[Federal Register Volume 70, Number 91 (Thursday, May 12, 2005)]
[Proposed Rules]
[Pages 25408-25423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-5520]



[[Page 25407]]

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Part III





Environmental Protection Agency





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40 CFR Parts 51 and 96



Inclusion of Delaware and New Jersey in the Clean Air Interstate Rule; 
Proposed Rule

  Federal Register / Vol. 70, No. 91 / Thursday, May 12, 2005 / 
Proposed Rules  

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 96

[OAR-2003-0053; FRL-7885-8]
RIN 2060-AM95


Inclusion of Delaware and New Jersey in the Clean Air Interstate 
Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: In this action, we are proposing to include Delaware and New 
Jersey in the Clean Air Interstate Rule (CAIR) for fine particles (PM 
2.5 ), based on a preliminary assessment that they 
contribute significantly to a downwind State's nonattainment. In the 
CAIR, we determined that upwind States that contribute 0.2 [mu]g/m\3\ 
or more to a downwind fine particles (PM 2.5 ) nonattainment 
area are potentially deemed to be contributing significantly to 
nonattainment. We are proposing here to combine Delaware and New Jersey 
for purposes of this test. We have tentatively determined that Delaware 
and New Jersey should be covered by the CAIR for annual sulfur dioxide 
(SO 2 ) and nitrogen oxides (NOX) requirements.
    In this proposal, we are not reopening any of the technical aspects 
of the CAIR final analyses. Rather, we are proposing to augment the 
analytical approach used in the CAIR by supplementing the air quality 
step of the contribution analysis.
    For a more detailed discussion of the purpose, background, and 
analytical approach of the CAIR, and for the detailed provisions of the 
CAIR, see the CAIR final rule which is published in today's Federal 
Register.

DATES: Comments must be received on or before June 27, 2005. A public 
hearing, if requested, will be held in Washington, DC on May 26, 2005, 
beginning at 9 a.m.

ADDRESSES: Submit your comments, identified by Docket ID No. OAR-2003-
0053, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the on-line instructions for submitting comments.
     Agency Website: http://www.epa.gov/edocket. EDOCKET, EPA's 
electronic public docket and comment system, is EPA's preferred method 
for receiving comments. Follow the on-line instructions for submitting 
comments.
     E-mail: [email protected].
     Fax: (202) 566-1741.
     Mail: Air Docket, Environmental Protection Agency, 
Mailcode: 6102T, 1200 Pennsylvania Ave., NW., Washington, DC 20460. 
Please include a total of two copies.
     Hand Delivery: EPA Docket Center (Air Docket), U.S. 
Environmental Protection Agency, 1301 Constitution Avenue, NW., Room 
B102, Washington, DC 20004. Such deliveries are only accepted during 
the Docket's normal hours of operation, and special arrangements should 
be made for deliveries of boxed information.
    Instructions: Direct your comments to Docket ID No. OAR-2003-0053. 
The EPA's policy is that all comments received will be included in the 
public docket without change and may be made available online at http://www.epa.gov/edocket, including any personal information provided, 
unless the comment includes information claimed to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Do not submit information that you consider to 
be CBI or otherwise protected through EDOCKET, regulations.gov, or e-
mail. The EPA EDOCKET and the Federal regulations.gov Web sites are 
``anonymous access'' systems, which means EPA will not know your 
identity or contact information unless you provide it in the body of 
your comment. If you send an e-mail comment directly to EPA without 
going through EDOCKET or regulations.gov, your e-mail address will be 
automatically captured and included as part of the comment that is 
placed in the public docket and made available on the Internet. If you 
submit an electronic comment, EPA recommends that you include your name 
and other contact information in the body of your comment and with any 
disk or CD-ROM you submit. 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. Electronic files should avoid 
the use of special characters, any form of encryption, and be free of 
any defects or viruses.
    Docket: All documents in the docket are listed in the EDOCKET index 
at http://www.epa.gov/edocket. Although listed in the index, some 
information is not publicly available, i.e., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically in EDOCKET or in hard 
copy at the Air Docket, EPA/DC, EPA West, Room B102, 1301 Constitution 
Ave., NW., Washington, DC. The 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. This Docket 
Facility is open from 8 a.m. to 5:30 p.m., Monday through Friday, 
excluding legal holidays. The Docket telephone number is (929) 566-
1742, fax (202) 566-1741.

FOR FURTHER INFORMATION CONTACT: General questions concerning today's 
action should be addressed to Jan King, U.S. EPA, Office of Air Quality 
Planning and Standards, Air Quality Strategies and Standards Division, 
Mail Code C539-02, Research Triangle Park, NC 27711, telephone (919) 
541-5665, e-mail [email protected]. For legal questions, please contact 
Steven Silverman, U.S. EPA, Office of General Counsel, Mail Code 2344A, 
1200 Pennsylvania Avenue, NW., Washington, DC 20460, telephone (202) 
564-5523, 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, Monitoring, and Analysis 
Division, Mail Code D243-01, Research Triangle Park, NC 27711, 
telephone (919) 541-5692, e-mail at [email protected]. For questions 
regarding the EGU cost analyses, emissions inventories, and budgets, 
please contact John Robbins, U.S. EPA, Office of Atmospheric Programs, 
Clean Air Markets Division, Mail Code 6204J, 1200 Pennsylvania Avenue, 
NW., Washington, DC 20460, telephone (202) 343-9390, e-mail at 
[email protected]. For questions regarding statewide emissions 
inventories, please contact Marc Houyoux, U.S. EPA, Office of Air 
Quality Planning and Standards, Emissions, Monitoring, and Analysis 
Division, Mail Code D205-01, Research Triangle Park, NC 27711, 
telephone (919) 541-3649, e-mail at [email protected]. For questions 
regarding emissions reporting requirements, please contact Bill 
Kuykendal, U.S. EPA, Office of Air Quality Planning and Standards, 
Emissions, Monitoring, and Analysis Division, Mail Code D205-01, 
Research Triangle Park, NC, 27711, telephone (919) 541-5372, 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

[[Page 25409]]

[email protected]. For questions regarding analyses required by 
statutes and executive orders, 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:

Public Hearing

    A public hearing, if requested, will be held in Washington, DC on 
May 26, 2005 beginning at 9 a.m. If you wish to request a hearing and 
present testimony or attend the hearing, you should notify, on or 
before May 19, 2005, Jan King, U.S. EPA, Office of Air Quality Planning 
and Standards, Air Quality Strategies and Standards Division, Mail Code 
C539-02, Research Triangle Park, NC 27711, telephone (919) 541-5665, e-
mail [email protected]. Oral testimony will be limited to 5 minutes 
each. The hearing will be strictly limited to the subject matter of the 
proposal, the scope of which is discussed below. Any member of the 
public may file a written statement by the close of the comment period. 
Written statements (duplicate copies preferred) should be submitted to 
Docket OAR-2003-0053, at the address listed above for submitted 
comments. The hearing location and schedule, including lists of 
speakers, will be posted on EPA's webpage at http://www.epa.gov/cleanairinterstaterule. A verbatim transcript of the hearing and 
written statements will be made available for copying during normal 
working hours at the Office of Air and Radiation Docket and Information 
Center at the address listed for inspection for documents.
    If no requests for a public hearing are received by close of 
business on May 19, 2005, the hearing will be cancelled. The 
cancellation will be announced on the webpage at the address shown 
above.

Outline

I. Background
    A. Summary of the Clean Air Interstate Rule
    B. What Are the Central Requirements of Today's Proposal?
II. Summary of EPA's Analytical Approach, Findings, and Final 
Actions in the Interstate Air Quality Rule
    A. How Did EPA Interpret the CAA's Pollution Transport 
Provisions?
    B. Which Air Pollutants Did EPA Address In the CAIR and Why?
    C. Air Quality Analysis of Ozone and PM2.5 
Contributions Among States
    D. Analysis of Highly Cost-Effective Controls and Timeframe For 
Emissions Reductions
III. Proposed Inclusion of Delaware and New Jersey in the Clean Air 
Interstate Rule
    A. Why is EPA Reconsidering the Status of Delaware and New 
Jersey in the CAIR?
    B. Air Quality Modeling Results
IV. Proposed Findings and Action
    A. Proposed Findings of Significant Contribution for Delaware 
and New Jersey
    B. SIP Approval Criteria
    C. SIP Submittal Deadline
    D. Emissions Reporting Requirements
V. Expected Effects of the Proposed Action
    A. Emissions
    B. Air Quality
VI. 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

I. Background

A. Summary of the Clean Air Interstate Rule

    In a final rule published in today's Federal Register, titled the 
Clean Air Interstate Rule (``CAIR''), EPA found that certain States 
must reduce emissions of SO2 and/or NOX by 
certain amounts because those emissions contribute significantly to 
nonattainment in downwind areas in other States that are not meeting 
the annual PM2.5 national ambient air quality standard 
(NAAQS), or the 8-hour ozone NAAQS.\1\ The CAIR establishes State 
implementation plan (SIP) requirements for the affected upwind States 
under Clean Air Act (CAA) section 110(a)(2). The CAA section 
110(a)(2)(D) requires SIPs to contain adequate provisions prohibiting 
air pollutant emissions from sources or activities in those States that 
contribute significantly to nonattainment in, or interfere with 
maintenance by, any other State with respect to a NAAQS. Based on air 
quality modeling analyses and cost analyses, EPA has concluded in the 
CAIR that SO2 and NOX emissions in certain States 
in the eastern half of the nation, through the phenomenon of air 
pollution transport,\2\ contribute significantly to nonattainment or 
interfere with maintenance of the PM2.5 and 8-hour ozone 
NAAQS in another State.\3\ This is because NOX and 
SO2 are important precursors of PM2.5, and 
NOX is an important precursor of ozone. As a result of the 
CAIR, EPA is requiring SIP revisions in 28 States and the District of 
Columbia to reduce SO2 and/or NOX emissions.
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    \1\ ``Rule to Reduce Interstate Transport of Fine Particulate 
Matter and Ozone (Interstate Air Quality Rule); Proposed Rule,'' (69 
FR 4566, January 30, 2004) (NPR or January Proposal); ``Supplemental 
Proposal for the Rule to Reduce Interstate Transport of Fine 
Particulate Matter and Ozone (Clean Air Interstate Rule); Proposed 
Rule'' (69 FR 32684, June 10, 2004) (SNPR or Supplemental Proposal). 
We summarize major features of that rule here as an aid to the 
reader. The EPA is not reconsidering any aspect of the CAIR rule and 
not accepting comment in this proceeding on the promulgated CAIR 
rule.
    \2\ In today's final rule, 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.
    \3\ We also found that emissions of SO2 and 
NOX from upwind States in the PM2.5 and ozone 
CAIR regions can interfere with these same downwind receptors' 
maintenance of each NAAQS.
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    The 23 States along with the District of Columbia that must reduce 
annual SO2 and NOX emissions for the purposes of 
the PM2.5 NAAQS are: Alabama, Florida, Georgia, Illinois, 
Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, 
Mississippi, Missouri, New York, North Carolina, Ohio, Pennsylvania, 
South Carolina, Tennessee, Texas, Virginia, West Virginia, and 
Wisconsin. While we had originally proposed including Delaware and New 
Jersey in this group based on our initial air quality contribution 
assessment, subsequent refinement of the emissions estimates and air 
quality modeling system resulted in their estimated contributions to 
PM2.5 nonattainment being below the final CAIR threshold for 
inclusion in the PM2.5-related requirements.
    The 25 States along with the District of Columbia that must reduce 
NOX emissions for the purposes of the 8-hour ozone NAAQS 
are: Alabama, Arkansas, Connecticut, Delaware, Florida, 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.
    Under CAA section 110 and thus under the CAIR, each State may 
determine independently which sources to subject to controls, and which 
control measures to adopt. Our analysis indicated that emissions 
reductions from electric generating units (EGUs) are

