result from the controls. As noted 
above, section VI contains a more detailed discussion of the process 
for determining the amounts of emissions in the base case.
    The EPA intends to propose in the SNPR monitoring, recordkeeping, 
and reporting requirements for sources other than EGUs. Further, EPA 
intends to include proposed rule language for these requirements. 
Commenters will have an opportunity to comment following publication of 
the SNPR. As a result, EPA is not soliciting comment on this subject 
now. Even so, EPA intends to consider any comments submitted on this 
subject that commenters may wish to submit.

VIII. Model Cap and Trade Program

    In today's action, we are outlining multi-State cap and trade 
programs for SO2 and NOX that States may choose 
as a cost-effective mechanism to achieve the required air emissions 
reductions. Use of these cap and trade programs will not only ensure 
that emissions reductions under the proposed rulemaking are achieved, 
but also provide the flexibility and cost effectiveness of a market-
based system. This section provides background information, a 
description of the cap and trade programs, and an explanation of how 
the cap and trade programs would interface with other State and Federal 
programs. It is EPA's intent to propose model SO2 and 
NOX cap and trade rules in a future SNPR that States could 
adopt.
    By adopting the model rules, States choose to participate in the 
cap and trade programs, which are a fully approvable control strategy 
for achieving emissions reductions required under today's proposed 
rulemaking. Should a State choose to participate in the cap and trade 
programs, EPA's authority to cooperate with and assist the State in the 
implementation of the cap and trade program(s) would reside in both 
State law and the CAA. With respect to State law, any State that elects 
to participate in the cap and trade programs as part of its SIP will be 
authorizing EPA to assist the State in implementing the cap and trade 
program with respect to the regulated sources in that State. With 
respect to the CAA, EPA believes that the Agency's assistance to those 
States that choose to participate in the cap and trade programs will 
facilitate the implementation of the programs and minimize any 
administrative burden on the States. One purpose of title I of the CAA 
is to offer assistance to States in implementing title I air pollution 
prevention and control programs (42 U.S.C. 101(b)(3)). In keeping with 
that purpose, section 103(a) and (b) generally authorize EPA to 
cooperate with and assist State authorities in developing and 
implementing pollution control strategies, making specific note of 
interstate problems and ozone transport. Finally, section 301(a) grants 
EPA broad authority to prescribe such regulations as are necessary to 
carry out its functions under the CAA. Taken together, EPA believes 
that these provisions of the CAA authorize EPA to cooperate with and 
assist the States in implementing cap and trade programs to reduce 
emissions of transported SO2 and NOX that 
contribute significantly to ozone and PM2.5 nonattainment.
    To inform the current rulemaking process, EPA recently hosted two 
workshops in July and August of 2003 to listen to States and multi-
State air planning organization's experience with the NOX 
SIP Call program to date: What has worked well, what may not have 
worked well, and what could be improved. (The EPA Web site \92\ 
provides information on these workshops.) Workshops such as these have 
played an important role in the development and implementation of the 
NOX SIP Call and will help in the development of this rule.
---------------------------------------------------------------------------

    \92\ http://www.epa.gov/airmarkets/business/noxsip/atlanta/atl03.html.
---------------------------------------------------------------------------

    This section in today's action describes, on a generally conceptual 
level, the cap and trade program. EPA will publish, in a future SNPR, a 
more detailed description of the proposed rules, as well as model 
rules. As a result, EPA is not soliciting comment on this section in 
today's action. Interested persons will have a full opportunity to 
comment on all aspects of this cap and trade program through the SNPR. 
Even so, EPA recognizes that continued stakeholder input on the cap and 
trade programs described in this section may be useful concerning the 
programmatic implications of addressing multiple environmental issues 
(i.e., PM2.5 and ozone) with synchronized cap and trade 
programs for SO2 and NOX. Accordingly, EPA 
intends to review comments that may be submitted on all of the program 
elements described in today's NPR.

A. Application of Cap and Trade Approach

1. Purpose of the Cap and Trade Programs and Model Rules
    In the cap and trade programs, EPA is proposing to jointly 
implement with participating States a capped market-based program for 
EGUs to achieve and maintain an emissions budget consistent with the 
proposed rulemaking. Specifically, EPA has designed today's proposal to 
assist States in their efforts to: (1) Improve air quality and achieve 
the emissions reductions required by the proposed rulemaking; (2) offer 
compliance flexibility for regulated sources; (3) reduce compliance 
costs for sources controlling emissions; (4)

[[Page 4628]]

streamline the administration of programs to reduce multiple pollutants 
for States; and (5) ensure that emission reductions are occurring and 
that results are publicly available. In addition to realizing these 
benefits of a cap and trade program, EPA also seeks to create as simple 
a regulatory regime as possible by applying a single, comprehensive 
regulatory approach to controlling multiple pollutants across multiple 
jurisdictions.
    Beyond choosing to use a cap and trade program, State adoption of 
the model rule would ensure consistency in certain key operational 
elements of the program among participating States. Uniformity of the 
key operational elements across the region is necessary to ensure a 
viable and efficient cap and trade program with low transaction costs 
and minimum administrative costs for sources, States, and EPA. (These 
necessary elements are discussed in section B.3.). States will continue 
to have flexibility in other important program elements (e.g., 
allowance allocations, inclusion of additional measures to address 
persistent local attainment issues).
2. Benefits of Participating in a Cap and Trade Program
a. Advantages of Cap and Trade Over Command-and-Control
    When designed and implemented properly, a cap and trade program 
offers many advantages over traditional command-and-control and 
project-by-project emission reduction credit trading programs. There 
are several advantages of a well-designed cap and trade system that 
include: (1) Control of emissions to desired levels under a fixed cap 
that is not compromised by future growth; (2) high compliance rates; 
(3) lower cost of compliance for individual sources and the regulated 
community as a whole; (4) incentives for early emissions reductions; 
(5) promotion of innovative compliance solutions and continued 
evolution of generation and pollution control technology; (6) 
flexibility for the regulated community (without resorting to waivers, 
exemptions and other forms of administrative relief that can delay 
emissions reductions); (7) direct legal accountability for compliance 
by those emitting; (8) coordinated program implementation that 
efficiently applies administrative resources while enhancing 
compliance; and (9) transparent, complete, and accurate recording of 
emissions. These benefits result primarily from the rigorous framework 
established by a cap and trade program that provides flexibility in 
compliance options available to sources and the monetary reward 
associated with avoided emissions in a market-based system. The cost of 
compliance in a market-based program is reduced because sources have 
the freedom to pursue various compliance strategies, such as switching 
fuels, installing pollution control technologies, or buying emission 
allowances from a source that has over-complied. Since reducing 
emissions to levels below the allocations for a source allows them to 
sell excess allowances on the market, this program promotes cost 
effective pollution prevention, and encourages innovations in less-
polluting alternatives and control equipment.
    A market-based system that employs a fixed, enforceable tonnage 
limitation (or cap) for a source or group of sources provides the 
greatest certainty that a specific level of emissions will be attained 
and maintained. With respect to transport of pollution, an emissions 
cap also provides assurance to downwind States that emissions from 
upwind States will be effectively managed over time. The capping of 
total emissions of pollutants over a region and through time ensures 
achievement of the environmental goal while allowing economic growth 
through the development of new sources or increased use of existing 
sources. In an uncapped system (where, for example, sources are 
required only to demonstrate that they meet a given emission rate) the 
addition of new sources to the regulated sector or an increase in 
activity at existing sources can increase total emissions even though 
the desired emission rate control is in effect.
    In addition, the reduced implementation burden for regulators and 
affected sources benefits taxpayers and those who must comply with the 
rules. This streamlined administration allows a relatively small number 
of government employees to successfully manage the emissions of many 
sources by (1) minimizing the necessity for case-by-case decisions, and 
(2) taking full advantage of electronic communication and data transfer 
to track compliance and develop detailed inventories of emissions and 
plant operations.
b. Application of the Cap and Trade Approach in Prior Rulemakings
i. Title IV
    Title IV of the CAA Amendments of 1990 established the Acid Rain 
Program, a program that utilizes a market-based cap and trade approach 
to require power plants, to reduce SO2 emissions by 50 
percent from 1980. At full implementation after 2010, emissions will be 
limited, or capped, at 8.95 million tons in the contiguous United 
States. The Acid Rain SO2 Program is widely acknowledged as 
a model air pollution control program because it provides significant 
and measurable environmental and human health benefits with low 
implementation costs.
    Individual units are directly allocated their share of the total 
allowances--each allowance is an authorization to emit a ton of 
SO2--based upon historical records of the heat content of 
the fuel that they combusted in 1985-1987. Units that reduce their 
emissions below the number of allowances they hold, may trade excess 
allowances on the open market or bank them to cover emissions in future 
years. Allowances may be purchased through the open market or at EPA-
managed auctions. Each affected source is required to surrender 
allowances to cover its emissions each year. Should any source fail to 
hold sufficient allowances, automatic penalties apply. In addition to 
financial penalties, sources either will have allowances deducted 
immediately from their accounts or, if this would interfere with 
electric reliability, may submit a plan to EPA that specifies when 
allowances will be deducted in the future.
    The Acid Rain Program requires affected sources to install systems 
that continuously monitor emissions. The use of continuous emissions 
monitoring systems (CEMS) is an important component of the program that 
allows both EPA and sources to track progress, ensure compliance, and 
provide credibility to the cap and trade component of the program.
    While title IV does provide for an Acid Rain Permit, this is a 
simple permit that does not incorporate source specific requirements, 
but rather requires the source to comply with the standard rules of the 
program. The Acid Rain Permit has been easily incorporated into the 
title V permit process and does not require the typically resource 
intensive, case-by-case review associated with other permits under 
command-and-control programs.
    The Acid Rain Program has achieved major SO2 emissions 
reductions, and associated air quality improvements, quickly and cost 
effectively. In 2002, SO2 emissions from power plants were 
10.2 million tons, 41 percent lower than 1980.\93\ (2002 Acid Rain 
Progress

[[Page 4629]]

Report.) These emission reductions have translated into substantial 
reductions in acid deposition, allowing lakes and streams in the 
Northeast to begin recovering from decades of acid rain. In addition, 
substantial improvements in air quality have occurred under the Acid 
Rain Program. Fine particle exposures have been reduced, providing 
significant benefits to public health. These benefits include the 
annual reduction of thousands of premature mortalities, thousands of 
cases of chronic bronchitis, thousands of hospitalizations for 
cardiovascular and respiratory diseases.
---------------------------------------------------------------------------

    \93\ U.S. EPA, EPA Acid Rain Program: 2002 Progress Report (EPA 
430-R-03-011), November 2003. Available at http://www.epa.gov/airmarkets/cmprpt/arp02/2002report.pdf.
---------------------------------------------------------------------------

    Cap and trade under the Acid Rain Program has created financial 
incentives for electricity generators to look for new and low-cost ways 
to reduce emissions, and improve the effectiveness of pollution control 
equipment, at costs much lower than predicted. The cap on emissions, 
automatic penalties for noncompliance, and stringent emissions 
monitoring and reporting requirements ensure that environmental goals 
are achieved and sustained, while allowing for flexible compliance 
strategies which take advantage of trading and banking. The level of 
compliance under the Acid Rain Program continues to be uncommonly high, 
measuring over 99 percent.
ii. Ozone Transport Commission NOX Budget Program
    The Ozone Transport Commission's (OTC) NOX Budget 
Program was a cap and trade program to reduce NOX emissions 
from power plants and other large combustion sources in the Northeast. 
The OTC was established under the CAA Amendments of 1990 to help States 
in the Northeast and Mid-Atlantic region meet the NAAQS for ground-
level ozone. The NOX Budget Program set a regional budget on 
NOX emissions from power plants and other large combustion 
sources during the ozone season (from May 1 through September 30) 
beginning in 1999.
    The OTC NOX Budget Program has significantly reduced 
NOX emissions from large combustion facilities in the 
Northeast and Mid-Atlantic region with total regional emissions in 2002 
approximately 60 percent below 1990 levels; well under target levels. 
Significant reductions in ozone season NOX emissions have 
occurred in all States across the region. In addition, the emission 
reductions have proven to be cost effective with the cost of 
NOX allowances stabilized below original projections.\94\
---------------------------------------------------------------------------

    \94\ Ozone Transport Commission. NOX Budget Program 
1999-2002 Progress Report, March 2003. Available at http://www.epa.gov/airmarkets/otc/otcreport.pdf.
---------------------------------------------------------------------------

    The OTC States generally folded their SIP requirements under the 
OTC NOX Budget Program into the SIP revisions they submitted 
with the NOX SIP Call. The NOX Budget Program was 
incorporated into the NOX SIP Call. The 2003 ozone season 
marked the first year of compliance with the NOX SIP Call 
for the OTC States.
iii. NOX SIP Call
    The NOX SIP Call, finalized in 1998, requires ozone 
season (i.e., summertime) NOX reductions across a region 
which includes most of the OTC States and southeastern and midwestern 
States that were found by EPA to have sources that contribute 
significantly to another State's ongoing ozone NAAQS nonattainment 
problems. The NOX SIP Call proposed a cap and trade program 
as a way to make cost-effective NOX reductions. Each of the 
States required to submit a NOX SIP under the NOX 
SIP Call chose to adopt the cap and trade program regulating large 
boilers and turbines. Each State based its cap and trade program on a 
model rule developed by EPA. This model rule included key elements such 
as the use of continuous emissions monitoring (CEMS) and 40 CFR part 75 
monitoring and reporting requirements, and a single party that is 
legally responsible for compliance. Some States essentially adopted the 
full model rule as is, while other States adopted the model rule with 
changes to the sections that EPA specifically identified as areas in 
which States may have some flexibility. The NOX SIP Call cap 
and trade program, modeled closely after the OTC NOX Budget 
Program takes effect in 2004. When it does so, it expands from the OTC 
States to eleven additional States in 2004. The EPA intends to draw 
heavily upon this and other experience in developing model 
SO2 and NOX cap and trade programs.
c. Regional Environmental Improvements Achieved Using Cap and Trade 
Programs
    One concern with emissions trading programs is that the flexibility 
associated with trading might allow sources or groups of sources to 
increase emissions, resulting in areas of elevated pollution or ``hot 
spots.'' The environmental results observed under the Acid Rain Program 
have instead indicated that the combination of trading with a stringent 
emissions cap results in substantial reductions throughout the region, 
with the greatest reductions achieved in the areas where pollution was 
originally the highest.
    Since 1990, SO2 and sulfate concentrations at CASTNET 
sites have been reduced substantially in the areas where concentrations 
were highest before the Acid Rain Program. (Acid Rain Program Progress 
Report 2002). All sites in the East showed reductions in SO2 
and sulfate 3 year average concentrations between 1990-1992 and 2000-
2002. The largest decreases in SO2 concentrations were 
observed at sites where SO2 emissions and monitored 
SO2 concentrations were highest before the program (from 
Illinois, to northern West Virginia, across Pennsylvania, to western 
New York). CASTNET sites throughout the broader eastern region also 
show a substantial reduction in sulfate concentrations, with the 
largest decreases in sulfate levels occurring along the Ohio River 
Valley from Illinois to West Virginia, Pennsylvania, and the mid-
Atlantic states.
    Independent analyses, in addition to those conducted by EPA, have 
shown that emissions trading under this type of program has not 
resulted in the creation of ``hot spots'' because trading has resulted 
in emissions reductions being achieved in areas where emissions were 
highest before the program.\95\ The Environmental Law Institute, 
Environmental Defense, and the Massachusetts Institute of Technology's 
Center for Energy and Environmental Policy have all examined emissions 
trading under the Acid Rain Program and none have concluded that the 
program has resulted in hot spots of high emissions. To the contrary, 
the highest emitting sources have tended to reduce emissions by the 
greatest amount. This is the case, in part, because trading occurs 
under a nationwide cap that represents a reduction in total emissions 
and improvements in regional air quality. The flexibility of a cap and 
trade system provides a mechanism for achieving established emission 
goal(s)at lowest possible cost. The most cost effective opportunities 
for reductions are at the larger, more efficient coal-fired units that 
have modest (or no) controls and are geographically dispersed.
---------------------------------------------------------------------------

    \95\ Environmental Law Institute (http://www.epa.gov/airmarkets/ 
articles/so2trading-hotspots--charts/pdf), Environmental Defense 
(http://www.environmentaldefense.org/ documents/645--SO2.pdf) and 
MIT's Center for Energy and Environmental Policy Research (http://web.mit.edu/ceepr/www/2003-015.pdf).
---------------------------------------------------------------------------

    Further support for trading actually reducing ``hot spots'' was 
found by Resources for the Future. Resources for the Future, a non-
partisan environmental advocacy group,

[[Page 4630]]

modeled air quality and health benefits under the trading program and 
under a non-trading scenario and found that trading actually resulted 
in additional benefits because emissions reductions took place in areas 
where they were more environmentally effective.\96\
---------------------------------------------------------------------------

    \96\ http://www.rff.org/CFDOCS/disc_papers/PDF_files/9925.pdf
---------------------------------------------------------------------------

    Cap and trade programs are designed to reduce emissions of numerous 
polluting sources by significant amounts over large geographic areas. 
The trading mechanism does not replace the requirement to meet the 
NAAQSs at the local level, but rather helps achieve this requirement 
through significant reductions in background pollution. Thus, State and 
local governments will continue to have the obligation and the 
authority under the CAA to assure that the NAAQS are met.
    Nearly 10 years of experience with the Acid Rain Program for 
SO2 has clearly demonstrated that market-based cap and trade 
programs are an effective vehicle for achieving broad improvements in 
air quality by reducing emissions of a regionally transported air 
pollutant. More recently, the OTC's regional NOX program 
also has shown the value of a cap and trade approach for NOX 
reductions. The more stringent SO2 and NOX caps 
proposed in this rulemaking will build on this track record of success.

