[Federal Register Volume 70, Number 146 (Monday, August 1, 2005)]
[Proposed Rules]
[Pages 44154-44175]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-14930]



[[Page 44153]]

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Part II





Environmental Protection Agency





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40 CFR Part 51



Regional Haze Regulations; Revisions to Provisions Governing 
Alternative to Source-Specific Best Available Retrofit Technology 
(BART) Determinations; Proposed Rule

  Federal Register / Vol. 70, No. 146 / Monday, August 1, 2005 / 
Proposed Rules  

[[Page 44154]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 51

[FRL-7944-6]
RIN 2060-AN22


Regional Haze Regulations; Revisions to Provisions Governing 
Alternative to Source-Specific Best Available Retrofit Technology 
(BART) Determinations

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: On July 1, 1999, EPA promulgated regulations to address 
regional haze (64 FR 35714). These regulations were challenged twice. 
On May 24, 2002, the U.S. Court of Appeals for the District of Columbia 
Circuit issued a ruling vacating the regional haze rule in part and 
sustaining it in part. American Corn Growers Ass'n v. EPA, 291 F.3d 1 
(D.C. Cir. 2002). On June 15, 2005, we finalized a rule addressing the 
court's ruling in that case. On February 18, 2005, the U.S. Court of 
Appeals for the District of Columbia Circuit issued another ruling 
vacating the regional haze rule in part and sustaining it in part. 
Center for Energy and Economic Development v. EPA, No. 03-1222, (D.C. 
Cir. Feb. 18, 2005) (``CEED v. EPA''). In this case, the court granted 
a petition challenging provisions of the regional haze rule governing 
the optional emissions trading program for certain western States and 
Tribes (the ``WRAP Annex Rule''). Today's proposed rule would revise 
the provisions of the regional haze rule governing alternative trading 
programs, and would provide additional guidance that is needed.

DATES: Comments must be received on or before September 17, 2005. A 
public hearing will be held on August 17, 2005, in Denver, Colorado. 
Please refer to the section on SUPPLEMENTARY INFORMATION for more 
information on the comment period and the public hearing.

ADDRESSES: Submit your comments, identified by Docket ID No. OAR-2002-
0076 by one of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
on-line instructions for submitting comments. Agency Web site: 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: http://www.epa.gov/edocket.
    Fax: 202-566-1741.
    Mail: OAR Docket, Environmental Protection Agency, Mailcode: B102, 
1200 Pennsylvania Ave., NW., Washington, DC 20460. Please include a 
total of 2 copies.
    Hand Delivery: EPA/DC, EPA West, Room B102, 1301 Constitution Ave., 
NW., Washington, DC. 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-2002-0076. 
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. For additional information about EPA's public 
docket visit EDOCKET on-line or see the Federal Register of May 31, 
2002 (67 FR 38102).
    For additional instructions on submitting comments, go to unit II 
of the SUPPLEMENTARY INFORMATION section of this document.
    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 OAR 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 OAR Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT: Kathy Kaufman at 919-541-0102 or by e-
mail at [email protected] or Todd Hawes at 919-541-5591 or by e-
mail at [email protected].

SUPPLEMENTARY INFORMATION: Regulated Entities. This proposed rule will 
affect the following: State and local permitting authorities and Indian 
Tribes containing major stationary sources of pollution affecting 
visibility in federally protected scenic areas.
    This list is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This list gives examples of the types of entities EPA is now 
aware could potentially be regulated by this action. Other types of 
entities not listed could also be affected. To determine whether your 
facility, company, business, organization, etc., is regulated by this 
action, you should examine the applicability criteria in Part II of 
this preamble. If you have any questions regarding the applicability of 
this action to a particular entity, consult the people listed in the 
preceding section.

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

    1. Submitting CBI. Do not submit this information to EPA through 
EDOCKET, regulations.gov or e-mail. Clearly mark the part or all of the 
information that you claim to be CBI. For CBI information in a disk or 
CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as 
CBI and then identify electronically within the disk or CD-ROM the 
specific information that is claimed as CBI). In addition to one 
complete version of the comment that includes information claimed as 
CBI, a copy of the comment that does not contain the information 
claimed as CBI must be submitted for inclusion in the public docket. 
Information so marked will not be disclosed except in accordance with 
procedures set forth in 40 CFR part 2.

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    2. Tips for Preparing Your Comments. When submitting comments, 
remember to:
    A. Identify the rulemaking by docket number and other identifying 
information (subject heading, Federal Register date and page number).
    B. Follow directions--The agency may ask you to respond to specific 
questions or organize comments by referencing a Code of Federal 
Regulations (CFR) part or section number.
    C. Explain why you agree or disagree; suggest alternatives and 
substitute language for your requested changes.
    D. Describe any assumptions and provide any technical information 
and/or data that you used.
    E. If you estimate potential costs or burdens, explain how you 
arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
    F. Provide specific examples to illustrate your concerns, and 
suggest alternatives.
    G. Explain your views as clearly as possible, avoiding the use of 
profanity or personal threats.
    H. Make sure to submit your comments by the comment period deadline 
identified.

Public Hearing

    The EPA will hold one public hearing on today's proposal. The 
hearing will be on August 17, 2005, at the EPA Region 8 Office 
Conference Center (second floor), 999-18th St. Suite 300, Denver, CO 
80202-2466. Because the hearing is being held at U.S. government 
facilities, everyone planning to attend the hearing should be prepared 
to show valid picture identification to the security staff in order to 
gain access to the meeting room. The public hearings will begin at 8 
a.m. and continue until 12 p.m. Oral testimony will be limited to 5 
minutes per commenter. The EPA encourages commenters to provide written 
versions of their oral testimonies either electronically (on computer 
disk or CD-ROM) or in paper copy. Verbatim transcripts and written 
statements will be included in the rulemaking docket. If you would like 
to present oral testimony at the hearing, please notify Kathy Kaufman 
at 919-541-0102 or by e-mail at [email protected] or Todd Hawes at 
919-541-5591 or by e-mail at [email protected] by August 7. Persons 
wishing to present oral testimony that have not made arrangements in 
advance should register by 9 a.m. the day of the hearing. The public 
hearing will provide interested parties the opportunity to present 
data, views, or arguments concerning the proposed rules. The EPA may 
ask clarifying questions during the oral presentations, but will not 
respond to the presentations or comments at that time. Written 
statements and supporting information submitted during the comment 
period will be considered with the same weight as any oral comments and 
supporting information presented at a public hearing.
    Outline. The contents of today's preamble are listed in the 
following outline.

I. Overview and Background
II. Revisions to Regional Haze Rule Sec.  51.308(e)(2)
    A. Revisions Related to the Demonstration That an Alternative 
Program Makes Greater Reasonable Progress than BART
    B. State Options for Complying with Sec.  51.308(e)(2)(i) as 
Proposed
    C. Analysis under Sec.  51.308(e)(2) when an independent 
requirement determines the level of emission reductions needed
    D. Revisions to Sec.  51.308(e)(2) to standardize and clarify 
the minimum elements of emissions trading programs in lieu of BART
III. Revisions to Regional Haze Rule Sec.  51.309
    A. Background
    B. Proposed Regulatory Framework for States choosing to 
implement the GCVTC/WRAP Strategies
IV. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination with 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children from 
Environmental Health Risks 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. Overview and Background

    Today's rulemaking provides the following changes to the regional 
haze regulations:
    (1) revised regulatory text in Sec.  51.308(e)(2)(i) in response to 
the CEED court's remand, to remove the requirement that the 
determination of the BART ``benchmark'' be based on cumulative 
visibility analyses, and to clarify the process for making such 
determinations, including the application of BART presumptions for EGUs 
as contained in Appendix Y to 40 CFR 51.
    (2) new regulatory text in Sec.  51.308(e)(2)(vi), to provide 
minimum elements for cap and trade programs in lieu of BART,
    (3) revised regulatory text in Sec.  51.309, to reconcile the 
optional framework for certain western States and Tribes to implement 
the recommendations of the Grand Canyon Visibility Transport Commission 
(GCVTC) with the CEED decision.
    How This Preamble Is Structured. Section I provides background on 
the Clean Air Act (CAA) BART requirements as codified in the regional 
haze rule, on the DC Circuit Court decision which remanded parts of the 
rule, and on the June 2005 BART rule. Section II discusses specific 
issues relating to the proposed revisions to Sec.  51.308(e)(2) of the 
Regional Haze Rule governing alternatives to source-by-source BART. 
Section III discusses specific issues relating to the proposed 
revisions to Sec.  51.309 of the Regional Haze Rule pertaining to the 
optional emissions trading program for certain western States and 
Tribes. Section IV provides a discussion of how this rulemaking 
complies with the requirements of Statutory and Executive Order 
Reviews.

The Regional Haze Rule and BART Guidelines

    In 1999, we published a final rule to address a type of visibility 
impairment known as regional haze (64 FR 35714, July 1, 1999). The 
regional haze rule requires States to submit implementation plans 
(SIPs) to address regional haze visibility impairment in 156 Federally-
protected parks and wilderness areas. These 156 scenic areas are called 
``mandatory Class I Federal areas'' in the Clean Air Act (CAA),\1\ but 
are referred to simply as ``Class I areas'' in today's rulemaking. The 
1999 rule was issued to fulfill a long-standing EPA commitment to 
address regional haze under the authority and requirements of sections 
169A and 169B of the CAA.
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    \1\ See, e.g. CAA Section 169(a)(1).
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    As required by the CAA, we included in the final regional haze rule 
a requirement for BART for certain large stationary sources that were 
put in place between 1962 and 1977. We discussed these requirements in 
detail in the preamble to the final rule (64 FR 35737-35743). The 
regulatory requirements for BART were codified at 40 CFR 51.308(e), and 
in definitions that appear in 40 CFR 51.301.
    In the preamble to the regional haze rule, we committed to issuing 
further guidelines to clarify the requirements of the BART provision. 
We announced

[[Page 44156]]

these final guidelines on June 15, 2005.\2\ The purpose of the BART 
guidelines is to assist States as they identify which of their BART-
eligible sources should undergo a BART analysis (i.e., which are 
``sources subject to BART''), and select controls in light of the 
statutory factors listed above (``the BART determination'').
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    \2\ See http://www.epa.gov/visibility/actions.html#bart1.
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    We explained in the preamble to the 1999 regional haze rule that 
the BART requirements in section 169A(b)(2)(A) of the CAA demonstrate 
Congress' intent to focus attention directly on the problem of 
pollution from a specific set of existing sources (64 FR 35737). The 
CAA requires that any of these existing sources ``which, as determined 
by the State, emits any air pollutant which may reasonably be 
anticipated to cause or contribute to any impairment of visibility [in 
a Class I area],'' shall install the best available retrofit technology 
for controlling emissions.\3\ In determining BART, the CAA requires the 
State to consider several factors that are set forth in section 
169A(g)(2) of the CAA, including the degree of improvement in 
visibility which may reasonably result from the use of such technology.
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    \3\ CAA Sections 169A(b)(2) and (g)(7).
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    The regional haze rule addresses visibility impairment resulting 
from emissions from a multitude of sources located across a wide 
geographic area. Because the problem of regional haze is caused in 
large part by the long-range transport of emissions from multiple 
sources, and for certain technical and other reasons explained in that 
rulemaking, we adopted an approach that required States to look at the 
contribution of all BART sources to the problem of regional haze in 
determining both applicability and the appropriate level of control. 
Specifically, we had concluded that if a source potentially subject to 
BART is located in an area from which pollutants may be transported to 
a Class I area, that source ``may reasonably be anticipated to cause or 
contribute'' to visibility impairment in the Class I area. Similarly, 
we also concluded that in weighing the factors set forth in the statute 
for determining BART, the States should consider the collective impact 
of BART sources on visibility. In particular, in considering the degree 
of visibility improvement that could reasonably be anticipated to 
result from the use of such technology, we stated that the State should 
consider the degree of improvement in visibility that would result from 
the cumulative impact of applying controls to all sources subject to 
BART. We concluded that the States should use this analysis to 
determine the appropriate BART emission limitations for specific 
sources.\4\
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    \4\ See 66 FR 35737-35743 for a discussion of the rationale for 
the BART requirements in the 1999 regional haze rule.
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    The 1999 regional haze rule also included Sec.  51.309, containing 
the strategies developed by the Grand Canyon Visibility Transport 
Commission (GCVTC). Certain western States and Tribes were eligible to 
submit implementation plans under Sec.  51.309 as an alternative method 
of achieving reasonable progress for Class I areas which were covered 
by the GCVTC's analysis--i.e., the 16 Class I areas on the Colorado 
Plateau. In order for States and Tribes to be able to utilize this 
section, however, the rule provided that EPA must receive an ``Annex'' 
to the GCVTC's final recommendations. The purpose of the Annex was to 
provide the specific provisions needed to translate the GCVTC's general 
recommendations for stationary source SO2 reductions into an 
enforceable regulatory program. The rule provided that such an Annex, 
meeting certain requirements, be submitted to EPA no later than October 
1, 2000. See Sec. Sec.  51.309(d)(4) and 51.309(f).

American Corn Growers v. EPA

    In American Corn Growers v. EPA, 291 F.3d 1 (DC Cir. 2002), 
industry petitioners challenged EPA's interpretation of the BART 
determination process and raised other challenges to the rule. The 
court in American Corn Growers concluded that the BART provisions in 
the 1999 regional haze rule were inconsistent with the provisions in 
the CAA ``giving the states broad authority over BART determinations.'' 
291 F.3d at 8. Specifically, with respect to the test for determining 
whether a source is subject to BART, the court held that the method EPA 
had prescribed for determining which eligible sources are subject to 
BART illegally constrained the authority Congress had conferred on the 
States. Id. The court did not decide whether the general collective 
contribution approach to determining BART applicability was necessarily 
inconsistent with the CAA. Id. at 9. Rather, the court stated that 
``[i]f the [regional haze rule] contained some kind of a mechanism by 
which a state could exempt a BART-eligible source on the basis of an 
individualized contribution determination, then perhaps the plain 
meaning of the Act would not be violated. But the [regional haze rule] 
contains no such mechanism.'' Id. at 12.
    The court in American Corn Growers also found that our 
interpretation of the CAA requiring the States to consider the degree 
of improvement in visibility that would result from the cumulative 
impact of applying controls in determining BART was inconsistent with 
the language of the Act. 291 F.3d at 8. Based on its review of the 
statute, the court concluded that the five statutory factors in section 
169A(g)(2) ``were meant to be considered together by the states.'' Id. 
at 6. The final rule signed on June 15, 2005 responded to the American 
Corn Growers court's decision on the BART provisions by amending the 
regional haze rule at 40 CFR 51.308 and by finalizing changes to the 
BART guidelines at 40 CFR part 51, appendix Y.\5\ These changes 
eliminate the previous constraint on State discretion and provide 
States with appropriate techniques and methods for determining which 
BART-eligible sources ``may reasonably be anticipated to cause or 
contribute to any impairment of visibility in any mandatory Class I 
Federal area.'' In addition, the revised regulations list the 
visibility improvement factor with the other statutory BART 
determination factors in Sec.  51.308(e)(1)(A), so that States will be 
required to consider all five factors, including visibility impacts, on 
an individual source basis when making each individual source BART 
determination.
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    \5\ http://www.epa.gov/visibility/actions.html#bart1.
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The Annex Rule

    In a rule dated June 5, 2003, EPA approved the WRAP's Annex to the 
GCVTC report, which had been submitted by the WRAP prior to October 1, 
2000, in accordance with Sec.  51.309(f). 68 FR 33764, June 5, 2003. In 
this action, referred to as the ``Annex rule,'' EPA approved the 
quantitative SO2 emission reduction milestones and the 
detailed provisions of the backstop market trading program developed by 
the WRAP as meeting the requirements of Sec.  51.309(f). EPA therefore 
codified the Annex provisions in Sec.  51.309(h). Subsequently, five 
States and one local agency submitted SIPs developed to comply with all 
of Sec.  51.309, including the Annex provisions at Sec.  51.309(h). In 
accordance with Sec.  51.309(c) these SIPs were submitted prior to 
December 31, 2003.

