[Federal Register Volume 70, Number 163 (Wednesday, August 24, 2005)]
[Proposed Rules]
[Pages 49708-49833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-15529]



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Part II





Environmental Protection Agency





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40 CFR Part 51, et al.



Rulemaking on Section 126 Petition From North Carolina To Reduce 
Interstate Transport of Fine Particulate Matter and Ozone; Federal 
Implementation Plans To Reduce Interstate Transport of Fine Particulate 
Matter and Ozone; Revisions to the Clean Air Interstate Rule; Revisions 
to the Acid Rain Program; Proposed Rule

  Federal Register / Vol. 70, No. 163 / Wednesday, August 24, 2005 / 
Proposed Rules  

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, 72, 73, 74, 78, 96, and 97

[OAR-2004-0076; FRL-7948-3]
RIN 2060-AM99


Rulemaking on Section 126 Petition From North Carolina To Reduce 
Interstate Transport of Fine Particulate Matter and Ozone; Federal 
Implementation Plans To Reduce Interstate Transport of Fine Particulate 
Matter and Ozone; Revisions to the Clean Air Interstate Rule; Revisions 
to the Acid Rain Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed rulemaking (NPR).

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SUMMARY: Today, EPA is proposing actions to address the interstate 
transport of emissions of nitrogen oxides (NOX) and sulfur 
dioxide (SO2) that contribute significantly to nonattainment 
and maintenance problems with respect to the national ambient air 
quality standards (NAAQS) for fine particulate matter 
(PM2.5) and 8-hour ozone. As one part of today's action, EPA 
is proposing its response to a petition submitted to EPA by the State 
of North Carolina under section 126 of the Clean Air Act (CAA). The 
petition requests that EPA find that SO2 and/or 
NOX emissions from electric generating units (EGUs) in 13 
States are significantly contributing to PM2.5 and/or 8-hour 
ozone nonattainment and maintenance problems in North Carolina, and 
requests that EPA establish control requirements to prohibit such 
significant contribution. The EPA's proposed response is based on 
extensive analyses conducted for the recently issued Clean Air 
Interstate Rule (CAIR). The EPA is proposing to deny the petition for 
sources in States not shown to be linked to nonattainment and 
maintenance problems in North Carolina under the CAIR. For sources in 
States that are linked to North Carolina under the CAIR, EPA is 
proposing in the alternative to deny the petition if EPA promulgates 
Federal implementation plans (FIPs) to address the interstate transport 
no later than the final section 126 response or to grant the petition 
if EPA does not promulgate the FIPs prior to or concurrently with the 
section 126 response. The EPA's preferred option is to promulgate the 
FIP concurrently with the final section 126 response.
    In today's action, EPA is also proposing FIPs for all jurisdictions 
that are covered by the CAIR. The FIPs would regulate EGUs in the 
affected States and achieve the emissions reductions requirements 
established by the CAIR until States have approved State implementation 
plans (SIPs) to achieve the reductions. The EPA intends the FIP to 
satisfy the concerns cited in the section 126 petition and provide a 
Federal backstop for the CAIR. In no way should the FIP for CAIR be 
viewed as a sign of any concern about States meeting the SIP 
responsibilities under CAIR.
    As the control requirements for both the section 126 action and the 
FIP, EPA is proposing Federal NOX and SO2 trading 
programs that provide emissions reductions equal to those required 
under the CAIR in affected States.
    The Section 126 and FIP actions would not constrain States in their 
selection of control strategies to meet the CAIR. The EPA intends to 
withdraw section 126 or FIP requirements in a State if that State 
submits and EPA approves a SIP meeting the requirements of CAIR.
    Today's action also proposes revisions to the CAIR in order to 
address the interaction between the EPA-administered Federal CAIR 
trading programs proposed today and the EPA-administered State CAIR 
trading programs that will be created by any State that elects to 
submit a SIP establishing such a trading program to meet the 
requirements of the CAIR. In addition, EPA is proposing revisions to 
the CAIR to correct certain minor errors.
    Today's action also proposes revisions to the Acid Rain Program in 
order to make the administrative appeals procedures, which currently 
apply to final determinations by the Administrator under the EPA-
administered State CAIR trading programs, also apply to the EPA-
administered trading programs under the section 126 and FIP actions. In 
addition, we are proposing certain minor revisions to the Acid Rain 
Program that would apply to all affected units.

DATES: Comments must be received on or before October 24, 2005. Public 
hearings will be held on September 15, 2005 in Washington, DC and on 
September 14, 2005 in Research Triangle Park, North Carolina. Please 
refer to SUPPLEMENTARY INFORMATION for additional information on the 
comment period and the public hearings.

ADDRESSES: Submit your comments, identified by Docket ID No. OAR-2004-
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: [email protected].
     Mail: Air Docket, Attention: Docket No. OAR-2004-0076, 
Environmental Protection Agency, Mailcode: 6102T, 1200 Pennsylvania 
Ave., NW., Washington, DC 20460.
     Hand Delivery: EPA Docket Center, 1301 Constitution 
Avenue, NW., Room B102, 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-2004-0076. 
The EPA's policy is that all comments received will be included in the 
public docket without change and may be made available online at http://www.epa.gov/edocket, including any personal information provided, 
unless the comment includes information claimed to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute. Do not submit information that you consider to 
be CBI or otherwise protected through EDOCKET, regulations.gov, or e-
mail. The EPA EDOCKET and the Federal regulations.gov Web sites are 
``anonymous access'' systems, which means EPA will not know your 
identity or contact information unless you provide it in the body of 
your comment. If you send an e-mail comment directly to EPA without 
going through EDOCKET or regulations.gov, your e-mail address will be 
automatically captured and included as part of the comment that is 
placed in the public docket and made available on the Internet. If you 
submit an electronic comment, EPA recommends that you include your name 
and other contact information in the body of your comment and with any 
disk or CD-ROM you submit. If EPA cannot read your comment due to 
technical difficulties and cannot contact you for clarification, EPA 
may not be able to consider your comment. Electronic files should avoid 
the use of special characters, any form of encryption, and be free of 
any defects or viruses. 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 the

[[Page 49709]]

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 EPA Docket Center, EPA West, Room B102, 1301 Constitution 
Avenue, NW., Washington, DC. The Public Reading Room is open from 8:30 
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The 
telephone number for the Public Reading Room is (202) 566-1744, and the 
telephone number for the Air Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT: For general questions concerning 
today's section 126 action, please contact Carla Oldham, U.S. EPA, 
Office of Air Quality Planning and Standards, Air Quality Strategies 
and Standards Division, C539-02, Research Triangle Park, NC 27711, 
telephone (919) 541-3347, e-mail at [email protected]. For general 
questions concerning today's FIP action, please contact Tom Coda, U.S. 
EPA, Office of Air Quality Planning and Standards, Air Quality 
Strategies and Standards Division, C539-02, Research Triangle Park, NC 
27711, telephone (919) 541-3037, e-mail at [email protected]. For legal 
questions concerning the section 126 action, please contact Steven 
Silverman, U.S. EPA, Office of General Counsel, Mail Code 2344A, 1200 
Pennsylvania Avenue, NW., Washington, DC 20460, telephone (202) 564-
5523, e-mail at [email protected]. For legal questions 
concerning the FIP action, please contact Sonja Petersen, U.S. EPA, 
Office of General Counsel, Mail Code 2344A, 1200 Pennsylvania Avenue, 
NW., Washington, DC, 20460, telephone (202) 564-4097, e-mail at 
[email protected]. For questions regarding the cap and trade 
programs and emissions budgets, please contact Meg Victor, U.S. EPA, 
Office of Atmospheric Programs, Clean Air Markets Division, Mail Code 
6204J, 1200 Pennsylvania Avenue, NW., Washington, DC, 20460, telephone 
(202) 343-9193, e-mail at [email protected]. For questions regarding 
the revisions to the CAIR and Acid Rain Programs, please contact Dwight 
Alpern, U.S. EPA, Office of Atmospheric Programs, Clean Air Markets 
Division, Mail Code 6204J, 1200 Pennsylvania Avenue, NW., Washington, 
DC, 20460, telephone (202) 343-9151, e-mail at [email protected]. 
For questions regarding analyses required by statutes and executive 
orders, please contact Ron Evans, U.S. EPA, Office of Air Quality 
Planning and Standards, Air Quality Strategies and Standards Division, 
Mail Code C339-01, Research Triangle Park, NC, 27711, telephone (919) 
541-5488, e-mail at [email protected].

SUPPLEMENTARY INFORMATION:

I. Does This Action Apply to Me?

    Categories and entities potentially regulated by this action 
include the following:

------------------------------------------------------------------------
                                      NAICS     Examples of potentially
             Category                code \1\      regulated entities
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Industry..........................     221112  Fossil fuel-fired
                                                electric utility steam
                                                generating units.
Federal government................        \2\  Fossil fuel-fired
                                       221122   electric utility steam
                                                generating units owned
                                                by the Federal
                                                government.
State/local/Tribal government.....        \2\  Fossil fuel-fired
                                       221122   electric utility steam
                                                generating units owned
                                                by municipalities.
                                       921150  Fossil fuel-fired
                                                electric utility steam
                                                generating units in
                                                Indian Country.
------------------------------------------------------------------------
\1\ North American Industry Classification System.
\2\ Federal, State, or local government-owned and operated
  establishments are classified according to the activity in which they
  are engaged.

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. To determine whether your facility could potentially be 
affected by this action, you should examine the definitions and 
applicability criteria in Sec. Sec.  72.2, 72.6, 72.7, 72.8, and 74.2 
for purposes of the Acid Rain Program revisions and proposed Sec. Sec.  
97.102, 97.104, 97.105, 97.202, 97.204, 97.205, 97.302, 97.304, and 
97.305 for purposes of the section 126 and FIP actions. If you have any 
questions regarding the applicability of this action to a particular 
entity, consult the person listed in the preceding section under FOR 
FURTHER INFORMATION CONTACT.

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

    1. Submitting CBI. Do not submit comments that include CBI 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. Send or deliver information 
identified as CBI only to the following address: Roberto Morales, U.S. 
EPA, Office of Air Quality Planning and Standards, Mail Code C404-02, 
Research Triangle Park, NC 27711, telephone (919) 541-0880, e-mail at 
[email protected], Attention Docket ID No. OAR-2004-0076.
    2. Tips for Preparing Your Comments. When submitting comments, 
remember to:
    i. Identify the rulemaking by docket number and other identifying 
information (subject heading, Federal Register date and page number).
    ii. 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.
    iii. Explain why you agree or disagree; suggest alternatives and 
substitute language for your requested changes.
    iv. Describe any assumptions and provide any technical information 
and/or data that you used.
    v. If you estimate potential costs or burdens, explain how you 
arrived at your estimate in sufficient detail to allow for it to be 
reproduced.

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    vi. Provide specific examples to illustrate your concerns, and 
suggest alternatives.
    vii. Explain your views as clearly as possible, avoiding the use of 
profanity or personal threats.
    viii. Make sure to submit your comments by the comment period 
deadline identified.

III. Availability of Related Information

    The EPA has conducted a separate rulemaking that contains actions 
and information related to this proposal, ``Rule to Reduce Interstate 
Transport of Fine Particulate Matter and Ozone (Clean Air Interstate 
Rule)'' (see proposal at 69 FR 4566, January 30, 2004; supplemental 
proposal at 69 FR 32684, June 10, 2004; notice of data availability at 
69 FR 47828, August 6, 2004; and final rule at 70 FR 25162; May 12, 
2005). Documents related to the CAIR are available for inspection in 
docket OAR-2003-0053 at the address and times given above. The EPA has 
established a Web site for the CAIR at http://www.epa.gov/cleanairinterstaterule or more simply http://www.epa.gov/cair/ which 
will also include information on the section 126 rulemaking actions. 
The rulemaking docket for the CAIR contains information and analyses 
that are relied upon in today's proposed actions. Therefore, EPA is 
including by reference the entire CAIR record for purposes of the 
section 126 and FIP rulemakings. The EPA is not accepting comment on 
the CAIR or otherwise reopening any issue decided in the CAIR for 
reconsideration or comment, except that we are taking comment 
specifically on the revisions to CAIR that EPA is proposing in today's 
action. Section VII in this preamble discusses the proposed changes to 
CAIR.

IV. Public Hearing

    The EPA will be holding two public hearings on today's proposal. On 
September 14, 2005, a public hearing will be held at the EPA, Building 
C, Room C111A-B, 109 T.W. Alexander Drive, Research Triangle Park, 
North Carolina 27709. On September 15, 2005, a public hearing will be 
held at EPA Headquarters, 1200 Pennsylvania Ave, NW., Room 1117 (EPA 
East), Washington, DC. The metro stop is Federal Triangle. Because 
these hearings are being held at U.S. government facilities, everyone 
planning to attend one of the hearings 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 9 a.m. and continue until 5 p.m., 
if necessary, depending on the number of speakers. The EPA may end the 
hearing early if all registered speakers have had an opportunity to 
speak, but no earlier than 2 p.m. Persons wishing to present oral 
testimony that have not made arrangements in advance should register by 
2 p.m. the day of the hearing. 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 Joann Allman, 
U.S. EPA, Office of Air Quality Planning and Standards, C539-02, 
Research Triangle Park, NC 27711, telephone (919) 541-1815, e-mail 
[email protected], by September 8, 2005. For updates and additional 
information on the public hearings, please check EPA's Web site for 
this rulemaking at http://www.epa.gov/cair.
    The public hearings 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

I. Background and Summary of Proposal
    A. Summary of Proposal
    B. General Background on PM2.5 and Ozone
    1. The PM2.5 Problem
    2. The 8-Hour Ozone Problem
    3. Other Environmental Effects Associated with SO2 
and NOX Emissions
    C. What Is the Statutory and Regulatory Background for Today's 
Action?
    1. What Is the ``Good Neighbor'' Provision?
    2. What Is the CAA Section 126 Provision?
    3. What Is EPA's Previous Section 126 Rulemaking?
    4. What Is the Clean Air Interstate Rule?
    5. What Are the Findings of Failure to Submit for the Section 
110(a)(2)(D) Plans?
    D. Summary of North Carolina Section 126 Petition
    1. What Sources Does the Petition Target?
    2. What Control Remedy Does the Petition Request?
    3. What Is the Technical Support for the Petition?
    E. What Is the Litigation on Section 126 Rulemaking Schedule?
    F. How Is EPA Addressing the Section 126-Related Comments 
Received During the CAIR Rulemaking?
II. What Is EPA's Legal and Analytical Approach for the Section 126 
Petition?
III. What Is EPA's Proposed Action on the Section 126 Petition?
    A. What Is EPA's Proposed Action With Respect to the 8-Hour 
Ozone NAAQS?
    B. What Is EPA's Proposed Action With Respect to the 
PM2.5 NAAQS?
    C. What Are the Proposed Requirements for Sources for Which EPA 
Makes a Section 126(b) Finding?
    D. When and How Would EPA Withdraw Section 126 Findings and 
Control Requirements in a State if EPA Approves a SIP to Meet the 
CAIR?
IV. What Is the Proposed Federal Implementation Plan for the CAIR?
    A. What Is the Legal Framework for the Proposed FIP?
    B. What Is the Timing and Scope of the CAIR FIP Action?
    C. What Are the FIP Control Measures?
    D. When and How Would EPA Remove the FIP Requirements if EPA 
Approves a SIP to Meet the CAIR?
V. Emission Reduction Requirements for the Proposed CAIR FIP and 
Proposed Section 126 Response
    A. Overview of Emission Reduction Requirements
    B. What Is EPA's Approach for Determining Regionwide 
NOX and SO2 Emissions Caps and State Emissions 
Budgets?
    1. Determination of Regionwide Caps for SO2 and 
NOX
    2. Determination of State by State Emissions Budgets for 
SO2 and NOX
    a. Determination of State SO2 Emissions Budgets
    b. Determination of State Annual and Ozone Season NOX 
Emissions Budgets
    C. What Are the State EGU Emission Budgets for the CAIR FIP and 
the Section 126 Response?
    1. What Are the Annual State EGU SO2 Emissions 
Budgets?
    2. What Are the Annual State EGU NOX Emissions 
Budgets?
    a. For States Affected by the CAIR FIP
    b. For States Affected by the Section 126 Response
    3. What Are the Ozone Season EGU NOX Emissions 
Budgets?
    a. For States Affected by the CAIR FIP
    b. For States Affected by the Section 126 Response
    4. What Are the Amounts of Allowances Available in the State 
Annual NOX Compliance Supplement Pools?
VI. Proposed Federal CAIR NOX and SO2 Cap and 
Trade Programs for EGUs
    A. Purpose of Federal CAIR NOX and SO2 Cap 
and Trade Programs and Relationship to the Section 126 Petition and 
the CAIR
    B. Overall Structure of the Proposed Federal CAIR Cap and Trade 
Programs
    1. SO2 Program
    2. NOX Program
    3. Ozone Season NOX Program
    C. Sources Affected Under the Proposed Federal CAIR Cap and 
Trade Programs
    D. Allocation of NOX Emission Allowances to Sources
    E. Allocation of SO2 Emission Allowances to Sources

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    F. Allowance Banking
    G. Incentives for Early Reductions
    1. SO2 Program
    2. NOX Program
    3. Ozone Season NOX Program
    H. Monitoring and Reporting Requirements
    I. Differences Between the Proposed Federal CAIR Cap and Trade 
Programs and the CAIR SIP Rules
    J. Coordination Between the Proposed Federal CAIR Cap and Trade 
Programs and CAIR SIPs
    K. Relationship of Emissions Trading Programs to Section 126 
Relief
    L. Interactions with Other CAA Programs
VII. What Are the Revisions to the CAIR?
VIII. What Are the Revisions to the Acid Rain Program?
IX. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination with 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children from 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions that Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer Advancement Act
    J. Executive Order 12898: Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations

I. Background and Summary of Proposal

A. Summary of Proposal

    Today, EPA is proposing two actions to address the interstate 
transport of emissions of NOX and SO2 that 
contribute significantly to nonattainment and maintenance problems with 
respect to the NAAQS for PM2.5 and 8-hour ozone. First, EPA 
is proposing its response to a petition submitted to EPA by the State 
of North Carolina under section 126 of the CAA. The petition requests 
that EPA establish control requirements for EGUs in 13 States based on 
findings that these sources are significantly contributing to 
PM2.5 and/or 8-hour ozone nonattainment and maintenance 
problems in North Carolina. (See Petition, Docket No. OAR-2004-0076-
0002.)
    The EPA's proposed response is based on extensive analyses 
conducted for the CAIR (70 FR 25162; May 12, 2005). The EPA is 
proposing to deny the petition for sources in States not shown in the 
CAIR to be linked to (that is, to significantly contribute to) 
nonattainment and maintenance problems in North Carolina. For sources 
in States that are linked to North Carolina under the CAIR for the 
PM2.5 NAAQS, EPA is proposing in the alternative (1) to deny 
the petition in the event that EPA promulgates FIPs no later than the 
final section 126 response to address the interstate transport or (2) 
to grant the petition if EPA does not promulgate a FIP prior to or 
concurrently with the section 126 response. The EPA's preferred 
approach is to promulgate the FIP concurrently with the final section 
126 response and deny the petition. The FIP would control the 
significant transport from sources in States named in the petition as 
well as from sources in the other CAIR States, in the event that the 
States do not have approved SIPs meeting the CAIR requirements. The 
States named in the petition with respect to the PM2.5 NAAQS 
are: Alabama, Georgia, Illinois, Indiana, Kentucky, Michigan, Ohio, 
Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia. 
Of these, Illinois and Michigan are not linked to North Carolina in the 
final CAIR. The EPA is proposing to deny the petition with respect to 
the 8-hour ozone NAAQS, because there are no States linked to North 
Carolina under the CAIR for that NAAQS. The States named in the 
petition with respect to the 8-hour ozone NAAQS are: Georgia, Maryland, 
South Carolina, Tennessee, and Virginia.
    In today's action, EPA is also proposing FIPs to address interstate 
transport of NOX and SO2 under section 
110(a)(2)(D) for all jurisdictions that are covered by the CAIR. In the 
CAIR, EPA determined that 28 States and the District of Columbia 
contribute significantly to nonattainment of the NAAQS for 
PM2.5 and/or 8-hour ozone in downwind States. The CAIR 
explains EPA's basis for determining significant contribution to 
downwind nonattainment and maintenance problems. In that rule, the EPA 
required the affected upwind States to revise their SIPs to include 
control measures to reduce emissions of SO2 and/or 
NOX. Sulfur dioxide is a precursor to PM2.5 
formation, and NOX is a precursor to both ozone and 
PM2.5 formation.
    In an action published on the same day as the final CAIR, EPA 
proposed to find that Delaware and New Jersey contribute significantly 
to PM2.5 nonattainment and maintenance problems in downwind 
States considering these States as a single entity (70 FR 25408; May 
12, 2005). These States were included in the final CAIR only with 
respect to their impacts on downwind 8-hour ozone problems. Today's FIP 
proposal includes emissions reductions requirements for Delaware and 
New Jersey that would address their significant contribution to 
nonattainment or maintenance problems for the PM2.5 NAAQS if 
EPA ultimately finds that these States significantly contribute to 
PM2.5 problems in downwind States based on the approach in 
the proposed rule cited above.
    The FIPs would regulate EGUs in the affected States and achieve the 
emissions reductions required by the CAIR until States have approved 
SIPs to achieve the reductions. The CAIR emissions budgets were based 
on control requirements that are highly cost effective for EGUs.
    The EPA intends the CAIR FIPs to satisfy the concerns cited in the 
section 126 petition and to provide a Federal backstop for CAIR. In no 
way should the FIPs for CAIR be viewed as a sign of any concern about 
States meeting the SIP responsibilities under CAIR. There are no 
sanctions associated with these FIPs and EPA does not intend CAIR FIPs 
to have any other negative consequences for the affected States. The 
EPA is proposing FIP approaches that are flexible and intended to 
provide States options for getting their SIPs in place.
    As the control remedy for both the section 126 action (should EPA 
make positive findings under section 126(b)) and the FIP, EPA is 
proposing Federal NOX and SO2 cap and trade 
programs that provide the emissions reductions required by the CAIR. 
The trading programs are designed after the model cap and trade 
programs that EPA provided as a control option for States to meet the 
CAIR. The EPA intends to integrate the Federal trading programs with 
the EPA-administered State CAIR trading programs that are based on the 
model rules so that sources could trade with one another under the 
respective emissions caps.
    The EPA emphasizes that the section 126 response and FIP would not 
limit the options available to States to meet the requirements of the 
CAIR. We do not intend to record NOX allocations in sources' 
allowance accounts (or take any other steps to implement the section 
126 or FIP requirements that could impact a State's ability to regulate 
their sources in a different manner) until more than a year after the 
CAIR SIP submission deadline.\1\ This would allow EPA time

[[Page 49712]]

to take rulemaking action to approve timely SIPs and, thus, the FIP or 
section 126 requirements would not go into place. In addition, States 
could replace the FIP or section 126 requirements at a later time.
---------------------------------------------------------------------------

    \1\ The CAIR requires affected sources to begin monitoring one 
year before the initial control periods (i.e., sources begin 
monitoring in 2008 for the NOX programs and begin 
monitoring in 2009 for the SO2 program). Note that EPA 
would take any necessary actions to implement the monitoring 
provisions of the proposed Federal trading rules in time for 
monitoring to begin in 2008. To the extent that a State chooses to 
control EGUs to meet its CAIR obligations, the monitoring 
requirements would be identical whether EPA regulated EGUs through 
the proposed Federal trading programs or the State regulated EGUs 
through their SIP.
---------------------------------------------------------------------------

    In today's action, EPA is also proposing revisions to the CAIR in 
order to address the interaction of EPA-administered NOX and 
SO2 trading programs under the CAIR and under the section 
126 and FIP actions. In addition, EPA is proposing some revisions to 
the CAIR in order to correct certain minor errors.
    The EPA is also proposing revisions to the Acid Rain Program in 
order to make the administrative appeals procedures (in 40 CFR part 
78), which currently apply to final determinations by the Administrator 
under the EPA-administered States CAIR trading programs, also apply to 
the EPA-administered trading programs under the section 126 and FIP 
actions. In addition, EPA is proposing some minor revisions that would 
apply to all affected units under the Acid Rain Program.
    For purposes of the section 126 and FIP rulemakings, the EPA is not 
accepting comment on the CAIR or otherwise reopening any issue decided 
in the CAIR for reconsideration or comment, except that we are taking 
comment specifically on revisions to the CAIR that EPA is proposing in 
today's action. Section VII of this preamble discusses the proposed 
changes to the CAIR.

B. General Background on PM2.5 and Ozone

1. The PM2.5 Problem
    In an action published on July 18, 1997, we revised the NAAQS for 
particulate matter (PM) to add new standards for fine particles, using 
as the indicator particles with aerodynamic diameters smaller than a 
nominal 2.5 micrometers, termed PM2.5 (62 FR 38652). We 
established health- and welfare-based (primary and secondary) annual 
and 24-hour standards for PM2.5. The annual standard is 15 
micrograms per cubic meter, based on the 3-year average of annual mean 
PM2.5 concentrations. The 24-hour standard is 65 micrograms 
per cubic meter, based on the 3-year average of the annual 98th 
percentile of 24-hour concentrations. The annual standard is generally 
considered the more limiting.
    Fine particles are associated with a number of serious health 
effects including premature mortality, aggravation of respiratory and 
cardiovascular disease (as indicated by increased hospital admissions, 
emergency room visits, absences from school or work, and restricted 
activity days), lung disease, decreased lung function, asthma attacks, 
and certain cardiovascular problems. (See EPA, Air Quality Criteria for 
Particulate Matter (EPA/600/P-99/002bF, October 2004) at 9.2.2.3). The 
EPA has estimated that attainment of the PM2.5 standards 
would prolong tens of thousands of lives and would prevent, each year, 
tens of thousands of hospital admissions as well as hundreds of 
thousands of doctor visits, absences from work and school, and 
respiratory illnesses in children.
    Individuals particularly sensitive to fine particle exposure 
include older adults, people with heart and lung disease, and children. 
More detailed information on health effects of fine particles can be 
found on EPA's Web site at: http://www.epa.gov/ttn/naaqs/standards/pm/s_pm_index.htm1.
    The secondary or welfare-based PM2.5 standards are 
designed to protect against major environmental effects caused by PM 
such as visibility impairment--including in Class I areas which include 
national parks and wilderness areas across the country--soiling, and 
materials damage.
    As discussed in other sections of this preamble, SO2 and 
NOX emissions both contribute to fine particle 
concentrations. In addition, NOX emissions contribute to 
ozone concentrations, described in the next section.
    The PM2.5 ambient air quality monitoring for the 2001-
2003 period shows that areas violating the standards are located across 
much of the eastern half of the United States and in parts of 
California and Montana. The EPA published the PM2.5 
attainment and nonattainment designations on January 5, 2005 (70 FR 
944).
2. The 8-Hour Ozone Problem
    In an action published on July 18, 1997, we promulgated identical 
revised primary and secondary ozone standards that specified an 8-hour 
ozone standard of 0.08 parts per million (ppm). Specifically, under the 
standards, the 3-year average of the fourth highest daily maximum 8-
hour average ozone concentration may not exceed 0.08 ppm. In general, 
the revised 8-hour standards are more protective of public health and 
the environment and more stringent than the pre-existing 1-hour ozone 
standards.
    Short-term (1- to 3-hour) and prolonged (6- to 8-hour) exposures to 
ambient ozone have been linked to a number of adverse health effects. 
Short-term exposure to ozone can irritate the respiratory system, 
causing coughing, throat irritation, and chest pain. Ozone can reduce 
lung function and make it more difficult to breathe deeply. Breathing 
may become more rapid and shallow than normal, thereby limiting a 
person's normal activity. Ozone also can aggravate asthma, leading to 
more asthma attacks that require a doctor's attention and the use of 
additional medication. Increased hospital admissions and emergency room 
visits for respiratory problems have been associated with ambient ozone 
exposures. Longer-term ozone exposure can inflame and damage the lining 
of the lungs, which may lead to permanent changes in lung tissue and 
irreversible reductions in lung function. A lower quality of life may 
result if the inflammation occurs repeatedly over a long time period 
(such as months, years, a lifetime). Recent epidemiological studies 
have shown a correlation between acute ozone exposures and increased 
risk of premature death.
    People who are particularly susceptible to the effects of ozone 
include people with respiratory diseases, such as asthma, and people 
with unusual sensitivity to ozone. Those who are exposed to higher 
levels of ozone include adults and children who are active outdoors.
    In addition to causing adverse health effects, ozone affects 
vegetation and ecosystems, leading to reductions in agricultural crop 
and commercial forest yields; reduced growth and survivability of tree 
seedlings; and increased plant susceptibility to disease, pests, and 
other environmental stresses (e.g., harsh weather). In long-lived 
species, these effects may become evident only after several years or 
even decades and have the potential for long-term adverse impacts on 
forest ecosystems. Ozone damage to the foliage of trees and other 
plants can also decrease the aesthetic value of ornamental species used 
in residential landscaping, as well as the natural beauty of our 
national parks and recreation areas. The economic value of some welfare 
losses due to ozone can be calculated, such as crop yield loss from 
both reduced seed production (e.g., soybean) and visible injury to some 
leaf crops (e.g., lettuce, spinach, tobacco), as well as visible injury 
to ornamental plants (i.e., grass, flowers, shrubs). Other types of 
welfare loss may not be quantifiable (e.g., reduced aesthetic value of 
trees growing in heavily visited national parks). More detailed 
information on health effects of ozone can be found at the following 
EPA Web

[[Page 49713]]

site: http://www.epa.gov/ttn/naaqs/standards/ozone/s_o3_index.html.
    Presently, wide geographic areas, including most of the nation's 
major population centers, experience ozone levels that violate the 
NAAQS for 8-hour ozone. These areas include much of the eastern part of 
the United States and large areas of California. The EPA published the 
8-hour ozone attainment and nonattainment designations in the Federal 
Register on April 30, 2004 (69 FR 23858).
3. Other Environmental Effects Associated With SO2 and 
NOX Emissions
    In addition to the enumerated human health and welfare benefits 
resulting from reductions in ambient levels of PM2.5 and 
ozone, reductions in NOX and SO2 will contribute 
to substantial visibility improvements in many parts of the eastern 
United States. Reductions in these pollutants will also reduce 
acidification and eutrophication of water bodies in the region. In 
addition, reducing emissions of NOX and SO2 from 
EGUs can be expected to reduce emissions of mercury. Reduced mercury 
emissions in turn may reduce mercury loadings in lakes and thereby 
potentially decrease both human and wildlife exposure to fish 
containing mercury.

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

1. What Is the ``Good Neighbor'' Provision?
    Following promulgation of new or revised NAAQS, the CAA requires 
all areas, regardless of their designation as attainment, 
nonattainment, or unclassifiable, to submit SIPs containing provisions 
specified under section 110(a)(2). Among these requirements are those 
specified by the so-called ``good neighbor'' provision section 
110(a)(2)(D) which addresses interstate transport of air pollution.
    Section 110(a)(2)(D) requires that a SIP contain adequate 
provisions--

    (i) Prohibiting, consistent with the provisions of this title, 
any source or other type of emissions activity within the State from 
emitting any air pollutant in amounts which will--
    (I) Contribute significantly to nonattainment in, or interfere 
with maintenance by, any other State with respect to [any] national 
primary or secondary ambient air quality standard, or
    (II) Interfere with measures required to be included in the 
applicable implementation plan for any other State under part C to 
prevent significant deterioration of air quality or to protect 
visibility.
    (ii) Insuring compliance with the applicable requirements of 
sections 126 and 115 (relating to interstate and international 
pollution abatement);

    Section 110(a)(2)(D) is the underlying provision for EPA's CAIR and 
today's proposed section 126 and FIP actions. Under the CAIR, EPA 
established the amount of SO2 and NOX emissions 
that each CAIR-affected State must prohibit through SIP revisions to 
address interstate transport with respect to the PM2.5 and 
8-hour ozone NAAQS.
2. What Is the CAA Section 126 Provision?
    Subsection (a) of section 126 requires, among other things, that 
SIPs require major proposed new (or modified) stationary sources to 
notify nearby States for which the air pollution levels may be affected 
by the fact that such sources have been permitted to commence 
construction. Subsection (b) provides:

    Any State or political subdivision may petition the 
Administrator for a finding that any major source or group of 
stationary sources emits or would emit any air pollutant in 
violation of the prohibition of section 110(a)(2)(D)(ii) * * * or 
this section.* * *

Subsection (c) of section 126 states that--

    [I]t shall be a violation of this section and the applicable 
implementation plan in such State [in which the source is located or 
intends to locate]--
    (1) For any major proposed new (or modified) source with respect 
to which a finding has been made under subsection (b) to be 
constructed or to operate in violation of this section and the 
prohibition of section 110(a)(2)(D)(ii) \2\ or this section, or
---------------------------------------------------------------------------

    \2\ While the text of section 126 refers to section 
110(a)(2)(D)(ii), EPA believes that this cross-reference is a 
scrivener's error that occurred during the 1990 Amendments to the 
CAA and that Congress intended to refer to section 110(a)(2)(D)(i). 
(See 64 FR 28267.) The EPA's interpretation was upheld in 
Appalachian Power Co. v. EPA, 249 F. 3d 1032, 1040-44 (DC Cir. 
2001).
---------------------------------------------------------------------------

    (2) For any major existing source to operate more than three 
months after such finding has been made with respect to it.

    However, subsection (c) further provides that EPA may permit the 
continued operation of such major existing sources beyond the 3-month 
period, if such sources comply with EPA-promulgated emissions limits 
within 3 years of the date of the finding.
3. What Is EPA's Previous Section 126 Rulemaking?
    The EPA has previously taken action under section 126 to address 
interstate ozone transport (64 FR 28250; May 25, 1999) and (65 FR 2674; 
January 18, 2000). Because there are many parallels between that 
earlier action and today's proposal, we briefly discuss our earlier 
action here.
    Like the present rulemaking, EPA's previous section 126 rulemaking, 
dealing with interstate transport of NOX, occurred 
essentially in conjunction with an EPA rulemaking dealing with 
interstate transport of the same pollutants, the NOX SIP 
Call (62 FR 60318; November 7, 1997). As in today's rule, EPA concluded 
that section 126 and section 110(a)(2)(D)(i) are integrally connected 
(due to the reference to the section 110(a)(2)(D) prohibition found in 
section 126(b)). Thus, the interstate transport problem at issue could 
be addressed under either provision, and once the underlying section 
110(a)(2)(D) SIP deficiency is eliminated, there no longer is a basis 
for EPA to make a positive finding under section 126. (See sections II 
and III below for a more detailed discussion.) In the earlier 
rulemaking, we therefore concluded that emissions reductions sufficient 
to eliminate a section 110(a)(2)(D) SIP deficiency would also be 
sufficient to satisfy section 126. The NOX SIP Call required 
SIP revisions eliminating the amount of emissions that contribute 
significantly to nonattainment in downwind States, the amount of 
emissions reductions corresponding to the quantity of emissions that 
could be eliminated by the application of highly cost-effective 
controls on specified sources in each upwind State. The section 126 
remedy consequently called for the same set of highly cost-effective 
controls for the section 126 source categories, based on the record of 
the NOX SIP Call. We are adopting this same conceptual 
approach in today's rulemaking.
    There are also parallels between our earlier section 126 action and 
this action with regard to timing of actions in the section 126 
proceeding and in the closely-related interstate transport proceeding 
under section 110(a)(2)(D). Because a section 126 finding turns on the 
existence of a section 110(a)(2)(D) deficiency, in the May 1999 Section 
126 Rule, we determined which petitions had technical merit, but we 
stopped short of granting the findings for the petitions. Instead, we 
stated that because we had promulgated the NOX SIP Call, as 
long as an upwind State remained on track to comply with that rule, EPA 
would defer making the section 126 findings. Thus, the Section 126 Rule 
included a provision under which the rule would be automatically 
withdrawn for sources in a State once that State submitted and EPA 
fully approved a SIP that complied with the NOX SIP Call or 
if EPA promulgated a FIP to achieve the emissions reductions. (See 64 
FR 28271-28274.) The reason

[[Page 49714]]

for this withdrawal would be the fact that the affected State's SIP 
revision or EPA's promulgated FIP would fulfill the section 
110(a)(2)(D) requirements, so that there would no longer be any basis 
for the section 126 finding with respect to that State. Later judicial 
action staying the NOX SIP Call rule resulted in EPA 
granting the section 126 petitions at issue, but the new rule retained 
the basic linkage between section 126 and section 110(a)(2)(D) by 
providing that EPA would withdraw the section 126 findings upon EPA 
approval of a SIP satisfying the emission reduction requirements of the 
NOX SIP Call rule or upon EPA's promulgation of a FIP that 
achieved the emissions reductions. (See 65 FR at 2683 and Appalachian 
Power v. EPA, 249 F. 3d 1032, 1039 (DC Cir. 2001).) Similarly, in 
today's rulemaking, we are proposing to deny the section 126 petition 
if we approve SIPs which satisfy the emission reduction requirements of 
the CAIR, or if we promulgate a FIP which includes the emission 
reduction requirements of the CAIR.
    Finally, in the earlier section 126 rule, EPA adopted as a remedy 
for section 126 a Federal NOX cap and trade program 
patterned after the model NOX cap and trade program that EPA 
developed for States as an option to meet their NOX SIP Call 
requirements. The EPA is proposing the same approach here in the event 
that it grants North Carolina's section 126 petition.
4. What Is the Clean Air Interstate Rule?
    The EPA developed the Clean Air Interstate Rule (CAIR) to address 
interstate pollution transport with respect to the newly adopted 
PM2.5 and 8-hour ozone NAAQS. The EPA published the 
proposals for CAIR (previously referred to as the Interstate Air 
Quality Rule) on January 30, 2004 (69 FR 4566) and June 10, 2004 (69 FR 
32684), a notice of data availability on August 6, 2004 (69 FR 47828), 
and the final rule on May 12, 2005 (70 FR 25162). The EPA is providing 
this description of the CAIR to help place today's proposal in context. 
As stated above, EPA is not accepting comment on the CAIR or otherwise 
reopening any issue decided in the CAIR for reconsideration or comment, 
except that EPA is taking comment specifically on the revisions to CAIR 
that EPA is proposing in today's action (Section VII in this preamble 
discusses the proposed changes to CAIR).
    In the CAIR, based on air quality modeling analyses and cost 
analyses, EPA concluded that SO2 and NOX 
emissions in certain States in the eastern part of the country, through 
the phenomenon of air pollution transport,\3\ contribute significantly 
to PM2.5 and/or 8-hour ozone nonattainment and maintenance 
problems in downwind States. The CAIR establishes emission reduction 
requirements for the affected upwind States under CAA section 
110(a)(2)(D). The affected States and the District of Columbia have 
until September 11, 2006 to adopt and submit SIP revisions to achieve 
these required reductions. The SIP revision must contain measures that 
will assure that sources in the State reduce their SO2 and/
or NOX emissions sufficiently to eliminate the amounts of 
SO2 and NOX that contribute significantly to 
nonattainment downwind. Reducing upwind precursor emissions will assist 
the downwind PM2.5 and 8-hour ozone areas in achieving and 
maintaining the NAAQS. Moreover, attainment will be achieved in a more 
equitable, cost-effective manner than if each nonattainment area 
attempted to achieve attainment by implementing local emissions 
reductions alone.
---------------------------------------------------------------------------

    \3\ When we use the term ``transport'' we mean to include the 
transport of both fine particles (PM2.5) and their 
precursor emissions and/or transport of both ozone and its precursor 
emissions.
---------------------------------------------------------------------------

    The EPA specified that the CAIR emissions reductions be implemented 
in two phases. The first phase of NOX reductions starts in 
2009 (covering 2009-2014) and the first phase of SO2 
reductions starts in 2010 (covering 2010-2014); the second phase of 
reductions for both NOX and SO2 starts in 2015 
(covering 2015 and thereafter). The emissions reduction requirements 
are based on controls that are known to be highly cost effective for 
EGUs, however States have the flexibility to determine what measures to 
adopt to achieve the necessary reductions. In the CAIR, EPA provided 
model SO2 and NOX trading programs for EGUs that 
States can choose to adopt to meet the emissions reduction requirements 
in a flexible and highly cost-effective manner.
    If EPA ultimately includes Delaware and New Jersey in the CAIR with 
respect to the PM2.5 NAAQS (see proposal at 70 FR 25408), 
EPA estimates that the CAIR would reduce SO2 emissions by 
3.6 million tons in 2010 and by 3.9 million tons in 2015; and would 
reduce annual NOX emissions by 1.2 million tons in 2009 and 
by 1.5 million tons in 2015. (These numbers reflect the annual 
SO2 and NOX requirements.) If all these States 
(including Delaware and New Jersey for the PM2.5 NAAQS) 
choose to achieve these reductions through EGU controls, then EGU 
SO2 emissions in the affected States would be capped at 3.7 
million tons in 2010 and 2.6 million tons in 2015; \4\ and EGU annual 
NOX emissions would be capped at 1.5 million tons in 2009 
and 1.3 million tons in 2015.
---------------------------------------------------------------------------

    \4\ It should be noted that the banking provisions of the cap 
and trade program which encourage sources to make significant 
reductions before 2010 also allow sources to operate above these cap 
levels until all of the banked allowances are used, therefore EPA 
does not project that these caps will be met in 2010 or 2015.
---------------------------------------------------------------------------

    Based on the promulgated CAIR (70 FR 25162), EPA estimates that the 
required SO2 and NOX emissions reductions would, 
by themselves, bring into attainment 52 of the 79 counties that are 
otherwise projected to be in nonattainment for PM2.5 in 
2010, and 57 of the 74 counties that are otherwise projected to be in 
nonattainment for PM2.5 in 2015. The EPA further estimates 
that the required NOX emissions reductions would, by 
themselves, bring into attainment 3 of the 40 counties that are 
otherwise projected to be in nonattainment for 8-hour ozone in 2010, 
and 6 of the 22 counties that are projected to be in nonattainment for 
8-hour ozone in 2015. In addition, the CAIR will improve 
PM2.5 and 8-hour ozone air quality in the areas that would 
remain nonattainment for those two NAAQS after implementation of the 
CAIR. Because of CAIR, the States with those remaining nonattainment 
areas will find it less burdensome and less expensive to reach 
attainment by adopting additional controls. The CAIR will also reduce 
PM2.5 and 8-hour ozone levels in attainment areas, providing 
significant health and environmental benefits in all areas of the 
eastern United States.
    For a more complete description of the CAIR and its impacts, the 
reader is encouraged to review the preamble to the CAIR.
5. What Are the Findings of Failure To Submit for the Section 
110(a)(2)(D) Plans?
    In a final rule published on April 25, 2005 (70 FR 21147), we made 
national findings that States have failed to submit SIPs required under 
section 110(a)(2)(D) to address interstate transport with respect to 
the 8-hour ozone and PM2.5 NAAQS.
    The April 25, 2005 findings started a 2-year clock for EPA to 
promulgate a Federal implementation plan (FIP) to address the 
requirements of section 110(a)(2)(D). Under section 110(c)(1), EPA may 
issue a FIP any time after such findings are made and must do so unless 
a SIP revision correcting the deficiency is approved by EPA before the 
FIP is promulgated. The EPA

[[Page 49715]]

intends to issue guidance regarding how States outside the CAIR region 
could satisfy the section 110(a)(2)(D) requirement. For States affected 
by CAIR, an approved SIP meeting the CAIR requirements would satisfy 
the requirement and turn off the FIP clock. As discussed below in 
section IV, EPA is today proposing a FIP for States affected by the 
CAIR. The EPA intends to promulgate the CAIR FIP by March 15, 2006 
along with the final section 126 response. However, EPA intends to 
withdraw the FIP in a State in coordination with approval of a SIP for 
the State that meets the CAIR requirements.
    The findings do not start a sanctions clock pursuant to section 179 
because the findings do not pertain to a part D plan for nonattainment 
areas required under section 110(a)(2)(I) and because the action is not 
a SIP Call pursuant to section 110(k)(5).

D. Summary of North Carolina's Section 126 Petition

1. What Sources Does the Petition Target?
    The North Carolina petition requests relief from certain emissions 
from large EGUs located in 13 States. With respect to the 
PM2.5 NAAQS, the petition requests that EPA find that 
NOX and SO2 emissions from large EGUs in 12 
States (Alabama, Georgia, Illinois, Indiana, Kentucky, Michigan, Ohio, 
Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia) 
are significantly contributing to nonattainment in, or interfering with 
maintenance by, North Carolina. With respect to the 8-hour ozone NAAQS, 
the petition requests that EPA find that NOX emissions from 
large EGUs in 5 States (Georgia, Maryland, South Carolina, Tennessee, 
and Virginia) are significantly contributing to nonattainment in, or 
interfering with maintenance by, North Carolina (Petition, p.1.)
    The petition defines the term ``EGUs'' as all facilities meeting 
the criteria described in the proposal for the CAIR. (See 69 FR 4566, 
4610; January 30, 2004.) In the proposal for the CAIR, we defined EGUs 
as ``fossil-fuel fired boilers and turbines serving an electric 
generator with a nameplate capacity of greater than 25 megawatts (MW) 
producing electricity for sale.'' (Id.) (See section VII of today's 
preamble for clarification of the EGU definition.\5\)
---------------------------------------------------------------------------

    \5\ As noted in section VII below, EPA is proposing to amend the 
definition of EGU to remove certain ambiguities regarding the 
definition's application to solid waste incinerators and to existing 
units that formerly generated electricity for sale but have not done 
so since before November 15, 1990. We understand the North Carolina 
section 126 petition as applying only to the sources included in the 
clarified definition and not to sources we are proposing to exclude 
from the definition of EGU.
---------------------------------------------------------------------------

2. What Control Remedy Does the Petition Request?
    In its petition, North Carolina states that compliance with the 
NOX and SO2 emissions budgets in the proposal for 
the CAIR would satisfy the requirements of the petition. These 
emissions budgets were based on controls that are highly cost effective 
for EGUs. North Carolina also states that it does not oppose the 
flexibility discussed by EPA (69 FR at 4622) to allow equivalent 
reductions from other source categories in given States, so long as 
those reductions are real and enforceable (Petition, p. 24).
    In the CAIR, EPA provided model NOX and SO2 
cap and trade programs for EGUs as control options for States to choose 
to meet the CAIR emissions reductions requirements. The trading 
programs allow interstate trading among sources in all States subject 
to the CAIR that adopt the programs. In its petition, North Carolina 
said it recognizes the value of allowing sources flexibility to reduce 
their emissions in the most cost-effective manner consistent with the 
statute. However, North Carolina expressed concerns about a regional 
trading program that could operate to deprive North Carolina of the 
benefits of the control remedy in the subset of States that affect 
North Carolina (Petition, pp. 25-28). We address this issue below in 
section VI.
3. What Is the Technical Support for the Petition?
    To support its claim that EGUs outside North Carolina are 
contributing significantly to nonattainment and maintenance problems in 
the State, North Carolina relies largely on EPA's technical analyses 
for the proposed CAIR. Therefore, as discussed above, the petition 
targets sources in the same States that EPA linked to North Carolina in 
the proposed CAIR. As additional support, North Carolina cites analyses 
conducted by the Southern Appalachian Mountains Initiative (SAMI) on 
PM2.5 transport, North Carolina's further evaluation of the 
SAMI's analyses, as well as back trajectory analyses performed by the 
North Carolina Division of Air Quality from PM2.5 monitors 
in two counties. (See Petition, pp. 13-17.)

E. What Is the Litigation on the Section 126 Rulemaking Schedule?

    On March 19, 2004, EPA received a petition from the State of North 
Carolina filed under CAA section 126. Section 126(b) requires EPA to 
make the requested finding, or to deny the petition, within 60 days of 
receipt. It also requires EPA to provide a public hearing before acting 
on the petition. In addition, EPA's action under section 126 is subject 
to the procedural requirements of section 307(d) of the CAA. (See 
section 307(d)(2)-(5).) One of these requirements is that EPA conduct 
notice-and-comment rulemaking. Section 307(d)(10) provides for a time 
extension, under certain circumstances, for rulemakings subject to that 
provision. Specifically, it allows statutory deadlines that require 
promulgation in less than 6 months from proposal to be extended to not 
more than 6 months from proposal to afford the public and the Agency 
adequate opportunity to carry out the purposes of section 307(d). In an 
action published on May 26, 2004 (69 FR 30038), EPA extended the 
deadline for EPA to take action on the North Carolina petition by the 
full 6 months, to November 18, 2004.
    On February 17, 2005, the State of North Carolina and the citizen 
group Environmental Defense filed complaints against EPA seeking to 
compel EPA to take action on the State's section 126 petition: State of 
North Carolina v. Johnson, No. 5:05-CV-112 (E.D. N.C.) and 
Environmental Defense v. Johnson, No. 5:05-CV-113 (E.D.N.C.). The EPA, 
North Carolina, and Environmental Defense filed a proposed consent 
decree that would establish a schedule for EPA to act on the petitions. 
Pursuant to CAA section 113(g), the EPA solicited comments on the 
proposed consent decree, by notice dated March 2, 2005 (70 FR 10089). 
The comment period closed April 1, 2005 without EPA receiving negative 
comment. On May 9, 2005, the court entered a slightly modified version 
of the consent decree.
    The schedule in the consent decree requires that no later than 
August 1, 2005, EPA must sign for publication the proposed action to 
grant or deny the petition. If EPA proposes to approve any part of the 
petition, the proposal must include the proposed remedy. No later than 
March 15, 2006, EPA must take final action to grant or deny the 
petition. If EPA grants any part of the petition (i.e., makes a section 
126(b) finding), the final action must include the remedy. The consent 
decree also requires EPA to hold a public hearing on the proposal 
during the week of September 12, 2005 in North Carolina. Today's 
proposal meets the first deadline set forth in the consent decree. The 
EPA has scheduled two public hearings during the week of September 12, 
2005, one to be held in

[[Page 49716]]

North Carolina and the other in Virginia (see DATES above for further 
information on the hearings).

F. How Is EPA Addressing the Section 126-Related Comments Received 
During the CAIR Rulemaking?

    In the January 30, 2004 CAIR proposal, EPA set forth its general 
view of the approach it expected to take in responding to any section 
126 petition that might be submitted that relies on essentially the 
same record as the CAIR (69 FR at 4580). That approach is the one EPA 
used in addressing section 126 petitions that were submitted to EPA in 
1997 while EPA was developing the NOX SIP Call to control 
ozone transport (as discussed in section I.C.3. above).
    The EPA received comments on the CAIR proposal regarding its 
intended approach for acting on any future section 126 petitions that 
might be filed. Many commenters expressed support for the approach that 
EPA had outlined. Other commenters raised issues regarding the timing 
of emissions reductions under a new section 126 action. Some pointed 
out that the CAIR compliance date would be later than the 3 years 
allowed for compliance under section 126. Some were concerned that the 
proposed CAIR compliance date was later than many attainment dates and, 
therefore, States may need section 126 petitions in order to get 
earlier upwind reductions in order to meet their attainment dates. Some 
questioned the legal basis for linking the two rules. Several 
commenters expressed concern that EPA would be restricting the use of 
or weakening the section 126 authority. A number of commenters urged 
EPA not to prejudge any petition, but to evaluate each on its own 
merit. Some thought that any petitions submitted prior to designations 
or before States had had the opportunity to prepare SIPs would be 
premature and should be denied. Others suggested that the CAIR might 
not solve all the transport problems and that States would need to 
retain the section 126 tool to seek further reductions.
    As discussed above, after issuing the CAIR proposal, EPA received, 
on March 19, 2004, the section 126 petition from North Carolina. In the 
final CAIR, we stated that when we propose action on the North Carolina 
petition, we would set forth our view of the interaction between 
section 110(a)(2)(D) and section 126 . Section II below explains EPA's 
view of this interaction.
    In addition, we said we would take into consideration and respond 
to the section 126-related comments we received on the CAIR. The EPA 
has reviewed all the comments and will be providing responses to the 
relevant ones in the docket for this rulemaking action.