B. Considerations and Aspects Unique to the SO2 Cap and 
Trading Program

1. SO2 Cap and Trade Program Overview
    This section of today's proposal outlines an SO2 cap and 
trade program which builds upon the concepts applied in the cap and 
trade programs described in section VIII.A. This section discusses 
elements unique to the proposed SO2 trading program, paying 
particular attention to those aspects that significantly differ from 
the corresponding provisions in existing programs. (Additional details 
on the SO2 and NOX trading program may be found 
in section VIII.D, which describes major program elements that must be 
consistent across States in order for EPA to implement a trading 
program.)
    While key considerations and program elements are outlined in 
today's proposed rule, a complete model cap and trade rule will be 
proposed by EPA in a future SNPR. In addition to a model rule, the SNPR 
will address other issues such as allocations and voluntary measures 
for States to address persistent local non-attainment issues.
    The proposed SO2 cap and trade program would apply to 
the large power generators in the transport region. (See section VI of 
today's rule for a discussion of the emission budgets and the core 
sources.) States would have some flexibility to include other sources 
or source categories in the trading program should they demonstrate 
their ability to measure the emissions from these other sources to the 
same standards required of the core trading sources.
    The units affected by today's SO2 rule are already 
regulated by EPA. EPA is committed to a transition that ensures 
continued environmental progress, preserves the integrity of existing 
emission trading markets, and minimizes confusion and cost for the 
public, sources and regulators. Section VIII.B.2 below discusses the 
interactions between today's proposal and existing programs by 
presenting analysis and implementation options. A discussion of the 
applicable sources is contained in section VIII.D.1.
2. Interactions With Existing Title IV Acid Rain SO2 Cap and 
Trade Program
    As discussed above, title IV of the CAA requires reductions in 
SO2 emissions from power plants to abate acid rain and 
improve public health using a cap and trade approach. Further, title I 
of the CAA requires EPA to help States develop and design 
implementation plans to meet the NAAQS. To achieve that end, today's 
action proposes a regional rule to reduce ambient concentrations of 
PM2.5, as mandated by the CAA. The SO2 program 
establishes a model cap and trade system for reducing emissions that 
States can adopt in order to help meet the NAAQS.
    As EPA developed this regulatory action, great consideration was 
given to interactions between the existing title IV program and a 
rulemaking designed to achieve significant reductions in SO2 
emissions beyond title IV. Requiring sources to reduce emissions beyond 
the title IV mandates has implications for the existing title IV 
SO2 program which are both environmental and economic. In 
the absence of a method for incorporating the statutory requirements of 
title IV, a rule that imposes a tighter cap on SO2 emissions 
for a particular region of the country would likely result in an excess 
supply of title IV allowances and the potential for increased emissions 
in the area not subject to the more stringent emission cap. The 
potential for increased emissions exists in the entire country for the 
years prior to the proposed implementation deadline and would continue 
after implementation for any areas not affected by the proposed rule. 
These excess emissions could negatively affect air quality, disrupt 
allowance markets, and erode confidence in cap and trade programs.
    In view of the significant reductions in SO2 emissions 
under title IV of the CAA, the large investments in pollution controls 
that firms have made under title IV that enable companies to sell 
excess emissions reductions, and the potential for emissions increases, 
it became a priority to think of ways to preserve the environmental 
benefits achieved through title IV and maintain the integrity of the 
title IV market for SO2 allowances.
    In addition, EPA does not have authority to remove the statutory 
requirements of title IV and must work within the context of the 
existing CAA to further reduce emissions of SO2 through a 
new rule. Title IV has successfully reduced emissions of SO2 
using the cap and trade approach, eliminating millions of tons of 
SO2 from the environment. Building off this existing program 
to further improve air quality by requiring additional reductions of 
SO2 emissions is appropriate.
    The EPA has developed an approach to incorporate the title IV 
SO2 market to ensure that the desired reductions under this 
rule are achieved in a manner consistent with the previously stated 
environmental goals. The following sections provide more detail on 
EPA's initial analysis of the interactions between the title IV Acid 
Rain program and this proposal outlines a solution for creating a rule 
that builds off of title IV.
Initial Analysis
    Initial analytical work shows that a more stringent cap on 
SO2 emissions in the eastern part of the country, that is 
separate from the title IV cap, would create an excess supply of title 
IV allowances nationwide as sources in that eastern region comply with 
a tighter requirement than title IV and no longer need as many title IV 
allowances. As a result of this excess supply, all title IV allowances 
would lose value. This impact on the title IV market results in (1) an 
incentive to use all banked title IV allowances prior to implementation 
of the rule as firms anticipate the value of allowances dropping 
essentially to zero and (2) emission increases outside the region after 
rule implementation because those sources would be able to obtain title 
IV allowances at essentially no cost.
b. Emissions Increases Prior to Implementation of the Proposed Rule
    The EPA expects that the number of banked (i.e., the retention of 
unused

[[Page 4631]]

allowances from one calendar year for use in a later calendar year) 
title IV allowances will be in the millions of tons at the end of 2009 
in the absence of the rule. The actual number of allowances banked will 
depend upon future economic growth and the independent decisions of the 
sources between now and 2010, and EPA will continue to evaluate 
emissions trends and the bank prior to finalizing the rule. Should the 
rule not permit the use of banked title IV allowances in the program, 
the banked allowances would likely be expended during the years prior 
to implementation of the rule. This could cause over 1 million tons per 
year of additional SO2 emissions, nationwide, that could be 
emitted above levels projected in the absence of a rule.
c. Consideration for Emissions Shifting Outside the Control Region
    Title IV sources outside the more stringently regulated region 
would be able to obtain title IV allowances from sources affected by 
the rule at very low cost after the commencement of the program. The 
flow of inexpensive, abundant allowances out of an area with more 
stringent emission control requirements is referred to as ``leakage'' 
and would likely result in increased emissions outside the region. In 
essence, sources outside of the region would not face a binding title 
IV constraint on their emissions of SO2 due to the potential 
availability of abundant allowances provided by sources inside of the 
control region. Though certain State and local requirements or physical 
constraints would mitigate the problem of emissions increases outside 
the region, meaningful increases would be a possibility. Emissions 
increases outside the region would worsen air quality in those areas 
and could potentially negate some of the reductions achieved in the 
region.
    The potential for leakage is dependent upon the size of the region. 
The large eastern trading region proposed in today's rule--which is 
based upon addressing PM2.5--is not likely to result in 
significant leakage because the region is large enough to take 
advantage of the physical limitations in the electricity grid that 
prevent large power movements from the East to the West (or vice versa) 
through the Western Interconnect.
d. Desired Outcomes in the Design of the Cap and Trade Rule
    The proposed cap and trade program will be designed to meet three 
primary goals: (1) Achieving environmental goals; (2) preserving and 
potential strengthening of allowance trading markets; and (3) providing 
the flexibility to incorporate additional jurisdictions and types of 
sources in the future, while maintaining the integrity of the cap and 
allowance markets.
    First and foremost, the proposed cap and trade program must be 
designed to improve air quality to protect the public's health and the 
environment. To accomplish this, the program must address the potential 
for emission leakage, require credible emission monitoring and 
reporting, and provide for source accountability.
    Preservation of the benefit of the title IV allowance market (i.e., 
a solution that would maintain or even increase the economic value of 
title IV allowances) would eliminate the incentive to increase 
emissions prior to the start of the program and ease the administrative 
transition. Incorporating title IV creates incentives for earlier 
reductions by title IV sources and may create incentives for title IV 
sources not included in the rule to maintain, or even reduce, emissions 
of SO2 both before and after the rule goes into effect. In 
addition, it sends a clear signal to sources that have already made 
investments in pollution control equipment that the allowance market is 
sound and will continue to operate.
    The proposed cap and trade solution must provide opportunities for 
incorporating additional sources (e.g., non-title IV sources, other 
source categories) and States, during promulgation and in the future. 
Designing a cap and trade program that can include these additional 
sources creates the potential to achieve additional environmental 
benefit and/or reduce the program's total cost.
e. Discussion of Possible Solutions
    The EPA explored several options for addressing the coordination of 
title IV and the proposed rule consistent with the objective of 
minimizing emissions increases and providing a mechanism of allocating 
allowances to sources lacking any title IV allocations. One option 
would establish a separate cap and trade program for SO2 
that would require the retirement of surplus title IV allowances for 
the rule (i.e., the difference between total title IV allocations and 
the trading budget for a given State under the rule). Sources would 
have to comply with both programs independently, and States would have 
flexibility in allocating the newly created allowances to non-title IV 
sources. Although this option could be designed so as to maintain the 
value of title IV allowances once the new cap and trade program begins 
under the rule, thus minimizing leakage, it would not address banked 
title IV allowances accumulated before implementation of the program, 
resulting in possible emissions increases prior to rule implementation.
    Another option would allow for conversion of title IV allowances 
into separate allowances under a new cap and trade program. This 
conversion would be applied at a specific ratio (e.g., two-to-one) that 
yields the desired emission reductions, and could be applied to both 
banked and current title IV allowances. By complying with the rule and 
submitting more than one title IV allowance for every ton emitted, a 
source would be in compliance with both programs. New allowances could 
be created to give States flexibility with SO2 allocations, 
but the conversion ratio would need to be adjusted to incorporate these 
new allowances. This solution presents some challenges, such as 
establishing the proper conversion ratio and the need to adjust the cap 
under the rule to account for the converted allowances. In addition, 
the uncertainty surrounding how many banked allowances would be 
converted poses challenges when designing the cap and trade rule.
f. Proposed Approach
    A third option and the approach proposed here best addresses the 
three principles identified above. It would require sources to use 
title IV allowances directly for compliance with the rule in a way that 
maintains the downward trend in emissions throughout the country, 
preserves the existing SO2 allowance market, and allows the 
inclusion of non-title IV sources, now and in the future.
    Title IV sources in the region would be required to comply with the 
rule by using more than one title IV allowance for every ton emitted 
(e.g., a two-to-one ratio). EPA would propose to amend the title IV 
rules in a future SNPR so that sources that comply with the rule would 
be deemed in compliance with title IV since by submitting allowances at 
a greater than one-to-one ratio, a source would be going beyond what 
title IV required. The requirement to submit more than one allowance 
for every ton emitted is, in effect, a reduction of the title IV cap. 
The specific ratio would be determined based on the amount of emissions 
to be allowed for the region. The ratio, in essence, would reflect the 
cap levels and determine the ultimate emissions in the region. Section 
VIII.B.3 below, discusses a methodology that could be used to provide 
allowances to EGUs that were not allocated allowances under title IV.
    While EPA is not currently proposing to require sources other than 
EGUs to be part of the cap and trade program, EPA

[[Page 4632]]

believes that this approach could also allow other sources to 
participate in the cap and trade program. States electing to include 
additional sources could develop mechanisms to provide them with access 
to allowances through auctions or direct allocations. (This is 
discussed in greater detail in section VIII.B.3.)
i. Using Pre-2010 Banked Title IV Allowances in Proposed SO2 
Cap and Trade Program
    Under the proposed approach, title IV allowances could be banked 
before the 2010 implementation date for use in the new program. Pre-
2010 title IV allowances banked prior to 2010 could be used at a one-
to-one ratio for compliance at any time. This provides incentives to 
reduce emissions before the 2010 implementation date because sources 
would want to ease the transition to the more stringent caps in 2010 
and thereafter. However, it should be noted that these allowances could 
then be used in later years, delaying the amount of time until the 
ultimate cap level is achieved.
ii. Proposed Ratios and the Phasing of the Caps
    The proposed SO2 program would allow: (1) Pre-2010 
allowances to be used at a one-to-one ratio; (2) 2010 through 2014 
allowances to be used at a two-to-one; and (3) 2015 and later 
allowances to be used at a three-to-one ratio. Since title IV 
allowances are already identified by serial numbers that indicate the 
year the allowance is first allowed to be used, it is possible to use 
different retirement ratios for allowances of different vintages. The 
progressively more stringent, phased-in nature of the rule will be 
reflected in the proposed cap and trade program by adjusting the ratio 
for retiring allowances in each phase. EPA developed these ratios to 
achieve the emissions reductions as described in section VI with 
careful consideration given to the title IV bank, State EGU budgets, 
and phasing in order to create ratios that are consistent with the 
objectives of the rule. The ratios, in effect, tighten the existing 
title IV cap.
    States choosing to participate in the cap and trade program must 
require sources to submit title IV allowances at the ratios set in the 
model rule.
    The EPA projects that using 2010 to 2014 vingtage title IV 
allowances at a ratio of two-to-one and post 2014 allowances at a ratio 
of three-to-one in the second phase will produce the desired emission 
reductions for SO2. These ratios are projected to lead 
sources to bank roughly an additional 10.5 million allowances prior to 
2010. Vintage year allowances 2009 and earlier are projected to be used 
starting in 2010 at an average rate of 1.3 million per year.
    The value of title IV allowances is projected to increase to $400 
during the first phase, and to fall to $330 during the second phase, 
according to EPA modeling. In other words, sources in the region would 
face a marginal cost of $805 per ton of emissions in the first phase at 
a two-to-one ratio and $989 in the second phase at a three-to-one 
ratio. The marginal cost numbers presented here are generated from EPA 
modeling of this rule, looking specifically at the interactions with 
title IV.
3. Allowance Allocations
a. Statewide Cap and Trade Budgets
    Today's rule proposes statewide EGU SO2 emission budgets 
(detailed in section VI) that States may allocate. Discretion in the 
allocation of this budget to title IV units (which constitute a 
majority of the EGUs) that already receive allowances under title IV is 
somewhat limited for States because the existing title IV 
SO2 allocation provisions explicitly allocate allowances to 
specific units. Therefore, as a practical matter, States that wish to 
participate in an EPA-managed interstate trading program will not have 
as much flexibility in developing their SO2 allocation 
methodology for title IV units that already receive allowances than 
they will with NOX allocations.
b. Determination of SO2 Allowance Allocations for EGUs Not 
Receiving Title IV Allowances
    As discussed in section VI (Statewide Emissions Budgets), States 
will have the flexibility to address equity issues for newer units that 
do not receive title IV allowances. However, as mentioned above, 
because title IV allocates virtually all of the Acid Rain Program 
allowances directly to individual sources, any State electing to 
provide allowances to newer sources would have to develop a mechanism 
that creates an excess of allowances after the initial allocation. One 
potential remedy is a mechanism that creates a State-managed pool of 
allowances from EGUs within that State by either: (1) Requiring in-
State EGUs that receive title IV allowances to surrender allowances at 
a rate tighter than today's rule retirement ratio and transferring this 
overage to the State (e.g., an EGU would retire 2 allowances and 
surrender 1 allowance for every ton emitted); or, (2) tightening the 
retirement ratio for in-State EGUs that receive title IV allowances and 
providing for EPA to create new SO2 allowances, the total 
being equal to or less than the overage, that are issued to the new 
sources (e.g., an EGU would retire 3 allowances for every ton emitted 
and EPA would issue a new SO2 allowance to the new source). 
EPA intends to assist States by providing a more detailed discussion of 
allocation alternatives in a future SNPR.
    Should States decide to allocate allowances to these newer EGUs, 
States would be given latitude in determining how they would distribute 
them from the pool of allowances for EGUs that receive title IV 
allowances. States may choose to hold an allowance auction or 
distribute allowances directly to sources. Should a State decide to 
allocate allowances, it would have flexibility in selecting the method 
upon which the allocation share is determined. Common methods for 
allocating allowances include:
    (1) Actual emissions (in tons) from the unit,
    (2) Actual heat input (in mmBtu) of the unit, and
    (3) Actual production output (in terms of electricity generation 
and/or steam energy) of the unit.
    Each of these options has variations, including the use of 
allowance set-asides, and may be implemented with allocations performed 
on a permanent or an updating basis.
    The details of specific allocation options will be presented in 
greater detail in the future SNPR.