[[Page 44157]]

Center for Energy and Economic Development v. EPA

    After the May 2004 reproposal of the BART guidelines, the DC 
Circuit decided another case where BART provisions were at issue, 
Center for Energy and Economic Development v. EPA, No. 03-1222, (D.C. 
Cir. Feb. 18, 2005) (``CEED v. EPA''). In this case, the court granted 
a petition challenging provisions of the regional haze rule governing 
the optional emissions trading program for certain western States and 
Tribes (the ``WRAP Annex Rule'').
    The court in CEED affirmed our interpretation of CAA 169A(b)(2) as 
allowing for non-BART alternatives where those alternatives are 
demonstrated to make greater progress than BART. (CEED, slip. op. at 
13). The court, however, took issue with provisions of the regional 
haze rule governing the methodology of that demonstration. 
Specifically, 40 CFR 51.308(e)(2) required that visibility improvements 
under source-specific BART--the benchmark for comparison to the 
alternative program--must be estimated based on the application of BART 
controls to all sources subject to BART. (This section was incorporated 
into the WRAP Annex rule by reference at 40 CFR 51.309(f)). The court 
held that we could not require this type of group BART approach, which 
was vacated in American Corn Growers in a source-specific BART context, 
even in an alternative trading program in which State participation was 
wholly optional.
    The BART guidelines as proposed in May 2004 contained a section 
offering guidance to States choosing to address their BART-eligible 
sources under the alternative strategy provided for in 40 CFR 
51.308(e)(2). This guidance included criteria for demonstrating that 
the alternative program achieves greater progress towards eliminating 
visibility impairment than would BART.
    In light of the DC Circuit's decision in CEED, we did not address 
alternative programs in the rulemaking finalizing the BART guidelines. 
However we note that our authority to address BART through alternative 
means was upheld in CEED, and we remain committed to providing States 
with that flexibility. Today's proposed revisions to the Regional Haze 
Rule, which responds to the holding in CEED, would provide that 
flexibility that States need to implement alternatives to BART.

Overview of Proposed Changes to Sec. Sec.  51.308(e)(2) and 51.309 of 
the Regional Haze Rule

    The EPA continues to support State efforts to develop trading 
programs and other alternative strategies to accomplish the 
requirements of the regional haze rule, including BART. We believe such 
strategies have the potential to achieve greater progress towards the 
national visibility goals, and to do so in the most cost effective 
manner practicable. Therefore, we are proposing the following 
amendments to the regional haze rule at Sec. Sec.  51.308(e)(2) and 
51.309 to enable States to continue to develop and implement such 
programs. We request comment on all of the provisions in this proposed 
rule.
    First, we are proposing amending the generally applicable 
provisions in Sec.  51.308(e)(2) prescribing the type of analysis used 
to determine emissions reductions achievable from source-by-source 
BART, for purposes of comparing to the alternative program. The 
proposed amendments would: reconcile the methodology with the court's 
decision in CEED v. EPA; provide additional guidance to States and 
Tribes regarding the minimum elements of an acceptable cap and trade 
program; and provide for consistent application of the BART guidelines 
for EGUs between source-by-source programs and alternative cap and 
trade programs.
    Second, we are proposing amendments to Sec.  51.309 to enable 
certain western States and Tribes to continue to utilize the strategies 
contained in this section as an optional means to satisfy reasonable 
progress requirements for certain Class I areas, for the first long-
term planning period. These changes would provide States and Tribes 
with an opportunity to revisit the details of the backstop 
SO2 emissions trading program without being required to 
assess visibility on a cumulative basis when determining emissions 
reductions achievable by source-by-source BART.

II. Revisions to Regional Haze Rule Section Sec.  51.308(e)(2)

A. Revisions Related to the Demonstration That an Alternative Program 
Makes Greater Reasonable Progress Than BART

    The DC Circuit's decision in CEED v. EPA prohibits the Agency from 
requiring that a BART alternative trading program be compared to a 
source-by-source BART program by assessing the effect on visibility of 
the source-by-source BART program on a cumulative basis.
    The general provision in the regional haze rule authorizing 
alternative programs in lieu of BART had required such an approach. See 
40 CFR 51.308(e)(2)(2004). The general provision, Sec.  51.308(e)(2), 
was incorporated by reference into the WRAP-specific section of the 
rule at Sec.  51.309(f)(1)(I).
    Section 51.308(e)(2)(i) specified the methodology for comparing a 
BART alternative trading program against source-by-source BART. This 
provision required States to demonstrate that a ``trading program or 
other alternative measure will achieve greater reasonable progress than 
would have resulted from the installation and operation of BART at all 
sources subject to BART in the State.'' The methodology consisted of 
three steps, quoted here in full:

    (A) A list of all BART eligible sources within the State.
    (B) An analysis of the best system of continuous emission 
control technology available and associated emission reductions 
achievable for each source within the State subject to BART. In this 
analysis, the State must take into consideration the technology 
available, the costs of compliance, the energy and nonair quality 
environmental impacts of compliance, any pollution control equipment 
in use at the source, and the remaining useful life of the source. 
The best system of continuous emission control technology and the 
above factors may be determined on a source category basis. The 
State may elect to consider both source-specific and category-wide 
information, as appropriate, in conducting its analysis.
    (C) An analysis of the degree of visibility improvement that 
would be achieved in each mandatory Class I Federal area as a result 
of the emission reductions achievable from all such sources subject 
to BART located within the region that contributes to visibility 
impairment in the Class I area, based on the analysis conducted 
under Sec.  51.308(e)(2)(i)(B).

    Although the DC Circuit had found this methodology to be 
inconsistent with the statutory requirements for source-by-source BART, 
when EPA revised the regional haze rule to incorporate the WRAP Annex 
in 2003, we did not believe that the decision in American Corn Growers 
in any way affected our ability to approve alternative measures such as 
trading programs. In reviewing our approval of the Annex submitted by 
the WRAP, however, the CEED court stated that EPA could not ``under 
section 309 require states to exceed invalid emission reductions.'' The 
court granted the petition challenging the Annex because, consistently 
with Sec.  51.308(e)(2)(i), EPA's regulations had required States to 
consider ``the impact of all emissions reductions to estimate 
visibility progress.''

[[Page 44158]]

    Based on our review of the CEED court's ruling, we believe that our 
regulations, which required an analysis of emissions reductions 
achievable for each source that was bifurcated into an individual 
source assessment for the first four of the five BART factors 
identified in the CAA for States to consider in BART determinations,\6\ 
and a cumulative source assessment for the fifth factor of visibility 
improvement, must be revised.
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    \6\ These four factors are the costs of compliance, the energy 
and non-air environmental impacts of compliance, any controls 
already in use, and the remaining useful life of the source.
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Revision to Sec.  51.308(e)(2)(i) To Address CEED
    We propose to revise Sec.  51.308(e)(2)(i) to provide that BART 
determinations be made in the trading program context in the same 
manner as in the source-by-source context. This would be accomplished 
by a cross reference to Sec.  51.308(e)(1) in proposed Sec.  
51.308(e)(2)(i)(C). Section 51.308(e)(1)(A), as contained in the recent 
action finalizing the BART guidelines, provides that the degree of 
visibility improvement be considered along with the other statutory 
factors when making BART determinations. Appendix Y to part 51 sets 
forth the process by which States should assess visibility improvement 
in BART determinations. Thus, with this amendment, the regional haze 
rule would not impose a bifurcated methodology for defining the level 
of emission reductions needed by an alternative program in lieu of 
BART. We believe this revision is the only regulatory change necessary 
to comply with the court's decision in CEED.\7\ The potential range of 
options States would have for performing analyses in compliance with 
this provision is discussed in section B below.
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    \7\ It is important to note that existing paragraph (C) does 
not, in and of itself, necessarily indicate a group BART approach. 
That is, if BART-equivalent reductions are estimated in an 
appropriate manner under paragraph (B) (i.e., a manner that takes 
into account the degree of visibility improvement anticipated from 
controls), nothing in paragraph (C)'s requirement to analyze the 
degree of improvement expected from all sources subject to BART 
would run afoul of the court's prohibition of a group-BART 
requirement. In other words, it is the absence of visibility 
improvement as a factor in the BART determination under paragraph 
(B) which is problematic, not its inclusion in paragraph (C) as an 
indicator of the overall improvement achievable from BART.
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Revisions to Demonstration Framework
    The other proposed changes to Sec.  51.308(e)(2)(i) are intended to 
provide a clearer framework for the demonstration that an alternative 
program provides greater reasonable progress than BART. Specifically, 
we propose revising paragraph (D) to require States to project 
visibility improvements resulting from the alternative program, and 
adding a new paragraph (E) to require that States compare the 
visibility results from source by source BART and the alternative 
program, using the test criteria in Sec.  51.308(e)(3).
    We are also clarifying the requirement in existing Sec.  
51.308(e)(2)(i)(C) that a State analyze ``the degree of visibility 
improvement that would be achieved in each mandatory Class I Federal 
area as a result of the emissions reductions achievable from all such 
sources subject to BART located within the region that contributes to 
visibility impairment in the Class I area, based on the analysis 
conducted under [Sec.  51.308(e)(2)(i)(B)].'' We believe this language 
is somewhat ambiguous, as it could be read to require an analysis for 
every Federal mandatory Class I area nationwide, regardless of the 
scope of the program at issue. Moreover, it seems to demand a 
determination of what region, which could be a subregion of the trading 
area, contributes to impairment at each Class I area. We anticipate 
that modeling will be conducted on a regionwide basis, based on 
emissions reductions achievable by BART at all sources subject to BART 
within the program area, rather than as a series of groupings of areas 
of contribution with impacted Class I areas.
    To clarify that every program need not address every Class I area 
nationwide, we propose adding the term ``affected'' to modify ``class I 
areas'' in paragraph (C). As noted in the preamble discussion of the 
finalization in Sec.  51.308(e)(3) of the criteria for determining 
whether an alternative program makes greater reasonable progress than 
BART, states have some discretion in defining ``affected'' Class I 
areas. See part IV.B. of final BART guideline preamble.\8\ We also 
propose eliminating the ambiguous clause formerly in paragraph (C).
---------------------------------------------------------------------------

    \8\ http://www.epa.gov/visibility/actions.html#bart1.
---------------------------------------------------------------------------

    In addition, we propose to clarify (in revised paragraph (B)) that 
the alternative program need not cover every BART category, but must 
cover every BART-eligible source within an affected category. The 
rationale for this is discussed below in the discussion of ``Minimum 
Universe of Affected Sources.''
    Finally, we propose to add a paragraph (E) which would direct the 
State to compare the expected visibility improvement under the 
alternative program and under BART according to the criteria 
established in Sec.  51.308(e)(3).
    With these changes, paragraphs within Sec.  51.308(e)(2)(i) would 
read as follows:

    (A) A list of all BART-eligible sources within the State.
    (B) A list of all BART source categories covered by the 
alternative program. The State is not required to include every BART 
source category in the program, but for each source category 
covered, the State must include each BART-eligible source within 
that category in the analysis required by paragraph (C) below.
    (C) An analysis of the degree of visibility improvement that 
would be achieved in each affected mandatory Class I Federal area as 
a result of the emission reductions projected from the installation 
and operation of BART controls under paragraph (e)(1) of this 
section at each source subject to BART in each source category 
covered by the program.
    (D) An analysis of the emissions reductions, and associated 
visibility improvement anticipated at each Class I area within the 
State, under the trading program or other alternative measure.
    (E) A determination that the emission reductions and associated 
visibility improvement projected under (D) above (i.e., the trading 
program or other alternative measure) comprise greater reasonable 
progress, as defined in paragraph (e)(3) of this section, than those 
projected under (C) above (i.e., BART).

    The new Sec.  51.308(e)(3), cross referenced in proposed Sec.  
51.308(e)(2)(i)(E) above, was finalized in the June 15, 2005 notice of 
final rule making for the BART guidelines. In that action, we noted 
that we would seek comment in this rulemaking on whether compliance 
with the two-pronged visibility test contained in Sec.  51.308(e)(3) 
should be the only means of demonstrating greater reasonable progress 
than BART, or whether other means, including qualitative factors, 
should also be allowed. Consequently, we seek comment in this proposal 
on whether it would be reasonable to allow States to use a weight-of-
evidence approach to evaluate both air quality modeling results and 
other policy considerations. Such an approach might be reasonable, for 
example, where (1) the alternative program achieves emissions 
reductions that are within the range believed achievable from source-
by-source BART at affected sources, (2) the program imposes a firm cap 
on emissions that represents meaningful reductions from current levels 
and, in contrast to BART, would prevent emissions growth from new 
sources, and (3) the State is unable to perform a sufficiently robust 
assessment of the programs using the two pronged visibility test due to 
technical or data limitations. Regarding the last point above, we are 
cognizant of the fact that

[[Page 44159]]

there may not be methods available to accurately project the 
distribution of emission reductions for source categories other than 
EGUs. Modeling tools such as the Integrated Planning Model, which 
enables projections of emission control decisions at EGUs based on 
regulatory requirements with a reasonable degree of confidence, do not 
exist for other source categories. We therefore seek comment on the 
extent to which other, non-modeled factors may be taken into 
consideration. We note that we are not soliciting comments on the terms 
of Sec.  51.308(e)(3), as that provision is final.
Role of BART Guidelines for EGUs
    The BART guidelines establish certain control levels or emission 
rates as presumptive standards for EGUs of greater than 200 MW capacity 
at plants with total generating capacity in excess of 750 MW. These 
presumptive levels were developed pursuant to EPA's duty under CAA 
section 169A(b)(2) to develop the guidelines under which States are 
required to make BART determinations for EGUs. The presumptive 
standards were developed through a formal rulemaking process, including 
extensive public comment and full analysis of costs and economic 
impacts, and apply to certain EGUs on a mandatory basis in the context 
of Sec.  51.308(e)(1). Because they have been developed for application 
on a source-specific basis, we believe it is all the more appropriate 
to apply them in a trading context where the burden to meet BART-
equivalent reductions may be shared among non-BART eligible sources as 
well. We therefore propose to make the presumptive standards guidelines 
applicable to alternative programs through a cross reference to Sec.  
51.308(e)(1) within Sec.  51.308(e)(2)(i)(C). Thus, when States are 
estimating emissions reductions achievable from source-by-source BART, 
they must assume that all EGUs which would otherwise be subject to BART 
will control at the presumptive level, unless they demonstrate such 
presumptions are not appropriate at particular units. This 
demonstration should be guided by the same criteria discussed in the 
BART guidelines. We request comment on this proposed requirement.
Minimum Universe of Affected Sources
    Section 51.308(e)(2)(ii) currently provides that, where a State 
opts to implement an alternative strategy to BART, the program must 
apply, at a minimum, to all BART-eligible sources within the State. 
Since the promulgation of the regional haze rule in 1999, EPA has had 
occasion to consider BART alternative programs in more detail, 
including the WRAP Annex and the Clean Air Interstate Rule, or CAIR.\9\ 
We now believe that this ``all or nothing'' requirement is unduly 
restrictive and could pose an unnecessary barrier to the development of 
BART alternatives. The reason for this is that some BART-eligible 
source categories might not be suitable for participation in a trading 
program. For example, for some source categories there may be 
difficulty in quantifying emissions with sufficient accuracy and 
precision to guarantee fungibility of emission allowances. Because of 
these considerations, we believe States should have the opportunity to 
pursue source-by-source BART for one or more categories which are more 
appropriately addressed in that manner and a trading program for other 
source categories. Once a source category is selected for inclusion in 
the alternative program, however, all BART sources within the effected 
categories must be covered. Therefore, we are proposing to revise 
Sec. Sec.  51.308(e)(2)(i)(B) and 51.308(e)(2)(ii) to this effect.
---------------------------------------------------------------------------

    \9\ In the case of the CAIR, EPA adopted separate provisions 
that allow the use of an alternative trading program for a subset of 
BART-eligible sources.
---------------------------------------------------------------------------