[[Page 25410]]

highly cost effective, and, in the CAIR rule, we encouraged States to 
adopt these controls. States that do so must place an enforceable 
limit, or cap, on EGU emissions (see section VII of the CAIR for 
further discussion). We calculated the amount of each State's EGU 
emissions cap, or budget, based on reductions that we have determined 
are highly cost-effective. States may allow their EGUs to participate 
in an EPA-administered cap and trade program as a way to reduce the 
cost of compliance, and to provide compliance flexibility. The cap and 
trade programs are described in more detail in section VIII of the 
CAIR.

B. What Are the Central Requirements of Today's Proposal?

    In today's action, we propose to combine Delaware and New Jersey 
for purposes of assessing whether that combination is contributing 
significantly to nonattainment of the PM2.5 NAAQS by 
downwind receptors under section 110(a)(2)(D), and to apply the finding 
from that combined assessment to each State. Based on presently 
available air quality modeling results, our tentative assessment is 
that the combination of the two states does contribute significantly to 
PM2.5 nonattainment in New York County, NY, and possibly to 
one or more counties in eastern Pennsylvania. Accordingly, we are 
proposing that Delaware and New Jersey be required under CAA section 
110(a)(2)(D) to adopt SIP requirements for addressing annual emissions 
of the PM2.5 precursors NOX and SO2. 
We intend to conduct confirmatory air quality modeling and make the 
results available through a Notice of Data Availability prior to 
finalization of this proposal.
    Delaware and New Jersey are already subject to the CAIR for 
purposes of ozone, and must reduce ozone season emissions of 
NOX starting in 2009. This proposal would add requirements 
for control of annual emissions of SO2 and of 
NOX.
    We propose to require that SIPs to achieve the required 
PM2.5 emissions reductions be submitted as soon as 
practicable, but no later than 18 months after the date of signature of 
the CAIR, i.e., September 11, 2006, the same deadline as in the CAIR 
rule. We are doing so because we anticipate being able to act quickly 
on this proposal, and because we believe this is a reasonable amount of 
time for submission of these States' SIPs. We also believe that there 
are evident efficiencies in having these reductions occur at the same 
time as the reductions from other states covered by the CAIR rule for 
NOX and SO2. See also section IV.D below.
    As an option for Delaware and New Jersey, should EPA finalize this 
proposal, we also propose to provide model cap and trade programs for 
EGUs. We would also administer these programs, which would be governed 
by rules provided by EPA that Delaware and New Jersey may adopt or 
incorporate by reference.

II. Summary of EPA's Analytical Approach, Findings, and Final Actions 
in the Interstate Air Quality Rule \4\
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    \4\ We note again that this section is provided for purposes of 
information, and not to reopen or reconsider any issues discussed in 
the section.
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A. How Did EPA Interpret the CAA's Pollution Transport Provisions?

    The CAIR is based on the ``good neighbor'' provision of CAA section 
110(a)(2)(D), which requires States to develop SIP provisions assuring 
that emissions from their sources do not contribute significantly to 
downwind nonattainment or interfere with maintenance of the NAAQS. We 
first interpreted this provision and developed a detailed methodology 
for applying it in the NOX SIP Call rulemaking (October 27, 
1998), which concerned interstate transport of ozone precursors.
    As summarized above, the CAIR requires upwind States to submit SIP 
revisions requiring their sources to eliminate emissions of certain 
precursors for PM2.5 and ozone, to protect downwind 
nonattainment areas. We developed the CAIR and this proposal relying 
heavily on the NOX SIP Call approach. In the NOX 
SIP Call, we interpreted section 110(a)(2)(D) to authorize us to 
determine the amount of emissions in upwind States that ``contribute 
significantly'' to downwind nonattainment or ``interfere with'' 
downwind maintenance, and to require those States to eliminate that 
amount of emissions. We recognized that States must retain full 
authority to choose the sources to control, and the control mechanisms, 
to achieve those reductions.
    In the NOX SIP Call, we set out several criteria or 
factors for the ``contribute significantly'' test, and further 
indicated that the same criteria should apply to the ``interfere with 
maintenance'' provision.\5\ The EPA determined the amount of emissions 
that significantly contribute to downwind nonattainment from sources in 
a particular upwind State primarily by (i) evaluating, with respect to 
each upwind State, several air quality related factors, including 
determining that all emissions from the State have a sufficiently great 
impact downwind (in the context of the collective contribution nature 
of the ozone problem); and
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    \5\ In the NOX SIP Call, because the same criteria 
applied, the discussion of the ``contribute significantly to 
nonattainment'' test generally also applied to the ``interfere with 
maintenance'' test. However, in the NOX SIP Call, EPA 
stated that the ``interfere with maintenance'' test applied with 
respect to only the 8-hour ozone NAAQS (63 FR 57379-80).
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    (ii) Determining the amount of that State's emissions that can be 
eliminated through the application of highly cost-effective controls. 
Before reaching a conclusion, EPA evaluated several secondary, and more 
general, considerations. These include:
     The consistency of the regional reductions with the 
attainment needs of the downwind areas with nonattainment problems;
     The overall fairness of the control regimes required of 
the downwind and upwind areas, including the extent of the controls 
required or implemented by the downwind and upwind areas;
     General cost considerations, including the relative cost 
effectiveness of additional downwind controls compared to upwind 
controls (63 FR 57403).
    In the CAIR rulemaking, we utilized much the same interpretation 
and application of section 110(a)(2)(D) for regulating downwind 
transport of precursors of ozone and PM2.5 as we adopted for 
the NOX SIP Call. We adjusted some aspects of the CAIR 
analytic approaches for various reasons, including the need to account 
for regulation of a different pollutant (PM2.5) with an 
additional precursor (SO2). The CAIR's approach to the ozone 
issue is essentially the same as in the NOX SIP Call, but 
applied to more recent data on the relevant air quality and cost 
factors.
    For a more detailed discussion of how we interpreted the CAA 
pollution transport provisions, see section II of the CAIR in today's 
Federal Register.

B. Which Air Pollutants Did EPA Address in the CAIR and Why?

    In section III of the CAIR (add cite), EPA provided the following 
characterization of the origin and distribution of 8-hour ozone air 
quality problems: 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 compound: 
Volatile organic compounds (VOCs) and NOX [mainly nitrogen 
oxide (NO) and nitrogen dioxide (NO2)]; and the formation of

[[Page 25411]]

ozone increases with temperature and sunlight, which is one reason 
ozone levels are higher during the summer.
    In the CAIR, EPA noted that we continue to rely on the assessment 
of ozone transport made in great depth by the Ozone Transport 
Assessment Group (OTAG) in the mid-1990s.\6\ 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:
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    \6\ Ozone Transport Assessment Group, OTAG Final Report, 1997.
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     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).
    In section III of the CAIR, we summarized key scientific and 
technical aspects of the occurrence, formation, and origins of 
PM2.5, as well as findings and observations relevant to 
formulating control approaches for reducing the contribution of 
transport to fine particle problems. For a detailed discussion of the 
key concepts and provisional conclusions drawn from the CAIR, see 
section III of the CAIR published in today's Federal Register.
    PM2.5 in ambient air is a complex mixture of component 
of different chemical compositions and origins. Based on the 
understanding of current scientific and technical information, as well 
as our air quality modeling, as summarized in the CAIR in today's 
Federal Register, we concluded that it was both appropriate and 
necessary to focus on control of SO2 and NOX 
emissions as the most effective approach to reducing the contribution 
of interstate transport to PM2.5. Current information 
relating to sources and controls for 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 (69 FR 4582). For all of these 
components, the lack of knowledge of and ability to quantify accurately 
the interstate transport of these components limited our ability to 
include these components in this rule.
    For a more detailed discussion of how we chose which pollutants to 
regulate, see section III.B.1.a of the final CAIR in the rules section 
of today's Federal Register.

C. Air Quality Analysis of Ozone and PM2.5 Contributions 
Among States

    For the CAIR, we performed State-by-State zero-out modeling to 
quantify the contribution from emissions in each State to future ozone 
and PM2.5 nonattainment in other States and to determine 
whether that contribution meets requirements of the ``contribute 
significantly'' test. This zero-out modeling technique provides an 
estimate of downwind impacts by comparing the model predictions from 
the 2010 base case to the predictions from a run in which all 
anthropogenic NOX emissions (in the case of ozone) or all 
anthropogenic SO2 and NOX emissions (in the case 
of PM2.5) are removed from specific States, one State at a 
time. Counties presently exceeding the ozone or PM2.5 NAAQS 
and forecast to be nonattainment for ozone or PM2.5 in the 
2010 Base Case were used as receptors for quantifying interstate 
contributions of ozone and/or PM2.5. For each State-by-State 
zero-out run, we projected the ozone design value or the annual average 
PM2.5 concentration at each receptor. The contribution from 
an upwind State to nonattainment at a given downwind receptor was 
determined by calculating difference in ozone or PM2.5 
concentration between the 2010 Base Case and the zero-out run at that 
receptor. We followed this process for each State-by-State zero-out run 
and each receptor, for both ozone and PM2.5. For each upwind 
State, we identified the largest PM2.5 contribution from 
that State to a downwind nonattainment receptor in order to determine 
the magnitude of the maximum downwind contribution to PM2.5 
nonattainment from each State. The maximum downwind contribution was 
our chosen metric for determining whether or not the PM2.5 
contribution was significant. After considering an updated analysis and 
public comments, we applied a threshold of 0.2 [mu]g/m3 for 
this determination. For ozone, we applied a multi-metric test of 
significant contribution. For ozone, we also used a second method of 
quantifying State-to-State contributions, known as source receptor 
modeling, in addition to the emissions zero-out approach just 
described. This contribution analysis is more fully described in 
section VI of the preamble for the CAIR.