C. Consideration and Aspects Unique to the NOX Cap and Trade 
Program

1. NOX Cap and Trade Program Overview
    The NOX cap and trade program would be substantially 
similar, in its basic requirements and procedures, to the 
SO2 cap and trade program described above. However, some 
components of a proposed NOX cap and trade program are 
unique to its implementation in the context of existing regional 
NOX control programs. This section describes those unique 
components. Because the authority for the existing NOX cap 
and trade programs exists at the State level and are not constrained by 
intricate title IV interactions, States may have more flexibility to 
revise their existing rules than they would have in complying with the 
proposed SO2 program. Section VIII.D discusses elements of 
the cap and trade programs that are common to both the SO2 
and NOX programs.

[[Page 4633]]

2. Interactions with the NOX SIP Call Cap and Trade Program 
and the Title IV NOX Program
    This section discusses specific implementation issues related to 
transitioning from existing regional NOX control programs to 
today's proposed NOX cap and trade program.
a. Geographic Scope
    States in the Proposed Region. Ideally, the NOX and 
SO2 cap and trade program regions would be identical. 
However, the geographic boundaries of the NOX cap and trade 
program must be related to the contribution made by emissions sources 
to the interstate transport of NOX as it affects non-
attainment of PM2.5 and ozone standards. While the 
PM2.5 standard of most interest is annual, the ozone 
standard is an 8-hour duration with exceedances in the summer season. 
Therefore, EPA is proposing a NOX trading region that 
applies to those States affected by the PM2.5 finding; a 
region which encompasses virtually the same region as would be affected 
by the ozone findings with the exception of the State of Connecticut. 
Furthermore, EPA is proposing to allow the State of Connecticut, which 
is required to reduce only summertime NOX emissions to 
address ozone under today's action, to participate in the EPA-managed 
NOX cap and trade program on an annual basis. In addition, 
EPA proposes to allow other States currently participating in EPA-
managed, ozone season, NOX cap and trade programs to join 
the year-round NOX cap and trade program on an annual basis. 
If States chose to participate on an annual basis, EPA will determine 
corresponding annual budgets.
    States Outside the Proposed Region with Existing Regional 
NOX Cap and Trade Programs. There are three States that 
participate in the existing regional NOX trading market that 
would not be affected by today's proposed ozone or PM2.5 
rules: New Hampshire (as part of the OTC), and Massachusetts and Rhode 
Island (as part of the NOX SIP Call). These States would be 
allowed and encouraged to voluntarily participate in the NOX 
cap and trade program under today's rules in order to minimize 
administrative burden and simplify compliance for sources. Both the OTC 
and NOX SIP Call are ozone season only compliance programs. 
Any States choosing to participate in an EPA-managed program proposed 
today, would be required to participate on an annual basis if they 
choose to participate in the proposed NOX cap and trade 
program.
b. Seasonal-to-Annual Compliance Period
    The NOX SIP Call regulates NOX emissions 
during an ``ozone season'' that lasts from May 1 through September 30. 
The proposed rule requires annual NOX reductions. As 
explained in section VI, EPA analysis shows that under the proposed 
annual caps, EGUs in the NOX SIP Call region would emit less 
during the ozone season than they were allowed to emit under the 
NOX SIP Call.
c. Revision of Existing State NOX SIP Call Rules
    The EPA plans to design the model cap and trade rule in such a way 
that States that are part of the NOX SIP Call will be able 
to modify their State rules to include the new provisions and new 
NOX caps, and States that are not currently part of the 
NOX SIP Call will be able to adopt the model rule language 
for the new program. Transition issues, such as new NOX caps 
and applicability will be discussed thoroughly in the SNPR.
d. Retention of Existing Title IV NOX Emission Rate Limits
    Title IV requires coal-fired EGUs to meet average annual 
NOX emission rates. These requirements would remain in 
effect after the 2010 compliance deadline for this proposed rule. EPA 
analysis shows that under the more stringent NOX cap of 
today's rule, the title IV NOX limits would not be binding 
for most units. Therefore, the limits would not interfere with the 
ability of the NOX trading market to find the least-cost 
reductions. However, without a statutory change, the title IV 
NOX program remains in effect and sources would have to 
continue to comply with its administrative requirements.
e. The NOX Allowance Banking
    The NOX emission allowance trading market being 
administered by EPA for the NOX SIP Call States has been 
active and we wish to make the transition to the NOX program 
proposed today as simple as possible. For that reason, any entity 
holding existing NOX allowances will be able to bank them 
and carry them forward into the new, proposed cap and trade program. 
While EPA believes it is important to provide this compliance 
flexibility for sources, it is unlikely that many sources will take 
advantage of this mechanism because the projected future value of 
NOX allowances under the proposed cap and trade program is 
less than under the existing NOX cap and trade programs.
3. NOX Allocations
    Within each State participating in the proposed NOX cap 
and trade program, the statewide EGU budget (described in section VI of 
today's proposal) would form the basis for NOX allocations. 
Unlike SO2 allocations that are heavily dictated by the 
interaction between the proposed SO2 cap and trade program 
and title IV, there are many allocation options that States could 
consider for distributing NOX allowances.
    There is a variety of allocation approaches that address equity 
issues and provide opportunities for States to encourage specific 
behaviors. This would include flexibility in how often the allocations 
are updated (i.e., a one-time permanent allocation or one that is 
periodically updated) and the process metric upon which the allocation 
share is determined. As described below in section VIII.D.4, States 
participating in an EPA-managed program would be required to be 
consistent in the deadline for finalizing their source-by-source 
allocation.
    The details of specific allocation options will be more fully 
developed and presented in detail in the future SNPR.
4. Joining Both SO2 and NOX Cap and Trade 
Programs for States Voluntarily Participating
    The participation by States in both the EPA-managed NOX 
cap and trade program and the EPA-managed SO2 program offers 
administrative advantages to EPA and, we think, maximizes cost-
effectiveness to the sources. We encourage each State to participate in 
both programs, and we think that, as a practical matter, many States 
will elect to do so.
    We would like, in the SNPR, to propose to require that States that 
elect to participate in the EPA-managed NOX cap and trade 
program be required to participate in the EPA-managed SO2 
program, and vice-versa. However, we are concerned that this 
requirement may be considered to intrude upon the prerogatives of the 
States in developing their SIPs.\97\ We solicit comment on this 
question.
---------------------------------------------------------------------------

    \97\ See Virginia v. EPA, 108 F.3d 1397 (D.C. Cir. 1997).
---------------------------------------------------------------------------

D. Cap and Trade Program Aspects That Are Common to Both the 
SO2 and NOX Programs

    Sections VIII.B and VIII.C discussed key considerations that are 
unique to the proposed SO2 and NOX cap and trade 
programs, respectively. This section presents elements of a cap and 
trade program that must be a part of a

[[Page 4634]]

State's rule--for both the SO2 and NOX programs--
if it wishes to participate in the regional cap and trade program. As 
noted earlier, EPA intends to provide a detailed discussion and propose 
model rules in the future SNPR. Although EPA is not soliciting comment 
on the discussion in this section VIII, and instead will provide a full 
opportunity to comment on the SNPR, EPA recognizes that some may wish 
to comment on today's discussion. As such, commenters are encouraged to 
focus on the implications of addressing multiple environmental problems 
(i.e., PM2.5 and ozone).
1. Applicability
    Applicability, or the group of sources that the regulations will 
affect, must be similar from State-to-State to minimize confusion, 
administrative burdens, and emission leakage.
a. Core Applicability
    As discussed in section VI, we have determined State EGU emission 
reduction requirements (which are sometimes referred to as ``budgets'') 
assuming reductions from large EGUs (e.g. boilers and turbines serving 
an electrical generator with a nameplate capacity exceeding 25MW and 
producing power for sale). States must include these core sources if 
they wish to participate in the regional cap and trade program. While 
States have discretion to achieve the required reduction levels by 
regulating other sources, EPA analysis identified EGUs as appropriate 
candidates for achieving the mandated reductions. If a State chooses to 
regulate other source categories, EPA is proposing that these source 
categories can be included in the cap and trade program only if EPA and 
the State agree that each source category can meet all of the 
requirements that are mandated for EGUs (e.g., monitoring according to 
40 CFR part 75 and the ability to clearly assign legal responsibility 
for compliance).
    Once a unit is classified as an EGU for purposes of this rule, the 
unit will remain classified as an EGU regardless of any future 
modifications to the unit. If a unit serving a generator that initially 
does not qualify as an EGU (based on the nameplate capacity) is later 
modified to increase the capacity of the generator to the extent that 
the unit meets the definition of EGU, this unit shall be considered an 
EGU for purposes of this rule. This approach is proposed to prevent 
sources from derating units for the purpose of avoiding regulation.
2. Allowance Management System, Compliance, Penalties, and Banking
    The allowance management system, compliance, penalties and banking 
are all components of the accounting system that enables the 
functioning of a cap and trade program. An accurate, efficient 
accounting system is critical to an emissions trading market. 
Transparency of the system, allowing all interested parties access to 
the information contained in the accounting system, increases the 
accountability for regulated sources and contributes to reduced 
transaction costs of transferring allowances by minimizing confusion 
and making allowance information readily available.
    In order to guarantee the equitable treatment of all affected 
sources across the trading region, the elements included in this 
section need to be incorporated in the same manner in each State that 
participates in the cap and trade program.
a. Allowance Management
    The EPA intends to propose a model cap and trade rule that will be 
reasonably consistent with the existing allowance tracking systems that 
are currently in use for the Acid Rain Program under title IV and the 
NOX Budget Trading Program under the NOX SIP 
Call. These two systems are called the Allowance Tracking System (ATS) 
and the NOX Allowance Tracking System (NATS), respectively. 
Under the cap and trade rule, the SO2 program and the 
NOX program would remain separate trading programs 
maintained in ATS and NATS. Both ATS and NATS would remain as automated 
systems used to track SO2 and NOX allowances held 
by affected units under the cap and trade program, as well as those 
allowances held by other organizations or individuals. Specifically, 
ATS and NATS would track the allocation of all SO2 and 
NOX allowances, holdings of SO2 and 
NOX allowances in accounts, deduction of SO2 and 
NOX allowances for compliance purposes, and transfers 
between accounts. The primary role of ATS and NATS is to provide an 
efficient, automated means of monitoring compliance with the cap and 
trade programs. ATS and NATS also provide the allowance market with a 
record of ownership of allowances, dates of allowance transfers, buyer 
and seller information, and the serial numbers of allowances 
transferred.
b. Compliance
    Compliance in the cap and trade program consists of the deduction 
of allowances from affected facilities' accounts to offset the quantity 
of emissions at the facilities for each compliance period. Currently 
under the Acid Rain and regional NOX cap and trade programs, 
compliance is assessed at the unit level. Some flexibility is allowed 
in the NOX program through the use of overdraft accounts. 
Both EPA and the regulated community find that, in practice, overdraft 
accounts and their use can be quite complicated and do not 
significantly reduce the burden of unit-level accounting. EPA is 
considering an approach that assesses compliance at the facility level 
in the proposed cap and trade program. More discussion of this option 
will be included in the future SNPR.
c. Penalties
    The EPA plans to propose a system of automatic penalties should a 
facility not obtain sufficient NOX or SO2 
allowances to cover emissions for the compliance period. In order to 
offset this deficiency in allowances, a facility must surrender 
allowances allocated for a future year equal in amount to the 
deficiency in allowances for the current compliance period. In 
addition, EPA will propose that an automatic penalty be imposed in 
addition to this offset in order to provide a strong incentive for 
facilities to hold sufficient allowances. The automatic penalty 
provisions will not limit the ability of the permitting authority or 
EPA to take enforcement action under State law or the CAA, but will 
establish for the regulated community the immediate, minimum economic 
consequences of noncompliance.
d. Banking
    Banking is the retention of unused allowances from one calendar 
year for use in a later calendar year. Banking allows sources to make 
reductions beyond required levels and ``bank'' the unused allowances 
for use later. Generally speaking, banking has several advantages: it 
can encourage earlier or greater reductions than are required from 
sources, stimulate the market and encourage efficiency, and provide 
flexibility in achieving emissions reduction goals. On the other hand, 
it may result in banked allowances being used to allow emissions in a 
given year to exceed the cap and trade program budget. Banking of 
allowances from the Acid Rain and regional NOX cap and trade 
programs into the proposed cap and trade program is discussed above in 
section VIII.B.2.f(i) for Acid Rain and above in section VIII.C.2.e. 
for the NOX SIP Call.
    Based on the experience of both the SO2 and 
NOX cap and trade programs,

[[Page 4635]]