B. State Options for Complying With Sec.  51.308(e)(2)(i) as Proposed

    Under the framework provided by CAA sections 169A and 169B, there 
are several different contexts in which visibility impact analysis 
could be conducted. The development of a BART-alternative program could 
entail separate visibility analysis in as many as three distinct 
stages: (1) Determining which BART eligible sources are subject to 
BART, (2) determining what BART is, for each source or source category 
subject to BART, and (3) determining the overall visibility improvement 
anticipated from the application of BART to all sources subject to 
BART. In addition, the first two stages, if conducted on a source-by-
source basis, could involve hundreds of separate modeling runs in each 
State. This could impose a tremendous burden on State air agency 
resources, and eliminate the administrative efficiency advantages 
provided by emission-trading alternatives. The EPA therefore seeks to 
allow States to combine modeling stages or use simplifying assumptions 
to the extent allowed by the CAA and controlling case law.
    Before discussing the first two stages, we note that an 
individualized analysis is never required at the third stage--
determining the overall improvement anticipated from source-by-source 
BART applied to all sources. By definition, visibility modeling at this 
stage must be done on a cumulative basis. This does not make it a 
prohibited approach under CEED v. EPA, because at this stage of the 
analysis, relevant aspects of the BART benchmark and the alternative 
program have already been determined. For example, if the emissions 
reductions anticipated from source-by-source BART were determined by 
conducting a full-scale BART analysis in accordance with Sec.  
51.308(e)(1) on each source, including the use of individualized 
modeling analysis for each source, it would then be appropriate to 
determine the overall visibility improvement expected from the 
application of this BART to all sources subject to BART.\10\ We now 
turn to the discussion of the potential for providing flexibility to 
States in assessing visibility in the first two stages listed above.
---------------------------------------------------------------------------

    \10\ This is the stage of the analysis prescribed by existing 
Sec.  51.308(e)(2)(i)(C), as noted in the section II.A above.
---------------------------------------------------------------------------

1. Determination of Which BART-Eligible Sources Are Subject to BART
    In the BART guidelines, announced on June 15, 2005,\11\ we provide 
States with guidance on how to determine which BART-eligible sources 
are ``reasonably anticipated to cause or contribute to any visibility 
impairment at any Class I area.'' Such sources are ``subject to BART,'' 
meaning that the State must perform a BART determination based on the 
five statutory factors. Under the guidelines, States have considerable 
discretion to determine which BART-eligible sources are subject to 
BART, as the court emphasized in American Corn Growers.
---------------------------------------------------------------------------

    \11\ http://www.epa.gov/visibility/actions.html#bart1.
---------------------------------------------------------------------------

    In providing States with the guidance for these determinations, we 
note that States may choose to make BART determinations for all BART-
eligible sources.\12\ Alternatively, States could determine which BART-
eligible sources are subject to BART using any of the options provided 
in the BART guidelines. States opting to develop a trading program or 
other alternative measure may wish to exercise their discretion to 
determine that all BART-eligible sources within affected categories are 
reasonably anticipated to cause or contribute to visibility impairment 
and therefore should be

[[Page 44160]]

included in the analysis of emissions reductions achievable by BART. 
While this might eliminate the need for visibility modeling for each 
BART eligible source(reducing the administrative burden on the State), 
it also maximizes the number of BART-eligible sources included in this 
step of the analysis of an alternative strategy. At the next stage of 
the process, the BART determination (i.e., a determination of emissions 
reductions that would be achievable under source-by-source BART), a 
visibility impact analysis of some sort (discussed in next section 
below) would still be required. Therefore, States would have the 
opportunity to consider the anticipated visibility improvement from 
imposing controls on a single source against cost of control and other 
factors.
---------------------------------------------------------------------------

    \12\ As noted in the preamble to the BART guidelines, States 
choosing this approach should use the data being developed by the 
regional planning organizations, or on their own, as part of the 
regional haze SIP development process to make a showing that the 
State contributes to visibility impairment in one or more Class I 
areas.
---------------------------------------------------------------------------

2. Determination of What Constitutes BART for Each BART Eligible Source

Source-by-Source Visibility Impact Analysis

    One way to handle the visibility improvement element of the BART 
determination for all BART sources covered by the program would be to 
conduct individualized assessments of visibility improvement expected 
from each BART source under various control scenarios, as described in 
the BART guidelines. Such an approach would comport with the court's 
decision in CEED v. EPA, as it would completely avoid any taint of a 
``group BART'' approach.
    However, such an approach, when used in the context of an 
alternative program, could impose a significant resource burden upon 
the States, especially if the State is modeling a large number of BART-
eligible sources over a broad regional area (i.e. multiple States). For 
example, a State could potentially need to conduct hundreds of model 
runs to isolate individual source contributions to multiple Class I 
areas across multiple States, and assess several sets of meteorological 
and terrain data to appropriately simulate the geophysical conditions 
influencing visibility. We seek comments, particularly from States and 
interested Tribes, regarding the feasibility of such an approach and 
other recommendations for the alternative program analysis. Although 
such an analysis is appropriate in the Sec.  51.308(e)(1) source-by-
source context, there may be more streamlined approaches that would be 
appropriate for BART determinations within an alternative program.
    One area of consideration might be the type of model used. The BART 
guidelines provide that CALPUFF is the preferred model for the 
visibility improvement analysis in the source-by-source (Sec.  
51.308(e)(1)) context but note that other appropriate models may be 
used. A regional modeling approach, using a photochemical grid model, 
may be more appropriate for an alternative program. In many cases, 
regional planning organizations (RPOs) have already prepared data sets 
that are ``model ready'' for a regional modeling application; this 
could significantly reduce the resource burden on States. We request 
comment on a preferred modeling methodology and whether the use of 
other models, including regional scale models such as the Community 
Multiscale Air Quality model (CMAQ) and the Comprehensive Air quality 
Model with extensions (CAMX), would be appropriate for BART 
determinations in the alternative-program context \13\, and whether 
their use would significantly ease the burden on States.
---------------------------------------------------------------------------

    \13\ To reiterate, the comments we seek in this part of the 
preamble are with respect to the use of other models for use in the 
course of estimating the BART ``benchmark'' through the 
determination of BART control levels at sources subject to BART. For 
example, regional scale models might be used to inform BART 
determinations at many sources simultaneously through the use of 
techniques which can track multiple single source contributions. 
This type of modeling is different from the use of regional scale 
models to assess the cumulative impact on visibility after BART 
determinations have been made. There is no question that the use of 
regional scale models is appropriate for the latter purpose, as with 
our use of CMAQ to assess the visibility effects of CAIR and of the 
most-stringent-case BART for EGUs.
---------------------------------------------------------------------------

Potentially Permissible Uses of Cumulative Approach

    Today's proposed revisions would require States to consider 
anticipated visibility improvement along with the other statutory 
factors when determining BART for each source subject to BART in a 
source-by-source program. The analysis would then be used to compare 
BART to the alternative program. A State that complied with this 
requirement by performing a full-scale individualized visibility impact 
determination for each source would clearly satisfy the American Corn 
Growers and CEED decisions.
    What is less clear from the decisions is whether a State may, in 
exercising its discretion, employ some type of cumulative approach or 
simplifying assumptions in the process of considering visibility 
improvement when estimating emissions reductions achievable by source-
by-source BART. The EPA believes that States retain such discretion, 
and that the holding of CEED v. EPA is limited to circumstances where 
the EPA attempts to require or induce States to adopt cumulative 
approaches. The EPA is not requiring such a cumulative approach.
    The court did not specifically discuss the relationship between the 
invalid ``group BART'' approach contained in the Annex (and approved in 
the Annex rule) and the requirements of the regional haze rule which 
governed the development of the Annex in the first place (i.e., 
Sec. Sec.  51.308(e)(2) and 51.309(f)). However, the idea that the EPA 
apparently forced this methodology upon the States appears to be 
central to the Court's reasoning in invalidating the Annex Rule. This 
is most clearly demonstrated in the court's discussion of the 
preliminary issue of whether the petitioner had standing to bring the 
suit. In that discussion, the court held that neither the fact that the 
States had a choice between the GCVTC provisions (Sec.  51.309) and the 
nationally applicable provisions (Sec.  51.308), nor the fact that 
States had taken the initiative in designing the Annex, was sufficient 
to ``undermine the inference that EPA's pressure has been decisive.'' 
CEED v. EPA at 8-9. The issue here was whether the petitioner's current 
``injury in fact'' (compliance with reporting requirements necessitated 
by the Annex) was fairly traceable to EPA's regulatory scheme, not 
whether the ``group BART'' provision per se was forced upon the States. 
However, since the ``group BART'' methodology was prescribed by the 
regulations which governed the Annex, to the extent EPA induced or 
``pressured'' States into accepting Sec.  51.309, it also must have 
pressured them into accepting group BART. Therefore, the CEED decision 
did not address the situation where a State exercises its discretion to 
use a cumulative approach to visibility modeling, absent any 
``pressure'' from the EPA.
    This reading of the case is not inconsistent with the court's 
statement that group BART is ``invalid in any 169A context,''--a 
statement made in the context of EPA's ripeness claim. The EPA had 
argued the claims brought by the petitioner in CEED v. EPA had been 
ripe for review in 1999 at the time the action in American Corn Growers 
was brought and were thus precluded from being raised several years 
later. Petitioner CEED argued that American Corn Growers had either 
invalidated Sec. Sec.  51.308(e)(2) and 51.309(f) (providing the States 
with the opportunity to submit the Annex), or regarded those issues as 
unripe at the time. CEED, Slip. Op. at 11. The court determined that 
American Corn Growers had not addressed ``better than BART in the 309 
context,'' and that the prior court's

[[Page 44161]]

hesitation to do so was ``reasonably based on the possibility that the 
BART benchmark used to calculate ``better-than-BART'' might in the end 
differ materially from the original BART.'' Finally, the court stated 
that ``either way American Corn Growers is read, it plainly forbade use 
of the original BART methodology in any 169A context.'' Id.
    We read the prohibition of group BART in ``any 169A context'' to 
mean that, in exercising its duty under CAA section 169A to promulgate 
BART regulations, EPA may not prescribe group BART in either the 
context of source specific BART or the context of a trading 
alternative. In both cases, it is EPA that is barred from prescribing 
such a methodology. Nothing in this decision appears to bar a State 
exercising its own discretion under CAA section 169A to define the BART 
benchmark using some approach that employs a cumulative analysis of 
visibility impairment.
    For the reasons above, the EPA believes that although EPA may not 
require a cumulative visibility approach to estimating emissions 
reductions achievable from BART, States are not barred from using such 
approaches if they so choose

C. Reliance on Emissions Reductions Required for Other Purposes

    In some cases, emissions reductions required to fulfill CAA 
requirements other than BART (or to fulfill requirements of a State law 
or regulation not required by the CAA) may also apply to some or all 
BART eligible sources. In such a situation, a State may wish to 
determine whether the reductions thus obtained would result in greater 
reasonable progress than would the installation and operation of BART 
at all sources subject to BART which are covered by the program.
    One prominent example of an independent requirement which would 
satisfy BART for affected sources in affected States is the CAIR. (70 
FR 25162, May 12, 2005). The emissions reductions required by the CAIR 
are for the purpose of addressing significant interstate contributions 
to PM and ozone nonattainment. The level of emissions reductions 
required was determined by an analysis of highly cost effective 
controls at EGUs. The CAIR establishes an EPA-administered cap and 
trade program for SO2 and NOX from EGUs, in which 
affected States may participate as a way of meeting their emission 
reduction requirements. (States can also choose to meet their emission 
reduction requirements in other ways, subject to certain limitations).
    Because the CAIR trading program would cover BART-eligible EGUs, 
and because the CAIR would result in emission reductions surplus to CAA 
requirements as of the baseline date of the SIP (defined as 2002 for 
regional haze purposes), we determined that it was appropriate to treat 
participation in this program as a potential means of satisfying BART 
requirements for that source sector. See section IV of the preamble to 
the final BART rule.\14\
---------------------------------------------------------------------------

    \14\ http://www.epa.gov/visibility/actions.html#bart1.
---------------------------------------------------------------------------

    The fact that the CAIR reductions were required in order to assist 
in attainment of the NAAQS, rather than for the purpose of satisfying 
BART, significantly alters the consideration of what type of analysis 
is permissible to show greater reasonable progress than BART. At the 
heart of the court's decision in CEED v. EPA was the concern that by 
requiring States to use a group-BART approach in developing the 
benchmark by which an alternative program would be measured, the 
regional haze rule would require States to adopt an unduly stringent 
alternative approach. No basis for such a concern exists when an 
independent requirement determines the level of reductions required by 
an alternative program covering a universe of sources (including BART 
eligible sources). In such a case, the better-than-BART demonstration 
is clearly an after-the-fact analysis, used simply for comparison of 
the programs, and not to define the alternative program. In the CAIR 
example, the emission reduction levels were not based on the invalid 
``group-BART'' approach or any other assumptions regarding BART, but 
were developed for other reasons. Specifically, the CAIR emission 
reductions were developed to assist with attainment of the NAAQS for 
PM2.5 and ozone. Had EPA not performed the comparison of 
CAIR to BART for visibility progress purposes, the CAIR emission 
reduction requirements would remain unchanged. Therefore, EPA could not 
be construed as imposing an invalid BART requirement on States but 
rather is simply allowing States, at their option, to utilize the CAIR 
cap and trade program as a means to satisfy BART for affected EGUs. 
This same reasoning would be applicable whenever any requirement other 
than BART defines the emission reductions required by the alternative 
program.
Reasonable Progress as an Independent Requirement
    The EPA believes that the requirement to make reasonable progress 
towards the national visibility goal, while related to the BART 
requirement, is a separate requirement analogous to the NAAQS-based 
requirements in CAIR. Therefore, where a State designs a program to 
meet reasonable progress goals, the ``better-than-BART'' demonstration 
would not be used to define the alternative programs, and the concerns 
of the DC Circuit in American Corn Growers and CEED v. EPA would not be 
applicable.
    A State may choose to exercise its discretion under CAA section 
169A and section 169B to achieve a larger portion of its reasonable 
progress requirements by use of an alternative program that affects 
non-BART eligible sources (including future sources) as well as BART-
eligible sources. The fact that the CAA establishes a minimum 
reasonable progress requirement in the form of BART for a certain 
subset of sources, based on category, size, and age, does not restrict 
the States' authority to establish a more ambitious reasonable progress 
program. The emission reduction requirements of such a program could be 
based on a number of different approaches not driven by a requirement 
to demonstrate greater reasonable progress than BART. In such a case, 
the better-than-BART test would serve simply as a check that the 
program had in fact met the minimum requirement of achieving more 
progress than BART. Because the BART estimation would not be defining 
the emission reductions required, the State would be free to use its 
discretion to begin the analysis with the simplifying assumption of a 
most-stringent-case BART scenario (similar to our application of the 
presumptive BART EGU standards to all-BART eligible sources in our CAIR 
analysis). If the program made greater reasonable progress than the 
most-stringent-case BART, the State could end its analysis there. In 
such a case, the program would obviously make greater reasonable 
progress than BART defined in any less stringent manner. If the program 
is not shown to make greater progress than most-stringent-case BART, 
the State could use its discretion to perform additional analysis to 
determine what progress would be achievable by BART after taking into 
account visibility on a source-by-source basis.
    To summarize, the EPA believes that where a State develops a 
program that include BART sources with the purpose of satisfying 
reasonable progress requirements for a larger universe of sources, the 
State's use of a most-stringent-case BART benchmark to satisfy the 
better than BART test would not run afoul of the D.C. Circuit's

[[Page 44162]]

decisions, as long as EPA does not attempt to require or otherwise 
impose such a benchmark.