II. What Is EPA's Legal and Analytical Approach for the Section 126 
Petition?

    As described in section I.C.2 above, section 126 of the CAA is 
integrally related to the CAA's ``good neighbor'' provision, section 
110(a)(2)(D), which requires States to adopt implementation plans to 
prohibit emissions from sources within the State that significantly 
contribute to other States' nonattainment of a NAAQS, or which 
interfere with other States' ability to maintain a NAAQS. Under section 
126, a downwind State ``may petition the Administrator for a finding 
that any major source or group of stationary sources emits or would 
emit any air pollutant in violation of CAA section 110(a)(2)(D).'' 
Should EPA make a finding that a source or group of sources is emitting 
in violation of the section 110(a)(2)(D) prohibition, existing sources 
in violation may operate no longer than 3 months unless the sources 
comply with emission limitations and compliance schedules provided by 
the Administrator which bring about compliance ``as expeditiously as 
practicable, but in no case later than three years after the date of 
such finding.'' See section 126(c).
    The EPA's determination whether or not to grant a section 126 
petition consequently turns on whether SIPs are in violation of section 
110(a)(2)(D). See Appalachian Power v. EPA, 249 F. 3d 1032, 1045-46 (DC 
Cir., 2001), holding that the determination of whether the 
``prohibition'' on excessive interstate transport of air pollutants is 
being violated is the same under section 110(a)(2)(D) and section 126; 
see also North Carolina Petition p. 22 (``the operative legal standard 
under sections 110 and 126 is identical''). Moreover, because of this 
interrelation and identity, EPA has construed section 126 as applying 
on a statewide contribution basis when dealing with issues of 
interstate transport of ozone precursors. This means that a finding by 
EPA that a SIP is in violation of section 110(a)(2)(D)(i) is a 
sufficient basis for a finding that sources within that State are in 
violation of that prohibition for purposes of section 126(b) (64 FR at 
28282). No more individualized determination for a source or group of 
sources is necessary. Id. This is because sources' contribution to 
nonattainment is collective, so that even relatively small individual 
contributions are significant in the aggregate. Id. Thus, ``[i]f State-
wide emissions contribute significantly to nonattainment downwind, then 
the State's section 126 sources may be subject to SIP controls; if 
State-wide emissions do not contribute significantly, then the State's 
section 126 sources would not be subject to SIP control.'' Id.; see 
Appalachian Power, 249 F. 3d 1049-50 (upholding this determination). 
Under this approach, therefore, if EPA determines that a State's SIP 
fails to meet the requirements of section 110(a)(2)(D)(i) with respect 
to a downwind State, it follows that the prohibition in section 126 is 
also violated with respect to that downwind State.
    In the CAIR, EPA defined ``significant contribution'' as consisting 
of an air quality factor reflecting an upwind State's ambient impact on 
downwind nonattainment areas, and the cost-factor of availability of 
highly cost-effective controls (70 FR at 25174). The reductions 
required are expressed as Statewide budgets of PM2.5 and 
ozone precursors (SO2 and NOX for 
PM2.5, and NOX for ozone) susceptible to 
reduction by highly cost effective controls. For PM2.5, an 
upwind State must contribute at least 0.2 [mu]g/m3 
PM2.5 to at least one downwind nonattainment area (the 
``link'') to satisfy the air quality part of the test. Id. at 25191. 
For ozone, the air quality component is satisfied if the maximum 
contribution by an upwind State is at least 2 parts per billion, the 
average contribution is greater than one percent, and certain other 
numerical criteria are met. Id. at 25175. The CAIR rule also stated 
that an upwind State's emissions can interfere significantly with a 
downwind State's maintenance of a NAAQS when EPA, or a State, can 
reasonably project based on available data that in the absence of CAIR 
controls, a current or projected nonattainment area will revert to 
nonattainment, after having achieved attainment, due to continued 
emissions growth or to other relevant factors. Id. at 25193; see also 
the response to comments document for the CAIR, section III.C.17, 
docket number OAR-2003-0053-2165.
    The EPA is adopting this same approach in the present rulemaking. 
This, of course, is a consequence of EPA's interpretation (just 
explained) that a violation of 110(a)(2)(D)(i) also indicates that 
sources are emitting in violation of the section 110(a)(2)(D) 
prohibition for purposes of section 126(b). For the same reason, EPA is 
adopting the highly cost-effective component of the test from the CAIR 
rule, with the consequent emission budgets.
    Once EPA finds under section 126(b) that a source (or sources) is 
operating in violation of the section 110(a)(2)(D)(i)

[[Page 49717]]

prohibition, the violation would be eliminated (assuming that sources 
continue to operate) by EPA approving a SIP containing provisions 
eliminating the significant contribution, or by EPA itself adopting a 
FIP which contains provisions eliminating that contribution, by the 
deadline for the section 126 sources. This means that a section 126(b) 
violation no longer exists once EPA approves a timely SIP, or adopts a 
timely FIP, requiring each State contributing significantly (in this 
case, to North Carolina) to reduce emissions to the levels reflecting 
elimination of the State's significant contribution, as specified in 
the CAIR. This result is again a consequence of the integral 
relationship of section 126(b) and section 110(a)(2)(D).
    The EPA intends to apply these same principles in responding to 
future section 126 petitions from States in the CAIR region addressing 
CAIR pollutants. Thus, we would deny these petitions with respect to 
any State having an approved SIP meeting the CAIR emissions reductions 
requirements and with respect to States for which EPA has promulgated a 
CAIR FIP. In such a case there would be no underlying section 
110(a)(2)(D) violation, and such a violation is the predicate for 
granting a section 126 petition.

III. What Is EPA's Proposed Action on the Section 126 Petition?

    As discussed in the preceding section, EPA is proposing to rely on 
the conclusions drawn in the final CAIR in determining whether 
emissions from sources in the States named in the petition contribute 
significantly to 8-hour ozone and/or PM2.5 nonattainment and 
maintenance problems in North Carolina. As discussed in section I 
above, North Carolina based its petition in large part on the analyses 
for the proposed CAIR--identifying EGUs in the same upwind States that 
EPA proposed to link to North Carolina. The EPA conducted new modeling 
analyses using updated emissions inventories for the final CAIR. The 
EPA also applied a different value for the threshold contribution level 
for the air quality portion of the significant contribution 
determination for PM2.5 in the final CAIR. Therefore, the 
upwind State-to-downwind State linkages differed in the final CAIR from 
the proposal.

A. What Is EPA's Proposed Action With Respect to the 8-Hour Ozone 
NAAQS?

    In its petition, North Carolina requested that EPA make findings 
that large EGUs in Georgia, Maryland, South Carolina, Tennessee, and 
Virginia contribute significantly to nonattainment in, or interfere 
with maintenance by, North Carolina with respect to the 8-hour ozone 
NAAQS. In the proposed CAIR, EPA linked these States to 8-hour ozone 
air quality problems in Mecklenburg County, North Carolina. In the 
final CAIR, EPA's updated analyses project all of North Carolina to be 
in attainment for 8-hour ozone in the CAIR 2010 base case. Therefore, 
EPA did not link any upwind States to North Carolina with respect to 
the 8-hour ozone NAAQS in the final CAIR (See preamble Table VI-9; 70 
FR at 25249). Consequently, EPA is proposing to deny the section 126 
petition with respect to the 8-hour ozone NAAQS.

B. What Is EPA's Proposed Action With Respect to the PM2.5 NAAQS?

    In its petition, North Carolina also requested that EPA make 
findings that large EGUs in Alabama, Georgia, Illinois, Indiana, 
Kentucky, Michigan, Ohio, Pennsylvania, South Carolina, Tennessee, 
Virginia and West Virginia contribute significantly to nonattainment 
in, or interfere with maintenance by, North Carolina with respect to 
the PM2.5 NAAQS. In the proposed CAIR, these 12 States were 
linked to PM2.5 nonattainment problems in North Carolina. In 
the final CAIR, as noted, EPA used different, updated modeling and also 
applied a 0.2 [mu]g/m3 contribution threshold level rather 
than the proposed 0.15 [mu]g/m3 for the air quality portion 
of the significant contribution determination (70 FR 25190-25191). 
Based on the updated modeling and the 0.2 [mu]g/m3 
contribution threshold level, EPA determined in CAIR that the following 
10 States are significantly contributing to PM2.5 air 
quality problems in North Carolina: Alabama, Georgia, Indiana, 
Kentucky, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, and 
West Virginia (see preamble Table VI-8; 70 FR at 25248-25249). As 
explained in section II above, under the collective contribution 
approach, this means for purposes of section 126(b) that sources within 
these States for which EPA determined highly cost-effective controls 
are available are also contributing significantly to PM2.5 
nonattainment problems in North Carolina.
    In determining what action to propose in response to the 
PM2.5 portion of the section 126 petition, EPA is taking 
into consideration the FIP that is being proposed today in conjunction 
with this section 126 action (see section IV below). The FIP proposes 
control requirements for each of the States affected by the CAIR in 
order to achieve the emissions reductions required to address 
interstate transport. The EPA plans to issue the final FIP at the same 
time as the final section 126 action. Therefore, for EGUs in States 
linked to North Carolina in CAIR (and therefore, for which EPA is 
proposing a FIP), EPA is proposing in the alternative (1) to deny the 
petition if EPA issues the final FIP to address the interstate 
transport no later than the final section 126 response or (2) to grant 
the petition and make section 126 findings if EPA does not promulgate 
the FIP prior to or concurrently with the final section 126 response. 
Because the FIP would fully address the PM2.5-related 
interstate transport problem identified in CAIR and thus eliminate the 
section 110(a)(2)(D) violation, there would no longer be a basis for 
the section 126 findings. As discussed in section VI, we are proposing 
the Federal CAIR NOX and SO2 cap and trade 
programs as the control remedy for both the section 126 action and the 
FIP. Therefore, whether the upwind sources in these 10 States are 
regulated under the section 126 action or the FIP, the emissions 
reductions requirements and compliance deadlines would be the same.
    For EGUs located in Illinois and Michigan, which are not linked to 
North Carolina in the final CAIR with respect to the PM2.5 
NAAQS (70 FR 25247-48), EPA is proposing to deny the petition.
    The EPA notes that it is not including any regulatory text for the 
proposed findings because EPA's preferred alternative is to promulgate 
the CAIR FIP and fully deny the North Carolina section 126 petition.

C. What Are the Proposed Requirements for Sources for Which EPA Makes a 
Section 126(b) Finding?

    The EPA is proposing, in sections V and VI below, NOX 
and SO2 Federal cap and trade programs that would apply to 
any new or existing EGU for which EPA ultimately makes a section 126(b) 
finding in response to the North Carolina petition. The proposed 
Federal cap and trade programs are largely the same as the model 
trading rules for EGUs that EPA provided in the CAIR as control options 
for States, although EPA is proposing certain differences that are 
primarily intended to account for Federal implementation and to 
facilitate transfer from the proposed Federal programs to State 
programs. (See section VI for a description of the differences). The 
same EGU budgets and compliance dates would apply.
    As in the CAIR, the NOX and SO2 reductions 
would occur in two phases.

[[Page 49718]]

The first phase of NOX reductions would start in 2009 
(covering 2009-2014) and the first phase of SO2 reductions 
would start in 2010 (covering 2010-2014); the second phase of 
reductions for both NOX and SO2 would start in 
2015 (covering 2015 and thereafter).
    Section 126(c) states, in relevant part, that: it shall be a 
violation of this section and the applicable implementation plan in 
such State

    (1) For any major proposed new (or modified) source with respect 
to which a finding has been made under subsection (b) to be 
constructed or to operate in violation of this section and the 
prohibition of section 110(a)(2)(D)([i]) or this section, or
    (2) For any major existing source to operate more than three 
months after such finding has been made with respect to it.

The Administrator may permit the continued operation of a source 
referred to in paragraph (2) beyond the expiration of such three-month 
period if such source complies with such emission limitations and 
compliance schedules (containing increments of progress) as may be 
provided by the Administrator to bring about compliance with the 
requirements contained in section 110(a)(2)(D)([i]) as expeditiously as 
practicable, but not later than three years after the date of such 
finding.
    The Federal cap and trade programs that EPA is proposing would 
satisfy the section 126 requirements. The control requirements would 
ensure that the sources do not emit in violation of the section 
110(a)(2)(D)(i) prohibition and would serve as the alternative set of 
requirements that the Administrator may apply for the purpose of 
allowing existing sources subject to a section 126(b) finding to 
operate for more than 3 months after the finding is made.
    Under the consent decree, described in section I above, EPA must 
sign the final action on the petition by March 15, 2006. If EPA makes 
any findings at that time, and they become effective 60 days later, 
consistent with section 126(c), compliance with the control remedy must 
be required no later than May 14, 2009. The control remedy that EPA is 
proposing would satisfy the 3-year compliance period in section 126(c). 
First, the remedy would commence within the 3-year maximum timeframe 
set out in section 126(c), since as just explained, the phase I 
NOX control requirements would take effect on January 1, 
2009. Further controls on SO2 and NOX would be 
required as soon as technically feasible. The EPA views the proposed 
NOX and SO2 emissions reduction requirements as a 
single action, but one that cannot be fully implemented in 2009 and 
instead must be implemented in phases solely for reasons of 
feasibility. In analyses conducted for the CAIR, EPA determined that 
part of the NOX and SO2 emissions reductions 
cannot feasibly be implemented until 2015 and the first phase of 
SO2 emission reductions cannot feasibly be implemented until 
2010. In this regard, we note that section 126(c) on its face 
contemplates that control measures satisfying both section 126 and 
section 110(a)(2)(D) may stretch out beyond a 3-year period. Section 
126(c) states that sources that are subject to a section 126(b) finding 
may continue to operate if they comply with ``emissions limitations and 
compliance schedules (containing increments of progress) provided by 
[EPA]'' (emphasis added); the reference to increments of progress can 
describe a situation where compliance is stretched out over periods 
exceeding 3 years provided initial action (i.e., an initial increment 
of progress) occurs within 3 years. See also North Carolina Petition at 
pp. 28-29 supporting a phased approach to compliance and noting that a 
stepwise approach to regional emissions reductions is ``consistent with 
the requirement that a section 126 remedy `contain[] increments of 
progress * * *' '' Section VII of this preamble describes the proposed 
section 126 control requirements in greater detail.

D. When and How Would EPA Withdraw Section 126 Findings and Control 
Requirements in a State if EPA Approves a SIP To Meet the CAIR?

    Under today's proposal, by March 15, 2006, EPA would take final 
action to either make section 126 findings for sources in 10 States 
contributing significantly to North Carolina's nonattainment and 
maintenance problems for the PM2.5 NAAQS or promulgate a FIP 
for all CAIR States for the PM2.5 and/or 8-hour ozone NAAQS. 
The CAIR requires States to submit SIP revisions by September 11, 2006. 
Therefore, the Federal CAIR trading programs would be promulgated in 
advance of the SIP submission deadline. As stated previously, the 
section 126 response and FIP would not limit the options available to 
States to meet the requirements of CAIR. The EPA intends to withdraw 
the section 126 or the FIP requirements in a State in coordination with 
approval of an implementation plan for the State that meets the CAIR 
requirements. In the timing of the SIP approval, EPA would take into 
consideration whether the SIP approval would occur before or after EPA 
has begun recording allowances in source accounts under Federal CAIR 
trading programs.
    It is EPA's preference that States regulate sources to control the 
interstate transport, including making decisions regarding 
NOX allocations, should a State choose to participate in the 
State CAIR trading programs. Consequently, EPA does not intend to 
record NOX allocations in sources' allowance accounts (or 
take any other steps to implement the section 126 or FIP requirements 
that could impact a State's ability to regulate their sources in a 
different manner) until December 1, 2007, more than a year after the 
CAIR SIP submission deadline.\6\ This would allow EPA time to take 
rulemaking action to approve timely, compliant SIPs and withdraw the 
section 126 or FIP requirements.
---------------------------------------------------------------------------

    \6\ The CAIR requires affected sources to begin monitoring 1 
year before the initial control periods (i.e., sources begin 
monitoring in 2008 for the NOX programs and begin 
monitoring in 2009 for the SO2 program). Note that EPA 
would take any necessary actions to implement the monitoring 
provisions of the proposed Federal trading rules in time for 
monitoring to begin in 2008. To the extent that a State chooses to 
control EGUs to meet its CAIR obligations, the monitoring 
requirements would be identical whether EPA regulated EGUs through 
the proposed Federal trading programs or the State regulated EGUs 
through their SIP.
---------------------------------------------------------------------------

    If a SIP is approved that includes the EPA-administered State CAIR 
trading programs after EPA has recorded allowances for the Federal CAIR 
trading programs, EPA would work with the State to ensure a smooth 
transition from the Federal trading programs to the State trading 
programs. To preserve the integrity of the trading program budgets, 
once Federal allocations are recorded in source accounts for a 
particular control period, EPA does not intend to approve overlapping 
State allocations for the same control period. Rather, EPA will work 
with the States to approve State allocations for control periods that 
begin upon the expiration of a control period for which Federal 
allocations have been recorded in source accounts.
    In section VI below, EPA proposes the schedule for recording 
Federal NOX allocations in source accounts. Under this 
schedule, EPA seeks to balance two goals: (1) To provide adequate time 
for States to submit and for EPA to approve SIPs containing the 
NOX allocations, and (2) to provide certainty to sources 
regarding their CAIR NOX allocations in adequate time for 
sources to make compliance decisions. Under this schedule, EPA would 
record the allowances 1 year at a time for the first two control 
periods. Thus, for SIPs approved after EPA has recorded the 2009 
allocations on December 1, 2007, but before EPA has recorded the 2010

[[Page 49719]]

allocations on December 1, 2008, EPA would time the withdrawal of the 
FIP or section 126 requirements such that allocations would be made 
under the State CAIR trading program for the 2010 control period. There 
would be another opportunity for transitioning from the Federal to 
State trading programs for the 2011 control period. As discussed in 
section VI below, EPA is proposing to record NOX allowances 
in source accounts by December 1, 2009 for the 2011-2013 control 
periods. Therefore, for SIPs approved after December 1, 2009, the 
transition from the Federal to State program would not occur until the 
2014 control period. The EPA believes it is unlikely that there would 
be any outstanding SIPs to be approved after December 1, 2009. The EPA 
intends to work with States to help ensure that NOX 
allowances can be allocated under the State CAIR trading programs 
beginning with the initial 2009 control period. In order to expedite 
the approval of the SIP allowance allocation methodology and provide 
additional flexibility to States, EPA is proposing an abbreviated SIP 
option as discussed in section VI. See section VI for a detailed 
discussion of EPA's proposed schedule for recording Federal 
NOX allocations in source allowance accounts.
    For States that choose to implement the CAIR requirements using a 
method other than the EPA-administered State CAIR trading programs, the 
EPA would also carefully consider the timing of the transition from the 
Federal trading programs to the State-implemented programs to avoid 
disruption of the Federal trading programs within any annual or ozone 
season control period.

IV. What Is the Proposed Federal Implementation Plan for the CAIR?

A. What Is the Legal Framework for the Proposed FIP?

    Section 110(c)(1) of the CAA requires the Administrator to 
promulgate a Federal Implementation Plan (FIP) within 2 years of: (1) 
Finding that a State has failed to make a required submittal, (2) 
finding that a submittal received does not satisfy the minimum 
completeness criteria established under section 110(k)(1)(A), or (3) 
disapproving a SIP submittal in whole or in part. The EPA may issue a 
FIP any time after making one of these findings or issuing a SIP 
disapproval and it must do so within 2 years. However, EPA is relieved 
of this obligation if a SIP revision correcting the deficiency 
identified is approved by EPA before such a FIP is promulgated.
    As discussed in paragraph I.D.5, in a final rule signed the same 
day as CAIR, EPA found that States have failed to submit SIPs to 
satisfy the interstate transport requirement under section 
110(a)(2)(D)(i) of the CAA for the PM2.5 and 8-hour ozone 
NAAQS (70 FR 21147). These findings started the 2-year clock for the 
promulgation of a FIP. They did not start a ``sanctions clock'' as 
there are no mandatory sanctions associated with the FIP or the finding 
of State failure to submit SIPs to satisfy 110(a)(2)(D)(i).
    The EPA has broad authority to act when it has identified 
deficiencies in SIPs. This authority is of three general types. First, 
EPA may promulgate any measure which it is permitted to issue pursuant 
to pre-existing independent statutory authority--for example, the 
provisions of title II. That is, EPA may promulgate any measure which 
it has authority to issue in a non-FIP context, without reliance on 
section 110(c). Second, EPA may invoke section 110(c)'s general FIP 
authority and act to cure a SIP deficiency in any way not clearly 
prohibited by statute. Third, under section 110(c), the courts have 
held that EPA may exercise all authority that the State may exercise 
under the CAA.
    The first type of authority, EPA's general authority is independent 
of section 110(c). It is not dependent on or altered by finding a 
deficiency in a SIP.
    The second type of authority, EPA's general authority under section 
110(c), is essentially remedial. The EPA has broad power under that 
section to cure a defective State plan. Thus, in promulgating a FIP, 
EPA may exercise its own, independent regulatory authority under the 
CAA in any way not clearly prohibited by an explicit provision of the 
CAA. When EPA has promulgated a FIP, courts have not required explicit 
authority for specific measures: ``We are inclined to construe 
Congress' broad grant of power to the EPA as including all enforcement 
devices reasonably necessary to the achievement and maintenance of the 
goals established by the legislation.'' (South Terminal Corp. v. EPA, 
504 F.2d 646, 669. (1st Cir., 1974)). See also City of Santa Rosa v. 
EPA, 534 F.2d 150, 153-154 (9th Cir., 1976) (upholding the 
Administrator's authority to promulgate a FIP imposing gas-rationing in 
Los Angeles on a massive scale). ``The authority to regulate pollution 
carries with it the power to do so in a manner reasonably calculated to 
reach that end.'' Id. at 155.
    In addition, when EPA has determined that a State has not 
completely discharged its primary responsibility to protect its air 
quality, EPA is compelled to assume this task and thus the powers of 
the defaulting State accrue to EPA. As the Ninth Circuit has held, when 
EPA acts in place of the State pursuant to a FIP under section 110(c), 
EPA ``stands in the shoes of the defaulting State, and all of the 
rights and duties that would otherwise fall to the State accrue instead 
to EPA,'' Central Arizona Water Conservation District v. EPA, 990 F.2d 
1531, at 1541 9th Cir., 1993). The First Circuit, in an early FIP case, 
agreed:

    The Administrator must promulgate promptly regulations setting 
forth an implementation plan for a State should the State itself 
fail to propose a satisfactory one. The statutory scheme would be 
unworkable were it read as giving to EPA when promulgating an 
implementation plan for a State, less than those necessary measures 
allowed by Congress to a State to accomplish Federal clean air 
goals. We do not adopt any such crippling interpretation.

South Terminal Corporation v. EPA, 504 F.2d 668 (1st Cir., 1974).
    In the case of federally-recognized Indian Tribes, as we explained 
in the CAIR, (70 FR 25167-68) Tribes are subject to section 
110(a)(2)(D), but are not required to submit implementation plans. The 
EPA is required to promulgate FIPs for Indian country as necessary or 
appropriate to protect air quality. See 40 CFR 49.11(a). Presently, 
there are no emissions sources in Indian country within the region 
affected by CAIR which would make a FIP necessary or appropriate. In 
the event of the planned construction of such a source within Indian 
country in the 28-State region subject to CAIR, EPA will work with the 
relevant Tribal government to regulate the source through a Tribal or 
Federal implementation plan. In the case of an EGU, the EPA anticipates 
that the Tribal implementation plan (TIP) or FIP would involve the 
participation of the EGU in the EPA administered cap and trade program. 
The EPA will also work with the Tribe and affected States to determine 
how allowances allocated to the Indian country source will affect State 
allowance allocations. Because any FIPs for Indian country will 
necessarily be tailored to the specific circumstances, today's proposal 
contains no such FIP. The reader is referred to the CAIR for a more 
detailed discussion of the interaction of the CAIR with Indian country 
(70 FR 25167-68, 25315).

B. What Is the Timing and Scope of the CAIR FIP Action?

    As described in the CAIR, EPA views seriously its responsibility to 
address the issue of regional transport of ozone and ozone precursor 
emissions.

[[Page 49720]]

Decreases in NOX and SO2 emissions are needed in 
the States identified in the CAIR to enable downwind States to develop 
and implement plans to achieve and maintain the PM2.5 and 8-
hour ozone NAAQS. The CAIR identified the specific amount of emissions 
reductions necessary for each State identified in the CAIR to meet 
their section 110(a)(2)(D) interstate transport obligations. 
Implementation of these reductions is necessary to enable downwind 
States to achieve the NAAQS in order to provide clean air for their 
residents.
    Therefore, EPA is proposing FIPs today in conjunction with the 
proposed action regarding North Carolina's section 126 petition 
concerning transport of PM2.5 and 8-hour ozone precursors as 
discussed in section III of this proposal. The EPA intends to 
promulgate these FIPs at the same time as its response to North 
Carolina's section 126 petition, which must be finalized no later than 
March 15, 2006 in accordance with a judicially enforceable consent 
decree. The EPA believes it is appropriate to coordinate these two 
rulemakings because they both address interstate transport, both will 
apply to EGUs, and because the States covered by the response to the 
section 126 petition are a geographical subset of the States covered by 
CAIR. In today's action, EPA is not proposing to promulgate FIPs for 
any States not covered by CAIR.
    The EPA believes it is appropriate to finalize the FIP in March 
2006 on the same schedule as EPA's response to the section 126 
petition. Moving quickly to promulgate a FIP is consistent with 
Congress' intent that attainment occur in these downwind nonattainment 
areas ``as expeditiously as practicable'' (sections 181(a), 172(a)). 
The FIP will help ensure that all emissions reductions required by 
CAIR, and the associated environmental benefits, will be achieved by 
the CAIR deadlines. In addition, the FIP will ensure that sources in 
all States covered by CAIR, regardless of whether they are affected by 
the North Carolina section 126 petition, will be required to achieve 
emissions reductions at the same time.
    By proposing and finalizing the FIP well before the deadline for 
States to submit their CAIR SIPs, EPA is providing States an additional 
option for complying with the requirements of CAIR. States planning to 
adopt the model trading programs contained in the CAIR rule, could 
accept the FIP and significantly reduce the State resources needed to 
establish a program to implement the CAIR. Since there are no punitive 
consequences for States associated with the FIP or the finding of 
failure to submit SIPs to satisfy section 110(a)(2)(D)(i), some States 
could avoid much of the time and expense of revising their SIPs to 
comply with CAIR. Some States, particularly those subject to the 
NOX SIP Call, may need to prepare minor SIP revisions 
regardless of whether they accept the FIP implementing the requirements 
of CAIR; yet the time and expense involved would be significantly 
reduced.
    The Agency proposes to provide States that are subject to today's 
proposed Federal requirements with the option to submit abbreviated SIP 
revisions covering specific elements of the Federal trading programs 
without submitting full SIP revisions to meet the requirements of CAIR. 
By proposing to accept such abbreviated SIP revisions, the Agency 
intends to increase the options available for States to comply with 
CAIR. A State could choose to retain control of these specific elements 
of the trading programs, without submitting a full SIP revision to meet 
the requirements of CAIR. As there are no sanctions associated with the 
proposed FIP, EPA anticipates that some States may prefer to avoid 
spending the time and money necessary to submit a full SIP revision.
    The Agency would accept abbreviated SIP revisions for any or all of 
the following 4 specific elements of the Federal trading programs: (1) 
Provisions for non-EGUs to opt-in to the Federal trading programs, (2) 
allocating annual and/or ozone season NOX allowances to 
individual sources in the State, (3) allocating allowances from the 
annual NOX Compliance Supplement Pool (CSP) to individual 
sources in the State, and (4) including NOX SIP Call trading 
sources that are not EGUs under CAIR in the Federal CAIR ozone season 
NOX cap and trade program. Upon approval of any such SIP 
revisions, EPA anticipates that the corresponding portions of the FIP 
for that State would be replaced or their application to sources would 
be modified.
    In offering a framework for abbreviated SIP revisions the Agency 
anticipates that many States will wish to retain control over the 
allocation of allowances to sources in their State and may wish to meet 
their NOX SIP Call obligations by allowing NOX 
budget units (that is, units in the NOX SIP Call trading 
program) that are not EGUs under CAIR to participate in the CAIR ozone 
season trading program.
    The EPA requests comment on the proposed option for States to 
submit abbreviated SIPs covering specific elements of the Federal 
trading programs. A more complete discussion of the proposed 
abbreviated SIP provisions is found in Section VI.
    Thus, the FIP will increase the options available for a State to 
comply with CAIR. Through the CAIR rulemaking actions, EPA has provided 
States with a great deal of data and analyses concerning air quality 
and control costs, as well as a determination whether upwind sources 
contribute significantly to downwind nonattainment under section 
110(a)(2)(D). The EPA recognizes that States would face great 
difficulties in developing transport SIPs to meet the requirements of 
section 110(a)(2)(D) without these data and policies. Indeed, EPA 
acknowledged in the CAIR that the Agency's extensive analyses and data, 
including the multi-year operation of a federally-funded monitoring 
system (and the considerable information generated through that system) 
was a necessary element in the Agency's conclusion that it was 
appropriate to impose such requirements on States (70 FR 25267).
    States have 18 months from the signature date of the CAIR, or until 
September 11, 2006, to develop, adopt, and submit revisions to their 
SIPs that meet the requirements of CAIR. We remain ready to work with 
the States to develop fully approvable SIPs. The FIP will not be 
promulgated for any State that has an approved SIP implementing the 
CAIR requirements in place prior to promulgation of the FIP. In 
addition, EPA will withdraw the FIP for any State once EPA approves a 
SIP that meets the CAIR requirements in that State.
    Having the FIP in place early will provide for a transition to a 
CAIR trading program with the greatest continuity, administrative ease, 
and cost savings for States that would otherwise develop a program 
identical to the model trading program. The EPA's goal is to have 
approvable programs in place that meet the requirements of the CAIR 
whether they are in the form of a SIP or a FIP. By finalizing a FIP, 
EPA would in no way preclude a State from developing its own SIP to 
either adopt the trading rule with any discretionary elements allowed 
by the CAIR, or to meeting the State emissions budget through different 
measures of the State's choosing. The EPA will carefully consider the 
timing of each element of the FIP process to make sure to preserve each 
State's freedom to develop and implement SIPs. In this way, EPA will 
enhance each State's options for complying with the requirements of the 
CAIR while ensuring that all the emissions reductions and environmental 
benefits of the CAIR are realized.

[[Page 49721]]

C. What Are the FIP Control Measures?

    In contrast to the SIP process--where selection and implementation 
of control measures is the primary responsibility of the State--in the 
case of a FIP, it is EPA's responsibility to select the control 
measures for sources and assure compliance with those measures. Thus, 
while the FIP would be designed by EPA to achieve the same total 
emissions reductions described in the CAIR, the specific control 
measures assigned in the FIP could be different from what a State might 
choose.
    In selecting the control measures for the FIP, EPA is proposing the 
same measures used in the CAIR for calculating the required emissions 
reductions. In the CAIR, EPA is requiring States to achieve specified 
levels of emissions reductions based on levels that are achievable 
through implementation of highly cost-effective controls on EGUs. See 
the discussion in section IV of the CAIR, ``What Amounts of 
SO2 and NOX Emissions Did EPA Determine Should Be 
Reduced?'' The EPA is including by reference the technical basis and 
supporting rationale for EPA's conclusions as to the highly cost-
effective strategy developed for the CAIR.
    The SO2 and NOX cap and trade programs for 
the FIP are discussed below in section VI. The unit allocations will be 
provided in a later action and will meet the State EGU budgets that are 
established in the CAIR for States that choose to meet the required 
emissions reductions by controlling EGUs only.

D. When and How Would EPA Remove the FIP Requirements if EPA Approves a 
SIP To Meet the CAIR?

    As discussed previously, EPA intends to finalize the FIP by March 
15, 2006, concurrently with EPA's response to the section 126 petition 
from North Carolina. The EPA intends to withdraw the FIP in a State in 
coordination with EPA's approval of a SIP for that State that meets the 
CAIR requirements. It is EPA's preference that States regulate sources 
to control the interstate transport, therefore EPA will work with 
States to help ensure that the FIP would not need to be implemented. 
The EPA's intended process for withdrawing the FIP or section 126 
requirements is discussed above under section III.D.

V. Emission Reduction Requirements for the Proposed CAIR FIP and 
Proposed Section 126 Response

A. Overview of Emission Reduction Requirements

    In the CAIR (70 FR 25162), EPA determined that SO2 and 
NOX emissions from sources in the District of Columbia and 
the following 23 States contribute significantly to downwind 
PM2.5 nonattainment: Alabama, Florida, Georgia, Illinois, 
Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, 
Mississippi, Missouri, New York, North Carolina, Ohio, Pennsylvania, 
South Carolina, Tennessee, Texas, Virginia, West Virginia, and 
Wisconsin.
    In the CAIR, the Agency also determined that the District of 
Columbia and the following 25 States contribute significantly to 
downwind 8-hour ozone nonattainment: Alabama, Arkansas, Connecticut, 
Delaware, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, 
Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, 
New York, North Carolina, Ohio, Pennsylvania, South Carolina, 
Tennessee, Virginia, West Virginia, and Wisconsin.
    The EPA established CAIR annual SO2 and NOX 
emission reduction requirements for States that contribute 
significantly to downwind PM2.5 nonattainment and 
established ozone season NOX emission reduction requirements 
for States that contribute significantly to downwind 8-hour ozone 
nonattainment. The CAIR requires upwind States to revise their State 
implementation plans (SIP) to include control measures to reduce 
emissions of SO2 and/or NOX to meet the 
requirements in CAIR (SO2 is a precursor to PM2.5 
formation, and NOX is a precursor to both ozone and 
PM2.5 formation).
    The CAIR requires that the emission reductions be implemented in 
two phases. The first phase of CAIR NOX reductions starts in 
2009 (covering 2009-2014) and the first phase of CAIR SO2 
reductions starts in 2010 (covering 2010-2014); the second phase of 
CAIR reductions for both NOX and SO2 starts in 
2015, covering 2015 and thereafter.
    The EPA determined the required amounts of CAIR emission reductions 
based on the application of highly cost-effective controls on electric 
generating units (EGUs). The States have flexibility in how to achieve 
the CAIR emission reductions.\7\ The CAIR includes model rules for 
regionwide EGU emission cap and trade programs, which States can choose 
to adopt to obtain the required reductions in a flexible and cost-
effective manner (the CAIR SIP model trading rules).
---------------------------------------------------------------------------

    \7\ The amounts of State-by-State emission reductions required 
by CAIR are determined based on State EGU emission budgets. 
Determination of a State's emission reduction requirements depends 
on the source categories that the State chooses to control and, if 
the State controls only EGUs, on whether it chooses to participate 
in the EPA-administered EGU emissions cap and trade programs. See 
section V in the CAIR NFR preamble (70 FR 25229) as well as the 
technical support document entitled ``Regional and State 
SO2 and NOX Emissions Budgets,'' March 2005, 
for detailed discussion of the relationship between CAIR EGU 
emissions budgets and the State emission reduction requirements. 
Also see Sec.  51.123 and Sec.  51.124 (70 FR 25319-25333).
---------------------------------------------------------------------------

    Today, EPA is proposing FIPs that are substantively the same as the 
CAIR SIP model cap and trade programs. The proposed FIPs would achieve 
the NOX and SO2 emission reductions required 
under the CAIR, by requiring EGUs in the affected States to reduce 
emissions through participation in Federal CAIR NOX and 
SO2 cap and trade programs. The EPA intends to integrate 
these Federal trading programs with the model trading programs that 
States may choose to adopt to meet the CAIR (see section VI.J in this 
preamble for a discussion of coordination between today's proposed 
Federal cap and trade programs and CAIR SIP cap and trade programs). 
The proposed Federal CAIR cap and trade programs would achieve the 
emission reductions required by CAIR by the deadlines established in 
that rule, with the same highly cost-effective EGU control measures 
forming the basis for the emission budgets.
    For States affected by the proposed section 126 remedy (see section 
III for affected States), the Federal CAIR cap and trade programs would 
achieve the required emission reductions. As explained in section I of 
this preamble, for sources in States that the Agency found to be 
contributing significantly to nonattainment or maintenance in North 
Carolina under CAIR, the Agency is proposing to deny the petition for 
sources in any such State if, prior to or concurrently with the final 
section 126 response, EPA promulgates a FIP to address the interstate 
transport from that State. The Agency is proposing, in the alternative, 
to grant the petition. The Agency intends to promulgate FIPs 
concurrently with the final section 126 response.
    The regionwide emission reduction requirements and State emission 
budgets that are the basis for today's proposal were established in the 
CAIR rulemaking. The EPA is not requesting comment on its determination 
of the CAIR regionwide emission reduction requirements or State 
emission budgets, nor is the EPA requesting comment on the CAIR 
regionwide requirements or State budgets themselves.
    On May 12, 2005, the Agency proposed to find that Delaware and New 
Jersey contribute significantly to downwind PM2.5 
nonattainment and

[[Page 49722]]

thus proposed to require annual SO2 and NOX 
controls in these two States (70 FR 25408). (In the CAIR NFR, the 
Agency found Delaware and New Jersey to contribute to downwind 8-hour 
ozone nonattainment but not to downwind PM2.5 
nonattainment). Based on the proposal to require annual SO2 
and NOX controls in Delaware and New Jersey, today's FIP 
proposal includes requirements for annual SO2 and 
NOX control in these two States. The EPA determined these 
required amounts of emission reductions based on the application of 
highly cost-effective controls on EGUs, and the proposed FIP would 
achieve these reductions by requiring EGUs to participate in the 
Federal CAIR cap and trade programs.
    The proposed CAIR FIP would require annual SO2 and 
NOX and ozone season NOX emission reductions (and 
the proposed section 126 remedy would require annual SO2 and 
NOX reductions) from EGUs in affected States, through 
participation in regionwide Federal cap and trade programs. The Agency 
intends the applicability provisions in today's proposal to be 
identical to the applicability provisions in the CAIR model cap and 
trade programs. As discussed elsewhere in today's preamble, the Agency 
is proposing two revisions to the applicability provisions in the CAIR 
model cap and trade programs. The applicability provisions that EPA is 
proposing in today's action for the FIP and section 126 remedy would be 
identical to the applicability provisions in the CAIR model programs if 
the two proposed revisions to the applicability provisions in the CAIR 
model programs are finalized. (See section VI.C in today's preamble for 
a discussion of the proposed applicability provisions for today's 
action, and see section VII for the proposed revisions to the 
applicability provisions in the CAIR model programs.)
    In this section, EPA describes the approaches for determining 
regionwide emission caps and State emission budgets taken in the CAIR 
rulemaking. In section VI in this preamble, the Agency explains in 
detail the proposed Federal CAIR cap and trade programs for the CAIR 
FIP and section 126 response.
    In today's action, the Agency is proposing a federally-administered 
program to meet the CAIR emission reduction requirements on the 
timeline established in CAIR. Today's proposal does not establish those 
emission reduction requirements or schedule, which were established by 
the CAIR rulemaking. Thus, the Agency is not requesting comment on the 
emission reduction requirements or the schedule for implementing the 
emissions reductions.
    The Agency is taking this action to satisfy the concerns of North 
Carolina cited in its section 126 petition and to provide a Federal 
backstop for CAIR where all States may not be able to develop and 
submit timely, approvable SIP revisions. In no way should the FIP for 
CAIR be viewed as a sign of any concern about States ultimately making 
the emission reductions required under CAIR. There are no sanctions 
associated with these FIPs, and EPA does not intend CAIR FIPs to have 
any other negative consequences for the affected States. To the 
contrary, EPA is proposing FIP approaches that are flexible and allow 
States a full opportunity to get their SIP revisions in place, with 
minimal disruption in transitioning from Federal to State 
implementation.

B. What Is EPA's Approach for Determining Regionwide NOX and SO2 
Emissions Caps and State Emissions Budgets?

1. Determination of Regionwide Caps for SO2 and 
NOX
    In the preamble to the CAIR NFR, the Agency explained how it 
determined regionwide SO2 and NOX emissions caps. 
See section IV in the CAIR NFR preamble (70 FR 25195-25229). In 
determining the amounts of SO2 and NOX emissions 
that must be eliminated for compliance with CAIR, EPA evaluated the 
amounts of SO2 and NOX emissions in upwind States 
that contribute significantly to downwind PM2.5 
nonattainment and the amounts of NOX emissions in upwind 
states that contribute significantly to downwind 8-hour ozone non-
attainment. The EPA determined the amounts of emissions that must be 
reduced to eliminate significant contributions from upwind States, by 
applying highly cost-effective control measures to EGUs and determining 
the emissions reductions that would result (70 FR 25195-25229).
    EPA used the Integrated Planning Model (IPM) to analyze the cost 
effectiveness of the CAIR emission reduction requirements.\8\ The EPA 
modeled the cost effectiveness of CAIR assuming interstate emissions 
trading. While the Agency does not require States to participate in the 
CAIR SIP regionwide interstate EGU cap and trade programs, we believe 
it is reasonable to evaluate control costs assuming States choose to 
participate in such programs since participation will result in less 
expensive emission reductions. The Agency modeled the CAIR requirements 
as three regionwide EGU cap and trade programs (an annual 
SO2 program, an annual NOX program, and an ozone 
season NOX program). Section IV.A.1 in the CAIR NFR preamble 
provides more discussion of EPA's cost modeling methodology for the 
CAIR rulemaking (70 FR 25196-25197). The Agency also evaluated the 
feasibility of achieving the CAIR emission reduction requirements in 
the CAIR time-frame, as discussed in section IV.C. in the CAIR NFR 
preamble (70 FR 25215-25225).
---------------------------------------------------------------------------

    \8\ The IPM is a multiregional, dynamic, deterministic linear 
programming model of the U.S. electric power sector. The Agency uses 
IPM to examine costs and, more broadly, analyze the projected impact 
of environmental policies on the electric power sector in the 48 
contiguous States and the District of Columbia.
---------------------------------------------------------------------------

    For SO2, the regionwide annual cap for 2015 and later 
(the second CAIR phase) is based on a 65 percent reduction of title IV 
Phase II allowances allocated to units in the 23 States and the 
District of Columbia that are required by CAIR to implement annual 
SO2 controls. The regionwide annual SO2 cap for 
the years 2010-2014 (the first CAIR phase) is based on a 50 percent 
reduction from those same title IV allocation amounts. The EPA 
determined these regionwide caps to be highly cost effective by 
analyzing the cost of controlling emissions from EGUs. Details of EPA's 
analysis are in section IV in the CAIR NFR preamble (70 FR 25195-
25229).
    Both the annual and the ozone season NOX regionwide caps 
were determined by applying uniform NOX emission rates to 
recent historic heat input for EGUs in the affected States (23 States 
and the District of Columbia for annual NOX, 25 States and 
the District of Columbia for ozone season NOX). For 2015 and 
later (the second CAIR phase), the Agency applied an emission rate of 
0.125 lb/mmBtu to recent historic heat input. For the years 2009-2014 
(the first CAIR phase) the Agency applied an emission rate of 0.15 lb/
mmBtu. The heat input amounts used in these calculations were the 
highest annual heat input (or ozone season heat input for the ozone 
season caps) from Acid Rain Program units for any year from 1999 to 
2002 for each State. The EPA determined the resulting regionwide caps 
to be highly cost effective by analyzing the cost of controlling 
emissions from EGUs. Details of EPA's analysis are in section IV in the 
CAIR NFR preamble (70 FR 25195-25229).

[[Page 49723]]

2. Determination of State by State Emissions Budgets for SO2 
and NOX
a. Determination of State SO2 Emissions Budgets
    In CAIR, the EPA determined State annual SO2 emissions 
budgets for 2015 and later based on a 65 percent reduction from title 
IV Phase II allowances allocated to units in the affected States and 
the District of Columbia, and for the years 2010-2014 based on a 50 
percent reduction from the title IV allocation amounts. Section V.A.1.a 
of the CAIR NFR preamble, 70 FR 25229-25230, describes the approach for 
determining State budgets. The Agency is not inviting comment on the 
CAIR State SO2 budgets. The EPA employed the same approach 
to determining proposed State SO2 budgets for Delaware and 
New Jersey in its proposal to include these two States in CAIR for 
annual SO2 controls (70 FR 25416).
    Today's proposed FIP and section 126 remedy would achieve the 
required SO2 emission reductions through a regionwide 
Federal SO2 cap and trade program for EGUs. As discussed 
further in section VI, below, the Federal CAIR SO2 cap and 
trade program would rely on title IV allowances, which sources would 
retire at specified ratios greater than 1-to-1 for compliance with the 
proposed Federal CAIR program. Congress has already allocated title IV 
SO2 allowances to sources in perpetuity. State 
SO2 emissions budgets would not affect the distribution of 
SO2 allowances and are not directly relevant for today's 
proposal.
    The CAIR State SO2 budgets were established to provide 
States flexibility in selecting a control remedy to meet the 
requirements of CAIR. States can choose to participate in the EPA-
administered CAIR SO2 trading program, in which case sources 
would comply by retiring title IV allowances at the specified 
retirement ratios, and the CAIR State SO2 budgets would not 
be directly relevant. For States that do not choose to participate in 
the EPA-administered SO2 trading program, however, the CAIR 
State SO2 budgets are used to determine the State's emission 
reduction requirements.\9\ The EPA determined title IV allowance 
retirement ratios for the CAIR SIP model SO2 trading program 
based on the ratio of the total of all States' CAIR SO2 
budgets (for 2010 and 2015) to the total of such States' title IV Phase 
II allowance levels.
---------------------------------------------------------------------------

    \9\ See section V in the CAIR NFR preamble (70 FR 25229-25233) 
as well as the technical support document entitled ``Regional and 
State SO2 and NOX Emissions Budgets,'' March 
2005, for detailed discussion of the relationship between CAIR EGU 
emissions budgets and the State emission reduction requirements. 
Also see Sec.  51.123 and Sec.  51.124 (70 FR 25319-25333).
---------------------------------------------------------------------------

    In the CAIR FIP and 126 remedy, the EPA is proposing to use a 
Federal SO2 trading program approach that is substantively 
identical to the CAIR SIP SO2 model trading rule and relies 
on retirement of title IV allowances at the same specified ratios. 
Thus, State SO2 emission budgets would not affect the 
distribution of SO2 allowances and are not directly relevant 
for today's proposal.
    For further discussion regarding achieving the required 
SO2 reductions in today's proposed Federal program through 
retirement ratios for title IV allowances, see section VI in today's 
preamble. Also see the CAIR NFR preamble in section V.A.1.c (70 FR 
25230) as well as section VII (70 FR 25255-25273).
b. Determination of State Annual and Ozone Season NOX 
Emissions Budgets
    In CAIR, EPA determined State annual and ozone season 
NOX emissions budgets by apportioning the CAIR regionwide 
annual and ozone season NOX caps to States based on each 
State's share of fuel-adjusted average recent historic heat input. For 
each CAIR State, for each year (1999 through 2002), the Agency summed 
heat input by fuel type, adjusted the heat input using fuel adjustment 
factors, and determined the average fuel-adjusted heat input for each 
State. The fuel adjustment factors that the Agency used to adjust heat 
input are 1.0 for coal, 0.4 for gas, and 0.6 for oil.
    The EPA summed the average adjusted heat inputs for each State in 
the CAIR region (either the annual NOX region or the ozone 
season NOX region, as appropriate), and divided each State's 
average adjusted heat input by the regionwide total average adjusted 
heat input, to determine each State's proportion of the total. The 
Agency multiplied each State's proportion by the regionwide caps, to 
determine each State's proportional share of the regionwide caps. The 
EPA used the same methodology to determine both annual and ozone season 
NOX State budgets, except that for annual budgets the annual 
heat input was used, whereas for ozone season budgets the ozone season 
heat input was used. (See section V of the CAIR NFR preamble for 
discussion of the Agency's determination of CAIR State emissions 
budgets, 70 FR 25229-25233.) The Agency is not inviting comment on the 
CAIR State annual and ozone season NOX budgets.
    For its proposal to include Delaware and New Jersey in CAIR for 
annual NOX controls, the Agency proposed to determine annual 
State NOX budgets for these two States by first calculating 
a total ``regional'' cap for the two States, using the same methodology 
used in CAIR to develop regionwide NOX caps (the regionwide 
NOX cap methodology is described above). The EPA proposed to 
determine State annual NOX budgets for these two States by 
apportioning the regional Delaware and New Jersey cap back to the two 
States using the same fuel-adjusted heat input basis as was used in the 
CAIR NFR, as described above (also see section IV.B. in the proposal to 
include Delaware and New Jersey in CAIR for PM2.5 purposes, 
70 FR 25416).
    In today's proposed Federal CAIR NOX cap and trade 
programs for EGUs, the State annual and ozone season EGU NOX 
budgets are the same as the budgets in the CAIR NFR (annual 
NOX budgets for Delaware and New Jersey in today's proposal 
are the same as the annual NOX budgets for these two States 
in the proposal to include them in CAIR for PM2.5 purposes).
    For each State affected by the proposed Federal CAIR NOX 
trading programs, the State NOX budgets are the total amount 
of allowances \10\ that the Agency will allocate to sources in the 
State. See section VI in this preamble for EPA's proposed methodology 
for allocating NOX allowances to affected sources. The EPA's 
proposed allocation methodology for NOX allowances in the 
annual NOX and the ozone season NOX cap and trade 
programs is in contrast with the approach taken in the case of 
SO2 allowances, which are already allocated under title IV 
of the Clean Air Act to sources in perpetuity, as explained above.
---------------------------------------------------------------------------

    \10\ As in CAIR, an annual NOX allowance would 
authorize the emission of a ton of NOX during a calendar 
year and an ozone season NOX allowance would authorize 
the emission of a ton of NOX during an ozone season. See 
section VI in this preamble for further discussion and see the 
proposed regulatory text for definitions.
---------------------------------------------------------------------------

C. What Are the State EGU Emission Budgets for the CAIR FIP and the 
Section 126 Response?

1. What Are the Annual State EGU SO2 Emissions Budgets?
    As explained above, the required SO2 emission reductions 
would be achieved solely based on the requirement that sources retire 
title IV SO2 allowances (which were already allocated to 
sources by Congress) at specified ratios greater than 1-to-1. Because 
State SO2 emission budgets do not affect the distribution of 
SO2 allowances and are

[[Page 49724]]

not directly relevant for today's proposal, the Agency is not including 
State SO2 budgets in today's proposal. See section VI in 
this preamble for discussion of the proposed Federal CAIR 
SO2 trading program.
2. What Are the Annual State EGU NOX Emissions Budgets?
a. For States Affected by the CAIR FIP
    For the proposed Federal CAIR annual NOX cap and trade 
program, State NOX emissions budgets--for the 23 States and 
the District of Columbia that are required by CAIR to control annual 
NOX--are provided in Table V-1, below. These annual 
NOX budgets are the same as the budgets shown in Table V-2 
of the CAIR NFR preamble (70 FR 25231). Table V-1, below, also includes 
annual NOX budgets that EPA proposed for Delaware and New 
Jersey (these are the same budgets that were included in Table IV-1 in 
``Inclusion of Delaware and New Jersey in the Clean Air Interstate 
Rule: Proposed Rule'' (70 FR 25416)). See section VI in this preamble 
for EPA's proposed methodology for allocating annual NOX 
allowances to sources in the Federal CAIR cap and trade programs.

      Table V-1.--CAIR Annual Electric Generating Units NOX Budgets
                                [In tons]
------------------------------------------------------------------------
                                                             State NOX
                                             State NOX     annual budget
                  State                    annual budget     2015 and
                                             2009-2014      thereafter
------------------------------------------------------------------------
Alabama.................................          69,020          57,517
Delaware................................           4,166           3,472
District of Columbia....................             144             120
Florida.................................          99,445          82,871
Georgia.................................          66,321          55,268
Illinois................................          76,230          63,525
Indiana.................................         108,935          90,779
Iowa....................................          32,692          27,243
Kentucky................................          83,205          69,337
Louisiana...............................          35,512          29,593
Maryland................................          27,724          23,104
Michigan................................          65,304          54,420
Minnesota...............................          31,443          26,203
Mississippi.............................          17,807          14,839
Missouri................................          59,871          49,892
New Jersey..............................          12,670          10,558
New York................................          45,617          38,014
North Carolina..........................          62,183          51,819
Ohio....................................         108,667          90,556
Pennsylvania............................          99,049          82,541
South Carolina..........................          32,662          27,219
Tennessee...............................          50,973          42,478
Texas...................................         181,014         150,845
Virginia................................          36,074          30,062
West Virginia...........................          74,220          61,850
Wisconsin...............................          40,759          33,966
                                         -----------------
    Total...............................       1,521,707       1,268,091
------------------------------------------------------------------------

b. For States Affected by the Section 126 Response
    For the proposed Federal CAIR annual NOX cap and trade 
program--for the ten States affected by the proposed section 126 remedy 
(see section III in this preamble for affected States)--the annual 
State NOX emissions budgets are the same as the budgets 
shown in Table V-1, above. See section VI in this preamble for EPA's 
proposed methodology for allocating annual NOX allowances to 
sources in the Federal CAIR cap and trade programs.
3. What Are the Ozone Season EGU NOX Emissions Budgets?
a. For States Affected by the CAIR FIP
    For the proposed Federal CAIR ozone season NOX cap and 
trade program, State EGU NOX emissions budgets--for the 25 
States and the District of Columbia that are required to control ozone 
season NOX--are shown by State in Table V-2, below. These 
ozone season budgets are identical to the budgets in Table V-4 in the 
CAIR NFR preamble (70 FR 25233). See section VI in this preamble for 
EPA's proposed methodology for allocating ozone season NOX 
allowances to individual sources for the Federal CAIR ozone season 
NOX cap and trade program.

  Table V-2.--CAIR Ozone Season Electricity Generating Unit NOX Budgets
                                [In tons]
------------------------------------------------------------------------
                                             State NOX       State NOX
                                           Ozone season    Ozone season
                 State*                    budget 2009-     budget 2015
                                               2014       and thereafter
------------------------------------------------------------------------
Alabama.................................          32,182          26,818

[[Page 49725]]

 
Arkansas................................          11,515           9,596
Connecticut.............................           2,559           2,559
Delaware................................           2,226           1,855
District of Columbia....................             112              94
Florida.................................          47,912          39,926
Illinois................................          30,701          28,981
Indiana.................................          45,952          39,273
Iowa....................................          14,263          11,886
Kentucky................................          36,045          30,587
Louisiana...............................          17,085          14,238
Maryland................................          12,834          10,695
Massachusetts...........................           7,551           6,293
Michigan................................          28,971          24,142
Mississippi.............................           8,714           7,262
Missouri................................          26,678          22,231
New Jersey..............................           6,654           5,545
New York................................          20,632          17,193
North Carolina..........................          28,392          23,660
Ohio....................................          45,664          39,945
Pennsylvania............................          42,171          35,143
South Carolina..........................          15,249          12,707
Tennessee...............................          22,842          19,035
Virginia................................          15,994          13,328
West Virginia...........................          26,859          26,525
Wisconsin...............................          17,987          14,989
                                         -----------------
    CAIR Region Total...................         567,744        484,506
------------------------------------------------------------------------
* For States that have lower EGU budgets under the NOX SIP Call than
  their 2009 CAIR budget, table V-2 includes their SIP Call budget. For
  Connecticut, the NOX SIP Call budget is also used for 2015 and beyond.

b. For States Affected by the Section 126 Response
    As explained in section III in this preamble, the EPA is proposing 
to deny the ozone portion of the section 126 petition. Therefore, the 
Agency is not proposing ozone season NOX State budgets for 
purposes of the section 126 remedy.
4. What Are the Amounts of Allowances Available in the State Annual 
NOX Compliance Supplement Pools?
    The CAIR established State Compliance Supplement Pools (CSP) of 
annual NOX allowances of vintage 2009. Under CAIR, a State 
that elects to achieve its CAIR annual NOX reduction 
requirements by creating an annual NOX cap and trade program 
can allocate CSP allowances (using mechanisms specified in CAIR) to its 
sources for use in complying with such an annual NOX program 
(see section VII in the CAIR NFR preamble for discussion, 70 FR 25255-
25273).
    Today's proposed Federal CAIR annual NOX cap and trade 
program includes the same State CSP amounts as were established in 
CAIR. See section V in the CAIR NFR preamble (70 FR 25231-25232), as 
well as the technical support document entitled ``Regional and State 
SO2 and NOX Emissions Budgets,'' March 2005 (in 
the CAIR docket) for discussion of the Agency's process for determining 
the annual NOX CSP amounts for each CAIR State. The Agency 
is not inviting comment on the CSPs established in CAIR.
    For the proposed Federal CAIR annual NOX cap and trade 
program, the CSP amount for each State is provided in Table V-3, below. 
These are the same CSP amounts as shown in the CAIR NFR preamble, Table 
V-3 (70 FR 25232). The CSP amounts for Delaware and New Jersey--if 
these two States are part of the final CAIR annual NOX 
requirements as the Agency has proposed--are also shown in Table V-3 
below, as well as in Table V-3 in the CAIR NFR preamble (70 FR 25232) 
and in Table IV-3 in ``Inclusion of Delaware and New Jersey in the 
Clean Air Interstate Rule: Proposed Rule'' (70 FR 25417). See section 
VI in this preamble for EPA's proposed methodology for allocating CSP 
allowances to sources for the Federal CAIR annual NOX cap 
and trade program.