EPA plans to propose in the future SNPR that the banking of allowances 
after the start of the cap and trade program be allowed with no 
restrictions.
3. Accountability for Affected Sources
    Key to the success of existing cap and trade programs and the 
integrity of the allowance trading markets has been clear 
accountability for unit emissions. This takes the form of affected 
units officially designating a specific person (and alternate) as 
responsible for the official certification of all allowance transfers 
and emissions monitoring and reporting as submitted to EPA in quarterly 
compliance reports. With each quarterly submission, this responsible 
party must certify that: the monitoring data were recorded in 
compliance with the monitoring and reporting requirements, including 
quality assurance testing and missing data procedures; and, the 
emission and operational reports are true, accurate, and complete.
    The cap and trade program to be proposed in the future SNPR will 
include provisions to provide for the same strict standards for source 
accountability established in the Acid Rain Program and the 
NOX SIP Call. This will include provisions for the 
establishment of an Authorized Account Representative. Adoption of 
these provisions will be required by all States that wish to 
participate in the cap and trade program.
4. Allowance Allocation Timing
    The SNPR will propose requirements for when a State would finalize 
allowance allocations for each control period in the cap and trade 
program and submit them to EPA for inclusion into the ATS and NATS. The 
timing requirements ensure that all units would have equal and 
sufficient time to plan for compliance for each control period and 
equal time to trade allowances. The requirement would also contribute 
to the efficient administration of the trading program. By establishing 
this schedule at the outset of the cap and trade program, both the 
States and EPA would be able to develop internal procedures for 
effectively implementing the allowance provisions of the trading 
program. The timing requirements would ensure that EPA would be able to 
record in the ATS and NATS the allowance allocations for the budget 
units in all participating States at the same time for each control 
period.
5. Emissions Monitoring and Reporting
    Monitoring and reporting of an affected source's emissions are 
integral parts of any cap and trade program. Consistent and accurate 
measurement of emissions ensures each allowance actually represents one 
ton of emissions and that one ton of reported emissions from one source 
is equivalent to one ton of reported emissions from another source. 
This establishes the integrity of the allowance and instills confidence 
in the market mechanisms which are designed to provide sources with 
flexibility in achieving compliance. Given the variability in the type, 
operation and fuel mix of sources in the cap and trade program, EPA 
believes that to ensure the needed accuracy and consistency, emissions 
must be monitored continuously. For many sources, this accuracy and 
consistency is achieved through the use of continuous emissions 
monitors (CEMS); however, alternative monitoring methodologies are 
appropriate for certain types of sources. The continuous emissions 
monitoring methods must also incorporate rigorous quality assurance 
procedures (e.g., periodic testing to ensure continued accuracy of the 
measurement method). Additionally, in order to account for all 
emissions at all times, provisions for estimating emissions during 
times when monitors are unavailable because of planned and unplanned 
outages are also necessary. Part 75 of the Acid Rain regulations (40 
CFR part 75) sets forth monitoring and reporting requirements for both 
SO2 and NOX mass emissions and includes the 
additional provisions necessary for a cap and trade program. Part 75 is 
used in both the Acid Rain and NOX SIP Call programs.
    In an effort to ensure program integrity, EPA proposes to require 
States to include year round part 75 monitoring and reporting for 
SO2 and NOX for all sources. Monitor 
certification deadlines and other details will be specified in the 
model cap and trade rule. The EPA believes that emissions will then be 
consistently and accurately monitored and reported from unit to unit 
and from State to State.
    Part 75 also specifies reporting requirements. The EPA proposes to 
require year-round, quarterly reporting of emissions and monitoring 
data from each unit at each affected facility. The EPA proposes a 
single quarterly report. The single report will include hourly 
emissions information for both SO2 and NOX 
emissions on a quarterly basis in a format specified by the Agency. The 
reports must be in an electronic data reporting (EDR) format and be 
submitted to EPA electronically using EPA's Emissions Tracking System 
(ETS). This coordinated reporting requirement is necessary to ensure 
consistent review, checking, and posting of the emissions and 
monitoring data at all affected sources, which contributes to the 
integrity and efficacy of the trading program.
    Many sources affected by this rulemaking are already meeting the 
requirements of part 75. Impacts on different types of sources will be 
discussed thoroughly in the SNPR.

E. Inter-Pollutant Trading

    Cap and trade programs can incorporate mechanisms for 
interpollutant trading when more than one pollutant contributes to the 
same environmental problem. While the proposed cap and trade programs 
would control SO2 to address PM2.5 and 
NOX for both PM2.5 and ozone, EPA solicits 
comment on whether SO2 allowances and NOX 
allowances should be interchangeable, and if so, at what ratio should 
the allowances be interchangeable. The main advantage of inter-
pollutant trading is that it presents regulated entities with more 
flexibility in meeting compliance, thus reducing the costs of 
compliance. If the relative air quality impact of the two pollutants on 
the environmental issue (i.e., PM2.5 or ozone)is known, then 
inter-pollutant trading set at this ratio will achieve the same total 
air quality impact. There are many technical difficulties involved with 
incorporating an effective inter-pollutant trading mechanism, and EPA 
solicits opinions on the feasibility of addressing these concerns:
    (1) What should be the exchange rate (i.e., the transfer ratio) for 
the two pollutants?
    (2) How can this transfer ratio best reflect the goals of achieving 
PM2.5 and ozone attainment in downwind States?
    (3) How would inter-pollutant trading accommodate the different 
geographic regions covered for SO2 and NOX under 
the proposed rule?

IX. Air Quality Modeling of Emissions Reductions

A. Introduction

    In this section, we describe the air quality modeling performed to 
determine the projected impacts on PM2.5 and 8-hour ozone of 
the regional SO2 and NOX emissions reductions in 
today's proposal. The regional emissions reductions are associated with 
State emissions budgets in 2010 and 2015, as explained in section VI. 
The impacts of the regional reductions in 2010 and 2015 are determined 
by comparing air quality modeling results for each of these regional 
control scenarios to the modeling results for the corresponding 2010 
and 2015 Base Case

[[Page 4636]]

scenarios. A description of the 2010 and 2015 Base Cases is provided in 
section IV. Note that neither the Base Cases nor the regional control 
strategy scenarios include any of the local control measures discussed 
in section IV. Also note that the 2015 Base Case does not include any 
2010 emissions reductions from the regional strategy.
    The 2010 and 2015 regional strategy budgets cover emissions from 
the power generation sector in 29 eastern States plus the District of 
Columbia that contribute significantly to both PM2.5 and 
ozone nonattainment in downwind States.\98\ These annual SO2 
and NOX budgets are provided in section VI.
---------------------------------------------------------------------------

    \98\ In addition, summer season only EGU NOX controls 
are proposed for Connecticut which significantly contributes to 
ozone, but not PM2.5 nonattainment in other States.
---------------------------------------------------------------------------

    As described in section VI, EPA modeled a two-phase cap and trade 
strategy for SO2 and for NOX using the IPM to 
assess the impacts of the budgets in today's proposal. For the purposes 
of air quality modeling, we used a scenario that assumes a 48-State 
SO2 trading area and SO2 allowances. Most of the 
SO2 emissions reductions in this scenario occur in the 28-
State and DC control region; there are only small changes in nearly 
States not affected by today's proposal.\99\ We do not expect these 
latter changes to actually occur; but, because they are only small 
changes, the results of using this IPM scenario are expected to be very 
similar to the actual results of today's proposal. For NOX, 
EPA modeled a NOX trading scenario covering 31 States, DC, 
and the eastern half of Texas. The 31 States include Arkansas, Iowa, 
Louisiana, Minnesota, Missouri, and all other States to the east of 
these five States. Thus, the modeled strategy does not match the 
NOX reductions required in today's proposal for Kansas and 
western Texas. In addition, the modeled strategy includes 
NOX reductions in Maine, New Hampshire, Rhode Island, and 
Vermont which do not have any required reductions in today's proposal.
---------------------------------------------------------------------------

    \99\ The modeled scenario reduces EGU emissions in the five New 
England States not covered by today's proposal by less than 3,000 
tons per year. In the 15 States located to the west of the region 
covered by today's proposal, total EGU SO2 emissions 
decline by 17 percent.
---------------------------------------------------------------------------

    Phase 1 of the regional strategy is forecast to reduce total EGU 
SO2 emissions in the 28-States plus DC by 40 percent in 
2010. Phase 2 is forecast to provide a 44 percent reduction in EGU 
SO2 emissions compared to the Base Case in 2015. When fully 
implemented, we expect today's proposed rule to result in more than a 
70 percent reduction in EGU SO2 emissions compared to 
current emissions levels. The net effect of the strategy on total 
SO2 emissions in the 28-State plus DC region, considering 
all sectors of emissions, is a 27 percent reduction in 2010 and a 28 
percent reduction in 2015. For NOX, Phase 1 of the strategy 
is forecast to reduce EGU emissions by 44 percent and total emissions 
by 10 percent in the 28-States plus DC region in 2010. In Phase 2, EGU 
NOX emissions are projected to decline by 53 percent in 
2015. Total NOX emissions are projected to be reduced by 14 
percent in 2015. The percent change in emissions by State for 
SO2 and NOX in 2010 and 2015 for the regional 
strategy are provided in the Air Quality Modeling Technical Support 
Document (AQMTSD).\100\
---------------------------------------------------------------------------

    \100\ ``Air Quality Modeling Technical Support Document for the 
Proposed Interstate Air Quality Rule'' (January 2004), can be 
obtained from the docket for today's proposed rule: OAR-2003-0053.
---------------------------------------------------------------------------

B. The PM2.5 Air Quality Modeling of the Proposed Regional 
SO2 and NOX Strategy

    The PM modeling platform described in section IV was used by EPA to 
model the impacts of the proposed SO2 and NOX 
emissions reductions on annual average PM2.5 concentrations. 
In brief, we ran the REMSAD model for the meteorological conditions in 
the year of 1996 using our nationwide modeling domain. Modeling for 
PM2.5 was performed for both 2010 and 2015 to assess the 
expected effects of the proposed regional strategy in each of these 
years on projected PM2.5 design value concentrations and 
nonattainment. The procedures used to project future PM2.5 
design values and nonattainment are described in section IV. The 
projected design values for each nonattainment county for the 2010 and 
2015 scenarios are provided in the AQMTSD. The counties that are 
projected to be nonattainment for the PM2.5 NAAQS are listed 
in Table IX-1 for the 2010 Base Case and the 2010 regional strategy 
scenario and in Table IX-2 for the 2015 Base Case and 2015 regional 
strategy scenario. The projected 2010 Base Case and control scenario 
PM2.5 design values are provided in Table IX-3. The 
projected 2015 Base Case and control PM2.5 design values are 
provided in Table IX-4. Concerning the future baseline concentrations, 
we expect improvement beyond 2015 based on the fact that the bank will 
be used up and further reductions are expected from the Heavy Duty 
Diesel Engines and Land-based Non-road Diesel Engines rules. Also, even 
those counties that remain nonattainment in 2015 after the controls in 
today's rule will benefit from air quality improvements and lower 
concentrations of fine particles as a result of the SO2 and 
NOX emissions reductions in this rule.

     Table IX-1.--Projected PM2.5 Nonattainment Counties for 2010 Base Case and Regional Strategy Scenarios
----------------------------------------------------------------------------------------------------------------
                                                                                 2010 regional strategy case
                 State                     2010 base case projected PM2.5       projected PM2.5 nonattainment
                                               nonattainment counties                      counties
----------------------------------------------------------------------------------------------------------------
AL....................................  DeKalb, Jefferson, Montgomery,       Jefferson, Russell, Talladaga.
                                         Russell, Talladaga.
CT....................................  New Haven..........................  None.
DC....................................  Washington DC......................  None.
DE....................................  New Castle.........................  None.
GA....................................  Clarke, Clayton, Cobb, DeKalb,       Clarke, Clayton, Cobb, DeKalb,
                                         Floyd, Fulton, Hall, Muscogee,       Floyd, Fulton, Muscogee,
                                         Paulding, Richmond, Wilkinson.       Wilkinson.
IL....................................  Cook, Madison, St. Clair, Will.....  Cook, Madison, St. Clair.
IN....................................  Clark, Marion......................  None.
KY....................................  Fayette, Jefferson.................  None.
MD....................................  Baltimore City.....................  None.
MI....................................  Wayne..............................  Wayne.
MO....................................  St. Louis..........................  None.
NY....................................  New York (Manhattan)...............  New York (Manhattan).
NC....................................  Catawba, Davidson, Mecklenburg.....  None.

[[Page 4637]]

 
OH....................................  Butler, Cuyahoga, Franklin,          Cuyahoga, Hamilton, Jefferson,
                                         Hamilton, Jefferson, Lawrence,       Scioto, Stark.
                                         Mahoning, Scioto, Stark, Summit,
                                         Trumbull.
PA....................................  Allegheny, Berks, Lancaster, York..  Allegheny.
SC....................................  Greenville.........................  None.
TN....................................  Davidson, Hamilton, Knox, Roane,     Knox.
                                         Sullivan.
WV....................................  Brooke, Cabell, Hancock, Kanawha,    None.
                                         Marshal, Wood.
----------------------------------------------------------------------------------------------------------------


     Table IX-2.--Projected PM2.5 Nonattainment Counties for 2015 Base Case and Regional Strategy Scenarios
----------------------------------------------------------------------------------------------------------------
                                                                                 2015 regional strategy case
                 State                     2015 base case projected PM2.5       projected PM2.5 nonattainment
                                               nonattainment counties                      counties
----------------------------------------------------------------------------------------------------------------
AL....................................  Jefferson, Montgomery, Russell,      Jefferson, Russel.
                                         Talladaga
CT....................................  New Haven..........................  None.
GA....................................  Clarke, Clayton, Cobb, DeKalb,       Clayton, DeKalb, Fulton.
                                         Floyd, Fulton, Hall, Muscogee,
                                         Richmond, Wilkinson.
IL....................................  Cook, Madison, St. Clair...........  Cook.
IN....................................  Clark, Marion......................  None.
KY....................................  Jefferson..........................  None.
MD....................................  Baltimore City.....................  None.
MI....................................  Wayne..............................  Wayne.
NY....................................  New York County (Manhattan)........  None.
OH....................................  Butler, Cuyahoga, Franklin,          Cuyahoga, Hamilton, Jefferson,
                                         Hamilton, Jefferson, Scioto,         Scioto.
                                         Stark, Summit
PA....................................  Allegheny, York....................  Allegheny.
TN....................................  Hamilton, Knox.....................  Knox.
WV....................................  Brooke, Cabell, Hancock, Kanawha,    None.
                                         Wood
----------------------------------------------------------------------------------------------------------------


        Table IX-3.--Projected PM2.5 Design Values for the 2010 Base Case and Regional Strategy Scenarios
----------------------------------------------------------------------------------------------------------------
                                                                                                   2010 regional
                   State                                    County                2010 base case      control
                                                                                                     strategy
----------------------------------------------------------------------------------------------------------------
Alabama....................................  DeKalb.............................           15.22           13.92
Alabama....................................  Jefferson..........................           20.03           18.85
Alabama....................................  Montgomery.........................           15.69           14.60
Alabama....................................  Russell............................           17.07           15.77
Alabama....................................  Talladega..........................           16.44           15.26
Connecticut................................  New Haven..........................           15.43           14.50
Delaware...................................  New Castle.........................           15.43           14.12
District of Columbia.......................  District of Columbia...............           15.48           13.70
Georgia....................................  Clarke.............................           17.04           15.56
Georgia....................................  Clayton............................           17.73           16.43
Georgia....................................  Cobb...............................           16.80           15.56
Georgia....................................  DeKalb.............................           18.26           16.92
Georgia....................................  Floyd..............................           16.99           15.65
Georgia....................................  Fulton.............................           19.79           18.37
Georgia....................................  Hall...............................           15.62           14.24
Georgia....................................  Muscogee...........................           16.68           15.41
Georgia....................................  Paulding...........................           15.40           14.17
Georgia....................................  Richmond...........................           15.99           14.65
Georgia....................................  Wilkinson..........................           16.68           15.51
Illinois...................................  Cook...............................           17.90           16.90
Illinois...................................  Madison............................           16.41           15.33
Illinois...................................  St. Clair..........................           16.31           15.11
Illinois...................................  Will...............................           15.21           14.25
Indiana....................................  Clark..............................           15.86           14.34
Indiana....................................  Marion.............................           15.89           14.39
Kentucky...................................  Fayette............................           15.21           13.55
Kentucky...................................  Jefferson..........................           15.79           14.23
Maryland...................................  Baltimore City.....................           16.58           14.82
Michigan...................................  Wayne..............................           18.78           17.65
Missouri...................................  St. Louis City.....................           15.25           14.14
New York...................................  New York...........................           16.30           15.25
North Carolina.............................  Catawba............................           15.26           13.87
North Carolina.............................  Davidson...........................           15.52           14.22

[[Page 4638]]