D. Revisions to Sec.  51.308(e)(2) To Standardize and Clarify the 
Minimum Elements of Emissions Trading Programs in Lieu of BART

    EPA is proposing to add provisions that list fundamental elements 
that any cap and trade program adopted under Sec.  51.308(e)(2) in lieu 
of BART must contain. A cap and trade program, for the purposes of this 
section, means a program that establishes a cap on total annual 
emissions from the sources in the program, issues allowances with a 
total tonnage value equal to the tonnage of the cap, requires each 
source in the program to hold an amount of allowances after the end of 
the year with a tonnage value at least equal to the tonnage of the 
source's emissions during the year, and allows the purchase and sale of 
allowances by sources or other parties.
    EPA is adding these elements in order to provide the States with 
the crucial requirements they need to adopt into their SIPs for a cap 
and trade program and also to help guide EPA's review of the SIPs. For 
a cap and trade program to function properly, States will need to adopt 
a number of specific provisions into their SIPs, but these fundamental 
elements are the ones EPA deems as necessary to ensure the integrity of 
any cap and trade program adopted in a SIP under Sec.  51.308(e)(2)in 
lieu of BART. The elements listed below are consistent with the 
provisions of EPA's guidance for economic incentive programs titled 
``Improving Air Quality with Economic Incentive Programs'' (EIP) (EPA-
452/R-01-001, January 2001).
    The following is a description of each of the trading program 
requirements that are included in proposed Sec.  51.308(e)(2)(vi). For 
each of these proposed requirements, EPA requests comment on whether we 
have addressed the requirement to an appropriate level of detail and on 
whether the substance of the requirement is sufficient to ensure 
program integrity for the cap and trade program.
Applicability Provisions
    EPA is proposing that States and Tribes must include applicability 
provisions specifically defining which sources are subject to the 
program. Applicability, or the group of sources that the cap and trade 
program will affect, must be essentially the same from state to state, 
or across a state, to minimize confusion and administrative burdens. 
For a cap and trade program, some of the factors States and Tribes may 
want to consider when defining the group of sources subject to the 
program include contribution to total emissions from each source within 
a given source category, and the ability to reliably measure emissions 
from the source. We encourage States and Tribes to design trading 
programs to be as inclusive as practicable, in order to maximize the 
efficiency of the market.
    The emission cap of a cap and trade program may be compromised if a 
State or Tribe defines the population of sources in a way that allows 
production and emissions from sources covered under the program to 
shift to those that are not covered under the program. EPA is proposing 
that States and Tribes must demonstrate in their SIPs/TIPs that the 
applicability provisions are designed to prevent any significant, 
potential shifting of production and emissions from sources in the 
program to sources outside the program. For programs covering a single 
State, the demonstration should address potential shifting within the 
State, while multi-state programs must address shifting among those 
states covered under the program.
    States and Tribes can demonstrate that the applicability provisions 
in the program will not result in significant shifting of emissions or 
production to sources outside the program by: (1) Showing that all the 
sources providing a product in the trading region are included in the 
cap and no sources outside the cap can pick up production from the 
capped source; or (2) otherwise showing that significant shifting of 
production and emissions is unlikely to occur, due to the nature of the 
program and the sources in the surrounding area.
Allowances
    Allowances are a key feature of a cap and trade program. An 
allowance is a limited authorization for a source to emit a specified 
amount of a pollutant, as defined by the specific trading program, 
during a specified period of time. While allowances are frequently 
denominated at one ton, an allowance could be valued at more than or 
less than one ton, depending on the needs of the specific trading 
program or the monitoring method. At the end of the compliance period, 
a source owner's total tonnage value of allowances held must exceed or 
equal its annual actual total tonnage of emissions. For example, if an 
allowance was valued at one ton, a source that emits 1,000 tons of a 
pollutant in a given year must hold at least 1,000 allowances for that 
same pollutant.
    Allowances are fully marketable commodities. Once allocated, 
allowances may be bought, sold, traded, or (where allowed) banked for 
use in future years.\15\ Allowances are the currency used to achieve 
compliance with the emission limitation requirements. A cap and trade 
program provides compliance flexibility because each covered source has 
four compliance options: (1) Emit at its allowance allocation; (2) emit 
less than its allocated allowances and transfer extra allowances to 
other sources; (3) emit less than its allocated allowances and (if 
banking is allowed) save unused allowances for a later compliance 
period; and (4) obtain allowances from other sources and emit more than 
its allocation.
---------------------------------------------------------------------------

    \15\ Allowances are typically defined as not constituting 
property rights. See e.g. CAA section 403(f): ``An allowance 
allocated under this title is a limited authorization to emit sulfur 
dioxide in accordance with the provision of this title. Such 
allowance does not constitute a property right. Nothing in this 
title or in any other provision of law shall be construed to limit 
the authority of the United States to terminate or limit such 
authorization.'' 42 U.S.C. 7651b(f).
---------------------------------------------------------------------------

    EPA proposes not to include the detailed requirements on how States 
and Tribes will allocate allowances for a cap and trade program adopted 
under Sec.  51.308(e)(2) in lieu of BART. A State or Tribe can 
determine how to allocate allowances as long as the SIPs/TIPs require 
that the allocation of the tonnage value of allowances not exceed the 
total number of tons of emissions capped by the budget. For example, if 
the emissions budget is capped at 100,000 tons of emissions, and each 
allowance is valued at one ton, the SIP/TIP must prohibit the 
allocation of more than 100,000 allowances in any year.
Monitoring, Recordkeeping, and Reporting
    Monitoring, recordkeeping, and reporting of a source's emissions 
are integral parts of any cap and trade program. Consistent and 
accurate measurement of emissions ensures that each allowance actually 
represents its specified tonnage value of emissions and that one ton of 
reported emissions from one source is equivalent to one ton of reported 
emissions at another source. This establishes the integrity of the 
allowance and instills confidence in the market mechanisms designed to 
provide sources with flexibility in achieving compliance. EPA is 
proposing that the monitoring, recordkeeping, and reporting provisions 
for boilers, combustion turbines, and cement kilns comply with 40 CFR 
Part 75, and that other sources include monitoring, recordkeeping, and 
reporting provisions

[[Page 44163]]

that result in information of the same precision, reliability, 
accessibility and timeliness as provided for under 40 CFR Part 75.\16\ 
Under certain circumstances, there may be some cap and trade programs 
that prevent certain sources from selling any allowances. EPA is 
expressly providing that such sources are not subject to the 
requirement that the monitoring, recordkeeping, and reporting 
provisions be consistent with, or equivalent to, 40 CFR Part 75.
---------------------------------------------------------------------------

    \16\ Part 75 establishes requirements for continuous emissions 
monitoring systems (CEMS), as well as other types of monitoring 
(e.g., low mass emissions monitoring under 40 CFR 75.19) that may be 
used in lieu of CEMS under certain circumstances. Part 75 also 
establishes a process for proposal by owners and operators, and 
approval by the Administrator, of alternative monitoring systems 
(under subpart E of part 75) that meet requirements concerning 
precision, reliability, accessibility, and timeliness. Under today's 
proposed rule, a unit that meets the requirements for, and uses, 
monitoring specifically provided under part 75 (e.g., a CEMS or low 
mass emissions monitoring) or that meets the requirements for, and 
uses, an alternative monitoring system approved under subpart E of 
part 75 could be included in a cap-and-trade program and could sell 
allowances.
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Tracking System
    A properly designed and implemented tracking system is critical to 
the functioning of a cap and trade program as allowance transfers, 
allocations, compliance, penalties, and banking are all components of 
the system. The tracking system must be accurate and efficient to allow 
for proper operation of an emissions trading market. The tracking 
system must also be transparent, allowing all interested parties access 
to the information contained in the accounting system. Transparency of 
the system increases the accountability for regulated sources and 
contributes to reduced transaction costs of transferring allowances by 
minimizing confusion and making allowance information readily 
available. The tracking system functions as the official record for the 
trading program. States, Tribes, and sources participating in the cap 
and trade program need to obtain accurate information about program 
activities, including information that allows them to track generation 
and use of allowance allocations and to ensure compliance. The 
allowance accounts in the tracking system are the official records for 
compliance purposes.
    The proposed rule requires that the SIPs/TIPs must include 
provisions identifying a specific tracking process to track allowances 
and emissions. The proposed rule requires that the implementation plans 
must provide that emissions, allowance, and transaction information is 
transparent and publicly available in a secure, centralized data base 
that allows for frequent updates. The SIPs/TIPs must also provide for a 
tracking system that provides a unique way to identify each allowance, 
enforceable procedures for recording data, and enforceable time frames 
for submitting information and balancing accounts. If the trading 
program covers more than one State, the tracking system should be 
coordinated among all participating States and consistent for all 
sources and other participants.
Account Representative
    EPA believes it is important that each source owner or operator 
designate an individual (account representative) who is authorized to 
represent the owner or operator in all matters pertaining to the 
trading program and who is responsible for the data reported for that 
source. The account representative will be responsible for, among other 
things, permit, compliance, and allowance related actions. In addition 
to designating an account representative, the SIP/TIP must provide that 
all matters pertaining to the account shall be undertaken only by the 
designated account representative. The proposed rule includes a 
requirement that the SIPs/TIPs must include such provisions.
Allowance Transfer
    The proposed rule requires that SIPs/TIPs contain provisions 
detailing a uniform process for transferring allowances among all 
sources covered by the program and other possible participants. The 
provisions must provide procedures for sources to request an allowance 
transfer, for the request and transfer to be recorded in the allowance 
tracking system, for notification to the source that the transfer has 
occurred, and for notification to the public of each transfer and 
request. The provisions must allow timely transfer and recording of 
allowances and minimize administrative barriers to the operation of the 
allowance market.
Compliance
    The proposed rule requires that cap and trade programs include a 
compliance provision that prohibits a source from emitting more 
emissions than the total tonnage value of allowances the source holds 
for that year. The proposed rule also requires that the cap and trade 
program specify the methods and procedures for determining on an annual 
basis whether a source holds sufficient allowances, by total tonnage 
value, for its emissions.
Penalty
    In order to provide sources with a strong incentive to comply with 
the requirement to hold sufficient allowances for their emissions on an 
annual basis and to establish an immediate minimum economic consequence 
for non-compliance, the program must include a system for mandatory 
allowance deductions. We are proposing that if a source has excess 
emissions in a given year, allowances allocated for the subsequent year 
will be deducted from the source's account in an amount at least equal 
to three times the excess emissions. For example, if a source had 10 
tons of excess emissions in the year 2014, and one allowance is valued 
at one ton, 30 allowances allocated for the year 2015 will be deducted 
from the source's account. This is consistent with existing trading 
programs such as the CAIR and the NOX SIP call, and is 
designed to ensure that the penalty is a sufficient deterrent to non-
compliance.
    While we are proposing that the allowance deduction would be 
mandatory, a source would have the right to seek administrative or 
judicial review of the State's or Tribe's determination that the source 
had excess emissions in a given year. For example, the regulations 
would not limit the ability of the source to appeal the following 
determinations made by the State or Tribe: The number of allowances 
held by the source as of the deadline for transferring allowances and 
available for compliance, the amount of the source's emissions, and the 
comparison of the amount of the source's emissions and the total 
tonnage value of the source's allowances held and available for 
compliance. If the State or Tribe determines that the source's 
emissions exceed the source's total tonnage value of allowances for the 
year, we are proposing that at least three times the tonnage of excess 
emissions for the year be automatically deducted from the source's 
allowance holdings for the next year, even if an appeal is pending. The 
allowance deduction can be reversed to the extent the source prevails 
on appeal, but we believe that certain and immediate penalties are 
necessary to ensure the integrity of the market for allowances. The 
mandatory allowance deduction penalty provision will not limit the 
ability of the State, Tribe, or EPA to take enforcement action under 
State or Tribal law or the CAA.
Banking Provisions
    The banking of allowances occurs when allowances that have not been 
used for compliance are set aside for use

[[Page 44164]]

in a later compliance period. Banking provides compliance flexibility 
to sources, encourages early reductions, and encourages early 
application of innovative technology. However, banking also carries an 
associated risk of delayed or impaired achievement of air quality goals 
due to the use of banked allowances. The proposed rule allows trading 
programs to include provisions for banked allowances, so long as the 
SIPs/TIPs clearly identify how unused allowances may be kept for use in 
future years and whether there are any restrictions on the use of any 
such banked allowances.
Periodic Assessment of the Trading Program
    The proposed rule requires the trading program to include 
provisions for periodic assessment of the program. Such periodic 
assessments are a way to retrospectively assess the performance of the 
trading program in meeting the goals of the regional haze program and 
determining whether the trading program needs any adjustments or 
changes. At a minimum, the program evaluation must be conducted every 
five years to coincide with the periodic report describing progress 
towards the reasonable progress goals required under Sec.  51.308(g) 
and must be submitted to EPA. The information needed to perform the 
program should be collected through the monitoring, recordkeeping, and 
reporting requirements for the program. SIPs/TIPs should also provide 
procedures to make the public aware the program is being assessed and 
to give the public an opportunity to comment on the assessment.
    Section 5.3(b) of the EIP contains a list of performance measures 
that States or Tribes should consider including in the program 
assessment. The performance measures needed by States/Tribes will 
depend upon the type of trading program, the amount of emissions 
covered by the program, the sources covered by the program, or public 
comments received during rulemaking. EPA suggests that States and 
Tribes work closely with their EPA Regional Office when developing the 
program assessment procedures.

III. Revisions to Regional Haze Rule Sec.  51.309

A. Background

    The previous section discussed the proposed changes to our 
regulations at Sec.  51.308(e)(2) governing alternative programs to 
BART, in general. In this section, we discuss the implications of the 
CEED decision on the particular program at issue in that case--the WRAP 
Annex--and our proposed revisions in the section of the haze rule which 
specifically addresses the optional approach for certain western states 
(Sec.  51.309).
What Portion of the WRAP's Regional Haze Strategies Were Affected by 
the Court's Decision?
    The petition for review granted by the court in CEED v. EPA 
requested that the ``Annex Rule'' be vacated and remanded. The ``Annex 
Rule'' refers to the June 2003 rule approving and codifying the 
``Annex'' to the Grand Canyon Visibility Transport Commission (GCVTC) 
Recommendations. (68 FR 33764, June 5, 2003). The Annex contained 
SO2 emission reduction milestones and the detailed 
provisions of a cap and trade program to be implemented automatically 
if voluntary measures failed to achieve the milestones. The Annex Rule 
codified these provisions in Sec.  51.309(h)
    The Annex was developed to implement the recommendations of the 
GCVTC for stationary sources. The court's decision in CEED v. EPA 
invalidated EPA's approval of the Annex, but did not question the 
validity of the GCVTC recommendations for a backstop trading 
program.\17\
---------------------------------------------------------------------------

    \17\ Subsequent to the CEED decision, the WRAP States expressed 
their disappointment with the decision and their desire to continue 
working with EPA to reconcile the WRAP's program to the court's 
decision. See WRAP State's statment at http://www.wrapair.org/news/releases/PR_Holmstead_ltr.pdf.
---------------------------------------------------------------------------