D. Analysis of Highly Cost-Effective Controls and Timeframe for 
Emissions Reductions

1. Overall Criteria
    In section IV.A of the CAIR rulemaking published in today's Federal 
Register, we considered a variety of factors in evaluating the source 
categories from which highly cost-effective reductions may be available 
and the level of reduction assumed from that sector. 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 further stated that overall, ``We are striving * * * 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.'' These criteria are unaffected by 
this proposal.
2. Evaluation of Cost Effectiveness and Feasibility
    Section IV in the CAIR Notice of Final Rulemaking (NFR) preamble 
describes EPA's determination of regionwide SO2 and 
NOX control levels. As described in section IV in the CAIR 
NFR preamble, EPA determined that highly cost-effective emissions 
reductions may be obtained by controlling EGUs. The EPA determined the 
amounts of emissions reductions that must be eliminated in upwind 
States to help downwind States achieve attainment of the 
PM2.5 and ozone NOX NAAQS, by assuming the 
application of highly cost-effective control measures to EGUs and 
determining the emissions reductions that would result.
    For CAIR, EPA determined highly cost-effective regionwide amounts 
of emissions reductions based on, as in the NOX SIP Call, 
comparison to reference lists of the cost effectiveness of other 
regulatory controls. We developed reference lists for both average and 
marginal cost effectiveness of those other controls. By comparison to 
the reference lists, EPA determined that the CAIR final (2015) 
SO2 and NOX regionwide control levels are highly 
cost effective. The EPA also developed marginal cost-effectiveness 
curves for SO2 and NOX abatement at varying 
levels of stringency, to corroborate its cost-effectiveness 
determinations.
    The EPA determined the interim control levels (commencing in 2009 
for NOX and in 2010 for SO2) based on evaluating 
the feasibility of installing the necessary emission control retrofits. 
Although the interim regionwide control levels were determined based on

[[Page 25412]]

feasibility considerations, EPA also evaluated the cost effectiveness 
of the interim control levels to ensure that they were also highly cost 
effective.
    Section IV.C in the CAIR NFR preamble describes EPA's feasibility 
analysis, and section IV.A describes our evaluation of highly cost-
effective controls. Section V in the CAIR NFR preamble describes the 
method EPA used to apportion regionwide control levels to the affected 
States. A technical support document in the CAIR docket entitled 
``Modeling of Control Costs, Emissions, and Control Retrofits for Cost 
Effectiveness and Feasibility Analyses'' describes EPA's use of the 
Integrated Planning Model (IPM) for its cost-effectiveness and 
feasibility analyses. In addition, a technical support document 
entitled ``Boilermaker Labor Analysis for the Final Clean Air 
Interstate Rule'' provides further explanation of EPA's feasibility 
analyses. Documentation for IPM, as well as IPM output files, are 
available in the CAIR docket.
3. CAIR Regionwide SO2 and NOX Emission Reduction 
Requirements
    The CAIR requires annual SO2 and NOX 
reductions in the District of Columbia and the following 23 States: 
Alabama, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, 
Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, New 
York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, 
Texas, Virginia, West Virginia, and Wisconsin. If all affected States 
choose to implement the CAIR annual SO2 emission reduction 
requirements by controlling EGUs, the regionwide annual SO2 
emissions caps that will apply for EGUs in these 23 States and the 
District of Columbia are 3.6 million tons in 2010 and 2.5 million tons 
in 2015. If all affected States choose to implement the CAIR annual 
NOX emission reduction requirements by controlling EGUs, the 
regionwide annual NOX emissions caps that will apply for 
EGUs in these 23 States and the District of Columbia are 1.5 million 
tons in 2009 and 1.3 million tons in 2015.
    The CAIR does not require annual SO2 or NOX 
emissions reductions in Delaware or New Jersey. However, today EPA is 
proposing to require annual SO2 and NOX 
reductions in these two States. Proposed annual SO2 and 
NOX budgets for Delaware and New Jersey are presented later 
in this preamble. If EPA finalizes these proposed annual SO2 
and NOX budgets for Delaware and New Jersey--and if those 
States choose to implement their annual emission reduction requirements 
by controlling EGUs--then the CAIR regionwide EGU caps would be revised 
to include reduction requirements for these two States. The revised 
annual SO2 caps, including Delaware and New Jersey, would be 
3.7 million tons in 2010 and 2.6 million tons in 2015. The revised 
annual NOX caps, including Delaware and New Jersey, would be 
1.5 million tons in 2009 and 1.3 million tons in 2015.
    In addition to its annual SO2 and NOX 
emission reduction requirements, the CAIR requires ozone season 
NOX emissions reductions in the District of Columbia and the 
following 25 States: Alabama, Arkansas, Connecticut, Delaware, Florida, 
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. If all affected States choose to implement the CAIR 
ozone season NOX emission reduction requirements by 
controlling EGUs, the regionwide ozone season NOX emissions 
caps that will apply for EGUs in these 25 States and the District of 
Columbia are 0.6 million tons in 2009 and 0.5 million tons in 2015.

III. Proposed Inclusion of Delaware and New Jersey in the Clean Air 
Interstate Rule

A. Why Is EPA Reconsidering the Status of Delaware and New Jersey in 
the CAIR?

    As explained earlier, section 110(a)(2)(D) of the CAA requires 
States to include in their SIPs adequate provisions prohibiting 
emissions that will contribute significantly to nonattainment in, or 
interfere with maintenance by, any other State. The term ``contribute 
significantly'' is not further defined, so in implementing this section 
we have had to develop an analytical approach to give specific meaning 
to that term. The underlying logic of the analytical approach used in 
both the NOX SIP Call and the CAIR is that the emission 
reduction efforts needed to reach attainment should be reasonably 
balanced between the State containing a nonattainment area and upwind 
States significantly contributing to the nonattainment. In this way, 
control efforts on one side of a border are not undermined (and even 
rendered futile) by out-of-State emissions, and highly cost-effective 
emissions reductions by out-of-State sources which contribute 
significantly to downwind receptors' nonattainment are achieved. We 
believe this approach is both efficient and equitable, so that overall 
costs are less and costs are more fairly distributed than if the burden 
of reaching attainment were entirely on the State with the 
nonattainment area.
    We are proposing to retain this underlying analytical approach, but 
to treat Delaware and New Jersey as special cases and as a single 
geographic area, because of their relatively small size (and 
correspondingly lower total emissions), because of the relatively high 
emissions density of these States, because we believe doing so will 
achieve a result that is more in keeping with the intention of section 
110(a)(2)(D), and because doing so will ensure that a State located 
between an upwind State that significantly contributes to nonattainment 
in a downwind State, and that downwind State, carries its appropriate 
emission reduction obligation mandated by section 110(a)(2)(D). 
Specifically, we propose to combine Delaware and New Jersey for 
purposes of assessing whether that combination is contributing 
significantly to nonattainment of the PM2.5 NAAQS by 
downwind receptors under section 110(a)(2)(D), and to apply the finding 
from that combined assessment to each State.
    As stated earlier, the analytical approach used for the CAIR has 
two parts, the first of which is a test of whether the air quality 
contribution from one entire State to nonattainment in any part of 
another State is strong enough to be considered significant, pending 
consideration of control costs. For ozone, we used a test for this 
first part which is based on several metrics of air quality 
contribution, involving absolute magnitude, relative magnitude, and 
frequency. For PM2.5, we used a test with the single 
criterion of whether the PM2.5 air quality contribution from 
an upwind State to nonattainment in a downwind State, due to total 
anthropogenic SO2 and NOX emissions in the upwind 
State, was 0.2 [mu]g/m3 or more. We believe that this 
specific form of the analytical approach used in the final CAIR rule 
has very appropriately identified a set of 23 States and the District 
of Columbia that should make certain reductions in annual emissions by 
2009 for NOX and by 2010 for SO2, and larger 
reductions by 2015 for NOX and SO2, in order to 
avoid contributing significantly to PM2.5 nonattainment or 
interfere with maintenance in other States. Similarly, we believe that 
the original analytical approach has very appropriately identified a 
set of 25 States and the District of Columbia that should make certain 
reductions in ozone season NOX emissions by 2009, and larger 
reductions by 2015, in order to avoid contributing significantly to