 
North Carolina.............................  Mecklenburg........................           15.18           13.92
Ohio.......................................  Butler.............................           16.01           14.53
Ohio.......................................  Cuyahoga...........................           19.13           17.68
Ohio.......................................  Franklin...........................           16.69           15.04
Ohio.......................................  Hamilton...........................           17.75           15.96
Ohio.......................................  Jefferson..........................           18.04           16.06
Ohio.......................................  Lawrence...........................           15.48           13.67
Ohio.......................................  Mahoning...........................           15.39           13.76
Ohio.......................................  Scioto.............................           18.40           16.33
Ohio.......................................  Stark..............................           17.09           15.19
Ohio.......................................  Summit.............................           16.35           14.71
Ohio.......................................  Trumbull...........................           15.13           13.56
Pennsylvania...............................  Allegheny..........................           19.52           16.92
Pennsylvania...............................  Berks..............................           15.39           13.84
Pennsylvania...............................  Lancaster..........................           15.46           13.71
Pennsylvania...............................  York...............................           15.68           13.93
South Carolina.............................  Greenville.........................           15.06           13.75
Tennessee..................................  Davidson...........................           15.36           13.92
Tennessee..................................  Hamilton...........................           16.14           14.74
Tennessee..................................  Knox...............................           18.36           16.60
Tennessee..................................  Roane..............................           15.18           13.69
Tennessee..................................  Sullivan...........................           15.24           13.77
West Virginia..............................  Brooke.............................           16.60           14.77
West Virginia..............................  Cabell.............................           16.39           14.41
West Virginia..............................  Hancock............................           16.69           14.85
West Virginia..............................  Kanawha............................           17.11           14.81
West Virginia..............................  Marshall...........................           15.53           13.25
West Virginia..............................  Wood...............................           16.30           14.15
----------------------------------------------------------------------------------------------------------------


        Table IX-4.--Projected PM2.5 Design Values for the 2015 Base Case and Regional Strategy Scenarios
----------------------------------------------------------------------------------------------------------------
                                                                                                   2015 regional
                   State                                    County                2015 base case      control
                                                                                                     strategy
----------------------------------------------------------------------------------------------------------------
Alabama....................................  Jefferson..........................           19.57           18.11
Alabama....................................  Montgomery.........................           15.35           14.05
Alabama....................................  Russell............................           16.68           15.05
Alabama....................................  Talladega..........................           15.97           14.57
Connecticut................................  New Haven..........................           15.13           14.13
Georgia....................................  Clarke.............................           16.46           14.58
Georgia....................................  Clayton............................           17.26           15.49
Georgia....................................  Cobb...............................           16.28           14.37
Georgia....................................  DeKalb.............................           17.93           16.22
Georgia....................................  Floyd..............................           16.51           14.71
Georgia....................................  Fulton.............................           19.44           17.62
Georgia....................................  Hall...............................           15.05           13.16
Georgia....................................  Muscogee...........................           16.31           14.71
Georgia....................................  Richmond...........................           15.51           13.82
Georgia....................................  Wilkinson..........................           16.40           14.88
Illinois...................................  Cook...............................           17.52           16.40
Illinois...................................  Madison............................           16.03           14.88
Illinois...................................  St. Clair..........................           15.91           14.67
Indiana....................................  Clark..............................           15.40           13.69
Indiana....................................  Marion.............................           15.31           13.79
Kentucky...................................  Jefferson..........................           15.32           13.57
Maryland...................................  Baltimore City.....................           16.11           14.20
Michigan...................................  Wayne..............................           18.28           17.06
New York...................................  New York (Manhattan)...............           15.82           14.69
Ohio.......................................  Butler.............................           15.39           13.77
Ohio.......................................  Cuyahoga...........................           18.58           17.05
Ohio.......................................  Franklin...........................           16.18           14.46
Ohio.......................................  Hamilton...........................           17.07           15.15
Ohio.......................................  Jefferson..........................           17.49           15.51
Ohio.......................................  Scioto.............................           17.62           15.49
Ohio.......................................  Stark..............................           16.42           14.52
Ohio.......................................  Summit.............................           15.78           14.14
Pennsylvania...............................  Allegheny..........................           18.64           16.09

[[Page 4639]]

 
Pennsylvania...............................  York...............................           15.13           13.26
Tennessee..................................  Hamilton...........................           15.63           13.91
Tennessee..................................  Knox...............................           17.73           15.59
West Virginia..............................  Brooke.............................           16.10           14.26
West Virginia..............................  Cabell.............................           15.70           13.71
West Virginia..............................  Hancock............................           16.18           14.33
West Virginia..............................  Kanawha............................           16.45           14.10
West Virginia..............................  Wood...............................           15.58           13.49
----------------------------------------------------------------------------------------------------------------

    The results of the air quality modeling indicate that 61 counties 
in the East are expected to be nonattainment for PM2.5 in 
the 2010 Base Case. Of these 61 counties, 38 are projected to come into 
attainment in 2010 following the SO2 and NOX 
emissions reductions resulting from the regional controls in today's 
proposal. The 23 counties projected to remain nonattainment after the 
application of the regional strategy are expected to experience a 
sizeable reduction in PM2.5 from this strategy, which will 
bring them closer to attainment. Specifically, the average reduction in 
these 23 residual 2010 nonattainment counties is 1.50 [mu]g/
m3 with a range of 0.93 to 2.60 [mu]g/m3.
    In 2015, the SO2 and NOX reductions in 
today's proposal are expected to reduce the number of PM2.5 
nonattainment counties in the East from 41 to 13. The regional strategy 
is predicted to provide large reductions in PM2.5 in those 
13 residual nonattainment counties. Specifically, the average reduction 
in these 13 residual 2015 nonattainment counties is 1.70 [mu]g/m\3\ 
with a range of 1.00 to 2.54 [mu]g/m\3\.
    Thus, the SO2 and NOX emissions reductions 
which will result from today's proposal will greatly reduce the extent 
of PM2.5 nonattainment by 2010 and beyond. These emissions 
reductions are expected to substantially reduce the number of 
PM2.5 nonattainment counties in the East and make attainment 
easier for those counties that remain nonattainment by substantially 
lowering PM2.5 concentrations in these residual 
nonattainment counties.

C. Ozone Air Quality Modeling of the Regional NOX Strategy

    The EPA used the ozone modeling platform described in section IV to 
model the impacts of the proposed EGU NOX controls on 8-hour 
ozone concentrations. In brief, we ran the CAMx model for the 
meteorological conditions in each of the three 1995 ozone episodes 
using the Eastern U.S. modeling domain. Ozone modeling was performed 
for both 2010 and 2015 to assess the projected effects of the regional 
strategy in each of these years on projected 8-hour ozone 
nonattainment.
    The results of the regional strategy ozone modeling are expressed 
in terms of the expected reduction in projected 8-hour design value 
concentrations and the implications for future nonattainment. The 
procedures used to project future 8-hour ozone design values and 
nonattainment are described in section IV. The projected design values 
and exceedance counts for each nonattainment county for the 2010 and 
2015 scenarios are provided in the AQMTSD. The counties that are 
projected to be nonattainment for the 8-hour ozone NAAQS are listed in 
Table IX-5 for the 2010 Base Case and the 2010 regional strategy 
scenario and in Table IX-6 for the 2015 Base Case and 2015 regional 
strategy scenario. The projected 2010 Base Case and control scenario 8-
hour ozone design values are provided in Table IX-7. The projected 2015 
Base and control 8-hour ozone design values are provided in Table IX-8.

  Table IX-5.--Projected 8-Hour Ozone Nonattainment Counties for 2010 Base Case and Regional Strategy Scenarios
----------------------------------------------------------------------------------------------------------------
                                                                                 2010 regional strategy case
                 State                    2010 base case projected 8-hour           projected 8-hour ozone
                                            ozone nonattainment counties            nonattainment counties
----------------------------------------------------------------------------------------------------------------
AR....................................  Crittenden.........................  Crittenden.
CT....................................  Fairfield, Middlesex, New Haven....  Fairfield, Middlesex, New Haven.
DC....................................  Washington, DC.....................  Washington, DC.
DE....................................  New Castle.........................  New Castle.
GA....................................  Fulton.............................  Fulton.
IL....................................  None...............................  None.
IN....................................  Lake...............................  Lake.
MD....................................  Anne Arundel, Baltimore, Cecil,      Anne Arundel, Baltimore, Cecil,
                                         Harford, Kent, Prince Georges.       Harford, Kent, Prince Georges.
MI....................................  None...............................  None.
NJ....................................  Bergen, Camden, Cumberland,          Bergen, Camden, Cumberland,
                                         Gloucester, Hudson, Hunterdon,       Gloucester, Hunterdon, Mercer,
                                         Mercer, Middlesex, Monmouth,         Middlesex, Monmouth, Morris,
                                         Morris, Ocean.                       Ocean.
NY....................................  Erie, Putnam, Richmond, Suffolk,     Erie, Putnam, Richmond, Suffolk,
                                         Westchester.                         Westchester.
NC....................................  Mecklenburg........................  Mecklenburg.
OH....................................  Geauga, Summit.....................  Geauga.
PA....................................  Allegheny, Bucks, Delaware,          Bucks, Delaware, Montgomery,
                                         Montgomery, Philadelphia.            Philadelphia.
RI....................................  Kent...............................  Kent.
TX....................................  Denton, Harris, Tarrant............  Denton, Harris, Tarrant.
VA....................................  Arlington, Fairfax.................  Arlington, Fairfax.

[[Page 4640]]

 
WI....................................  Kenosha, Racine, Sheboygan.........  Kenosha, Racine, Sheboygan.
----------------------------------------------------------------------------------------------------------------


  Table IX-6.--Projected 8-Hour Ozone Nonattainment Counties for 2015 Base Case and Regional Strategy Scenarios
----------------------------------------------------------------------------------------------------------------
                                                                                 2015 regional strategy case
                 State                    2015 base case projected 8-hour           projected 8-hour ozone
                                            ozone nonattainment counties            nonattainment counties
----------------------------------------------------------------------------------------------------------------
AR....................................  Crittenden.........................  None.
CT....................................  Fairfield, Middlesex, New Haven....  Fairfield, Middlesex, New Haven.
DC....................................  Washington, DC.....................  Washington, DC.
DE....................................  None...............................  None.
GA....................................  None...............................  None.
IL....................................  Cook...............................  None.
IN....................................  Lake...............................  Lake.
MD....................................  Anne Arundel, Cecil, Harford.......  Anne Arundel, Cecil, Harford.
MI....................................  Macomb.............................  None.
NJ....................................  Bergen, Camden, Gloucester,          Bergen, Camden, Gloucester,
                                         Hunterdon, Mercer, Middlesex,        Hunterdon, Mercer, Middlesex,
                                         Monmouth, Morris, Ocean.             Monmouth, Ocean.
NY....................................  Erie, Richmond, Suffolk,             Erie, Richmond, Suffolk,
                                         Westchester.                         Westchester.
NC....................................  None...............................  None.
OH....................................  Geauga.............................  None.
PA....................................  Bucks, Montgomery, Philadelphia....  Bucks, Montgomery, Philadelphia.
RI....................................  Kent...............................  None.
TX....................................  Harris.............................  Harris.
VA....................................  Arlington, Fairfax.................  Arlington.
WI....................................  Kenosha, Sheboygan.................  Kenosha.
----------------------------------------------------------------------------------------------------------------


    Table IX-7.--Projected 8-Hour Ozone Design Values for the 2010 Base Case and Regional Strategy Scenarios
----------------------------------------------------------------------------------------------------------------
                                                                                                   2010 regional
                   State                                    County                2010 base case      control
                                                                                                     strategy
----------------------------------------------------------------------------------------------------------------
Arkansas...................................  Crittenden.........................              86              86
Connecticut................................  Fairfield..........................              94              94
Connecticut................................  Middlesex..........................              91              91
Connecticut................................  New Haven..........................              92              92
District of Columbia.......................  District of Columbia...............              88              88
Delaware...................................  New Castle.........................              87              86
Georgia....................................  Fulton.............................              86              85
Indiana....................................  Lake...............................              87              86
Maryland...................................  Anne Arundel.......................              91              91
Maryland...................................  Baltimore..........................              85              85
Maryland...................................  Cecil..............................              90              90
Maryland...................................  Harford............................              93              93
Maryland...................................  Kent...............................              89              88
Maryland...................................  Prince Georges.....................              86              85
New Jersey.................................  Bergen.............................              88              87
New Jersey.................................  Camden.............................              93              92
New Jersey.................................  Cumberland.........................              86              85
New Jersey.................................  Gloucester.........................              95              95
New Jersey.................................  Hudson.............................              85              84
New Jersey.................................  Hunterdon..........................              89              89
New Jersey.................................  Mercer.............................              98              98
New Jersey.................................  Middlesex..........................              95              95
New Jersey.................................  Monmouth...........................              89              89
New Jersey.................................  Morris.............................              88              87
New Jersey.................................  Ocean..............................             105             104
New York...................................  Erie...............................              90              89
New York...................................  Putnam.............................              85              85
New York...................................  Richmond...........................              90              89
New York...................................  Suffolk............................              90              90
New York...................................  Westchester........................              86              85
North Carolina.............................  Mecklenburg........................              85              86
Ohio.......................................  Geauga.............................              88              88
Ohio.......................................  Summit.............................              85              84

[[Page 4641]]

 
Pennsylvania...............................  Allegheny..........................              85              84
Pennsylvania...............................  Bucks..............................              97              97
Pennsylvania...............................  Delaware...........................              87              86
Pennsylvania...............................  Montgomery.........................              90              89
Pennsylvania...............................  Philadelphia.......................              92              92
Rhode Island...............................  Kent...............................              89              88
Texas......................................  Denton.............................              87              87
Texas......................................  Harris.............................             100             100
Texas......................................  Tarrant............................              88              87
Virginia...................................  Arlington..........................              88              88
Virginia...................................  Fairfax............................              87              87
Wisconsin..................................  Kenosha............................              94              93
Wisconsin..................................  Racine.............................              86              85
Wisconsin..................................  Sheboygan..........................              90              89
----------------------------------------------------------------------------------------------------------------


    Table IX-8.--Projected 8-Hour Ozone Design Values for the 2015 Base Case and Regional Strategy Scenarios
----------------------------------------------------------------------------------------------------------------
                                                                                                   2015 regional
                   State                                    County                2015 base case      control
                                                                                                     strategy
----------------------------------------------------------------------------------------------------------------
Arkansas...................................  Crittenden.........................              85              83
Connecticut................................  Fairfield..........................              94              93
Connecticut................................  Middlesex..........................              89              88
Connecticut................................  New Haven..........................              90              89
District of Columbia.......................  District of Columbia...............              86              85
Illinois...................................  Cook...............................              85              84
Indiana....................................  Lake...............................              87              86
Maryland...................................  Anne Arundel.......................              87              86
Maryland...................................  Cecil..............................              86              85
Maryland...................................  Harford............................              89              88
Michigan...................................  Macomb.............................              86              84
New Jersey.................................  Bergen.............................              87              86
New Jersey.................................  Camden.............................              91              90
New Jersey.................................  Gloucester.........................              93              92
New Jersey.................................  Hunterdon..........................              87              86
New Jersey.................................  Mercer.............................              96              95
New Jersey.................................  Middlesex..........................              92              92
New Jersey.................................  Monmouth...........................              87              86
New Jersey.................................  Morris.............................              85              83
New Jersey.................................  Ocean..............................             102             101
New York...................................  Erie...............................              88              86
New York...................................  Richmond...........................              87              87
New York...................................  Suffolk............................              89              89
New York...................................  Westchester........................              86              85
Ohio.......................................  Geauga.............................              85              83
Pennsylvania...............................  Bucks..............................              95              94
Pennsylvania...............................  Montgomery.........................              89              88
Pennsylvania...............................  Philadelphia.......................              91              90
Rhode Island...............................  Kent...............................              85              84
Texas......................................  Harris.............................              99              98
Virginia...................................  Arlington..........................              87              86
Virginia...................................  Fairfax............................              85              84
Wisconsin..................................  Kenosha............................              93              91
Wisconsin..................................  Sheboygan..........................              86              84
----------------------------------------------------------------------------------------------------------------

    In the 2010 Base Case (i.e., without the emissions reductions 
called for in today's proposal), 47 counties in the East are forecast 
to be nonattainment for ozone. With the implementation of the proposed 
regional NOX strategy, three of the 47 2010 Base Case 
nonattainment counties are forecast to come into attainment. Of the 44 
counties that are projected to remain nonattainment in 2010 after the 
regional controls, 12 are projected to be within 2 ppb of attainment 
(i.e., counties that have design values of 85 or 86 ppb).
    In 2015, the number of nonattainment counties is expected to 
decline from 34 counties in the Base Case to 26 counties after the 
NOX emissions reductions in today's proposal. The proposed 
regional NOX strategy is projected to reduce nonattainment 
ozone design values in the East by 1 to 2 ppb in all but three of the 
34 2015 Base Case nonattainment counties. Of the 26 counties that are

[[Page 4642]]

forecast to remain nonattainment in the control case, ten are projected 
to be within 2 ppb of attainment. Thus, our modeling indicates that by 
2010 and 2015 the NOX controls in today's proposal will 
reduce ozone concentrations throughout the East and help bring areas 
into attainment with the 8-hour ozone NAAQS.