How Is the ``WRAP Annex'' Related to Other Strategies Contained in 
Regional Haze Rule Sec.  51.309?
    As noted, the WRAP Annex was designed to implement one of the 
recommendations of the GCVTC. This commission, the creation of which 
was expressly required by CAA section 169B(f), also made numerous other 
recommendations. Other important provisions of the GCVTC report 
include: Strategies for addressing smoke emissions from wildland fires 
and agricultural burning; provisions to prevent pollution by 
encouraging renewable energy development; and provisions regarding 
clean air corridors, mobile sources, and wind-blown dust, among other 
things. The backstop cap and trade program which eventually became the 
Annex thus comprised only one component--albeit a central one--of a 
suite of strategies developed by the GCVTC.
    The requirement that Western States submit an Annex to the GCVTC 
report in order to complete the GCVTC recommendations as an alternative 
means of regional haze compliance was contained in the 1999 Regional 
Haze Rule. In that rulemaking, we determined that the GCVTC strategies 
would provide for reasonable progress when supplemented by an Annex 
containing quantitative emission reduction milestones and documentation 
of the trading program or other alternative measure. See 64 FR 35749 
and 35756-57. We therefore provided that the States' ability to comply 
with regional haze rule requirements through implementation of the 
provisions of Sec.  51.309 was contingent upon EPA receiving the Annex 
meeting certain requirements no later than October 1, 2000. See Sec.  
51.309(f).
    Five of the nine eligible States and one local agency (Bernalillo 
county, NM) opted to submit SIPs under section 51.309 prior to the 2003 
deadline in 51.309(c). Doing so was not simply a matter of codifying 
those recommendations into State law but required the production, 
through a consensus process, of numerous subsidiary policy and 
technical tools. These included emissions inventories for stationary, 
mobile, area, fire, and road dusts sources; policy agreements on 
various issues such as annual emissions goals for wild land fires and 
incentives to increase renewable energy production (to name just a few 
of many); development of numerous technical support documents, and, of 
course, the development of the actual model rules for the backstop 
trading program. See the ``Section 309 implementation Material'' page 
of the WRAP's Web site at http://www.wrapair.org/309/index.html for a 
more complete listing.
    The EPA believes the dedication of the WRAP States and Tribes to 
move forward with regional haze implementation in an expeditious manner 
is commendable and we want to continue to support these efforts. The 
substantial investment in time and resources (including millions of 
dollars of Congressionally allocated funding) made over a period of 
more than a decade has tremendously advanced the scientific 
understanding of the causes of visibility impairment in the West. In 
addition, the GCVTC, and the WRAP after it, have been extraordinarily 
successful in forging consensus on a large number of policy measures 
among a wide variety of States, Tribal governments, environmental 
advocates, and industry interests. As a result, EPA believes there are 
compelling policy reasons to continue to recognize the GCVTC/WRAP 
strategies and to provide a regulatory framework in the regional

[[Page 44165]]

haze rule that allows for expedited implementation by interested States 
and Tribes.
    The EPA also has the authority to promulgate regulations which are 
responsive to the GCVTC recommendations for addressing visibility 
impairment. In addition to requiring EPA to establish the GCVTC, 
Congress also imposed a duty upon EPA to promulgate regulations 
pursuant to CAA section 169A within 18 months of receipt of the report 
from the GCVTC, and to take that report into account in doing so. See 
CAA section 169B(e). Congress clearly intended EPA's regional haze 
regulations to be informed by the knowledge and information developed 
by the GCVTC.
    The EPA is committed to fulfilling its obligation to further the 
work of the GCVTC by permitting the western states and tribes to move 
forward with the regional haze program recommended by the GCVTC. 
Therefore, in order to provide GCVTC States and Tribes an opportunity 
to revisit the program without being constrained by the invalid group 
BART methodology, we propose to amend the regional haze rule to allow 
states to submit (or resubmit) implementation plans under Sec.  51.309, 
in conjunction with the first regional haze SIPs otherwise required 
under 51.308. This will provide time for States to revisit the 
SO2 milestones and backstop emission trading program.
    With respect to the other strategies contained 51.309, although 
these other provisions of Sec.  51.309 were not affected by the 
decision in CEED v. EPA and may remain effective as a matter of State 
law in each State, the EPA cannot approve implementation plans under 
Sec.  51.309 as meeting reasonable progress until the plans contain 
valid provisions for addressing stationary sources. The backstop 
SO2 emissions trading program was a key element of the GCVTC 
recommendations, as evidenced by the fact that the use of the Sec.  
51.309 strategies to satisfy reasonable progress requirements was made 
contingent upon EPA receiving a satisfactory Annex. Because the Annex 
has been invalidated, States must have an opportunity to resubmit the 
details of the backstop trading program, before EPA can take action to 
determine whether reasonable progress requirements will be satisfied by 
Sec.  51.309 SIPs.
    The regulatory structure proposed to provide States and Tribes with 
this opportunity is discussed in more detail below.

B. Proposed Regulatory Framework for States and Tribes Choosing To 
Implement the GCVTC/WRAP Strategies

    We interpret the court's decision in CEED v. EPA as having vacated 
the provisions in Sec.  51.309(h) which were promulgated in 2003. (68 
FR 33764, June 5, 2003.) The vacature of these provisions returns Sec.  
51.309 to the status quo ante as of that rulemaking. This included 
certain provisions for stationary sources contained in Sec.  
51.309(d)(4) and the provision calling for the submission of the Annex 
in the first place in Sec.  51.309(f). For the reasons discussed below, 
we are not proposing to require States to resubmit another ``Annex'' to 
the GCVTC report, and are therefore repealing Sec.  51.309(f); we are 
also proposing to retain the general stationary source requirements at 
Sec.  51.309(d)(4), with certain modifications.
Will States Be Required To Submit a Revised Annex?
    Section 51.309(f) made the approvability of Sec.  51.309 SIPs 
contingent upon EPA receiving from the GCVTC (or other regional 
planning organization) an ``annex'' to the GCVTC report no later than 
October 1, 2000. The Annex was required to contain: quantitative 
emissions milestones for the years 2003, 2008, 2103, and 2018, which 
would provide for steady and continuing emissions reductions for the 
2003-2018 period and satisfy the GCVTC goal of 50-70 percent reductions 
from 1990 emissions by 2040. The milestones were also required to show 
greater reasonable progress than would be achieved by the application 
of BART per Sec.  51.308(e)(2) and be approvable in lieu of BART. In 
addition to quantitative milestones meeting these criteria, the Annex 
was required to contain documentation of the ``backstop'' market 
trading program, including model rules, monitoring provisions, 
provisions for the ``triggering'' of the trading program, and 
operational details. See Sec.  51.309(f)(1)(i)-(ii).
    Section 51.309(f) further provided procedures by which EPA would 
incorporate the provisions of the Annex into the regional haze rule (if 
an acceptable Annex were received). This in fact occurred, with the 
Annex being incorporated at Sec.  51.309(h). Section 51.309 in its 
totality, including the new Sec.  51.309(h), then governed the content 
of the SIPs which were due no later than December 31, 2003, per Sec.  
51.309(c).
    The EPA believes the substantive requirements of Sec.  51.309(f) 
remain valid. However, we do not believe the unusual procedural 
approach required by that section--wherein States submit provisions for 
EPA to codify in federal regulation for the purpose of governing 
subsequent SIP content--is either necessary or appropriate at this 
time. Therefore, we are proposing to import those substantive 
provisions of Sec.  51.309(f) which are still relevant into Sec.  
51.309(d)(4), and to repeal the Sec.  51.309(f) mechanism requiring an 
Annex. We are also proposing to import into Sec.  51.309(d)(4) a few 
selected substantive provisions from the repealed Annex rule (Sec.  
51.309(h)) for reasons explained later in this section of the preamble.
    In 1999, EPA included Sec.  51.309 in response to the western 
States' and Tribes' comments calling for recognition of the policy 
development efforts of the GCVTC. The Western Governors' Association in 
particular requested that EPA issue a final rule that explicitly 
described the content of SIPs that would assure reasonable progress in 
addressing visibility impairment on the Colorado Plateau based on the 
technical work and policy recommendations of the GCVTC. At that time, 
however, the GCVTC's recommendations did not address the requirements 
for BART, or provide sufficient detail to allow EPA to ascertain 
whether the backstop market trading program that was a central element 
of the Commission's recommendations would provide greater reasonable 
progress than BART. The purpose of the requirement in the 1999 rule 
that an Annex to the GCVTC report be submitted by October of 2000 was 
to insure that the GCVTC stationary source recommendations were 
developed and refined in sufficient detail to enable EPA to make an up-
front determination that SIPs based on the work of the GCVTC would meet 
the requirements of the CAA. The decision to utilize an intermediate 
step of requiring States and Tribes to submit the details of the 
stationary source provisions in an ``Annex'', rather than directly in 
their SIPs (or TIPs), was a policy decision on EPA's part to 
accommodate the western State's request for endorsement of the 
substantial work of the GCVTC. In light of the facts as they exist now, 
six years later, the EPA does not believe that an ``Annex'' type 
approach is appropriate going forward.
    One reason that an Annex approach would not be appropriate is that 
it would not be practicable to repeat such an approach at this time 
given that all regional haze SIPs, whether under Sec.  51.309 or Sec.  
51.308, are due at the end of 2007, or about 18 months after

[[Page 44166]]

today's proposal.\18\ The 1999 rule provided that EPA would promulgate 
regulations incorporating the Annex provisions within one year of 
receipt of the Annex. If a similar approach were followed today, there 
would not be sufficient time for States to follow their internal 
processes for SIP revisions, even if a new Annex were made due 
immediately upon finalization of this rule.
---------------------------------------------------------------------------

    \18\ See 42 U.S.C. 7407(d)(7)(A).
---------------------------------------------------------------------------

    In addition, we are proposing that States submit Sec.  51.309 SIPs 
at the same time as Sec.  51.308 SIPs. These Sec.  51.308 SIPS will 
establish reasonable progress goals for all Class I areas in the 
region. It is expected that some States will wish to build on the Sec.  
51.309 strategies in developing Sec.  51.308 SIPs. Because both types 
of SIPs will be reviewed concurrently, it is a better policy in terms 
of both administrative efficiency and environmental progress to review 
both Sec. Sec.  51.308 and 51.309 SIPs under the same overarching 
criteria, rather than providing prescriptive requirements for Sec.  
51.309 which may interfere in unforeseen ways with the integration of 
Sec. Sec.  51.308 and 51.309 SIPs without providing any environmental 
benefits.
    Finally, in 1999, the GCVTC had discharged its duties and the WRAP 
had not yet established a track record for producing consensus 
decisions on difficult policy issues such as the design of the backstop 
market trading program. Six years later, the WRAP has built up 
considerable institutional capacity, with EPA's support, and is well 
positioned to facilitate consensus and coordinate SIP development to 
insure inter-state consistency, without the need for prescriptive 
requirements at the level of detail formerly contained in the Annex 
Rule.
    Therefore, we propose to amend Sec.  51.309(d)(4) to provide that 
the major substantive requirements formerly required to be submitted in 
the form of an Annex to the GCVTC report will instead now be required 
in the Sec.  51.309 SIP itself. These major substantive requirements 
include quantitative emissions milestones for the years 2008, 2013, and 
2018 which provide for steady and continuing emissions reductions, 
satisfy the GCVTC goal of 50-70 percent reductions from 1990 emissions 
by 2040, and achieve greater reasonable progress than would be achieved 
by the application of BART per Sec.  51.308(e)(2).
Which States and Tribes May Submit Implementation Plans Under Sec.  
51.309 as Proposed for Revision?
    Because the WRAP Annex was invalidated due to its reliance on a 
group-BART methodology, the EPA cannot condition future participation 
in the Sec.  51.309 program upon the submission and implementation of 
SIPs under the Annex rule (i.e., the SIPs that were due in 2003). Doing 
so would have the effect of continuing to impose upon the four states 
that did not opt for Sec.  51.309 the choice between a Sec.  51.309 
program defined by an invalid methodology and Sec.  51.308. Therefore, 
States in the 9-state visibility transport region that did not submit a 
SIP in 2003 under Sec.  51.309 are not precluded from submitting a SIP 
under Sec.  51.309 in 2007. Tribes in the transport region, as 
determined in earlier rulemakings, are not subject to the same 
deadlines and may submit a TIP under Sec.  51.309 at a later date. In 
addition, nothing precludes States outside of the 9-state transport 
region from incorporating elements of the GCVTC strategies into their 
SIPs (under Sec.  51.308), provided they demonstrate that such 
strategies meet the reasonable progress requirements of Sec.  51.308.
What Is the Proposed Implementation Plan Schedule?
    We are proposing that SIPs under Sec.  51.309 will be due at the 
same time as those under Sec.  51.308. The implementation plan 
deadlines for regional haze were amended by Congress to provide that 
regional haze SIPs for the entire State shall be submitted no later 
than three years after the promulgation of designations for the PM2.5 
NAAQS.\19\ Those designations were promulgated by EPA on December 17, 
2004. Therefore regional haze SIPs are due no later than December 17, 
2007. CAA 107(d)(7)(A).
---------------------------------------------------------------------------

    \19\ See Consolidated Appropriations Act for Fiscal Year 2004, 
Public Law 108-199, January 23, 2004.
---------------------------------------------------------------------------

    CAA 107(d)(7)(B) provides that the above requirement does not 
preclude implementation plan revisions by the GCVTC States in 2003. 
However, as portions of the haze rule that governed the 2003 SIPs have 
been invalidated, States opting for Sec.  51.309 will be required to 
resubmit SIPs some time after those portions have been rectified 
through finalization of today's proposed rule. As a practical matter it 
would be difficult for States to complete this process any time 
appreciably sooner than the end of 2007. The EPA sees no environmental 
advantage to requiring Sec.  51.309 SIPs to be submitted on a different 
schedule than under Sec.  51.308. Moreover, simultaneous deadlines will 
allow States and participating Tribes to more effectively integrate the 
technical work and policy development under the two sections. 
Therefore, we propose amending Sec.  51.309(c) to replace the December 
31, 2003 deadline with December 17, 2007.
    In addition, we are proposing to delete certain language included 
in the SIP schedule provision in Sec.  51.309(c) and replace it with 
similar provisions in the purpose provisions in Sec.  51.309(a). 
Specifically, Sec.  51.309(c) currently provides that ``A Transport 
Region State that does not submit an implementation plan that complies 
with the requirements of this section (or whose plan does not comply 
with all of the requirements of this section) is subject to the 
requirements of Sec.  51.308 in the same manner and to the same extent 
as any State not included within the Transport Region.'' This language 
was formerly included in the SIP schedule section to clarify that, 
under the former bifurcated schedule, the final date for a State to 
make a decision between Sec. Sec.  51.308 and 51.309 was at the time 
the Sec.  51.309 SIP was due, in 2003. Now that we are proposing the 
same deadline for both sections, it is not necessary to specify that 
Sec.  51.308 will come into effect if a GCVTC State misses the Sec.  
51.309 deadline. Each State in the GCVTC may choose between submitting 
a SIP under Sec. Sec.  51.308 and 51.309 as it's regional haze strategy 
for the Colorado Plateau Class I areas; in either case the State must 
submit its SIP by the same deadline. Moreover, all GCVTC States will 
also be required to submit SIPs under Sec.  51.308 whether or not they 
submit Sec.  51.309 SIPs, in order to cover at a minimum any non-
Colorado Plateau Class I areas within or affected by the States, unless 
those Class I areas have been covered under Sec.  51.309(g) (additional 
Class I areas).
    Finally, Sec.  51.309(d)(1) currently requires that Sec.  51.309 
SIPs must be effective for the entire time between December 31, 2003, 
and December 31, 2018. We propose striking the reference to beginning 
in 2003, but maintaining the requirement to be effective through 2018. 
We also propose adding a clause to clarify that Sec.  51.309 SIPs shall 
continue in effect until an implementation plan revision is approved by 
EPA in accordance with Sec.  51.308(f). This will provide for 
continuity of visibility protection during the transition to the next 
long-term strategy period.