         Table V-3.--CAIR Annual NOX Compliance Supplement Pools
                                [In tons]
------------------------------------------------------------------------
                                                            Compliance
                          State                             supplement
                                                               pool
------------------------------------------------------------------------
Alabama.................................................          10,166
Delaware................................................             843
District of Columbia....................................               0
Florida.................................................           8,335
Georgia.................................................          12,397
Illinois................................................          11,299
Indiana.................................................          20,155
Iowa....................................................           6,978
Kentucky................................................          14,935
Louisiana...............................................           2,251
Maryland................................................           4,670
Michigan................................................           8,347
Minnesota...............................................           6,528
Mississippi.............................................           3,066
Missouri................................................           9,044
New Jersey..............................................             660
New York................................................               0
North Carolina..........................................               0
Ohio....................................................          25,037
Pennsylvania............................................          16,009
South Carolina..........................................           2,600
Tennessee...............................................           8,944
Texas...................................................             772
Virginia................................................           5,134
West Virginia...........................................          16,929
Wisconsin...............................................           4,898
                                                         ---------------

[[Page 49726]]

 
    Total...............................................         199,997
------------------------------------------------------------------------

VI. Proposed Federal CAIR NOX and SO2 Cap and 
Trade Programs for EGUs

A. Purpose of Federal CAIR NOX and SO2 Cap and Trade Programs and 
Relationship to the Section 126 Petition and the CAIR

    In today's action, EPA is proposing Federal CAIR NOX and 
SO2 cap and trade programs for EGUs as the control remedy 
for both the CAIR FIP and the section 126 response, should EPA make any 
section 126(b) findings (see section VI.C., below, for applicability 
provisions).
    The Agency is proposing regulatory text for the CAIR FIP rules in 
today's action. Regulatory text for the section 126 remedy would be 
largely the same. The proposed new Federal NOX and 
SO2 cap and trade programs will be located in part 97 in 
title 40 of the CFR.
    The Agency proposes three separate Federal CAIR cap and trade 
programs: (1) SO2; (2) NOX; and (3) ozone season 
NOX. Emissions cap and trade programs are a proven method 
for achieving highly cost-effective emissions reductions while 
providing regulated sources of emissions with flexibility in adopting 
compliance strategies.
    Participation in the proposed Federal CAIR NOX and 
SO2 cap and trade programs would be mandatory for all 
sources covered by the final CAIR FIP or by a final section 126(b) 
finding in response to the North Carolina petition. Note that, as 
discussed in section I in today's preamble, EPA is proposing to deny 
the section 126 petition with respect to the 8-hour ozone NAAQS, 
therefore the section 126 remedy would not include an ozone season 
NOX program.
    The emission sources that the Agency is proposing to include in the 
Federal CAIR NOX and SO2 cap and trade programs--
EGUs fitting the applicability requirements described in section VI.C, 
below--are the same types of sources included in the CAIR 
NOX Annual Trading Program, CAIR NOX Ozone Season 
Trading Program, and CAIR SO2 Trading Program (contained in 
part 96) that EPA promulgated as model trading rules that States may 
elect to use in responding to the CAIR. The emission sources identified 
in today's proposal are the sources for which EPA assumed emission 
reductions in determining the regionwide emission reduction 
requirements and calculating the State emission budgets in CAIR. (As 
discussed in section VII, below, EPA is proposing certain revisions 
clarifying the EGU definition in CAIR, and the proposed applicability 
provisions in the Federal CAIR trading programs are consistent with 
those proposed revisions.)
    The CAIR established State EGU emissions budgets that each State 
would use to determine its required emissions reductions. The proposed 
Federal CAIR cap and trade programs set specific rules for EGUs to 
decrease NOX and SO2 emissions sufficiently to 
achieve emission reductions that are required under CAIR. The proposed 
section 126 remedy is limited to the set of States that North Carolina 
named in its petition and for which EPA makes a positive determination 
(see section III, above). The named States are a geographic subset of 
the CAIR States. Each of the three actions--the CAIR, the proposed CAIR 
FIP, and the proposed section 126 remedy--aim to reduce the transport 
of PM2.5 precursors by controlling emissions from sources in 
a given State that are found to be contributing significantly to 
nonattainment and maintenance in another State. The CAIR and the 
proposed CAIR FIP also aim to reduce transport of ozone precursors by 
controlling emissions from sources in a given State that are found to 
be contributing significantly to nonattainment and maintenance in 
another State.
    The EPA intends that if States choose to meet their emission 
reduction obligations under CAIR by adopting the SIP model cap and 
trade rules and participating in the EPA administered trading programs, 
such participation will be fully integrated with Federal CAIR 
NOX and SO2 cap and programs that EPA may 
promulgate in a final FIP or in a final section 126 response. 
Integration is possible because, as noted above, the CAIR, a 
corresponding FIP, and the section 126 remedy all seek to mitigate 
transport of emissions from upwind sources that significantly 
contribute to downwind nonattainment of the PM2.5 NAAQS, and 
the CAIR and a corresponding FIP both seek to mitigate such transport 
with regard to the 8-hour ozone NAAQS. Further, the sources covered in 
the CAIR SIP model cap and trade programs are the same types of sources 
named in the section 126 petition (except that the petition names a 
subset of the States affected by CAIR), and are the same as the sources 
that EPA proposes to regulate in the proposed FIP and section 126 
remedy.
    In order to be eligible to participate in an emissions cap and 
trade program, the Agency believes that there are two principal 
criteria that sources must meet, as stated in the supplemental proposal 
for the NOX SIP Call (62 FR 25923). The first criterion 
requires that sources be able to account accurately and consistently 
for all of their emissions to ensure the trading program goal of 
maintaining emissions within a cap. Emissions monitoring must be 
accurate and consistent among all sources so that each allowance 
represents the same amount of emissions. The second criterion for 
participation in a trading program is the ability to identify a 
responsible party for each regulated source who would be accountable 
for demonstrating and ensuring compliance with the program's 
provisions. The EPA believes that today's proposed rule meets those 
criteria. The Agency also believes that, because today's proposal 
contains the same mandatory program elements as are in the part 96 CAIR 
SIP model trading programs, and is designed to meet the same 
environmental goals and caps sources at the same levels as those model 
trading programs, it is appropriate to design CAIR FIP and section 126 
trading programs that are integrated with the CAIR SIP trading 
programs.
    Under this scenario of common trading programs (i.e., integrated 
FIP-section 126-SIP for NOX annual, NOX ozone 
season, and SO2 trading programs), sources subject to 
Federal CAIR trading programs under the FIP or the section 126 remedy, 
and sources in States choosing to participate in the EPA-administered 
CAIR SIP trading programs could trade allowances with one another under 
common emissions caps across participating States. Integration of the 
trading programs reduces the possibility of inconsistent or conflicting 
deadlines or requirements, increases the potential cost savings for 
sources, and streamlines program administration. Unnecessary 
inconsistency in trading programs could hamper sources' ability to plan 
and achieve the needed reductions as cost effectively as possible. In 
addition, if a State submitted a SIP including CAIR EPA-administered 
emissions trading programs after EPA had established Federal programs 
under a FIP or section 126 response, disruptions to sources that would 
shift from regulation under a FIP or section 126 remedy to regulation 
under a SIP would be minimized.

[[Page 49727]]

    The EPA proposes, in part 97, to establish the geographic 
boundaries of the common trading programs as those States submitting 
SIPs in response to the CAIR, or subject to FIPs, and/or the sources in 
States for which EPA makes a positive finding for the section 126 
petition. The EPA would administer these common trading programs in 
collaboration with affected States.
    Today, the Agency proposes Federal CAIR NOX and 
SO2 cap and trade programs for the FIP or section 126 remedy 
that are virtually the same as the CAIR SIP model trading programs 
(which are the model trading programs that States may choose to adopt 
in response to CAIR). Although EPA intends the proposed Federal CAIR 
cap and trade programs to be as similar as possible to the CAIR SIP 
model trading rules, the Agency is proposing certain differences as 
described below. The differences arise primarily from the need for 
Federal implementation of the programs rather than State implementation 
and to facilitate transfer from Federal to State-implemented programs. 
For example, under today's proposal, the Agency determines 
NOX allowance allocations for each unit in the Federal CAIR 
annual and ozone season NOX cap and trade programs, rather 
than EPA simply providing a recommended methodology for States to use 
to determine allocations in CAIR SIP NOX trading programs. 
Note that today's proposed Federal CAIR cap and trade programs include 
all of the mandatory elements that States are required to include in 
their SIPs in order to participate in the EPA-administered cap and 
trade programs for CAIR.
    As noted in section IV in this preamble, the Agency proposes to 
provide States that are subject to today's proposed Federal 
requirements with the option to submit abbreviated SIP revisions 
covering specific elements of the Federal trading programs without 
submitting full SIP revisions to meet the requirements of CAIR. The 
Agency would accept abbreviated SIP revisions for the following 4 
specific elements of the Federal trading programs: (1) Provisions for 
non-EGUs to opt-in to the Federal trading programs, (2) allocating 
annual and/or ozone season NOX allowances to individual 
sources in the State, (3) allocating allowances from the annual 
NOX Compliance Supplement Pool (CSP) to individual sources 
in the State, and (4) including NOX SIP Call trading sources 
that are not EGUs under CAIR in the Federal CAIR ozone season 
NOX cap and trade program. The Agency discusses each of 
these elements further below.
    By proposing to accept such abbreviated SIP revisions, the Agency 
intends to increase the options available for States to comply with 
CAIR. A State could choose to retain control of these specific elements 
of the trading programs, without submitting a full SIP revision to meet 
the requirements of CAIR.
    As explained in the CAIR NFR, States have until September 11, 2006 
to submit to the Agency revisions to their SIPs that meet the 
requirements of CAIR. The Agency proposes that, for abbreviated SIP 
revisions addressing the specific elements identified in today's 
proposal, States have until March 31, 2007 to make their submissions. 
The EPA proposes to allow States to submit abbreviated SIP revisions 
later than full revisions because the Agency anticipates that we will 
be able to complete the approval process more quickly for abbreviated 
SIP revisions due to their narrower scope. If States submit approvable 
full or abbreviated SIP revisions by these dates, the Agency believes 
it will be able to approve the revisions in time to record State 
NOX allocations in source accounts by December 2007 for the 
first NOX control period for any State submitting revisions 
that include NOX allocations. See section VI.D. in this 
preamble for a detailed discussion of timing considerations with 
respect to NOX allocations.
    The Agency proposes to include appendices in part 97 that will list 
any States with approved abbreviated SIP revisions covering non-EGUs 
opt-ins, allocating NOX allowances, distributing CSP 
allowances, or including non-CAIR NOX SIP Call trading 
sources in the Federal CAIR ozone season NOX trading 
program.
    The EPA requests comment on the proposed option for States to 
submit abbreviated SIPs covering specific elements of the Federal 
trading programs.

B. Overall Structure of the Proposed Federal CAIR Cap and Trade 
Programs

    In the CAIR NFR, the Agency provided model rules for the CAIR 
NOX, CAIR ozone season NOX, and CAIR 
SO2 trading programs that States can use to meet the 
emission reduction requirements in the CAIR (in part 96). The proposed 
Federal CAIR cap and trade programs are based on these model rules. The 
EPA designed these rules to be similar to the NOX SIP Call 
model trading rules (also in part 96) and to coordinate with the Acid 
Rain Program.
    The Agency proposes in today's action that the mandated emission 
reductions will be achieved from EGUs (see section VI.C, below, for 
discussion of proposed applicability provisions). Descriptions of each 
of the proposed Federal CAIR cap and trade programs (i.e., the 
SO2 program, NOX annual program, and 
NOX ozone season program) are presented below.
    The proposed Federal CAIR cap and trade programs rely on the 
detailed unit-level emissions monitoring and reporting procedures of 
part 75 and consistent allowance management practices. All affected 
sources would be required to monitor and report their emissions using 
part 75. Source information management, emissions data reporting, and 
allowance trading would be accomplished using on-line systems similar 
to those currently used for the Acid Rain SO2 and 
NOX SIP Call Programs.
    Penalty provisions for excess emissions under the CAIR SIP model 
trading programs are described in the CAIR NFR preamble (70 FR 25274). 
The Agency intends the penalty provisions for excess emissions in 
today's proposal to be identical to the provisions in the CAIR. As 
discussed in section VII in today's preamble, the Agency is proposing 
revisions to the excess emission penalties in the CAIR SO2 
trading program to clarify the penalties for units that have excess 
emissions under both the Acid Rain Program and the CAIR SO2 
trading program. The excess emissions penalty provisions in today's 
proposed Federal NOX and SO2 cap and trade 
programs would be identical to the penalty provisions in the CAIR if 
the proposed revisions to the CAIR SO2 trading program 
penalties are finalized.
1. SO2 Program
    The proposed Federal CAIR SO2 cap and trade program 
would require affected sources to hold SO2 allowances 
sufficient to cover their emissions for each control period. This 
proposed program is based on the existing Acid Rain Program and would 
rely on title IV SO2 allowances, in the same way that the 
CAIR SO2 model trading rule relies on title IV allowances.
    As in the CAIR SIP SO2 model trading program, 
SO2 reductions for the Federal CAIR SO2 cap and 
trade program would be achieved by requiring sources to retire, in most 
cases, more than one title IV allowance for each ton of SO2 
emissions. Sources could use pre-2010 title IV SO2 
allowances for compliance with the Federal CAIR SO2 cap and 
trade program at a 1-to-1 ratio (i.e., SO2 allowances of 
vintage 2009 and earlier would offset one ton of SO2 
emissions). Allowances of vintages 2010 through

[[Page 49728]]

2014 would offset 0.5 tons of emissions (i.e., such allowances would 
need to be retired at a ratio of 2-to-1 for CAIR compliance, in other 
words 2 allowances for every ton of emissions). Allowances of vintages 
2015 and beyond would offset 0.35 tons of emissions (i.e., such 
allowances would need to be retired at a ratio of 2.86-to-1, in other 
words 2.86 allowances for every ton of emissions). Thus, the emission 
value of an SO2 allowance would be independent of the year 
in which it is used, but rather would be based on its vintage (i.e., 
the year in which the allowance is issued). These SO2 
allowance retirement ratios are identical to the retirement ratios in 
the CAIR NFR (see discussion in section VII in the CAIR NFR preamble at 
70 FR 25255-25273, as well as in section IX at 70 FR 25290-25291).
    The Agency proposes to use the single term, ``CAIR SO2 
allowance'' to refer to an SO2 allowance under a CAIR SIP, 
CAIR FIP, or section 126 response.\11\ A CAIR SO2 allowance 
could be used for compliance with the SO2 allowance-holding 
requirement in a CAIR SIP, CAIR FIP, or section 126 SO2 
trading program. Sources in States governed by any of these three 
SO2 trading programs could trade CAIR SO2 
allowances with each other.The CAIR SIP SO2 model trading 
rule (upon which the proposed Federal CAIR SO2 program is 
based) is included in subparts AAA through III of part 96 (70 FR 25362-
25382). Section VIII in the CAIR NFR preamble describes the CAIR model 
cap and trade programs (70 FR 25273-25289).
---------------------------------------------------------------------------

    \11\ A CAIR SO2 allowance is a title IV 
SO2 allowance. For purposes of compliance with the EPA-
administered SIP SO2 trading program or with the Federal 
SO2 trading program in today's proposal, the value of 
such SO2 allowances are discounted based on the allowance 
vintage year, as explained above.
---------------------------------------------------------------------------

2. NOX Program
    The proposed Federal CAIR annual NOX cap and trade 
program would require affected sources to hold annual NOX 
allowances sufficient to cover their emissions for each control period. 
The proposed program would rely on CAIR annual NOX 
allowances that would be allocated to affected sources by the EPA (see 
section VI.D. for the Agency's proposed NOX allocation 
methodology). As in CAIR, an annual NOX allowance would 
authorize the emission of one ton of NOX (see the proposed 
regulatory text for definitions).
    As in the CAIR annual NOX program, the Agency is 
proposing a Compliance Supplement Pool (CSP) of allowances that would 
be allocated to sources and could then be used for compliance with the 
Federal CAIR annual NOX cap and trade program. As explained 
in the CAIR NFR, the Agency apportioned a regionwide pool of about 
200,000 CSP allowances to the CAIR States (see 70 FR 25231-25232). 
Those State CSP amounts are provided in Table V-3 in this preamble. The 
Agency is not inviting comment on the apportionment of CSP allowances 
as determined in CAIR.
    For the Federal annual NOX cap and trade program in 
today's action, the Agency proposes that, for each affected State, we 
would allocate to sources in that State an amount of CSP allowances up 
to the amount that was apportioned to the State in CAIR. The Agency's 
proposed methodology to allocate CSP allowances to sources is described 
below, in section VI.D.
    The Agency proposes that ozone season NOX allowances 
issued under the NOX SIP Call or under the Federal CAIR 
ozone season cap and trade program could not be used for compliance 
with the Federal CAIR annual NOX reduction requirement 
(which is the same restriction as in the CAIR SIP model trading rules).
    The Agency proposes to use the single term, ``CAIR NOX 
allowance'' to refer to a NOX allowance issued under a CAIR 
SIP, CAIR FIP, or section 126 response. A CAIR NOX allowance 
could be used for compliance in a CAIR SIP, CAIR FIP, or section 126 
NOX trading program. Sources in States governed by any of 
these three annual NOX trading programs could trade CAIR 
NOX allowances with each other.
    The CAIR SIP NOX annual model trading rule (upon which 
the proposed Federal CAIR NOX annual program is based) is 
included in subparts AA through II of part 96 (70 FR 25339-25362). 
Section VIII in the CAIR NFR preamble describes the CAIR model cap and 
trade programs (70 FR 25273-25289).
3. Ozone Season NOX Program
    The proposed Federal CAIR ozone season NOX cap and trade 
program would require affected sources to hold CAIR ozone season 
NOX allowances sufficient to cover their emissions for each 
control period. For the proposed ozone season program, the control 
period would extend from May 1 through September 30 for each year of 
the program. As in CAIR, a NOX ozone season allowance would 
authorize the emission of one ton of NOX during the ozone 
season (see the proposed regulatory text for definitions).
    The proposed program would rely on CAIR ozone season NOX 
allowances that would be allocated to affected sources by the EPA (see 
section VI.D. for the Agency's proposed NOX allocation 
methodology). In addition, pre-2009 NOX SIP Call allowances 
could be banked into the proposed Federal CAIR ozone season 
NOX program and used by affected sources for compliance with 
that program. The Agency proposes that NOX allowances issued 
under the Federal CAIR annual NOX program could not be used 
for compliance with the Federal CAIR ozone season NOX 
reduction requirement (which is the same restriction as in the CAIR SIP 
model trading rules).
    As discussed in the CAIR NFR, certain emissions sources that do not 
fit the applicability requirements of CAIR are included in the existing 
EPA-administered NOX Budget Trading Program under the 
NOX SIP Call. (The types of NOX Budget Trading 
Program units that are not EGUs under CAIR include industrial boilers 
and turbines, cement kilns, and small EGUs.) As explained in the CAIR 
NFR, EPA will no longer administer the NOX SIP Call ozone 
season cap and trade program after the 2008 ozone season (see 70 FR 
25290). The CAIR NFR provides that States that choose to participate in 
the CAIR EPA-administered ozone season NOX cap and trade 
program may choose whether or not to bring their non-CAIR 
NOX SIP Call trading sources into the CAIR ozone season 
trading program, through their SIP revision. See section VII in the 
CAIR NFR (70 FR 25255-25273) and section IX.A. (70 FR 25289-25290).
    As discussed above, the Agency is proposing that States may choose 
to submit an abbreviated SIP revision to bring their non-CAIR 
NOX SIP Call trading sources into the proposed Federal CAIR 
ozone season NOX cap and trade program. The abbreviated SIP 
revision would increase a State's ozone season NOX trading 
budget under the proposed Federal CAIR ozone season NOX cap 
and trade program by an amount equal to the portion of the State's 
NOX SIP Call State trading budget that is attributed to such 
units.
    The Agency proposes to use the single term, ``CAIR Ozone Season 
NOX allowance'' to refer to an ozone season NOX 
allowance issued under a CAIR SIP or CAIR FIP. A CAIR ozone season 
NOX allowance could be used for compliance in a CAIR SIP or 
CAIR FIP ozone season NOX trading program. Sources in States 
governed by either of these ozone season NOX trading 
programs could trade CAIR Ozone Season NOX allowances with 
each other.
    The CAIR SIP NOX ozone season model trading rule, upon 
which the proposed Federal CAIR NOX ozone

[[Page 49729]]

season program is based, is included in subparts AAAA through IIII of 
part 96 (70 FR 25382-25405). Section VIII in the CAIR NFR preamble 
describes the CAIR model cap and trade programs (70 FR 25273-25289).

C. Sources Affected Under the Proposed Federal CAIR Cap and Trade 
Programs

    Under the proposed Federal CAIR cap and trade programs, only EGUs 
are subject to the proposed rules. The Agency intends the applicability 
provisions for the proposed Federal CAIR trading programs to be 
identical to the applicability provisions for the CAIR SIP model 
trading programs.
    In today's action, the Agency is proposing two revisions to the 
applicability provisions that were finalized in the CAIR SIP model 
trading rules (see section VIII.C. in the CAIR NFR preamble for 
applicability discussion at 70 FR 25276-25278 and see section VII in 
today's preamble for proposed changes to the CAIR EGU definition). The 
applicability provisions in today's proposed Federal CAIR trading 
programs are identical to the applicability provisions that would apply 
for CAIR if the Agency finalizes its proposed revisions to the CAIR 
model trading rules.
    The proposed revisions to the applicability provisions in CAIR are 
intended to provide clarity and also to align the provisions more 
closely with the provisions in the title IV Acid Rain Program. The 
proposed revisions include adding an exemption for certain solid waste 
incinerators and exempting existing units that have not served a 
generator since before November 15, 1990. Each of these revisions is 
discussed below.
    The status of solid waste incinerators under the CAIR as finalized 
is unclear. The Agency proposes a revision to the applicability 
provisions that would establish a specific exemption for certain solid 
waste incinerators. In the CAIR NFR, the Agency applied the CAIR model 
trading programs to any stationary, fossil-fuel-fired boiler or 
stationary, fossil-fuel-fired combustion turbine serving at any time, 
since the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe producing electricity for sale 
(with exclusions for certain cogeneration units). Under the current 
definition, units would be considered fossil-fuel-fired if they burned 
any fossil fuel. Because solid waste incinerators usually use fossil 
fuel, at least to start up, and because they may burn fossil-fuel 
derived products (such as tires), they are often considered fossil-
fuel-fired. Therefore, to the extent that such incinerators are 
connected to a generator of capacity greater than 25 MWe that generated 
electricity for sale, they would be considered affected units under 
CAIR. However, in the record for the CAIR, EPA stated that the CAIR 
requirements do not reflect any emission reductions from solid waste 
incinerators \12\. Therefore, the EPA is proposing an exemption for 
certain solid waste incinerators. The proposed exemption is analogous 
to an exemption for such units under the Acid Rain Program. The Agency 
proposes this exemption as a revision to the applicability provisions 
in the CAIR and proposes the identical exemption for the Federal CAIR 
trading programs.
---------------------------------------------------------------------------

    \12\ ``Corrected Response to Significant Public Comments on the 
Proposed Clean Air Interstate Rule,'' April 2005, Docket  
OAR-2003-0053-2172.
---------------------------------------------------------------------------

    In addition, the status, under CAIR, of units that formerly 
generated electricity for sale but stopped doing so many years ago 
warrants further clarification. As finalized in CAIR, the applicability 
provisions include units serving ``* * * at any time, since the start-
up of the unit's combustion chamber, a generator * * *'' The Agency is 
proposing to revise the applicability provisions to exempt existing 
units that have not served a generator since before November 15, 1990. 
This proposed exemption is analogous to the approach under the Acid 
Rain Program. The Agency proposes this exemption as a revision to the 
applicability provisions in the CAIR and proposes the identical 
exemption for the Federal CAIR trading programs.
    The Agency proposes that, in any jurisdiction for which a final 
CAIR FIP or section 126 response is promulgated, the following units 
will be subject to the Federal CAIR trading programs (i.e., to the 
Federal CAIR SO2, NOX annual, or NOX 
ozone season programs, as appropriate).
    Except for a unit that qualifies as a cogeneration unit or a solid 
waste incinerator (see below), an affected unit is any stationary, 
fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion 
turbine serving at any time, since the later of November 15, 1990 or 
the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe producing electricity for sale.

Cogeneration Unit Exemption

    As in the CAIR NFR, certain cogeneration units would be exempt from 
the proposed Federal CAIR cap and trade programs. Cogeneration units 
include units having equipment used to produce electricity and useful 
thermal energy for industrial, commercial, heating, or cooling purposes 
through sequential use of energy and meeting certain operating and 
efficiency standards. The program has different applicability 
provisions for non-cogeneration units and cogeneration units. Any 
cogeneration unit, serving (since the later of November 15, 1990 or the 
start-up of the unit), a generator with a nameplate capacity of greater 
than 25 MW and supplying more than \1/3\ potential electric output 
capacity and more than 219,000 MW-hrs annually to any utility power 
distribution system for sale, would be subject to the requirements of 
the proposed Federal CAIR trading rules. Otherwise, the unit would 
qualify for an exemption under the Federal rules. This cogeneration 
unit exemption is identical to the exemption in the CAIR NFR. (Note 
that some language to clarify application of the exemption is proposed 
for the CAIR SIP trading programs and the same language is also 
included in the proposed Federal trading programs.) Section VIII.C.3. 
of the CAIR NFR preamble describes the cogeneration unit exemption and 
discusses the specific elements of how units would qualify and remain 
qualified for the exemption (70 FR 25276-25278).

Solid Waste Incinerator Exemption

    As explained above, the Agency is proposing today to provide an 
exemption for certain solid waste incinerators in the Federal CAIR cap 
and trade programs and to revise the provisions in the CAIR to exempt 
certain solid waste incinerators.
    Specifically, the Agency proposes that, for a solid waste 
incineration unit commencing operation before January 1, 1985, for 
which the average annual fuel consumption of non-fossil fuels during 
1985-1987 exceeded 80 percent and during any 3 consecutive calendar 
years after 1990 the average annual fuel consumption of non-fossil 
fuels exceeds 80 percent, the unit is not subject to the Federal CAIR 
cap and trade programs.
    The Agency also proposes that, for a solid waste incineration unit 
commencing operation on or after January 1, 1985, for which the average 
annual fuel consumption of non-fossil fuels for the first 3 calendar 
years of operation exceeds 80 percent and during any 3 consecutive 
calendar years after 1990 the average annual fuel consumption of non-
fossil fuels exceeds 80 percent, the unit is not subject to the Federal 
CAIR cap and trade programs.

[[Page 49730]]

Individual Unit Opt-Ins

    Today's proposal includes provisions for individual units to opt-in 
to the Federal CAIR trading programs. However, EPA proposes that those 
provisions would become applicable to sources in a given State only if 
the State chooses to submit an abbreviated SIP revision that would 
provide for the inclusion of non-EGU opt-ins in the Federal CAIR 
trading programs.
    The CAIR final rule includes provisions for individual unit opt-ins 
in the CAIR SIP model trading programs. As discussed in CAIR, States 
choosing to participate in the EPA-administered CAIR trading programs 
can choose whether or not to include opt-in provisions in their CAIR 
SIP revisions. If States choose to include opt-in provisions, they must 
include the provisions provided in the CAIR SIP model trading rules.
    The Agency generally believes that States should have the option of 
including provisions for individual unit opt-ins in the CAIR SIP 
trading programs. The EPA considered requiring all States to have opt-
in provision in the proposed Federal CAIR trading programs. By not 
requiring opt-in provisions in all States covered by the proposed 
Federal trading programs, the Agency seeks to preserve the States' 
flexibility to decide whether to allow opt-in units.
    If EPA were to implement Federal CAIR trading programs with 
required provisions allowing individual units to opt-in, then some 
units may opt-in to the Federal programs. If the Agency subsequently 
approved a CAIR SIP revision that did not include opt-in provisions, 
then any units in the affected State that had opted-in under the 
Federal programs would be stranded. Such units would likely have made 
decisions--such as to install emission control equipment--based on 
participation in a trading program in which they would no longer be 
able to participate. The alternative to stranding such units would be 
for a State that would not otherwise choose to implement the opt-in 
provisions to implement such provisions at least for the past opt-in 
units. Thus, in order to preserve States' flexibility with regard to 
opt-ins the Agency does not propose to require the opt-in provisions to 
apply in all States under the Federal CAIR trading programs, but 
proposes that each State have the option of activating the opt-in 
provisions in the Federal CAIR programs through an abbreviated SIP 
revision.
    The Agency proposes that if States choose to submit abbreviated SIP 
revisions to provide for the inclusion of non-EGU opt-ins in the 
Federal CAIR trading programs, the SIP revisions must include the opt-
in provisions that are provided in the CAIR final rule. See section 
VIII.G. in the CAIR NFR preamble for discussion of opt-in provisions 
(70 FR 25286-25288).

D. Allocation of NOX Emission Allowances to Sources

    For States that choose under CAIR to participate in the EPA-
administered annual and/or ozone season NOX cap and trade 
programs (adopting the CAIR SIP model trading rules), the EPA provided 
in the CAIR NFR an example methodology for allocating NOX 
allowances to individual sources. See section VIII.D. of the CAIR NFR 
preamble (70 FR 25278-25282).
    For the Federal CAIR NOX cap and trade programs, the 
Agency is proposing to use a NOX allocation methodology that 
is consistent with the CAIR SIP model trading rules. Within each 
affected State, the Agency would allocate (i.e., distribute) to sources 
a total amount of allowances authorizing an emissions tonnage that 
equals the State's NOX budget. The Agency's proposed 
NOX allocation methodology is described below.

Timing of NOX Allocations

    For the reasons discussed in section IV in today's preamble, the 
EPA intends to finalize a CAIR FIP in March 2006. By finalizing a FIP, 
the EPA would in no way preclude a State from developing its own SIP 
either to adopt the CAIR model trading rules (with any discretionary 
elements allowed by the CAIR rule, including allocation of unit-by-unit 
NOX allowances) or to meet the CAIR emission reduction 
requirements through different measures of the State's choosing.
    The Agency's preference is for States to make decisions about 
NOX allocations for their sources. The EPA intends to 
determine Federal unit-by-unit NOX allocations (with 
opportunity for public comment). However, we intend to only record 
those Federal allocations in allowance accounts for sources located in 
a State without a timely, approved CAIR SIP (or timely, approved 
abbreviated CAIR SIP revision providing for State allocations).
    In considering when to record Federal NOX allocations in 
source accounts, the Agency seeks to balance the following two goals: 
(1) To provide certainty to sources regarding their CAIR NOX 
allocations and time for sources to make compliance decisions, and (2) 
to provide States choosing to allocate CAIR NOX allowances 
with time to do so and EPA with time to approve SIP revisions that 
include State allocations. Taking into consideration the CAIR SIP 
submittal dates (for full or abbreviated revisions), the amount of time 
needed by the Agency to approve SIP revisions, and the amount of time 
remaining before the initial CAIR control period, the EPA developed a 
proposed schedule for recording NOX allocations in source 
accounts. The Agency's proposed NOX allocation schedule is 
presented below. The EPA seeks comment on this proposed schedule.
    The Agency will endeavor to work with States to ensure that we can 
approve SIP revisions and record State NOX allocations in 
source accounts. The EPA intends to act in such a way that, once 
Federal NOX allocations are recorded for a particular 
control period (which would only occur in the absence of a timely, 
approved full CAIR SIP revision, or timely, approved abbreviated CAIR 
SIP revision containing allocations), we would not approve overlapping 
State allocations for that same control period.\13\ Rather, EPA will 
work with the States to approve SIP revisions with State allocations 
for control periods that begin upon the expiration of a control period 
for which Federal allocations have been recorded in source accounts. It 
would be highly disruptive to the allowance market if Federal 
allocations that had been recorded and traded on the market could 
subsequently be rendered invalid due to approval of overlapping State 
allocations for the same control period.
---------------------------------------------------------------------------

    \13\ As discussed in the CAIR NFR preamble (70 FR 25278), each 
State has the flexibility to allocate its allowances however they 
choose (within their State budgets) so long as certain timing 
requirements are met. Today's preamble discusses the approval of 
State allocations within the context of coordinating timing for 
recording Federal allocations--note that this discussion is not 
intended to imply any less flexibility for States in their choice of 
allocation methodology than the flexibility provided in CAIR.
---------------------------------------------------------------------------

    The discussion in this section is focused on the timing for 
recordation of Federal allocations in coordination with approval of SIP 
revisions and recordation of State allocations--assuming States choose 
to participate in the EPA-administered CAIR NOX trading 
programs. The Agency would also carefully consider the timing of a 
transition from Federal to State-implemented programs for any State 
choosing to use a method other than the EPA-administered State CAIR 
trading programs to meet their CAIR obligations.
    As discussed further below, the EPA intends to record Federal 
allocations 1 year at a time for the initial control periods. In this 
manner, even if a State does not have an approved CAIR SIP

[[Page 49731]]

revision in time for the Agency to record State allocations for the 
first control period, it would be possible to record State allocations 
for future control periods. The Agency strongly urges States to submit 
CAIR SIP revisions (full or abbreviated revisions) to the Agency in a 
timely manner, and we intend to work with States and ensure that we 
would not have overlapping allocations for any control period.
    As explained in the CAIR NFR, the States have until September 11, 
2006 to submit full CAIR SIP revisions to the Agency. For a State that 
chooses to participate in the EPA-administered CAIR SIP NOX 
trading programs this SIP revision would be required to include the 
State's NOX allocation methodology. The EPA anticipates that 
it may require about a year to approve a full SIP submission. The CAIR 
SIP rules require States to submit their first set of CAIR 
NOX allocations to EPA by October 31, 2006.
    As discussed above, the Agency is proposing that States may choose 
to submit an abbreviated SIP revision to allocate NOX 
allowances to individual sources in their State (for the annual and/or 
ozone season Federal CAIR NOX trading programs). In this 
way, a State could choose to allocate NOX allowances to its 
sources while letting the FIP (or section 126 remedy) control all other 
aspects of the trading programs. Through an abbreviated SIP revision, a 
State can also ensure that its allocations will apply even though its 
full SIP revision is still undergoing EPA review. Note that States 
could also choose to address non-EGU opt-ins, allocation of CSP 
allowances, and/or inclusion of non-CAIR NOX SIP Call 
trading sources in an abbreviated SIP revision. The Agency proposes 
that States would have until March 31, 2007 to submit their allocation 
methodology in an abbreviated SIP revision. The EPA proposes to allow 
States to submit abbreviated SIP revisions later than full revisions 
because we anticipate that we will be able to complete the approval 
process more quickly for abbreviated SIP revisions due to their 
narrower scope. The Agency proposes that the State would have until 
October 31, 2007 to submit their first set of CAIR NOX 
allocations pursuant to an abbreviated SIP revision. The proposed dates 
for recording NOX allocations, discussed below, would be the 
same whether the allocations are approved in a full SIP revision or in 
an abbreviated revision.
    Assuming that States submit full CAIR SIP revisions by the 
September 2006 deadline and that EPA can approve the revisions in about 
a year, and assuming some additional time may be required for 
coordination between States and EPA before State allocations can be 
recorded in source accounts, it is reasonable to assume that EPA could 
record such State allocations by December 1, 2007. Likewise, assuming 
that States submit abbreviated SIP revisions that address allocations 
by the March 2007 deadline and that EPA can approve the abbreviated 
revisions in about 6 months, it is reasonable to assume that EPA could 
record such allocations by December 1, 2007.
    Therefore, the EPA proposes to record NOX allocations in 
source accounts for the 2009 control period by December 1, 2007. If a 
State's timely NOX allocations are approved then the Agency 
would record State allocations for the 2009 control period. However, 
for any CAIR State for which a SIP is not approved by December 1, 2007, 
the EPA would record Federal NOX allocations for 2009. 
Recording NOX allocations by December 2007 for the 2009 
control period provides affected sources with certainty of their 
allocations 1 year in advance of the beginning of the control period.
    The Agency proposes to record Federal NOX allocations in 
source accounts 1 year at a time for the 2009 and 2010 control periods 
in order to provide flexibility to States. If EPA records Federal 
allocations for the 2009 control period and subsequently approves a 
State's timely SIP revision including NOX allocations (a 
full or abbreviated revision), the Agency would record the State's 
allocations for future years. The Agency does not intend to approve 
State NOX allocations for a particular control period that 
would overlap with Federal allocations already recorded in source 
accounts. Provisions for withdrawal of CAIR FIPs and section 126 
remedies are discussed elsewhere in this preamble.
    The EPA proposes to record NOX allocations in source 
accounts by December 1, 2008 for the 2010 control period. If a State's 
NOX allocations are approved by then, the Agency may record 
State allocations for the 2010 control period. However, for any CAIR 
State for which a SIP is not approved by December 1, 2008, the EPA 
would record Federal NOX allocations for 2010. Therefore, if 
a State obtained SIP approval after December 1, 2007 but before 
December 1, 2008, the State's NOX allocations may be 
recorded in source accounts for the 2010 control period.
    The Agency proposes to record NOX allocations in source 
accounts by December 1, 2009 for the 2011-2013 control periods. 
Therefore, if a State obtained SIP approval after December 1, 2008 but 
before December 1, 2009, the State's NOX allocations may be 
recorded in source accounts for the 2011-2013 control periods. However, 
for any CAIR State for which a SIP is not approved by December 1, 2009, 
the EPA would record Federal NOX allocations for 2011-2013.
    Beginning with the 2014 control period and for each control period 
thereafter, EPA proposes to record Federal NOX allocations 
in source accounts by December 1 of each year for the control period in 
the fourth year after the recordation year, thereby providing 
allowances about 3 years in advance for sources to plan their 
compliance strategies. For example, EPA would record allocations for 
the 2014 control period by December 1, 2010.
    The CAIR requires States to submit to the Agency their unit-by-unit 
NOX allocations for a given year no less than 3 years prior 
to the applicable control year to ensure sources have time to plan for 
compliance (see CAIR NFR preamble at 70 FR 25278-25279)\14\. In today's 
proposal, EPA would record Federal NOX allocations in source 
accounts (in absence of approved timely SIP revisions) with less than 3 
years lead time for the first 4 control periods, i.e., for 2009 through 
2012. Beginning with the 2013 control period, however, we propose to 
record Federal allocations with about 3 years' lead time. This proposed 
schedule is intended to balance the need to provide sources their 
allocations in advance to facilitate planning for compliance, with the 
need to preserve opportunities for States to allocate allowances to 
sources if they choose. The EPA acknowledges that it is preferable for 
sources to have at least 3 years lead time to the extent feasible. We 
strongly urge States to submit timely CAIR SIP revisions so that we can 
approve revisions and record State allocations in source accounts 
according to the schedule in CAIR, which would provide at least 3 years 
notice for all but the first control period.
---------------------------------------------------------------------------

    \14\ As discussed in the CAIR NFR (70 FR 25278), based on a SIP 
submission deadline in September 2006 there would be less than 3 
years notice of allocations for the first control period.
---------------------------------------------------------------------------

    Table VI-1, below, summarizes the Agency's proposed timing for 
recording Federal NOX allocations in source accounts. The 
table shows the timing scheme through the 2016 control period. Timing 
for subsequent control periods would follow the same pattern as is 
shown for 2014-2016, i.e., allocations would by recorded by 3 years in 
advance of the control period.

[[Page 49732]]



          Table VI-1.--Proposed Timing for NOX Allocations\15\
------------------------------------------------------------------------
                                                       Time between
                            Date Federal NOX       recordation date and
 CAIR  control period       allocations are        beginning of control
                                recorded                  period
------------------------------------------------------------------------
2009..................  December 1, 2007.......  1 year.
2010..................  December 1, 2008.......  1 year.
2011..................  December 1, 2009.......  1 year.
2012..................  December 1, 2009.......  2 years.
2013..................  December 1, 2009.......  3 years.
2014..................  December 1, 2010.......  3 years.
2015..................  December 1, 2011.......  3 years.
2016..................  December 1, 2012.......  3 years.
------------------------------------------------------------------------

    The Agency intends to publish its determination of Federal 
NOX allocations for 2009-2014 in a single notice (with 
opportunity for comment) prior to December 1, 2007. The Agency would 
publish its determination of Federal NOX allocations (with 
opportunity for comment) prior to December 1 of each year for future 
years. For example, we would publish Federal NOX allocations 
for the 2015 control period during 2011.
---------------------------------------------------------------------------

    \15\ The Agency does not intend to wait until December 1, 2007 
to record State NOX allocations for the 2009 control 
period but rather would record approved allocations as soon as 
feasible and according to the schedule in the CAIR SIP rules. The 
EPA proposes that we would not record Federal NOX 
allocations for any State until December 1, 2007 for the 2009 
control period in order to provide the opportunity for State 
allocations to be submitted and approved. The Agency proposes the 
same process for future years as well (i.e., we would record State 
allocations for the 2010 control period as soon as is feasible and 
according to the schedule in the CAIR SIP rules, but would wait 
until December 1, 2008 to record Federal allocations for 2010 in 
order to provide opportunity for States to allocate).
---------------------------------------------------------------------------

    The Agency intends to work with the States to ensure that for any 
State that chooses to allocate NOX allocations--either 
through a full SIP revision or an abbreviated revision--the Agency will 
record the State's allocations (contained in an approved SIP revision) 
in source accounts rather than record Federal allocations, as soon as 
it is feasible. The proposed timing scheme for recording Federal 
NOX allocations is intended to provide States with as much 
flexibility as is feasible given the available time, while also 
providing sources time to plan compliance strategies.
    For States choosing to submit full SIP revisions for CAIR, the 
Agency suggests they could consider designating any of the four 
specific elements that we propose to accept in abbreviated SIP 
revisions (e.g., NOX allocations) as being submitted for 
purposes of both a full SIP revision and an abbreviated revision. 
Because the Agency anticipates that we would be able to approve 
abbreviated SIP revisions more quickly than full revisions, a State 
could, by designating its NOX allocations as an abbreviated 
SIP revision (as well as being part of a full SIP revision), 
potentially allow for the allocations portion to be approved more 
quickly. This might have benefit, for example, in a situation in which 
it was not feasible to approve a State's full SIP revision before 
December 1, 2007. If the NOX allocations portion of the 
revision could be approved by December 1, 2007, then the State's 
allocations may be recorded in source accounts. Until the full SIP were 
subsequently approved, the other elements of the trading programs would 
be controlled by the Federal CAIR programs. Provisions for withdrawal 
of CAIR FIPs and section 126 responses are discussed elsewhere in this 
preamble.
    Today the Agency is proposing its NOX allocation 
methodology for the Federal CAIR NOX cap and trade programs. 
The EPA intends to publish its initial determination of unit-by-unit 
Federal CAIR NOX allocations in a subsequent notice of data 
availability (NODA).\16\ The public will have opportunity to comment on 
those initial allocations.
---------------------------------------------------------------------------

    \16\ The Agency will determine Federal NOX 
allocations based on the best available data. When EPA publishes its 
NOX allocations, the unit-by-unit list of allocations 
would not constitute a list of affected sources and should not be 
interpreted as such.
---------------------------------------------------------------------------

    In the NODA, the Agency intends to publish its initial 
NOX allocation determinations for the control periods 2009 
through 2014. After public comment, the EPA would publish its final 
determinations of allocations for 2009 through 2014. Although EPA 
intends to publish its allocations for 2009 through 2014 in a single 
notice, the Agency intends to record allocations in source accounts one 
year at a time for 2009 and 2010 in order to provide flexibility to 
States.

Proposed NOX Allocation Methodology

    Today's proposed NOX allocation approach for both annual 
and ozone season allowances is consistent with the example methodology 
presented in the CAIR SIP model trading rules. The proposed methodology 
is the same for annual NOX allowances and for ozone season 
NOX allowances, except that the ozone season method uses 
ozone season heat input not annual heat input.
    For existing units, the proposed NOX allocation 
methodology uses input-based allocations, adjusting the heat input by 
factors based on fuel type, as described below. As in the example 
allocation methodology in the CAIR model rules, for existing units the 
Agency proposes to use heat input based on the average of the 3 highest 
amounts of a unit's adjusted heat input for 5 years (2000 through 
2004). The EPA also asks for comment on using heat input based on 3 or 
4 years of data rather than 5 years.
    For new units that have established baselines, allocations would be 
based on generation using a modified output approach to convert output 
to heat input (described below), and allocations to existing units 
would be updated to take into account new generation as new units would 
be allocated from the pool of allowances shared with existing sources. 
New units that have not yet established baseline data would be 
allocated from a new unit set-aside.
    The Agency would allocate from the State's EGU NOX 
budget for the first 6 control periods (2009 through 2014) for existing 
sources on the basis of historic baseline heat input. Consistent with 
CAIR, January 1, 2001 is the proposed cut-off on-line date for 
considering units as existing units. Allowances for 2015 and later 
would be allocated from the State's EGU NOX budget annually, 
3 years in advance. These allocations would take into account output 
data from new units with established baselines (modified by heat input 
conversion factors to yield heat input numbers, as described below). As 
new units enter into service and establish a baseline, they would be 
allocated allowances in proportion to their share of the total 
calculated heat input. Allowances allocated to existing units would 
slowly decline as their share of total calculated heat input decreases 
with the entry of new units (note that once a baseline heat input is 
established for existing units, this baseline heat input would not 
change).
    New units that have entered service but have not yet started 
receiving allowances through the updating of allocations would receive 
allowances each year from a new unit set-aside. The allowances from the 
set-aside would be distributed based on a unit's actual emissions from 
the previous year, which would provide allowances for use in meeting 
the allowance-holding requirement during the interim period before the 
unit is allocated allowances on the same basis as existing units. 
Consistent with the CAIR SIP example allocation methodology, the new 
unit set-aside would be equal to 5 percent of a State's emission budget 
for the years 2009-2013 and 3 percent of a State's

[[Page 49733]]

emission budget for subsequent years. New units would begin receiving 
allowances from the set-aside for the control period immediately 
following the control period in which the new unit commences commercial 
operation, based on the unit's emissions from the preceding control 
period. Under the proposed CAIR Federal cap and trade programs, EPA 
would allocate allowances from the set-aside to all new units in any 
given year as a group. If there are more allowances requested than in 
the set-aside, allowances would be distributed on a pro-rata basis.
    As in the CAIR SIP example methodology, after 5 years of operation, 
a new unit would have an adequate operating baseline of output data to 
be incorporated into the calculations for NOX allocations to 
all affected units. The average of the highest 3 years from these 5 
years would be multiplied by the applicable heat-input conversion 
factors to calculate the heat input value used to determine the new 
unit's allocation from the pool of allowances for all sources. New 
units would update the heat input numbers only once--for the initial 5 
year baseline period after they start operating. As in the CAIR SIP 
example methodology, existing units as a group would not update their 
heat input, which would eliminate the potential for a generation 
subsidy. Retired units would continue to receive allowances 
indefinitely, thereby creating an incentive to retire less efficient 
units.
    The Agency seeks comment on its proposed NOX allocation 
methodology.

Sources of Data for NOX Allocations

    To determine NOX allocations for purposes of the Federal 
CAIR cap and trade programs, the Agency proposes to use heat input and 
fuel type data reported to EPA's Electronic Data Reporting (EDR) 
system, where available, and to use best available heat input and fuel 
type data (e.g., data from the Energy Information Administration (EIA)) 
where EDR data is not available. The Agency proposes to use output data 
reported to EPA's EDR system.

Adjustments to Heat Input Data by Fuel Factors

    As in the example allocation methodology in the CAIR SIP model 
rules, today's proposed approach would include adjustments to heat 
input by fuel type, using fuel adjustment factors that are based on 
average historic NOX emissions rates by three fuel types 
(coal, natural gas, and oil) for the years 1999--2002. These adjustment 
factors are 1.0 for coal-fired units, 0.6 for oil-fired units, and 0.4 
for units fired with all other fuels (e.g., gas). The factors reflect 
the inherently different emissions rates of different fossil fuel-fired 
units.

Modified Output Approach for New Units

    As in the CAIR example allocation approach, the Agency proposes to 
allocate to new units that have established baselines on a ``modified 
output'' basis, by multiplying the unit's gross output by a heat rate 
conversion factor of 7,900 Btu/kWh for coal units and 6,675 Btu/kWh for 
oil and gas units. A conversion rate for each fuel type will create 
consistent and level incentives for efficient generation, rather than 
favoring new units that may have higher heat rates. The conversion 
factors are based on assumptions in EIA's Annual Energy Outlook (AEO) 
2004.

Cogeneration Units

    As in the CAIR SIP example methodology, for new cogeneration units, 
allowances would be calculated by converting the available thermal 
output (Btu) of useable steam from a boiler to an equivalent heat input 
by dividing the total thermal output (Btu) by a general boiler/heat 
exchanger efficiency of 80 percent.
    For new combustion turbine cogeneration units, allowances would be 
calculated by converting the available thermal output of useable steam 
from a heat recovery steam generator (HRSG) to an equivalent heat input 
by dividing the total thermal output (Btu) by the same efficiency rate, 
then adding the electrical generation from the combustion turbine 
converted to an equivalent heat input by multiplying by the conversion 
factor of 3,413 Btu/kWh. This sum will yield the total equivalent heat 
input for the cogeneration unit. This approach focuses on the 
efficiency of a cogeneration unit in capturing energy in the form of 
steam or heat from the fuel input.
    For additional discussion of the example NOX allocation 
methodology in the CAIR SIP model trading rules, see section VIII.D. in 
the CAIR NFR preamble (70 FR 25278-25282).
    Alternative allocation approach on which the Agency seeks comment: 
Providing sources owned by small entities with a greater share of 
allowances.
    The EPA also seeks comment on allocating in such a way as to 
provide sources owned by small entities with a greater share of 
allowances. The Agency convened a Small Business Advocacy Review Panel 
that discussed options to provide additional flexibility to small 
entities. Specifically, the Agency is taking comment on an option 
(proposed by one member of the Panel) that would set aside some 
percentage of States' annual NOX budgets and provide these 
allowances to certain small entity sources that can demonstrate 
economic hardship as a result of the rule. Such an option would 
necessitate adjusting the number of NOX allowances available 
to other affected sources in order to ensure that the overall reduction 
requirements of CAIR are achieved. Because EPA does not allocate 
SO2 allowances, the Agency could only provide relief through 
NOX allowance allocations. However, because allowances are 
fungible, it would be possible for the burden on small entity sources 
that would experience hardship as a result of the SO2 
trading program to be reduced through the distribution of additional 
NOX allowances. The EPA solicits comments on appropriate 
criteria for establishing hardship. See section 9.4 of the Panel report 
(http://www.epa.gov/sbrefa) and section IX.C. in this preamble for 
further description of the Panel discussions.
    Alternative allocation approach on which the Agency seeks comment: 
Use of an auction to distribute NOX allowances.
    Allowances can be distributed by allocating them directly to 
sources, offering them for sale to bidders (i.e., an ``auction'') or a 
combination of the two. Today's notice proposes to allocate 
NOX allowances directly to emissions sources. However, the 
Agency also seeks comment on the desirability of using a combination of 
direct allocations and auctions for distributing allowances in the 
proposed Federal CAIR trading programs. The primary benefit of 
allowance auctions is that they are the most economically efficient way 
to distribute allowances. This approach can ensure that all parties, 
including the general public, have access to allowances. With an 
auction, existing and new sources have equal access to allowances. 
Under a combination approach, such as the one we are taking comment on, 
the effect of these benefits is dependent upon the percentage of 
allowances that are auctioned.
    The EPA discussed allowance auctions and took comment on using 
auctions in the CAIR proposal (69 FR 4566, January 30, 2004) and 
supplemental proposal (69 FR 32684, June 10, 2004). The title IV Acid 
Rain Program uses a combination approach to distributing allowances, 
reserving 2.8 percent of available allowances for an auction and 
directly allocating the remainder.
    The Agency seeks comment on using a combination approach for 
distributing

[[Page 49734]]

NOX allowances in the proposed Federal CAIR trading 
programs. The proposed approach is analogous to the auction approach in 
the Administration's proposed Clear Skies legislation, and is defined 
as follows: For the first CAIR NOX control period (2009) the 
Agency would allocate 100 percent of the allowances using the fuel-
factor adjusted heat input approach described above. For the second 
control period (2010) the Agency would allocate 99 percent of 
allowances to units and auction the remaining 1 percent. The percentage 
of allowances distributed via auction would increase over time, with 
the Agency distributing via auction an additional 1 percent of 
allowances every year for twenty years, and then an additional 2.5 
percent of allowances every year thereafter, until eventually 100 
percent of allowances would be distributed via auction.
    If EPA implemented allowance auctions for the Federal CAIR trading 
programs, the Agency would establish procedures for the frequency and 
timing of auctions, bidding schedules and bidding mechanisms, 
requirements for financial guarantees, and other administrative 
requirements and procedures as necessary to implement allowance 
auctions. The Agency seeks comment on appropriate auction procedures 
for the proposed Federal CAIR trading programs. Allowance auctions are 
typically (but are not required to be) open to any person, including 
sources or third-party entities, that can comply with the auction 
protocols. Proceeds from any auction conducted for Federal CAIR trading 
programs would be deposited in the United States Treasury.
    Regardless of whether or not the allowance distribution approach 
taken by the Agency in its Federal trading programs includes the use of 
auctions, the States have full flexibility in determining the 
allocation method to use in their State CAIR implementation plans. As 
discussed above, the EPA would allocate NOX allowances to 
sources only in a CAIR-State that does not have a timely, approved full 
CAIR SIP revision or timely, approved abbreviated CAIR SIP revision 
that includes allocations. A State choosing to submit a full SIP 
revision or an abbreviated SIP revision that covers allowance 
allocations could elect to distribute allowances using auctions, direct 
allocations to sources, or other methodologies (or combinations of 
methodologies). The Agency intends to withdraw Federal CAIR trading 
programs in coordination with approval of full CAIR SIP revisions 
(provisions for withdrawal of CAIR FIPs and section 126 responses are 
discussed elsewhere in this preamble).