X. Benefits of Emissions Reductions in Addition to the PM and Ozone 
NAAQS

    This proposed action will result in benefits in addition to the 
enumerated human health and welfare benefits resulting from reductions 
in ambient levels of PM and ozone. These other benefits occur both 
directly, from the reductions in NOX and SO2, and 
indirectly, through reductions in co-pollutants, such as mercury. For 
example, reductions in emissions of NOX and SO2 
will contribute to substantial visibility improvements in many parts of 
the eastern U.S. where people live, work, and recreate, including 
mandatory Federal Class I areas such as the Great Smoky Mountains. 
Reductions in NOX and SO2 emissions from affected 
sources will also reduce acidification and eutrophication of water 
bodies. The potential for reductions in nitrate contamination of 
drinking water is another possible benefit of the rule. This proposal 
will also reduce acid and particulate deposition that damages cultural 
monuments and other materials. Reduced mercury emissions will lessen 
mercury contamination in lakes that can potentially reduce both human 
and wildlife exposure through consumption of contaminated fish. In 
contrast to the benefits discussed, it is also possible that this 
proposal will lessen the benefits of passive fertilization for forest 
and terrestrial ecosystems where nutrients are a limiting factor and 
for some croplands.
    This rule will improve visibility in the transport region. 
Visibility impairment is widespread and expected to continue (67 FR 
68251, November 8, 2002) and this proposed rule will help to improve 
visibility. We provide a limited assessment of the economic value of 
expected improvements in visibility at some Federal Class I areas in 
section XI.
    The following section presents information on three categories of 
public welfare and environmental impacts related to reductions in 
emissions from affected sources: reduced acid deposition, reduced 
eutrophication of water bodies, and reduced human health and welfare 
effects due to deposition of mercury. A more thorough discussion of 
these effects is provided in ``Benefits of the Proposed Interstate Air 
Quality Rule (January 2004).''

A. Atmospheric Deposition of Sulfur and Nitrogen--Impacts on Aquatic, 
Forest, and Coastal Ecosystems

    Atmospheric deposition of sulfur and nitrogen, more commonly known 
as acid rain, occurs when emissions of SO2 and 
NOX react in the atmosphere (with water, oxygen, and 
oxidants) to form various acidic compounds. These acidic compounds fall 
to earth in either a wet form (rain, snow, and fog) or a dry form 
(gases and particles). Prevailing winds can transport acidic compounds 
hundreds of miles, often across State and national borders. Acidic 
compounds (including small particles such as sulfates and nitrates) 
cause many negative environmental effects, including acidifying lakes 
and streams, harming sensitive forests, and harming sensitive coastal 
ecosystems.
1. Acid Deposition and Acidification of Lakes and Streams
    Acid deposition causes acidification of lakes and streams. The 
effect of atmospheric deposition of acids on freshwater and forest 
ecosystems depends largely upon the ecosystem's ability to neutralize 
the acid. Acid Neutralizing Capacity (ANC), a key indicator of the 
ability of the water and watershed soil to neutralize the acid 
deposition it receives, depends largely on the watershed's physical 
characteristics: geology, soils, and size. Waters that are sensitive to 
acidification tend to be located in small watersheds that have few 
alkaline minerals and shallow soils. Conversely, watersheds that 
contain alkaline minerals, such as limestone, tend to have waters with 
a high ANC. Areas especially sensitive to acidification include 
portions of the Northeast (particularly the Adirondack and Catskill 
Mountains, portions of New England, and streams in the mid-Appalachian 
highlands) and Southeastern streams.
    Quantitative impacts of this proposal on acidification of water 
bodies have been assessed. Modeling for this proposed rule indicates 
lakes in the Northeast and Adirondack Mountains would improve in acid 
buffering capacity. Specifically, no lakes in the Andirondack Mountains 
are projected to be categorized as chronically acidic in 2030 as a 
result of this proposal. In contrast, twelve percent of these lakes are 
projected to be chronically acidic without the emissions reductions 
envisioned in this proposal. For Northeast lakes in general, 6 percent 
of the lakes are anticipated to be chronically acidic before 
implementation of this proposal. The IAQR is expected to decrease the 
percentage of chronically acidic lakes in the Northeast to 1 percent.
2. Acid Deposition and Forest Ecosystem Impacts
    Current understanding of the effects of acid deposition on forest 
ecosystems focuses on the effects of ecological processes affecting 
plant uptake, retention, and cycling of nutrients within forest 
ecosystems. Research results from the 1990s indicate documented 
decreases in base cations (calcium, magnesium, potassium, and others) 
from soils in the northeastern and southeastern United States are at 
least partially attributable to acid deposition. Losses of calcium from 
forest soils and forested watersheds have now been documented as a 
sensitive early indicator of soil response to acid deposition for a 
wide range of forest soils in the United States.
    Although sulfate is the primary cause of base cation leaching, 
nitrate is a significant contributor in watersheds that are nearly 
nitrogen saturated. Base cation depletion is a cause for concern 
because of the role these ions play in surface water acid 
neutralization and their importance as essential nutrients for tree 
growth (calcium, magnesium and potassium).
    In red spruce stands, a clear link exists between acid deposition, 
calcium supply, and sensitivity to abiotic stress. Red spruce uptake 
and retention of calcium is impacted by acid deposition in two main 
ways: leaching of important stores of calcium from needles and 
decreased root uptake of calcium due to calcium depletion from the soil 
and aluminum mobilization. These changes increase the sensitivity of 
red spruce to winter injuries under normal winter conditions in the 
Northeast, result in the loss of needles, slow tree growth, and impair 
the overall health and productivity of forest ecosystems in many areas 
of the eastern United States. In addition, recent studies of sugar 
maple decline in the Northeast link low base cation availability, high 
levels of aluminum and manganese in the soil, and increased levels of 
tree mortality due to native defoliating insects. This proposal will 
improve acid deposition in the transport region, and is likely to have 
positive effects on the health and productivity of forest systems in 
the region.
3. Coastal Ecosystems
    Since 1990, a large amount of research has been conducted on the 
impact of nitrogen deposition to coastal waters.

[[Page 4643]]

Nitrogen is often the limiting nutrient in coastal ecosystems. 
Increasing the levels of nitrogen in coastal waters can cause 
significant changes to those ecosystems. In recent decades, human 
activities have greatly accelerated nitrogen nutrient inputs, causing 
excessive growth of algae and leading to degraded water quality and 
associated impairments of estuarine and coastal resources for human 
uses.
    It is now known that nitrogen deposition is a significant source of 
nitrogen to many estuaries. The amount of nitrogen entering estuaries 
due to atmospheric deposition varies widely, depending on the size and 
location of the estuarine watershed and other sources of nitrogen in 
the watershed. There are a handful of estuaries where atmospheric 
deposition of nitrogen contributes well over 40 percent of the total 
nitrogen load; however, in most estuaries for which estimates exist, 
the contribution from atmospheric deposition ranges from 15 to 30 
percent. The area with the highest deposition rates stretches from 
Massachusetts to the Chesapeake Bay and along the central Gulf of 
Mexico coast.
    In 1999, National Oceanic and Atmospheric Administration (NOAA) 
published the results of a 5-year national assessment of the severity 
and extent of estuarine eutrophication. An estuary is defined as the 
inland arm of the sea that meets the mouth of a river. The 138 
estuaries characterized in the study represent more than 90 percent of 
total estuarine water surface area and the total number of U.S. 
estuaries. The study found that estuaries with moderate to high 
eutrophication conditions represented 65 percent of the estuarine 
surface area.
    Eutrophication is of particular concern in coastal areas with poor 
or stratified circulation patterns, such as the Chesapeake Bay, Long 
Island Sound, and the Gulf of Mexico. In such areas, the 
``overproduced'' algae tends to sink to the bottom and decay, using all 
or most of the available oxygen and thereby reducing or eliminating 
populations of bottom-feeder fish and shellfish, distorting the normal 
population balance between different aquatic organisms, and in extreme 
cases causing dramatic fish kills. Severe and persistent eutrophication 
often directly impacts human activities. For example, fishery resource 
losses can be caused directly by fish kills associated with low 
dissolved oxygen and toxic blooms. Declines in tourism occur when low 
dissolved oxygen causes noxious smells and floating mats of algal 
blooms create unfavorable aesthetic conditions. Risks to human health 
increase when the toxins from algal blooms accumulate in edible fish 
and shellfish, and when toxins become airborne, causing respiratory 
problems due to inhalation. According to the NOAA report, more than 
half of the nation's estuaries have moderate to high expressions of at 
least one of these symptoms--an indication that eutrophication is well 
developed in more than half of U.S. estuaries.
    This proposal is anticipated to reduce nitrogen deposition in the 
IAQR region. Thus, reductions in the levels of nitrogen deposition will 
have a positive impact upon current eutrophic conditions in estuaries 
and coastal areas in the region.

B. Human Health and Welfare Effects Due to Deposition of Mercury

    Mercury emitted from utilities and other natural and man-made 
sources is carried by winds through the air and eventually is deposited 
to water and land. In water, Hg is transformed to methylmercury through 
biological processes. Methylmercury, a highly toxic form of Hg, is the 
form of Hg of greatest concern for the purpose of this rulemaking. Once 
Hg has been transformed into methylmercury, it can be ingested by the 
lower trophic level organisms where it can bioaccumulate in fish tissue 
(i.e., concentrations in predatory fish build up over the fish's entire 
lifetime, accumulating in the fish tissue as predatory fish consume 
other species in the food chain). Thus, fish and wildlife at the top of 
the food chain can have Hg concentrations that are higher than the 
lower species, and they can have concentrations of Hg that are higher 
than the concentration found in the water body itself. Therefore, the 
most common form of exposure to Hg for humans and wildlife is through 
the consumption of contaminated predatory fish, such as: commercially 
consumed tuna, shark, or other saltwater fish species and 
recreationally caught bass, perch, walleye or other freshwater fish 
species. When humans consume fish contaminated with methylmercury, the 
ingested methylmercury is almost completely absorbed into the blood and 
distributed to all tissues (including the brain); it also readily 
passes through the placenta to the fetus and fetal brain.
    Based on the findings of the National Research Council, EPA has 
concluded that benefits of Hg reductions would be most apparent at the 
human consumption stage, as consumption of fish is the major source of 
exposure to methylmercury. At lower levels, documented Hg exposure 
effects may include more subtle, yet potentially important, 
neurodevelopmental effects. Some subpopulations in the U.S., such as: 
Native Americans, Southeast Asian Americans, and lower income 
subsistence fishers, may rely on fish as a primary source of nutrition 
and/or for cultural practices. Therefore, they consume larger amounts 
of fish than the general population and may be at a greater risk to the 
adverse health effects from Hg due to increased exposure. In pregnant 
women, methylmercury can be passed on to the developing fetus, and at 
sufficient exposure may lead to a number of neurological disorders in 
children. Thus, children who are exposed to low concentrations of 
methylmercury prenatally may be at increased risk of poor performance 
on neurobehavioral tests, such as those measuring attention, fine motor 
function, language skills, visual-spatial abilities (like drawing), and 
verbal memory. The effects from prenatal exposure can occur even at 
doses that do not result in effects in the mother. Mercury may also 
affect young children who consume fish contaminated with Hg. 
Consumption by children may lead to neurological disorders and 
developmental problems, which may lead to later economic consequences.
    In response to potential risks of consuming fish containing 
elevated concentrations of Hg, EPA and FDA have issued fish consumption 
advisories which provide recommended limits on consumption of certain 
fish species for different populations. EPA and FDA are currently 
developing a joint advisory that has been released in draft form. This 
newest draft FDA-EPA fish advisory recommends that women and young 
children reduce the risks of Hg consumption in their diet by moderating 
their fish consumption, diversifying the types of fish they consume, 
and by checking any local advisories that may exist for local rivers 
and streams. This collaborative FDA-EPA effort will greatly assist in 
educating the most susceptible populations. Additionally, the 
reductions of Hg from this regulation may potentially lead to fewer 
fish consumption advisories, which will benefit the fishing community.
    We are unable to quantify changes in the levels of methylmercury in 
fish associated with reductions in mercury emissions for this proposal. 
While it is beneficial to society to reduce mercury, we are unable to 
quantify and provide a monetized estimate of benefits at this time due 
to gaps in available information on emissions, fate and transport, 
human exposure, and health impact models. However, this proposal is 
anticipated to decrease annual EGU mercury emissions by 10.6 tons in 
2010 or approximately 23.5 percent, by 11.8 tons in 2015 or 26.3 
percent, and by

[[Page 4644]]

14.3 tons or 32 percent in 2020. Emission reduction percentage 
decreases are based upon expected mercury emissions changes from 
fossil-fired EGUs larger than 25 megawatt capacity.