[[Page 44167]]

What Stationary Source Provisions Must Sec.  51.309 SIPs Contain?
    The 1999 regional haze rule, in addition to providing in Sec.  
51.309(h) for the submission of an Annex containing further elaboration 
of the GCVTC stationary source recommendations, also included certain 
fundamental requirements in Sec.  51.309(d)(4) for a market trading 
program addressing stationary sources. These Sec.  51.309(d)(4) 
requirements established the basic framework of the backstop trading 
approach, which were to be given more detailed form through the Annex 
provisions. Specifically, this section called for monitoring and 
reporting of SO2 emissions, criteria and procedures for 
activation and operation of the backstop trading program, and 
provisions for compliance reporting. The section also called for a 
report on the necessity of adding stationary source provisions for 
NOX and PM in the next SIP (due in 2008). See Sec.  
51.309(d)(4)(i)-(v). Upon the finalization of the Annex rule, these 
provisions were amended to add cross references as appropriate to the 
new Annex rule at Sec.  51.309(h).
    The EPA believes it is appropriate to retain these provisions in 
Sec.  51.309(d)(4), in order to provide for the broad contours of a 
backstop cap and trade program consistent with the GCVTC 
recommendations. Nothing in these very general requirements imposes any 
invalid constraints upon the program in violation of CEED v. EPA. In 
addition, in the process of working over the past several years on the 
development of the detailed provisions of the Annex backstop trading 
program, EPA and the States have identified several specific areas 
where regulatory guidance is desirable. Therefore, certain provisions 
codified as part of the Annex rule in Sec.  51.309(h) have been 
retained as SIP requirements in Sec.  51.309(d)(4). By specifying EPA's 
expectations clearly in the rule provisions, we will promote 
consistency between States and provide greater certainty for the SIP 
review process. In doing so, EPA is cognizant of the need to avoid 
importing into Sec.  51.309(d)(4) any provisions of the Annex rule that 
were directly or indirectly dependent on or related to the specific 
quantitative milestones contained in the Annex. Therefore, we have 
retained only those provisions we believe are critical to any 
conceivable variation on the GCVTC's backstop trading program 
recommendation. These are described in the following sections.
Provisions for Stationary Sources of Sulfur Dioxide
    One of the critical components of the GCVTC's recommendations was 
the establishment of a series of declining caps on regional sulfur 
dioxide emissions from stationary sources. These declining caps on 
emissions are referred to as emissions milestones and must provide for 
steady and continuing reductions in sulfur dioxide emissions over time. 
While EPA is not specifying what the milestones must be, this provision 
requires the States to submit milestones for the period through 2018 
that are consistent with the GCVTC's definition of reasonable progress 
and its goal of reducing sulfur dioxide emissions by 2040 to 50-70 
percent of 1990 actual levels. We are proposing that the milestones be 
defined on an annual basis. However, we do not interpret the GCVTC's 
recommendation for steady and continuing reduction as requiring the 
milestones to decline each year. Rather, as was the case in the annex, 
the milestone may remain the same for more than one year as long as 
they provide for steady and continuing reductions over the course of 
long term planning period.
    States must also show that the milestones provide for greater 
reasonable progress than would be achieved by application of BART in 
accordance with Sec.  51.308(e)(2) and be approvable in lieu of BART. 
Because the Sec.  51.308(e)(2) is proposed to be amended to remove the 
group BART requirement, there is no longer the concern that the Sec.  
51.309 option might be defined by an invalid condition. Instead, the 
Sec.  51.308(e)(2) demonstration simply insures that the backstop 
trading program is approvable in lieu of BART, an approach based on our 
interpretation of CAA 169A(b)(2) which was upheld by the D.C. Circuit.
Documentation of Emissions Calculation Methods [(Sec.  
51.309(d)(4)(ii)]
    EPA is proposing that States must include documentation of the 
specific methodology used to calculate emissions in the base year for 
each source included in the program. EPA is also proposing that States 
must provide for the documentation of the specific emission calculation 
methods used for determining emissions from stationary sources for each 
of the subsequent years after the base year. This requirement was 
originally included in Sec.  51.309(h)(2)(ii), and EPA is proposing to 
include it in Sec.  51.309(d)(4)(ii). This provision is necessary 
because in establishing the baseline emissions for stationary sources, 
States will be using emissions data that reflect the emission 
calculation methodology the source was using at that time. It is likely 
that some facilities that have relied on emission factors and other 
less accurate methods for determining the emissions will improve the 
accuracy of the emission estimates. In order to ensure the 
determination of emissions and emission reductions are a true measure 
of progress and not a change in emission calculation methods, the rule 
requires States to provide documentation of the emission calculation 
methods that were used for affected sources. This information will be 
relied upon by the States and EPA to ensure that the comparison of 
emissions at the beginning of the program to the current reporting year 
takes into account changes in emissions calculation methods and ensures 
that comparisons do not provide for ``paper'' increases or decreases in 
emissions.
Monitoring, Recordkeeping, and Reporting of Sulfur Dioxide Emissions 
[Sec.  51.309(d)(4)(iii)]
    EPA is proposing to revise Sec.  51.309(d)(4)(ii) to incorporate 
necessary changes reflecting the new date of SIP submittals, to address 
the implications of the court's decision in CEED v. EPA as it affects 
the Annex, and to add a recordkeeping requirement. In addition, we are 
renumbering Sec.  51.309(d)(4)(ii) through (d)(4)(iii). Under the 
revised language, a State must require monitoring and annual reporting 
of sulfur dioxide emissions within the State, and require that records 
be retained for a minimum of 10 years from the establishment of the 
record in order to ensure the enforceability of the program. EPA 
believes that requiring records to be retained for 10 years is 
reasonable because of the long duration of each planning period (i.e., 
the first planning period for the Sec.  51.309 program extends to the 
year 2018). In addition, by requiring records to be maintained for 10 
years, States will ensure that any lag between the first phase of the 
program and full implementation of the backstop trading program will 
not hamper the enforceability of the program. EPA has determined these 
provisions are necessary to assess compliance with the sulfur dioxide 
milestones each year of the program. The monitoring, recordkeeping and 
reporting data required by each State must be sufficient to determine 
whether the milestones are achieved for each year through 2018.

[[Page 44168]]

Criteria and Procedures for a Market Trading Program [Sec.  
51.309(d)(4)(iv)]
    The approach to addressing stationary source SO2 
emissions recommended by the GCVTC was to establish a declining cap on 
emissions that would be met through voluntary measures. If voluntary 
measures did not succeed, however, the GCVTC recommended that States 
implement an enforceable market-based program that would serve as the 
``backstop'' to the voluntary measures. EPA is proposing to require 
States to include in their SIPs the criteria and procedures for 
implementing the voluntary phase of the program and for triggering and 
activating the backstop phase of their programs if the voluntary 
measures do not succeed. The main elements of this requirement were 
originally included under Sec.  51.309(h)(2)(iv), (v), and (vii), and 
Sec.  51.309(h)(3). EPA is proposing to include these elements under 
Sec.  51.309(d)(4)(iv). This provision requires the States annually to 
compare regional sulfur dioxide emissions to the milestone to determine 
whether the milestone was achieved for that year. The States must 
complete a draft annual evaluation report no later than 12 months after 
the milestone year. The Annex had provided that the annual compliance 
check be based on a three-year rolling average of actual emissions 
versus the corresponding three-year rolling average of the milestone, 
except for the first two years and the last year (2018) of the program. 
While we do not think it is appropriate to require the use of three-
year average,we continue to believe that such an approach would be 
acceptable. We therefore propose to allow for this approach in Sec.  
51.308(d)(4)(i). If the comparison shows the milestone has been 
achieved, the plan must include procedures to activate the backstop 
trading program. This provisions also requires that the plans provide 
for program assessments in the years 2013 and 2018.
Market Trading Program [Sec.  51.309(d)(4)(v)]
    As a backstop to voluntary measures, the implementation of the 
market trading program must be akin to a ``turn-key'' operation. EPA 
proposes to require that the plan include a complete and fully 
developed backstop market trading program sufficient to achieve the 
2018 milestone that is consistent with the criteria for cap and trade 
program in Sec.  51.308(e)(2)(vi). In the event a milestone has not 
been achieved, the States will be required to make this final 
determination no later than 15 months after the end of the first year 
in which the milestone was not achieved. The final determination that 
the milestone has not been achieved will trigger (i.e., activate) the 
trading program. After the market trading program has been triggered, 
some time will be required before the full implementation of the 
trading program can be accomplished, but the trading program should 
come into effect as soon as practicable.
Provision for 2018 Milestone [Sec.  51.309(d)(4)(vi)]
    We are proposing new provisions governing the period beginning in 
2018. The Sec.  51.309 program generally focuses on setting and 
achieving milestones for the period of 2003 through 2018. States 
participating in the Sec.  51.309 program will eventually need to 
prepare additional plans to address visibility beyond 2018. See Sec.  
51.308(f). These plans will need to meet the requirements of Sec.  
51.308 or other alternate regulations EPA may adopt in the future. The 
proposed language in Sec.  51.309(d)(4)(vi) is intended to bridge any 
potential gaps between the Sec.  51.309 plan and these future plans and 
to ensure the milestone for 2018 is achieved by the Sec.  51.309 plans 
and maintained in future plans. Section 51.309(d)(4)(vi)(A) requires 
that Sec.  51.309 plans clearly prohibit emissions beginning in 2018 in 
excess of the 2018 milestone unless and until a new plan covering the 
period after 2018 is approved by EPA.
    Section 51.309(d)(4)(vi)(B) requires that Sec.  51.309 plans 
include special provisions for ensuring the 2018 milestone is achieved 
beginning in 2018. Specifically, this provision requires Sec.  51.309 
plans to address the potential gap created by any lag between the date 
the backstop trading program is triggered and the date the trading 
program is fully implemented and source compliance is required. Under 
the backstop trading program, sources have an incentive to voluntarily 
achieve the milestones to avoid triggering an enforceable trading 
program. Because the Sec.  51.309 plans are designed generally to cover 
the period between the initial submission in 2007 and 2018, the 
deterrent incentives of the backstop trading program are diminished 
where enforceable requirements do not begin until after the end of the 
covered period or where such enforceable requirements may never be 
implemented because they will be replaced by a different planning 
approach. Thus, a special regulatory provision is necessary to address 
the possible situation where a milestone is exceeded close to, in, or 
after 2018 such that any delay in the implementation of the trading 
program could undercut the necessary incentives to meet the 2018 
milestone.
    To satisfy the requirements of Sec.  51.309(d)(4)(vi), States will 
need to address both the situation where milestones are exceeded in or 
after 2018, and the situation where milestones are exceeded before 2018 
but the backstop emissions trading program will not be fully 
implemented and enforceable until after 2018. In both situations, the 
Sec.  51.309 plan must include special provisions, including financial 
penalties, to prohibit and enforce against any exceedances of the 2018 
milestone beginning in 2018 and continuing until the Sec.  51.309 
program is replaced with a plan covering the period after 2018.\20\
---------------------------------------------------------------------------

    \20\ This special penalty provision for 2018 is distinct from 
the requirement for automatic allowance deductions in Sec.  
51.308(e)(2)(vi)(J), which is also applicable to the WRAP's program 
per the cross reference to Sec.  51.308(e)(2) in Sec.  
51.309(d)(4)(v). In the Annex rule, SIPs were required to provide 
for automatic allowance deductions at a 2:1 ratio, and for automatic 
financial penalties of $5000/ton or an alternative amount that 
substantially exceeds the cost of allowances. See Sec.  51.309(h)(x) 
and preamble discussion at 68 FR 33776-33777. Because some States 
subsequently determined that they lack authority to impose automatic 
financial penalties, we are proposing to instead utilize the 3:1 
ratio for automatic allowance deductions as provided in Sec.  
51.308(e)(2)(vi)(J) in order to insure there is a sufficient 
incentive for compliance.
---------------------------------------------------------------------------

    With respect to the financial penalty provisions to be included in 
the SIPs, it is important that the mechanism for assessing and 
collecting penalties be sufficiently immediate to provide the proper 
incentives for the cap and trade program. Penalties that are negotiated 
and require potentially drawn out litigation to enforce may not ensure 
that sources have a clear, known cost associated with a given amount of 
excess emissions. One option to create the proper incentives is for 
States to require automatic penalties or, for States lacking authority 
for such automatic penalties, to create a streamlined penalty approach 
that encourages timely payment. Specifically, EPA believes States could 
adopt an approach that sets a fixed penalty (e.g., $5,000 per ton of 
excess emissions) that sources can volunteer to pay to quickly settle 
an excess emissions violation. The States would commit to take formal 
enforcement action and seek higher penalties as authorized by law 
against any source that has excess emissions and does not agree to the 
streamlined settlement. Such an enforcement strategy, if consistently 
and aggressively administered, should result in a penalty scheme that 
is sufficiently immediate to create the proper cap and trade 
incentives. EPA will review State implementation of any such 
streamlined

[[Page 44169]]

settlement approaches and will consider taking separate federal 
enforcement action in the event a State fails to pursue adequate 
enforcement against a source declining the streamlined settlement. In 
such cases, EPA will pursue penalties up to the maximum allowed under 
the CAA (currently $32,500 per day per violation). In addition, if EPA 
finds a pattern of State failure to obtain appropriate penalties, EPA 
could use its authority under CAA section 110 to call for a SIP 
revision to address the deficiency.
Provisions for NOX and PM BART Requirements [Sec.  
51.309(d)(4)(vii)]
    In the 1999 rule Sec.  51.309(d)(4)(v) required States to submit a 
report assessing emission control strategies for stationary source 
NOX and PM. The report was required to include an evaluation 
of the need to establish milestones for NOX and PM to avoid 
any net increases in these pollutants from Stationary Sources within 
the Transport region. The report was also intended to support the 
potential development and implementation of a multipollutant market 
based program. The initial Sec.  51.309 SIPs (submitted by 12/31/2003) 
were required to provide for SIP revisions no later than 12/31/2008, 
containing any long term strategies and BART requirements for 
stationary source PM and NOX.
    The WRAP developed the report required by this section.\21\ The 
development of the report provided much useful information on the role 
of PM and NOX in visibility impairment at western Class I 
areas, and the contribution of stationary source emissions to 
impairment caused by these pollutants. However, the report concluded 
that currently available computer models could not replicate the 
chemical interactions of NOX with other atmospheric 
constituents with sufficient accuracy to support regulatory decisions. 
For this and other reasons, the WRAP States have not yet determined 
appropriate control strategies for NOX and PM, but are 
continuing to work on these issues.
---------------------------------------------------------------------------

    \21\ ``Stationary Source NOX and PM Emissions in the 
WRAP Region: An Initial Assessment of Emissions, Controls, and Air 
Quality Impacts'' http://www.wrapair.org/forums/mtf/nox-pm.html.
---------------------------------------------------------------------------

    Therefore, we propose amending the stationary source NOX 
and PM provision within Sec.  51.309 (now numbered Sec.  
51.309(d)(4)(vii)) to specify that States submitting Sec.  51.309 SIPs 
must address BART for PM and NOX. This proposed provision is 
intended to clarify that if EPA determines that the SO2 
emission reductions milestones and backstop trading program submitted 
in the Sec.  51.309 SIPs makes greater reasonable progress than BART 
for SO2, this will not constitute a determination that BART 
for PM or NOX is satisfied for any sources which would 
otherwise be subject to BART for those pollutants.\22\ Proposed Sec.  
51.309(d)(4)(vii) would allow States the flexibility to address these 
BART provisions either on a source-by-source basis under Sec.  
51.308(e)(1), or through an alternative strategy under Sec.  
51.308(e)(2). The determination of which strategy to use is separate 
for each pollutant. For example, a State could choose to address PM 
through a source-by-source BART program, while addressing 
NOX by use of a trading program or other alternative 
measure. Moreover, such an alternative measure could build upon the 
backstop SO2 program under Sec.  51.309 and employ a similar 
approach for PM and/or NOX, or the alternative measure could 
be completely different than the SO2 approach. For example, 
a State (or group of States) could decide to implement a NOX 
cap and trade program from the outset, rather than employ a 
``backstop'' approach.
---------------------------------------------------------------------------

    \22\ In limited circumstances, it may be possible for a State to 
demonstrate that an alternative program which controls only 
emissions of SO2 could achieve greater visibility 
improvement than application of source-specific BART controls on 
emissions of SO2, NOX and/or PM. We 
nevertheless believe that such a showing will be quite difficult to 
make in most geographic areas, given that controls on SO2 
emissions alone in most cases will result in increased formation of 
ammonium nitrate particles.
---------------------------------------------------------------------------