Allocation of CSP Annual NOX Allowances to Sources

    As discussed in section V, above, the Agency proposes that we will 
distribute annual NOX allowances from the Compliance 
Supplement Pools (CSP) to sources for use in complying with the Federal 
annual NOX cap and trade program. The proposed CSP amounts 
for each State are the same as in the CAIR NFR, and are shown in Table 
V-3 in today's action. The Agency is not inviting comment on the State 
CSP amounts.
    In the CAIR NFR, the Agency provided that a State participating in 
the EPA-administered CAIR SIP NOX annual trading program 
would distribute its CSP allowances by two mechanisms: (1) To sources 
that implement NOX control measures resulting in reductions 
in 2007 or 2008 that are beyond what is required by any applicable 
State or Federal emissions limitation (early reductions); and, (2) 
based on demonstration of need for an extension of the 2009 deadline 
for implementing emission controls. See section VII.A. in the CAIR NFR 
preamble (70 FR 25256-25263).
    Today, the Agency proposes to allocate CSP allowances to sources 
for use in the Federal CAIR annual NOX cap and trade program 
based on the same two mechanisms as we provided in the CAIR NFR for 
States to use. However, we propose to use a more specific methodology 
for determining early reductions than the mechanism provided in the 
CAIR NFR.
    The Agency proposes to award CSP allowances for early reductions to 
units that--for the years for which they apply for early reduction 
credits--are operating at an annual NOX emission rate below 
0.25 lb/mmBtu. In addition, the Agency proposes that if a unit applying 
for early reduction credit is included in a title IV NOX 
averaging plan, then the source must demonstrate that the plan-wide 
weighted-average NOX emission rate for the year for which 
early reduction credit is sought must be equal to or lower than the 
plan-wide rate for the year prior to the year for which credit is 
sought. Provided a unit met these proposed criteria, it could request 
early reduction credit equal to the difference between 0.25 lb/mmBtu 
and the unit's actual emission rate multiplied by the unit's actual 
heat input for the applicable control period. In proposing these 
criteria, for early reductions, EPA believes that the criteria ensure 
that the award of CSP allowances will be aimed at early reductions and 
that owners and operators will be able to make reasonable projections 
about how many allowances they may receive for their early reductions. 
This early reduction method is similar to the method used in the 
NOX SIP Call section 126 action (65 FR 2674, January 18, 
2000). The Agency seeks comment on this proposed method for determining 
early reductions.
    Under the abbreviated SIP revision option that the Agency proposes 
today, States could choose to submit abbreviated revisions addressing 
distribution of CSP allowances to individual sources. Such revisions 
would need to include mechanisms based on early reductions as well as 
based on demonstration of need. States could choose to include the 
early reduction mechanism set forth in the CAIR SIP model trading rules 
or could choose to use the more specific early reduction criteria 
proposed in today's Federal trading rules, in addition to the criterion 
based on demonstration of need.

E. Allocation of SO2 Emission Allowances to Sources

    The proposed Federal CAIR SO2 cap and trade program 
would rely on title IV allowances, as does the CAIR SIP model 
SO2 trading rule. Title IV allowances have already been 
allocated in perpetuity to individual units by title IV of the CAA (70 
FR 25278). Thus, today's proposal does not include an allocation 
methodology for SO2 allowances, except with regard to opt-in 
units.

F. Allowance Banking

    Allowance banking is the retention of unused emissions allowances 
from 1 calendar year for use in a later calendar year. Banking allows 
sources to make reductions beyond required levels and ``bank'' the 
unused allowances for use later. Generally speaking, banking has 
several advantages. Allowance banking can encourage earlier or greater 
reductions than are required from sources, stimulate the market and 
encourage efficiency, and provide flexibility in achieving emissions 
reductions goals.
    The Agency proposes to allow unrestricted banking under the Federal 
CAIR cap and trade programs, the same as in the CAIR SIP model cap and 
trade programs. For additional discussion on allowance banking 
provisions in CAIR, see section VIII.E.1 in the CAIR NFR preamble (70 
FR 25282-25283).

G. Incentives for Early Reductions

    When sources reduce their SO2 and NOX 
emissions prior to the first phase

[[Page 49735]]

of a multi-phase cap and trade program, it creates a slope of emissions 
that gradually declines over time, an emission reduction ``glide path'' 
that provides early environmental benefit and lowers the costs of 
compliance. Early reduction credits (ERCs) can provide an incentive for 
sources to install and/or operate controls before the implementation 
dates. Allowing emission allowances from existing programs to be used 
for compliance in new programs is another mechanism to encourage early 
reductions prior to the start of cap and trade programs. See further 
discussion of this topic in section VIII.F. of the CAIR NFR preamble 
(70 FR 25284-25286).
    As in the CAIR SIP model trading rules, the proposed Federal CAIR 
cap and trade programs would provide incentives for early reductions in 
each of the three programs (the SO2 program, NOX 
program, and ozone season NOX program), as described below.
1. SO2 Program
    The proposed Federal CAIR SO2 cap and trade program 
would allow for affected sources to use title IV SO2 
allowances of vintage 2009 and earlier for compliance with the Federal 
CAIR program at a 1-to-1 ratio. This approach was part of the CAIR 
policy case assumptions used in the rulemaking modeling and the EPA has 
shown that the SO2 cap and trade program, with this early 
incentive mechanism, will achieve the level of SO2 
reductions needed to meet the CAIR goals. This proposed early reduction 
incentive is identical to the SO2 incentive in the CAIR SIP 
model cap and trade programs.
2. NOX Program
    The proposed Federal CAIR NOX cap and trade program 
would provide incentives for early annual NOX reductions by 
creating a Compliance Supplement Pool (CSP) for each affected State, 
from which EPA could distribute allowances for early, surplus 
NOX emissions reductions occurring in the years 2007 and 
2008, as described above. The Agency's proposed method for allocating 
CSP allowances to States is explained above. As in the CAIR SIP rule, 
the CSP for today's proposal would provide a total of about 200,000 
annual NOX allowances of vintage 2009 for the CAIR region, 
apportioned to each State, which would be in addition to each State's 
annual NOX budgets. Table V-3 in this preamble provides the 
CSP amounts by State. The Agency is not inviting comment on the CSP 
amounts that were determined in CAIR. This proposed early reduction 
incentive is identical to the annual NOX incentive in the 
CAIR SIP rule, except that we are proposing a more specific methodology 
for determining early reductions than the criteria in the CAIR SIP 
rule.
3. Ozone Season NOX Program
    The proposed Federal CAIR ozone season NOX cap and trade 
program would allow the use of NOX SIP Call allowances of 
vintage years 2008 and earlier for compliance with the Federal CAIR 
ozone season program. This mechanism would provide an incentive for 
sources in NOX SIP Call States to reduce their ozone season 
NOX emissions early and bank additional allowances into the 
Federal CAIR ozone season program. This proposed early reduction 
incentive is identical to the ozone season NOX incentive in 
the CAIR SIP cap and trade programs.

H. Monitoring and Reporting Requirements

    Under the CAIR SIP model cap and trade rules, sources are required 
to monitor and report NOX and SO2 mass emissions 
in accordance with 40 CFR part 75. (See Section VIII.H. of the CAIR NFR 
preamble, 70 FR 25288.) Many CAIR sources are measuring and reporting 
SO2 mass emissions and NOX emission rate year 
round under the Acid Rain Program. Many additional sources are also 
reporting NOX mass emissions at least during the ozone 
season and often year round under the NOX SIP Call. The CAIR 
SIP model rules require continuous measurement of NOX mass 
emissions by all affected sources by January 1, 2008 using part 75 
certified monitoring methodologies for the NOX annual 
program and May 1, 2008 for the NOX ozone season program. 
SO2 emissions must be monitored by those same sources 
beginning January 1, 2009.
    Today's proposal requires Part 75 monitoring and reporting for all 
sources subject to the Federal CAIR cap and trade programs. This is 
consistent with the CAIR SIP model cap and trade programs. For 
additional discussion on monitoring and reporting requirements, see 
Section VIII.H. in the CAIR NFR preamble (70 FR 25288).

I. Differences Between the Proposed Federal CAIR Cap and Trade Programs 
and the CAIR SIP Rules

    The proposed Federal CAIR NOX and SO2 cap and 
trade programs are largely the same as the CAIR SIP model trading 
programs. The EPA intends the proposed Federal CAIR cap and trade rules 
to be as similar as possible to the CAIR SIP model cap and trade rules 
so that the two sets of rules will operate as single integrated cap and 
trade programs, one for annual NOX, one for SO2, 
and one for ozone season NOX. However, the Agency is 
proposing certain limited differences as described below. These 
differences arise primarily from the need for Federal implementation of 
the programs rather than State implementation and to facilitate the 
transition from Federal implementation to State implementation. Note 
that the proposed Federal CAIR cap and trade programs include all of 
the mandatory elements that States must include in order to participate 
in the EPA-administered cap and trade programs for CAIR (the SIP model 
trading rules).
    This section describes the main differences between the proposed 
Federal CAIR trading rules and the CAIR SIP rules. This is not an 
exhaustive list of differences.

NOX Allocations

    As discussed above, the proposed NOX allocation 
methodology for the Federal CAIR annual and ozone season NOX 
trading programs is consistent with the sample NOX 
allocation methodology in the CAIR SIP model trading rules. However, 
timing for recordation of NOX allowances in source accounts 
differs in the proposed Federal CAIR rules compared to the SIP model 
rules (see timing discussion, above).
    Additionally, when the Agency allocates NOX allocations, 
we follow notice and comment procedures consistent with Federal law 
(the Administrative Procedures Act), whereas under a SIP, a State 
follows its own administrative procedures (e.g., for notice and 
comment). Further, the proposed Federal CAIR rules include criteria for 
``best available data'' for purposes of NOX allocations (in 
absence of continuous emission monitoring systems (CEMS) data), which 
are not included in the SIP model rules.

Criteria for Allocating CSP Allowances to Sources

    As discussed above, the proposed Federal CAIR rules include a more 
specific methodology for determining early reductions for purposes of 
allocating CSP allowances than the mechanism in the CAIR SIP model 
rules.

Abbreviated SIP Revisions

    As discussed above, the Agency proposes to give States the option 
to retain control of certain elements of the Federal CAIR trading 
programs without submitting full SIP revisions. States could submit 
abbreviated SIP revisions that cover any of the following four specific 
elements: (1) Non-EGU opt-ins,

[[Page 49736]]

(2) allocation of NOX allowances to individual sources, (3) 
allocation of annual NOX Compliance Supplement Pool (CSP) 
allowances to individual sources, and (4) inclusion of non-CAIR 
NOX SIP Call trading sources in the Federal CAIR ozone 
season NOX trading program.

Applicability

    The EPA intends the applicability provisions specifying units 
covered by the CAIR Federal trading programs to be identical to those 
provisions in the CAIR SIP rules. As discussed elsewhere in today's 
preamble, the Agency is proposing certain changes to the applicability 
provisions in the CAIR SIP rules. The proposed applicability provisions 
for the Federal CAIR trading programs are the same as those for the 
CAIR SIP rules if today's proposed changes to the CAIR SIP rules are 
finalized.

Definitions

    The EPA is proposing to use the same definitions as those that 
apply in the CAIR SIP rules with a few exceptions that are necessary to 
reflect Federal implementation rather than State implementation.

Issuance of NOX Allowances Allocations

    The Administrator, rather than the permitting authority, would 
allocate NOX allowances under the Federal CAIR cap and trade 
programs, unless an abbreviated SIP revision is approved providing for 
State allocation of allowances.

Monitoring and Reporting Requirements

    The proposed Federal CAIR monitoring and reporting provisions 
(including, among other things, general requirements, initial 
certification and recertification procedures, out of control periods, 
notifications, recordkeeping and reporting, and petitions) are 
essentially the same as the monitoring-related provisions of CAIR SIP 
model trading rules. The differences between the provisions reflect the 
fact that the Agency would oversee administration of the monitoring 
requirements, rather than both the Agency and the permitting authority 
overseeing the requirements as in the CAIR SIP rules. As a result, for 
example, monitoring certification applications would be submitted to 
the Administrator, and the Administrator, rather than the permitting 
authority, would act on the applications. By further example, the 
Administrator would handle all audit decertifications and all petitions 
for alternatives to the monitoring requirements.

J. Coordination Between the Proposed Federal CAIR Cap and Trade 
Programs and CAIR SIPs

    The EPA intends that if States choose to meet their emission 
reduction obligations under CAIR by participating in the EPA-
administered CAIR SIP NOX and SO2 trading 
programs, such programs will be fully integrated with respective 
Federal CAIR NOX and SO2 trading programs that 
EPA may promulgate in a final FIP or in a final section 126 response. 
The sources covered in the CAIR SIP model trading rules are the same 
types of sources named in the section 126 petition (except that the 
petition names a subset of the States affected by CAIR) and are the 
same types as the sources that EPA proposes to regulate in the proposed 
CAIR FIP and section 126 remedy.
    The SO2 allowances under the CAIR SIP SO2 
trading program, CAIR FIP SO2 trading program, or section 
126 SO2 trading program would all be termed ``CAIR 
SO2 allowances'' and could be used for compliance with the 
allowance-holding requirement in any of these trading programs. The 
NOX annual allowances under the CAIR SIP, CAIR FIP, or 
section 126 NOX trading program would all be termed ``CAIR 
NOX allowances'' and could be used for compliance in any of 
these trading programs. The NOX ozone season allowances 
under the CAIR SIP or CAIR FIP ozone season NOX trading 
program would all be termed ``CAIR Ozone Season NOX 
allowances'' and could be used for compliance in either of these 
programs.
    The proposed regulatory text for the CAIR FIP provides that 
allowances issued under a CAIR FIP or CAIR SIP trading program could be 
used for compliance in the CAIR FIP trading program (within each of the 
respective trading programs--SO2, annual NOX, or 
ozone season NOX). Today's proposal also includes revisions 
to the CAIR SIP model trading rules that would provide that allowances 
issued under a CAIR FIP or CAIR SIP trading program could be used for 
compliance in the CAIR SIP trading program (within the respective 
SO2, annual NOX, or ozone season NOX 
trading programs).
    As discussed above, today's proposal does not include regulatory 
text for the proposed section 126 remedy. If the Agency promulgates 
regulatory text for the section 126 remedy, the text would include a 
provision that allowances issued under a CAIR FIP, CAIR SIP, or section 
126 trading program could be used for compliance in any of these 
programs (within the respective emissions trading programs). In that 
case, the Agency would propose corresponding changes to the CAIR FIP 
and SIP trading rules to provide that allowances issued under a CAIR 
FIP, CAIR SIP, or section 126 trading program could be used for 
compliance in any of these programs.

K. Relationship of Emissions Trading Programs to Section 126 Relief

    In its petition, North Carolina states that ``EPA cannot allow 
interstate trading of emissions allowances to thwart North Carolina's 
remedy under section 126.'' Petition p. 25. The State's concern is that 
under a regionwide trading program, EGUs in upwind States which 
contribute to North Carolina nonattainment might not in fact reduce 
their emissions (or might not reduce emissions sufficiently for North 
Carolina's purposes) since they could purchase allowances from non-
contributing (or less-contributing) EGUs. Id. p. 26. North Carolina 
believes this result to be ``irrational'' because EPA ``would have made 
the technical finding of contribution without requiring a real 
remedy''. Id.
    EPA disagrees. As explained above in section II.A., a finding of 
whether there is a violation of section 126 turns on whether there is a 
violation of section 110(a)(2)(D), i.e., whether upwind States are 
contributing significantly to nonattainment or interfering 
significantly with maintenance in downwind receptors. Upwind States 
contribute significantly if collective contribution is above a 
designated amount and highly cost-effective controls are available to 
reduce emissions. In CAIR, EPA determined the extent of reductions 
required to eliminate significant contribution (i.e., to remove the 
section 110(a)(2)(D) violation) and expressed the reductions as 
statewide budgets of the PM2.5 precursors SO2 and 
NOX susceptible to reduction by highly cost-effective 
controls. Emissions trading (within the constraints of the emissions 
caps based on these statewide emission budgets) is one means of 
implementing highly cost-effective controls and consequently is a 
lawful (and CAIR-authorized) means of eliminating a section 
110(a)(2)(D) violation.
    It therefore follows that once a section 110(a)(2)(D) violation is 
eliminated, there is no section 126 violation since the basis for the 
section 126 finding would not exist.\17\ The violation can be

[[Page 49737]]

eliminated through EPA adopting a FIP containing the CAIR trading 
programs or through EPA approving a SIP containing the CAIR trading 
programs (or approving a SIP containing the other emission reduction 
options specified in CAIR).
---------------------------------------------------------------------------

    \17\ Indeed, North Carolina's petition itself essentially 
recognizes this point, since the petition notes (correctly) that 
section 110(a)(2)(D) and section 126 are co-extensive for purposes 
of what constitutes a violation. Id. p. 3. The petition likewise 
accepts the CAIR definition of ``significant contribution'' and 
agrees with the statewide emission budgets proposed in CAIR. Id. p. 
21.
---------------------------------------------------------------------------

    For the same reasons, if EPA chooses to act directly under section 
126 by making the section 126(b) findings and adopting a remedy 
pursuant to section 126(c) (rather than eliminating the section 
110(a)(2)(D) violation by means of a FIP), EPA could ``bring about 
compliance with the requirements contained in section [110(a)(2)(D)]'' 
(CAA section 126(c)) by adopting the CAIR FIP trading programs, for the 
States containing sources linked to North Carolina PM2.5 
NAAQS nonattainment or maintenance problems. This result necessarily 
follows because, as just explained, these CAIR FIP provisions eliminate 
the significant contribution to North Carolina nonattainment and 
maintenance of the PM2.5 NAAQS.
    In any event, the Agency believes that upwind sources in States 
that were found to contribute significantly to North Carolina 
nonattainment will in fact reduce emissions of PM2.5 
precursors under the CAIR trading regime. The Agency used the 
Integrated Planning Model (IPM) to project emission and cost impacts of 
CAIR.\18\ The EPA modeled the CAIR requirements assuming interstate 
emissions trading programs for EGUs. We modeled three separate 
regionwide EGU emissions trading programs (an annual SO2 
program, an annual NOX program, and an ozone season 
NOX program). The Agency's IPM modeling for the CAIR NFR--
which assumes interstate emissions trading \19\--projects decreases in 
annual SO2 and NOX emissions under CAIR compared 
to the Base Case (without CAIR) in both 2010 and 2015 for each of the 
States found in the CAIR NFR analysis to contribute significantly to 
nonattainment of the PM2.5 NAAQS in North Carolina.\20\
    Moreover, the emission reductions under CAIR are likely to be 
sufficient to eliminate PM2.5 nonattainment in North 
Carolina. In the CAIR NFR, the Agency presented its modeling of the 
Base Case, which projects that 10 States would contribute significantly 
to PM2.5 nonattainment in North Carolina in 2010 without 
CAIR (see discussion in section III in this preamble). Under CAIR, 
however, EPA's modeling projects that by 2010 there will be no 
remaining PM2.5 nonattainment counties in North Carolina, 
thus no States contributing to nonattainment. These projected CAIR 
impacts are likewise from EPA's CAIR modeling with interstate emissions 
trading.
---------------------------------------------------------------------------

    \18\ See discussion of EPA's modeling using IPM in section V in 
this preamble. For further description, see section IV in the CAIR 
NFR preamble (70 FR 25196-25197) as well as a technical support 
document entitled ``Modeling of Control Costs, Emissions, and 
Control Retrofits for Cost Effectiveness and Feasibility Analyses'' 
in the CAIR docket.
    \19\ The IPM projects plant-level SO2 and 
NOX emissions under interstate emissions cap and trade 
programs. Emissions trading allows sources to find the least cost 
compliance strategy.
    \20\ The CAIR annual NOX program includes a 
compliance supplement pool of about 200,000 allowances for the 
entire CAIR region, the use of which could lead to slightly higher 
NOX emissions in some CAIR States than the projections 
shown in the CAIR NFR.
---------------------------------------------------------------------------

    This discussion of the Agency's analysis of CAIR is informational 
and is not intended to reopen or reconsider any issue related to that 
analysis.
    Air quality modeling results are in the Air Quality Modeling 
Technical Support Document for the Final Clean Air Interstate Rule, 
March 2005, Appendix F. The EGU emissions modeling for the CAIR NFR is 
in the CAIR docket. State-by-State summaries of projected emissions 
impacts of CAIR are on the CAIR Web site at epa.gov/cair/where.html.

L. Interactions With Other CAA Programs

    In the CAIR NFR preamble, section IX discusses interactions between 
the NOX SIP Call and CAIR. Section IX also discusses 
interactions between the title IV Acid Rain Program and CAIR. Today's 
proposal covers the same States as the CAIR (this proposal includes 
Delaware and New Jersey for PM2.5 purposes which is 
consistent with EPA's proposal at 70 FR 25408) and uses Federal trading 
programs that are substantively identical to the CAIR SIP model trading 
rules, thus the interactions would be as described in CAIR (70 FR 
25289-25299).

VII. What Are the Revisions to the CAIR?

    In today's action, EPA is proposing a number of revisions to the 
regulations issued as part of the CAIR. The proposed revisions to CAIR, 
explained in greater detail below, are primarily intended to facilitate 
federal implementation of the CAIR and to facilitate interaction 
between the proposed EPA-administered Federal CAIR trading programs and 
any EPA-administered State CAIR trading programs established through an 
approved SIP revision to meet the requirements of the CAIR.
    With regard to Sec.  51.123 in the CAIR, EPA is proposing to add 
provisions that allow states to submit abbreviated SIP revisions--as 
discussed above in Sections IV and VI of this preamble--that would have 
to meet certain requirements and that, if approved, would be integrated 
with the FIP trading programs and replace portions of the programs or 
modify application of the programs to sources in the State. In 
particular, a State could submit an abbreviated SIP revision providing 
for the permitting authority (instead of the Administrator) to allocate 
CAIR NOX allowances in the Federal CAIR NOX 
Annual Trading Program. The abbreviated SIP revision could also provide 
for the permitting authority to allocate the compliance supplement pool 
in the Federal CAIR NOX Annual Trading Program. Similarly, 
the State could submit an abbreviated SIP revision providing for the 
expansion of the applicability provisions of the Federal CAIR 
NOX Ozone Season Trading Program to include all units in the 
State's NOX Budget Trading Program that are not already 
covered by such applicability provisions. The abbreviated SIP revisions 
could also provide for the permitting authority to allocate CAIR 
NOX Ozone Season allowances under the Federal CAIR 
NOX Ozone Season Trading Program. The abbreviated SIP 
revision could also provide for the inclusion of non-EGU opt-ins in the 
Federal CAIR trading programs. These changes will facilitate transfer 
from an EPA-administered Federal CAIR trading program to any EPA-
administered State CAIR trading program.
    Also, included in today's proposal are corresponding provisions in 
the Federal CAIR trading program regulations that would modify the 
allocation or applicability sections to be consistent with such 
approved abbreviated SIP revisions under Sec.  51.123. For example, the 
Federal CAIR NOX Annual Trading Program provides that, if an 
abbreviated SIP revision setting forth procedures for allowance 
allocations by the permitting authority is approved, the provisions in 
that SIP revision would replace the provisions otherwise in effect in 
that trading program for allowance allocation by the Administrator. By 
further example, the Federal CAIR NOX Ozone Season Trading 
Program provides that, if an abbreviated SIP revision setting forth 
expanded applicability provisions to include NOX Budget 
units not already in CAIR is approved, the applicability provisions in 
the trading program would be

[[Page 49738]]

expanded to include such units. These changes will also facilitate 
transfer from a Federal CAIR trading program to a State CAIR trading 
program.
    In addition to the proposed revisions to Sec.  51.123 providing for 
abbreviated SIP revisions, today's action proposes other revisions to 
both Sec.  51.123 and Sec.  51.124 in order to clarify the definition 
of ``EGU'' in those rules. In particular, as discussed above in Section 
VI of the preamble, the status of solid waste incinerators under the 
CAIR is unclear. EPA did not intend for CAIR to require States that 
elect to participate in the EPA-administered CAIR trading program to 
regulate solid waste incineration units. In addition, the CAIR FIP is 
not intended to directly regulate solid waste incineration units. 
Furthermore, EPA has received two petitions to reconsider the 
definition of EGU with respect to solid waste incinerators in the model 
trading rule. The petitions were submitted by the Integrated Waste 
Service Association (IWSA) and the Commonwealth of Massachusetts.\21\ 
In its petition, IWSA presents two main arguments regarding why EPA 
should reconsider the treatment of solid waste incinerators (and 
particularly municipal waste incinerators) under CAIR. First, it 
indicates that EPA failed to take notice and comment on the treatment 
of municipal waste incinerators (MWCs) under CAIR. The Commonwealth of 
Massachusetts makes a similar argument Second, IWSA argues that ``the 
regulation of MWCs is contrary to the core EPA methodology for 
regulating interstate transport of emissions under CAIR.'' As part of 
the second argument, IWSA makes two main points. They argue that 
emission reductions from municipal waste units are not highly cost 
effective and they argue that emissions of SO2 and 
NOX from municipal waste combustors are very small. The 
Commonwealth of Massachusetts also argues that EPA did not perform any 
specific cost analysis on municipal waste combustors to determine 
whether emission reductions from this source category were highly cost 
effective.
---------------------------------------------------------------------------

    \21\ The petitions, as well as the letters granting 
reconsideration of the petitions, will be available in the docket 
for the CAIR (OAR-2003-0053).
---------------------------------------------------------------------------

    EPA has granted reconsideration on the issue of the definition of 
EGU in the final CAIR model trading rule as it relates to solid waste 
incinerators (and particularly municipal waste incinerators) because 
EPA agrees, that its analysis of highly cost effective emissions 
reductions did not assume that emissions from municipal waste 
combustors were highly cost effective to control. Further, EPA did not 
specifically indicate that it intended solid waste incinerators to be 
included in the model trading program. In fact, in both the proposed 
and final actions, EPA indicated that it did not consider reductions 
from municipal waste combustors in its determination of highly cost 
effective emission reductions. In a January 2004, technical support 
document entitled ``Identification and Discussion of Sources of 
Regional Point Source NOX and SO2 Emissions other 
than EGUs'', EPA indicated that, ``In examining non-EGU categories for 
emission reduction opportunities, we identified categories emitting 
more than one percent of the overall projected SO2 or 
NOX year 2010 emission inventory for the geographic area of 
interest.'' The document also notes that SO2 emissions from 
waste incinerators emit about 0.1 percent of the SO2, and 
0.7 percent of the NOX. In the response to comments document 
for the final rule, EPA indicated that, ``the final rule, as was the 
case for the proposal, does not reflect any emission reductions for 
NOX or SO2 from MWC facilities.'' For this 
reason, EPA decided to grant the petitions to reconsider this issue. It 
is therefore unnecessary for EPA to consider the other arguments 
presented by petitioners.
    In this rulemaking EPA is reconsidering the definition of EGU in 
the final CAIR as it relates to MWCs and is taking comment on that 
issue. EPA is not taking comment on other issues not being reconsidered 
or addressed in this rulemaking--including the determination that, for 
purposes of the CAIR rulemaking, EPA did not determine that there were 
highly cost effective emission reductions from MWCs. It should also be 
noted that excluding MWCs from the definition of EGU in the CAIR model 
trading rule, does not preclude States from regulating MWCs, or other 
non-EGU sources, for the purpose of obtaining emission reductions 
required by CAIR.
    The proposed revisions of the ``EGU'' definition address these 
issues. The proposed revisions would establish a specific exemption for 
certain solid waste incineration units. The proposed exemption is 
analogous to an exemption for such units under the Acid Rain Program. 
In addition, the status, under the CAIR, of units that formerly 
generated electricity for sale but stopped doing so many years ago 
warrants further clarification. The proposed revisions to the ``EGU'' 
definition state that, in order to be an EGU, a unit must serve a 
generator producing electricity for sale at any time since the later of 
November 15, 1990 or the start-up of the unit's combustion chamber. 
This proposed approach is analogous to the approach under the Acid Rain 
Program. This proposed approach also makes consistent EPA's position on 
this issue in the CAIR and the CAIR FIP proposed today.
    Today's action also includes proposed revisions to the regulations 
setting forth the CAIR model trading programs. There are three 
categories of revisions. The first category includes revisions to 
clarify certain aspects of the CAIR model trading programs. This 
category of changes primarily intends to ensure consistency between the 
CAIR model trading rules and the proposed Federal CAIR trading 
programs. For example, revisions, analogous to the proposed revisions 
to the ``EGU'' definition in Sec. Sec.  51.123 and 51.124, are proposed 
for the applicability provisions of the CAIR model trading programs to 
exclude certain solid waste incineration units and certain units that 
stopped before November 15, 1990, and do not resume, serving a greater-
than-25 MW generator producing electricity for sale. Further, the 
definitions of some terms in the CAIR model trading programs 
(``commence commercial operation'' and ``commence operation'') are also 
revised consistent with the exclusion of units that, before November 
15, 1990, stopped serving a greater-than-25MW generator producing 
electricity for sale. These revisions make the CAIR model trading rules 
consistent with the proposed applicability provisions and definitions 
for the Federal CAIR trading programs.
    Another set of revisions are proposed to clarify the interaction of 
the application of excess emission penalties for sources that are 
subject to, and have excess emissions under, both the Acid Rain Program 
and the CAIR SO2 trading program. Under the existing CAIR 
SO2 model trading rule, the Administrator first determines, 
for a source in both the Acid Rain Program and the CAIR SO2 
trading program, whether the source holds enough allowances to cover 
emissions under the Acid Rain Program and then whether the source holds 
enough allowances to cover emissions under the CAIR SO2 
trading program. To the extent a source fails to hold enough allowances 
and so has excess emissions under the Acid Rain Program, the owners and 
operators must provide the Administrator one allowance from the next 
year to offset each ton of excess emissions and pay a $2,000 inflation-
adjusted penalty per ton of excess emissions. To the extent the source 
also fails to hold enough allowances and so has excess emissions under 
the CAIR

[[Page 49739]]

SO2 trading program, the owners and operators must provide a 
tonnage equivalent of allowances equaling 3 times (including a one-for-
one offset) the tonnage of the excess emissions. As a result, the 
owners and operators may be liable, for a given ton of excess 
emissions, for both the offset and dollar penalty under the Acid Rain 
Program and the three-for-one allowance deduction.
    Under the proposed revisions, for a given ton of SO2 
excess emissions at a source, the owners and operators will be liable 
for either the offset and dollar penalty under the Acid Rain Program or 
the three-for-one allowance deduction under the CAIR trading program. 
EPA believes that the Acid Rain dollar penalty, which is currently 
about $3,000 per ton of excess emissions (due to the inflation 
adjustment of the original $2,000 per ton penalty) is sufficiently 
large to provide a strong incentive for compliance with the allowance-
holding requirement with regard to any tons of excess emissions under 
the Acid Rain Program. Under the proposal, any tons of excess emissions 
that a source under both the Acid Rain and CAIR trading programs has 
beyond the Acid Rain Program excess emissions would be subject to the 
three-for-one allowance deduction under the CAIR trading program. The 
EPA maintains that it is unnecessary to apply to a given ton of excess 
emissions both the Acid Rain and CAIR trading program penalties. The 
EPA also notes that the proposed revisions would address only the 
automatic penalties under the two programs and would not affect in any 
way the ability to impose, through enforcement actions, additional 
discretionary civil or criminal penalties.
    The second category of revisions to the CAIR model trading rules 
includes those necessary to integrate the State CAIR trading programs 
with the appropriate Federal CAIR trading programs. As discussed above 
in Section VI of the preamble, EPA's intention is that the State CAIR 
trading programs for those States with approved SIP revisions and the 
Federal CAIR trading programs for those States without approved SIP 
revisions (or with only approved abbreviated SIP revisions) would all 
operate together as integrated trading programs, one integrated program 
covering NOX annual emissions, one covering SO2 
annual emissions, and one covering NOX ozone season 
emissions. Certain revisions to the CAIR model trading programs (and 
certain analogous provisions in the Federal CAIR trading programs) are 
necessary to accomplish this integration. For example, the definition 
of ``CAIR NOX allowance'' is revised in order to ensure that 
NOX allowances issued in a Federal CAIR NOX 
annual trading program are treated the same in the State CAIR 
NOX annual trading program as (and so is interchangeable 
with) NOX allowances issued in the latter program. The 
definitions of ``CAIR SO2 allowance'' and ``CAIR 
NOX Ozone Season allowance'' are similarly revised.
    The third category of revisions includes minor corrections of the 
CAIR model trading program regulations. These changes are intended to 
facilitate federal implementation of the CAIR and ensure consistency 
between State CAIR trading programs and the Federal CAIR trading 
programs by removing ambiguities in the CAIR. For example, certain 
provisions of the current CAIR SO2 model trading rule 
reference non-existent provisions about SO2 allowance 
allocations. EPA is proposing to remove the provisions that include 
these references.
    By further example, the CAIR NOX model trading rule 
requires the Administrator to record allocations submitted by the 
States for 2009 by December 1, 2006. However, since the SIP revisions 
that include such allocations are not due until September 11, 2006, it 
is highly unlikely that the SIP revisions will be approved by EPA in 
time for the allocations to be recorded by December 1, 2006. CAIR 
NOX allowance allocations should not be recorded, and 
thereby be tradable in the allowance market, before the SIP revision on 
which the allocations are based is final. It would be highly disruptive 
to the allowance market if allocations that could be recorded and 
traded could subsequently be rendered invalid due to disapproval of the 
SIP revision on which the allocations are based. For this reason, EPA 
is proposing to remove the deadline for recordation of the allocations 
for existing units for the first set of years submitted in the SIP 
revision, but to retain the deadlines for recordation for the 
subsequent allocations.

VIII. What Are the Revisions to the Acid Rain Program?

    EPA is also proposing in today's action a few revisions to the Acid 
Rain Program regulations. Most of the proposed revisions are changes to 
the administrative appeal procedures in part 78 of the Acid Rain 
Program regulations in order to make those procedures applicable to all 
final decisions of the Administrator under the Federal CAIR trading 
programs. In the CAIR, part 78 was revised to make those administrative 
appeal procedures apply to the Administrator's final decisions under 
the State CAIR trading programs. The part 78 revisions in today's 
proposal are analogous to those revisions made in the CAIR and are 
necessary to provide consistent appeal procedures to sources subject to 
the CAIR FIP.
    The remaining provisions aim to facilitate interaction between the 
EPA-administered Federal CAIR trading programs, any EPA-administered 
State CAIR trading programs, and the Acid Rain Program. A number of 
these proposed revisions involve minor changes to language in some 
certifications included in the certificate of representation for 
designated representatives and in some certifications by authorized 
account representatives for general accounts. Analogous minor revisions 
are proposed for provisions describing the relationship of the 
designated representative to the owners or operators of the sources and 
units represented and of the authorized account representative to the 
owners of the allowances in the general account involved. The purpose 
of these proposed revisions is to make the wording of these Acid Rain 
Program provisions and certifications essentially the same as the 
analogous provisions and certifications in the State and Federal CAIR 
trading programs in order to streamline the requirements and the forms 
that must be submitted. Many sources are likely to be subject to both 
the Acid Rain Program and the CAIR trading programs.
    Some of the proposed revisions are related to the change, finalized 
in the CAIR rulemaking, from unit-level to source-level compliance with 
the Acid Rain Program SO2 trading program. For example, EPA 
is proposing to remove a provision that allows two designated 
representatives for the same source under certain circumstances. While 
it was workable to have one designated representative for one, non-opt-
in unit at the source and a different designated representative for 
another, opt-in unit at the same source where compliance with the 
allowance-holding requirement was achieved unit-by-unit, this is not 
workable where compliance is at the source-level and one individual 
must be responsible for compliance by all units at the source.

IX. 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

[[Page 49740]]

must determine whether a regulatory action is ``significant'' and 
therefore subject to Office of Management and Budget (OMB) review and 
the requirements of the Executive Order. The Order defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may:
    1. Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or Tribal governments or 
communities;
    2. Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    3. Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    4. Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    In view of its important policy implications and potential effect 
on the economy of over $100 million, this action has been judged to be 
an economically ``significant regulatory action'' within the meaning of 
the Executive Order. As a result, today's action was submitted to OMB 
for review. The FIP proposal represents a federal mandate to implement 
the recently published CAIR (March 2005) covering the same set of air 
pollution emission reductions in the event States fail to implement 
CAIR. The section 126 proposal would impose regulatory requirements 
similar to CAIR in the States that significantly contribute to downwind 
emissions in North Carolina. For this reason, EPA is relying on the 
economic analysis conducted for CAIR entitled ``Regulatory Impact 
Analysis of the Final Clean Air Interstate Rule'' (March 2005) to serve 
as the analysis for these rulemakings. The costs and benefits presented 
in this economic analysis are an accurate representation of the 
benefits and costs of the FIP. The benefits and costs of the section 
126 action would be a subset of the benefits and costs associated with 
CAIR, because only a subset of CAIR-affected States would be affected.

B. Paperwork Reduction Act

    EPA believes that the Paperwork Reduction Act (44 U.S.C. 3501 et 
seq.) requirements of this rule are satisfied through the Information 
Collection Request (ICR) (EPA ICR number 2152.02) submitted to the OMB 
for review and approval on May 12, 2005 as part of the Clean Air 
Interstate Rule (CAIR) (70 FR25162-25405). The ICR describes the nature 
of the information collection and its estimated burden and cost 
associated with that final rule. In cases where information is already 
collected by a related program, the ICR takes into account only the 
additional burden. (This situation arises in States that are also 
subject to requirements of the Consolidated Emissions Reporting Rule 
(EPA ICR number 0916.10; OMB control number 2060-0088) or for sources 
that are subject to the Acid Rain Program (EPA ICR number 1633.13; OMB 
control number 2060-0258) or NOX SIP Call (EPA ICR number 
1857.03; OMB number 2060-0445) requirements.)
    The burden of today's proposed rule is essentially the same as the 
burden estimated for the CAIR. There is a modest transfer of burden 
from the States to EPA if the federal plan is implemented rather than 
the CAIR State plan. The overall total burden is essentially unchanged.
    An agency may not conduct or sponsor, and a person is not required 
to respond to a collection of information unless it displays a 
currently valid OMB control number. The OMB control numbers for EPA's 
regulations in 40 CFR, after appearing in the preamble of the final 
rule, are listed in 40 CFR part 9.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act (SBREFA), generally 
requires an agency to prepare a regulatory flexibility analysis for any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act or any other statute, unless the agency 
certifies that the proposed rule, if promulgated, 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 the purposes of this rulemaking, EPA defined small entities 
according to the following three criteria:
    (1) A small business according to the Small Business Administration 
size standards by the North American Industry Classification System 
(NAICS) category of the owning entity. The range of small business size 
standards for electric utilities is 4 billion kilowatt-hours of 
production or less;
    (2) a small government jurisdiction that is a government of a city, 
county, town, district, or special district with a population of less 
than 50,000; and
    (3) a small organization that is any not-for-profit enterprise that 
is independently owned and operated and is not dominant in its field.
    Table IX-1 lists entities potentially affected by this proposed 
rule with applicable NAICS code.

------------------------------------------------------------------------
                                      NAICS     Examples of potentially
             Category                 code b       regulated entities
------------------------------------------------------------------------
Industry..........................     221112  Fossil fuel-fired
                                                electric utility steam
                                                generating units.
Federal Government................        \c\  Fossil fuel-fired
                                       221112   electric utility steam
                                                generating units owned
                                                by the federal
                                                government.
State/Local/Tribal Government.....        \c\  Fossil fuel-fired
                                       221112   electric utility steam
                                                generating units owned
                                                by municipalities.
                                       921150  Fossil fuel-fired
                                                electric utility steam
                                                generating units in
                                                Indian Country.
------------------------------------------------------------------------
a Include NAICS categories for source categories that own and operate
  electric generating units only.
b North American Industry Classification System.
c Federal, state, or local government-owned and operated establishments
  are classified according to the activity in which they are engaged.

1. Small Business Advocacy Review Panel
    As required by section 609(b) of the RFA, as amended by SBREFA, EPA 
convened a Small Business Advocacy Review Panel (SBAR Panel or Panel) 
and conducted outreach to small entities representatives (SERs) to 
obtain the advice and recommendations of small entities that 
potentially would be subject to the rule's requirements.
    On April 27, 2005, EPA's Small Business Advocacy chairperson 
convened a SBAR Panel under section

[[Page 49741]]

609(b) of the RFA, as amended by SBREFA. For this proposal, in addition 
to the EPA Small Business Advocacy chairperson, the Panel consisted of 
EPA's Director of Air Quality Strategies and Standards Division within 
the Office of Air and Radiation, the Administrator of the Office of 
Information and Regulatory Affairs within the Office of Management and 
Budget (OMB), and the Chief Counsel for Advocacy of Small Business 
Administration (SBA).
    As described below, this Panel conducted outreach to SERs and 
completed a report on this proposed action. The Panel Report provides 
background information on the proposal as it was being developed and 
the types of small entities that may be subject to the proposal, 
describes efforts to obtain the advice and recommendations of 
representatives of those small entities, summarizes the comments that 
have been received to date from those representatives, and presents the 
findings and recommendations of the Panel. The Panel Report, written 
comments from the SERs, the Initial Regulatory Flexibility Analysis 
(discussed below), and other information are contained in the docket 
for this rulemaking. The Panel Report is also available on the EPA's 
Web site at http://www.epa.gov/sbrefa. It is important to note that the 
Panel's findings and discussions are based on the information available 
at the time the Panel Report was drafted.
    Prior to convening the SBAR Panel, EPA had several discussions and 
a conference call with small entities that could be affected by this 
rule. In consultation with SBA, EPA invited 16 stakeholders to 
participate in its outreach efforts on this proposal. On April 4, 2005, 
EPA held conference call with the potential SERs and invited 
representatives from the Office of Advocacy of the SBA and the Office 
of Information and Regulatory Affairs within the OMB to the call. 
During this call, EPA presented an overview of the SBREFA process, an 
explanation of the planned CAIR FIP and Section 126 rulemaking, and 
technical background on such information as control options and costs. 
Subsequent to the meeting, the stakeholders submitted follow-up 
comments in writing.
    On May 5, 2005, the SBAR Panel invited the SERs to an outreach 
meeting and provided them with additional background information for 
their consideration. These materials included the previously provided 
background on the potential action and pollutants of interest, as well 
as information the relevant States and further technical and economic 
information about affected entities. The outreach meeting occurred on 
May 24, 2005, followed by written comments from some of the SERs. 
Written comments were summarized in the Panel Report and can be found 
in the docket.
    The SBAR Panel considered the oral and written comments of the SERs 
in preparing the final Panel Report discussed above. The primary topic 
of the Panel discussion was the applicability of the FIP to the various 
categories of small entity-owned EGUs, the costs the proposal could 
potentially impose, and the advantages and disadvantages of 
implementing any of four regulatory flexibility alternatives. 
Additional topics included monitoring and reporting provisions and 
overlap with existing federal rules.
    The SBAR Panel process for today's action was conducted before the 
proposed proposal was fully drafted. The Panel holds its discussions 
and makes its report at a preliminary stage of the rule development. 
The Panel discussions and report provide the Agency with an opportunity 
to identify and explore potential ways of shaping the proposal to 
minimize the burden of the proposal on small entities while achieving 
the purpose of the proposed action.
    The SBAR Panel discussions for this proposal focused on the 
objectives and general outline of the CAIR FIP and Section 126 
Response. The EPA also explained to the Panel that the proposal would 
be very similar to the CAIR model trading rules and provided the Panel 
with analyses that were conducted for CAIR. The Panel considered that 
the proposal would need to obtain the same emission reductions as would 
be achieved under CAIR and that the proposal would be designed to work 
in concert with the CAIR trading rules.
    The action proposed today includes certain revisions to the Acid 
Rain Program and the final CAIR proposed in conjunction with the CAIR 
FIP and section 126 response. These revisions are intended to 
facilitate federal implementation of the CAIR, and address the 
interaction between the proposed EPA-administered federal CAIR trading 
program and any EPA-administered State CAIR trading programs. These 
revisions support the CAIR FIP and the 126 response extensively 
discussed by the Panel and are explained in greater detail in sections 
VII and VIII above.
    To the extent that the Panel Report or the initial regulatory 
flexibility analysis for today's proposal address any proposed changes 
to the CAIR, EPA notes that courts have interpreted the RFA to require 
a regulatory flexibility analysis only when small entities will be 
subject to the requirements of the rule. See Michigan v. EPA, 213 F.3d 
663, 668-69 (D.C. Cir., 2000), cert. den. 121 S.Ct. 225, 149 L.Ed.2d 
135 (2001). The proposed revisions to the CAIR would not establish 
requirements directly applicable to small entities and, like the CAIR 
(70 FR at 25420), do not require a regulatory flexibility analysis.
2. Initial Regulatory Flexibility Analysis
    Pursuant to section 603 of the RFA, EPA prepared an initial 
regulatory flexibility analysis (IRFA) that examines the impact of this 
proposal on small entities along with regulatory alternatives that 
could reduce that impact. The IRFA is available for review in the 
docket for today's rulemaking and is summarized in the sections below.
a. Background on Today's Proposal and the IRFA
    This action proposes Federal Implementation Plans (FIPs) for all 
States affected by the Clean Air Interstate Rule (CAIR). The FIPs would 
serve as a backstop measure to achieve the emission reductions 
requirements established by the CAIR until States have approved State 
implementation plans (SIPs) to achieve the reductions. The Agency's 
authority to promulgate FIPs is contained in section 110 of the CAA.
    This action also proposes EPA's response to a petition submitted by 
the State of North Carolina under section 126 of the CAA. The EPA is 
proposing Federal cap and trade programs for electric generation units 
(EGUs) as the control strategy for the FIPs as well as the section 126 
action. The proposed Federal cap and trade programs are virtually 
identical to the CAIR model trading rules.
    The EPA is also proposing certain revisions to the CAIR and the 
Acid Rain Program. Sections I through IV in today's preamble explain in 
more detail the reasons the Agency is considering this action, as well 
as the Agency's objectives and the legal basis for the proposed action.
    The CAIR does not establish specific requirements applicable to 
small entities. Instead, the CAIR requires states to develop, adopt and 
submit SIP revisions that will achieve the necessary SO2 and 
NOX reductions, leaving to states the task of determining 
how and by which entities these reductions will be obtained. Although 
not required by the RFA, EPA conducted an analysis of the impact of 
regulations implementing the CAIR model trading rules on small

[[Page 49742]]

entities. The Federal cap and trade programs in today's proposal are 
virtually identical to the CAIR model trading rules. For the small 
entity analysis conducted for CAIR we analyzed the potential impacts 
that regulations implementing the model trading rules in the CAIR might 
have on small entities. EPA expects the impacts of the CAIR FIP trading 
programs in today's proposal to be identical to the impacts we analyzed 
for regulations implementing the model trading rules in the CAIR. 
Therefore, the small entity analysis that the Agency conducted for CAIR 
rulemaking provides the basis for the IRFA for today's proposal. The 
CAIR small entity analysis is contained in chapter 8 of the Regulatory 
Impact Analysis for the Final Clean Air Interstate Rule, March 2005, 
available in the docket for the CAIR rulemaking.
b. Potentially Affected Small Entities
    Approximately 140 of the estimated 3,000 EGUs potentially affected 
by today's action are owned by the 58 potentially affected small 
entities identified by EPA. Of the 140, 49 units are owned by small 
entities that also share ownership with large entities. Of these units, 
34 are believed to be more than 50 percent owned by a large entity. An 
additional 189 units owned by small entities in these states could be 
exempted because they have a nameplate capacity less than 25 MW. The 
above estimates include a number of units that are owned jointly by 
small and non-small entities. In addition, these estimates represent 
the maximum number of units potentially affected by the CAIR FIP. Only 
units in states that fail to submit an approved SIP would be directly 
regulated under the CAIR FIP. The actual number of affected units will 
depend on the number of states that do not submit a SIP or do not get 
their SIP submittal approved.
c. Impact on Potentially Affected Small Entities
    EPA has assessed the potential impact of today's action on small 
entities. This analysis is based in large part on EPA's prior analysis 
of the potential impact of regulations implementing the CAIR model 
trading programs in the CAIR region. The analysis of the model trading 
programs was based on the best information available at that time and 
assumed that 75 small entities could be affected by any eventual 
implementation of the trading programs. However, EPA subsequently 
determined that some of these 75 entities either did not meet the 
definition of a small entity, or had units that were no longer 
generating. EPA's final analysis thus concluded that only 58 entities 
would be affected by today's action. Because the Agency's analysis of 
small entity impacts was based on the earlier estimate of affected 
small entities (i.e., the impacts were analyzed based on 75 affected 
entities not 58 entities), the impact analysis would overstate the 
maximum potential impact of today's action on small entities.
    Overall, EPA analysis suggested that about 445 MW of total small 
entity capacity, or 1.0 percent of total small entity capacity in the 
CAIR region, is projected to be uneconomic to maintain under 
regulations implementing the CAIR trading programs relative to the Base 
Case. In practice, units projected to be uneconomic to maintain may be 
``mothballed'', retired, or kept in service to ensure transmission 
reliability in certain parts of the grid. Our IPM modeling is unable to 
distinguish between these potential outcomes.
    Of the 75 initially identified as potentially impacted by 
regulations implementing the model trading programs, EPA determined 
that 29 might experience compliance costs in excess of one percent of 
revenues in 2010 and 46 might in 2015. Potentially affected small 
entities experiencing compliance costs in excess of 1 percent of 
revenues have some potential for significant impact resulting from 
implementation of CAIR.
    Moreover, the decision to include only units greater than 25 MW in 
size exempts 185 small entities that would otherwise be potentially 
affected by today's actions. In the final CAIR, EPA stated its belief 
that it is reasonable to assume no further control of air emissions 
from these smaller EGUs. Available air emissions data indicate that the 
collective emissions from small EGUs with capacity less than or equal 
to 25 MW are relatively small and that further regulating their 
emissions would be burdensome, to both the regulated community and 
regulators, given the relatively large number of units. In addition, 
the use of cap and trade in general will limit impacts on small 
entities relative to a less flexible command-and-control program.
    EPA considered several additional suggestions raised during the 
SBAR panel process that would have changed the scope, and thus the 
impact, of today's action. One SER suggested exempting small gas 
turbines from the rule. The Panel did not recommend exempting small gas 
turbines from the program. The Panel believed that the reduced 
monitoring requirements for this set of sources under CAIR will provide 
a significant level of relief to these sources, which are low emitters 
of both NOX and SO2. According to EPA analysis, 
most of these sources are projected to be net sellers of allowances, 
and the maximum impact projected for any one of these sources in terms 
of the ratio of costs to electricity generation revenues is 
approximately 3 percent. Additionally, today's action does exempt a 
number of small gas turbines as a result of the 25 MW and below 
exemption. The SBAR Panel supported retaining this exemption in today's 
action.
d. Potential Reporting, Record Keeping, and Compliance Requirements
    EPA also considered suggestions from the SBAR Panel regarding 
reporting and recordkeeping requirements of the proposed action. During 
the outreach to the SERs, one SER noted that EPA should coordinate 
emissions monitoring reporting among this and other related rules as 
much as possible. EPA has developed emission monitoring and reporting 
provisions intended to minimize the burden of reporting requirements on 
sources. Sources will submit one quarterly report that will account for 
emissions under any of the following programs that they are subject to: 
Title IV SO2 and/or NOX, Federal CAIR 
SO2, annual NOX and/or ozone season 
NOX. Finally, as part of the FIP development process, EPA 
has coordinated FIP and SIP requirements as much as possible to 
minimize any conflicts in requirements that could occur if a State 
submitted a SIP that was approved by EPA and replaced the Federal CAIR 
trading rules.
e. Relevant Federal Rules
    There are four Federal rules that may cover the same types of 
sources and pollutants as those covered in this proposal: The Clean Air 
Interstate Rule (CAIR), Regional Haze Rule, Acid Rain Program, and the 
NOX SIP Call. During development of this proposal the Agency 
took great care to ensure that the proposed programs not conflict with 
other CAA programs. As discussed in detail elsewhere in this preamble, 
the Agency designed each of the elements of today's proposal--the CAIR 
FIP, section 126 response, revisions to CAIR and revisions to the Acid 
Rain Program--to work together. The Agency gave particular emphasis to 
the interaction between CAIR and the Acid Rain Program, since CAIR 
relies on the use of Acid Rain Program allowances for SO2, 
and this feature of the program limits the flexibility of EPA in its 
design of regulatory flexibility alternatives for the CAIR FIP/126 
rules. The Panel did not make specific recommendations in this area. 
EPA's decision to use the existing

[[Page 49743]]

SO2 allocation from the Acid Rain Program is explained in 
greater detail in the preamble to the final CAIR (70 FR 25299).
f. Regulatory Flexibility Alternatives
    The SBAR Panel discussed four options to provide additional 
flexibility to small entities:
    Option 1. An alternative compliance method for units with low 
emissions, whereby facilities could adopt a voluntary limit on 
emissions;
    Option 2. An option to buy allowances from EPA at a fixed price, 
which would protect units from market volatility in the price of 
allowances;
    Option 3. Provide sources owned by small entities with a greater 
share of allowances, and;
    Option 4. Recognize and utilize the existing flexibilities within 
the CAIR model trading rules.
    In considering the four regulatory alternatives, the SBAR Panel 
evaluated the feasibility of implementing each option, as well as the 
extent to which the analysis of each option showed effective relief for 
financially-impacted small entities. Implementation of Options 1, 2, or 
3 would require adjusting the number of allowances available to non-
small-entity sources, in order to ensure that the overall reduction 
requirements of CAIR are achieved. As is discussed in Section 3 of the 
Panel Report, these adjustments could introduce administrative 
complexity and uncertainty in the case of SO2 as to whether 
the reduction requirement is being met. The Panel also discussed how to 
set appropriate exemption levels, allowance adjustments, or price 
levels if EPA were to decide to implement one of the first three 
alternatives. Additionally, the Panel had to consider how to determine 
small entities' eligibility for potential relief, as well as treatment 
of sources that were primarily owned by large entities, but had 
minority ownership by small entities.
    The SBAR Panel undertook detailed analysis of the four regulatory 
flexibility alternatives and of the comments and discussion provided by 
the small entity representatives during the SBAR Panel process. 
Consensus was not reached as to the final recommendation of the Panel. 
Two Panel members recommended that EPA pursue Option 4 as the means of 
providing flexibility to small entities under the proposed CAIR FIP and 
section 126 action. In general, this was due to the ability of the 
existing CAIR rule to provide a number of flexibilities to small entity 
sources, such as ability to trade and bank allowances, the inclusion of 
a compliance supplement pool for NOX, and reduced monitoring 
requirements for some small units. In making this recommendation, these 
two Panel members also considered the possible trade-offs in terms of 
administrative ease and the ability to target sources that would need 
effective relief.
    All SBAR Panel members agree that for the great majority of 
affected small entities, the CAIR model trading rules, or Option 4, 
provides the appropriate mechanism for limiting economic burdens, by 
allowing the purchase and sale of allowances in the market by all 
units. In the view of one Panel member, the Option 3 hardship approach 
best accommodates the needs of small entities with severe hardships and 
the burden of administering this added program element, while 
preserving the identical benefits of the CAIR program. Essentially, 
this Panel member suggested that EPA could provide meaningful relief to 
entities expected to experience severe hardship by setting aside some 
percentage of States' annual NOX budgets, and providing 
these allowances to small entity sources that demonstrate the potential 
for severe economic hardship as a result of the proposed action. 
Analysis conducted by this Panel member suggested that setting aside 
approximately 15,000 NOX allowances annually could provide 
significant relief to entities projected to experience severe hardship 
as a result of the proposed CAIR FIP and section 126 action.
    The SBAR Panel did not recommend that EPA incorporate Option 1 or 
Option 2 into the CAIR FIP and section 126 action. Regarding Option 1, 
the Panel generally agreed that this option would not provide a 
mechanism for providing relief to many small entity sources. 
Additionally, EPA noted that this option was made available under the 
NOX SIP call, and was used very sparsely. The majority of 
small entity representatives did not express support for this option. 
Option 2 could be implemented using either a safety valve price for 
small entity sources that falls below the projected allowance prices, 
or above projected allowance prices. Given the implementation issues 
discussed in Section 3 of the Report, and the uncertainty about what 
type of relief this option might provide, the Panel did not recommend 
that EPA consider this option further.
    The EPA invites comment on all aspects of the proposal and its 
impacts on small entities. The EPA is accepting comment only on today's 
proposal. EPA is not accepting comment on the CAIR or otherwise 
reopening any issue decided in the CAIR for reconsideration or comment, 
except that we are taking comment specifically the revisions to the 
CAIR and the Acid Rain program that EPA is proposing in today's action, 
as well as on the proposed CAIR FIP, the Section 126 response, and the 
impacts of these proposals on small entities.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4, 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).
    The EPA is taking the position that the requirements of UMRA apply 
because this action could result in the establishment of enforceable 
mandates directly applicable to sources (including sources owned by 
State and local governments) that could result in costs greater than 
$100 million in any one year. 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.
    EPA is relying upon the government entity analysis prepared for the 
final CAIR. The actual impacts on government entities of today's action 
would likely be less than those estimated in the analysis done for the 
CAIR because fewer States and individual sources are likely to be 
affected.
    According to EPA's analysis, the total net economic impact on 
government-

[[Page 49744]]

owned entities is expected to be negative in both 2010 and 2015. 
However, IPM modeling projects that about 340 MW of municipality-owned 
capacity (about 0.4 percent of all subdivision, State and municipality 
capacity in the CAIR region) would be uneconomic to maintain under 
CAIR, beyond what is projected in the Base Case. In practice, units 
projected to be uneconomic to maintain may be ``mothballed'', retired, 
or kept in service to ensure transmission reliability in certain parts 
of the grid. Our IPM modeling is unable to distinguish between these 
potential outcomes.
    Of the 81 potentially affected government entities considered in 
EPA's analysis, and the 265 government entities in the CAIR region that 
are included in EPA modeling, 19 may experience compliance costs in 
excess of one percent of revenues in 2010, and 38 may in 2015, based on 
our assumptions of how the affected States implement control measures 
to meet their emissions budgets as set forth CAIR.
    Government entities projected to experience compliance costs in 
excess of 1 percent of revenues have some potential for significant 
impact resulting from implementation of this rulemaking. However, the 
majority of entities facing potentially significant impacts are located 
in States with regulated electricity markets, where they have the 
ability to pass some or all of their compliance cost on to ratepayers. 
In addition, the decision to include only units greater than 25 MW in 
size exempts 179 government entities that would otherwise be 
potentially affected by regulations implementing the CAIR trading 
programs. Finally, the use of cap and trade in general will limit 
impacts on entities owned by small governments relative to a less 
flexible command-and-control program.
    Under section 203 of UMRA, 2 U.S.C. 1533, before EPA establishes 
any regulatory requirements ``that might significantly or uniquely 
affect small governments,'' EPA must have developed 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. The requirements do not distinguish EGUs 
based on ownership, either for those units that are included within the 
scope of the rule or for those units that are exempted by the 
generating capacity cut-off. Consequently, the rule has no requirements 
that uniquely affect small governments that own or operate EGUs within 
the SIP call region. With respect to the significance of the rule's 
provisions, EPA's UMRA analysis demonstrates that the economic impact 
of the rule will not significantly affect State or municipal EGUs or 
non-EGUs, either in terms of total cost incurred and the impact of the 
costs on revenue, or increased cost of electricity to consumers. 
Therefore, development of a small government plan under section 203 of 
the Act is not required.
    During the CAIR rulemaking process, EPA prepared a written 
statement consistent with the requirements of section 202 of the UMRA. 
Furthermore, in a manner consistent with the intergovernmental 
consultation provisions of section 204 of the UMRA, EPA carried out 
consultations with the governmental entities potentially affected by 
this rule during the CAIR rulemaking process.