XI. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), the 
Agency must determine whether a regulatory action is ``significant'' 
and therefore subject to Office of Management and Budget (OMB) review 
and the requirements of the Executive Order. The Order defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may:
    1. Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or Tribal governments or 
communities;
    2. Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    3. Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    4. Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    In view of its important policy implications and potential effect 
on the economy of over $100 million, this action has been judged to be 
an economically ``significant regulatory action'' within the meaning of 
the Executive Order. As a result, today's proposal was submitted to OMB 
for review, and EPA has prepared documents entitled ``Benefits of the 
Proposed Interstate Air Quality Rule'' (January 2004), ``Economic and 
Energy Impact of the Proposed Interstate Air Quality Rule'' (January 
2004), and other related technical support documents collectively 
referred to here as the ``economic analyses.''
1. Summary of Economic Analyses
    The economic analyses provide several important analyses of impacts 
on public welfare. These include an analysis of the social benefits, 
social costs, and net benefits of the regulatory scenario. The economic 
analyses also address issues involving small business impacts, unfunded 
mandates (including impacts for Tribal governments), environmental 
justice, children's health, energy impacts, and requirements of the 
Paperwork Reduction Act (PRA). Many of the analyses summarized below 
are preliminary. The EPA intends to update these analyses as part of 
the SNPR.
a. Benefit-Cost Analysis
    The benefit-cost analysis concludes that substantial net economic 
benefits to society are likely to be achieved as a result of the 
reduction in emissions occurring as a result of this rulemaking. The 
results detailed below show that this rule would be highly beneficial 
to society, with annual net benefits in 2010 of approximately $55 
billion, ($58 billion benefits compared to social cost of approximately 
$3 billion) and net benefits in 2015 of $80 billion ($84 benefits 
compared to social costs of $4 billion). All amounts are reflected in 
1999$. As discussed in section IX, we did not complete air quality 
modeling that precisely matches the IAQR region. We anticipate that any 
differences in estimates due to the modeling region analyzed should be 
small.
i. Control Scenario
    Today's proposed rulemaking sets forth requirements for States to 
eliminate their significant contribution to down-wind State's 
nonattainment of the ozone and PM2.5 NAAQS. In order to reduce this 
significant contribution, EPA is proposing to require that certain 
States reduce their emissions of SO2 and NOX. 
Those quantities were derived by calculating the amount of emissions of 
SO2 and NOX that EPA believes can be controlled 
from large EGUs in a highly cost-effective manner. For a more complete 
description of the reduction requirements and how they were calculated, 
see section VI of today's rulemaking.
    While the emission reduction requirements were developed assuming 
highly cost-effective controls on EGUs, States are free to obtain the 
emissions reductions from other source categories. For purposes of 
analyzing the impacts of the rule, EPA is assuming the application of 
the controls that it has identified to be highly cost effective on all 
EGUs in the transport region.
ii. Cost Analysis and Economic Impacts
    For purposes of today's proposal, EPA analyzed the costs using the 
IPM. The IPM is a model that EPA has used to analyze the impacts of 
regulations on the power sector. A description of the methodology used 
to model the costs and the results can be found in section VI. More 
details can be found in ``Economic and Energy Impact of the Proposed 
Interstate Air Quality Rule'' (January 2004).
iii. Human Health and Welfare Benefit Analysis
    Our analysis of the health and welfare benefits anticipated from 
this proposed rule are presented in this section. Briefly, the analysis 
projects major benefits from implementation of the rule in 2010 and 
2015. As described below, thousands of deaths and other serious health 
effects would be prevented. We are able to monetize annual benefits of 
approximately $58 billion in 2010 and $84 billion in 2015 (1999$) of 
those benefits.
    Table XI-1 presents the primary estimates of reduced incidence of 
PM and ozone related health effects for the years 2010 and 2015 for the 
regulatory control strategy. In interpreting the results, it is 
important to keep in mind the limited set of effects we are able to 
monetize. Specifically, the table lists the PM and ozone related 
benefits associated with the reduction of ambient PM and ozone levels. 
These benefits are substantial both in incidence and dollar value. In 
2010, we estimate that there will be approximately 9,600 fewer 
premature deaths annually associated with PM2.5, and the rule will 
result in 5,200 fewer cases of chronic bronchitis, 13,000 fewer non-
fatal heart attacks, 8,900 fewer hospitalizations (for respiratory and 
cardiovascular disease combined); and result in significant reductions 
in days of restricted activity due to respiratory illness (with an 
estimate of 6.4 million fewer cases). We also estimate substantial 
health improvements for children from reduced upper and lower 
respiratory illness, acute bronchitis, and asthma attacks. Ozone health 
related benefits are expected to occur during the summer ozone season 
(usually ranging from May to September in the Eastern U.S.). Based upon 
modeling for 2010, ozone-related health benefits are expected to 
include 1,000 fewer hospital admissions for respiratory illnesses, 120 
emergency room admissions for asthma, 280,000 fewer days with 
restricted activity levels, and 180,000 fewer days where children are 
absent from school due to illnesses. While we did not include separate 
estimates of the number of premature deaths that would be avoided due 
to reductions in ozone levels, recent evidence has been found linking 
short-term ozone exposures with premature mortality independent of PM 
exposures. Recent reports by Thurston and Ito (2001) and the World 
Health Organization (WHO) support an independent ozone mortality 
impact,

[[Page 4645]]

and the EPA Science Advisory Board has recommended that EPA reevaluate 
the ozone mortality literature for possible inclusion in the estimate 
of total benefits. Based on these new analyses and recommendations, EPA 
is sponsoring three independent meta-analyses of the ozone-mortality 
epidemiology literature to inform a determination on inclusion of this 
important health endpoint. Upon completion and peer-review of the meta-
analyses, EPA will make its determination on whether and how benefits 
of reductions in ozone-related mortality will be included in the 
benefits analysis for the final interstate air quality rule.
    Table XI-2 presents the estimated monetary value of reductions in 
the incidence of health and welfare effects. PM-related health benefits 
and ozone benefits are estimated to be approximately $56.9 billion and 
$82.4 billion annually in 2010 and 2015, respectively. Estimated annual 
visibility benefits in Southeastern Class I areas brought about by the 
IAQR are estimated to be $880 million in 2010 and $1.4 billion in 2015. 
All monetized estimates are stated in 1999$. Table XI-3 presents the 
total monetized benefits for the years 2010 and 2015. This table also 
indicates with a ``B'' those additional health and environmental 
effects that we were unable to quantify or monetize. These effects are 
additive to the estimate of total benefits, and EPA believes there is 
considerable value to the public of the benefits that could not be 
monetized. A listing of the benefit categories that could not be 
quantified or monetized in our estimate is provided in Table XI-4.
    In summary, EPA's primary estimate of the annual benefits of the 
rule is approximately 58 + B billion in 2010. In 2015, total monetized 
benefits are approximately $84 + B billion annually. These estimates 
account for growth in real gross domestic product (GDP) per capita 
between the present and the years 2010 and 2015. As the table 
indicates, total benefits are driven primarily by the reduction in 
premature fatalities each year, which account for over 90 percent of 
total benefits.

                        Table XI-1.--Estimated Reductions in Incidence of Health Effects
----------------------------------------------------------------------------------------------------------------
                                                                                       2010            2015
                   Endpoint                                Constituent               estimated       estimated
                                                                                     reduction       reduction
----------------------------------------------------------------------------------------------------------------
Premature Mortality--Adult....................  PM2.5...........................           9,600          13,000
Mortality--Infant.............................  PM2.5...........................              22              29
Chronic Bronchitis............................  PM2.5...........................           5,200           6,900
Acute Myocardial Infarction--Total............  PM2.5...........................          13,000          18,000
Hospital Admissions--Respiratory..............  PM2.5, Ozone....................           5,200           8,100
Hospital Admissions--Cardiovascular...........  PM2.5...........................           3,700           5,000
Emergency Room Visits--Respiratory............  PM2.5, Ozone....................           7,100           9,400
Acute Bronchitis..............................  PM2.5...........................          12,000          16,000
Lower Respiratory Symptoms....................  PM2.5...........................         140,000         190,000
Upper Respiratory Symptoms....................  PM2.5...........................         490,000         620,000
Asthma Exacerbation...........................  PM2.5...........................         190,000         240,000
Acute Respiratory Symptoms (MRADs *)..........  PM2.5, Ozone....................       6,400,000       8,500,000
Work Loss Days................................  PM2.5...........................       1,000,000       1,300,000
School Loss Days..............................  Ozone...........................         180,000        390,000
----------------------------------------------------------------------------------------------------------------
* MRADs = minor restricted activity days.


         Table XI-2.--Estimated Monetary Value of Reductions in Incidence of Health and Welfare Effects
                                           (Millions of 1999 dollars)
----------------------------------------------------------------------------------------------------------------
                                                                                  2010 estimated  2015 estimated
                Endpoint group                             Constituent            monetary value  monetary value
                                                                                   of reductions   of reductions
----------------------------------------------------------------------------------------------------------------
Premature Mortality--Adult....................  PM2.5...........................         $53,000         $77,000
Mortality--Infant.............................  PM2.5...........................             130             180
Chronic Bronchitis............................  PM2.5...........................           1,900           2,700
Acute Myocardial Infarction--Total............  PM2.5...........................           1,100           1,500
Hospital Admissions--Respiratory..............  PM2.5, Ozone....................              85             130
Hospital Admissions--Cardiovascular...........  PM2.5...........................              78             110
Emergency Room Visits--Respiratory............  PM2.5, Ozone....................             2.0             2.6
Acute Bronchitis..............................  PM2.5...........................             4.3             5.7
Lower Respiratory Symptoms....................  PM2.5...........................             2.3             3.0
Upper Respiratory Symptoms....................  PM2.5...........................              13              17
Asthma Exacerbation...........................  PM2.5...........................             8.0              10
Acute Respiratory Symptoms (MRADs *)..........  PM2.5, Ozone....................             320             440
Work Loss Days................................  PM2.5...........................             140             170
School Loss Days..............................  Ozone...........................              13              28
Worker Productivity...........................  Ozone...........................             8.0              17
Visibility--Southeastern Class I Areas........  Light Extinction................             880           1,400
                                                                                 -----------------
    TOTAL + B * *.............................  ................................         $58,000        $84,000
----------------------------------------------------------------------------------------------------------------
B = non-monetized benefits
* MRADs = minor restricted activity days.
** Note total dollar benefits are rounded to the nearest billion and column totals may not add due to rounding.


[[Page 4646]]

2. Benefit-Cost Comparison
    Based upon Table XI-3, the estimated social costs to implement the 
proposed rule emission reductions in 2010 and 2015 are $3 and $4 
billion annually, respectively (1999$). Thus, the net benefit (social 
benefits minus social costs) of the program is approximately $55 + B 
billion annually in 2010 and $80 + B billion annually in 2015. 
Therefore, implementation of the proposed rule is expected to provide 
society with a net gain in social welfare based on economic efficiency 
criteria.

 Table XI-3.--Summary of Annual Benefits, Costs, and Net Benefits of the
                       Interstate Air Quality Rule
                       (Billions of 1999 dollars)
------------------------------------------------------------------------
           Description                   2010                2015
------------------------------------------------------------------------
Social Costs a..................  2.9...............  3.7
Social Benefits b, c............
    Ozone-related benefits......  0.1...............  0.1
    PM-related health benefits..  56.8 + B..........  82.3 + B
    Visibility benefits.........  0.9...............  1.4
Annual Net Benefits (Benefits-    $55 + B...........  $80 + B
 Costs) b, c, d.
------------------------------------------------------------------------
Notes:
a Note that costs are the estimated total annual costs of reducing
  pollutants including NOX and SO2 in the IAQR region.
b As the table indicates, total benefits are driven primarily by PM
  related health benefits. The reduction in premature fatalities each
  year accounts for over 90 percent of total benefits. Benefits in this
  table are associated with NOX and SO2 reductions.
c Not all possible benefits or disbenefits are quantified and monetized
  in this analysis. B is the sum of all unquantified benefits and
  disbenefits. Potential benefit categories that have not been
  quantified and monetized are listed in Table XI-4.
d Net benefits are rounded to nearest billion. Columnar totals may not
  sum due to rounding.

    Every benefit-cost analysis examining the potential effects of a 
change in environmental protection requirements is limited to some 
extent by data gaps, limitations in model capabilities (such as 
geographic coverage), and uncertainties in the underlying scientific 
and economic studies used to configure the benefit and cost models. 
Deficiencies in the scientific literature often result in the inability 
to estimate quantitative changes in health and environmental effects, 
such as potential increases in premature mortality associated with 
increased exposure to carbon monoxide. Deficiencies in the economics 
literature often result in the inability to assign economic values even 
to those health and environmental outcomes that can be quantified. 
While these general uncertainties in the underlying scientific and 
economics literatures (that can cause the valuations to be higher or 
lower) are discussed in detail in the economic analyses and its 
supporting documents and references, the key uncertainties which have a 
bearing on the results of the benefit-cost analysis of this proposed 
rule include the following:
     The exclusion of potentially significant benefit 
categories (such as health and ecological benefits of reduction in 
mercury);
     Errors in measurement and projection for 
variables such as population growth and baseline incidence rates;
     Uncertainties in the estimation of future year 
emissions inventories and air quality;
     Variability in the estimated relationships of 
health and welfare effects to changes in pollutant concentrations;
     Uncertainties in exposure estimation;
     Uncertainties in the size of the effect 
estimates linking air pollution and health endpoints;
     Uncertainties about relative toxicity of 
different components within the complex mixture of PM;
     Uncertainties associated with the effect of 
potential future actions to limit emissions.
    Despite these uncertainties, we believe the benefit-cost analysis 
provides a reasonable indication of the expected economic benefits of 
the proposed rulemaking in future years under a set of reasonable 
assumptions.
    There are a number of health and environmental effects that we were 
unable to quantify or monetize. A full appreciation of the overall 
economic consequences of the proposed rule requires consideration of 
all benefits and costs expected to result from the proposed rule, not 
just those benefits and costs which could be expressed here in dollar 
terms. A listing of the benefit categories that could not be quantified 
or monetized in our estimate are provided in Table XI-4. These effects 
are denoted by ``B'' in Table XI-3 above, and are additive to the 
estimates of benefits.
    We are unable to quantify changes in levels of methylmercury 
contamination in fish associated with reductions in mercury emissions 
for this proposal. However, this proposal is anticipated to decrease 
annual EGU mercury emissions nationwide by 10.6 tons in 2010 or 
approximately 23.5 percent, by 11.8 tons in 2015 or 26.3 percent, and 
by 14.3 tons or 32 percent in 2020. Emission reduction percentage 
decreases are based upon expected mercury emissions changes from 
fossil-fired EGUs larger than 25 megawatt capacity. In a separate 
action today, EPA is proposing to regulate mercury and nickel from 
certain types of electric generating units using the maximum achievable 
control technology (MACT) provisions of section 112 of the CAA or, in 
the alternative, using the performance standards provisions under 
section 111 of the CAA. This proposal will have implications for 
mercury reductions, and potential interactions may exist between the 
rulemakings.

[[Page 4647]]



     Table XI-4.--Additional Non-monetized Benefits of the Proposed
                       Interstate Air Quality Rule
------------------------------------------------------------------------
                                               Unquantified and/or
               Pollutant                       nonmonetized effects
------------------------------------------------------------------------
Ozone Health...........................  Premature mortality.a
                                         Increased airway responsiveness
                                          to stimuli.
                                         Inflammation in the lung.
                                         Chronic respiratory damage.
                                         Premature aging of the lungs.
                                         Acute inflammation and
                                          respiratory cell damage.
                                         Increased susceptibility to
                                          respiratory infection.
                                         Non-asthma respiratory
                                          emergency room visits.
Ozone Welfare..........................  Decreased yields for commercial
                                          forests.
                                         Decreased yields for fruits and
                                          vegetables.
                                         Decreased yields for commercial
                                          and non-commercial crops.
                                         Damage to urban ornamental
                                          plants.
                                         Impacts on recreational demand
                                          from damaged forest
                                          aesthetics.
                                         Damage to ecosystem functions.
PM Health..............................  Low birth weight.
                                         Changes in pulmonary function.
                                         Chronic respiratory diseases
                                          other than chronic bronchitis.
                                         Morphological changes.
                                         Altered host defense
                                          mechanisms.
                                         Non-asthma respiratory
                                          emergency room visits.
PM Welfare.............................  Visibility in many Class I
                                          areas.
                                         Residential and recreational
                                          visibility in non-Class I
                                          areas.
                                         Soiling and materials damage.
                                         Damage to ecosystem functions.
Nitrogen and Sulfate Deposition Welfare  Impacts of acidic sulfate and
                                          nitrate deposition on
                                          commercial forests.
                                         Impacts of acidic deposition on
                                          commercial freshwater fishing.
                                         Impacts of acidic deposition on
                                          recreation in terrestrial
                                          ecosystems.
                                         Reduced existence values for
                                          currently healthy ecosystems.
                                         Impacts of nitrogen deposition
                                          on commercial fishing,
                                          agriculture, and forests.
                                         Impacts of nitrogen deposition
                                          on recreation in estuarine
                                          ecosystems.
                                         Damage to ecosystem functions.
Mercury Health.........................  Neurological disorders.
                                         Learning disabilities.
                                         Developmental delays.
                                         Potential cardiovascular
                                          effects.*
                                         Altered blood pressure
                                          regulation.*
                                         Increased heart rate
                                          variability.*
                                         Myocardial infarction.*
                                         Potential reproductive effects
                                          in adults.*
Mercury Deposition Welfare.............  Impact on birds and mammals
                                          (e.g., reproductive effects).
                                         Impacts on commercial,
                                          subsistence, and recreational
                                          fishing.
                                         Reduced existence values for
                                          currently healthy ecosystems.
------------------------------------------------------------------------
 Notes:
a Premature mortality associated with ozone is not separately included
  in this analysis.
* These are potential effects as the literature is either contradictory
  or incomplete.