[[Page 25413]]

ozone nonattainment or interfere with maintenance in other States.
    In the course of applying that analytical approach, we realized 
that an upwind State may have relatively low total emissions and thus 
have a maximum contribution on other States that is below the air 
quality contribution threshold used in the CAIR, simply because the 
State is small in geographic area, and yet clearly contributes to a 
degree to PM2.5 nonattainment in downwind States, because 
the upwind State is located between an even further upwind State that 
significantly contributes to nonattainment in a downwind State, and the 
downwind receptor State. Also, Delaware and New Jersey each has 
substantial emissions for its size. Therefore, excluding Delaware or 
New Jersey from emission reduction requirements related to 
PM2.5 might prevent the desired balancing of local and 
upwind controls. Excluding either State could forgo opportunities for 
highly cost-effective control that would improve air quality in nearby 
States' nonattainment areas. Ignoring the contributions of Delaware and 
New Jersey could result in both air quality detriments and cost 
inefficiencies and inequities.
    The EPA considered alternative approaches to addressing this issue. 
We do not believe it would be appropriate to consider amending or 
revising the significance critria set forth in the final CAIR notice. 
Nevertheless, we believe that these two States, which combined 
represent a significant source of emissions, should not be allowed to 
fail to meet these tests, in the unique circumstances presented here, 
solely because of their comparatively small geographic size. We have 
faced a similar issue with respect to small geographic entities in the 
NOX SIP Call, and more recently in CAIR. In the 
NOX SIP Call we combined both Delaware and the District of 
Columbia with Maryland in the contribution analyses, foreshadowing the 
issues addressed by this proposal. Furthermore, the final CAIR 
similarly addressed the special case of one small political 
jurisdiction, the District of Columbia and combined that with Maryland. 
In all the analysis of air quality contributions for the CAIR, we 
combined the District of Columbia and Maryland into one unit for 
purposes of analyzing contributions to nonattainment in other States, 
because of the small size of the District of Columbia and, hence, its 
emissions, and its close proximity to Maryland. We applied the finding 
from this combined analysis to each jurisdiction separately. We did not 
receive any adverse comment on this approach. Nor did we receive 
adverse comment in the SIP Call rule regarding combining Delaware, 
Maryland, and the District of Columbia in the contribution analysis.
    The final CAIR's exclusion of Delaware and New Jersey for purposes 
of PM2.5 drew our attention because of features unique to 
Delaware and New Jersey. Table III-1 presents relevant facts regarding 
Delaware and New Jersey, and Table III-2 presents similar information 
for Maryland, New York, and Pennsylvania for comparison. On balance, we 
believe the most appropriate way to address the factual situation of 
the issue here is to consider Delaware's and New Jersey's contributions 
together, as one unit of analysis. Since Delaware and New Jersey are 
already subject to CAIR for purposes of ozone, the remainder of this 
discussion focuses on PM2.5 considerations.
    Delaware and New Jersey are both relatively small in land area; 
both are smaller than any of the 23 states already subject to CAIR for 
purposes of PM2.5. Portions of both States are urbanized and 
industrialized, and overall both have a high emissions density, 
comparable to that of their neighbors.\7\ Delaware has an emissions 
density of 76.1 tons/year per square mile, almost twice that of 
neighboring Pennsylvania and also higher than that of Maryland, States 
already linked to downwind nonattainment areas. New Jersey has an 
emissions density of 46.6 tons/year per square mile, above that of 
Pennsylvania although somewhat lower than that of Maryland.
---------------------------------------------------------------------------

    \7\ By emissions density we mean the total SO2 and 
NOX emissions from each State in tons per year, divided 
by the geographic area of the State in square miles. For comparing 
emissions densities for the purposes of contributions to 
PM2.5 nonattainment, we have compared the emissions 
density expressed in terms of SO2 plus NOX 
emissions per square mile. Such a comparison is a reasonable measure 
of comparison that is independent of the disparity in the land area 
size of the two States.
---------------------------------------------------------------------------

    Delaware and New Jersey are near major cities where current 
PM2.5 nonattainment affects large populations. Also, both 
are relatively near to a county or counties in other States that are 
projected to still be nonattainment for PM2.5 in 2010 in the 
base case. Delaware and New Jersey are also near large markets for 
electric power in other States subject to CAIR for PM2.5, 
and both are part of the PJM Interconnection electricity grid. Another 
consideration is the potential for emission increases as a result of 
emissions shifting from States subject to the PM2.5 
requirements of CAIR to States not subject to those requirements, e.g., 
New Jersey and Delaware. The EPA requests comment on whether it is 
appropriate under section 110(a)(2)(D) to consider this factor in this 
rulemaking.\8\
---------------------------------------------------------------------------

    \8\ Because electricity generation costs in States subject to 
the CAIR will in general rise to some degree to cover the cost of 
new emission controls, there is the possibility that some electrical 
generation load and the associated emissions may shift to States 
that remain outside the CAIR. Such shifting may not always occur, 
because physical factors in the electrical transmission and 
distribution system, economic factors, or other regulatory 
requirements may prevent it. The IPM model predicts that increases 
will occur in Delaware and New Jersey if they are not included under 
CAIR's PM2.5-related requirements.
---------------------------------------------------------------------------

    Both Delaware and New Jersey lie between upwind States that are now 
subject to the CAIR for both ozone and PM2.5 and downwind 
receptor PM2.5 nonattainment areas that are linked to one or 
both of those upwind States. Maryland has already been determined to 
contribute significantly to nonattainment in both Philadelphia and New 
York City, Pennsylvania has already been determined to contribute 
significantly to nonattainment in New York City, and New York has been 
determined to contribute to nonattainment in Lancaster County, 
Pennsylvania. New Jersey lies between Pennsylvania and New York City, 
and Delaware lies between Maryland and both Philadelphia and New York 
City. This means that emissions from Delaware and New Jersey are mixed 
with the emissions of these other upwind States and arrive together at 
the downwind nonattainment areas in other States. Moreover, Delaware 
and New Jersey are closer to these receptors.
    Given these highly distinctive facts, considered in conjunction 
with the data concerning the downwind emissions contributions from New 
Jersey and Delaware, it is reasonable that Delaware and New Jersey 
could be viewed as contributing significantly to PM2.5 
nonattainment in downwind States. We have therefore considered how to 
determine in an objective way whether they should be formally 
considered to contribute to PM2.5 nonattainment in specific 
other States and thus whether they incur a section 110(a)(2)(D) 
obligation. We propose to do this by treating the combination of these 
two small states as a unit, subjecting that combination to the 0.2 
[mu]g/m3 threshold for PM2.5 air quality 
contribution used in the original analytical approach for the CAIR. As 
noted, this is consistent with our approach in the NOX SIP 
Call, where Maryland, Delaware, and the District of Columbia were 
treated as a combined unit. We note also that Delaware and New Jersey 
lie side-by-side and together form a compact geographic area. In 
addition, Delaware

[[Page 25414]]

and New Jersey are both part of the PJM Interconnection, which means 
they are in a coordinated portion of the electricity grid. We believe 
this further supports combining them for purposes of this analysis. By 
combining these two small States we believe the underlying cost-
balancing and control program efficiency goals of our original 
analytical approach can be better met.
    Based on the air quality modeling that was done for the CAIR, we 
propose to find that when treated as a combined unit, Delaware and New 
Jersey do in fact contribute 0.2 [mu]g/m3 or more to 
PM2.5 nonattainment in New York County, NY and may do so in 
one or more counties in eastern Pennsylvania. The next section of this 
preamble presents these modeling results.

       Table III-1.--Contribution Factors for States Under Review
------------------------------------------------------------------------
              State                         Contribution factors
------------------------------------------------------------------------
Delaware.........................  Land Area of State
                                   2050 square miles.
                                   Most Affected Downwind Nonattainment
                                    Counties
                                   Philadelphia Co., PA.
                                   Delaware Co., PA.
                                   Lancaster Co., PA.
                                   Berks Co., PA.
                                   New York Co., NY.
                                   Geography
                                   The Wilmington area, which is the
                                    most densely industrialized and
                                    populated part of Delaware, lies on
                                    or very close to the lines of
                                    transport between the Maryland
                                    suburbs of the District of Columbia
                                    and Philadelphia Co. and Delaware
                                    Co. PA, and also on or very close to
                                    the lines of transport between
                                    Baltimore and the Philadelphia Co.
                                    and Delaware Co., PA.
                                   The Wilmington area also lies on or
                                    very close to the line of transport
                                    between these areas of Maryland and
                                    New York Co., NY.
                                   2010 Base Emissions of SO2 plus NOX
                                   156,000 tons/year.
                                   SO2 plus NOX Emissions Density
                                   76.1 tons/year per square mile.
                                   Emission Changes
                                   IPM predicts that implementing the
                                    CAIR without subjecting Delaware to
                                    limits on annual emissions will
                                    result in increases in EGU SO2
                                    emissions of 5,000 tons and 2,000
                                    tons in 2010 and 2015, respectively,
                                    and an increase in NOX emissions of
                                    2,000 tons in 2010 with no increase
                                    in 2015.
----------------------------------
New Jersey.......................  Land Area of State
                                   7510 square miles.
                                   Most Affected Downwind Nonattainment
                                    Counties
                                   New York Co., NY.
                                   Berks Co., PA.
                                   Lancaster Co., PA.
                                   Geography:
                                   Some part of New Jersey lies in the
                                    path of transport connecting any
                                    source in Pennsylvania to New York
                                    Co., NY.
                                   2010 Base Emissions of SO2 plus NOX
                                   350,000 tons/year.
                                   SO2 Plus NOX Emissions Density
                                   46.58 tons/year per square mile.
                                   SO2 plus NOX Emission Changes
                                   IPM predicts that implementing the
                                    CAIR without subjecting New Jersey
                                    to limits on annual emissions will
                                    result in increases in EGU SO2
                                    emissions of 1,000 and 2,000 tons in
                                    2010 and 2015, respectively, and an
                                    increase in EGU NOX emissions of
                                    1,000 tons in 2010 and 2015.
------------------------------------------------------------------------


    Table III-2.--Contribution Factors for Neighboring States Already
   Subject to the CAIR, for Purposes of Comparison to Delaware and New
                                 Jersey
------------------------------------------------------------------------
              State                         Contribution factors
------------------------------------------------------------------------
Maryland & DC....................  Size of State
                                   Land Area
                                   9,740 square miles.
                                   2010 Base Emissions of SO2 plus NOX
                                   631,000 tons/year.
                                   Nearby Downwind Nonattainment
                                    Counties with Significant
                                    Contribution From This State
                                   Lancaster Co., PA.
                                   Berks Co., PA.
                                   Philadelphia Co., PA.
                                   Delaware Co., PA.
                                   New York Co., NY.
                                   Union Co., NJ.
                                   SO2 plus NOX Emissions Density
                                   64.8 tons/year per square mile.
----------------------------------

[[Page 25415]]

 
New York.........................  Size of State
                                   Land Area
                                   48,560 square miles.
                                   2010 Base Emissions of SO2 plus NOX
                                   902,400 tons/year.
                                   Nearby Downwind Nonattainment
                                    Counties with Significant
                                    Contribution From This State
                                   New Haven, CT.
                                   Berks Co., PA.
                                   Lancaster Co., PA.
                                   Philadelphia Co., PA.
                                   Delaware Co., PA.
                                   Union Co., NJ.
                                   SO2 plus NOX Emissions Density
                                   18.6 tons/year per square mile.
----------------------------------
Pennsylvania.....................  Size of State
                                   Land Area
                                   45,360 square miles.
                                   2010 Base Emissions of SO2 plus NOX
                                   1,818,000 tons/year.
                                   Nearby Downwind Nonattainment
                                    Counties with Significant
                                    Contribution From This State
                                   New York Co., NY.
                                   Union Co., NJ.
                                   SO2 plus NOX Emissions Density
                                   40.1 tons/year per square mile.
------------------------------------------------------------------------