E. Executive Order 13132: Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    This 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. These effects would not occur 
from the final rule itself because it is the provisions of the CAA that 
require EPA, after a State has failed to submit a SIP or a complete 
SIP, to make a finding to that effect and then to promulgate a FIP 
within 2 years of the finding. Although EPA would be exercising 
discretion to promulgate the FIP within the early part of the 2-year 
period, EPA would rescind the FIP for each State that submits a SIP 
that EPA approves, and, if the FIP remains, sources are not required to 
implement controls until after the close of the 2-year period. 
Moreover, as emphasized throughout the preamble, States are not 
required to adopt the FIP provisions, or any particular portion 
thereof, in order for EPA to approve their SIPs. Thus, Executive Order 
13132 does not apply to this proposed rule.
    Even so, in the spirit of Executive Order 13132, and consistent 
with EPA policy to promote communications between EPA and State and 
local governments, EPA consulted with State and local officials early 
in the process of developing the proposed regulation to permit them to 
have meaningful and timely input into its development. The EPA is 
including a number of provisions for States in the proposed rule so as 
not to constrain States' abilities to complete approvable SIP 
revisions, such as the ability to submit abbreviated SIP revisions, and 
the intent to withdraw the FIP upon approval of State SIP revisions.

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

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by Tribal officials in the development of regulatory 
policies that have Tribal implications.'' This proposal does not have 
``Tribal implications'' as specified in Executive Order 13175.
    This proposal addresses transport of pollution for precursors of 
ozone and PM2.5. The CAA provides for States and Tribes to 
develop plans to regulate emissions of air pollutants within their 
jurisdictions. The regulations clarify the statutory obligations of 
States and Tribes that develop plans to implement these rules. The 
Tribal Authority Rule (TAR) gives Tribes the opportunity to develop and 
implement CAA programs, but it leaves to the discretion of the Tribe 
whether to develop these programs and which programs, or appropriate 
elements of a program, the Tribe will adopt.
    This proposal does not have Tribal implications as defined by 
Executive Order 13175. It do not have a substantial direct effect on 
one or more Indian Tribes, because no Tribe has implemented a 
federally-enforceable air quality management program under the CAA at 
this time. Furthermore, this proposal does not affect the relationship 
or distribution of power and responsibilities between the Federal 
Government and Indian Tribes. The CAA and the TAR establish the 
relationship of the Federal Government

[[Page 49745]]

and Tribes in developing plans to attain the NAAQS, and this proposal 
does nothing to modify that relationship. Because this proposal does 
not have Tribal implications, Executive Order 13175 does not apply.
    If one assumes a Tribe is implementing a Tribal Implementation 
Plan, today's proposal could have implications for that Tribe, but 
would not impose substantial direct costs upon the Tribe, nor preempt 
Tribal law. As provided above, EPA has estimated that the total annual 
private costs for the FIP for the CAIR region as implemented by State, 
local, and Tribal governments to be approximately $2.4 billion in 2010 
and $3.6 billion in 2015 (1999$). There are currently very few 
emissions sources in Indian country that could be affected by these 
rules and the percentage of Tribal land that will be impacted is very 
small. For Tribes that choose to regulate sources in Indian country, 
the costs would be attributed to inspecting regulated facilities and 
enforcing adopted regulations.
    EPA consulted with Tribal officials in developing the final CAIR 
rule. The EPA encouraged Tribal input at an early stage. Also, EPA held 
periodic meetings with the States and the Tribes during the technical 
development of CAIR. Three meetings were held with the Crow Tribe, 
where the Tribe expressed concerns about potential impacts of the rule 
on their coal mine operations. In addition, EPA held three calls with 
Tribal environmental professionals to address concerns specific to the 
Tribes. These discussions have given EPA valuable information about 
Tribal concerns regarding the development of CAIR. During the CAIR 
rulemaking process, the EPA provided briefings for Tribal 
representatives and the newly formed National Tribal Air Association 
(NTAA), and other national Tribal forums. Input from Tribal 
representatives was taken into consideration in development of CAIR.

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

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

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

    Executive Order 13211 (66 FR 28355, May 22, 2001) provides that 
agencies shall prepare and submit to the Administrator of the Office of 
Regulatory Affairs, OMB, a Statement of Energy Effects for certain 
actions identified as ``significant energy actions.'' Section 4(b) of 
Executive Order 13211 defines ``significant energy actions'' as ``any 
action by an agency (normally published in the Federal Register) that 
promulgates or is expected to lead to the promulgation of a final rule 
or regulation, including notices of inquiry, advance notices of final 
rulemaking, and notices of final rulemaking (1) (i) a significant 
regulatory action under Executive Order 12866 or any successor order, 
and (ii) likely to have a significant adverse effect on the supply, 
distribution, or use of energy; or (2) designated by the Administrator 
of the Office of Information and Regulatory Affairs as a ``significant 
energy action.'' This proposed rule is a significant regulatory action 
under Executive Order 12866, and this rule may have a significant 
adverse effect on the supply, distribution, or use of energy. These 
impacts are detailed in the final CAIR (70 FR 25315).

I. National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act (NTTAA) of 1995 (Pub. L. 104-113; 15 U.S.C. 272 note) directs EPA 
to use voluntary consensus standards in its regulatory and procurement 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures, business practices) developed or adopted by one or more 
voluntary consensus bodies. The NTTAA directs EPA to provide Congress, 
through annual reports to OMB, with explanations when an agency does 
not use available and applicable voluntary consensus standards.
    Today's proposed rule would implement requirements largely 
identical to the requirements in the CAIR. This proposal would require 
all sources that participate in the trading programs under part 97 
(analogous to the CAIR SIP trading programs under part 96) to meet the 
applicable monitoring requirements of part 75. Part 75 already 
incorporates a number of voluntary consensus standards. Consistent with 
the Agency's Performance Based Measurement System (PBMS), part 75 sets 
forth performance criteria that allow the use of alternative methods to 
the ones set forth in part 75. The PBMS approach is intended to be more 
flexible and cost effective for the regulated community; it is also 
intended to encourage innovation in analytical technology and improved 
data quality. At this time, EPA is not recommending any revisions to 
part 75; however, EPA periodically revises the test procedures set 
forth in part 75. When EPA revises the test procedures set forth in 
part 75 in the future, EPA will address the use of any new voluntary 
consensus standards that are equivalent. Currently, even if a test 
procedure is not set forth in part 75, EPA is not precluding the use of 
any method, whether it constitutes a voluntary consensus standard or 
not, as long as it meets the performance criteria specified; however, 
any alternative methods must be approved through the petition process 
under Section 75.66 before they are used under part 75.

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

    Executive Order 12898, ``Federal Actions to Address Environmental 
Justice in Minority Populations and Low-Income Populations,'' requires 
Federal agencies to consider the impact of programs, policies, and 
activities on minority populations and low-income populations. 
According to EPA guidance,\22\ agencies are to assess whether minority 
or low-income populations face risks or a rate of exposure to hazards 
that are significant and that ``appreciably exceed or is likely to 
appreciably exceed the risk or rate to the general population or to the

[[Page 49746]]

appropriate comparison group.'' (EPA, 1998)
---------------------------------------------------------------------------

    \22\ U.S. Environmental Protection Agency, 1998. Guidance for 
Incorporating Environmental Justice Concerns in EPA's NEPA 
Compliance Analyses. Office of Federal Activities, Washington, DC, 
April, 1998.
---------------------------------------------------------------------------

    In accordance with Executive Order 12898, the Agency has considered 
whether these proposals, if promulgated, may have disproportionate 
negative impacts on minority or low-income populations. The Agency 
expects these proposals would lead to reductions in air pollution and 
exposures generally. For this reason, negative impacts to these sub-
populations that appreciably exceed similar impacts to the general 
population are not expected.

List of Subjects

40 CFR Parts 51 and 52

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

40 CFR Parts 72, 73, 74, and 78

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

40 CFR Parts 96 and 97

    Administrative practice and procedure, Air pollution control, 
Electric utilities, Nitrogen oxides, Reporting and recordkeeping 
requirements, Sulfur dioxide.

    Dated: August 1, 2005.
Stephen L. Johnson,
Administrator.
    For the reasons set forth in the preamble, parts 51, 52, 72, 73, 
74, 78, 96, and 97 of chapter I of title 40 of the Code of Federal 
Regulations are proposed to be amended as follows:

PART 51--[AMENDED]

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

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


Sec.  51.123  [Amended]

    2. Section 51.123 is amended by:
    a. In paragraph (o)(2)(ii)(B), replace the words ``for the year 
after the year of'' by the words ``for the 4th year after the year 
of'';
    b. Add a new paragraph (p);
    c. In paragraph (cc), amend the definition of ``Electric generating 
unit'' or ``EGU'' by:
    i. In paragraph (1) of the definition, redesignate the paragraph as 
paragraph ``(1)(i)'', replace the words ``since the start-up'' with the 
words ``since the later of November 15, 1990 or the start-up'', and add 
a new paragraph (1)(ii); and
    ii. Revise paragraph (2) of the definition; and
    d. In paragraph (cc), add a new definition for ``Solid waste 
incineration unit''; and
    e. Add a new paragraph (ee) to read as follows:


Sec.  51.123  Findings and requirements for submission of State 
implementation plan revisions relating to emissions of oxides of 
nitrogen pursuant to the Clean Air Interstate Rule.

* * * * *
    (p) Notwithstanding any other provision of this section, a State 
may adopt, and include in a SIP revision submitted by March 31, 2007, 
regulations relating to the Federal CAIR NOX Annual Trading 
Program under subparts AA through HH of part 97 of this chapter as 
follows:
    (1) The State may adopt, as CAIR NOX allowance 
allocation provisions replacing the provisions in subpart EE of part 97 
of this chapter:
    (i) Allocation provisions substantively identical to subpart EE of 
part 96 of this chapter, under which the permitting authority makes the 
allocations; or
    (ii) Any methodology for allocating CAIR NOX allowances 
to individual sources under which the permitting authority makes the 
allocations, provided that:
    (A) The State's methodology must not allow the permitting authority 
to allocate CAIR NOX allowances for a year in excess of the 
amount in the State's Annual EGU NOX budget for such year.
    (B) The State's methodology must require that, for EGUs commencing 
operation before January 1, 2001, the permitting authority will 
determine, and notify the Administrator of, each unit's allocation of 
CAIR NOX allowances by September 30, 2007 for 2009, 2010, 
and 2011 and by October 31, 2008 and October 31 of each year thereafter 
for the 4th year after the year of the notification deadline. The 
State's methodology must also provide that, if the permitting authority 
fails to submit to the Administrator such allocations in accordance 
with such applicable deadline, the Administrator will assume that the 
allocations of CAIR NOX allowances for the applicable 
control period are the same as for the control period that immediately 
precedes the applicable control period, except that, if the applicable 
control period is in 2015, the Administrator will assume that the 
allocations equal 83 percent of the allocations for the control period 
in 2014.
    (C) The State's methodology must require that, for EGUs commencing 
operation on or after January 1, 2001, the permitting authority will 
determine, and notify the Administrator of, each unit's allocation of 
CAIR NOX allowances by October 31 of the year for which the 
CAIR NOX allowances are allocated. The State's methodology 
must also provide that, if the permitting authority fails to submit to 
the Administrator such allocations in accordance with such applicable 
deadline, the Administrator will assume that the allocations of CAIR 
NOX allowances for the applicable control period are the 
same as for the control period that immediately precedes the applicable 
control period, except that, if the applicable control period is in 
2015, the Administrator will assume that the allocations equal 83 
percent of the allocations for the control period in 2014 and except 
that any CAIR NOX unit that would otherwise be allocated 
CAIR NOX allowances under paragraph (p)(1)(ii)(B) of this 
section, as well as under this paragraph, for the applicable control 
period will be assumed to be allocated no CAIR NOX 
allowances under this paragraph for the applicable control period.
    (2) The State may adopt, as compliance supplement pool provisions 
replacing the provisions in Sec.  97.143 of this chapter:
    (i) Provisions for allocating the State's compliance supplement 
pool that are substantively identical to Sec.  97.143 of this chapter, 
except that the permitting authority makes the allocations and the 
Administrator records the allocations made by the permitting authority; 
or
    (ii) Provisions for allocating the State's compliance supplement 
pool that are substantively identical to Sec.  96.143 of this chapter.
    (3) The State may adopt CAIR opt-in unit provisions as follows:
    (i) Provisions for CAIR opt-in units, including provisions for 
applications for CAIR opt-in permits, approval of CAIR opt-in permits, 
treatment of units as CAIR opt-in units, and allocation and recordation 
of CAIR NOX allowances for CAIR opt-in units, that are 
substantively identical to subpart II of part 96 of this chapter and 
the provisions of subparts AA through HH that are applicable to CAIR 
opt-in units or units for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied;
    (ii) Provisions for CAIR opt-in units, including provisions for 
applications for CAIR opt-in permits, approval of CAIR opt-in permits, 
treatment of units as CAIR opt-in units, and allocation and

[[Page 49747]]

recordation of CAIR NOX allowances for CAIR opt-in units, 
that are substantively identical to subpart II of part 96 of this 
chapter and the provisions of subparts AA through HH that are 
applicable to CAIR opt-in units or units for which a CAIR opt-in permit 
application is submitted and not withdrawn and a CAIR opt-in permit is 
not yet issued or denied, except that the provisions exclude Sec.  
96.188(b) of this chapter and the provisions of subpart II of part 96 
of this chapter that apply only to units covered by Sec.  96.188(b) of 
this chapter; or
    (iii) Provisions for applications for CAIR opt-in units, including 
provisions for CAIR opt-in permits, approval of CAIR opt-in permits, 
treatment of units as CAIR opt-in units, and allocation and recordation 
of CAIR NOX allowances for CAIR opt-in units, that are 
substantively identical to subpart II of part 96 of this chapter and 
the provisions of subparts AA through HH that are applicable to CAIR 
opt-in units or units for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied, except that the provisions exclude Sec.  96.188(c) of this 
chapter and the provisions of subpart II of part 96 of this chapter 
that apply only to units covered by Sec.  96.188(c) of this chapter.
    (cc) * * *
    Electric generating unit or EGU means:
    (1)(i) * * *
    (ii) If a stationary, fossil-fuel-fired boiler or stationary, 
fossil-fuel-fired combustion turbine that, under paragraph (1)(i) of 
this definition, is not an electric generating unit begins to serve a 
generator with nameplate capacity of more than 25 MWe producing 
electricity for sale, the unit shall become an electric generating unit 
on the date on which it first serves such generator.
    (2) A unit that meets the requirements set forth in paragraphs 
(2)(i)(A), (2)(ii)(A), or (2)(ii)(B) of this definition shall not be an 
electric generating unit:
    (i)(A) A unit:
    (1) Qualifying as a cogeneration unit during the 12-month period 
starting on the date the unit first produces electricity and continuing 
to qualify as a cogeneration unit; and
    (2) Not serving at any time, since the later of November 15, 1990 
or the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe supplying in any calendar year 
more than one-third of the unit's potential electric output capacity or 
219,000 MWh, whichever is greater, to any utility power distribution 
system for sale.
    (B) If a unit qualifies as a cogeneration unit during the 12-month 
period starting on the date the unit first produces electricity and 
meets the requirements of paragraph (1)(i)(A) of this definition for at 
least one calendar year, but subsequently no longer meets all such 
requirements, the unit shall become an electric generating unit 
starting on the earlier of January 1 after the first calendar year 
during which the unit first no longer qualifies as a cogeneration unit 
or January 1 after the first calendar year during which the unit no 
longer meets the requirements of paragraph (1)(i)(A)(2) of this 
definition.
    (ii)(A) A unit commencing operation before January 1, 1985:
    (1) Qualifying as a solid waste incineration unit; and
    (2) With an average annual fuel consumption of non-fossil fuel for 
1985-1987 exceeding 80 percent (on a Btu basis) and an average annual 
fuel consumption of non-fossil fuel for any 3 consecutive calendar 
years after 1990 exceeding 80 percent (on a Btu basis).
    (B) A unit commencing operation on or after January 1, 1985:
    (1) Qualifying as a solid waste incineration unit; and
    (2) With an average annual fuel consumption of non-fossil fuel for 
the first 3 calendar years of operation exceeding 80 percent (on a Btu 
basis) and an average annual fuel consumption of non-fossil fuel for 
any 3 consecutive calendar years after 1990 exceeding 80 percent (on a 
Btu basis).
    (C) If a unit qualifies as a solid waste incineration unit and 
meets the requirements of paragraph (2)(ii)(A) or (B) of this 
definition for at least 3 consecutive calendar years, but subsequently 
no longer meets all such requirements, the unit shall become an 
electric generating unit starting on the earlier of January 1 after the 
first calendar year during which the unit first no longer qualifies as 
a solid waste incineration unit or January 1 after the first 3 
consecutive calendar years after 1990 for which the unit has an average 
annual fuel consumption of fossil fuel of 20 percent or more.
* * * * *
    Solid waste incineration unit means a stationary, fossil-fuel-fired 
boiler or stationary, fossil-fuel-fired combustion turbine that is a 
``solid waste incineration unit'' as defined in section 129(g)(1) of 
the Clean Air Act.
* * * * *
    (ee) Notwithstanding any other provision of this section, a State 
may adopt, and include in a SIP revision submitted by March 31, 2007, 
regulations relating to the Federal CAIR NOX Ozone Season 
Trading Program under subparts AAAA through HHHH of part 97 of this 
chapter as follows:
    (1) The State adopt, as applicability provisions replacing the 
provisions in Sec.  97.304 of this chapter, provisions for 
applicability that are substantively identical to the provisions in 
Sec.  96.304 of this chapter expanded to include all non-EGUs subject 
to the State's emissions trading program approved under Sec.  
51.121(p).
    (2) The State may adopt, as CAIR NOX Ozone Season 
allowance allocation provisions replacing the provisions in subpart 
EEEE of part 97 of this chapter:
    (i) Allocation provisions substantively identical to subpart EEEE 
of part 96 of this chapter, under which the permitting authority makes 
the allocations; or
    (ii) Any methodology for allocating CAIR NOX Ozone 
Season allowances to individual sources under which the permitting 
authority makes the allocations, provided that:
    (A) The State may provide for issuance of an amount of CAIR Ozone 
Season NOX allowances for an ozone season, in addition to 
the amount in the State's Ozone Season EGU NOX Budget for 
such ozone season, not exceeding the portion of the State's State 
trading program budget, under the State's emissions trading program 
approved under Sec.  51.121(p), attributed to the non-EGUs that the 
applicability provisions in Sec.  96.304 of this chapter are expanded 
to include under paragraph (ee)(1) of this section.
    (B) The State's methodology must not allow the State to allocate 
CAIR Ozone Season NOX allowances for an ozone season in 
excess of the amount in the State's Ozone Season EGU NOX 
Budget for such ozone season plus any additional amount of CAIR Ozone 
Season NOX allowances issued under paragraph (ee)(2)(ii)(A) 
of this section for such ozone season.
    (C) The State's methodology must require that, for EGUs commencing 
operation before January 1, 2001, the permitting authority will 
determine, and notify the Administrator of, each unit's allocation of 
CAIR NOX Ozone Season allowances by September 30, 2007 for 
2009, 2010, and 2011 and by October 31, 2008 and October 31 of each 
year thereafter for the 4th year after the year of the notification 
deadline. The State's methodology must also provide that, if the 
permitting authority fails to submit to the Administrator such 
allocations in accordance with such applicable deadline, the 
Administrator will assume that the allocations of CAIR NOX 
Ozone Season allowances for the applicable control period are the same 
as for the

[[Page 49748]]

control period that immediately precedes the applicable control period, 
except that, if the applicable control period is in 2015, the 
Administrator will assume that the allocations equal 83 percent of the 
allocations for the control period in 2014.
    (D) The State's methodology must require that, for EGUs commencing 
operation on or after January 1, 2001, the permitting authority will 
determine, and notify the Administrator of, each unit's allocation of 
CAIR NOX Ozone Season allowances by July 31 of the year for 
which the CAIR NOX Ozone Season allowances are allocated. 
The State's methodology must also provide that, if the permitting 
authority fails to submit to the Administrator such allocations in 
accordance with such applicable deadline, the Administrator will assume 
that the allocations of CAIR NOX allowances for the 
applicable control period are the same as for the control period that 
immediately precedes the applicable control period, except that, if the 
applicable control period is in 2015, the Administrator will assume 
that the allocations equal 83 percent of the allocations for the 
control period in 2014 and except that any CAIR NOX unit 
that would otherwise be allocated CAIR NOX allowances under 
paragraph (ee)(2)(ii)(C) of this section, as well as under this 
paragraph, for the applicable control period will be assumed to be 
allocated no CAIR NOX allowances under this paragraph for 
the applicable control period.
    (3) The State may adopt CAIR opt-in unit provisions as follows:
    (i) Provisions for CAIR opt-in units, including provisions for 
applications for CAIR opt-in permits, approval of CAIR opt-in permits, 
treatment of units as CAIR opt-in units, and allocation and recordation 
of CAIR NOX Ozone Season allowances for CAIR opt-in units, 
that are substantively identical to subpart IIII of part 96 of this 
chapter and the provisions of subparts AAAA through HHHH that are 
applicable to CAIR opt-in units or units for which a CAIR opt-in permit 
application is submitted and not withdrawn and a CAIR opt-in permit is 
not yet issued or denied;
    (ii) Provisions for CAIR opt-in units, including provisions for 
applications for CAIR opt-in permits, approval of CAIR opt-in permits, 
treatment of units as CAIR opt-in units, and allocation and recordation 
of CAIR NOX Ozone Season allowances for CAIR opt-in units, 
that are substantively identical to subpart IIII of part 96 of this 
chapter and the provisions of subparts AAAA through HHHH that are 
applicable to CAIR opt-in units or units for which a CAIR opt-in permit 
application is submitted and not withdrawn and a CAIR opt-in permit is 
not yet issued or denied, except that the provisions exclude Sec.  
96.388(b) of this chapter and the provisions of subpart IIII of part 96 
of this chapter that apply only to units covered by Sec.  96.388(b) of 
this chapter; or
    (iii) Provisions for applications for CAIR opt-in units, including 
provisions for CAIR opt-in permits, approval of CAIR opt-in permits, 
treatment of units as CAIR opt-in units, and allocation and recordation 
of CAIR NOX allowances for CAIR opt-in units, that are 
substantively identical to subpart IIII of part 96 of this chapter and 
the provisions of subparts AAAA through HHHH that are applicable to 
CAIR opt-in units or units for which a CAIR opt-in permit application 
is submitted and not withdrawn and a CAIR opt-in permit is not yet 
issued or denied, except that the provisions exclude Sec.  96.388(c) of 
this chapter and the provisions of subpart IIII of part 96 of this 
chapter that apply only to units covered by Sec.  96.388(c) of this 
chapter.


Sec.  51.124  [Amended]

    3. Section 51.124 is amended by:
    a. In paragraph (q), amend the definition of ``Electric generating 
unit'' or ``EGU'' by:
    i. In paragraph (1) of the definition, redesignate the paragraph as 
paragraph ``(1)(i)'', replace the words ``since the start-up'' with the 
words ``since the later of November 15, 1990 or the start-up'', and add 
a new paragraph (1)(ii); and
    ii. Revise paragraph (2) of the definition; and
    b. In paragraph (q), add a new definition for ``Solid waste 
incineration unit''; and
    c. Add a new paragraph (r) to read as follows:


Sec.  51.124  Findings and requirements for submission of State 
implementation plan revisions relating to emissions of sulfur dioxide 
pursuant to the Clean Air Interstate Rule.

* * * * *
    (q) * * *
    Electric generating unit or EGU means:
    (1)(i) * * *
    (ii) If a stationary, fossil-fuel-fired boiler or stationary, 
fossil-fuel-fired combustion turbine that, under paragraph (1)(i) of 
this definition, is not an electric generating unit begins to serve a 
generator with nameplate capacity of more than 25 MWe producing 
electricity for sale, the unit shall become an electric generating unit 
on the date on which it first serves such generator.
    (2) A unit that meets the requirements set forth in paragraphs 
(2)(i)(A), (2)(ii)(A), or (2)(ii)(B) of this definition shall not be an 
electric generating unit:
    (i)(A) A unit:
    (1) Qualifying as a cogeneration unit during the 12-month period 
starting on the date the unit first produces electricity and continuing 
to qualify as a cogeneration unit; and
    (2) Not serving at any time, since the later of November 15, 1990 
or the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe supplying in any calendar year 
more than one-third of the unit's potential electric output capacity or 
219,000 MWh, whichever is greater, to any utility power distribution 
system for sale.
    (B) If a unit qualifies as a cogeneration unit during the 12-month 
period starting on the date the unit first produces electricity and 
meets the requirements of paragraph (1)(i)(A) of this definition for at 
least one calendar year but subsequently no longer meets all such 
requirements, the unit shall become an electric generating unit 
starting on the earlier of January 1 after the first calendar year 
during which the unit first no longer qualifies as a cogeneration unit 
or January 1 after the first calendar year during which the unit no 
longer meets the requirements of paragraph (1)(i)(A)(2) of this 
definition.
    (ii)(A) A unit commencing operation before January 1, 1985:
    (1) Qualifying as a solid waste incineration unit; and
    (2) With an average annual fuel consumption of non-fossil fuel for 
1985-1987 exceeding 80 percent (on a Btu basis) and an average annual 
fuel consumption of non-fossil fuel for any 3 consecutive calendar 
years after 1990 exceeding 80 percent (on a Btu basis).
    (B) A unit commencing operation on or after January 1, 1985:
    (1) Qualifying as a solid waste incineration unit; and
    (2) With an average annual fuel consumption of non-fossil fuel for 
the first 3 calendar years of operation exceeding 80 percent (on a Btu 
basis) and an average annual fuel consumption of non-fossil fuel for 
any 3 consecutive calendar years after 1990 exceeding 80 percent (on a 
Btu basis).
    (C) If a unit qualifies as a solid waste incineration unit and 
meets the requirements of paragraph (2)(ii)(A) or (B) of this 
definition for at least 3 consecutive calendar years, but subsequently 
no longer meets all such requirements, the unit shall become an 
electric generating unit starting on the earlier of January 1 after the 
first calendar year during which the unit first no longer qualifies as 
a solid waste incineration unit or January 1 after the

[[Page 49749]]

first 3 consecutive calendar years after 1990 for which the unit has an 
average annual fuel consumption of fossil fuel of 20 percent or more.
* * * * *
    Solid waste incineration unit means a stationary, fossil-fuel-fired 
boiler or stationary, fossil-fuel-fired combustion turbine that is a 
``solid waste incineration unit'' as defined in section 129(g)(1) of 
the Clean Air Act.
* * * * *
    (r) Notwithstanding any other provision of this section, a State 
may adopt, and include in a SIP revision submitted by March 31, 2007, 
regulations relating to the Federal CAIR SO2 Trading Program 
under subparts AAA through HHH of part 97 of this chapter as follows. 
The State may adopt the following CAIR opt-in unit provisions:
    (1) Provisions for CAIR opt-in units, including provisions for 
applications for CAIR opt-in permits, approval of CAIR opt-in permits, 
treatment of units as CAIR opt-in units, and allocation and recordation 
of CAIR SO2 allowances for CAIR opt-in units, that are 
substantively identical to subpart III of part 96 of this chapter and 
the provisions of subparts AAA through HHH that are applicable to CAIR 
opt-in units or units for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied;
    (2) Provisions for CAIR opt-in units, including provisions for 
applications for CAIR opt-in permits, approval of CAIR opt-in permits, 
treatment of units as CAIR opt-in units, and allocation and recordation 
of CAIR SO2 allowances for CAIR opt-in units, that are 
substantively identical to subpart III of part 96 of this chapter and 
the provisions of subparts AAA through HHH that are applicable to CAIR 
opt-in units or units for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied, except that the provisions exclude Sec.  96.288(b) of this 
chapter and the provisions of subpart III of part 96 of this chapter 
that apply only to units covered by Sec.  96.288(b) of this chapter; or
    (3) Provisions for applications for CAIR opt-in units, including 
provisions for CAIR opt-in permits, approval of CAIR opt-in permits, 
treatment of units as CAIR opt-in units, and allocation and recordation 
of CAIR SO2 allowances for CAIR opt-in units, that are 
substantively identical to subpart III of part 96 of this chapter and 
the provisions of subparts AAA through HHH that are applicable to CAIR 
opt-in units or units for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied, except that the provisions exclude Sec.  96.288(c) of this 
chapter and the provisions of subpart III of part 96 of this chapter 
that apply only to units covered by Sec.  96.288(c) of this chapter.

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

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

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

Subpart A--General Provisions

    2. Subpart A is amended by adding Sec. Sec.  52.35 and 52.36 to 
read as follows:


Sec.  52.35  What are the requirements of the Federal Implementation 
Plans (FIPs) for the Clean Air Interstate Rule relating to emissions of 
nitrogen oxides?

    The Federal CAIR NOX Annual Trading Program provisions 
of part 97 of this chapter constitute the Clean Air Interstate Rule 
Federal Implementation Plan provisions that relate to annual emissions 
of nitrogen oxides (NOX). These provisions apply to sources 
in each State that is described in Sec.  51.123(c)(1) and (2) of this 
chapter, Delaware, and New Jersey, each of which States is subject to a 
finding by the Administrator that the State failed to submit a State 
Implementation Plan (SIP) to satisfy the requirements of section 
110(a)(2)(D)(I) of the Clean Air Act for the PM2.5 NAAQS. 
The Federal CAIR NOX Ozone Season Trading Program provisions 
of part 97 of this chapter constitute the Clean Air Interstate Rule 
Federal Implementation Plan provisions for emissions of nitrogen oxides 
(NOX) during the ozone season, as defined in Sec.  97.302 of 
this chapter. These provisions apply to sources in each State that is 
described in Sec.  51.123(c)(1) and (3) of this chapter, each of which 
States is subject to a finding by the Administrator that the State 
failed to submit a State Implementation Plan (SIP) to satisfy the 
requirements of section 110(a)(2)(D)(I) of the Clean Air Act for the 8-
hour ozone NAAQS. These provisions do not invalidate or otherwise 
affect the obligations of States, emissions sources, or other 
responsible entities with respect to all portions of plans approved or 
promulgated under this part, nor the obligations of States under the 
requirements of Sec. Sec.  51.123 and 51.125 of this chapter.


Sec.  52.36  What are the requirements of the Clean Air Interstate Rule 
Federal Implementation Plans relating to emissions of sulfur dioxide?

    The Federal CAIR SO2 Trading Program provisions of part 
97 of this chapter constitute the Clean Air Interstate Rule Federal 
Implementation Plan provisions for emissions of sulfur dioxide 
(SO2). These provisions apply to sources in each State that 
is described in Sec.  51.124(c) of this chapter, Delaware, and New 
Jersey, each of which States is subject to an EPA finding that the 
State failed to submit a State Implementation Plan (SIP) to satisfy the 
requirements of section 110(a)(2)(D)(I) of the Clean Air Act for the 
PM2.5 NAAQS. These provisions do not invalidate or otherwise 
affect the obligations of States, emissions sources, or other 
responsible entities with respect to all portions of plans approved or 
promulgated under this part, nor the obligations of States under the 
requirements of Sec. Sec.  51.124 and 51.125 of this chapter.

Subpart B--Alabama

    3. Subpart B is amended by adding Sec. Sec.  52.54 and 52.55 to 
read as follows:


Sec.  52.54  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Alabama and for which requirements are set forth under the 
Federal CAIR NOX Annual and Ozone Season Trading Programs in 
part 97 of this chapter must comply with such applicable requirements.


Sec.  52.55  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Alabama and for which requirements are set forth under the 
Federal CAIR SO2 Trading Program in part 97 of this chapter 
must comply with such applicable requirements.

Subpart E--Arkansas

    4. Subpart E is amended by adding Sec. Sec.  52.184 to read as 
follows:


Sec.  52.184  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Arkansas and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading

[[Page 49750]]

Programs in part 97 of this chapter must comply with such applicable 
requirements.

Subpart H--Connecticut

    5. Subpart H is amended by adding Sec. Sec.  52.386 to read as 
follows:


Sec.  52.386  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Connecticut and for which requirements are set forth under 
the Federal CAIR NOX Ozone Season Trading Program in part 97 
of this chapter must comply with such applicable requirements.

Subpart I--Delaware

    6. Subpart I is amended by adding Sec. Sec.  52.440 and 52.441 to 
read as follows:


Sec.  52.440  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Delaware and for which requirements are set forth under 
the Federal CAIR NOX Ozone Season Trading Program in part 97 
of this chapter must comply with such applicable requirements.


Sec.  52.441  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Delaware and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart J--District of Columbia

    7. Subpart J is amended by adding Sec. Sec.  52.484 and 52.485 to 
read as follows:


Sec.  52.484  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the District of Columbia and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.485  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the District of Columbia and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart K--Florida

    8. Subpart K is amended by adding Sec. Sec.  52.540 and 52.541 to 
read as follows:


Sec.  52.540  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Florida and for which requirements are set forth under the 
Federal CAIR NOX Annual and Ozone Season Trading Programs in 
part 97 of this chapter must comply with such applicable requirements.


Sec.  52.541  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Florida and for which requirements are set forth under the 
Federal CAIR SO2 Trading Program in part 97 of this chapter 
must comply with such applicable requirements.

Subpart L--Georgia

    9. Subpart L is amended by adding Sec. Sec.  52.584 and 52.585 to 
read as follows:


Sec.  52.584  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Georgia and for which requirements are set forth under 
Federal CAIR NOX Annual and Ozone Season Trading Programs in 
part 97 of this chapter must comply with such applicable requirements.


Sec.  52.585  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Georgia and for which requirements are set forth under the 
Federal CAIR SO2 Trading Program in part 97 of this chapter 
must comply with such applicable requirements.

Subpart O--Illinois

    10. Subpart O is amended by adding Sec. Sec.  52.745 and 52.746 to 
read as follows:


Sec.  52.745  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Illinois and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.746  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Illinois and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart P--Indiana

    11. Subpart P is amended by adding Sec. Sec.  52.789 and 52.790 to 
read as follows:


Sec.  52.789  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Indiana and for which requirements are set forth under the 
Federal CAIR NOX Annual and Ozone Season Trading Programs in 
part 97 of this chapter must comply with such applicable requirements.


Sec.  52.790  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Indiana and for which requirements are set forth under the 
Federal CAIR SO2 Trading Program in part 97 of this chapter 
must comply with such applicable requirements.

Subpart Q--Iowa

    12. Subpart Q is amended by adding Sec.  52.840 and 52.841 to read 
as follows:


Sec.  52.840  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Iowa and for which requirements are set forth under the 
Federal CAIR NOX Annual

[[Page 49751]]

and Ozone Season Trading Programs in part 97 of this chapter must 
comply with such applicable requirements.


Sec.  52.841  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Iowa and for which requirements are set forth under the 
Federal CAIR SO2 Trading Program in part 97 of this chapter 
must comply with such applicable requirements.

Subpart S--Kentucky

    14. Subpart S is amended by adding Sec. Sec.  52.940 and 52.941 to 
read as follows:


Sec.  52.940  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Kentucky and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.941  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Kentucky and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart T--Louisiana

    15. Subpart T is amended by adding Sec. Sec.  52.984 and 52.985 to 
read as follows:


Sec.  52.984  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Louisiana and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.985  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Louisiana and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart V--Maryland

    16. Subpart V is amended by adding Sec. Sec.  52.1084 and 52.1085 
to read as follows:


Sec.  52.1084  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Maryland and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.1085  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Maryland and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart W--Massachusetts

    17. Subpart W is amended by adding Sec. Sec.  52.1140 to read as 
follows:


Sec.  52.1140  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Massachusetts and for which requirements are set forth 
under the Federal CAIR NOX Ozone Season Trading Program in 
part 97 of this chapter must comply with such applicable requirements.

Subpart X--Michigan

    18. Subpart X is amended by adding Sec. Sec.  52.1186 and 52.1187 
to read as follows:


Sec.  52.1186  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Michigan and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.1187  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Michigan and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart Y--Minnesota

    19. Subpart Y is amended by adding Sec. Sec.  52.1240 and 52.1241 
to read as follows:


Sec.  52.1240  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Minnesota and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.1241  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Minnesota and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart Z--Mississippi

    20. Subpart Z is amended by adding Sec. Sec.  52.1284 and 52.1285 
to read as follows:


Sec.  52.1284  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Mississippi and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.1285  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Mississippi and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this

[[Page 49752]]

chapter must comply with such applicable requirements.

Subpart AA--Missouri

    21. Subpart AA is amended by adding Sec. Sec.  52.1341 and 52.1342 
to read as follows:


Sec.  52.1341  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Missouri and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.1342  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Missouri and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart FF--New Jersey

    22. Subpart FF is amended by adding Sec. Sec.  52.1584 and 52.1585 
to read as follows:


Sec.  52.1584  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of New Jersey and for which requirements are set forth under 
the Federal CAIR NOX Ozone Season Trading Program in part 97 
of this chapter must comply with such applicable requirements.


Sec.  52.1585  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of New Jersey and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart HH--New York

    23. Subpart HH is amended by adding Sec. Sec.  52.1684 and 52.1685 
to read as follows:


Sec.  52.1684  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of New York and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.1685  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of New York and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart II--North Carolina

    24. Subpart II is amended by adding Sec. Sec.  52.1784 and 52.1785 
to read as follows:


Sec.  52.1784  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of North Carolina and for which requirements are set forth 
under the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.1785  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of North Carolina and for which requirements are set forth 
under the Federal CAIR SO2 Trading Program in part 97 of 
this chapter must comply with such applicable requirements.

Subpart KK--Ohio

    25. Subpart KK is amended by adding Sec. Sec.  52.1891 and 52.1892 
to read as follows:


Sec.  52.1891  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Ohio and for which requirements are set forth under the 
Federal CAIR NOX Annual and Ozone Season Trading Programs in 
part 97 of this chapter must comply with such applicable requirements.


Sec.  52.1892  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Ohio and for which requirements are set forth under the 
Federal CAIR SO2 Trading Program in part 97 of this chapter 
must comply with such applicable requirements.

Subpart NN--Pennsylvania

    26. Subpart NN is amended by adding Sec. Sec.  52.2040 and 52.2041 
to read as follows:


Sec.  52.2040  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Pennsylvania and for which requirements are set forth 
under the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.2041  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Pennsylvania and for which requirements are set forth 
under the Federal CAIR SO2 Trading Program in part 97 of 
this chapter must comply with such applicable requirements.

Subpart PP--South Carolina

    27. Subpart PP is amended by adding Sec. Sec.  52.2140 and 52.2141 
to read as follows:


Sec.  52.2140  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of South Carolina and for which requirements are set forth 
under the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.2141  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of South Carolina and for which requirements are

[[Page 49753]]

set forth under the Federal CAIR SO2 Trading Program in part 
97 of this chapter must comply with such applicable requirements.

Subpart RR--Tennessee

    28. Subpart RR is amended by adding Sec. Sec.  52.2240 and 52.2241 
to read as follows:


Sec.  52.2240  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Tennessee and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.2241  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Tennessee and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart SS--Texas

    29. Subpart SS is amended by adding Sec. Sec.  52.2283 and 52.2284 
to read as follows:


Sec.  52.2283  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Texas and for which requirements are set forth under the 
Federal CAIR NOX Annual and Ozone Season Trading Programs in 
part 97 of this chapter must comply with such applicable requirements.


Sec.  52.2284  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Texas and for which requirements are set forth under the 
Federal CAIR SO2 Trading Program in part 97 of this chapter 
must comply with such applicable requirements.

Subpart VV--Virginia

    30. Subpart VV is amended by adding Sec. Sec.  52.2440 and 52.2441 
to read as follows:


Sec.  52.2440  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Virginia and for which requirements are set forth under 
the Federal CAIR NOX Annual and Seasonal Trading Programs in 
part 97 of this chapter must comply with such applicable requirements.


Sec.  52.2441  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Virginia and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

Subpart XX--West Virginia

    31. Subpart XX is amended by adding Sec. Sec.  52.2540 and 52.2541 
to read as follows:


Sec.  52.2540  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of West Virginia and for which requirements are set forth 
under the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.2541  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of West Virginia and for which requirements are set forth 
under the Federal CAIR SO2 Trading Program in part 97 of 
this chapter must comply with such applicable requirements.

Subpart YY--Wisconsin

    32. Subpart YY is amended by adding Sec. Sec.  52.2587 and 52.2588 
to read as follows:


Sec.  52.2587  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of nitrogen oxides?

    The owner or operator of each NOX source located within 
the State of Wisconsin and for which requirements are set forth under 
the Federal CAIR NOX Annual and Ozone Season Trading 
Programs in part 97 of this chapter must comply with such applicable 
requirements.


Sec.  52.2588  Interstate pollutant transport provisions; What are the 
FIP requirements for decreases in emissions of sulfur dioxide?

    The owner or operator of each SO2 source located within 
the State of Wisconsin and for which requirements are set forth under 
the Federal CAIR SO2 Trading Program in part 97 of this 
chapter must comply with such applicable requirements.

PART 72--[Amended]

    1. The authority citation for part 72 continues to read as follows:

    Authority: 42 U.S.C. 7601 and 7651 et seq.


Sec.  72.7  [Amended]

    2. Section 72.7 is amended by:
    a. In paragraph (f)(4)(i), replace the words ``become an affected 
unit under the Acid Rain Program and parts 70 and 71 of this chapter'' 
with the words ``, for purposes of applying parts 70 and 71 of this 
chapter, shall be treated as an affected unit under the Acid Rain 
Program''; and
    b. Revise paragraph (f)(2) to read as follows:


Sec.  72.7  New units exemption.

* * * * *
    (f) * * *
    (2) For any period for which a unit is exempt under this section:
    (i) For purposes of applying parts 70 and 71 of this chapter, the 
unit shall not be treated as an affected unit under the Acid Rain 
Program and shall continue to be subject to any other applicable 
requirements under parts 70 and 71 of this chapter.
    (ii) The unit shall not be eligible to be an opt-in source under 
part 74 of this chapter.
* * * * *


Sec.  72.8  [Amended]

    3. Section 72.8 is amended by:
    a. In paragraph (d)(6)(i) introductory text, replace the words 
``become an affected unit under the Acid Rain Program and parts 70 and 
71 of this chapter'' with the words ``, for purposes of applying parts 
70 and 71 of this chapter, shall be treated as an affected unit under 
the Acid Rain Program''; and
    b. Revise paragraph (d)(4) to read as follows:


Sec.  72.8  Retired units exemption.

* * * * *
    (d) * * *
    (4) For any period for which a unit is exempt under this section:
    (i) For purposes of applying parts 70 and 71 of this chapter, the 
unit shall not

[[Page 49754]]

be treated as an affected unit under the Acid Rain Program and shall 
continue to be subject to any other applicable requirements under parts 
70 and 71 of this chapter.
    (ii) The unit shall not be eligible to be an opt-in source under 
part 74 of this chapter.
* * * * *


Sec.  72.20  [Amended]

    4. Section 72.20 is amended by, in paragraph (b), replace the words 
``his or her actions'' by the words ``his or her representations, 
actions''.


Sec.  72.22  [Amended]

    5. Section 72.22 is amended by, in paragraph (b), replace the words 
``any action, representation, or failure to act'' with the words ``any 
representation, action, inaction, or submission'' whenever they appear.


Sec.  72.23  [Amended]

    6. Section 72.23 is amended by, in paragraphs (a), (b), and (c)(1), 
replace the words ``submissions, actions, and inactions'' with the 
words ``representations, actions, inactions, and submissions'' whenever 
they appear.


Sec.  72.24  [Amended]

    7. Section 72.24 is amended by:
    a. In paragraph (a)(6), replace the words ``actions, inactions, or 
submissions'' with the words ``representations, actions, inactions, or 
submissions''.
    b. In paragraph (a)(9)(ii), replace the words ``or, if such 
multiple'' with the words ``, except that, if such multiple''.


Sec.  72.25  [Amended]

    8. Section 72.25 is amended by, in paragraph (b), replace the words 
``submission, action or inaction'' with the words ``representation, 
action, inaction, or submission'' and replace the words ``submission, 
action, or inaction'' with the words ``representation, action, 
inaction, or submission''.

PART 73--[AMENDED]

    1. The authority citation for Part 73 continues to read as follows:

    Authority: 42 U.S.C. 7601 and 7651 et seq.


Sec.  73.31  [Amended]

    2. Section 73.31 is amended by, in paragraph (c)(1)(v), replace the 
words ``actions, inactions, or submissions'' with the words 
``representations, actions, inactions, or submissions''.


Sec.  73.33  [Amended]

    3. Section 73.33 is amended by:
    a. In paragraph (d)(4), replace the words ``action, representation, 
or failure to act'' with the words ``representation, action, inaction, 
or submission'' and replace the word ``an action'' with the words ``a 
representation, action, inaction, or submission''.
    b. In paragraph (e), replace the word ``actions'' with the words 
``representations, actions, inactions, or submissions''.
    c. In paragraph (f), replace the words ``any submission to'' with 
the words ``any representation, action, inaction, or submission to'' 
and replace the words ``the recordation of transfers submitted by'' 
with the words ``any representation, action, inaction, or submission 
of''.

PART 74--[AMENDED]

    1. The authority citation for Part 74 continues to read as follows:

    Authority: 7601 and 7651 et seq.


Sec.  74.4  [Amended]

    2. Section 74.4(c) is removed.

PART 78--APPEAL PROCEDURES

    1. The authority citation for Part 78 continues to read as follows:

    Authority: 42 U.S.C. 7401, 7403, 7410, 7426, 7601, and 7651, et 
seq.


Sec.  78.1  [Amended]

    2. Section 78.1 is amended by:
    a. In paragraph (b)(8)(ii), replace the words ``Sec.  97.256'' by 
the words ``Sec.  96.256''.
    b. Add new paragraphs (b)(10), (b)(11), and (b)(12) to read as 
follows:


Sec.  78.1  Purpose and scope.

* * * * *
    (b) * * *
    (10) Under subparts AA through HH of part 97 of this chapter,
    (i) The decision on the allocation of CAIR NOX 
allowances under subpart EE of part 97 of this chapter.
    (ii) The decision on the deduction of CAIR NOX 
allowances, and the adjustment of the information in a submission and 
the decision on the deduction or transfer of CAIR NOX 
allowances based on the information as adjusted, under Sec.  97.154 of 
this chapter;
    (iii) The correction of an error in a CAIR NOX Allowance 
Tracking System account under Sec.  97.156 of this chapter;
    (iv) The decision on the transfer of CAIR NOX allowances 
under Sec.  97.161 of this chapter;
    (v) The finalization of control period emissions data, including 
retroactive adjustment based on audit;
    (vi) The approval or disapproval of a petition under Sec.  97.175 
of this chapter.
    (11) Under subparts AAA through HHH of part 97 of this chapter,
    (i) The decision on the deduction of CAIR SO2 
allowances, and the adjustment of the information in a submission and 
the decision on the deduction or transfer of CAIR SO2 
allowances based on the information as adjusted, under Sec.  97.254 of 
this chapter;
    (ii) The correction of an error in a CAIR SO2 Allowance 
Tracking System account under Sec.  97.256 of this chapter;
    (iii) The decision on the transfer of CAIR SO2 
allowances under Sec.  97.261 of this chapter;
    (iv) The finalization of control period emissions data, including 
retroactive adjustment based on audit;
    (v) The approval or disapproval of a petition under Sec.  97.275 of 
this chapter.
    (12) Under subparts AAAA through HHHH of part 97 of this chapter,
    (i) The decision on the allocation of CAIR NOX Ozone 
Season allowances under subpart EEEE of part 97 of this chapter.
    (ii) The decision on the deduction of CAIR NOX Ozone 
Season allowances, and the adjustment of the information in a 
submission and the decision on the deduction or transfer of CAIR 
NOX Ozone Season allowances based on the information as 
adjusted, under Sec.  97.354 of this chapter;
    (iii) The correction of an error in a CAIR NOX Ozone 
Season Allowance Tracking System account under Sec.  97.356 of this 
chapter;
    (iv) The decision on the transfer of CAIR NOX Ozone 
Season allowances under Sec.  97.361;
    (v) The finalization of control period emissions data, including 
retroactive adjustment based on audit;
    (vi) The approval or disapproval of a petition under Sec.  97.375 
of this chapter.
* * * * *


Sec.  78.3  [Amended]

    3. Section 78.3 is amended by:
    a. In paragraph (b)(3)(i), replace the words ``under paragraph 
(a)(4), (5), or (6) of this section'' by the words ``under paragraph 
(a)(4), (5), (6), (7), (8), or (9) of this section'';
    b. In paragraph (d)(3), replace the words ``account certificate of 
representation submitted by a CAIR designated representative'' by the 
words ``certificate of representation submitted by a CAIR designated 
representative'' and replace the words ``or subparts AAAA through IIII 
of part 96 of this chapter'', the words ``subparts AAAA through IIII of 
part 96 of this chapter, or under part 97 of this chapter'';
    c. Add new paragraphs (a)(7), (a)(8), (a)(9), (d)(8), (d)(9), and 
(d)(10) to read as follows:


Sec.  78.3  Petition for administrative review and request for 
evidentiary hearing.