B. Paperwork Reduction Act

    The EPA intends to discuss the possible information collection 
burdens of this action in the SNPR. Assuming that States choose to use 
the optional trading program detailed in section VIII, the EPA 
anticipates that the impact on sources will be very small. Under these 
circumstances, the majority of the sources subject to today's rule are 
subject to the title IV Acid Rain Program and many sources are already 
subject to the NOX SIP Call. For sources subject to both of 
these programs, EPA does not anticipate any additional monitoring or 
reporting costs. For more detail on the monitoring and reporting costs 
for sources not currently subject to the title IV Acid Rain Program and 
or the NOX SIP Call see, ``Monitoring and Reporting Costs 
Under the Proposed Interstate Air Quality Rule'' (January 2004).
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time 
needed to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources; complete and review the collection of information; 
and transmit or otherwise disclose the information.
    An Agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA), as 
amended by the Small Business Regulatory Enforcement Fairness Act 
(Public Law No. 104-121) (SBREFA), provides that whenever an agency is 
required to publish a general notice of proposed rulemaking, it must 
prepare and make available an initial regulatory flexibility analysis, 
unless it certifies that the proposed rule, if promulgated, will not 
have ``a significant economic impact on a substantial number of small 
entities.''

[[Page 4648]]

5 U.S.C. 605(b). Small entities include small businesses, small 
organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of today's rule on small 
entities, small entity is defined as: (1) A small business that is 
identified by the North American Industry Classification System (NAICS) 
Code, as defined by the Small Business Administration (SBA); (2) a 
small governmental jurisdiction that is a government of a city, county, 
town, school district or special district with a population of less 
that 50,000; and (3) a small organization that is any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field. Table XI-5 lists entities potentially impacted 
by this proposed rule with applicable NAICS code.

       Table XI-5.--Potentially Regulated Categories and Entities
------------------------------------------------------------------------
                                                 Examples of potentially
            Category             NAICS code \1\     regulated entities
------------------------------------------------------------------------
Industry.......................          221112  Fossil fuel-fired
                                                  electric utility steam
                                                  generating units.
Federal government.............       \2\ 22112  Fossil fuel-fired
                                                  electric utility steam
                                                  generating units owned
                                                  by the Federal
                                                  government.
State/local/Tribal government..       \2\ 22112  Fossil fuel-fired
                                         921150   electric utility steam
                                                  generating units owned
                                                  by municipalities.
                                                  Fossil fuel-fired
                                                  electric utility steam
                                                  generating units in
                                                  Indian Country.
------------------------------------------------------------------------
\1\ North American Industry Classification System.
\2\ Federal, State, or local government-owned and operated
  establishments are classified according to the activity in which they
  are engaged.

    According to the SBA size standards for NAICS code 221112 
Utilities-Fossil Fuel Electric Power Generation, a firm is small if, 
including its affiliates, it is primarily engaged in the generation, 
transmission, and or distribution of electric energy for sale and its 
total electric output for the preceding fiscal year did not exceed 4 
million megawatt hours.
    Courts have interpreted the RFA to require a regulatory flexibility 
analysis only when small entities will be subject to the requirements 
of the rule.\101\ This rule would not establish requirements applicable 
to small entities. Instead, it would require States to develop, adopt, 
and submit SIP revisions that would achieve the necessary 
SO2 and NOX emissions reductions, and would leave 
to the States the task of determining how to obtain those reductions, 
including which entities to regulate. Moreover, because affected States 
would have discretion to choose the sources to regulate and how much 
emissions reductions each selected source would have to achieve, EPA 
could not predict the effect of the rule on small entities. Although 
not required by the RFA, the Agency intends for the SNPR to conduct a 
general analysis of the potential impact on small entities of possible 
implementation strategies.
---------------------------------------------------------------------------

    \101\ See Michigan v. EPA, 213 F.3d 663, 668-69 (D.C. Cir. 
2000), cert. den. 121 S.Ct. 225, 149 L.Ed.2d 135 (2001). An agency's 
certification need consider the rule's impact only on entities 
subject to the rule.
---------------------------------------------------------------------------

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995(Public Law 
104-4)(UMRA), establishes requirements for Federal agencies to assess 
the effects of their regulatory actions on State, local, and Tribal 
governments and the private sector. Under section 202 of the UMRA, 2 
U.S.C. 1532, EPA generally must prepare a written statement, including 
a cost-benefit analysis, for any proposed or final rule that ``includes 
any Federal mandate that may result in the expenditure by State, local, 
and Tribal governments, in the aggregate, or by the private sector, of 
$100,000,000 or more * * * in any one year.'' A ``Federal mandate'' is 
defined under section 421(6), 2 U.S.C. 658(6), to include a ``Federal 
intergovernmental mandate'' and a ``Federal private sector mandate.'' A 
``Federal intergovernmental mandate,'' in turn, is defined to include a 
regulation that ``would impose an enforceable duty upon State, Local, 
or Tribal governments,'' section 421(5)(A)(i), 2 U.S.C. 658(5)(A)(i), 
except for, among other things, a duty that is ``a condition of Federal 
assistance,'' section 421(5)(A)(i)(I). A ``Federal private sector 
mandate'' includes a regulation that ``would impose an enforceable duty 
upon the private sector,'' with certain exceptions, section 421(7)(A), 
2 U.S.C. 658(7)(A).
    Before promulgating an EPA rule for which a written statement is 
needed under section 202 of the UMRA, section 205, 2 U.S.C. 1535, of 
the UMRA generally requires EPA to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, most 
cost-effective, or least burdensome alternative that achieves the 
objectives of the rule.
    The EPA intends to prepare a written statement for the SNPR 
consistent with the requirements of section 202 of the UMRA 
Furthermore, as EPA stated in the proposal, EPA is not directly 
establishing any regulatory requirements that may significantly or 
uniquely affect small governments, including Tribal governments. Thus, 
EPA is not obligated to develop under section 203 of the UMRA a small 
government agency plan. Furthermore, in a manner consistent with the 
intergovernmental consultation provisions of section 204 of the UMRA, 
EPA carried out consultations with the governmental entities affected 
by this rule.
    For several reasons, however, EPA is not reaching a final 
conclusion as to the applicability of the requirements of UMRA to this 
rulemaking action. First, it is questionable whether a requirement to 
submit a SIP revision would constitute a Federal mandate in any case. 
The obligation for a State to revise its SIP that arises out of section 
110(a) of the CAA is not legally enforceable by a court of law, and at 
most is a condition for continued receipt of highway funds. Therefore, 
it is possible to view an action requiring such a submittal as not 
creating any enforceable duty within the meaning of section 
421(5)(9a)(I) of UMRA (2 U.S.C. 658 (a)(I)). Even if it did, the duty 
could be viewed as falling within the exception for a condition of 
Federal assistance under section 421(5)(a)(i)(I) of UMRA (2 U.S.C. 
658(5)(a)(i)(I)).
    As noted earlier, however, notwithstanding these issues, EPA plans 
to prepare for the SNPR the statement that would be required by UMRA if 
its statutory provisions applied, and the EPA has consulted with 
governmental entities as would be required by UMRA. Consequently, it is 
not necessary for EPA to reach a conclusion as to the applicability of 
the UMRA requirements.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of

[[Page 4649]]

regulatory policies that have federalism implications.'' ``Policies 
that have federalism implications'' is defined in the Executive Order 
to include regulations that have ``substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government.''
    This proposed rule does not have federalism implications. It will 
not have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. The CAA establishes the 
relationship between the Federal government and the States, and this 
rule does not impact that relationship. Thus, Executive Order 13132 
does not apply to this rule. In the spirit of Executive Order 13132, 
and consistent with EPA policy to promote communications between EPA 
and State and local governments, EPA specifically solicits comment on 
this proposed rule from State and local officials.

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

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by Tribal officials in the development of regulatory 
policies that have Tribal implications.'' This proposed rule does not 
have ``Tribal implications'' as specified in Executive Order 13175.
    This proposed rule concerns the implementation of the rules that 
address transport of pollution that causes ozone and PM2.5. The CAA 
provides for States and Tribes to develop plans to regulate emissions 
of air pollutants within their jurisdictions. The proposed regulations 
clarify the statutory obligations of States and Tribes that develop 
plans to implement this rule. The TAR gives Tribes the opportunity to 
develop and implement CAA programs, but it leaves to the discretion of 
the Tribe whether to develop these programs and which programs, or 
appropriate elements of a program, they will adopt.
    This proposed rule does not have Tribal implications as defined by 
Executive Order 13175. It does not have a substantial direct effect on 
one or more Indian Tribes, since no Tribe has implemented an air 
quality management program at this time. Furthermore, this proposed 
rule does not affect the relationship or distribution of power and 
responsibilities between the Federal government and Indian Tribes. The 
CAA and the TAR establish the relationship of the Federal government 
and Tribes in developing plans to attain the NAAQS, and this proposed 
rule does nothing to modify that relationship. Because this proposed 
rule does not have Tribal implications, Executive Order 13175 does not 
apply.
    Assuming a Tribe is implementing such a plan at this time, while 
the proposed rule would have Tribal implications upon that Tribe, it 
would not impose substantial direct costs upon it, nor would it preempt 
Tribal law. As provided above, EPA has estimated that the total annual 
costs for the rule as implemented by State, Local, and Tribal 
governments is approximately $3 billion in 2010 and $4 billion in 2010 
(1999$). There are currently very few emissions sources in Indian 
country that could be affected by this rule and the percentage of 
Tribal land that will be impacted is very small. For Tribes that choose 
to regulate sources in Indian country, the costs would be attributed to 
inspecting regulated facilities and enforcing adopted regulations.
    Although Executive Order 13175 does not apply to this proposed 
rule, EPA consulted with Tribal officials in developing this proposed 
rule. The EPA has encouraged Tribal input at an early stage. Also, the 
EPA held periodic meetings with the States and the Tribes during the 
technical development of this rule. In addition, EPA held three calls 
with Tribal environmental professionals to address concerns specific to 
the Tribes. These discussions have given EPA valuable information about 
Tribal concerns regarding the development of this rule. The EPA has 
provided briefings for Tribal representatives and the newly formed 
National Tribal Air Association (NTAA), and other national Tribal 
forums. Input from Tribal representatives has been taken into 
consideration in development of this proposed rule. The EPA 
specifically solicits additional comment on this proposed rule from 
Tribal officials.

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

    Executive Order 13045, ``Protection of Children from Environmental 
Health Risks and Safety Risks'' (62 FR 19885, April 23, 1997) applies 
to any rule that (1) is determined to be ``economically significant'' 
as defined under Executive Order 12866, and (2) concerns an 
environmental health or safety risk that EPA has reason to believe may 
have a disproportionate effect on children. If the regulatory action 
meets both criteria, Section 5-501 of the Order directs the Agency to 
evaluate the environmental health or safety effects of the planned rule 
on children, and explain why the planned regulation is preferable to 
other potentially effective and reasonably feasible alternatives 
considered by the Agency.
    This proposed rule is not subject to the Executive Order because it 
does not involve decisions on environmental health or safety risks that 
may disproportionately affect children. The EPA believes that the 
emissions reductions from the strategies proposed in this rulemaking 
will further improve air quality and will further improve children's 
health.

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

    Executive Order 13211 (66 FR 28355, May 22, 2001) provides that 
agencies shall prepare and submit to the Administrator of the Office of 
Regulatory Affairs, OMB, a Statement of Energy Effects for certain 
actions identified as ``significant energy actions.'' Section 4(b) of 
Executive Order 13211 defines ``significant energy actions'' as ``any 
action by an agency (normally published in the Federal Register) that 
promulgates or is expected to lead to the promulgation of a final rule 
or regulation, including notices of inquiry, advance notices of final 
rulemaking, and notices of final rulemaking (1) (i) that is a 
significant regulatory action under Executive Order 12866 or any 
successor order, and (ii) is likely to have a significant adverse 
effect on the supply, distribution, or use of energy; or (2) that is 
designated by the Administrator of the Office of Information and 
Regulatory Affairs as a ``significant energy action.'' This proposed 
rule is a significant regulatory action under Executive Order 12866, 
and this proposed rule may have a significant adverse effect on the 
supply, distribution, or use of energy. We have prepared a Statement of 
Energy Effects for this action, which may be briefly summarized as 
follows:
    If States choose to obtain the emission reductions required by this 
rule by regulating EGUs, EPA projects that approximately 3100 MWs of 
coal-fired generation may be retired earlier than the generation would 
have been retired absent today's proposed rule-making. We do not 
believe that this rule will have any other impacts that exceed the 
significance criteria. The EPA projects that the average annual 
electricity price

[[Page 4650]]

will increase by about 2 percent in 2010, and about 3 percent in 2015.
    The EPA believes that a number of features of today's rulemaking 
serve to reduce its impact on energy supply. First, by allowing the use 
of a trading program, overall cost and thus impact on energy supply is 
reduced. Second EPA has provided adequate time for EGUs to install the 
required controls.
    The use of a capped trading program to reduce emissions of 
SO2 and NOX is also consistent with the 
President's National Energy Policy.

I. National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise practical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. The NTTAA directs EPA 
to provide Congress, through OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    In the SNPR, EPA will include regulatory language concerning 
monitoring, recordkeeping, and recording provisions that will apply to 
certain source categories if States choose to require reductions from 
them. These provisions may involve technical standards that may 
implicate the use of voluntary consensus standards. Therefore, EPA will 
address the NTTAA in the SNPR.

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

    Executive Order 12898, ``Federal Actions to Address Environmental 
Justice in Minority Populations and Low-Income Populations,'' requires 
Federal agencies to consider the impact of programs, policies, and 
activities on minority populations and low-income populations. 
According to EPA guidance,\102\ agencies are to assess whether minority 
or low-income populations face risk or a rate of exposure to hazards 
that is significant and that ``appreciably exceeds or is likely to 
appreciably exceed the risk or rate to the general population or to the 
appropriate comparison group.''
---------------------------------------------------------------------------

    \102\ U.S. Environmental Protection Agency. ``Guidance for 
Incorporating Environmental Justice Concerns in EPA's NEPA 
Compliance Analyses'' (Review Draft). Office of Federal Activities. 
July 12, 1996.
---------------------------------------------------------------------------

    In accordance with Executive Order 12898, the Agency has considered 
whether this proposed rule may have disproportionate negative impacts 
on minority or low income populations. Because the Agency expects this 
proposed rule to reduce pollutant loadings and exposures generally, 
negative impacts to these sub-populations which appreciably exceed 
similar impacts to the general population are not expected.

List of Subjects

40 CFR Part 51

    Administrative practice and procedure, Air pollution control, 
Intergovernmental relations, Nitrogen dioxide, Ozone, Particulate 
matter, Reporting and recordkeeping requirements, Sulfur oxides, 
Volatile organic compounds.

40 CFR Part 72

    Acid rain, Administrative practice and procedure, Air pollution 
control, Electric utilities, Intergovernmental relations, Nitrogen 
oxides, Reporting and recordkeeping requirements, Sulfur oxides.

40 CFR Part 75

    Acid rain, Air pollution control, Electric utilities, Nitrogen 
oxides, Reporting and recordkeeping requirements, Sulfur oxides.

40 CFR Part 96

    Administrative practice and procedure, Air pollution control, 
Nitrogen oxides, Reporting and recordkeeping requirements.

    Dated: December 17, 2003.
Michael O. Leavitt,
Administrator.
[FR Doc. 04-808 Filed 1-29-04; 8:45 am]
BILLING CODE 6560-50-P