B. Air Quality Modeling Results

    As explained in section II above, the air quality modeling used to 
assess contributions to PM2.5 nonattainment estimated the 
contribution by individual States by selectively removing anthropogenic 
emissions of SO2 and NOX from one State at a 
time, and observing how that change in emissions affected 
PM2.5 concentrations in other States. This included separate 
assessments for New Jersey and Delaware, and did not include any run in 
which emissions in both states were removed together. Consequently, we 
do not presently have exactly the same type of air quality modeling 
analysis for the combination of Delaware and New Jersey as we do for 
the 23 States already subject to CAIR for purposes of PM2.5. 
We intend to perform such modeling as soon as possible and to make the 
results available for public comment through a Notice of Data 
Availability.
    However, a tentative assessment is currently possible. Since 
results are available from the separate air quality model runs that 
were done for Delaware and New Jersey, we can add (or superimpose) the 
contributions from the two States on each individual receptor monitor 
in order to estimate the contribution that would be calculated if the 
two states were taken as one unit of analysis. While there are non-
linear chemical and other atmospheric processes which could make the 
outcomes of these two approaches somewhat different, we believe the 
superimposition approach is sufficiently persuasive to support 
proposing inclusion of both States as significantly contributing to 
downwind PM2.5 nonattainment problems.
    Table III-3 presents the superimposition analysis, using detailed 
contribution results from the air quality analysis for the final 
CAIR.\9\ The table shows that the sum of Delaware's and New Jersey's 
contributions to PM2.5 nonattainment in New York County, New 
York is 0.21 [mu]g/m3 for one of the monitors in that 
county. We note that this is the result that obtained from using the 
base case emissions from the two States. In actuality, as previously 
stated, we estimate, based on the IPM model, that under the final CAIR, 
which does not require reductions from Delaware and New Jersey for 
purposes of PM2.5, emissions in Delaware and New Jersey will 
be higher than in this base case. Thus, the actual contribution of 
Delaware and New Jersey combined and considered as a unit may be higher 
than the 0.21 [mu]g/m3 result shown in the table. As 
mentioned above, non-linearities in the atmospheric process may also 
affect the result, in either direction. Based on this analysis, we 
propose that New Jersey and Delaware taken together as one unit 
contribute significantly to PM2.5 nonattainment in New York 
County.
---------------------------------------------------------------------------

    \9\ The Air Quality Technical Support Document provides full 
details of how the air quality modeling was done and all of the 
results.
---------------------------------------------------------------------------

    Of the several PM2.5 nonattainment counties in eastern 
Pennsylvania that are shown in Table III-3, none have a superimposed 
contribution from Delaware and New Jersey that is as large as 0.2 
[mu]g/m\3\. However, the planned air quality modeling that treats 
Delaware and New Jersey as a combined unit and that reflects the above 
mentioned emissions increases as a result of their current exclusion 
from CAIR may yield a different result.

[[Page 25416]]



  Table III-3.--Assessment of Combined Contribution by Delaware and New Jersey to PM2.5 Nonattainment Based on
                          Superimposition of Results From Air Quality Modeling for CAIR
----------------------------------------------------------------------------------------------------------------
                                                       PM2.5 Contribution    PM2.5 Contribution
         Receptor state             Receptor county       from Delaware        from New Jersey      Sum ([mu]g/
                                                          ([mu]g/m\3\)          ([mu]g/m\3\)           m\3\)
----------------------------------------------------------------------------------------------------------------
New York........................  New York..........                  0.08                  0.13            0.21
Pennsylvania....................  Berks.............                  0.10                  0.06            0.16
Pennsylvania....................  Dauphin...........                  0.07                  0.04            0.11
Pennsylvania....................  Delaware..........                  0.14                  0.04            0.18
Pennsylvania....................  Lancaster.........                  0.12                  0.06            0.18
Pennsylvania....................  Philadelphia......                  0.14                  0.04            0.18
Pennsylvania....................  York..............                  0.09                  0.04            0.13
----------------------------------------------------------------------------------------------------------------

IV. Proposed Findings and Action

A. Proposed Findings of Significant Contribution for Delaware and New 
Jersey

    We are proposing to find that emissions of the PM2.5 
precursors SO2 and NOX emitted by Delaware and 
New Jersey contribute significantly to nonattainment of the 
PM2.5 NAAQS in downwind States. Accordingly, we are 
proposing SIP requirements for these States under section 110(a)(1) to 
meet the requirements of section 110(a)(2)(D), namely, to contain 
adequate provisions to prohibit SO2 and NOX 
emissions from sources or activities within the States from 
``contribut[ing] significantly to nonattainment'' of the 
PM2.5 NAAQS in downwind States.

B. SIP Approval Criteria

    The CAIR added two new sections to Title 40 of the Code of Federal 
Regulations, Sec. Sec.  51.123 and 51.124 containing requirements 
related to NOX and SO2 respectively, which 
establish the requirement for submission of SIP revisions to comply 
with the CAIR and the criteria which EPA will use to review these 
revisions for approval or disapproval. The content of these sections is 
presented in section VII of the preamble to the CAIR, which appears in 
the rules section of today's Federal Register. Delaware and New Jersey 
are already subject to the ozone-related provisions of these sections 
but not to the provisions that relate to PM2.5. We propose 
to amend these two sections to extend the PM2.5-related 
provisions to both States. The practical effect of the proposed 
amendments will be to subject the States to budgets (if they choose to 
control large EGUs) for annual emission reduction requirements of 
NOX and SO2.
    The proposed NOX and SO2 annual and ozone 
season budgets for New Jersey and Delaware are shown below in Tables 
IV-1 and IV-2.

                Table IV-1.--Proposed Annual NOX Budgets
                                 [Tons]
------------------------------------------------------------------------
                     Year                         Delaware    New Jersey
------------------------------------------------------------------------
2009..........................................        4,166       12,670
2015..........................................        3,472       10,558
------------------------------------------------------------------------


                Table IV-2.--Proposed Annual SO2 Budgets
                                 [Tons]
------------------------------------------------------------------------
                     Year                         Delaware    New Jersey
------------------------------------------------------------------------
2010..........................................       22,411       32,392
2015..........................................       15,687       22,674
------------------------------------------------------------------------

    State annual SO2 budgets for the years 2010-2014 (Phase 
I) are based on a 50 percent reduction from title IV allocations for 
all units in the affected State. The State annual budgets for 2015 and 
beyond (Phase II) are based on a 65 percent reduction from title IV 
allowances allocated to units in the affected State for SO2 
control.
    To calculate annual State NOX budgets, EPA calculated a total 
``regional'' budget for Delaware and New Jersey using the same 
methodology as in the CAIR. The EPA calculates the regional 
NOX budget using the highest heat input for each State for 
the years 1999-2002, multiplied by 0.15 lb/mmBtu (for 2009) and 0.125 
lb/mmBtu (for 2015).
    The EPA is proposing to calculate State NOX budgets 
through a fuel-adjusted heat-input basis, as is being finalized in the 
CAIR. State budgets would be determined by multiplying historic heat 
input data (summed by fuel) by different adjustment factors for the 
different fuels. These factors reflect for each fuel (coal, gas and 
oil), the 1999-2002 average emissions by State, summed for the CAIR 
region, divided by average heat input by fuel by State, summed for the 
CAIR region. The resulting adjustment factors from this calculation are 
1.0 for coal, 0.4 for gas and 0.6 for oil. The factors would reflect 
the inherently higher emissions rate of coal-fired plants, and 
consequently the greater burden on coal plants to control emissions. 
The regional budget is then apportioned to States on a pro-rata basis, 
based on each State's share of total adjusted average heat input.
    The final CAIR annual NOX cap and trade rule will 
provide additional incentives for early annual NOX 
reductions by creating a Compliance Supplement Pool (CSP) for CAIR 
States from which they can distribute allowances for early, annual 
NOX emissions reductions in the years 2007 and 2008. The CSP 
functions much like the NOX SIP Call's CSP. The CSP would be 
comprised of CAIR annual NOX allowances of vintage year 
2009.
    In the final CAIR, EPA apportions a 200,000 ton CSP to all States. 
The CSP was apportioned based on a State's share of the required 
emissions reductions (i.e., the difference between their State baseline 
emissions and their projected emissions under the CAIR). States may 
distribute these CAIR NOX allowances to sources based upon 
either: (1) A demonstration to the State of NOX emissions 
reductions in surplus of any existing NOX emission control 
requirements; or (2) a demonstration to the State that the facility has 
a ``need'' that would affect electricity grid reliability. Sources that 
wish to receive CAIR CSP allowances based upon a demonstration of 
surplus emission reductions will be awarded one CAIR annual 
NOX allowance for every ton of NOX emissions 
reductions. (Should a State receive more requests for allowances than 
their share of the CAIR CSP, the State would pro-rate the allowance 
distribution.) Determination of surplus emissions must use emissions 
data measured using Part 75 monitoring.
    The CSP for CAIR States affected by the CAIR NFR has a total of 
198,494 CAIR NOX allowances in addition to the annual CAIR 
NOX budgets. If Delaware and New Jersey are part of the 
final CAIR program, as we propose, they would be allotted an additional 
1,503

[[Page 25417]]

allowances. Table IV-3 shows the NOX CSP for New Jersey and 
Delaware.