    (a) * * *

[[Page 49755]]

    (7) The following persons may petition for administrative review of 
a decision of the Administrator that is made under subparts AA through 
HH of part 97 of this chapter and that is appealable under Sec.  
78.1(a):
    (i) The CAIR designated representative for a unit or source, or the 
CAIR authorized account representative for any CAIR NOX 
Allowance Tracking System account, covered by the decision; or
    (ii) Any interested person.
    (8) The following persons may petition for administrative review of 
a decision of the Administrator that is made under subparts AAA through 
HHH of part 97 and that is appealable under Sec.  78.1(a):
    (i) The CAIR designated representative for a unit or source, or the 
CAIR authorized account representative for any CAIR SO2 
Allowance Tracking System account, covered by the decision; or
    (ii) Any interested person.
    (9) The following persons may petition for administrative review of 
a decision of the Administrator that is made under subparts AAAA 
through HHHH of part 97 and that is appealable under Sec.  78.1(a):
    (i) The CAIR designated representative for a unit or source, or the 
CAIR authorized account representative for any CAIR Ozone Season 
NOX Allowance Tracking System account, covered by the 
decision; or
    (ii) Any interested person.
* * * * *
    (d) * * *
    (8) Any provision or requirement of subparts AA through HH of part 
97 of this chapter, including the standard requirements under Sec.  
97.106 of this chapter and any emission monitoring or reporting 
requirements.
    (9) Any provision or requirement of subparts AAA through HHH of 
part 97 of this chapter, including the standard requirements under 
Sec.  97.206 of this chapter and any emission monitoring or reporting 
requirements.
    (10) Any provision or requirement of subparts AAAA through HHHH of 
part 97 of this chapter, including the standard requirements under 
Sec.  97.306 of this chapter and any emission monitoring or reporting 
requirements.

PART 96--NOX BUDGET TRADING PROGRAM AND CAIR NOX AND SO2 TRADING 
PROGRAMS FOR STATE IMPLEMENTATION PLANS

    1. The heading of part 96 is revised to read as set forth above.
    2. The authority citation for part 96 continues to read as follows:

    Authority: 42 U.S.C. 7401, 7403, 7410, 7601, and 7651, et seq.


Sec.  96.102  [Amended]

    3. Section 96.102 is amended by:
    a. In the definition of ``Alternate CAIR designated 
representative'', add at the end the words ``If the CAIR NOX 
source is also subject to the Hg Budget Trading Program, then this 
natural person shall be the same person as the alternate Hg designated 
representative under the Hg Budget Trading Program.''
    b. In the definition of ``CAIR designated representative'', add at 
the end the words ``If the CAIR NOX source is also subject 
to the Hg Budget Trading Program, then this natural person shall be the 
same person as the Hg designated representative under the Hg Budget 
Trading Program.''
    c. In the definition of ``CAIR NOX allowance'', replace 
the words ``by the permitting authority under'' with the words ``by the 
permitting authority or the Administrator under'', replace the words 
``Sec.  96.188'' with the words ``Sec.  96.188, or under subpart EE of 
part 97 or Sec.  97.188 of this chapter,'', and replace the words 
``Sec.  51.123(o)(1) or (2) of this chapter'' with the words ``Sec.  
51.123(o)(1) or (2) of this chapter or subpart EE of part 97 or Sec.  
97.188 of this chapter'';
    d. In the definition of ``CAIR NOX allowance deduction 
or deduct CAIR NOX allowances'', add, after the words 
``compliance account'', the words ``, e.g.,'';
    e. In the definition of ``CAIR NOX Annual Trading 
Program'', replace the words ``Sec.  51.123 of this chapter,'' with the 
words ``Sec.  51.123 of this chapter or established by the 
Administrator in accordance with subparts AA through II of part 97 of 
this chapter and Sec.  52.35 of this chapter,'';
    f. In the definition of ``CAIR NOX Ozone Season Trading 
Program'', replace the words ``Sec.  51.123 of this chapter,'' with the 
words ``Sec.  51.123 of this chapter or established by the 
Administrator in accordance with subparts AAAA through IIII of part 97 
of this chapter and Sec.  52.35 of this chapter,'';
    g. In the definition of ``CAIR SO2 Trading Program'', 
replace the words ``Sec.  51.123 of this chapter,'' with the words 
``Sec.  51.124 of this chapter or established by the Administrator in 
accordance with subparts AAA through III of part 97 of this chapter and 
Sec.  52.36 of this chapter,'';
    h. In paragraph (2) of the definition of ``Cogeneration unit'', 
replace the words ``calendar year after which'' with the words 
``calendar year after the calendar year in which'';
    i. In the definition of ``Commence commercial operation'', replace 
the words ``on the date the unit commences'' with the words ``on the 
later of November 15, 1990 or the date the unit commences'' in 
paragraphs (1)(i), (1)(ii), and (2);
    j. In the definition of ``Commence operation'', revise paragraphs 
(1)(i) and (1)(ii), remove paragraph (2), replace in paragraphs (3)(i) 
and (3)(ii) the words ``in paragraph (3)'' with the words ``in 
paragraph (2)'', replace in paragraph (3)(ii) the words ``in paragraph 
(1), (2), or (3)'' with the words ``in paragraph (1) or (2)'', and 
redesignate paragraph (3) as paragraph (2);
    k. In the definition of ``Control period'', replace the words 
``January 1 of a calendar year and'' with the words ``January 1 of a 
calendar year, except as provided in Sec.  96.106(c)(2), and'';
    l. In the definition of ``Oil-fired'', replace the words ``in a 
specified year.'' with the words ``in a specified year and not 
qualifying as coal-fired.''; and
    m. Add new definitions of ``Hg Budget Trading Program'' and ``Solid 
waste incineration unit'' and revise to read as follows:


Sec.  96.102  Definitions.

* * * * *
    Commence operation means:
    (1) * * *
    (i) For a unit that undergoes a physical change (other than 
replacement of the unit by a unit at the same source) after the date 
the unit commences operation as defined in paragraph (1) of this 
definition, such date shall remain the unit's date of commencement of 
operation.
    (ii) For a unit that is replaced by a unit at the same source 
(e.g., repowered) after the date the unit commences operation as 
defined in paragraph (1) of this definition, the replacement unit shall 
be treated as a separate unit with a separate date for commencement of 
operation as defined in paragraph (1) or (2) of this definition as 
appropriate.
* * * * *
    Hg Budget Trading Program means a multi-state Hg air pollution 
control and emission reduction program approved and administered by the 
Administrator in accordance subpart HHHH of part 60 of this chapter and 
Sec.  60.24(h)(6), or established by the Administrator, as a means of 
reduction national Hg emissions.
* * * * *
    Solid waste incineration unit means a stationary, fossil-fuel-fired 
boiler or stationary, fossil-fuel-fired combustion turbine that is a 
``solid waste

[[Page 49756]]

incineration unit'' as defined in section 129(g)(1) of the Clean Air 
Act.
* * * * *
    4. Section 96.103 is revised to read as follows:


Sec.  96.103  Measurements, abbreviations, and acroynyms.

    Measurements, abbreviations, and acronyms used in this subpart and 
subparts BB through II are defined as follows:

Btu--British thermal unit
CO2--carbon dioxide
H2O--water
Hg--mercury
hr--hour
kW--kilowatt electrical
kWh--kilowatt hour
lb--pound
mmBtu--million Btu
MWe--megawatt electrical
MWh--megawatt hour
NOX--nitrogen oxides
O2--oxygen
ppm--parts per million
scfh--standard cubic feet per hour
SO2--sulfur dioxide
yr--year


Sec.  96.104  [Amended]

    5. Section 96.104 is revised to read as follows:


Sec.  96.104  Applicability.

    (a) Except as provided in paragraph (b) of this section:
    (1) The following units in a State shall be CAIR NOX 
units, and any source that includes one or more such units shall be a 
CAIR NOX source, subject to the requirements of this subpart 
and subparts BB through HH of this part: any stationary, fossil-fuel-
fired boiler or stationary, fossil-fuel-fired combustion turbine 
serving at any time, since the later of November 15, 1990 or the start-
up of the unit's combustion chamber, a generator with nameplate 
capacity of more than 25 MWe producing electricity for sale.
    (2) If a stationary, fossil-fuel-fired boiler or stationary, 
fossil-fuel-fired combustion turbine that, under paragraph (a)(1) of 
this section, is not a CAIR NOX unit begins to serve a 
generator with nameplate capacity of more than 25 MWe producing 
electricity for sale, the unit shall become a CAIR NOX unit 
on the date on which it first serves such generator.
    (b) The units in a State that meet the requirements set forth in 
paragraph (b)(1)(i), (b)(2)(i), or (b)(2)(ii) of this section shall not 
be CAIR NOX units:
    (1)(i) Any unit:
    (A) Qualifying as a cogeneration unit during the 12-month period 
starting on the date the unit first produces electricity and continuing 
to qualify as a cogeneration unit; and
    (B) Not serving at any time, since the later of November 15, 1990 
or the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe supplying in any calendar year 
more than one-third of the unit's potential electric output capacity or 
219,000 MWh, whichever is greater, to any utility power distribution 
system for sale.
    (ii) If a unit qualifies as a cogeneration unit during the 12-month 
period starting on the date the unit first produces electricity and 
meets the requirements of paragraphs (b)(1)(i) of this section for at 
least one calendar year, but subsequently no longer meets all such 
requirements, the unit shall become a CAIR NOX unit starting 
on the earlier of January 1 after the first calendar year during which 
the unit first no longer qualifies as a cogeneration unit or January 1 
after the first calendar year during which the unit no longer meets the 
requirements of paragraph (b)(1)(i)(B) of this section.
    (2)(i) Any unit commencing operation before January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
1985-1987 exceeding 80 percent (on a Btu basis) and an average annual 
fuel consumption of non-fossil fuel for any 3 consecutive calendar 
years after 1990 exceeding 80 percent (on a Btu basis).
    (ii) Any unit commencing operation on or after January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
the first 3 calendar years of operation exceeding 80 percent (on a Btu 
basis) and an average annual fuel consumption of non-fossil fuel for 
any 3 consecutive calendar years after 1990 exceeding 80 percent (on a 
Btu basis).
    (iii) If a unit qualifies as a solid waste incineration unit and 
meets the requirements of paragraph (b)(2)(i) or (ii) of this section 
for at least 3 consecutive calendar years, but subsequently no longer 
meets all such requirements, the unit shall become a CAIR 
NOX unit starting on the earlier of January 1 after the 
first calendar year during which the unit first no longer qualifies as 
a solid waste incineration unit or January 1 after the first 3 
consecutive calendar years after 1990 for which the unit has an average 
annual fuel consumption of fossil fuel of 20 percent or more.


Sec.  96.105  [Amended]

    6. Section 96.105 is amended by:
    a. In paragraph (a)(1), replace the words ``Sec.  96.106(c)(4) 
through (8)'' with the words ``Sec.  96.106(c)(4) through (7)'' and 
replace the words ``subparts EE through GG'' with the words ``subparts 
BB and EE through GG''; and
    b. In paragraph (b)(3), replace the words ``shall retain at the 
source'' with the words ``shall retain, at the source''.


Sec.  96.106  [Amended]

    7. Section 96.106 is amended by:
    a. In paragraph (a)(1)(i), replace the words ``in Sec.  96.121(a) 
and (b)'' with the words ``in Sec.  96.121'';
    b. In paragraph (c)(2), replace the words ``under paragraph (c)(1) 
of this section'' with ``under paragraph (c)(1) of this section for the 
control period'' and replace the words ``under Sec.  96.170(b)(1), (2), 
or (5)'' with the words ``under Sec.  96.170(b)(1), (2), or (5) and for 
each control period thereafter'';
    c. In paragraph (c)(7), replace the words ``from a CAIR 
NOX unit's compliance account'' with the words ``from a CAIR 
NOX source's compliance account'' and replace the words 
``CAIR permit of the source that includes the CAIR NOX 
unit'' with the words ``CAIR permit of the source''; and
    d. In paragraph (d), remove paragraph (2), remove the designation 
of paragraph (1), redesignate paragraph (i) as paragraph (1), and 
redesignate paragraph (ii) as paragraph (2).


Sec.  96.113  [Amended]

    8. Section 96.113 is amended by, in paragraph (a)(4)(iv), replacing 
the words ``where a customer'' with the words ``where a utility or 
industrial customer''.


Sec.  96.142  [Amended]

    9. Section 96.142 is amended by:
    a. In paragraph (a)(2)(ii)(C), replace the words ``3,414 Btu/kWh'' 
with the words ``3,413 Btu/kWh'';
    b. In paragraph (c)(1), replace the words ``2009 through 2013'' 
with the words ``2009 through 2014'' and replace the words ``in 2014'' 
with the words ``in 2015'';
    c. In paragraph (c)(2), replace the words ``on or before July 1'' 
with the words ``on or before May 1''; and
    d. In paragraph (c)(4)(ii), replace the words ``On or after July 
1'' with the words ``On or after May 1''.


Sec.  96.143  [Amended]

    10. Section 96.143 is amended by:
    a. In paragraph (d)(3), replace the words `` `Unit's allocation' is 
the number of CAIR NOX allowances'' with the words `` 
`Unit's allocation' is the amount of CAIR NOX allowances';
    b. In paragraph (d)(4), replace the words ``paragraph (d)(3) or 
(4)'' with the words ``paragraph (d)(2) or (3)''; and

[[Page 49757]]

    c. In paragraph (d)(5), replace the words ``paragraph (d)(5)'' with 
the words ``paragraph (d)(4)''.


Sec.  96.153  [Amended]

    11. Section 96.153 is amended by:
    a. In paragraph (a), replace the words ``By December 1, 2006, the 
Administrator'' with the words ``The Administrator''; and
    b. Revise paragraph (c) to read as follows:


Sec.  96.153  Recordation of CAIR NOX allowance allocations.

* * * * *
    (c) By December 1, 2009 and December 1 of each year thereafter, the 
Administrator will record in the CAIR NOX source's 
compliance account the CAIR NOX allowances allocated for the 
CAIR NOX units at the source, as submitted by the permitting 
authority or as determined by the Administrator in accordance with 
Sec.  96.141(b), for the control period in the sixth year after the 
year of the applicable deadline for recordation under this paragraph.
* * * * *


Sec.  96.154  [Amended]

    12. Section 96.154 is amended by, in paragraph (c)(2)(ii), replace 
the words ``to any unit'' with the words ``to any entity''.


Sec.  96.170  [Amended]

    13. Section 96.170 is amended by:
    a. In paragraph (b)(5), replace the words ``paragraphs (b)(1), (2), 
and (4) of this section and solely for purposes of Sec.  96.106(c)(2), 
for the owner'' with the words ``paragraphs (b)(1) and (2) of this 
section, for the owner''; and
    b. Add a new paragraph (e) to read as follows:


Sec.  96.170  General Requirements.

* * * * *
    (e) Long-term cold storage. The owner or operator of a CAIR 
NOX unit is subject to the applicable provisions of part 75 
of this chapter concerning units in long-term cold storage.


Sec.  96.171  [Amended]

    14. Section 96.171 is amended by, in paragraph (c), replace the 
words ``Sec.  75.12, Sec.  75.17, or subpart H of part 75'' with the 
words ``Sec.  75.12 or Sec.  75.17''.


Sec.  96.173  [Amended]

    15. Section 96.173 is amended by removing the words ``, except that 
if the unit is not subject to an Acid Rain emissions limitation, the 
notification is only required to be sent to the permitting authority''.


Sec.  96.174  [Amended]

    16. Section 96.174 is amended by:
    a. In paragraph (d)(1)(i), replace the words ``2008; or'' with the 
words ``2008;'';
    b. In paragraph (d)(1)(ii), replace the words ``2008.'' with the 
words ``2008;'';
    c. Add new paragraphs (d)(1)(iii) and (iv); and
    d. In paragraph (d)(3), replace the words ``or CAIR SO2 
Trading Program,'' with the words '', CAIR SO2 Trading 
Program, or Hg Budget Trading Program,'' and replace the words 
``subparts F through H'' with the words ``subparts F through I'' to 
read as follows:


Sec.  96.174  Recordkeeping and reporting.

* * * * *
    (d) * * *
    (1) * * *
    (iii) Notwithstanding paragraphs (d)(1)(i) and (ii) of this 
section, for a unit for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied under subpart II of this part, the calendar quarter 
corresponding to the date specified in Sec.  96.184(b); and
    (iv) Notwithstanding paragraphs (d)(1)(i) and (ii) of this section, 
for a CAIR NOX opt-in unit under subpart II of this part, 
the calendar quarter corresponding to the date on which the CAIR 
NOX opt-in unit enters the CAIR NOX Annual 
Trading Program as provided in Sec.  96.184(g) of this chapter.
* * * * *


Sec.  96.184  [Amended]

    17. Section 96.184 is amended by:
    a. In paragraph (c)(2), replace the words ``for the control period 
under paragraph (b)(1)(ii) of this section and for the control periods 
under paragraph (b)(2) of this section'' with the words ``for the 
control periods under paragraphs (b)(1)(ii) and (b)(2) of this 
section'';
    b. In paragraph (d)(2), replace the words ``for the control period 
under paragraph (b)(1)(ii) of this section and the control periods 
under paragraph (b)(2) of this section'' with the words ``for the 
control periods under paragraphs (b)(1)(ii) and (b)(2) of this 
section''; and
    c. In paragraph (d)(3), replace the words ``for such control 
period'' with words ``for such control periods''.


Sec.  96.185  [Amended]

    18. Section 96.185 is amended by:
    a. In paragraph (b), replacing the words ``under subpart FF or GG'' 
with the words ``under subpart FF, GG, or II''; and
    b. Adding a new paragraph (c) to read as follows:


Sec.  96.185  CAIR opt-in permit contents.

* * * * *
    (c) The CAIR opt-in permit shall be included, in a format specified 
by the permitting authority, in the CAIR permit for the source where 
the CAIR opt-in unit is located.


Sec.  96.186  [Amended]

    19. Section 96.186 is amended by, in paragraph (b)(2), replace the 
words ``equal in number to'' with the words ``equal in amount to''.


Sec.  96.187  [Amended]

    20. Section 96.187 is amended by:
    a. In paragraph (b)(2)(i), replace the words ``equal in number to'' 
with the words ``equal in amount to''; and
    b. In paragraphs (b)(3)(ii) and (b)(3)(ii)(A), replace the words 
``number of CAIR NOX allowances'' with the words ``amount of 
CAIR NOX allowances''.


Sec.  96.188  [Amended]

    21. Section 96.188 is amended by:
    a. Revise the heading of the section; and
    b. In paragraph (d)(2), replace the words ``CAIR opt-in unit'' with 
the words ``CAIR NOX opt-in unit''.


Sec.  96.188  CAIR NOX allowance allocations to CAIR NOX opt-in units.

* * * * *


Sec.  96.202  [Amended]

    22. Section 96.202 is amended by:
    a. In the definition of ``Alternative CAIR designated 
representative'', add at the end the words ``If the CAIR SO2 
source is also subject to the Hg Budget Trading Program, then this 
natural person shall be the same person as the alternate designated 
representative under the Hg Budget Trading Program.''
    b. In the definition of ``CAIR designated representative'', add at 
the end the words ``If the CAIR SO2 source is also subject 
to the Hg Budget Trading Program, then this natural person shall be the 
same person as the Hg designated representative under the Hg Budget 
Trading Program.''
    c. In the definition of ``CAIR NOX Annual Trading 
Program'', replace the words ``Sec.  51.123 of this chapter,'' with the 
words ``Sec.  51.123 of this chapter or established by the 
Administrator in accordance with subparts AA through II of part 97 of 
this chapter and Sec.  52.35 of this chapter,'';
    d. In the definition of ``CAIR NOX Ozone Season Trading 
Program'', replace the words ``Sec.  51.123 of this chapter,'' with the 
words ``Sec.  51.123 of this chapter or established by the 
Administrator in accordance with subparts AAAA through IIII of part 97

[[Page 49758]]

of this chapter and Sec.  52.35 of this chapter,'';
    e. In the definition of ``CAIR SO2 allowance'', replace 
in the introductory text the words ``under Sec.  96.288,'' with the 
words ``under Sec.  96.288 or Sec.  97.288 of this chapter,'', 
designate the last sentence of the definition as paragraph (4), and, in 
paragraph (4), replace the words ``Program or under the provisions of'' 
with the words ``Program, under provisions of'' and replace the words 
``is approved'' with the words ``are approved'' and replace the words 
``of this chapter'' with the words ``of this chapter, or under Sec.  
97.288 of this chapter'';
    f. In the definition of ``CAIR SO2 allowance deduction 
or deduct CAIR SO2 allowances'', add, after the words 
``compliance account'', the words ``,e.g.,'';
    g. In the definition of ``CAIR SO2 Trading Program'', 
replace the words ``Sec.  51.123 of this chapter,'' with the words 
``Sec.  51.124 of this chapter or established by the Administrator in 
accordance with subparts AAA through III of part 97 of this chapter and 
Sec.  52.36 of this chapter,'';
    h. In paragraph (2) of the definition of ``Cogeneration unit'', 
replace the words ``calendar year after which'' with the words 
``calendar year after the calendar year in which'';
    i. In the definition of ``Commence commercial operation'', replace 
the words ``on the date the unit commences'' with the words ``on the 
later of November 15, 1990 or the date the unit commences'' in 
paragraphs (1)(i), (1)(ii), and (2) and remove the words ``or Sec.  
96.287(b)(3)'' in paragraph (3);
    j. In the definition of ``Commence operation'', revise paragraphs 
(1)(i), and (1)(ii), remove paragraph (2), remove the words ``or Sec.  
96.287(b)(3)'' in paragraph (3), replace the words ``in paragraph (3)'' 
with the words ``in paragraph (2)'' in paragraphs (3)(i) and (3)(ii), 
replace the words ``in paragraph (1), (2), or (3)'' with the words ``in 
paragraph (1) or (2)'', and redesignate paragraph (3) as paragraph (2);
    k. In the definition of ``Control period'', replace the words 
``January 1 of a calendar year and'' with the words ``January 1 of a 
calendar year, except as provided in Sec.  96.206(c)(2), and'';
    l. In the definition of ``Useful thermal energy'', replace in 
paragraph (2) the word ``heat'' with the word ``heating''; and
    m. Add new definitions of ``Hg Budget Trading Program'' and ``Solid 
waste incineration unit'' and revise to read as follows:


Sec.  96.202  Definitions.

* * * * *
    Commence operation means:
    (1) * * *
    (i) For a unit that undergoes a physical change (other than 
replacement of the unit by a unit at the same source) after the date 
the unit commences operation as defined in paragraph (1) of this 
definition, such date shall remain the unit's date of commencement of 
operation.
    (ii) For a unit that is replaced by a unit at the same source 
(e.g., repowered) after the date the unit commences operation as 
defined in paragraph (1) of this definition, the replacement unit shall 
be treated as a separate unit with a separate date for commencement of 
operation as defined in paragraph (1) or (2) of this definition as 
appropriate.
* * * * *
    Hg Budget Trading Program means a multi-state Hg air pollution 
control and emission reduction program approved and administered by the 
Administrator in accordance subpart HHHH of part 60 of this chapter and 
Sec.  60.24(h)(6), or established by the Administrator, as a means of 
reduction national Hg emissions.
* * * * *
    Solid waste incineration unit means a stationary, fossil-fuel-fired 
boiler or stationary, fossil-fuel-fired combustion turbine that is a 
``solid waste incineration unit'' as defined in section 129(g)(1) of 
the Clean Air Act.
* * * * *
    23. Section 96.203 is revised to read as follows:


Sec.  96.203  Measurements, abbreviations, and acroynyms.

    Measurements, abbreviations, and acronyms used in this subpart and 
subparts BBB through III are defined as follows:

Btu--British thermal unit
CO2--carbon dioxide
H2O--water
Hg--mercury
hr--hour
kW--kilowatt electrical
kWh--kilowatt hour
lb--pound
mmBtu--million Btu
MWe--megawatt electrical
MWh--megawatt hour
NOX--nitrogen oxides
O2--oxygen
ppm--parts per million
scfh--standard cubic feet per hour
SO2--sulfur dioxide
yr--year
    24. Section 96.204 is revised to read as follows:


Sec.  96.204  Applicability.

    (a) Except as provided in paragraph (b) of this section:
    (1) The following units in a State shall be CAIR SO2 
units, and any source that includes one or more such units shall be a 
CAIR SO2 source, subject to the requirements of this subpart 
and subparts BBB through HHH of this part: any stationary, fossil-fuel-
fired boiler or stationary, fossil-fuel-fired combustion turbine 
serving at any time, since the later of November 15, 1990 or the start-
up of the unit's combustion chamber, a generator with nameplate 
capacity of more than 25 MWe producing electricity for sale.
    (2) If a stationary, fossil-fuel-fired boiler or stationary, 
fossil-fuel-fired combustion turbine that, under paragraph (a)(1) of 
this section, is not a CAIR SO2 unit begins to serve a 
generator with nameplate capacity of more than 25 MWe producing 
electricity for sale, the unit shall become a CAIR SO2 unit 
on the date on which it first serves such generator.
    (b) The units in a State that meet the requirements set forth in 
paragraph (b)(1)(i), (b)(2)(i), or (b)(2)(ii) of this section shall not 
be CAIR SO2 units:
    (1)(i) Any unit:
    (A) Qualifying as a cogeneration unit during the 12-month period 
starting on the date the unit first produces electricity and continuing 
to qualify as a cogeneration unit; and
    (B) Not serving at any time, since the later of November 15, 1990 
or the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe supplying in any calendar year 
more than one-third of the unit's potential electric output capacity or 
219,000 MWh, whichever is greater, to any utility power distribution 
system for sale.
    (ii) If a unit qualifies as a cogeneration unit during the 12-month 
period starting on the date the unit first produces electricity and 
meets the requirements of paragraphs (b)(1)(i) of this section for at 
least one calendar year, but subsequently no longer meets all such 
requirements, the unit shall become a CAIR SO2 unit starting 
on the earlier of January 1 after the first calendar year during which 
the unit first no longer qualifies as a cogeneration unit or January 1 
after the first calendar year during which the unit no longer meets the 
requirements of paragraph (b)(1)(i)(B) of this section.
    (2)(i) Any unit commencing operation before January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for

[[Page 49759]]

1985-1987 exceeding 80 percent (on a Btu basis) and an average annual 
fuel consumption of non-fossil fuel for any 3 consecutive calendar 
years after 1990 exceeding 80 percent (on a Btu basis).
    (ii) Any unit commencing operation on or after January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
the first 3 calendar years of operation exceeding 80 percent (on a Btu 
basis) and an average annual fuel consumption of non-fossil fuel for 
any 3 consecutive calendar years after 1990 exceeding 80 percent (on a 
Btu basis).
    (iii) If a unit qualifies as a solid waste incineration unit and 
meets the requirements of paragraph (b)(2)(i) or (ii) of this section 
for at least 3 consecutive calendar years, but subsequently no longer 
meets all such requirements, the unit shall become a CAIR 
SO2 unit starting on the earlier of January 1 after the 
first calendar year during which the unit first no longer qualifies as 
a solid waste incineration unit or January 1 after the first 3 
consecutive calendar years after 1990 for which the unit has an average 
annual fuel consumption of fossil fuel of 20 percent or more.


Sec.  96.205  [Amended]

    25. Section 96.205 is amended by:
    a. In paragraph (a)(1), replace the words ``Sec.  96.206(c)(4) 
through (8)'' with the words ``Sec.  96.206(c)(4) through (7)'' and 
replace the words ``subparts FFF and GGG'' with the words ``subparts 
BBB, FFF, and GGG:''; and
    b. In paragraph (b)(2), replace the words ``shall retain at the 
source'' with the words ``shall retain, at the source''.


Sec.  96.206  [Amended]

    26. Section 96.206 is amended by:
    a. In paragraph (a)(1)(i), replace the words ``in Sec.  96.221(a) 
and (b)'' with the words ``in Sec.  96.221'';
    b. In paragraph (c)(2), replace the words ``under paragraph (c)(1) 
of this section'' with ``under paragraph (c)(1) of this section for the 
control period'' and replace the words ``under Sec.  96.270(b)(1), (2), 
or (5)'' with the words ``under Sec.  96.270(b)(1), (2), or (5) and for 
each control period thereafter'';
    c. In paragraph (c)(7), replace the words ``from a CAIR 
SO2 unit's compliance account'' with the words ``from a CAIR 
SO2 source's compliance account'' and replace the words 
``CAIR permit of the source that includes the CAIR SO2 
unit'' with the words ``CAIR permit of the source''; and
    d. In paragraph (d), remove paragraph (2), remove the designation 
of paragraph (1), redesignate paragraph (i) as paragraph (1), and 
redesignate paragraph (ii) as paragraph (2).


Sec.  96.213  [Amended]

    27. Section 96.213 is amended by, in paragraph (a)(4)(iv), 
replacing the words ``where a customer'' with the words ``where a 
utility or industrial customer''.


Sec.  96.220  [Amended]

    28. Section 96.220 is amended by, in paragraph (b), replacing the 
words ``CAIR SO2 units at the source'' with the words ``CAIR 
SO2 units at the source covered by the CAIR permit''.


Sec.  96.254  [Amended]

    29. Section 96.254 is amended by:
    a. In paragraph (a)(3), replace the words ``deduction for excess 
emissions'' with the words ``deductions for excess emissions''; and
    b. In paragraphs (c)(2)(ii), (c)(2)(iv), and (c)(2)(vi), replace 
the words ``to any unit'' with the words ``to any entity''.
    c. In paragraph (d)(1), replace the words ``3 times the number of 
tons of the source's excess emissions.'' with the words ``the sum of 
the following amounts:'' and add paragraphs (d)(1)(i) and (d)(1)(ii) to 
read as follows:


Sec.  96.254  Compliance with CAIR SO2 emissions limitation.

* * * * *
    (d) * * *
    (1) * * *
    (i) The number of tons of the source's excess emissions minus, if 
the source is subject to an Acid Rain emissions limitation, the amount 
of the CAIR SO2 allowances required to be deducted under 
paragraph (b)(1)(ii) of this section; and
    (ii) Two times:
    (A) The number of tons of the source's excess emissions, if the 
source is not subject to an Acid Rain emissions limitation; or
    (B) The number of tons of the source's excess emissions minus the 
amount of the CAIR SO2 allowances required to be deducted 
under paragraph (b)(1)(ii) of this section, if the source is subject to 
an Acid Rain emissions limitation.
* * * * *


Sec.  96.261  [Amended]

    30. Section 96.261 is amended by:
    a. In paragraph (a)(1), replace the words ``Sec.  96.260; and'' 
with the words ``Sec.  96.260;';
    b. In paragraph (a)(2), replace the words ``transfer.'' with the 
words ``transfer; and''; and
    c. Add a new paragraph (a)(3) to read as follows:


Sec.  96.261  EPA recordation.

    (a) * * *
    (3) The transfer is in accordance with the limitation on transfer 
under Sec.  74.42 of this chapter and Sec.  74.47(c) of this chapter, 
as applicable.
* * * * *


Sec.  96.270  [Amended]

    31. Section 96.270 is amended by:
    a. In paragraph (b)(5), replace the words ``paragraphs (b)(1) and 
(2) of this section and solely for purposes of Sec.  96.206(c)(2), for 
the owner'' with the words ``paragraphs (b)(1) and (2) of this section, 
for the owner''; and
    b. Add a new paragraph (e) to read as follows:


Sec.  96.270  General Requirements.

* * * * *
    (e) Long-term cold storage. The owner or operator of a CAIR 
SO2 unit is subject to the applicable provisions of part 75 
of this chapter concerning units in long-term cold storage.


Sec.  96.271  [Amended]

    32. Section 96.271 is amended by removing and reserving paragraph 
(c).


Sec.  96.273  [Amended]

    33. Section 96.273 is amended by removing the words '', except that 
if the unit is not subject to an Acid Rain emissions limitation, the 
notification is only required to be sent to the permitting authority''.


Sec.  96.274  [Amended]

    34. Section 96.274 is amended by:
    a. In paragraph (d)(1)(i), replace the words ``2009; or'' with the 
words ``2009;'';
    b. In paragraph (d)(1)(ii), replace the words ``2009.'' with the 
words ``2009;'';
    c. Add new paragraphs (d)(1)(iii) and (iv); and
    d. In paragraph (d)(3), replace the words ``or CAIR NOX 
Ozone Season Trading Program,'' with the words '', CAIR NOX 
Ozone Season Trading Program, or Hg Budget Trading Program,'' and 
replace the words ``subparts F through H'' with the words ``subparts F 
through I''.


Sec.  96.274  Recordkeeping and reporting.

* * * * *
    (d) * * *
    (1) * * *
    (iii) Notwithstanding paragraphs (d)(1)(i) and (ii) of this 
section, for a unit for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied under subpart III of this part, the calendar quarter 
corresponding to the date specified in Sec.  96.284(b); and
    (iv) Notwithstanding paragraphs (d)(1)(i) and (ii) of this section, 
for a

[[Page 49760]]

CAIR SO2 opt-in unit under subpart III of this part, the 
calendar quarter corresponding to the date on which the CAIR 
SO2 opt-in unit enters the CAIR SO2 Trading 
Program as provided in Sec.  96.284(g).
* * * * *


Sec.  96.283  [Amended]

    35. Section 96.283 is amended by:
    a. In paragraph (a)(2)(iii), replace the words ``CAIR opt-in unit'' 
with the words ``CAIR SO2 opt-in unit''; and
    b. In paragraph (b)(1), replace the words ``or permitting 
authority''s'' with the words ``or the permitting authority's''.


Sec.  96.284  [Amended]

    36. Section 96.284 is amended by:
    a. In paragraph (c)(2), replace the words ``for the control period 
under paragraph (b)(1)(ii) of this section and the control periods 
under paragraph (b)(2) of this section'' with the words ``for the 
control periods under paragraphs (b)(1)(ii) and (b)(2) of this 
section'';
    b. In paragraph (d)(2), replace the words ``for the control period 
under paragraph (b)(1)(ii) of this section and the control periods 
under paragraph (b)(2) of this section'' with the words ``for the 
control periods under paragraphs (b)(1)(ii) and (b)(2) of this 
section''; and
    c. In paragraph (d)(3), replace the words ``for such control 
period'' with words ``for such control periods''.


Sec.  96.285  [Amended]

    37. Section 96.285 is amended by:
    a. In paragraph (b), replacing the words ``under subpart FFF or 
GGG'' with the words ``under subpart FFF, GGG, or III''; and
    b. Adding a new paragraph (c) to read as follows:


Sec.  96.285  CAIR opt-in permit contents.

* * * * *
    (c) The CAIR opt-in permit shall be included, in a format specified 
by the permitting authority, in the CAIR permit for the source where 
the CAIR opt-in unit is located.


Sec.  96.286  [Amended]

    38. Section 96.286 is amended by, in paragraph (b)(2), replacing 
the words ``equal in number to'' with the words ``equal in amount to''.


Sec.  96.287  [Amended]

    39. Section 96.287 is amended by:
    a. In paragraph (b)(2)(i), replace the words ``equal in number to'' 
with the words ``equal in amount to''; and
    b. Remove paragraph (b)(3).


Sec.  96.288  [Amended]

    40. Section 96.288 is amended by:
    a. Revise the heading of the section; and
    b. In paragraph (d)(2), replace the words ``CAIR opt-in unit'' with 
the words ``CAIR SO2 opt-in unit''.


Sec.  96.288  CAIR SO2 allowance allocations to CAIR SO2 opt-in units.

* * * * *


Sec.  96.302  [Amended]

    41. Section 96.302 is amended by:
    a. In the definition of ``Allocate or allocation'', replace with 
words ``under subpart EEEE'' with the words ``under subpart EEEE of 
this part or Sec.  51.123(aa)(2)(iii), (bb)(2)(iii) or (iv), or (dd)(3) 
or (4) of this chapter'';
    b. In the definition of ``Alternate CAIR NOX designated 
representative'', add at the end the words ``If the CAIR NOX 
Ozone Season source is also subject to the Hg Budget Trading Program, 
then this natural person shall be the same person as the alternate Hg 
designated representative under the Hg Budget Trading Program.''
    c. In the definition of ``CAIR NOX designated 
representative'', add at the end the words ``If the CAIR NOX 
Ozone Season source is also subject to the Hg Budget Trading Program, 
then this natural person shall be the same person as the Hg designated 
representative under the Hg Budget Trading Program.''
    d. In the definition of ``CAIR NOX Annual Trading 
Program'', replace the words ``Sec.  51.123 of this chapter,'' with the 
words ``Sec.  51.123 of this chapter or established by the 
Administrator in accordance with subparts AA through II of part 97 of 
this chapter and Sec.  52.35 of this chapter,'';
    e. In the definition of ``CAIR NOX Ozone Season 
allowance'', replace the words ``by the permitting authority under'' 
with the words ``by the permitting authority or the Administrator 
under'', replace the words ``Sec.  51.123(aa)(2)(iii)(A)'' with the 
words ``Sec.  51.123(aa)(2)(iii)'', replace the words ``or (dd)(3) or 
(4) of this chapter'' with the words ``or (dd)(3) or (4) of this 
chapter, or under subpart EEEE of part 97 or Sec.  97.388 of this 
chapter'', replace the words `` Budget Trading Program'' with the words 
`` Budget Trading Program in accordance with Sec.  51.121(p) of this 
chapter'', and replace the words ``or (dd) of this chapter'' with the 
words ``or (dd) of this chapter or subpart EEEE of part 97 or Sec.  
97.388 of this chapter'';
    f. In the definition of ``CAIR NOX Ozone Season 
allowance deduction or deduct CAIR NOX Ozone Season 
allowances'', add, after the words ``compliance account'', the words 
``,e.g.,'';
    g. In the definition of ``CAIR NOX Ozone Season Trading 
Program'', replace the words ``Sec.  51.123 of this chapter,'' with the 
words ``Sec.  51.123 of this chapter or established by the 
Administrator in accordance with subparts AAAA through IIII of part 97 
of this chapter and Sec.  52.35 of this chapter,'';
    h. In the definition of ``CAIR NOX SO2 
Trading Program'', replace the words ``Sec.  51.123 of this chapter,'' 
with the words ``Sec.  51.124 of this chapter or established by the 
Administrator in accordance with subparts AAA through III of part 97 of 
this chapter and Sec.  52.36 of this chapter,'';
    i. In paragraph (2) of the definition of ``Cogeneration unit'', 
replace the words ``calendar year after which'' with the words 
``calendar year after the calendar year in which'';
    j. In the definition of ``Commence commercial operation'', in 
paragraphs (1)(i), (1)(ii), and (2), replace the words ``on the date 
the unit commences'' with the words ``on the later of November 15, 1990 
or the date the unit commences'';
    k. In the definition of ``Commence operation'', revise paragraphs 
(1)(i), (1)(ii) and (2);
    l. In the definition of ``Control period'', replace the words 
``January 1 of a calendar year and'' with the words ``January 1 of a 
calendar year, except as provided in Sec.  96.306(c)(2), and'';
    m. In the definition of ``Oil-fired'', replace the words ``in a 
specified year.'' with the words ``in a specified year and not 
qualifying as coal-fired.'';
    n. In the definition of ``Useful thermal energy'', replace in 
paragraph (2) the word ``heat'' with the word ``heating''; and
    o. Add new definitions of ``Hg Budget Trading Program'' and ``Solid 
waste incineration unit'' and revise to read as follows:


Sec.  96.302  Definitions.

* * * * *
    Commence operation means:
    (1) * * *
    (i) For a unit that undergoes a physical change (other than 
replacement of the unit by a unit at the same source) after the date 
the unit commences operation as defined in paragraph (1) of this 
definition, such date shall remain the unit's date of commencement of 
operation.
    (ii) For a unit that is replaced by a unit at the same source 
(e.g., repowered) after the date the unit commences operation as 
defined in paragraph (1) of this definition, the replacement unit shall 
be treated as a separate unit with a separate date for commencement of 
operation as defined in paragraph (1),

[[Page 49761]]

(2), or (3) of this definition as appropriate.
    (2) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  96.305, for a unit that is a CAIR NOX 
Ozone Season unit under Sec.  96.304(d), but not on the later of 
November 15, 1990 or the date the unit commences operation as defined 
in paragraph (1) of this definition, and is not a unit under paragraph 
(3) of this definition, the unit's date for commencement of operation 
shall be the date on which the unit becomes a CAIR NOX Ozone 
Season unit under Sec.  96.304(d).
    (i) For a unit with a date for commencement of commercial operation 
as defined in paragraph (2) of this definition and that subsequently 
undergoes a physical change (other than replacement of the unit by a 
unit at the same source), such date shall remain the unit's date of 
commencement of commercial operation.
    (ii) For a unit with a date for commencement of commercial 
operation as defined in paragraph (2) of this definition and that is 
subsequently replaced by a unit at the same source (e.g., repowered), 
the replacement unit shall be treated as a separate unit with a 
separate date for commencement of commercial operation as defined in 
paragraph (1),(2), or (3) of this definition as appropriate.
* * * * *
    Hg Budget Trading Program means a multi-state Hg air pollution 
control and emission reduction program approved and administered by the 
Administrator in accordance subpart HHHH of part 60 of this chapter and 
Sec.  60.24(h)(6), or established by the Administrator, as a means of 
reduction national Hg emissions.
* * * * *
    Solid waste incineration unit means a stationary, fossil-fuel-fired 
boiler or stationary, fossil-fuel-fired combustion turbine that is a 
``solid waste incineration unit'' as defined in section 129(g)(1) of 
the Clean Air Act.
* * * * *
    42. Section 96.303 is revised to read as follows:


Sec.  96.303  Measurements, abbreviations, and acroynyms.

    Measurements, abbreviations, and acronyms used in this subpart and 
subparts BBBB through IIII are defined as follows:

Btu--British thermal unit
CO2--carbon dioxide
H2O--water
Hg--mercury
hr--hour
kW--kilowatt electrical
kWh--kilowatt hour
lb--pound
mmBtu--million Btu
MWe--megawatt electrical
MWh--megawatt hour
NOX--nitrogen oxides
O2--oxygen
ppm--parts per million
scfh--standard cubic feet per hour
SO2--sulfur dioxide
yr--year


Sec.  96.304  [Amended]

    43. Section 96.304 is revised to read as follows:


Sec.  96.304  Applicability.

    (a) Except as provided in paragraph (b) of this section:
    (1) The following units in a State shall be CAIR NOX 
Ozone Season units, and any source that includes one or more such units 
shall be a CAIR NOX Ozone Season source, subject to the 
requirements of this subpart and subparts BBBB through HHHH of this 
part: any stationary, fossil-fuel-fired boiler or stationary, fossil-
fuel-fired combustion turbine serving at any time, since the later of 
November 15, 1990 or the start-up of the unit's combustion chamber, a 
generator with nameplate capacity of more than 25 MWe producing 
electricity for sale.
    (2) If a stationary, fossil-fuel-fired boiler or stationary, 
fossil-fuel-fired combustion turbine that, under paragraph (a)(1) of 
this section, is not a CAIR NOX Ozone Season unit begins to 
serve a generator with nameplate capacity of more than 25 MWe producing 
electricity for sale, the unit shall become a CAIR NOX Ozone 
Season unit on the date on which it first serves such generator.
    (b) The units in a State that meet the requirements set forth in 
paragraph (b)(1)(i), (b)(2)(i), or (b)(2)(ii) of this section shall not 
be CAIR NOX Ozone Season units:
    (1)(i) Any unit:
    (A) Qualifying as a cogeneration unit during the 12-month period 
starting on the date the unit first produces electricity and continuing 
to qualify as a cogeneration unit; and
    (B) Not serving at any time, since the later of November 15, 1990 
or the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe supplying in any calendar year 
more than one-third of the unit's potential electric output capacity or 
219,000 MWh, whichever is greater, to any utility power distribution 
system for sale.
    (ii) If a unit qualifies as a cogeneration unit during the 12-month 
period starting on the date the unit first produces electricity and 
meets the requirements of paragraphs (b)(1)(i) of this section for at 
least one calendar year, but subsequently no longer meets all such 
requirements, the unit shall become a CAIR NOX Ozone Season 
unit starting on the earlier of January 1 after the first calendar year 
during which the unit first no longer qualifies as a cogeneration unit 
or January 1 after the first calendar year during which the unit no 
longer meets the requirements of paragraph (b)(1)(i)(B) of this 
section.
    (2)(i) Any unit commencing operation before January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
1985-1987 exceeding 80 percent (on a Btu basis) and an average annual 
fuel consumption of non-fossil fuel for any 3 consecutive calendar 
years after 1990 exceeding 80 percent (on a Btu basis).
    (ii) Any unit commencing operation on or after January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
the first 3 calendar years of operation exceeding 80 percent (on a Btu 
basis) and an average annual fuel consumption of non-fossil fuel for 
any 3 consecutive calendar years after 1990 exceeding 80 percent (on a 
Btu basis).
    (iii) If a unit qualifies as a solid waste incineration unit and 
meets the requirements of paragraph (b)(2)(i) or (ii) of this section 
for at least 3 consecutive calendar years, but subsequently no longer 
meets all such requirements, the unit shall become a CAIR 
NOX Ozone Season unit starting on the earlier of January 1 
after the first calendar year during which the unit first no longer 
qualifies as a solid waste incineration unit or January 1 after the 
first 3 consecutive calendar years after 1990 for which the unit has an 
average annual fuel consumption of fossil fuel of 20 percent or more.


Sec.  96.305  [Amended]

    44. Section 96.305 is amended by:
    a. In paragraph (a)(1), replace the words ``Sec.  96.306(c)(4) 
through (8) '' with the words ``Sec.  96.306(c)(4) through (7) '' and 
replace the words ``subparts EEEE through GGGG'' with the words 
``subparts BBBB and EEEE through GGGG''; and
    b. In paragraph (b)(3), replace the words ``shall retain at the 
source'' with the words ``shall retain, at the source''.


Sec.  96.306  [Amended]

    45. Section 96.306 is amended by:

[[Page 49762]]

    a. In paragraph (a)(1)(i), replace the words ``in Sec.  96.321(a) 
and (b) '' with the words ``in Sec.  96.321'';
    b. In paragraph (c)(2), replace the words ``under paragraph (c)(1) 
of this section'' with ``under paragraph (c)(1) of this section for the 
control period'' and replace the words ``under Sec.  96.370(b)(1), (2), 
(3), or (7) '' with the words ``under Sec.  96.370(b)(1), (2), (3), or 
(7) and for each control period thereafter'';
    c. In paragraph (c)(7), replace the words ``from a CAIR 
NOX Ozone Season unit's compliance account'' with the words 
``from a CAIR NOX Ozone Season source's compliance account'' 
and replace the words ``CAIR permit of the source that includes the 
CAIR NOX Ozone Season unit'' with the words ``CAIR permit of 
the source''; and
    d. In paragraph (d), remove paragraph (2), remove the designation 
of paragraph (1), redesignate paragraph (i) as paragraph (1), and 
redesignate paragraph (ii) as paragraph (2).


Sec.  96.313  [Amended]

    46. Section 96.313 is amended by, in paragraph (a)(4)(iv), 
replacing the words ``where a customer'' with the words ``where a 
utility or industrial customer''.


Sec.  96.342  [Amended]

    47. Section 96.342 is amended by:
    a. In paragraph (a)(2)(i), replace the words ``during a calendar 
year'' by the words ``during a control period in a calendar year'';
    b. In paragraph (a)(2)(ii)(C), replace the words ``3,414 Btu/kWh'' 
with the words ``3,413 Btu/kWh'';
    c. In paragraph (c)(1), replace the words ``2009 through 2013'' 
with the words ``2009 through 2014'' and replace the words ``in 2014'' 
with the words ``in 2015'';
    d. In paragraph (c)(2), replace the words ``on or before April 1'' 
with the words ``on or before February 1''; and
    e. In paragraph (c)(4)(ii), replace the words ``On or after April 
1'' with the words ``On or after February 1 ''.


Sec.  96.353  [Amended]

    48. Section 96.353 is amended by:
    a. In paragraph (a), replace the words ``By December 1, 2006, the 
Administrator'' with the words ``The Administrator''; and
    b. Revise paragraph (c) to read as follows:


Sec.  96.353  Recordation of CAIR NOX Ozone Season allowance 
allocations.

* * * * *
    (c) By December 1, 2009 and December 1 of each year thereafter, the 
Administrator will record in the CAIR NOX Ozone Season 
source's compliance account the CAIR NOX Ozone Season 
allowances allocated for the CAIR NOX Ozone Season units at 
the source, as submitted by the permitting authority or as determined 
by the Administrator in accordance with Sec.  96.341(b), for the 
control period in the sixth year after the year of the applicable 
deadline for recordation under this paragraph.
* * * * *


Sec.  96.354  [Amended]

    49. Section 96.354 is amended by, in paragraph (c)(2)(ii), replace 
the words ``to any unit'' with the words ``to any entity'.


Sec.  96.370  [Amended]

    50. Section 96.370 is amended by:
    a. In paragraph (b)(7), replace the words ``paragraphs (b)(1), (2), 
and (3) of this section and solely for purposes of Sec.  96.206(c)(2), 
for the owner'' with the words ``paragraphs (b)(1), (2), and (3) of 
this section, for the owner'' and replace the words ``CAIR 
NOX Ozone Season opt-in unit'' with the words ``CAIR 
NOX Ozone Season opt-in unit under subpart IIII of this 
part''; and
    b. Add a new paragraph (e) to read as follows:


Sec.  96.370  General Requirements.

* * * * *
    (e) Long-term cold storage. The owner or operator of a CAIR 
NOX Ozone Season unit is subject to the applicable 
provisions of part 75 of this chapter concerning units in long-term 
cold storage.


Sec.  96.371  [Amended]

    51. Section 96.371 is amended by, in paragraph (c), replace thee 
words ``Sec.  75.12, Sec.  75.17, or subpart H of part 75'' with the 
words ``Sec.  75.12 or Sec.  75.17''.


Sec.  96.373  [Amended]

    52. Section 96.373 is amended by removing the words ``, except that 
if the unit is not subject to an Acid Rain emissions limitation, the 
notification is only required to be sent to the permitting authority''.


Sec.  96.374  [Amended]

    53. Section 96.374 is amended by:
    a. In paragraph (d)(1)(i), replace the words ``2008; or'' with the 
words ``2008.'';
    b. In paragraph (d)(2)(i)(A), replace the words ``2008;'' with the 
words ``2008.'';
    c. Add new paragraphs (d)(1)(iii) and (iv) and (d)(2)(iii) and 
(iv); and
    d. In paragraph (d)(3), replace the words ``or CAIR SO2 
Trading Program,'' with the words '', CAIR SO2 Trading 
Program, or Hg Budget Trading Program,'' and replace the words 
``subparts F through H'' with the words ``subparts F through I'' to 
read as follows:


Sec.  96.374  Recordkeeping and reporting.

* * * * *
    (d) * * *
    (1) * * *
    (iii) Notwithstanding paragraphs (d)(1)(i) and (ii) of this 
section, for a unit for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied under subpart IIII of this part, the calendar quarter 
corresponding to the date specified in Sec.  96.384(b); and
    (iv) Notwithstanding paragraphs (d)(1)(i) and (ii) of this section, 
for a CAIR NOX Ozone Season opt-in unit under subpart IIII 
of this part, the calendar quarter corresponding to the date on which 
the CAIR NOX Ozone Season opt-in unit enters the CAIR 
NOX Ozone Season Trading Program as provided in Sec.  
96.384(g).
    (2) * * *
    (iii) Notwithstanding paragraphs (d)(2)(i) and (ii) of this 
section, for a unit for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied under subpart IIII of this part, the calendar quarter 
corresponding to the date specified in Sec.  96.384(b).
    (iv) Notwithstanding paragraphs (d)(2)(i) and (ii) of this section, 
for a CAIR NOX Ozone Season opt-in unit under subpart IIII 
of this part, the calendar quarter corresponding to the date on which 
the CAIR NOX Ozone Season opt-in unit enters the CAIR 
NOX Ozone Season Trading Program as provided in Sec.  
96.384(g).
* * * * *


Sec.  96.384  [Amended]

    54. Section 96.384 is amended by:
    a. In paragraph (c)(2), replace the words ``for the control period 
under paragraph (b)(1)(ii) of this section and for the control periods 
under paragraph (b)(2) of this section'' with the words ``for the 
control periods under paragraphs (b)(1)(ii) and (b)(2) of this 
section'';
    b. In paragraph (d)(2), replace the words ``for the control period 
under paragraph (b)(1)(ii) of this section and the control periods 
under paragraph (b)(2) of this section'' with the words ``for the 
control periods under paragraphs (b)(1)(ii) and (2) of this section''; 
and
    c. In paragraph (d)(3), replace the words ``for such control period 
`` with words ``for such control periods'.


Sec.  96.385  [Amended]

    55. Section 96.385 is amended by:

[[Page 49763]]

    a. In paragraph (b), replacing the words ``under subpart FFFF or 
GGGG'' with the words ``under subpart FFFF, GGGG, or IIII''; and
    b. Adding a new paragraph (c) to read as follows:


Sec.  96.385  CAIR opt-in permit contents.

* * * * *
    (c) The CAIR opt-in permit shall be included, in a format specified 
by the permitting authority, in the CAIR permit for the source where 
the CAIR opt-in unit is located.


Sec.  96.386  [Amended]

    56. Section 96.386 is amended by, in paragraph (b)(2), replacing 
the words ``equal in number to'' with the words ``equal in amount to'.


Sec.  96.387  [Amended]

    57. Section 96.387 is amended by:
    a. In paragraph (b)(2)(i), replace the words ``equal in number to'' 
with the words ``equal in amount to''; and
    b. In paragraphs (b)(3)(ii) and (b)(3)(ii)(A), replace the words 
``number of CAIR NOX Ozone Season allowances'' with the 
words ``amount of CAIR NOX Ozone Season allowances''.


Sec.  96.388  [Amended]

    58. Section 96.388 is amended by:
    a. Revise the heading of the section; and
    b. In paragraph (d)(2), replace the words ``CAIR opt-in unit'' with 
the words ``CAIR NOX Ozone Season opt-in unit''.


Sec.  96.388  CAIR NOX Ozone Season allowance allocations to CAIR NOX 
Ozone Season opt-in units.

* * * * *

PART 97--FEDERAL NOX BUDGET TRADING PROGRAM AND CAIR NOX AND SO2 
TRADING PROGRAMS

    1. The heading of part 97 is revised to read as set forth above.
    2. The authority citation for Part 97 is revised to read as 
follows:

    Authority: 42 U.S.C. 7401, 7403, 7410, 7426, 7601, and 7651, et 
seq.