Projection of Visibility Improvement (Sec.  51.309(d)(2) and Periodic 
SIP Updates (Sec.  51.309(d)(10)
    Section 51.309(d)(10), as promulgated in 1999, required periodic 
SIP revisions in 2008, 2013, and 2018. Among other things, these 
revisions were to include an assessment of whether current SIP elements 
and strategies are sufficient to enable the State (and other States 
affected by its emissions) to meet ``all established reasonable 
progress goals.'' Sec.  51.309(d)(10)(i)(G). Section 51.309(d)(10) also 
required that if the State determines that existing measures were 
inadequate to meet reasonable progress goals, the State must revise its 
SIP to contain additional strategies within one year, or take certain 
other specified actions in the event that emission sources in other 
jurisdictions threaten reasonable progress. See Sec.  
51.309(d)(10)(ii)(A)-(D).
    Because implementation of Sec.  51.309 SIPs has been delayed by the 
CEED decision and the consequent need to revise Sec.  51.309 in this 
rulemaking, a SIP revision in 2008 will no longer be appropriate. Under 
today's proposed revisions to Sec.  51.309, SIPs will not be due until 
December 2007, and therefore will not have been in effect long enough 
to permit assessment in 2008. Given these facts, we believe that the 
visibility projection called for by Sec.  51.309(d)(2) should serve as 
a demonstration that the complete strategies contained in Sec.  51.309 
SIPs comprise reasonable progress for the 16 mandatory federal areas on 
the Colorado Plateau.
    This also points to a need for clarification of what that 
reasonable progress test entails. Section 51.309(d)(10) refers to 
strategies which meet ``established reasonable progress goals.'' As the 
preamble notes, the language of Sec.  51.309(d) is virtually identical 
to the periodic SIP review provisions in Sec. Sec.  51.308(g) and 
51.308(h). 64 FR 35755. In the Sec.  51.308 context, the meaning of 
that term is clear, as Sec.  51.308(d)(1) calls for the establishment 
of reasonable progress, in deciviews, for each federal mandatory Class 
I area, based upon a uniform rate of progress to natural conditions in 
2064 and the application of the statutory reasonable progress factors. 
See 64 FR 35731. Section 51.308(d)(1) also provides that reasonable 
progress goals must ``ensure no degradation of visibility for the least 
impaired days.'' In the Sec.  51.309 context, however, it is less clear 
what yardstick should be used against the visibility projections 
because by definition reasonable progress under Sec.  51.309 is defined 
as compliance with all the provisions of Sec.  51.309.
    In our Guidance for Tracking Progress Under the Regional Haze Rule, 
we explained:

    Section 169A(a)(4) and other subsections of the Clean Air Act 
call for reasonable progress ``toward meeting the national goal'' of 
eliminating man-made impairment of visibility. Since any progress 
goal calling for degradation of visibility, even at a modest rate, 
would not be progress toward the goal, it is unlikely that EPA could 
propose to approve any demonstrations that purport to show further 
visibility degradation as reasonable progress, (e.g., in situations 
where visibility would be expected to degrade, and such projected 
degradations would be lessened but not reversed thru proposed 
emission control strategies). EPA-454/B-03-004, September 2003, at 
p. 1-9.

    Therefore, although reasonable progress for the 16 Class 1 areas on 
the Colorado Plateau is not defined by the ``glide path'' methodology 
in Sec.  51.308, we propose establishing as a minimum criterion of 
reasonable progress for these areas a requirement of no degradation 
from baseline conditions, for both the 20 percent most impaired and 20 
percent least impaired days. These criteria should be used in the 
visibility

[[Page 44170]]

projection under Sec.  51.309(d)(2) and in the progress reports under 
Sec.  51.309(d)(10). Furthermore, the assessment required in Sec.  
51.309(d)(10)(i)(C) should be conducted as described in the Tracking 
Progress guidelines. Baseline conditions, as defined in that document, 
should be based on monitoring data from the 2000-2004 period.
    We also wish to clarify that a projection of visibility conditions 
is not necessarily limited to the output of air quality simulation 
models. Under Sec.  51.309(d)(2), the State could use the same methods 
to project visibility improvement that a State could use under Sec.  
51.308(d)(3)(ii) and (iii) to demonstrate how its long term strategy 
will satisfy its contribution to achieving the reasonable progress 
goals established for each Class I area the State may affect. Examples 
of such methods are described in the EPA's Draft Guidance for 
Demonstrating Attainment of Air Quality Goals for PM2.5 and 
Regional Haze (January 2, 2001).
Additional Class I Areas [Sec.  51.309(g)]
    In the 1999 rule, Sec.  51.309(g) provided that a State could 
satisfy reasonable progress requirements for mandatory Class I Federal 
areas in addition to the 16 Class I areas on the Colorado plateau by 
implementing the strategies in Sec.  51.309. To do so, a State was 
required to establish reasonable progress goals for the additional 
Class I areas and adopt additional measures if necessary, in accordance 
with Sec.  51.308(d)(1) through (4) (i.e., the generally applicable 
requirements for reasonable progress). States were also required to 
declare in the SIP submitted no later than December 31, 2003 whether 
their other Class I areas would be addressed under Sec.  51.308 or 
under Sec.  51.309(g). Section 51.309(g)(4)(i) clarified that States 
could build upon and take credit for the strategies under Sec.  51.309 
in developing long term strategies for additional Class I areas. 
Section 51.309(g)(4)(ii) clarified that the SO2 backstop 
emissions trading program could satisfy BART for additional Class I 
areas, subject to a demonstration that greater reasonable progress 
would be achieved at such Class I areas.
    We are proposing to retain the substance of the additional Class I 
area provisions in Sec.  51.309(g), but to eliminate the requirement 
that States make a declaration in the SIP due in 2003 as to which 
section of the rule would be used to address additional Class I areas. 
This change is to conform with our determination, discussed earlier in 
this preamble, that it is no longer appropriate to impose a 2003 
deadline or to condition future participation in Sec.  51.309 
strategies upon the submission of SIPs in 2003. Other administrative 
changes in the structure of Sec.  51.309 are proposed to accommodate 
this change (i.e., renumbering of paragraphs and corrections of cross 
references).

IV. 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 the regulatory action is ``significant'' 
and therefore subject to Office of Management and Budget (OMB) review 
and the requirements of the Executive Order. The Order defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or Tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary 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.''
    Pursuant to the terms of Executive Order 12866, we have determined 
that this proposed rule is a significant regulatory action. We have 
therefore provided it to OMB for review.
    Today's proposed rule would provide States and interested Tribes 
with optional means, such as emissions trading programs, to comply with 
CAA requirements for BART. The proposed rule would require that 
alternatives achieve greater ``reasonable progress'' towards CAA 
visibility goals than would source-by-source BART. By their nature, 
emissions trading programs are designed to achieve a given level of 
environmental improvement in the most cost effective manner possible. 
Therefore, today's proposed rule would achieve at least as a great a 
societal benefit as source-by-source BART, at a social cost that is 
likely to be less than, or at worst equal to, the social costs of 
source-by-source BART.
    In the Regulatory Impact Analysis (RIA) for our recent promulgation 
of the source-by-source BART guidelines, we determined that the social 
costs of source-by-source BART for both EGUs and non-EGUs nationwide 
was between $0.3 and $2.9 billion (1999 dollars), depending on the 
level of stringency implemented by States and on the interest rate 
used. The human health benefits of BART, in contrast, ranged from $1.9 
to $12 billion (1999 dollars), depending on the same variables. These 
figures do not include many other human health benefits that could not 
be quantified or monetized, including all benefits attributable to 
ozone reduction (the benefits were based on reductions in PM only). In 
addition, economic benefits due to visibility improvement in the 
southeastern and southwestern U.S. were estimated to be from $80 
million to $420 million. Finally, BART would also produce visibility 
benefits in other parts of the country, and non-visibility ecosystem 
benefits, which were also not quantified. Therefore, the social 
benefits of BART far outweigh the social costs.
    It is not possible to perform an economic analysis of today's rule 
because the actual parameters of any trading programs in lieu of BART 
will be determined by States and Tribes. However, because trading 
program alternatives would produce comparable overall benefits (in the 
course of satisfying the requirement to achieve greater ``reasonable 
progress'' towards visibility goals ) and use market forces to reduce 
costs, the benefits of today's rule would also far outweigh the costs.

B. Paperwork Reduction Act

    This action does not add any new requirements involving the 
collection of information as defined by the Paperwork Reduction Act, 44 
U.S.C. 3501 et seq. The OMB has approved the information collection 
requirements contained in the final Regional Haze regulations (64 FR 
35714, July 1, 1999) and has assigned OMB control number 2060-0421 (EPA 
ICR No. 1813.04).
    Burden means the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency. This includes the time 
needed to review instructions; develop, acquire, install, and utilize 
technology and systems for the purposes of collecting, validating, and 
verifying information, processing and maintaining information, and 
disclosing and providing information; adjust the existing ways to 
comply with any previously applicable instructions and requirements; 
train personnel to be able to respond to a collection of information; 
search data sources;

[[Page 44171]]

complete and review the collection of information; and transmit or 
otherwise disclose the information. An agency may not conduct or 
sponsor, and a person is not required to respond to a collection of 
information unless it displays a currently valid OMB control number. 
The OMB control numbers for EPA's regulations are listed in 40 CFR part 
9 and 48 CFR chapter 15.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 
601 et seq., generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to notice and comment 
rulemaking requirements under the Administrative Procedure Act or any 
other statute unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
Small entities include small businesses, small organizations, and small 
governmental jurisdictions.
    For purposes of assessing the impacts of today's proposed 
rulemaking on small entities, small entity is defined as: (1) A small 
business that is a small industrial entity as defined in the U.S. Small 
Business Administration (SBA) size standards (as discussed on the SBA 
Web site at http://www.sba.gov/size/indextableofsize.html); (2) a small 
governmental jurisdiction that is a government of a city, county, town, 
school district or special district with a population of less than 
50,000; and (3) a small organization that is any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.
    After considering the economic impacts of today's proposed rule on 
small entities, I certify that this action will not have a significant 
economic impact on a substantial number of small entities. This 
proposed rule will not impose any requirements on small entities. This 
proposed rule would revise the provisions of the regional haze rule 
governing alternative trading programs, and provide additional guidance 
to States, which are not defined as small entities. We continue to be 
interested in the potential impacts of our rules on small entities and 
welcome comments on issues related to such impacts.

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. In addition, before EPA establishes any 
regulatory requirements that may significantly or uniquely affect small 
governments, including tribal governments, it must have developed under 
section 203 of the UMRA a small government agency plan. The plan must 
provide for notifying potentially affected small governments, enabling 
officials of affected small governments to have meaningful and timely 
input in the development of EPA regulatory proposals with significant 
Federal intergovernmental mandates, and informing, educating, and 
advising small governments on compliance with the regulatory 
requirements.
    We believe that this rulemaking is not subject to the requirements 
of UMRA. For regional haze SIPs overall, it is questionable whether a 
requirement to submit a SIP revision constitutes a Federal mandate, as 
discussed in the preamble to the regional haze rule (64 FR 35761, July 
1, 1999). However, today's proposed rule contains no Federal mandates 
(under the regulatory provisions of title II of the UMRA) for State, 
local or Tribal governments or the private sector. In addition, the 
program contained in 40 CFR 51.309, including today's revisions, is an 
optional program. Because the alternative trading programs under 40 CFR 
51.308 and 40 CFR 51.309 are options that each of the States may choose 
to exercise, these revisions to Sec. Sec.  51.308 and 51.309 do not 
establish any regulatory requirements that may significantly or 
uniquely affect small governments, including Tribal governments. The 
program is not required and, thus is clearly not a ``mandate.'' 
Moreover, as explained above, today's proposed rule would reduce any 
regulatory burdens. Accordingly, this rule will not result in 
expenditures to State, local, and tribal governments, in the aggregate, 
or the private sector, of $100 million or more in any given year. Thus 
EPA is not obligated, under section 203 of UMRA, to develop a small 
government agency plan.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    Under section 6(b) of Executive Order 13132, EPA may not issue a 
regulation that has federalism implications, that imposes substantial 
direct compliance costs, and that is not required by statute, unless 
the Federal government provides the funds necessary to pay the direct 
compliance costs incurred by State and local governments, or EPA 
consults with State and local officials early in the process of 
developing a regulation. Under section 6(c) of Executive Order 13132, 
EPA may not issue a regulation that has federalism implications and 
that preempts State law, unless EPA consults with State and local 
officials early in the process of developing the regulation.
    This proposed rule does not have federalism implications. It would 
not have substantial direct effects on the States, on the relationship 
between the national government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
as specified in Executive Order 13132. As described above, this 
proposed rule contains revisions to Sec. Sec.  51.308 and 51.309 of the

[[Page 44172]]

regional haze rule which would reduce any regulatory burden on the 
States. In addition, these are optional programs for States. These 
revisions to Sec. Sec.  51.308 and 51.309, accordingly, would not 
directly impose significant new requirements on State and local 
governments. Moreover, even if today's proposed revisions did have 
federalism implications, these proposed revisions would not impose 
substantial direct compliance costs on State or local governments, nor 
would they preempt State law. Thus, Executive Order 13132 does not 
apply to this proposed rule.
    Consistent with EPA policy, we nonetheless did consult with 
representatives of State and local governments in developing this 
proposed rule. This rule directly implements specific recommendations 
from the Western Regional Air Partnership (WRAP), which includes 
representatives from all the affected States.
    In the spirit of Executive Order 13132 and consistent with EPA 
policy to promote communications between EPA and State and local 
governments, EPA specifically solicits comment on today's rule from 
State and local officials.

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

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 6, 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.'' ``Policies that have tribal 
implications'' is defined in the Executive Order to include regulations 
that have ``substantial direct effects on one or more Indian tribes, on 
the relationship between the Federal government and the Indian tribes, 
or on the distribution of power and responsibilities between the 
Federal government and Indian tribes.''
    This proposed rule will overall reduce any regulatory burden on the 
Tribes. Moreover, the Sec. Sec.  51.308 and 51.309 programs are 
optional programs for Tribes. Accordingly, this proposed rule would not 
have tribal implications. In addition, this proposed rule would 
directly implement specific recommendations from the Western Regional 
Air Partnership (WRAP), which includes representatives of Tribal 
governments. Thus, although this proposed rule would not have tribal 
implications, representatives of Tribal governments have had the 
opportunity to provide input into development of the recommendations 
forming its basis.

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

    Executive Order 13045: ``Protection of Children from Environmental 
Health and Safety Risks'' (62 FR 19885, April 23, 1997) applies to any 
rule that: (1) Is determined to be ``economically significant'' as 
defined under Executive Order 12866, and (2) concerns an environmental 
health or safety risk that EPA has reason to believe may have a 
disproportionate effect on children. If the regulatory action meets 
both criteria, the Agency must evaluate the environmental health or 
safety effects of the planned rule on children, and explain why the 
planned regulation is preferable to other potentially effective and 
reasonably feasible alternatives considered by the Agency.
    The EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that are based on health or safety risks, such that 
the analysis required under section 5-501 of the Order has the 
potential to influence the regulation. Similarly to the recently 
finalized source-specific BART revisions (70 FR 39104, July 6, 2005), 
this proposed rule is not subject to Executive Order 13045 because it 
does not establish an environmental standard based on health or safety 
risks. Therefore this proposed rule does not involve decisions on 
environmental health or safety risks that may disproportionately affect 
children. The EPA believes that the emissions reductions from the 
control strategies considered in this rulemaking will further improve 
air quality and will further improve children's health.

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

    This proposed rule is not subject to Executive Order 13211, 
``Actions that Significantly Affect Energy Supply, Distribution, or 
Use'' (66 FR 28355, May 22, 2001) because it is not likely to have a 
significant adverse effect on the supply, distribution, or use of 
energy. This rule is not a ``significant energy action,'' because it 
will have less than a 1 percent impact on the cost of energy production 
and does not exceed other factors described by OMB that may indicate a 
significant adverse effect. (See, ``Guidance for Implementing E.O. 
13211,'' OMB Memorandum 01-27 (July 13, 2001) www.whitehouse.gov/omb/memoranda/m01-27.html.) This proposed rule provides an optional cost 
effective and less burdensome alternative to source-by-source BART as 
recently finalized (70 FR 39104, July 6, 2005); we have already found 
that source-by-source BART is not likely to have a significant adverse 
effect on the supply, distribution, or use of energy. The 1999 regional 
haze rule provides substantial flexibility to the States, allowing them 
to adopt alternative measures such as a trading program in lieu of 
requiring the installation and operation of BART on a source by source 
basis. This proposed rule contains provisions governing these 
alternative measures, which will provide an alternative to BART that 
reduces the overall cost of the regulation and its impact on the energy 
supply.