          Table IV-3.--Proposed NOX Compliance Supplement Pool
                                 [Tons]
------------------------------------------------------------------------
              Delaware                            New Jersey
------------------------------------------------------------------------
                     843                                  660
------------------------------------------------------------------------

C. SIP Submittal Deadline

    We are also proposing today to require that PM2.5 
transport SIPs be submitted, under CAA section 110(a)(1), as soon as 
practicable, but not later than 18 months from the date of signature of 
the CAIR, i.e., September 11, 2006. Our expectation is that this will 
be no less than 12 months from the date of promulgation of the present 
proposal.
    We note that this would leave the two States affected by this 
proposal less time to submit transport SIPs than allowed for States 
covered by the CAIR rule. There are a number of reasons this result 
appears to be justifiable. First, Delaware and New Jersey were covered 
by the initial CAIR proposal for PM2.5 precursors, so the 
States already have been on notice that they might have to submit 
transport SIPs for PM2.5. Moreover, we are proposing here to 
adopt all of the key features of the initial CAIR proposal, including 
the same annual SO2 and NOX reductions and 
budgets and the same implementation mechanisms. Again, since these 
States have been on notice regarding these issues, we believe that less 
time would be needed to submit transport SIPs. Moreover, as noted, we 
expect to finalize this proposal within 6 months. If we do so, and if 
we adopt the proposed SIP submittal deadline, transport SIPs would be 
required within 12 months of the final action, the same period as 
provided in the NOX SIP Call (69 FR 4585).
    According to EPA modeling, including New Jersey and Delaware in the 
annual CAIR program results in only one additional flue gas 
desulfurization (FGD) unit installation in the two States, i.e., one 
additional FGD in New Jersey.\10\ The EPA modeling shows no additional 
selective catalytic reduction (SCR) units would be required in the two 
States.\11\ Assuming EPA finalizes this proposal in 6 months (by 
September 15, 2005) and allows the two States 18 months from signature 
of the CAIR to submit their SIPs (i.e., due by September 11, 2006), 
there would be about 40 months remaining for the installation of the 
one additional FGD required. The EPA estimates 27 months are required 
to install an FGD. Also, EPA believes sufficient boiler maker labor and 
other resources exist to support one additional FGD installation by 
January 1, 2010. Therefore, EPA proposes the above schedule for 
finalizing and implementing this rule.
---------------------------------------------------------------------------

    \10\ The EPA compared IPM runs with and without New Jersey and 
Delaware to make this determination. See IPM runs in the docket for 
further details.
    \11\ The EPA compared IPM runs with and without New Jersey and 
Delaware to make this determination. See IPM runs in the docket for 
further details.
---------------------------------------------------------------------------

    For all these reasons, we think it reasonable to propose that 
Delaware and New Jersey submit PM2.5 transport SIPs by 
September 11, 2006.

D. Emissions Reporting Requirements

    In order to provide emissions inventory information that will allow 
EPA to better monitor the implementation and effects of the CAIR's 
emissions reductions, EPA incorporated into the CAIR revisions to the 
pre-existing emission inventory reporting requirements applicable to 
States affected by the CAIR. Those requirements were specific to 
whether a State was affected by the annual emission reduction 
requirements for SO2 and NOX or only the ozone-
season reduction requirements for NOX. Because we are 
proposing to apply the annual emissions reduction requirements to 
Delaware and New Jersey, we are also proposing to place these two 
States under the corresponding provisions of the emissions reporting 
requirements. The only practical effect of this change relative to 
existing requirements is that if either State chooses to obtain some of 
the required annual emissions reductions from a source which emits less 
than 2500 tons/year of both SO2 and NOX and that 
source is not also made subject to the EPA-operated emissions trading 
programs, the State must report the annual emissions of that source to 
EPA annually in contrast to the triennial requirement that presently 
applies to such sources.

V. Expected Effects of the Proposed Action

A. Emissions

    EPA has conducted power sector analysis of The CAIR using the IPM. 
The IPM is a dynamic linear programming model that can be used to 
examine air pollution control policies for SO2 and 
NOX throughout the contiguous United States for the entire 
power system. Documentation for IPM can be found at www.epa.gov/airmarkets/epa-ipm.
    Emissions of SO2 and NOX in the CAIR region 
would be higher under the final CAIR where Delaware and New Jersey are 
only included in a summer season ozone cap, similar to Connecticut and 
Massachusetts. If these two States are included as part of the annual 
SO2 and NOX caps for the CAIR as proposed in this 
proposal, emissions in the region would be reduced by another 48,000 
tons of SO2 and 11,000 tons of NOX from the final 
CAIR scenario.
    The inclusion of Delaware and New Jersey in the annual CAIR 
requirements would result in additional reductions of SO2 
and NOX that would help in achieving attainment for downwind 
States.
---------------------------------------------------------------------------

    \12\ The CAIR region for purposes of this table includes the 
following States: Alabama, Arkansas, Connecticut, Delaware, District 
of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, 
Louisiana, Maryland, Massachusetts, Michigan, Minnesota, 
Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, 
Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West 
Virginia, Wisconsin.

                   Table V-1.--Annual Emissions From Affected Sources for the CAIR Region \12\
                                                 [Thousand tons]
----------------------------------------------------------------------------------------------------------------
                                                                                           2015
                                                               2010    --------------------------------------------
                                                                            SO2          NOX          SO2      NOX
------------------------------------------------------------------------------------------------------------- -----
Base Case................................................        8,868        2,826        8,056        2,853
Final CAIR (DE and NJ Included for Ozone Season NOX Only)        5,336        1,592        4,216        1,342
CAIR Modified By This Proposal (DE and NJ Included for           5,305        1,582        4,168        1,331
 Annual SO2 and NOX).....................................
Difference between CAIR Scenarios........................           32           10           48          11
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not add due to rounding.


[[Page 25418]]

B. Air Quality

    Section VI of the preamble to the CAIR, which appears in the rules 
section of today's Federal Register, describes the air quality modeling 
performed to determine the projected impacts of the CAIR on 
PM2.5 and 8-hour ozone of the SO2 and 
NOX emissions reductions in the control region modeled. The 
modeling used to estimate the air quality impact of these reductions 
assumed annual SO2 and NOX controls for Arkansas, 
Delaware, and New Jersey (as had been proposed before completion of the 
final contribution analysis) in addition to the 23-States plus the 
District of Columbia. Since Arkansas, Delaware, and New Jersey are not 
included in the final CAIR PM2.5 region, the modeled 
estimated impacts are overstated for today's final CAIR which excludes 
all three States from the CAIR region for PM. Because we are now 
proposing that Delaware and New Jersey become subject to the 
PM2.5-related emissions limits for SO2 and 
NOX, the air quality modeling for the final CAIR better 
approximates the net effects of the CAIR plus today's proposal, but 
still overestimates the air quality changes somewhat due to the 
continued discrepancy regarding Arkansas. The Regulatory Impact 
Analysis for the CAIR discusses these differences in scenarios in more 
detail.
    The EPA analyzed the impacts of the regional emissions reductions 
in both 2010 and 2015. These impacts are quantified by comparing air 
quality modeling results for the regional control scenario to the 
modeling results for the corresponding 2010 and 2015 Base Case 
scenarios. The 2010 and 2015 emissions reductions and air quality 
improvements from the regional control strategy modeled are presented 
in summary form in section VI of the preamble to the CAIR and in detail 
in the Emission Inventory Technical Support Document and the Air 
Quality Modeling Technical Support Document for the CAIR.
    The EPA estimates, based on the air quality analysis for the CAIR, 
that the required SO2 and NOX emissions 
reductions would, by themselves, bring into attainment 52 of the 80 
counties that are otherwise expected to be in nonattainment for 
PM2.5 in 2010, and 57 of the 75 counties that are otherwise 
expected to be in nonattainment for PM2.5 in 2015. The EPA 
further estimates that the required NOX emissions reductions 
would, by themselves, bring into attainment 3 of the 40 counties that 
are otherwise expected to be in nonattainment for 8-hour ozone in 2010, 
and 6 of the 22 counties that are expected to be in nonattainment for 
8-hour ozone in 2015. In addition, today's rule will improve 
PM2.5 and 8-hour ozone air quality in the areas that will 
remain nonattainment for those two NAAQS after implementation of 
today's rule. Because of today's rule, the States with those remaining 
nonattainment areas will find it less burdensome and less expensive to 
reach attainment by adopting additional local controls. The CAIR will 
also reduce PM2.5 and 8-hour ozone levels in attainment 
areas.
    We have not conducted an incremental analysis of the air quality 
effects from the proposed extension of the annual emissions reductions 
requirements to New Jersey and Delaware. However, IPM modeling of EGU 
emissions indicates that assuming that all States join the EPA trading 
programs, highly cost-effective emissions reductions will be 
distributed across the region in addition to New Jersey and Delaware 
themselves, and contribute to the attainment of these two States' 
downwind neighbors as well as other States with nonattainment areas.

VI. 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, the CAIR program inclusive of this 
proposal 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 
an economic analysis of the CAIR program including this proposal 
entitled ``Regulatory Impact Analysis of the Final Clean Air Interstate 
Rule'' (March 2005).
1. What Economic Analyses Were Conducted for the Rulemaking?
    The analyses conducted for the CAIR program (CAIR final rule plus 
this New Jersey and Delaware proposal) 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.
2. What Are the Benefits and Costs of the CAIR Program?
    The benefit-cost analysis shows that substantial net economic 
benefits to society are likely to be achieved due to reduction in 
emissions resulting from the CAIR program that includes annual 
SO2 and NOX controls for New Jersey and Delaware. 
The results show that the CAIR program would be highly beneficial to 
society, with annual net benefits (benefits less costs) of 
approximately $71.4 or $60.4 billion in 2010 and $98.5 or $83.2 billion 
in 2015. These alternative net benefits estimates occur due to 
differing assumptions concerning the social discount rate used to 
estimate the annual value of the benefits of the rule with the lower 
estimates relating to a discount rate of 7 percent and the higher 
estimates a discount rate of 3 percent. All amounts are reflected in 
1999 dollars. For more information, see the NFR for the CAIR published 
in today's Federal Register and the Regulatory Impact Analysis for the 
Final Clean Air Interstate Rule (March 2005).
3. What Are the Incremental Costs to the Electricity-Generating 
Industry Associated With This New Jersey and Delaware Proposal?
    The costs presented here represent the total incremental cost to 
the electricity-generating industry of reducing NOX and 
SO2 emissions to meet the reduction requirements set forth 
in the rule, assuming all States participate in a regionwide cap-and-
trade program. These costs estimates are referred to as private costs, 
and these estimates differ