    3. Part 97 is amended by adding subparts AA through HH, to read as 
follows:
Subpart AA--CAIR NOX Annual Trading Program General Provisions
Sec.
97.101 Purpose.
97.102 Definitions.
97.103 Measurements, abbreviations, and acronyms.
97.104 Applicability.
97.105 Retired unit exemption.
97.106 Standard requirements.
97.107 Computation of time.
97.108 Appeal Procedures.
Subpart BB--CAIR Designated Representative for CAIR NOX Sources
97.110 Authorization and responsibilities of CAIR designated 
representative.
97.111 Alternate CAIR designated representative.
97.112 Changing CAIR designated representative and alternate CAIR 
designated representative; changes in owners and operators.
97.113 Certificate of representation.
97.114 Objections concerning CAIR designated representative.
Subpart CC--Permits
97.120 General CAIR NOX Annual Trading Program permit 
requirements.
97.121 Submission of CAIR permit applications.
97.122 Information requirements for CAIR permit applications.
97.123 CAIR permit contents and term.
97.124 CAIR permit revisions.
Subpart DD--[Reserved]
Subpart EE--CAIR NOX Allowance Allocations
97.140 State trading budgets.
97.141 Timing requirements for CAIR NOX allowance 
allocations.
97.142 CAIR NOX allowance allocations.
97.143 Compliance supplement pool.
97.144 Alternative of allocation of CAIR NOX allowances 
and compliance supplement pool by permitting authority.
Appendix A to Subpart EE of Part 97--States With Approved State 
Implementation Plan Revisions Concerning Allocations
Subpart FF--CAIR NOX Allowance Tracking System
97.150 [Reserved]
97.151 Establishment of accounts.
97.152 Responsibilities of CAIR authorized account representative.
97.153 Recordation of CAIR NOX allowance allocations.
97.154 Compliance with CAIR NOX emissions limitation.
97.155 Banking.
97.156 Account error.
97.157 Closing of general accounts.
Subpart GG--CAIR NOX Allowance Transfers
97.160 Submission of CAIR NOX allowance transfers.
97.161 EPA recordation.
97.162 Notification.
Subpart HH--Monitoring and Reporting
97.170 General requirements.
97.171 Initial certification and recertification procedures.
97.172 Out of control periods.
97.173 Notifications.
97.174 Recordkeeping and reporting.
97.175 Petitions.
97.176 Additional requirements to provide heat input data.
Subpart II--CAIR NOX Opt-in Units
97.180 Applicability.
97.181 General.
97.182 CAIR designated representative.
97.183 Applying for CAIR opt-in permit.
97.184 Opt-in process.
97.185 CAIR opt-in permit contents.
97.186 Withdrawal from CAIR NOX Annual Trading Program.
97.187 Change in regulatory status.
97.188 CAIR NOX allowance allocations to CAIR NOX opt-in units.
Appendix A to Subpart II of Part 97--States With Approved State 
Implementation Plan Revisions Concerning CAIR NOX Opt-In 
Units

Subpart AA--CAIR NOX Annual Trading Program General Provisions


Sec.  97.101  Purpose.

    This subpart and subparts BB through II set forth the general 
provisions and the designated representative, permitting, allowance, 
monitoring, and opt-in provisions for the Federal Clean Air Interstate 
Rule (CAIR) NOX Annual Trading Program, under section 110 of 
the Clean Air Act and Sec.  52.35 of this chapter, as a means of 
mitigating interstate transport of fine particulates and nitrogen 
oxides.


Sec.  97.102  Definitions.

    The terms used in this subpart and subparts BB through II shall 
have the meanings set forth in this section as follows:
    Account number means the identification number given by the 
Administrator to each CAIR NOX Allowance Tracking System 
account.
    Acid Rain emissions limitation means a limitation on emissions of 
sulfur dioxide or nitrogen oxides under the Acid Rain Program.
    Acid Rain Program means a multi-state sulfur dioxide and nitrogen 
oxides air pollution control and emission reduction program established 
by the Administrator under title IV of the CAA and parts 72 through 78 
of this chapter.
    Actual weighted average NOX emission rate means, for a 
NOX averaging plan under Sec.  76.11 of this chapter and for 
a year:
    (1) The sum of the products of the actual annual average 
NOX emission rate and actual annual heat input (as 
determined in accordance with part 75 of this chapter) for all units in 
the NOX averaging plan for the year; divided by
    (2) The sum of the actual annual heat input (as determined in 
accordance with part 75 of this chapter) for all units in the 
NOX averaging plan for the year.
    Administrator means the Administrator of the United States 
Environmental Protection Agency or the Administrator's duly authorized 
representative.
    Allocate or allocation means, with regard to CAIR NOX 
allowances issued

[[Page 49764]]

under subpart EE, the determination by the permitting authority or the 
Administrator of the amount of such CAIR NOX allowances to 
be initially credited to a CAIR NOX unit or a new unit set-
aside and, with regard to CAIR NOX allowances issued under 
Sec.  97.188, the determination by the permitting authority of the 
amount of such CAIR NOX allowances to be initially credited 
to a CAIR NOX unit.
    Allowance transfer deadline means, for a control period, midnight 
of March 1, if it is a business day, or, if March 1 is not a business 
day, midnight of the first business day thereafter immediately 
following the control period and is the deadline by which a CAIR 
NOX allowance transfer must be submitted for recordation in 
a CAIR NOX source's compliance account in order to be used 
to meet the source's CAIR NOX emissions limitation for such 
control period in accordance with Sec.  97.154.
    Alternate CAIR designated representative means, for a CAIR 
NOX source and each CAIR NOX unit at the source, 
the natural person who is authorized by the owners and operators of the 
source and all such units at the source in accordance with subparts BB 
and II of this part, to act on behalf of the CAIR designated 
representative in matters pertaining to the CAIR NOX Annual 
Trading Program. If the CAIR NOX source is also a CAIR 
SO2 source, then this natural person shall be the same 
person as the alternate CAIR designated representative under the CAIR 
SO2 Trading Program. If the CAIR NOX source is 
also a CAIR NOX Ozone Season source, then this natural 
person shall be the same person as the alternate CAIR designated 
representative under the CAIR NOX Ozone Season Trading 
Program. If the CAIR NOX source is also subject to the Acid 
Rain Program, then this natural person shall be the same person as the 
alternate designated representative under the Acid Rain Program. If the 
CAIR NOX source is also subject to the Hg Budget Trading 
Program, then this natural person shall be the same person as the 
alternate designated representative under the Hg Budget Trading 
Program.
    Automated data acquisition and handling system or DAHS means that 
component of the continuous emission monitoring system, or other 
emissions monitoring system approved for use under subpart HH of this 
part, designed to interpret and convert individual output signals from 
pollutant concentration monitors, flow monitors, diluent gas monitors, 
and other component parts of the monitoring system to produce a 
continuous record of the measured parameters in the measurement units 
required by subpart HH of this part.
    Boiler means an enclosed fossil- or other-fuel-fired combustion 
device used to produce heat and to transfer heat to recirculating 
water, steam, or other medium.
    Bottoming-cycle cogeneration unit means a cogeneration unit in 
which the energy input to the unit is first used to produce useful 
thermal energy and at least some of the reject heat from the useful 
thermal energy application or process is then used for electricity 
production.
    CAIR authorized account representative means, with regard to a 
general account, a responsible natural person who is authorized, in 
accordance with subparts BB and II of this part, to transfer and 
otherwise dispose of CAIR NOX allowances held in the general 
account and, with regard to a compliance account, the CAIR designated 
representative of the source.
    CAIR designated representative means, for a CAIR NOX 
source and each CAIR NOX unit at the source, the natural 
person who is authorized by the owners and operators of the source and 
all such units at the source, in accordance with subparts BB and II of 
this part, to represent and legally bind each owner and operator in 
matters pertaining to the CAIR NOX Annual Trading Program. 
If the CAIR NOX source is also a CAIR SO2 source, 
then this natural person shall be the same person as the CAIR 
designated representative under the CAIR SO2 Trading 
Program. If the CAIR NOX source is also a CAIR 
NOX Ozone Season source, then this natural person shall be 
the same person as the CAIR designated representative under the CAIR 
NOX Ozone Season Trading Program. If the CAIR NOX 
source is also subject to the Acid Rain Program, then this natural 
person shall be the same person as the designated representative under 
the Acid Rain Program. If the CAIR NOX source is also 
subject to the Hg Budget Trading Program, then this natural person 
shall be the same person as the designated representative under the Hg 
Budget Trading Program.
    CAIR NOX allowance means a limited authorization issued by the 
permitting authority or the Administrator under subpart EE of this part 
or under Sec.  97.188, or under provisions of a State implementation 
plan that are approved under Sec.  51.123(o) (1) or (2) of this 
chapter, to emit one ton of nitrogen oxides during a control period of 
the specified calendar year for which the authorization is allocated or 
of any calendar year thereafter under the CAIR NOX Program. 
An authorization to emit nitrogen oxides that is not issued under 
subpart EE of this part, Sec.  97.188, or provisions of a State 
implementation plan that are approved under Sec.  51.123(o)(1) or (2) 
of this chapter shall not be a CAIR NOX allowance.
    CAIR NOX allowance deduction or deduct CAIR NOX 
allowances means the permanent withdrawal of CAIR NOX 
allowances by the Administrator from a compliance account, e.g., in 
order to account for a specified number of tons of total nitrogen 
oxides emissions from all CAIR NOX units at a CAIR 
NOX source for a control period, determined in accordance 
with subpart HH of this part, or to account for excess emissions.
    CAIR NOX Allowance Tracking System means the system by which the 
Administrator records allocations, deductions, and transfers of CAIR 
NOX allowances under the CAIR NOX Annual Trading 
Program. Such allowances will be allocated, held, deducted, or 
transferred only as whole allowances.
    CAIR NOX Allowance Tracking System account means an account in the 
CAIR NOX Allowance Tracking System established by the 
Administrator for purposes of recording the allocation, holding, 
transferring, or deducting of CAIR NOX allowances.
    CAIR NOX allowances held or hold CAIR NOX allowances means the CAIR 
NOX allowances recorded by the Administrator, or submitted 
to the Administrator for recordation, in accordance with subparts FF, 
GG, and II of this part, in a CAIR NOX Allowance Tracking 
System account.
    CAIR NOX Annual Trading Program means a multi-state nitrogen oxides 
air pollution control and emission reduction program established by the 
Administrator in accordance with subparts AA through II of this part 
and Sec.  52.35 of this chapter or administered by the Administrator 
under provisions of a State implementation plan that are approved under 
Sec.  51.123(o) (1) or (2) of this chapter, as a means of mitigating 
interstate transport of fine particulates and nitrogen oxides.
    CAIR NOX emissions limitation means, for a CAIR NOX 
source, the tonnage equivalent of the CAIR NOX allowances 
available for deduction for the source under Sec.  97.154 (a) and (b) 
for a control period.
    CAIR NOX Ozone Season source means a source that includes one or 
more CAIR NOX Ozone Season units.
    CAIR NOX Ozone Season Trading Program means a multi-
state nitrogen oxides air pollution control and emission reduction 
program established by the Administrator in accordance with subparts 
AAAA through IIII of this part and Sec.  52.35 of this chapter or

[[Page 49765]]

administered by the Administrator under provisions of a State 
implementation plan that are approved under Sec.  51.123(aa)(1) or (2) 
(and (bb)(1)), (bb)(2), or (dd) of this chapter, as a means of 
mitigating interstate transport of ozone and nitrogen oxides.
    CAIR NOX Ozone Season unit means a unit that is subject to the CAIR 
NOX Ozone Season Trading Program under Sec.  97.304 and a 
CAIR NOX Ozone Season opt-in unit under subpart IIII of this 
part.
    CAIR NOX source means a source that includes one or more CAIR 
NOX units.
    CAIR NOX unit means a unit that is subject to the CAIR 
NOX Annual Trading Program under Sec.  97.104 and, except 
for purposes of Sec.  97.105 and subpart EE of this part, a CAIR 
NOX opt-in unit under subpart II of this part.
    CAIR permit means the legally binding and federally enforceable 
written document, or portion of such document, issued by the permitting 
authority under subpart CC of this part, including any permit 
revisions, specifying the CAIR NOX Annual Trading Program 
requirements applicable to a CAIR NOX source, to each CAIR 
NOX unit at the source, and to the owners and operators and 
the CAIR designated representative of the source and each such unit.
    CAIR SO2 source means a source that includes one or more CAIR 
SO2 units.
    CAIR SO2 Trading Program means a multi-state sulfur dioxide air 
pollution control and emission reduction program established by the 
Administrator in accordance with subparts AAA through III of this part 
and Sec.  52.36 of this chapter or administered by the Administrator 
under provisions of a State implementation plan that are approved under 
Sec.  51.124(o)(1) or (2) of this chapter, as a means of mitigating 
interstate transport of fine particulates and sulfur dioxide.
    CAIR SO2 unit means a unit that is subject to the CAIR 
SO2 Trading Program under Sec.  97.204 and a CAIR 
SO2 opt-in unit under subpart III of this part.
    Certifying official means:
    (1) For a corporation, a president, secretary, treasurer, or vice-
president of the corporation in charge of a principal business function 
or any other person who performs similar policy or decision-making 
functions for the corporation;
    (2) For a partnership or sole proprietorship, a general partner or 
the proprietor respectively; or
    (3) For a local government entity or State, Federal, or other 
public agency, a principal executive officer or ranking elected 
official.
    Clean Air Act or CAA means the Clean Air Act, 42 U.S.C. 7401, et 
seq.
    Coal means any solid fuel classified as anthracite, bituminous, 
subbituminous, or lignite.
    Coal-derived fuel means any fuel (whether in a solid, liquid, or 
gaseous state) produced by the mechanical, thermal, or chemical 
processing of coal.
    Coal-fired means:
    (1) Except for purposes of subpart EE of this part, combusting any 
amount of coal or coal-derived fuel, alone or in combination with any 
amount of any other fuel, during any year; or
    (2) For purposes of subpart EE of this part, combusting any amount 
of coal or coal-derived fuel, alone or in combination with any amount 
of any other fuel, during a specified year.
    Cogeneration unit means a stationary, fossil-fuel-fired boiler or 
stationary, fossil-fuel-fired combustion turbine:
    (1) Having equipment used to produce electricity and useful thermal 
energy for industrial, commercial, heating, or cooling purposes through 
the sequential use of energy; and
    (2) Producing during the 12-month period starting on the date the 
unit first produces electricity and during any calendar year after the 
calendar year in which the unit first produces electricity--
    (i) For a topping-cycle cogeneration unit,
    (A) Useful thermal energy not less than 5 percent of total energy 
output; and
    (B) Useful power that, when added to one-half of useful thermal 
energy produced, is not less then 42.5 percent of total energy input, 
if useful thermal energy produced is 15 percent or more of total energy 
output, or not less than 45 percent of total energy input, if useful 
thermal energy produced is less than 15 percent of total energy output.
    (ii) For a bottoming-cycle cogeneration unit, useful power not less 
than 45 percent of total energy input.
    Combustion turbine means:
    (1) An enclosed device comprising a compressor, a combustor, and a 
turbine and in which the flue gas resulting from the combustion of fuel 
in the combustor passes through the turbine, rotating the turbine; and
    (2) If the enclosed device under paragraph (1) of this definition 
is combined cycle, any associated heat recovery steam generator and 
steam turbine.
    Commence commercial operation means, with regard to a unit serving 
a generator:
    (1) To have begun to produce steam, gas, or other heated medium 
used to generate electricity for sale or use, including test 
generation, except as provided in Sec.  97.105.
    (i) For a unit that is a CAIR NOX unit under Sec.  
97.104 on the later of November 15, 1990 or the date the unit commences 
commercial operation as defined in paragraph (1) of this definition and 
that subsequently undergoes a physical change (other than replacement 
of the unit by a unit at the same source), such date shall remain the 
unit's date of commencement of commercial operation.
    (ii) For a unit that is a CAIR NOX unit under Sec.  
97.104 on the later of November 15, 1990 or the date the unit commences 
commercial operation as defined in paragraph (1) of this definition and 
that is subsequently replaced by a unit at the same source (e.g., 
repowered), the replacement unit shall be treated as a separate unit 
with a separate date for commencement of commercial operation as 
defined in paragraph (1), (2), or (3) of this definition as 
appropriate.
    (2) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  97.105, for a unit that is not a CAIR NOX 
unit under Sec.  97.104 on the later of November 15, 1990 or the date 
the unit commences commercial operation as defined in paragraph (1) of 
this definition and is not a unit under paragraph (3) of this 
definition, the unit's date for commencement of commercial operation 
shall be the date on which the unit becomes a CAIR NOX unit 
under Sec.  97.104.
    (i) For a unit with a date for commencement of commercial operation 
as defined in paragraph (2) of this definition and that subsequently 
undergoes a physical change (other than replacement of the unit by a 
unit at the same source), such date shall remain the unit's date of 
commencement of commercial operation.
    (ii) For a unit with a date for commencement of commercial 
operation as defined in paragraph (2) of this definition and that is 
subsequently replaced by a unit at the same source (e.g., repowered), 
the replacement unit shall be treated as a separate unit with a 
separate date for commencement of commercial operation as defined in 
paragraph (1), (2), or (3) of this definition as appropriate.
    (3) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  97.184(h) or Sec.  97.187(b)(3), for a CAIR 
NOX opt-in unit or a unit for which a CAIR opt-in permit 
application is submitted and not withdrawn and a CAIR opt-in permit is 
not yet issued or denied under subpart II of this part, the unit's date 
for commencement of commercial operation shall be the date

[[Page 49766]]

on which the owner or operator is required to start monitoring and 
reporting the NOX emissions rate and the heat input of the 
unit under Sec.  97.184(b)(1)(i).
    (i) For a unit with a date for commencement of commercial operation 
as defined in paragraph (3) of this definition and that subsequently 
undergoes a physical change (other than replacement of the unit by a 
unit at the same source), such date shall remain the unit's date of 
commencement of commercial operation.
    (ii) For a unit with a date for commencement of commercial 
operation as defined in paragraph (3) of this definition and that is 
subsequently replaced by a unit at the same source (e.g., repowered), 
the replacement unit shall be treated as a separate unit with a 
separate date for commencement of commercial operation as defined in 
paragraph (1), (2), or (3) of this definition as appropriate.
    (4) Notwithstanding paragraphs (1) through (3) of this definition, 
for a unit not serving a generator producing electricity for sale, the 
unit's date of commencement of operation shall also be the unit's date 
of commencement of commercial operation.
    Commence operation means:
    (1) To have begun any mechanical, chemical, or electronic process, 
including, with regard to a unit, start-up of a unit's combustion 
chamber, except as provided in Sec.  97.105.
    (i) For a unit that undergoes a physical change (other than 
replacement of the unit by a unit at the same source) after the date 
the unit commences operation as defined in paragraph (1) of this 
definition, such date shall remain the unit's date of commencement of 
operation.
    (ii) For a unit that is replaced by a unit at the same source 
(e.g., repowered) after the date the unit commences operation as 
defined in paragraph (1) of this definition, the replacement unit shall 
be treated as a separate unit with a separate date for commencement of 
operation as defined in paragraph (1) or (2) of this definition as 
appropriate.
    (2) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  97.184(h) or Sec.  97.187(b)(3), for a CAIR 
NOX opt-in unit or a unit for which a CAIR opt-in permit 
application is submitted and not withdrawn and a CAIR opt-in permit is 
not yet issued or denied under subpart II of this part, the unit's date 
for commencement of operation shall be the date on which the owner or 
operator is required to start monitoring and reporting the 
NOX emissions rate and the heat input of the unit under 
Sec.  97.184(b)(1)(i).
    (i) For a unit with a date for commencement of operation as defined 
in paragraph (2) of this definition and that subsequently undergoes a 
physical change (other than replacement of the unit by a unit at the 
same source), such date shall remain the unit's date of commencement of 
operation.
    (ii) For a unit with a date for commencement of operation as 
defined in paragraph (2) of this definition and that is subsequently 
replaced by a unit at the same source (e.g., repowered), the 
replacement unit shall be treated as a separate unit with a separate 
date for commencement of operation as defined in paragraph (1) or (2) 
of this definition as appropriate.
    Common stack means a single flue through which emissions from 2 or 
more units are exhausted.
    Compliance account means a CAIR NOX Allowance Tracking 
System account, established by the Administrator for a CAIR 
NOX source under subpart FF or II of this part, in which any 
CAIR NOX allowance allocations for the CAIR NOX 
units at the source are initially recorded and in which are held any 
CAIR NOX allowances available for use for a control period 
in order to meet the source's CAIR NOX emissions limitation 
in accordance with Sec.  97.154.
    Continuous emission monitoring system or CEMS means the equipment 
required under subpart HH of this part to sample, analyze, measure, and 
provide, by means of readings recorded at least once every 15 minutes 
(using an automated data acquisition and handling system (DAHS)), a 
permanent record of nitrogen oxides emissions, stack gas volumetric 
flow rate, stack gas moisture content, and oxygen or carbon dioxide 
concentration (as applicable), in a manner consistent with part 75 of 
this chapter. The following systems are the principal types of 
continuous emission monitoring systems required under subpart HH of 
this part:
    (1) A flow monitoring system, consisting of a stack flow rate 
monitor and an automated data acquisition and handling system and 
providing a permanent, continuous record of stack gas volumetric flow 
rate, in standard cubic feet per hour (scfh);
    (2) A nitrogen oxides concentration monitoring system, consisting 
of a NOX pollutant concentration monitor and an automated 
data acquisition and handling system and providing a permanent, 
continuous record of NOX emissions, in parts per million 
(ppm);
    (3) A nitrogen oxides emission rate (or NOX-diluent) 
monitoring system, consisting of a NOX pollutant 
concentration monitor, a diluent gas (CO2 or O2) 
monitor, and an automated data acquisition and handling system and 
providing a permanent, continuous record of NOX 
concentration, in parts per million (ppm), diluent gas concentration, 
in percent CO2 or O2; and NOX emission 
rate, in pounds per million British thermal units (lb/mmBtu);
    (4) A moisture monitoring system, as defined in Sec.  75.11(b)(2) 
of this chapter and providing a permanent, continuous record of the 
stack gas moisture content, in percent H2O;
    (5) A carbon dioxide monitoring system, consisting of a 
CO2 pollutant concentration monitor (or an oxygen monitor 
plus suitable mathematical equations from which the CO2 
concentration is derived) and an automated data acquisition and 
handling system and providing a permanent, continuous record of 
CO2 emissions, in percent CO2; and
    (6) An oxygen monitoring system, consisting of an O2 
concentration monitor and an automated data acquisition and handling 
system and providing a permanent, continuous record of O2, 
in percent O2.
    Control period means the period beginning January 1 of a calendar 
year, except as provided in Sec.  97.106(c)(2), and ending on December 
31 of the same year, inclusive.
    Emissions means air pollutants exhausted from a unit or source into 
the atmosphere, as measured, recorded, and reported to the 
Administrator by the CAIR designated representative and as determined 
by the Administrator in accordance with subpart HH of this part.
    Excess emissions means any ton of nitrogen oxides emitted by the 
CAIR NOX units at a CAIR NOX source during a 
control period that exceeds the CAIR NOX emissions 
limitation for the source.
    Fossil fuel means natural gas, petroleum, coal, or any form of 
solid, liquid, or gaseous fuel derived from such material.
    Fossil-fuel-fired means, with regard to a unit, combusting any 
amount of fossil fuel in any calendar year.
    Fuel oil means any petroleum-based fuel (including diesel fuel or 
petroleum derivatives such as oil tar) and any recycled or blended 
petroleum products or petroleum by-products used as a fuel whether in a 
liquid, solid, or gaseous state.
    General account means a CAIR NOX Allowance Tracking 
System account, established under subpart FF of this part, that is not 
a compliance account.
    Generator means a device that produces electricity.
    Gross electrical output means, with regard to a cogeneration unit, 
electricity

[[Page 49767]]

made available for use, including any such electricity used in the 
power production process (which process includes, but is not limited 
to, any on-site processing or treatment of fuel combusted at the unit 
and any on-site emission controls).
    Heat input means, with regard to a specified period of time, the 
product (in mmBtu/time) of the gross calorific value of the fuel (in 
Btu/lb) divided by 1,000,000 Btu/mmBtu and multiplied by the fuel feed 
rate into a combustion device (in lb of fuel/time), as measured, 
recorded, and reported to the Administrator by the CAIR designated 
representative and determined by the Administrator in accordance with 
subpart HH of this part and excluding the heat derived from preheated 
combustion air, recirculated flue gases, or exhaust from other sources.
    Heat input rate means the amount of heat input (in mmBtu) divided 
by unit operating time (in hr) or, with regard to a specific fuel, the 
amount of heat input attributed to the fuel (in mmBtu) divided by the 
unit operating time (in hr) during which the unit combusts the fuel.
    Hg Budget Trading Program means a multi-state Hg air pollution 
control and emission reduction program approved and administered by the 
Administrator in accordance with subpart HHHH of part 60 of this 
chapter and Sec.  60.24(h)(6), or established by the Administrator, as 
a means of reduction national Hg emissions.
    Life-of-the-unit, firm power contractual arrangement means a unit 
participation power sales agreement under which a utility or industrial 
customer reserves, or is entitled to receive, a specified amount or 
percentage of nameplate capacity and associated energy generated by any 
specified unit and pays its proportional amount of such unit's total 
costs, pursuant to a contract:
    (1) For the life of the unit;
    (2) For a cumulative term of no less than 30 years, including 
contracts that permit an election for early termination; or
    (3) For a period no less than 25 years or 70 percent of the 
economic useful life of the unit determined as of the time the unit is 
built, with option rights to purchase or release some portion of the 
nameplate capacity and associated energy generated by the unit at the 
end of the period.
    Maximum design heat input means, starting from the initial 
installation of a unit, the maximum amount of fuel per hour (in Btu/hr) 
that a unit is capable of combusting on a steady state basis as 
specified by the manufacturer of the unit, or, starting from the 
completion of any subsequent physical change in the unit resulting in a 
decrease in the maximum amount of fuel per hour (in Btu/hr) that a unit 
is capable of combusting on a steady state basis, such decreased 
maximum amount as specified by the person conducting the physical 
change.
    Monitoring system means any monitoring system that meets the 
requirements of subpart HH of this part, including a continuous 
emissions monitoring system, an alternative monitoring system, or an 
excepted monitoring system under part 75 of this chapter.
    Most stringent State or Federal NOX emissions limitation means, 
with regard to a unit, the lowest NOX emissions limitation 
(in terms of lb/mmBtu) that is applicable to the unit under State or 
Federal law, regardless of the averaging period to which the emissions 
limitation applies.
    Nameplate capacity means, starting from the initial installation of 
a generator, the maximum electrical generating output (in MWe) that the 
generator is capable of producing on a steady state basis and during 
continuous operation (when not restricted by seasonal or other 
deratings) as specified by the manufacturer of the generator or, 
starting from the completion of any subsequent physical change in the 
generator resulting in an increase in the maximum electrical generating 
output (in MWe) that the generator is capable of producing on a steady 
state basis and during continuous operation (when not restricted by 
seasonal or other deratings), such increased maximum amount as 
specified by the person conducting the physical change.
    Oil-fired means, for purposes of subpart EE of this part, 
combusting fuel oil for more than 15.0 percent of the annual heat input 
in a specified year and not qualifying as coal-fired.
    Operator means any person who operates, controls, or supervises a 
CAIR NOX unit or a CAIR NOX source and shall 
include, but not be limited to, any holding company, utility system, or 
plant manager of such a unit or source.
    Owner means any of the following persons:
    (1) With regard to a CAIR NOX source or a CAIR 
NOX unit at a source, respectively:
    (i) Any holder of any portion of the legal or equitable title in a 
CAIR NOX unit at the source or the CAIR NOX unit;
    (ii) Any holder of a leasehold interest in a CAIR NOX 
unit at the source or the CAIR NOX unit; or
    (iii) Any purchaser of power from a CAIR NOX unit at the 
source or the CAIR NOX unit under a life-of-the-unit, firm 
power contractual arrangement; provided that, unless expressly provided 
for in a leasehold agreement, owner shall not include a passive lessor, 
or a person who has an equitable interest through such lessor, whose 
rental payments are not based (either directly or indirectly) on the 
revenues or income from such CAIR NOX unit; or
    (2) With regard to any general account, any person who has an 
ownership interest with respect to the CAIR NOX allowances 
held in the general account and who is subject to the binding agreement 
for the CAIR authorized account representative to represent the 
person's ownership interest with respect to CAIR NOX 
allowances.
    Permitting authority means the State air pollution control agency, 
local agency, other State agency, or other agency authorized by the 
Administrator to issue or revise permits to meet the requirements of 
the CAIR NOX Annual Trading Program in accordance with 
subpart CC of this part or, if no such agency has been so authorized, 
the Administrator.
    Potential electrical output capacity means 33 percent of a unit's 
maximum design heat input, divided by 3,413 Btu/kWh, divided by 1,000 
kWh/MWh, and multiplied by 8,760 hr/yr.
    Receive or receipt of means, when referring to the permitting 
authority or the Administrator, to come into possession of a document, 
information, or correspondence (whether sent in hard copy or by 
authorized electronic transmission), as indicated in an official 
correspondence log, or by a notation made on the document, information, 
or correspondence, by the permitting authority or the Administrator in 
the regular course of business.
    Recordation, record, or recorded means, with regard to CAIR 
NOX allowances, the movement of CAIR NOX 
allowances by the Administrator into or between CAIR NOX 
Allowance Tracking System accounts, for purposes of allocation, 
transfer, or deduction.
    Reference method means any direct test method of sampling and 
analyzing for an air pollutant as specified in Sec.  75.22 of this 
chapter.
    Repowered means, with regard to a unit, replacement of a coal-fired 
boiler with one of the following coal-fired technologies at the same 
source as the coal-fired boiler:
    (1) Atmospheric or pressurized fluidized bed combustion;
    (2) Integrated gasification combined cycle;
    (3) Magnetohydrodynamics;

[[Page 49768]]

    (4) Direct and indirect coal-fired turbines;
    (5) Integrated gasification fuel cells; or
    (6) As determined by the Administrator in consultation with the 
Secretary of Energy, a derivative of one or more of the technologies 
under paragraphs (1) through (5) of this definition and any other coal-
fired technology capable of controlling multiple combustion emissions 
simultaneously with improved boiler or generation efficiency and with 
significantly greater waste reduction relative to the performance of 
technology in widespread commercial use as of January 1, 2005.
    Sequential use of energy means:
    (1) For a topping-cycle cogeneration unit, the use of reject heat 
from electricity production in a useful thermal energy application or 
process; or
    (2) For a bottoming-cycle cogeneration unit, the use of reject heat 
from useful thermal energy application or process in electricity 
production.
    Serial number means, for a CAIR NOX allowance, the 
unique identification number assigned to each CAIR NOX 
allowance by the Administrator.
    Solid waste incineration unit means a stationary, fossil-fuel-fired 
boiler or stationary, fossil-fuel-fired combustion turbine that is a 
``solid waste incineration unit'' as defined in section 129(g)(1) of 
the Clean Air Act.
    Source means all buildings, structures, or installations located in 
one or more contiguous or adjacent properties under common control of 
the same person or persons. For purposes of section 502(c) of the Clean 
Air Act, a ``source,'' including a ``source'' with multiple units, 
shall be considered a single ``facility.''
    State means one of the States or the District of Columbia that is 
subject to the CAIR NOX Annual Trading Program pursuant to 
Sec.  52.35 of this chapter.
    Submit or serve means to send or transmit a document, information, 
or correspondence to the person specified in accordance with the 
applicable regulation:
    (1) In person;
    (2) By United States Postal Service; or
    (3) By other means of dispatch or transmission and delivery. 
Compliance with any ``submission'' or ``service'' deadline shall be 
determined by the date of dispatch, transmission, or mailing and not 
the date of receipt.
    Title V operating permit means a permit issued under title V of the 
Clean Air Act and part 70 or part 71 of this chapter.
    Title V operating permit regulations means the regulations that the 
Administrator has approved or issued as meeting the requirements of 
title V of the Clean Air Act and part 70 or 71 of this chapter.
    Ton means 2,000 pounds. For the purpose of determining compliance 
with the CAIR NOX emissions limitation, total tons of 
nitrogen oxides emissions for a control period shall be calculated as 
the sum of all recorded hourly emissions (or the mass equivalent of the 
recorded hourly emission rates) in accordance with subpart HH of this 
part, but with any remaining fraction of a ton equal to or greater than 
0.50 tons deemed to equal one ton and any remaining fraction of a ton 
less than 0.50 tons deemed to equal zero tons.
    Topping-cycle cogeneration unit means a cogeneration unit in which 
the energy input to the unit is first used to produce useful power, 
including electricity, and at least some of the reject heat from the 
electricity production is then used to provide useful thermal energy.
    Total energy input means, with regard to a cogeneration unit, total 
energy of all forms supplied to the cogeneration unit, excluding energy 
produced by the cogeneration unit itself.
    Total energy output means, with regard to a cogeneration unit, the 
sum of useful power and useful thermal energy produced by the 
cogeneration unit.
    Unit means a stationary, fossil-fuel-fired boiler or combustion 
turbine or other stationary, fossil-fuel-fired combustion device.
    Unit operating day means a calendar day in which a unit combusts 
any fuel.
    Unit operating hour or hour of unit operation means an hour in 
which a unit combusts any fuel.
    Useful power means, with regard to a cogeneration unit, electricity 
or mechanical energy made available for use, excluding any such energy 
used in the power production process (which process includes, but is 
not limited to, any on-site processing or treatment of fuel combusted 
at the unit and any on-site emission controls).
    Useful thermal energy means, with regard to a cogeneration unit, 
thermal energy that is:
    (1) Made available to an industrial or commercial process (not a 
power production process), excluding any heat contained in condensate 
return or makeup water;
    (2) Used in a heating application (e.g., space heating or domestic 
hot water heating); or
    (3) Used in a space cooling application (i.e., thermal energy used 
by an absorption chiller).
    Utility power distribution system means the portion of an 
electricity grid owned or operated by a utility and dedicated to 
delivering electricity to customers.


Sec.  97.103  Measurements, abbreviations, and acronyms.

    Measurements, abbreviations, and acronyms used in this subpart and 
subparts BB through II are defined as follows:
Btu--British thermal unit
CO2--carbon dioxide
H2O--water
Hg--mercury
hr--hour
kW--kilowatt electrical
kWh--kilowatt hour
lb--pound
mmBtu--million Btu
MWe--megawatt electrical
MWh--megawatt hour
NOX--nitrogen oxides
O2--oxygen
ppm--parts per million
scfh--standard cubic feet per hour
SO2--sulfur dioxide
yr--year


Sec.  97.104  Applicability.

    (a) Except as provided in paragraph (b) of this section:
    (1) The following units in a State shall be CAIR NOX 
units, and any source that includes one or more such units shall be a 
CAIR NOX source, subject to the requirements of this subpart 
and subparts BB through HH of this part: any stationary, fossil-fuel-
fired boiler or stationary, fossil-fuel-fired combustion turbine 
serving at any time, since the later of November 15, 1990 or the start-
up of the unit's combustion chamber, a generator with nameplate 
capacity of more than 25 MWe producing electricity for sale.
    (2) If a stationary, fossil-fuel-fired boiler or stationary, 
fossil-fuel-fired combustion turbine that, under paragraph (a)(1) of 
this section, is not a CAIR NOX unit begins to serve a 
generator with nameplate capacity of more than 25 MWe producing 
electricity for sale, the unit shall become a CAIR NOX unit 
on the date on which it first serves such generator.
    (b) The units in a State that meet the requirements set forth in 
paragraph (b)(1)(i), (b)(2)(i), or (b)(2)(ii) of this section shall not 
be CAIR NOX units:
    (1)(i) Any unit:
    (A) Qualifying as a cogeneration unit during the 12-month period 
starting on the date the unit first produces electricity and continuing 
to qualify as a cogeneration unit; and
    (B) Not serving at any time, since the later of November 15, 1990 
or the start-

[[Page 49769]]

up of the unit's combustion chamber, a generator with nameplate 
capacity of more than 25 MWe supplying in any calendar year more than 
one-third of the unit's potential electric output capacity or 219,000 
MWh, whichever is greater, to any utility power distribution system for 
sale.
    (ii) If a unit qualifies as a cogeneration unit during the 12-month 
period starting on the date the unit first produces electricity and 
meets the requirements of paragraphs (b)(1)(i) of this section for at 
least one calendar year, but subsequently no longer meets all such 
requirements, the unit shall become a CAIR NOX unit starting 
on the earlier of January 1 after the first calendar year during which 
the unit first no longer qualifies as a cogeneration unit or January 1 
after the first calendar year during which the unit no longer meets the 
requirements of paragraph (b)(1)(i)(B) of this section.
    (2)(i) Any unit commencing operation before January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
1985-1987 exceeding 80 percent (on a Btu basis) and an average annual 
fuel consumption of non-fossil fuel for any 3 consecutive calendar 
years after 1990 exceeding 80 percent (on a Btu basis).
    (ii) Any unit commencing operation on or after January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
the first 3 calendar years of operation exceeding 80 percent (on a Btu 
basis) and an average annual fuel consumption of non-fossil fuel for 
any 3 consecutive calendar years after 1990 exceeding 80 percent (on a 
Btu basis).
    (iii) If a unit qualifies as a solid waste incineration unit and 
meets the requirements of paragraph (b)(2)(i) or (ii) of this section 
for at least 3 consecutive calendar years, but subsequently no longer 
meets all such requirements, the unit shall become a CAIR 
NOX unit starting on the earlier of January 1 after the 
first calendar year during which the unit first no longer qualifies as 
a solid waste incineration unit or January 1 after the first 3 
consecutive calendar years after 1990 for which the unit has an average 
annual fuel consumption of fossil fuel of 20 percent or more.
    (c) A certifying official of an owner or operator of any unit may 
petition the Administrator at any time for a determination concerning 
the applicability, under paragraphs (a) and (b) of this section, of the 
CAIR NOX Annual Trading Program to the unit.
    (1) Petition content. The petition shall be in writing and include 
the identification of the unit and the relevant facts about the unit. 
The petition and any other documents provided to the Administrator in 
connection with the petition shall include the following certification 
statement, signed by the certifying official: ``I am authorized to make 
this submission on behalf of the owners and operators of the unit for 
which the submission is made. I certify under penalty of law that I 
have personally examined, and am familiar with, the statements and 
information submitted in this document and all its attachments. Based 
on my inquiry of those individuals with primary responsibility for 
obtaining the information, I certify that the statements and 
information are to the best of my knowledge and belief true, accurate, 
and complete. I am aware that there are significant penalties for 
submitting false statements and information or omitting required 
statements and information, including the possibility of fine or 
imprisonment.''
    (2) Submission. The petition and any other documents provided in 
connection with the petition shall be submitted to the Director of the 
Clean Air Markets Division, U.S. Environmental Protection Agency, who 
will act on the petition as the Administrator's duly authorized 
representative.
    (3) Response. The Administrator will issue a written response to 
the petition and may request supplemental information relevant to such 
petition. The Administrator's determination concerning the 
applicability, under paragraphs (a) and (b) of this section, of the 
CAIR NOX Annual Trading Program to the unit shall be binding 
on the permitting authority unless the petition or other information or 
documents provided in connection with the petition are found to have 
contained significant, relevant errors or omissions.


Sec.  97.105  Retired unit exemption.

    (a)(1) Any CAIR NOX unit that is permanently retired and 
is not a CAIR NOX opt-in unit under subpart II of this part 
shall be exempt from the CAIR NOX Annual Trading Program, 
except for the provisions of this section, Sec.  97.102, Sec.  97.103, 
Sec.  97.104, Sec.  97.106(c)(4) through (7), Sec.  97.107, and 
subparts BB and EE through GG of this part.
    (2) The exemption under paragraph (a)(1) of this section shall 
become effective the day on which the CAIR NOX unit is 
permanently retired. Within 30 days of the unit's permanent retirement, 
the CAIR designated representative shall submit a statement to the 
permitting authority otherwise responsible for administering any CAIR 
permit for the unit and shall submit a copy of the statement to the 
Administrator. The statement shall state, in a format prescribed by the 
permitting authority, that the unit was permanently retired on a 
specific date and will comply with the requirements of paragraph (b) of 
this section.
    (3) After receipt of the statement under paragraph (a)(2) of this 
section, the permitting authority will amend any permit under subpart 
CC of this part covering the source at which the unit is located to add 
the provisions and requirements of the exemption under paragraphs 
(a)(1) and (b) of this section.
    (b) Special provisions.
    (1) A unit exempt under paragraph (a) of this section shall not 
emit any nitrogen oxides, starting on the date that the exemption takes 
effect.
    (2) The Administrator will allocate CAIR NOX allowances 
under subpart EE of this part to a unit exempt under paragraph (a) of 
this section.
    (3) For a period of 5 years from the date the records are created, 
the owners and operators of a unit exempt under paragraph (a) of this 
section shall retain, at the source that includes the unit, records 
demonstrating that the unit is permanently retired. The 5-year period 
for keeping records may be extended for cause, at any time before the 
end of the period, in writing by the permitting authority or the 
Administrator. The owners and operators bear the burden of proof that 
the unit is permanently retired.
    (4) The owners and operators and, to the extent applicable, the 
CAIR designated representative of a unit exempt under paragraph (a) of 
this section shall comply with the requirements of the CAIR 
NOX Annual Trading Program concerning all periods for which 
the exemption is not in effect, even if such requirements arise, or 
must be complied with, after the exemption takes effect.
    (5) A unit exempt under paragraph (a) of this section and located 
at a source that is required, or but for this exemption would be 
required, to have a title V operating permit shall not resume operation 
unless the CAIR designated representative of the source submits a 
complete CAIR permit application under Sec.  97.122 for the unit not 
less than 18 months (or such lesser time provided by the permitting 
authority) before the later of January 1, 2009 or the date on which the 
unit resumes operation.
    (6) On the earlier of the following dates, a unit exempt under 
paragraph (a) of this section shall lose its exemption:

[[Page 49770]]

    (i) The date on which the CAIR designated representative submits a 
CAIR permit application for the unit under paragraph (b)(5) of this 
section;
    (ii) The date on which the CAIR designated representative is 
required under paragraph (b)(5) of this section to submit a CAIR permit 
application for the unit; or
    (iii) The date on which the unit resumes operation, if the CAIR 
designated representative is not required to submit a CAIR permit 
application for the unit.
    (7) For the purpose of applying monitoring, reporting, and 
recordkeeping requirements under subpart HH of this part, a unit that 
loses its exemption under paragraph (a) of this section shall be 
treated as a unit that commences operation and commercial operation on 
the first date on which the unit resumes operation.


Sec.  97.106  Standard requirements.

    (a) Permit requirements. (1) The CAIR designated representative of 
each CAIR NOX source required to have a title V operating 
permit and each CAIR NOX unit required to have a title V 
operating permit at the source shall:
    (i) Submit to the permitting authority a complete CAIR permit 
application under Sec.  97.122 in accordance with the deadlines 
specified in Sec.  97.121; and
    (ii) Submit in a timely manner any supplemental information that 
the permitting authority determines is necessary in order to review a 
CAIR permit application and issue or deny a CAIR permit.
    (2) The owners and operators of each CAIR NOX source 
required to have a title V operating permit and each CAIR 
NOX unit required to have a title V operating permit at the 
source shall have a CAIR permit issued by the permitting authority 
under subpart CC of this part for the source and operate the source and 
the unit in compliance with such CAIR permit.
    (3) Except as provided under subpart II of this part, the owners 
and operators of a CAIR NOX source that is not otherwise 
required to have a title V operating permit and each CAIR 
NOX unit that is not otherwise required to have a title V 
operating permit are not required to submit a CAIR permit application, 
and to have a CAIR permit, under subpart CC of this part for such CAIR 
NOX source and such CAIR NOX unit.
    (b) Monitoring, reporting, and recordkeeping requirements. (1) The 
owners and operators, and the CAIR designated representative, of each 
CAIR NOX source and each CAIR NOX unit at the 
source shall comply with the monitoring, reporting, and recordkeeping 
requirements of subpart HH of this part.
    (2) The emissions measurements recorded and reported in accordance 
with subpart HH of this part shall be used to determine compliance by 
each CAIR NOX source with the CAIR NOX emissions 
limitation under paragraph (c) of this section.
    (c) Nitrogen oxides emission requirements. (1) As of the allowance 
transfer deadline for a control period, the owners and operators of 
each CAIR NOX source and each CAIR NOX unit at 
the source shall hold, in the source's compliance account, CAIR 
NOX allowances available for compliance deductions for the 
control period under Sec.  97.154(a) in an amount not less than the 
tons of total nitrogen oxides emissions for the control period from all 
CAIR NOX units at the source, as determined in accordance 
with subpart HH of this part.
    (2) A CAIR NOX unit shall be subject to the requirements 
under paragraph (c)(1) of this section for the control period starting 
on the later of January 1, 2009 or the deadline for meeting the unit's 
monitor certification requirements under Sec.  97.170(b)(1), (2), or 
(5) and for each control period thereafter.
    (3) A CAIR NOX allowance shall not be deducted, for 
compliance with the requirements under paragraph (c)(1) of this 
section, for a control period in a calendar year before the year for 
which the CAIR NOX allowance was allocated.
    (4) CAIR NOX allowances shall be held in, deducted from, 
or transferred into or among CAIR NOX Allowance Tracking 
System accounts in accordance with subpart EE of this part.
    (5) A CAIR NOX allowance is a limited authorization to 
emit one ton of nitrogen oxides in accordance with the CAIR 
NOX Annual Trading Program. No provision of the CAIR 
NOX Annual Trading Program, the CAIR permit application, the 
CAIR permit, or an exemption under Sec.  97.105 and no provision of law 
shall be construed to limit the authority of the United States to 
terminate or limit such authorization.
    (6) A CAIR NOX allowance does not constitute a property 
right.
    (7) Upon recordation by the Administrator under subpart FF, GG, or 
II of this part, every allocation, transfer, or deduction of a CAIR 
NOX allowance to or from a CAIR NOX source's 
compliance account is incorporated automatically in any CAIR permit of 
the source.
    (d) Excess emissions requirements. If a CAIR NOX source 
emits nitrogen oxides during any control period in excess of the CAIR 
NOX emissions limitation, then:
    (1) The owners and operators of the source and each CAIR 
NOX unit at the source shall surrender the CAIR 
NOX allowances required for deduction under Sec.  
97.154(d)(1) and pay any fine, penalty, or assessment or comply with 
any other remedy imposed, for the same violations, under the Clean Air 
Act or applicable State law; and
    (2) Each ton of such excess emissions and each day of such control 
period shall constitute a separate violation of this subpart, the Clean 
Air Act, and applicable State law.
    (e) Recordkeeping and reporting requirements. (1) Unless otherwise 
provided, the owners and operators of the CAIR NOX source 
and each CAIR NOX unit at the source shall keep on site at 
the source each of the following documents for a period of 5 years from 
the date the document is created. This period may be extended for 
cause, at any time before the end of 5 years, in writing by the 
permitting authority or the Administrator.
    (i) The certificate of representation under Sec.  97.113 for the 
CAIR designated representative for the source and each CAIR 
NOX unit at the source and all documents that demonstrate 
the truth of the statements in the certificate of representation; 
provided that the certificate and documents shall be retained on site 
at the source beyond such 5-year period until such documents are 
superseded because of the submission of a new certificate of 
representation under Sec.  97.113 changing the CAIR designated 
representative.
    (ii) All emissions monitoring information, in accordance with 
subpart HH of this part, provided that to the extent that subpart HH of 
this part provides for a 3-year period for recordkeeping, the 3-year 
period shall apply.
    (iii) Copies of all reports, compliance certifications, and other 
submissions and all records made or required under the CAIR 
NOX Annual Trading Program.
    (iv) Copies of all documents used to complete a CAIR permit 
application and any other submission under the CAIR NOX 
Annual Trading Program or to demonstrate compliance with the 
requirements of the CAIR NOX Annual Trading Program.
    (2) The CAIR designated representative of a CAIR NOX 
source and each CAIR NOX unit at the source shall submit the 
reports required under the CAIR NOX Annual Trading Program, 
including those under subpart HH of this part.
    (f) Liability. (1) Each CAIR NOX source and each CAIR 
NOX unit shall

[[Page 49771]]

meet the requirements of the CAIR NOX Annual Trading 
Program.
    (2) Any provision of the CAIR NOX Annual Trading Program 
that applies to a CAIR NOX source or the CAIR designated 
representative of a CAIR NOX source shall also apply to the 
owners and operators of such source and of the CAIR NOX 
units at the source.
    (3) Any provision of the CAIR NOX Annual Trading Program 
that applies to a CAIR NOX unit or the CAIR designated 
representative of a CAIR NOX unit shall also apply to the 
owners and operators of such unit.
    (g) Effect on other authorities. No provision of the CAIR 
NOX Annual Trading Program, a CAIR permit application, a 
CAIR permit, or an exemption under Sec.  97.105 shall be construed as 
exempting or excluding the owners and operators, and the CAIR 
designated representative, of a CAIR NOX source or CAIR 
NOX unit from compliance with any other provision of the 
applicable, approved State implementation plan, a federally enforceable 
permit, or the Clean Air Act.


Sec.  97.107  Computation of time.

    (a) Unless otherwise stated, any time period scheduled, under the 
CAIR NOX Annual Trading Program, to begin on the occurrence 
of an act or event shall begin on the day the act or event occurs.
    (b) Unless otherwise stated, any time period scheduled, under the 
CAIR NOX Annual Trading Program, to begin before the 
occurrence of an act or event shall be computed so that the period ends 
the day before the act or event occurs.
    (c) Unless otherwise stated, if the final day of any time period, 
under the CAIR NOX Annual Trading Program, falls on a 
weekend or a State or Federal holiday, the time period shall be 
extended to the next business day.


Sec.  97.108  Appeal procedures.

    The appeal procedures for decisions of the Administrator under the 
CAIR NOX Annual Trading Program are set forth in part 78 of 
this chapter.

Subpart BB--CAIR designated representative for CAIR NOX sources


Sec.  97.110  Authorization and responsibilities of CAIR designated 
representative.

    (a) Except as provided under Sec.  97.111, each CAIR NOX 
source, including all CAIR NOX units at the source, shall 
have one and only one CAIR designated representative, with regard to 
all matters under the CAIR NOX Annual Trading Program 
concerning the source or any CAIR NOX unit at the source.
    (b) The CAIR designated representative of the CAIR NOX 
source shall be selected by an agreement binding on the owners and 
operators of the source and all CAIR NOX units at the source 
and shall act in accordance with the certification statement in Sec.  
97.113(a)(4)(iv).
    (c) Upon receipt by the Administrator of a complete certificate of 
representation under Sec.  97.113, the CAIR designated representative 
of the source shall represent and, by his or her representations, 
actions, inactions, or submissions, legally bind each owner and 
operator of the CAIR NOX source represented and each CAIR 
NOX unit at the source in all matters pertaining to the CAIR 
NOX Annual Trading Program, notwithstanding any agreement 
between the CAIR designated representative and such owners and 
operators. The owners and operators shall be bound by any decision or 
order issued to the CAIR designated representative by the permitting 
authority, the Administrator, or a court regarding the source or unit.
    (d) No CAIR permit will be issued, no emissions data reports will 
be accepted, and no CAIR NOX Allowance Tracking System 
account will be established for a CAIR NOX unit at a source, 
until the Administrator has received a complete certificate of 
representation under Sec.  97.113 for a CAIR designated representative 
of the source and the CAIR NOX units at the source.
    (e)(1) Each submission under the CAIR NOX Annual Trading 
Program shall be submitted, signed, and certified by the CAIR 
designated representative for each CAIR NOX source on behalf 
of which the submission is made. Each such submission shall include the 
following certification statement by the CAIR designated 
representative: ``I am authorized to make this submission on behalf of 
the owners and operators of the source or units for which the 
submission is made. I certify under penalty of law that I have 
personally examined, and am familiar with, the statements and 
information submitted in this document and all its attachments. Based 
on my inquiry of those individuals with primary responsibility for 
obtaining the information, I certify that the statements and 
information are to the best of my knowledge and belief true, accurate, 
and complete. I am aware that there are significant penalties for 
submitting false statements and information or omitting required 
statements and information, including the possibility of fine or 
imprisonment.''
    (2) The permitting authority and the Administrator will accept or 
act on a submission made on behalf of owner or operators of a CAIR 
NOX source or a CAIR NOX unit only if the 
submission has been made, signed, and certified in accordance with 
paragraph (e)(1) of this section.


Sec.  97.111  Alternate CAIR designated representative.

    (a) A certificate of representation under Sec.  97.113 may 
designate one and only one alternate CAIR designated representative, 
who may act on behalf of the CAIR designated representative. The 
agreement by which the alternate CAIR designated representative is 
selected shall include a procedure for authorizing the alternate CAIR 
designated representative to act in lieu of the CAIR designated 
representative.
    (b) Upon receipt by the Administrator of a complete certificate of 
representation under Sec.  97.113, any representation, action, 
inaction, or submission by the alternate CAIR designated representative 
shall be deemed to be a representation, action, inaction, or submission 
by the CAIR designated representative.
    (c) Except in this section and Sec. Sec.  97.102, 97.110(a) and 
(d), 97.112, 97.113, and 97.151 and Sec.  97.182, whenever the term 
``CAIR designated representative'' is used in subparts AA through II of 
this part, the term shall be construed to include the CAIR designated 
representative or any alternate CAIR designated representative.


Sec.  97.112  Changing CAIR designated representative and alternate 
CAIR designated representative; changes in owners and operators.

    (a) Changing CAIR designated representative. The CAIR designated 
representative may be changed at any time upon receipt by the 
Administrator of a superseding complete certificate of representation 
under Sec.  97.113. Notwithstanding any such change, all 
representations, actions, inactions, and submissions by the previous 
CAIR designated representative before the time and date when the 
Administrator receives the superseding certificate of representation 
shall be binding on the new CAIR designated representative and the 
owners and operators of the CAIR NOX source and the CAIR 
NOX units at the source.
    (b) Changing alternate CAIR designated representative. The 
alternate CAIR designated representative may be changed at any time 
upon receipt by the Administrator of a superseding complete certificate 
of representation under Sec.  97.113. Notwithstanding any such change, 
all representations, actions, inactions, and submissions by

[[Page 49772]]

the previous alternate CAIR designated representative before the time 
and date when the Administrator receives the superseding certificate of 
representation shall be binding on the new alternate CAIR designated 
representative and the owners and operators of the CAIR NOX 
source and the CAIR NOX units at the source.
    (c) Changes in owners and operators. (1) In the event a new owner 
or operator of a CAIR NOX source or a CAIR NOX 
unit is not included in the list of owners and operators in the 
certificate of representation under Sec.  97.113, such new owner or 
operator shall be deemed to be subject to and bound by the certificate 
of representation, the representations, actions, inactions, and 
submissions of the CAIR designated representative and any alternate 
CAIR designated representative of the source or unit, and the decisions 
and orders of the permitting authority, the Administrator, or a court, 
as if the new owner or operator were included in such list.
    (2) Within 30 days following any change in the owners and operators 
of a CAIR NOX source or a CAIR NOX unit, 
including the addition of a new owner or operator, the CAIR designated 
representative or any alternate CAIR designated representative shall 
submit a revision to the certificate of representation under Sec.  
97.113 amending the list of owners and operators to include the change.