I. National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, section 12(d) (15 U.S.C. 
272 note) directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. The NTTAA directs EPA 
to provide Congress, through OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    This proposed rulemaking does not involve technical standards. 
Therefore, EPA is not considering the use of any voluntary consensus 
standards. We welcome comments on this aspect of the proposed 
rulemaking and, specifically, invite the public to identify 
potentially-applicable voluntary consensus standards and to explain why 
such standards should be used in this regulation.

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

    Executive Order 12898 requires that each Federal agency make 
achieving environmental justice part of its mission by identifying and 
addressing, as appropriate, disproportionately high and adverse human 
health or environmental effects of its programs, policies, and 
activities on minorities and low-income populations. The requirements 
of Executive Order 12898 have been previously addressed to the extent 
practicable in the Regulatory Impact Analysis (RIA) for the regional

[[Page 44173]]

haze rule (cited above), particularly in chapters 2 and 9 of the RIA. 
This proposed rule makes no changes that would have a 
disproportionately high and adverse human health or environmental 
effect on minorities and low-income populations.

IV. Statutory Provisions and Legal Authority

    Statutory authority for today's proposed rule comes from sections 
169(a) and 169(b) of the CAA (42 U.S.C. 7545(c) and (k)). These 
sections require EPA to issue regulations that will require States to 
revise their SIPs to ensure that reasonable progress is made toward the 
national visibility goals specified in section 169(A).

List of Subjects in 40 CFR Part 51

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

    Dated: July 21, 2005.
Stephen L. Johnson,
Administrator.

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

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

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

    Authority: 23 U.S.C. 101; 42 U.S.C. 7401-7671q.

Subpart P--Protection of Visibility

    2. Section 51.308 is amended by revising paragraphs (e)(2)(i)(A), 
(e)(2)(i)(B), (e)(2)(i)(C), and (e)(2)(ii), and adding paragraphs 
(e)(2)(i)(D), (e)(2)(i)(E), and (e)(2)(vi) to read as follows:


Sec.  51.308  Regional haze program requirements.

* * * * *
    (e) * * *
    (2) * * *
    (i) * * *
    (A) A list of all BART-eligible sources within the State.
    (B) A list of all BART source categories covered by the alternative 
program. The State is not required to include every BART source 
category in the program, but for each source category covered, the 
State must include each BART-eligible source within that category in 
the analysis required by paragraph (e)(2)(i)(C) of this section.
    (C) An analysis of the degree of visibility improvement that would 
be achieved in each affected mandatory Class I Federal area as a result 
of the emission reductions projected from the installation and 
operation of BART controls under paragraph (e)(1) of this section at 
each source subject to BART in each source category covered by the 
program.
    (D) An analysis of the emissions reductions, and associated 
visibility improvement anticipated at each Class I area within the 
State, under the trading program or other alternative measure.
    (E) A determination that the emission reductions and associated 
visibility improvement projected under paragraph (e)(2)(i)(D) of this 
section (i.e., the trading program or other alternative measure) 
comprise greater reasonable progress, as defined in paragraph (e)(3) of 
this section, than those projected under paragraph (e)(2)(i)(C) of this 
section (i.e., BART).
    (ii) A demonstration that the emissions trading program or 
alternative measures will apply, at a minimum, to all BART-eligible 
sources within the covered source categories within the State. Those 
sources having a federally enforceable emission limitation determined 
by the State and approved by EPA as meeting BART in accordance with 
section 302(c) or paragraph (e)(1) of this section do not need to meet 
the requirements of the emissions trading program or alternative 
measure, but may choose to participate if they meet the requirements of 
the emissions trading program or alternative measure.
* * * * *
    (vi) A cap and trade program adopted by a State in lieu of BART 
must include the following elements:
    (A) Applicability provisions defining which sources are subject to 
the program. The state must demonstrate that the applicability 
provisions (including the size criteria for including sources in the 
program) are designed to prevent any significant, potential shifting 
within the state of production and emissions from sources in the 
program to sources outside the program. In the case of programs 
including multiple states, the states must demonstrate that the 
applicability provisions cover essentially the same size facilities 
and, if source categories are specified, the same source categories and 
prevent any significant, potential shifting within such states of 
production and emissions to sources outside the program.
    (B) Allowance provisions ensuring that the total tonnage value of 
allowances issued each year under the program will never exceed the 
total number of tons of the emissions cap established by the budget or 
milestone.
    (C) Monitoring provisions providing for consistent and accurate 
emissions measurements to ensure that each allowance actually 
represents the same specified tonnage of emissions and that emissions 
are measured with similar accuracy at all sources in the program. The 
monitoring provisions must require that boilers, combustion turbines, 
and cement kilns allowed to sell allowances comply with part 75 of this 
chapter. The monitoring provisions for other sources allowed to sell 
allowances must require that such sources provide emissions information 
with the same precision, reliability, accessibility, and timeliness as 
information provided under part 75 of this chapter.
    (D) Recordkeeping provisions that ensure the enforceability of the 
emissions monitoring provisions and other program requirements. The 
recordkeeping provisions must require that sources allowed to sell 
allowances comply with the recordkeeping provisions of part 75 of this 
chapter.
    (E) Reporting provisions requiring timely reporting of monitoring 
data with sufficient frequency to ensure the enforceability of the 
emissions monitoring provisions and other program requirements and the 
ability to audit the program. The reporting provisions must require 
that sources allowed to sell allowances comply with the reporting 
provisions of part 75 of this chapter, except that, if the 
Administrator is not the tracking system administrator for the program, 
emissions may be reported to the tracking system administrator, rather 
than the Administrator.
    (F) Tracking system provisions which provide for a tracking system 
that is publicly available in a secure, centralized database to track 
in a consistent manner all allowances and emissions in the program.
    (G) Authorized account representative provisions ensuring that a 
source owner or operator designates one individual who is authorized to 
represent the owner or operator in all matters pertaining to the 
trading program.
    (H) Allowance transfer provisions providing procedures that allow 
timely transfer and recording of allowances, minimize administrative 
barriers to the operation of the allowance market and ensure that such 
procedures apply uniformly to all sources and other potential 
participants in the allowance market.

[[Page 44174]]

    (I) Compliance provisions prohibiting a source from emitting a 
total tonnage of a pollutant that exceeds the tonnage value of its 
allowance holdings and including the methods and procedures for 
determining whether emissions exceed allowance holdings. Such method 
and procedures shall apply consistently from source to source.
    (J) Penalty provisions providing for mandatory allowance deduction 
for excess emissions that apply consistently from source to source. The 
tonnage value of the allowances deducted shall equal at least three 
times the tonnage of the excess emissions.
    (K) For a trading program that allows banking of allowances, 
provisions clarifying any restrictions on the use of these banked 
allowances.
    (L) Program Assessment provisions providing for periodic program 
evaluation to assess whether the program is accomplishing its goals, 
and whether modifications to the program are needed to enhance 
performance of the program.
    3. 51.309 is amended as follows:
    a. Revising paragraph (a).
    b. Revising paragraphs (b)(5) and (b)(7).
    c. Revising paragraph (c).
    d. Revising paragraphs (d)(1), (d)(4)(i) through (v) and (d)(10).
    e. Revising paragraph (f).
    f. Revising paragraphs (g) introductory text and paragraphs (g)(1) 
and (2).
    g. Removing paragraphs (g)(3) and (g)(4).
    h. Adding paragraphs (d)(vi)(A), (d)(vi)(B) and (d)(vii).
    i. Removing paragraph (h).


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

    (a) What is the purpose of this section? This section establishes 
the requirements for the first regional haze implementation plan to 
address regional haze visibility impairment in the 16 Class I areas 
covered by the Grand Canyon Visibility Transport Commission Report. For 
the period through 2018, certain States (defined in paragraph (b) of 
this section as Transport Region States) may choose to implement the 
Commission's recommendations within the framework of the national 
regional haze program and applicable requirements of the Act by 
complying with the provisions of this section. If a transport-region 
State submits an implementation plan which is approved by EPA as 
meeting the requirements of this section, it will be deemed to comply 
with the requirements for reasonable progress with respect to the 16 
Class I areas for the period from approval of the plan through 2018. 
Any Transport Region State electing not to submit an implementation 
plan under this section is subject to the requirements of Sec.  51.308 
in the same manner and to the same extent as any State not included 
within the Transport Region. Except as provided in paragraph (g) of 
this section, each Transport Region State is also subject to the 
requirements of Sec.  51.308 with respect to any other Federal 
mandatory Class I areas within the State or affected by emissions from 
the State.
    (b) * * *
    (5) Milestone means the maximum level of annual regional sulfur 
dioxide emissions, in tons per year, for a given year, assessed 
annually, through the year 2018, consistent with paragraph (d)(4) of 
this section.
* * * * *
    (7) Base year means the year for which data for a source included 
within the program were used by the WRAP to calculate emissions as a 
starting point for development of the milestone required by paragraph 
(d)(4)(i) of this section.
* * * * *
    (c) Implementation Plan Schedule. Each Transport Region State 
electing to submit an implementation plan under this section must 
submit such a plan no later than December 17, 2007. Indian Tribes may 
submit implementation plans after this deadline.
    (d) * * *
    (1) Time period covered. The implementation plan must be effective 
through December 31, 2018, and shall continue in effect until an 
implementation plan revision is approved by EPA in accordance with 
Sec.  51.308(f).
* * * * *
    (4) * * *
    (i) Provisions for stationary source sulfur dioxide. The plan 
submission must include a sulfur dioxide program that contains 
quantitative emissions milestones for stationary source sulfur dioxide 
emissions for each year through 2018. Compliance with the annual 
milestones may be measured by comparing a three-year rolling average of 
actual emissions with a rolling average of the emissions milestones for 
the same three years. The milestones must provide for steady and 
continuing emissions reductions through 2018 consistent with the 
Commission's definition of reasonable progress, its goal of 50 to 70 
percent reduction in sulfur dioxide emissions from 1990 actual emission 
levels by 2040, applicable requirements under the CAA, and the timing 
of implementation plan assessments of progress and identification of 
deficiencies which will be due in the years 2013 and 2018. The 
milestones must be shown to provide for greater reasonable progress 
than would be achieved by application of BART pursuant to Sec.  
51.308(e)(2) and approvable in lieu of BART.
    (ii) Documentation of emissions calculation methods. The plan 
submission must include documentation of the specific methodology used 
to calculate emissions during the base year for each emitting unit 
included in the program. The implementation plan must also provide for 
documentation of any change to the specific methodology used to 
calculate emissions at any emitting unit for any year after the base 
year.
    (iii) Monitoring, recordkeeping, and reporting of sulfur dioxide 
emissions. The plan submission must include provisions requiring the 
monitoring, recordkeeping, and annual reporting of actual stationary 
source sulfur dioxide emissions within the State. The monitoring, 
recordkeeping, and reporting data must be sufficient to determine 
annually whether the milestone for each year through 2018 is achieved. 
The plan submission must provide for reporting of these data by the 
State to the Administrator and to the regional planning organization. 
The plan must provide for retention of records for at least 10 years 
from the establishment of the record.
    (iv) Criteria and Procedures for a Market Trading Program. The plan 
must include the criteria and procedures for conducting an annual 
evaluation of whether the milestone is achieved and in accordance with 
paragraph (d)(4)(v) of this section, for activating a market trading 
program in the event the milestone is not achieved. A draft of the 
annual report evaluating whether the milestone for each year is 
achieved shall be completed no later than 12 months of the end of each 
milestone year. The plan must also provide for assessments of the 
program in the years 2013 and 2018.
    (v) Market Trading Program. The implementation plan must include 
requirements for a market trading program to be implemented in the 
event a milestone is not achieved. The plan shall require that the 
market trading program be activated beginning no later than 15 months 
after the end of the first year in which the milestone is not achieved. 
The plan shall also require that sources comply, as soon as 
practicable, with the requirement to hold allowances covering their 
emissions. Such market trading program

[[Page 44175]]

must be sufficient to achieve the milestones in paragraph (d)(4)(i) of 
this section, and must be consistent with the elements for such 
programs outlined in Sec.  51.308(e)(2)(vi).
    (vi) Provision for the 2018 milestone.
    (A) Unless and until a revised implementation plan is submitted in 
accordance with Sec.  51.308(f) and approved by EPA, the implementation 
plan shall prohibit emissions from covered stationary sources in any 
year beginning in 2018 that exceed the year 2018 milestone. In no event 
shall a market-based program approved under Sec.  51.308(f) allow an 
emissions cap that is less stringent than the 2018 milestone, unless 
the milestones are replaced by a different program that meets BART and 
reasonable progress requirements established in Sec.  51.308, and is 
approved by EPA.
    (B) The implementation plan must provide a framework, including 
financial penalties for excess emissions based on the 2018 milestone, 
sufficient to ensure that the 2018 milestone will be met even if the 
implementation of the market trading program in paragraph (d)(4)(v) of 
this section has not yet been triggered, or the source allowance 
compliance provision of the trading program is not yet in effect.
    (vii) Provisions for stationary source NOX and PM. The 
implementation plan must contain any necessary long term strategies and 
BART requirements for stationary source PM and NOX. Any such 
BART provisions may be submitted pursuant to either Sec.  51.308(e)(1) 
or Sec.  51.308(e)(2).
* * * * *
    (10) Periodic implementation plan revisions. Each Transport Region 
State must submit to the Administrator periodic reports in the years 
2013 and 2018. The progress reports must be in the form of 
implementation plan revisions that comply with the procedural 
requirements of Sec. Sec.  51.102 and 51.103.
* * * * *
    (f) [Reserved]
    (g) Additional Class I areas. Each Transport Region State 
implementing the provisions of this section as the basis for 
demonstrating reasonable progress for mandatory Class I Federal areas 
other than the 16 Class I areas must include the following provisions 
in its implementation plan. If a Transport Region State submits an 
implementation plan which is approved by EPA as meeting the 
requirements of this section, it will be deemed to comply with the 
requirements for reasonable progress for the period from approval of 
the plan to 2018.
    (1) A demonstration of expected visibility conditions for the most 
impaired and least impaired days at the additional mandatory Class I 
Federal area(s) based on emissions projections from the long-term 
strategies in the implementation plan. This demonstration may be based 
on assessments conducted by the States and/or a regional planning body.
    (2) Provisions establishing reasonable progress goals and 
implementing any additional measures necessary to demonstrate 
reasonable progress for the additional mandatory Federal Class I areas. 
These provisions must comply with the provisions of Sec.  51.308(d)(1) 
through (4).
    (i) In developing long-term strategies pursuant to Sec.  
51.308(d)(3), the State may build upon the strategies implemented under 
paragraph (d) of this section, and take full credit for the visibility 
improvement achieved through these strategies.
    (ii) The requirement under Sec.  51.308(e) related to Best 
Available Retrofit Technology for regional haze is deemed to be 
satisfied for pollutants addressed by the milestones and backstop 
trading program if, in establishing the emission reductions milestones 
under paragraph (d)(4) of this section, it is shown that greater 
reasonable progress will be achieved for these additional Class I areas 
than would be achieved through the application of source-specific BART 
emission limitations under Sec.  51.308(e)(1).
    (iii) The Transport Region State may consider whether any 
strategies necessary to achieve the reasonable progress goals required 
by paragraph (g)(2) of this section are incompatible with the 
strategies implemented under paragraph (d) of this section to the 
extent the State adequately demonstrates that the incompatibility is 
related to the costs of the compliance, the time necessary for 
compliance, the energy and no air quality environmental impacts of 
compliance, or the remaining useful life of any existing source subject 
to such requirements.

[FR Doc. 05-14930 Filed 7-29-05; 8:45 am]
BILLING CODE 6560-50-P