[[Page 25419]]

from the cost of the program to society or social cost estimates 
presented for the CAIR program discussed previously. As shown in Table 
VI-1, EPA estimates the annual private costs of this proposal are 
approximately $30 million in 2010 and $40 million in 2015. All 
estimates reflect 1999 dollars. Overall, the impacts of the CAIR 
program are modest, particularly in light of the large benefits we 
expect. This industry generates over $250 billion in annual 
revenues.\13\ The industry has the ability to largely pass along the 
costs of the rule to consumers, and this will result in the costs 
largely falling upon the consumers of electricity. Retail electricity 
prices are projected to increase roughly 2.0--2.7 percent with the CAIR 
program (inclusive of this proposal) in the 2010 and 2015 timeframe, 
and then drop below 2.0 percent thereafter. The effects of the CAIR 
program on natural gas prices and the power sector generation mix is 
also small, with a 1.6 percent or less increase in natural gas prices 
projected from 2010 to 2020. There will be continued reliance on coal-
fired generation, which is projected to remain at roughly 50 percent of 
total electricity generated. A relatively small amount of coal-fired 
capacity, about 5.3 GW (1.7 percent of all coal-fired capacity and 0.5 
percent of all generating capacity), is projected to be uneconomic to 
maintain. For the most part, these units are small and infrequently 
used generating units that are dispersed throughout the CAIR region. 
Units projected to be uneconomic to maintain may be `mothballed,' 
retired, or kept in service to ensure transmission reliability in 
certain parts of the grid.
---------------------------------------------------------------------------

    \13\ In 2003, the electric power industry had retail sales of 
259 billion dollars (http://www.eia.doe.gov/cneaf/electricty/epm/table5-2.html).
---------------------------------------------------------------------------

    As demand grows in the future, additional coal-fired generation is 
projected to be built under the CAIR program. As a result, both coal-
fired generation and coal production for electricity generation are 
projected to increase from 2003 levels by about 15 percent in 2010 and 
25 percent by 2020, and we expect a small shift towards greater coal 
production in Appalachia and the Interior coal regions of the country 
with the CAIR.
    For today's proposal, EPA analyzed the costs using the IPM. The IPM 
is a dynamic linear programming model that can be used to examine the 
economic impacts of air pollution control policies for SO2 
and NOX throughout the contiguous U.S. for the entire power 
system. Documentation for IPM can be found in the docket for this 
rulemaking or at www.epa.gov/airmarkets/epa-ipm. The additional 
annualized incremental cost of including Delaware and New Jersey in the 
CAIR program occur because of the additional installation and operation 
of a modest amount of pollution control equipment and other relatively 
minor compliance costs.

  Table VI-1.--Annualized Incremental Private Costs for the CAIR Region
                       [Billions of 1999 dollars]
------------------------------------------------------------------------
                                                     Costs in   Costs in
                      Program                          2010       2015
------------------------------------------------------------------------
Final CAIR (DE and NJ: Ozone Season NOX Only).....      $2.33      $3.59
Final CAIR plus NJ and DE proposal (DE and NJ:           2.36       3.63
 Annual SO2 and NOX)..............................
Difference between CAIR scenarios.................       0.03       0.04
------------------------------------------------------------------------

4. What Potential Benefits May Be Associated With This Proposal?
    Air quality modeling was not conducted for the New Jersey and 
Delaware proposal. For this reason, an analysis of the potential 
benefits for the New Jersey and Delaware proposal could not be 
completed with any degree of specificity. However based on the air 
quality modeling results for the CAIR, we make ball park estimates of 
the benefits and net benefits that might occur with this proposal. 
Including New Jersey and Delaware in the CAIR program would result in 
additional reductions of SO2 and NOX emissions. 
We estimate that approximately $630 million of the total annual CAIR 
program benefits previously discussed are attributable to annual 
SO2 and NOX controls for New Jersey and Delaware 
in 2010. This estimate increases to over $1.1 billion in 2015. The full 
CAIR analysis including New Jersey and Delaware showed a benefit-cost 
ratio of around 39:1 in 2015. Based on the relatively low estimated 
private costs of including New Jersey and Delaware of $30 million in 
2010 and $40 million in 2015, it is highly unlikely that costs of 
including New Jersey and Delaware would exceed benefits even if 
benefits of controlling SO2 and NOX for New 
Jersey and Delaware were substantially lower than the average benefit 
we used to estimate the benefits. It is highly unlikely that benefits 
are much lower than average given the urban nature of much of New 
Jersey, and the proximity of New Jersey and Delaware to many heavily 
populated urban areas.

B. Paperwork Reduction Act

    The information collection requirements in this proposed rule have 
been submitted for approval to the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The 
Information Collection Request (ICR) document prepared by EPA has been 
assigned EPA ICR number 2184.01.
    The purpose of the ICR is to estimate the anticipated monitoring, 
reporting, and recordkeeping burden estimates and associated costs for 
States, local governments, and sources that are expected to result from 
this proposal. This ICR describes the nature of the information 
collection and the estimated burden for this proposal. In cases where 
information is already collected by a related program, the ICR takes 
into account only the additional burden. This situation arises in 
States that are also subject to requirements of the Consolidated 
Emissions Reporting Rule (EPA ICR number 0916.10; OMB control number 
2060-0088) or for sources that are subject to the Acid Rain Program 
(EPA ICR 2152.01; EPA ICR number 1633.13; OMB control number 2060-0258) 
or NOX SIP Call (EPA ICR number 1857.03; OMB number 2060-
0445) requirements.
    The total monitoring, recordkeeping, and reporting burden to 
sources resulting from New Jersey and Delaware choosing to participate 
in a regional cap and trade program are expected to be approximately 
$270,000 at the time the monitors are implemented. This estimate 
includes the annualized cost of installing and operating appropriate 
SO2 and NOX emissions monitoring equipment to 
measure and report the total emissions of these pollutants from 
affected EGUs (serving generators greater than 25 megawatt capacity) 
for this proposed rule. The burden to State and local air agencies 
includes any necessary SIP revisions, performing monitoring 
certification, and fulfilling audit responsibilities.
    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

[[Page 25420]]

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 in 40 CFR are listed in 40 CFR part 9.
    To comment on the Agency's need for this information, the accuracy 
of the provided burden estimates, and any suggested methods for 
minimizing respondent burden, including the use of automated collection 
techniques, EPA has established a public docket for this rule, which 
includes this ICR, under Docket ID number OAR-2003-0053. Submit any 
comments related to the ICR for this proposed rule to EPA and OMB. See 
ADDRESSES section at the beginning of this notice for where to submit 
comments to EPA. Send comments to OMB at the Office of Information and 
Regulatory Affairs, Office of Management and Budget, 725 17th Street, 
NW., Washington, DC 20503, Attention: Desk Office for EPA. Since OMB is 
required to make a decision concerning the ICR between 30 and 60 days 
after May 12, 2005, a comment to OMB is best assured of having its full 
effect if OMB receives it by June 13, 2005. The final rule will respond 
to any OMB or public comments on the information collection 
requirements contained in this proposal.

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 (Pub. 
L. 104-121)(SBREFA), provides that whenever an agency is required to 
publish a general notice of rulemaking, it must prepare and make 
available an initial regulatory flexibility analysis, unless it 
certifies that the rule, if promulgated, will not have ``a significant 
economic impact on a substantial number of small entities.'' 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 VI-2 lists entities potentially impacted 
by this rule with applicable NAICS code.

                              VI-2.--Potentially Regulated Categories and Entities
----------------------------------------------------------------------------------------------------------------
                   Category                      NAICS code \1\     Examples of potentially regulated entities
----------------------------------------------------------------------------------------------------------------
Industry......................................           221112  Fossil fuel-fired electric utility steam
                                                                  generating units.
Federal government............................       \2\ 221122  Fossil fuel-fired electric utility steam
                                                                  generating units owned by the Federal
                                                                  government.
State/local/Tribal government.................       \2\ 221122  Fossil fuel-fired electric utility steam
                                                                  generating units owned by municipalities.
                                                         921150  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. 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).
    The CAIR final rule and this proposed 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 has conducted a 
small business analysis for the CAIR program inclusive of the New 
Jersey and Delaware proposal.
    Overall, about 445 MW of total small entity capacity, or 1.0 
percent of total small entity capacity in the CAIR region, is projected 
to be uneconomic to maintain under the CAIR relative to the base case. 
In practice, units projected to be uneconomic to maintain may be 
``mothballed,'' retired, or kept in service to ensure transmission 
reliability in certain parts of the grid. Our IPM modeling is unable to 
distinguish between these potential outcomes.
    The EPA modeling identified 264 small power-generating entities 
within the entire CAIR region based upon the definition of small entity 
outlined above. The EPA excluded from this analysis 189 small entities 
that were not projected to have at least one unit with a generating 
capacity of 25 MW or great operating in the base case. Thus, we found 
that 75 small entities may potentially be affected by the CAIR program. 
Of these 75 small entities, 28 may experience compliance costs in 
excess of 1 percent of revenues in 2010, and 46 may in 2015, based on 
the Agency's assumptions of how the affected States implement control 
measures to meet their emissions budgets as set forth in this 
rulemaking. Potentially affected small entities experiencing compliance 
costs in excess of 1 percent of revenues have some potential for 
significant impact resulting from implementation of the CAIR. However, 
it is the Agency's position that because none of the affected entities 
currently operate in a competitive market environment, they should be 
able to pass the costs of complying with the CAIR on to rate-payers. 
Moreover, the decision to include only units greater than 25 MW in size 
exempts 185 small entities that would otherwise be potentially affected 
by the CAIR.
    Two other points should be considered when evaluating the impact of 
the CAIR program (inclusive of the New Jersey and Delaware proposal), 
specifically, and cap and trade programs more generally, on small 
entities. First, under the CAIR program, the cap-and-trade program is 
designed such that States determine how NOX allowances

[[Page 25421]]

are to be allocated across units. A State that wishes to mitigate the 
impact of the rule on small entities might choose to allocate 
NOX allowances in a manner that is favorable to small 
entities. Finally, the use of cap and trade in general will limit 
impacts on small entities relative to a less flexible command-and-
control program.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4)(UMRA), establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and Tribal 
governments and the private sector. Under section 202 of the UMRA, 2 
U.S.C. 1532, EPA generally must prepare a written statement, including 
a cost-benefit analysis, for any proposed or final rule that ``includes 
any Federal mandate that may result in the expenditure by State, local, 
and Tribal governments, in the aggregate, or by the private sector, of 
$100,000,000 or more * * * in any one year.'' A ``Federal mandate'' is 
defined under section 421(6), 2 U.S.C. 658(6), to include a ``Federal 
intergovernmental mandate'' and a ``Federal private sector mandate.'' A 
``Federal intergovernmental mandate,'' in turn, is defined to include a 
regulation that ``would impose an enforceable duty upon State, Local, 
or Tribal governments,'' section 421(5)(A)(i), 2 U.S.C. 658(5)(A)(i), 
except for, among other things, a duty that is ``a condition of Federal 
assistance,'' section 421(5)(A)(i)(I). A ``Federal private sector 
mandate'' includes a regulation that ``would impose an enforceable duty 
upon the private sector,'' with certain exceptions, section 421(7)(A), 
2 U.S.C. 658(7)(A).
    Before promulgating an EPA rule for which a written statement is 
needed under section 202 of the UMRA, section 205, 2 U.S.C. 1535, of 
the UMRA generally requires EPA to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, most 
cost-effective, or least burdensome alternative that achieves the 
objectives of the rule.
    The EPA prepared a written statement for the CAIR final inclusive 
of this proposal consistent with the requirements of section 202 of the 
UMRA. Furthermore, as EPA stated in the rule, 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 
prepared the statement that would be required by UMRA if its statutory 
provisions applied for the CAIR final rule and this proposal. The EPA 
also 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.
    The EPA conducted an analysis of the economic impacts anticipated 
from the CAIR program inclusive of the New Jersey and Delaware proposal 
for government-owned entities. The modeling conducted using the IPM 
projects that about 340 MW of municipality-owned capacity (about 0.4 
percent of all subdivision, State and municipality capacity in the CAIR 
region) would be uneconomic to maintain under the CAIR program, beyond 
what is projected in the base case. In practice, however, the units 
projected to be uneconomic to maintain may be ``mothballed,'' retired, 
or kept in service to ensure transmission reliability in certain parts 
of the grid. For the most part, these units are small and infrequently 
used generating units that are dispersed throughout the CAIR region.
    The EPA modeling identified 265 State or municipally-owned 
entities, as well as subdivisions, within the entire CAIR region. The 
EPA excluded from the analysis government-owned entities that were not 
projected to have at least one unit with generating capacity of 25 MW 
or greater in the base case. Thus, we excluded 184 entities from the 
analysis. We found that 81 government entities will be potentially 
affected by the CAIR. Of the 81 government entities, 20 may experience 
compliance costs in excess of 1 percent of revenues in 2010, and 39 may 
in 2015, based on our assumptions of how the affected States implement 
control measures to meet their emissions budgets as set forth in this 
rulemaking.
    Government entities projected to experience compliance costs in 
excess of 1 percent of revenues have some potential for significant 
impact resulting from implementation of the CAIR. However, as noted 
above, it is EPA's position that because these government entities can 
pass on their costs of compliance to rate-payers, they will not be 
significantly impacted. Furthermore, the decision to include only units 
greater than 25 MW in size exempts 179 government entities that would 
otherwise be potentially affected by the CAIR program.
    The above points aside, potentially adverse impacts of the CAIR 
program on State and municipality-owned entities could be limited by 
the fact that the cap and trade program is designed such that States 
determine how NOX allowances are to be allocated across 
units. A State that wishes to mitigate the impact of the rule on State 
or municipality-owned entities might choose to allocate NOX 
allowances in a manner that is favorable to these entities. Finally, 
the use of cap and trade in general will limit impacts on entities 
owned by small governments relative to a less flexible command-and-
control program.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    This proposal 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

[[Page 25422]]

Federal government and the States, and this proposed rule does not 
impact that relationship. Thus, Executive Order 13132 does not apply to 
this proposal. In the spirit of Executive Order 13132, and consistent 
with EPA policy to promote communications between EPA and State and 
local governments, EPA specifically solicited comment on the CAIR 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.'' The CAIR program (CAIR final 
and New Jersey and Delaware proposed rule) does not have ``Tribal 
implications'' as specified in Executive Order 13175.
    The CAIR program addresses transport of pollution that are 
precursors for ozone and PM2.5. The CAA provides for States 
and Tribes to develop plans to regulate emissions of air pollutants 
within their jurisdictions. The regulations clarify the statutory 
obligations of States and Tribes that develop plans to implement this 
rule. The Tribal Authority Rule (TAR) give 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, the Tribe will adopt.
    The CAIR program 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, because no Tribe has implemented a federally 
enforceable air quality management program under the CAA at this time. 
Furthermore, the CAIR program 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 rule does nothing to modify that 
relationship. Because the CAIR program does not have Tribal 
implications, Executive Order 13175 does not apply.
    If one assumes a Tribe is implementing a Tribal Implementation 
Plan, today's proposal could have implications for that Tribe, but it 
would not impose substantial direct costs upon the Tribe, nor preempt 
Tribal law. As provided above, EPA has estimated that the total annual 
private costs for the CAIR program inclusive of the New Jersey and 
Delaware proposal for the CAIR region as implemented by State, Local, 
and Tribal governments is approximately $2.4 billion in 2010 and $3.6 
billion in 2015 (1999 dollars). There are currently very few emissions 
sources in Indian country that could be affected by the CAIR program 
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 proposal, EPA 
consulted with Tribal officials in developing the CAIR program. The EPA 
has encouraged Tribal input at an early stage. Also, EPA held periodic 
meetings with the States and the Tribes during the technical 
development of the CAIR program. Three meetings were held with the Crow 
Tribe, where the Tribe expressed concerns about potential impacts of 
the CAIR on their coal mine operations. The addition of Delaware and 
New Jersey to the CAIR program does not have any bearing upon the 
concerns expressed by the Tribes. 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 the CAIR program. 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 the CAIR program.

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

    Executive Order 13045, ``Protection of Children from Environmental 
Health and Safety Risks'' (62 FR 19885, April 23, 1997) applies to any 
rule that (1) is determined to be ``economically significant'' as 
defined under Executive Order 12866, and (2) concerns an environmental 
health or safety risk that EPA has reason to believe may have a 
disproportionate effect on children. If the regulatory action meets 
both criteria, 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.
    The CAIR program inclusive of the New Jersey and Delaware proposal 
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 in this rule 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) a significant 
regulatory action under Executive Order 12866 or any successor order, 
and (ii) likely to have a significant adverse effect on the supply, 
distribution, or use of energy; or (2) designated by the Administrator 
of the Office of Information and Regulatory Affairs as a ``significant 
energy action.'' The CAIR program (the CAIR final and the New Jersey 
and Delaware proposal) is a significant regulatory action under 
Executive Order 12866, and the CAIR program may have a significant 
adverse effect on the supply, distribution, or use of energy.
    If States choose to obtain the emissions reductions required by the 
CAIR final and this proposed rule by regulating EGUs, EPA projects that 
approximately 5.3 GWs of coal-fired generation may be removed from 
operation by 2010. In practice, however, the units projected to be 
uneconomic to maintain may be ``mothballed,'' retired, or kept in 
service to ensure transmission reliability in certain parts of the 
grid. For the most part, these units are small and infrequently used 
generating units that are dispersed throughout the CAIR region. Less 
conservative assumptions regarding natural gas prices or electricity 
demand would create a greater incentive to keep these units 
operational. The EPA projects that the average annual electricity price 
will increase by less than 2.7 percent in the

[[Page 25423]]

CAIR region for the CAIR program. The EPA does not believe that the 
CAIR final and this proposed rule will have any other impacts that 
exceed the significance criteria.
    The EPA believes that a number of features of today's rulemaking 
serve to reduce its impact on energy supply. First, the optional 
trading program provides considerable flexibility to the power sector 
and enables industry to comply with the emission reduction requirements 
in the most cost-effective manner, thus minimizing overall costs and 
the ultimate impact on energy supply. The ability to use banked 
allowances from the existing title IV SO2 Trading Program 
and the NOX SIP Call Trading Program also provide additional 
flexibility. Second, the CAIR program caps are set in two phases and 
provide adequate time for EGUs to install pollution controls. For more 
details concerning energy impacts, see the Regulatory Impact Analysis 
for the Final Clean Air Interstate Rule (March 2005).

I. National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer Advancement Act 
(NTTAA) of 1995 (Pub. L. 104-113; 15 U.S.C. 272 note) directs EPA to 
use voluntary consensus standards in its regulatory and procurement 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures, business practices) developed or adopted by one or more 
voluntary consensus bodies. The NTTAA directs EPA to provide Congress, 
through annual reports to OMB, with explanations when an agency does 
not use available and applicable voluntary consensus standards.
    The CAIR final and this proposed rule would require all sources 
that participate in the trading program under part 96 to meet the 
applicable monitoring requirements of part 75. Part 75 already 
incorporates a number of voluntary consensus standards. Consistent with 
the Agency's Performance Based Measurement System (PBMS), part 75 sets 
forth performance criteria that allow the use of alternative methods to 
the ones set forth in Part 75. The PBMS approach is intended to be more 
flexible and cost effective for the regulated community; it is also 
intended to encourage innovation in analytical technology and improved 
data quality. At this time, EPA is not recommending any revisions to 
part 75; however, EPA periodically revises the test procedures set 
forth in Part 75. When EPA revises the test procedures set forth in 
Part 75 in the future, EPA will address the use of any new voluntary 
consensus standards that are equivalent. Currently, even if a test 
procedure is not set forth in part 75, EPA is not precluding the use of 
any method, whether it constitutes a voluntary consensus standard or 
not, as long as it meets the performance criteria specified; however, 
any alternative methods must be approved through the petition process 
under section 75.66 before they are used under part 75.

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,\14\ agencies are to assess whether minority 
or low-income populations face risks or a rate of exposure to hazards 
that are significant and that ``appreciably exceed or is likely to 
appreciably exceed the risk or rate to the general population or to the 
appropriate comparison group.'' (EPA, 1998)
---------------------------------------------------------------------------

    \14\ U.S. Environmental Protection Agency, 1998. Guidance for 
Incorporating Environmental Justice Concerns in EPA's NEPA 
Compliance Analyses. Office of Federal Activities, Washington, DC, 
April, 1998.
---------------------------------------------------------------------------

    In accordance with Executive Order 12898, the Agency has considered 
whether the CAIR program inclusive of the New Jersey and Delaware 
proposed rule may have disproportionate negative impacts on minority or 
low income populations. The Agency expects the CAIR program to lead to 
reductions in air pollution and exposures generally. For this reason, 
negative impacts to these sub-populations that appreciably exceed 
similar impacts to the general population are not expected.

K. Congressional Review Act

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

List of Subjects

40 CFR Part 51

    Environmental protection, 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 96

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

    Dated: March 10, 2005.
Stephen L Johnson,
Acting Administrator.
[FR Doc. 05-5520 Filed 5-11-05; 8:45 am]
BILLING CODE 6560-50-P