Sec.  97.113  Certificate of representation.

    (a) A complete certificate of representation for a CAIR designated 
representative or an alternate CAIR designated representative shall 
include the following elements in a format prescribed by the 
Administrator:
    (1) Identification of the CAIR NOX source, and each CAIR 
NOX unit at the source, for which the certificate of 
representation is submitted.
    (2) The name, address, e-mail address (if any), telephone number, 
and facsimile transmission number (if any) of the CAIR designated 
representative and any alternate CAIR designated representative.
    (3) A list of the owners and operators of the CAIR NOX 
source and of each CAIR NOX unit at the source.
    (4) The following certification statements by the CAIR designated 
representative and any alternate CAIR designated representative--
    (i) ``I certify that I was selected as the CAIR designated 
representative or alternate CAIR designated representative, as 
applicable, by an agreement binding on the owners and operators of the 
source and each CAIR NOX unit at the source.''
    (ii) ``I certify that I have all the necessary authority to carry 
out my duties and responsibilities under the CAIR NOX Annual 
Trading Program on behalf of the owners and operators of the source and 
of each CAIR NOX unit at the source and that each such owner 
and operator shall be fully bound by my representations, actions, 
inactions, or submissions.''
    (iii) ``I certify that the owners and operators of the source and 
of each CAIR NOX unit at the source shall be bound by any 
order issued to me by the Administrator, the permitting authority, or a 
court regarding the source or unit.''
    (iv) ``Where there are multiple holders of a legal or equitable 
title to, or a leasehold interest in, a CAIR NOX unit, or 
where a customer purchases power from a CAIR NOX unit under 
a life-of-the-unit, firm power contractual arrangement, I certify that: 
I have given a written notice of my selection as the ``CAIR designated 
representative'' or ``alternate CAIR designated representative'', as 
applicable, and of the agreement by which I was selected to each owner 
and operator of the source and of each CAIR NOX unit at the 
source; and CAIR NOX allowances and proceeds of transactions 
involving CAIR NOX allowances will be deemed to be held or 
distributed in proportion to each holder's legal, equitable, leasehold, 
or contractual reservation or entitlement, except that, if such 
multiple holders have expressly provided for a different distribution 
of CAIR NOX allowances by contract, CAIR NOX 
allowances and proceeds of transactions involving CAIR NOX 
allowances will be deemed to be held or distributed in accordance with 
the contract.''
    (5) The signature of the CAIR designated representative and any 
alternate CAIR designated representative and the dates signed.
    (b) Unless otherwise required by the permitting authority or the 
Administrator, documents of agreement referred to in the certificate of 
representation shall not be submitted to the permitting authority or 
the Administrator. Neither the permitting authority nor the 
Administrator shall be under any obligation to review or evaluate the 
sufficiency of such documents, if submitted.


Sec.  97.114  Objections concerning CAIR designated representative.

    (a) Once a complete certificate of representation under Sec.  
97.113 has been submitted and received, the permitting authority and 
the Administrator will rely on the certificate of representation unless 
and until a superseding complete certificate of representation under 
Sec.  97.113 is received by the Administrator.
    (b) Except as provided in Sec.  97.112(a) or (b), no objection or 
other communication submitted to the permitting authority or the 
Administrator concerning the authorization, or any representation, 
action, inaction, or submission, of the CAIR designated representative 
shall affect any representation, action, inaction, or submission of the 
CAIR designated representative or the finality of any decision or order 
by the permitting authority or the Administrator under the CAIR 
NOX Annual Trading Program.
    (c) Neither the permitting authority nor the Administrator will 
adjudicate any private legal dispute concerning the authorization or 
any representation, action, inaction, or submission of any CAIR 
designated representative, including private legal disputes concerning 
the proceeds of CAIR NOX allowance transfers.

Subpart CC--Permits


Sec.  97.120  General CAIR Annual Trading Program permit requirements.

    (a) For each CAIR NOX source required to have a title V 
operating permit or required, under subpart II of this part, to have a 
title V operating permit or other federally enforceable permit, such 
permit shall include a CAIR permit administered by the permitting 
authority for the title V operating permit or the federally enforceable 
permit as applicable. The CAIR portion of the title V permit or other 
federally enforceable permit as applicable shall be administered in 
accordance with the permitting authority's title V operating permits 
regulations promulgated under part 70 or 71 of this chapter or the 
permitting authority's regulations for other federally enforceable 
permits as applicable, except as provided otherwise by this subpart and 
subpart II of this part.
    (b) Each CAIR permit shall contain, with regard to the CAIR 
NOX source and the CAIR NOX units at the source 
covered by the CAIR permit, all applicable CAIR NOX Annual 
Trading Program, CAIR NOX Ozone Season Trading Program, and 
CAIR SO2 Trading Program requirements and shall be a 
complete and separable portion of the title V operating permit or other 
federally enforceable permit under paragraph (a) of this section.


Sec.  97.121  Submission of CAIR permit applications.

    (a) Duty to apply. The CAIR designated representative of any CAIR

[[Page 49773]]

NOX source required to have a title V operating permit shall 
submit to the permitting authority a complete CAIR permit application 
under Sec.  97.122 for the source covering each CAIR NOX 
unit at the source at least 18 months (or such lesser time provided by 
the permitting authority) before the later of January 1, 2009 or the 
date on which the CAIR NOX unit commences operation.
    (b) Duty to Reapply. For a CAIR NOX source required to 
have a title V operating permit, the CAIR designated representative 
shall submit a complete CAIR permit application under Sec.  97.122 for 
the source covering each CAIR NOX unit at the source to 
renew the CAIR permit in accordance with the permitting authority's 
title V operating permits regulations addressing permit renewal.


Sec.  97.122  Information requirements for CAIR permit applications.

    A complete CAIR permit application shall include the following 
elements concerning the CAIR NOX source for which the 
application is submitted, in a format prescribed by the permitting 
authority:
    (a) Identification of the CAIR NOX source;
    (b) Identification of each CAIR NOX unit at the CAIR 
NOX source; and
    (c) The standard requirements under Sec.  97.106.


Sec.  97.123  CAIR permit contents and term.

    (a) Each CAIR permit will contain, in a format prescribed by the 
permitting authority, all elements required for a complete CAIR permit 
application under Sec.  97.122.
    (b) Each CAIR permit is deemed to incorporate automatically the 
definitions of terms under Sec.  97.102 and, upon recordation by the 
Administrator under subpart FF, GG, or II of this part, every 
allocation, transfer, or deduction of a CAIR NOX allowance 
to or from the compliance account of the CAIR NOX source 
covered by the permit.
    (c) The term of the CAIR permit will be set by the permitting 
authority, as necessary to facilitate coordination of the renewal of 
the CAIR permit with issuance, revision, or renewal of the CAIR 
NOX source's title V operating permit or other federally 
enforceable permit as applicable.


Sec.  97.124  CAIR permit revisions.

    Except as provided in Sec.  97.123(b), the permitting authority 
will revise the CAIR permit, as necessary, in accordance with the 
permitting authority's title V operating permits regulations or the 
permitting authority's regulations for other federally enforceable 
permits as applicable addressing permit revisions.

Subpart DD--[Reserved]

Subpart EE--CAIR NOX Allowance Allocations


Sec.  97.140  State trading budgets.

    The State trading budgets for annual allocations of CAIR 
NOX allowances for the control periods in 2009 through 2014 
and in 2015 and thereafter are respectively as follows:

------------------------------------------------------------------------
                                                           State Trading
                                           State Trading    Budget for
                  State                     Budget for       2015 and
                                             2009-2014      thereafter
                                              (tons)          (tons)
------------------------------------------------------------------------
Alabama.................................          69,020          57,517
Delaware................................           4,166           3,472
District of Columbia....................             144             120
Florida.................................          99,445          82,871
Georgia.................................          66,321          55,268
Illinois................................          76,230          63,525
Indiana.................................         108,935          90,779
Iowa....................................          32,692          27,243
Kentucky................................          83,205          69,337
Louisiana...............................          35,512          29,593
Maryland................................          27,724          23,104
Michigan................................          65,304          54,420
Minnesota...............................          31,443          26,203
Mississippi.............................          17,807          14,839
Missouri................................          59,871          49,892
New Jersey..............................          12,670          10,558
New York................................          45,617          38,014
North Carolina..........................          62,183          51,819
Ohio....................................         108,667          90,556
Pennsylvania............................          99,049          82,541
South Carolina..........................          32,662          27,219
Tennessee...............................          50,973          42,478
Texas...................................         181,014         150,845
Virginia................................          36,074          30,062
West Virginia...........................          74,220          61,850
Wisconsin...............................          40,759          33,966
                                         -----------------
    Total...............................       1,521,707       1,268,091
------------------------------------------------------------------------

Sec.  97.141  Timing requirements for CAIR NOX allowance 
allocations.

    (a) The Administrator will determine by order the CAIR 
NOX allowance allocations, in accordance with Sec.  
97.142(a) and (b), for the control periods in 2009, 2010, 2011, 2012, 
2013, and 2014.
    (b) By July 31, 2011 and July 31 of each year thereafter, the 
Administrator will determine by order the CAIR NOX allowance 
allocations, in accordance with Sec.  97.142(a) and (b), for the 
control period in the fourth year after the year of the applicable 
deadline for the determination under this paragraph.
    (c) By July 31, 2009 and July 31 of each year thereafter, the 
Administrator will determine by order the CAIR NOX allowance 
allocations, in accordance

[[Page 49774]]

with Sec.  97.142(a),(c), and (d), for the control period in the year 
of the applicable deadline for the determination under this paragraph.
    (d) The Administrator will make available to the public each 
determination of CAIR NOX allowances under paragraph (a), 
(b), or (c) of this section and will provide an opportunity for 
submission of objections to the determination. Objections shall be 
limited to addressing whether the determination is in accordance with 
Sec.  97.142. Based on any such objections, the Administrator will 
adjust each determination to the extent necessary to ensure that it is 
in accordance with Sec.  97.142.


Sec.  97.142  CAIR NOX allowance allocations.

    (a)(1) The baseline heat input (in mmBtu) used with respect to CAIR 
NOX allowance allocations under paragraph (b) of this 
section for each CAIR NOX unit will be:
    (i) For units commencing operation before January 1, 2001 the 
average of the 3 highest amounts of the unit's adjusted control period 
heat input for 2000 through 2004, with the adjusted control period heat 
input for each year calculated as follows:
    (A) If the unit is coal-fired during the year, the unit's control 
period heat input for such year is multiplied by 100 percent;
    (B) If the unit is oil-fired during the year, the unit's control 
period heat input for such year is multiplied by 60 percent; and
    (C) If the unit is not subject to paragraph (a)(1)(i)(A) or (B) of 
this section, the unit's control period heat input for such year is 
multiplied by 40 percent.
    (ii) For units commencing operation on or after January 1, 2001 and 
operating each calendar year during a period of 5 or more consecutive 
calendar years, the average of the 3 highest amounts of the unit's 
total converted control period heat input over the first such 5 years.
    (2)(i) A unit's control period heat input, and a unit's status as 
coal-fired or oil-fired, for a calendar year under paragraph (a)(1)(i) 
of this section, and a unit's total tons of NOX emissions 
during a calendar year under paragraph (c)(3) of this section, will be 
determined in accordance with part 75 of this chapter, to the extent 
the unit was otherwise subject to the requirements of part 75 of this 
chapter for the year, or will be determined based on the best available 
data reported to the Administrator for the unit, to the extent the unit 
was not otherwise subject to the requirements of part 75 of this 
chapter for the year.
    (ii) A unit's converted control period heat input for a calendar 
year specified under paragraph (a)(1)(ii) of this section equals:
    (A) Except as provided in paragraph (a)(2)(ii)(B) or (C) of this 
section, the control period gross electrical output of the generator or 
generators served by the unit multiplied by 7,900 Btu/kWh, if the unit 
is coal-fired for the year, or 6,675 Btu/kWh, if the unit is not coal-
fired for the year, and divided by 1,000,000 Btu/mmBtu, provided that 
if a generator is served by 2 or more units, then the gross electrical 
output of the generator will be attributed to each unit in proportion 
to the unit's share of the total control period heat input of such 
units for the year;
    (B) For a unit that is a boiler and has equipment used to produce 
electricity and useful thermal energy for industrial, commercial, 
heating, or cooling purposes through the sequential use of energy, the 
total heat energy (in Btu) of the steam produced by the boiler during 
the control period, divided by 0.8 and by 1,000,000 Btu/mmBtu; or
    (C) For a unit that is a combustion turbine and has equipment used 
to produce electricity and useful thermal energy for industrial, 
commercial, heating, or cooling purposes through the sequential use of 
energy, the control period gross electrical output of the enclosed 
device comprising the compressor, combustor, and turbine multiplied by 
3,413 Btu/kWh, plus the total heat energy (in Btu) of the steam 
produced by any associated heat recovery steam generator during the 
control period divided by 0.8, and with the sum divided by 1,000,000 
Btu/mmBtu.
    (iii) Gross electrical output and total heat energy under paragraph 
(a)(2)(ii) of this section will be determined based on the best 
available data reported to the Administrator.
    (3) The Administrator will determine what data are the best 
available data under paragraph (a)(2) of this section by weighing the 
likelihood that data are accurate and reliable and will give greater 
weight to data submitted to a governmental entity in compliance with 
legal requirements or substantiated by an independent entity.
    (b)(1) For each control period in 2009 and thereafter, the 
Administrator will allocate to all CAIR NOX units in a State 
that have a baseline heat input (as determined under paragraph (a) of 
this section) a total amount of CAIR NOX allowances equal to 
95 percent for a control period during 2009 through 2014, and 97 
percent for a control period during 2015 and thereafter, of the tons of 
NOX emissions in the State trading budget for such State 
under Sec.  97.140 (except as provided in paragraphs (d) and (e) of 
this section).
    (2) The Administrator will allocate CAIR NOX allowances 
to each CAIR NOX unit under paragraph (b)(1) of this section 
in an amount determined by multiplying the total amount of CAIR 
NOX allowances allocated under paragraph (b)(1) of this 
section by the ratio of the baseline heat input of such CAIR 
NOX unit to the total amount of baseline heat input of all 
such CAIR NOX units in the State and rounding to the nearest 
whole allowance as appropriate.
    (c) For each control period in 2009 and thereafter, the 
Administrator will allocate CAIR NOX allowances to CAIR 
NOX units in a State that commenced operation on or after 
January 1, 2001 and do not yet have a baseline heat input (as 
determined under paragraph (a) of this section), in accordance with the 
following procedures:
    (1) The Administrator will establish a separate new unit set-aside 
for each control period. Each new unit set-aside will be allocated CAIR 
NOX allowances equal to 5 percent for a control period in 
2009 through 2014, and 3 percent for a control period in 2015 and 
thereafter, of the amount of tons of NOX emissions in the 
State trading budget for the State under Sec.  97.140.
    (2) The CAIR designated representative of such a CAIR 
NOX unit may submit to the Administrator a request, in a 
format specified by the Administrator, to be allocated CAIR 
NOX allowances, starting with the later of the control 
period in 2009 or the first control period after the control period in 
which the CAIR NOX unit commences commercial operation and 
until the first control period for which the unit is allocated CAIR 
NOX allowances under paragraph (b) of this section. The CAIR 
NOX allowance allocation request must be submitted on or 
before May 1 of the first control period for which the CAIR 
NOX allowances are requested and after the date on which the 
CAIR NOX unit commences commercial operation.
    (3) In a CAIR NOX allowance allocation request under 
paragraph (c)(2) of this section, the CAIR designated representative 
may request for a control period CAIR NOX allowances in an 
amount not exceeding the CAIR NOX unit's total tons of 
NOX emissions during the calendar year immediately before 
such control period.
    (4) The Administrator will review each CAIR NOX 
allowance allocation request under paragraph (c)(2) of this section and 
will allocate CAIR NOX

[[Page 49775]]

allowances for each control period pursuant to such request as follows:
    (i) The Administrator will accept an allowance allocation request 
only if the request meets, or is adjusted by the Administrator as 
necessary to meet, the requirements of paragraphs (c)(2) and (3) of 
this section.
    (ii) On or after May 1 of the control period, the Administrator 
will determine the sum of the CAIR NOX allowances requested 
(as adjusted under paragraph (c)(4)(i) of this section) in all 
allowance allocation requests accepted under paragraph (c)(4)(i) of 
this section for the control period.
    (iii) If the amount of CAIR NOX allowances in the new 
unit set-aside for the control period is greater than or equal to the 
sum under paragraph (c)(4)(ii) of this section, then the Administrator 
will allocate the amount of CAIR NOX allowances requested 
(as adjusted under paragraph (c)(4)(i) of this section) to each CAIR 
NOX unit covered by an allowance allocation request accepted 
under paragraph (c)(4)(i) of this section.
    (iv) If the amount of CAIR NOX allowances in the new 
unit set-aside for the control period is less than the sum under 
paragraph (c)(4)(ii) of this section, then the Administrator will 
allocate to each CAIR NOX unit covered by an allowance 
allocation request accepted under paragraph (c)(4)(i) of this section 
the amount of the CAIR NOX allowances requested (as adjusted 
under paragraph (c)(4)(i) of this section), multiplied by the amount of 
CAIR NOX allowances in the new unit set-aside for the 
control period, divided by the sum determined under paragraph 
(c)(4)(ii) of this section, and rounded to the nearest whole allowance 
as appropriate.
    (v) The Administrator will notify each CAIR designated 
representative that submitted an allowance allocation request of the 
amount of CAIR NOX allowances (if any) allocated for the 
control period to the CAIR NOX unit covered by the request.
    (d) If, after completion of the procedures under paragraph (c)(4) 
of this section for a control period, any unallocated CAIR 
NOX allowances remain in the new unit set-aside under 
paragraph (c) of this section for a State for the control period, the 
Administrator will allocate to each CAIR NOX unit that was 
allocated CAIR NOX allowances under paragraph (b) of this 
section an amount of CAIR NOX allowances equal to the total 
amount of such remaining unallocated CAIR NOX allowances, 
multiplied by the unit's allocation under paragraph (b) of this 
section, divided by 95 percent for a control period during 2009 through 
2014, and 97 percent for a control period during 2015 and thereafter, 
of the amount of tons of NOX emissions in the State trading 
budget for such State under Sec.  97.140, and rounded to the nearest 
whole allowance as appropriate.
    (e) If the Administrator determines that CAIR NOX 
allowances were allocated under paragraphs (a) and (b) of this section, 
paragraphs (a) and (c) of this section, or paragraph (d) of this 
section for a control period and that the recipient of the allocation 
is not actually a CAIR NOX unit under Sec.  97.104 in such 
control period, then the Administrator will notify the CAIR designated 
representative and will act in accordance with the following 
procedures:
    (1) Except as provided in paragraph (e)(2) or (3) of this section, 
the Administrator will not record such CAIR NOX allowances 
under Sec.  97.153.
    (2) If the Administrator already recorded such CAIR NOX 
allowances under Sec.  97.153 and if the Administrator makes such 
determination before making deductions for the source that includes 
such recipient under Sec.  97.154(b) for the control period, then the 
Administrator will deduct from the account in which such CAIR 
NOX allowances were recorded under Sec.  97.153 an amount of 
CAIR NOX allowances allocated for the same or a prior 
control period equal to the amount of such already recorded CAIR 
NOX allowances. The CAIR authorized account representative 
shall ensure that there are sufficient CAIR NOX allowances 
in such account for completion of the deduction.
    (3) If the Administrator already recorded such CAIR NOX 
allowances under Sec.  97.153 and if the Administrator makes such 
determination after making deductions for the source that includes such 
recipient under Sec.  97.154(b) for the control period, then the 
Administrator will apply paragraph (e)(1) or (2) of this section, as 
appropriate, to any subsequent control period for which CAIR 
NOX allowances were allocated to such recipient.
    (4) The Administrator will transfer the CAIR NOX 
allowances that are not recorded, or that are deducted, in accordance 
with paragraphs (e)(1), (2), and (3) of this section to a new unit set-
aside for the State in which such recipient is located.


Sec.  97.143  Compliance supplement pool.

    (a) In addition to the CAIR NOX allowances allocated 
under Sec.  97.142, the Administrator may allocate for the control 
period in 2009 up to the following amount of CAIR NOX 
allowances to CAIR NOX units in the respective State:

------------------------------------------------------------------------
                                                            Compliance
                          State                             supplement
                                                               pool
------------------------------------------------------------------------
Alabama.................................................          10,166
Delaware................................................             843
District of Columbia....................................               0
Florida.................................................           8,335
Georgia.................................................          12,397
Illinois................................................          11,299
Indiana.................................................          20,155
Iowa....................................................           6,978
Kentucky................................................          14,935
Louisiana...............................................           2,251
Maryland................................................           4,670
Michigan................................................           8,347
Minnesota...............................................           6,528
Mississippi.............................................           3,066
Missouri................................................           9,044
New Jersey..............................................             660
New York................................................               0
North Carolina..........................................               0
Ohio....................................................          25,037
Pennsylvania............................................          16,009
South Carolina..........................................           2,600
Tennessee...............................................           8,944
Texas...................................................             772
Virginia................................................           5,134
West Virginia...........................................          16,929
Wisconsin...............................................           4,898
                                                         ---------------
    Total...............................................         199,997
------------------------------------------------------------------------

    (b) For any CAIR NOX unit in a State whose average 
annual NOX emission rate for 2007 or 2008 is less than 0.25 
lb/mmBtu and, if such unit is included in a NOX averaging 
plan under Sec.  76.11 of this chapter under the Acid Rain Program for 
such year, whose NOX averaging plan has an actual weighted 
average NOX emission rate for such year equal to or less 
than the actual weighted average NOX emission rate for the 
year before such year achieves NOX emission reductions in 
2007 and 2008, the CAIR designated representative of the unit may 
request early reduction credits, and allocation of CAIR NOX 
allowances from the compliance supplement pool under paragraph (a) of 
this section for such early reduction credits, in accordance with the 
following:
    (1) The owners and operators of such CAIR NOX unit shall 
monitor and report the NOX emissions rate and the heat input 
of the unit in accordance with subpart HH of this part in each control 
period for which early reduction credit is requested.
    (2) The CAIR designated representative of such CAIR NOX 
unit shall submit to the Administrator by July 1, 2009 a request, in a 
format specified by the Administrator, for allocation of an amount of 
CAIR NOX allowances from the compliance supplement pool not 
exceeding the sum of the unit's heat input for the control

[[Page 49776]]

period in 2007 multiplied by the difference (if any greater than zero) 
between 0.25 lb/mmBtu and the unit's NOX emission rate for 
the control period in 2007 plus the unit's heat input for the control 
period in 2008 multiplied by the difference (if any greater than zero) 
between 0.25 lb/mmBtu and the unit's NOX emission rate for 
the control period in 2008, determined in accordance with subpart HH of 
this part and with the sum divided by 2,000 lb/ton and rounded to the 
nearest whole number of tons as appropriate.
    (c) For any CAIR NOX unit in a State whose compliance 
with CAIR NOX emissions limitation for the control period in 
2009 would create an undue risk to the reliability of electricity 
supply during such control period, the CAIR designated representative 
of the unit may request the allocation of CAIR NOX 
allowances from the compliance supplement pool under paragraph (a) of 
this section, in accordance with the following:
    (1) The CAIR designated representative of such CAIR NOX 
unit shall submit to the Administrator by July 1, 2009 a request, in a 
format specified by the Administrator, for allocation of an amount of 
CAIR NOX allowances from the compliance supplement pool not 
exceeding the minimum amount of CAIR NOX allowances 
necessary to remove such undue risk to the reliability of electricity 
supply.
    (2) In the request under paragraph (c)(1) of this section, the CAIR 
designated representative of such CAIR NOX unit shall 
demonstrate that, in the absence of allocation to the unit of the 
amount of CAIR NOX allowances requested, the unit's 
compliance with CAIR NOX emissions limitation for the 
control period in 2009 would create an undue risk to the reliability of 
electricity supply during such control period. This demonstration must 
include a showing that it would not be feasible for the owners and 
operators of the unit to:
    (i) Obtain a sufficient amount of electricity from other 
electricity generation facilities, during the installation of control 
technology at the unit for compliance with the CAIR NOX 
emissions limitation, to prevent such undue risk; or
    (ii) Obtain under paragraphs (b) and (d) of this section, or 
otherwise obtain, a sufficient amount of CAIR NOX allowances 
to prevent such undue risk.
    (d) The Administrator will review each request under paragraph (b) 
or (c) of this section submitted by July 1, 2009 and will allocate CAIR 
NOX allowances for the control period in 2009 to CAIR 
NOX units in a State and covered by such request as follows:
    (1) Upon receipt of each such request, the Administrator will make 
any necessary adjustments to the request to ensure that the amount of 
the CAIR NOX allowances requested meets the requirements of 
paragraph (b) or (c) of this section.
    (2) If the State's compliance supplement pool under paragraph (a) 
of this section has an amount of CAIR NOX allowances not 
less than the total amount of CAIR NOX allowances in all 
such requests (as adjusted under paragraph (d)(1) of this section), the 
Administrator will allocate to each CAIR NOX unit covered by 
such requests the amount of CAIR NOX allowances requested 
(as adjusted under paragraph (d)(1) of this section).
    (3) If the State's compliance supplement pool under paragraph (a) 
of this section has a smaller amount of CAIR NOX allowances 
than the total amount of CAIR NOX allowances in all such 
requests (as adjusted under paragraph (d)(1) of this section), the 
Administrator will allocate CAIR NOX allowances to each CAIR 
NOX unit covered by such requests according to the following 
formula and rounding to the nearest whole allowance as appropriate:

    Unit's allocation = Unit's adjusted allocation x (State's 
compliance supplement pool / Total adjusted allocations for all 
units)

Where:

    ``Unit's allocation'' is the amount of CAIR NOX 
allowances allocated to the unit from the State's compliance 
supplement pool.
    ``Unit's adjusted allocation'' is the amount of CAIR 
NOX allowances requested for the unit under paragraph (b) 
or (c) of this section, as adjusted under paragraph (d)(1) of this 
section.
    ``State's compliance supplement pool'' is the amount of CAIR 
NOX allowances in the State's compliance supplement pool.
    ``Total adjusted allocations for all units'' is the sum of the 
amounts of allocations requested for all units under paragraph (b) 
or (c) of this section, as adjusted under paragraph (d)(1) of this 
section.

    (4) By November 30, 2009, the Administrator will determine by order 
the allocations under paragraph (d)(2) or (3) of this section, as 
applicable. The Administrator will make available to the public each 
determination of CAIR NOX allowances under such paragraph 
and will provide an opportunity for submission of objections to the 
determination. Objections shall be limited to addressing whether the 
determination is in accordance with paragraph (b) or (c) of this 
section and paragraph (d)(2) or (3) of this section, as appropriate. 
Based on any such objections, the Administrator will adjust each 
determination to the extent necessary to ensure that it is in 
accordance with such paragraphs.
    (5) By January 1, 2010, the Administrator will record the 
allocations under paragraph (d)(4) of this section.


Sec.  97.144  Alternative of allocation of CAIR NOX allowances and 
compliance supplement pool by permitting authority.

    (a) Notwithstanding Sec. Sec.  97.141, 97.142, and 97.153 if a 
State submits, and the Administrator approves, a State implementation 
plan revision in accordance with Sec.  51.123(p)(1) of this chapter 
providing for allocation of CAIR NOX allowances by the 
permitting authority, then the permitting authority shall make such 
allocations in accordance with such approved State implementation plan 
revision, the Administrator will not make and record allocations under 
Sec. Sec.  97.141, 97.142, and 97.153 for the CAIR NOX units 
in the State, and the Administrator will record the allocations made 
under such approved State implementation plan revision.
    (b) Notwithstanding Sec.  97.143, if a State submits, and the 
Administrator approves, a State implementation plan revision in 
accordance with Sec.  51.123(p)(2) of this chapter providing for 
allocation of the State's compliance supplement pool by the permitting 
authority, then the permitting authority shall make such allocations in 
accordance with such approved State implementation plan revision, the 
Administrator will not make and record allocations under Sec.  97.143 
for the CAIR NOX units in the State, and the Administrator 
will record the allocations of the State's compliance supplement pool 
made under such approved State implementation plan revision.
    (c)(1) In implementing paragraph (a) of this section and Sec. Sec.  
97.141, 97.142, and 97.153, the Administrator will ensure that the 
total amount of CAIR NOX allowances allocated, under such 
provisions and under a State's State implementation plan revision 
approved in accordance with Sec.  51.123(p)(1) of this chapter, for a 
control period for CAIR NOX sources in the State or for 
other entities specified by the permitting authority will not exceed 
the State's State trading budget for the year of the control period.
    (2) In implementing paragraph (b) of this section and Sec.  97.143, 
the Administrator will ensure that the total amount of CAIR 
NOX allowances allocated, under such provisions and under a 
State's State implementation

[[Page 49777]]

plan revision approved in accordance with Sec.  51.123(p)(2), for CAIR 
NOX sources in the State will not exceed the State's 
compliance supplement pool.

Appendix A to Subpart EE of Part 97--States With Approved State 
Implementation Plan Revisions Concerning Allocations

    1. The following States have State Implementation Plan revisions 
under Sec.  51.123(p)(1) of this chapter approved by the 
Administrator and providing for allocation of CAIR NOX 
allowances by the permitting authority under Sec.  97.144(a):

[Reserved]

    2. The following States have State Implementation Plan revisions 
under Sec.  51.123(p)(2) of this chapter approved by the 
Administrator and providing for allocation of the Compliance 
Supplement Pool by the permitting authority under Sec.  97.144(b):

[Reserved]

Subpart FF--CAIR NOX Allowance Tracking System


Sec.  97.150  [Reserved]


Sec.  97.151  Establishment of accounts.

    (a) Compliance accounts. Except as provided in Sec.  97.184(e), 
upon receipt of a complete certificate of representation under Sec.  
97.113, the Administrator will establish a compliance account for the 
CAIR NOX source for which the certificate of representation 
was submitted unless the source already has a compliance account.
    (b) General accounts.--(1) Application for general account. (i) Any 
person may apply to open a general account for the purpose of holding 
and transferring CAIR NOX allowances. An application for a 
general account may designate one and only one CAIR authorized account 
representative and one and only one alternate CAIR authorized account 
representative who may act on behalf of the CAIR authorized account 
representative. The agreement by which the alternate CAIR authorized 
account representative is selected shall include a procedure for 
authorizing the alternate CAIR authorized account representative to act 
in lieu of the CAIR authorized account representative.
    (ii) A complete application for a general account shall be 
submitted to the Administrator and shall include the following elements 
in a format prescribed by the Administrator:
    (A) Name, mailing address, e-mail address (if any), telephone 
number, and facsimile transmission number (if any) of the CAIR 
authorized account representative and any alternate CAIR authorized 
account representative;
    (B) Organization name and type of organization, if applicable;
    (C) A list of all persons subject to a binding agreement for the 
CAIR authorized account representative and any alternate CAIR 
authorized account representative to represent their ownership interest 
with respect to the CAIR NOX allowances held in the general 
account;
    (D) The following certification statement by the CAIR authorized 
account representative and any alternate CAIR authorized account 
representative: ``I certify that I was selected as the CAIR authorized 
account representative or the alternate CAIR authorized account 
representative, as applicable, by an agreement that is binding on all 
persons who have an ownership interest with respect to CAIR 
NOX allowances held in the general account. I certify that I 
have all the necessary authority to carry out my duties and 
responsibilities under the CAIR NOX Annual Trading Program 
on behalf of such persons and that each such person shall be fully 
bound by my representations, actions, inactions, or submissions and by 
any order or decision issued to me by the Administrator or a court 
regarding the general account.''
    (E) The signature of the CAIR authorized account representative and 
any alternate CAIR authorized account representative and the dates 
signed.
    (iii) Unless otherwise required by the permitting authority or the 
Administrator, documents of agreement referred to in the application 
for a general account shall not be submitted to the permitting 
authority or the Administrator. Neither the permitting authority nor 
the Administrator shall be under any obligation to review or evaluate 
the sufficiency of such documents, if submitted.
    (2) Authorization of CAIR authorized account representative. (i) 
Upon receipt by the Administrator of a complete application for a 
general account under paragraph (b)(1) of this section:
    (A) The Administrator will establish a general account for the 
person or persons for whom the application is submitted.
    (B) The CAIR authorized account representative and any alternate 
CAIR authorized account representative for the general account shall 
represent and, by his or her representations, actions, inactions, or 
submissions, legally bind each person who has an ownership interest 
with respect to CAIR NOX allowances held in the general 
account in all matters pertaining to the CAIR NOX Annual 
Trading Program, notwithstanding any agreement between the CAIR 
authorized account representative or any alternate CAIR authorized 
account representative and such person. Any such person shall be bound 
by any order or decision issued to the CAIR authorized account 
representative or any alternate CAIR authorized account representative 
by the Administrator or a court regarding the general account.
    (C) Any representation, action, inaction, or submission by any 
alternate CAIR authorized account representative shall be deemed to be 
a representation, action, inaction, or submission by the CAIR 
authorized account representative.
    (ii) Each submission concerning the general account shall be 
submitted, signed, and certified by the CAIR authorized account 
representative or any alternate CAIR authorized account representative 
for the persons having an ownership interest with respect to CAIR 
NOX allowances held in the general account. Each such 
submission shall include the following certification statement by the 
CAIR authorized account representative or any alternate CAIR authorized 
account representative: ``I am authorized to make this submission on 
behalf of the persons having an ownership interest with respect to the 
CAIR NOX allowances held in the general account. I certify 
under penalty of law that I have personally examined, and am familiar 
with, the statements and information submitted in this document and all 
its attachments. Based on my inquiry of those individuals with primary 
responsibility for obtaining the information, I certify that the 
statements and information are to the best of my knowledge and belief 
true, accurate, and complete. I am aware that there are significant 
penalties for submitting false statements and information or omitting 
required statements and information, including the possibility of fine 
or imprisonment.''
    (iii) The Administrator will accept or act on a submission 
concerning the general account only if the submission has been made, 
signed, and certified in accordance with paragraph (b)(2)(ii) of this 
section.
    (3) Changing CAIR authorized account representative and alternate 
CAIR authorized account representative; changes in persons with 
ownership interest. (i) The CAIR authorized account representative for 
a general account may be changed at any time upon receipt by the 
Administrator of a superseding complete application for a general 
account under paragraph (b)(1) of this section. Notwithstanding any 
such change, all representations, actions, inactions, and submissions 
by the previous CAIR authorized account representative before the time 
and date when the Administrator receives the

[[Page 49778]]

superseding application for a general account shall be binding on the 
new CAIR authorized account representative and the persons with an 
ownership interest with respect to the CAIR NOX allowances 
in the general account.
    (ii) The alternate CAIR authorized account representative for a 
general account may be changed at any time upon receipt by the 
Administrator of a superseding complete application for a general 
account under paragraph (b)(1) of this section. Notwithstanding any 
such change, all representations, actions, inactions, and submissions 
by the previous alternate CAIR authorized account representative before 
the time and date when the Administrator receives the superseding 
application for a general account shall be binding on the new alternate 
CAIR authorized account representative and the persons with an 
ownership interest with respect to the CAIR NOX allowances 
in the general account.
    (iii)(A) In the event a new person having an ownership interest 
with respect to CAIR NOX allowances in the general account 
is not included in the list of such persons in the application for a 
general account, such new person shall be deemed to be subject to and 
bound by the application for a general account, the representation, 
actions, inactions, and submissions of the CAIR authorized account 
representative and any alternate CAIR authorized account representative 
of the account, and the decisions and orders of the Administrator or a 
court, as if the new person were included in such list.
    (B) Within 30 days following any change in the persons having an 
ownership interest with respect to CAIR NOX allowances in 
the general account, including the addition of persons, the CAIR 
authorized account representative or any alternate CAIR authorized 
account representative shall submit a revision to the application for a 
general account amending the list of persons having an ownership 
interest with respect to the CAIR NOX allowances in the 
general account to include the change.
    (4) Objections concerning CAIR authorized account representative. 
(i) Once a complete application for a general account under paragraph 
(b)(1) of this section has been submitted and received, the 
Administrator will rely on the application unless and until a 
superseding complete application for a general account under paragraph 
(b)(1) of this section is received by the Administrator.
    (ii) Except as provided in paragraph (b)(3)(i) or (ii) of this 
section, no objection or other communication submitted to the 
Administrator concerning the authorization, or any representation, 
action, inaction, or submission of the CAIR authorized account 
representative or any alternative CAIR authorized account 
representative for a general account shall affect any representation, 
action, inaction, or submission of the CAIR authorized account 
representative or any alternative CAIR authorized account 
representative or the finality of any decision or order by the 
Administrator under the CAIR NOX Annual Trading Program.
    (iii) The Administrator will not adjudicate any private legal 
dispute concerning the authorization or any representation, action, 
inaction, or submission of the CAIR authorized account representative 
or any alternative CAIR authorized account representative for a general 
account, including private legal disputes concerning the proceeds of 
CAIR NOX allowance transfers.
    (c) Account identification. The Administrator will assign a unique 
identifying number to each account established under paragraph (a) or 
(b) of this section.


Sec.  97.152  Responsibilities of CAIR authorized account 
representative.

    Following the establishment of a CAIR NOX Allowance 
Tracking System account, all submissions to the Administrator 
pertaining to the account, including, but not limited to, submissions 
concerning the deduction or transfer of CAIR NOX allowances 
in the account, shall be made only by the CAIR authorized account 
representative for the account.


Sec.  97.153  Recordation of CAIR NOX allowance allocations.

    (a) By December 1, 2007, the Administrator will record in the CAIR 
NOX source's compliance account the CAIR NOX 
allowances allocated for the CAIR NOX units at a source in 
accordance with Sec.  97.142(a) and (b) for the control period in 2009.
    (b) By December 1, 2008, the Administrator will record in the CAIR 
NOX source's compliance account the CAIR NOX 
allowances allocated for the CAIR NOX units at the source in 
accordance with Sec.  97.142(a) and (b) for the control period in 2010.
    (c) By December 1, 2009, the Administrator will record in the CAIR 
NOX source's compliance account the CAIR NOX 
allowances allocated for the CAIR NOX units at the source in 
accordance with Sec.  97.142(a) and (b) for the control periods in 
2011, 2012, and 2013.
    (d) By December 1, 2010 and December 1 of each year thereafter, the 
Administrator will record in the CAIR NOX source's 
compliance account the CAIR NOX allowances allocated for the 
CAIR NOX units at the source in accordance with Sec.  
97.142(a) and (b) for the control period in the fourth year after the 
year of the applicable deadline for recordation under this paragraph.
    (e) By December 1, 2009 and December 1 of each year thereafter, the 
Administrator will record in the CAIR NOX source's 
compliance account the CAIR NOX allowances allocated for the 
CAIR NOX units at the source in accordance with Sec.  
97.142(a) and (c) for the control period in the year of the applicable 
deadline for recordation under this paragraph.
    (f) Serial numbers for allocated CAIR NOX allowances. 
When recording the allocation of CAIR NOX allowances for a 
CAIR NOX unit in a compliance account, the Administrator 
will assign each CAIR NOX allowance a unique identification 
number that will include digits identifying the year of the control 
period for which the CAIR NOX allowance is allocated.


Sec.  97.154  Compliance with CAIR NOX emissions limitation.

    (a) Allowance transfer deadline. The CAIR NOX allowances 
are available to be deducted for compliance with a source's CAIR 
NOX emissions limitation for a control period in a given 
calendar year only if the CAIR NOX allowances:
    (1) Were allocated for the control period in the year or a prior 
year;
    (2) Are held in the compliance account as of the allowance transfer 
deadline for the control period or are transferred into the compliance 
account by a CAIR NOX allowance transfer correctly submitted 
for recordation under Sec.  97.160 by the allowance transfer deadline 
for the control period; and
    (3) Are not necessary for deductions for excess emissions for a 
prior control period under paragraph (d) of this section.
    (b) Deductions for compliance. Following the recordation, in 
accordance with Sec.  97.161, of CAIR NOX allowance 
transfers submitted for recordation in a source's compliance account by 
the allowance transfer deadline for a control period, the Administrator 
will deduct from the compliance account CAIR NOX allowances 
available under paragraph (a) of this section in order to determine 
whether the source meets the CAIR NOX emissions limitation 
for the control period, as follows:
    (1) Until the amount of CAIR NOX allowances deducted 
equals the number

[[Page 49779]]

of tons of total nitrogen oxides emissions, determined in accordance 
with subpart HH of this part, from all CAIR NOX units at the 
source for the control period; or
    (2) If there are insufficient CAIR NOX allowances to 
complete the deductions in paragraph (b)(1) of this section, until no 
more CAIR NOX allowances available under paragraph (a) of 
this section remain in the compliance account.
    (c)(1) Identification of CAIR NOX allowances by serial 
number. The CAIR authorized account representative for a source's 
compliance account may request that specific CAIR NOX 
allowances, identified by serial number, in the compliance account be 
deducted for emissions or excess emissions for a control period in 
accordance with paragraph (b) or (d) of this section. Such request 
shall be submitted to the Administrator by the allowance transfer 
deadline for the control period and include, in a format prescribed by 
the Administrator, the identification of the CAIR NOX source 
and the appropriate serial numbers.
    (2) First-in, first-out. The Administrator will deduct CAIR 
NOX allowances under paragraph (b) or (d) of this section 
from the source's compliance account, in the absence of an 
identification or in the case of a partial identification of CAIR 
NOX allowances by serial number under paragraph (c)(1) of 
this section, on a first-in, first-out (FIFO) accounting basis in the 
following order:
    (i) Any CAIR NOX allowances that were allocated to the 
units at the source, in the order of recordation; and then
    (ii) Any CAIR NOX allowances that were allocated to any 
entity and transferred and recorded in the compliance account pursuant 
to subpart GG of this part, in the order of recordation.
    (d) Deductions for excess emissions. (1) After making the 
deductions for compliance under paragraph (b) of this section for a 
control period in a calendar year in which the CAIR NOX 
source has excess emissions, the Administrator will deduct from the 
source's compliance account an amount of CAIR NOX 
allowances, allocated for the control period in the immediately 
following calendar year, equal to 3 times the number of tons of the 
source's excess emissions.
    (2) Any allowance deduction required under paragraph (d)(1) of this 
section shall not affect the liability of the owners and operators of 
the CAIR NOX source or the CAIR NOX units at the 
source for any fine, penalty, or assessment, or their obligation to 
comply with any other remedy, for the same violations, as ordered under 
the Clean Air Act or applicable State law.
    (e) Recordation of deductions. The Administrator will record in the 
appropriate compliance account all deductions from such an account 
under paragraph (b) or (d) of this section.
    (f) Administrator's action on submissions. (1) The Administrator 
may review and conduct independent audits concerning any submission 
under the CAIR NOX Annual Trading Program and make 
appropriate adjustments of the information in the submissions.
    (2) The Administrator may deduct CAIR NOX allowances 
from or transfer CAIR NOX allowances to a source's 
compliance account based on the information in the submissions, as 
adjusted under paragraph (f)(1) of this section.


Sec.  97.155  Banking.

    (a) CAIR NOX allowances may be banked for future use or 
transfer in a compliance account or a general account in accordance 
with paragraph (b) of this section.
    (b) Any CAIR NOX allowance that is held in a compliance 
account or a general account will remain in such account unless and 
until the CAIR NOX allowance is deducted or transferred 
under Sec.  97.154, Sec.  97.156, or subpart GG of this part.


Sec.  97.156  Account error.

    The Administrator may, at his or her sole discretion and on his or 
her own motion, correct any error in any CAIR NOX Allowance 
Tracking System account. Within 10 business days of making such 
correction, the Administrator will notify the CAIR authorized account 
representative for the account.


Sec.  97.157  Closing of general accounts.

    (a) The CAIR authorized account representative of a general account 
may submit to the Administrator a request to close the account, which 
shall include a correctly submitted allowance transfer under Sec.  
97.160 for any CAIR NOX allowances in the account to one or 
more other CAIR NOX Allowance Tracking System accounts.
    (b) If a general account has no allowance transfers in or out of 
the account for a 12-month period or longer and does not contain any 
CAIR NOX allowances, the Administrator may notify the CAIR 
authorized account representative for the account that the account will 
be closed following 20 business days after the notice is sent. The 
account will be closed after the 20-day period unless, before the end 
of the 20-day period, the Administrator receives a correctly submitted 
transfer of CAIR NOX allowances into the account under Sec.  
97.160 or a statement submitted by the CAIR authorized account 
representative demonstrating to the satisfaction of the Administrator 
good cause as to why the account should not be closed.

Subpart GG--CAIR NOX Allowance Transfers


Sec.  97.160  Submission of CAIR NOX allowance transfers.

    A CAIR authorized account representative seeking recordation of a 
CAIR NOX allowance transfer shall submit the transfer to the 
Administrator. To be considered correctly submitted, the CAIR 
NOX allowance transfer shall include the following elements, 
in a format specified by the Administrator:
    (a) The account numbers for both the transferor and transferee 
accounts;
    (b) The serial number of each CAIR NOX allowance that is 
in the transferor account and is to be transferred; and
    (c) The name and signature of the CAIR authorized account 
representative of the transferor account and the date signed.


Sec.  97.161  EPA recordation.

    (a) Within 5 business days (except as provided in paragraph (b) of 
this section) of receiving a CAIR NOX allowance transfer, 
the Administrator will record a CAIR NOX allowance transfer 
by moving each CAIR NOX allowance from the transferor 
account to the transferee account as specified by the request, provided 
that:
    (1) The transfer is correctly submitted under Sec.  97.160; and
    (2) The transferor account includes each CAIR NOX 
allowance identified by serial number in the transfer.
    (b) A CAIR NOX allowance transfer that is submitted for 
recordation after the allowance transfer deadline for a control period 
and that includes any CAIR NOX allowances allocated for any 
control period before such allowance transfer deadline will not be 
recorded until after the Administrator completes the deductions under 
Sec.  97.154 for the control period immediately before such allowance 
transfer deadline.
    (c) Where a CAIR NOX allowance transfer submitted for 
recordation fails to meet the requirements of paragraph (a) of this 
section, the Administrator will not record such transfer.


Sec.  97.162  Notification.

    (a) Notification of recordation. Within 5 business days of 
recordation of a CAIR NOX allowance transfer under Sec.  
97.161, the Administrator will notify the CAIR authorized account 
representatives of

[[Page 49780]]

both the transferor and transferee accounts.
    (b) Notification of non-recordation. Within 10 business days of 
receipt of a CAIR NOX allowance transfer that fails to meet 
the requirements of Sec.  97.161(a), the Administrator will notify the 
CAIR authorized account representatives of both accounts subject to the 
transfer of:
    (1) A decision not to record the transfer, and
    (2) The reasons for such non-recordation.
    (c) Nothing in this section shall preclude the submission of a CAIR 
NOX allowance transfer for recordation following 
notification of non-recordation.

Subpart HH--Monitoring and Reporting


Sec.  97.170  General requirements.

    The owners and operators, and to the extent applicable, the CAIR 
designated representative, of a CAIR NOX unit, shall comply 
with the monitoring, recordkeeping, and reporting requirements as 
provided in this subpart and in subpart H of part 75 of this chapter. 
For purposes of complying with such requirements, the definitions in 
Sec.  97.102 and in Sec.  72.2 of this chapter shall apply, and the 
terms ``affected unit,'' ``designated representative,'' and 
``continuous emission monitoring system'' (or ``CEMS'') in part 75 of 
this chapter shall be deemed to refer to the terms ``CAIR 
NOX unit,'' ``CAIR designated representative,'' and 
``continuous emission monitoring system'' (or ``CEMS'') respectively, 
as defined in Sec.  97.102. The owner or operator of a unit that is not 
a CAIR NOX unit but that is monitored under Sec.  
75.72(b)(2)(ii) of this chapter shall comply with the same monitoring, 
recordkeeping, and reporting requirements as a CAIR NOX 
unit.
    (a) Requirements for installation, certification, and data 
accounting. The owner or operator of each CAIR NOX unit 
shall:
    (1) Install all monitoring systems required under this subpart for 
monitoring NOX mass emissions and individual unit heat input 
(including all systems required to monitor NOX emission 
rate, NOX concentration, stack gas moisture content, stack 
gas flow rate, CO2 or O2 concentration, and fuel 
flow rate, as applicable, in accordance with Sec. Sec.  75.71 and 75.72 
of this chapter);
    (2) Successfully complete all certification tests required under 
Sec.  97.171 and meet all other requirements of this subpart and part 
75 of this chapter applicable to the monitoring systems under paragraph 
(a)(1) of this section; and
    (3) Record, report, and quality-assure the data from the monitoring 
systems under paragraph (a)(1) of this section.
    (b) Compliance deadlines. The owner or operator shall meet the 
monitoring system certification and other requirements of paragraphs 
(a)(1) and (2) of this section on or before the following dates. The 
owner or operator shall record, report, and quality-assure the data 
from the monitoring systems under paragraph (a)(1) of this section on 
and after the following dates.
    (1) For the owner or operator of a CAIR NOX unit that 
commences commercial operation before July 1, 2007, by January 1, 2008.
    (2) For the owner or operator of a CAIR NOX unit that 
commences commercial operation on or after July 1, 2007, by the later 
of the following dates:
    (i) January 1, 2008; or
    (ii) 90 unit operating days or 180 calendar days, whichever occurs 
first, after the date on which the unit commences commercial operation.
    (3) For the owner or operator of a CAIR NOX unit for 
which construction of a new stack or flue or installation of add-on 
NOX emission controls is completed after the applicable 
deadline under paragraph (b)(1), (2), (4), or (5) of this section, by 
90 unit operating days or 180 calendar days, whichever occurs first, 
after the date on which emissions first exit to the atmosphere through 
the new stack or flue or add-on NOX emissions controls.
    (4) Notwithstanding the dates in paragraphs (b)(1) and (2) of this 
section, for the owner or operator of a unit for which a CAIR opt-in 
permit application is submitted and not withdrawn and a CAIR opt-in 
permit is not yet issued or denied under subpart II of this part, by 
the date specified in Sec.  97.184(b).
    (5) Notwithstanding the dates in paragraphs (b)(1) and (2) of this 
section, for the owner or operator of a CAIR NOX opt-in unit 
under subpart II of this part, by the date on which the CAIR 
NOX opt-in unit enters the CAIR NOX Annual 
Trading Program as provided in Sec.  97.184(g).
    (c) Reporting data. (1) Except as provided in paragraph (c)(2) of 
this section, the owner or operator of a CAIR NOX unit that 
does not meet the applicable compliance date set forth in paragraph (b) 
of this section for any monitoring system under paragraph (a)(1) of 
this section shall, for each such monitoring system, determine, record, 
and report maximum potential (or, as appropriate, minimum potential) 
values for NOX concentration, NOX emission rate, 
stack gas flow rate, stack gas moisture content, fuel flow rate, and 
any other parameters required to determine NOX mass 
emissions and heat input in accordance with Sec.  75.31(b)(2) or (c)(3) 
of this chapter, section 2.4 of appendix D to part 75 of this chapter, 
or section 2.5 of appendix E to part 75 of this chapter, as applicable.
    (2) The owner or operator of a CAIR NOX unit that does 
not meet the applicable compliance date set forth in paragraph (b)(3) 
of this section for any monitoring system under paragraph (a)(1) of 
this section shall, for each such monitoring system, determine, record, 
and report substitute data using the applicable missing data procedures 
in subpart D or subpart H of, or appendix D or appendix E to, part 75 
of this chapter, in lieu of the maximum potential (or, as appropriate, 
minimum potential) values, for a parameter if the owner or operator 
demonstrates that there is continuity between the data streams for that 
parameter before and after the construction or installation under 
paragraph (b)(3) of this section.
    (d) Prohibitions. (1) No owner or operator of a CAIR NOX 
unit shall use any alternative monitoring system, alternative reference 
method, or any other alternative to any requirement of this subpart 
without having obtained prior written approval in accordance with Sec.  
97.175.
    (2) No owner or operator of a CAIR NOX unit shall 
operate the unit so as to discharge, or allow to be discharged, 
NOX emissions to the atmosphere without accounting for all 
such emissions in accordance with the applicable provisions of this 
subpart and part 75 of this chapter.
    (3) No owner or operator of a CAIR NOX unit shall 
disrupt the continuous emission monitoring system, any portion thereof, 
or any other approved emission monitoring method, and thereby avoid 
monitoring and recording NOX mass emissions discharged into 
the atmosphere, except for periods of recertification or periods when 
calibration, quality assurance testing, or maintenance is performed in 
accordance with the applicable provisions of this subpart and part 75 
of this chapter.
    (4) No owner or operator of a CAIR NOX unit shall retire 
or permanently discontinue use of the continuous emission monitoring 
system, any component thereof, or any other approved monitoring system 
under this subpart, except under any one of the following 
circumstances:
    (i) During the period that the unit is covered by an exemption 
under Sec.  97.105 that is in effect;
    (ii) The owner or operator is monitoring emissions from the unit 
with

[[Page 49781]]

another certified monitoring system approved, in accordance with the 
applicable provisions of this subpart and part 75 of this chapter, by 
the Administrator for use at that unit that provides emission data for 
the same pollutant or parameter as the retired or discontinued 
monitoring system; or
    (iii) The CAIR designated representative submits notification of 
the date of certification testing of a replacement monitoring system 
for the retired or discontinued monitoring system in accordance with 
Sec.  97.171(d)(3)(i).
    (e) Long-term cold storage. The owner or operator of a CAIR 
NOX unit is subject to the applicable provisions of part 75 
of this chapter concerning units in long-term cold storage.


Sec.  97.171  Initial certification and recertification procedures.

    (a) The owner or operator of a CAIR NOX unit shall be 
exempt from the initial certification requirements of this section for 
a monitoring system under Sec.  97.170(a)(1) if the following 
conditions are met:
    (1) The monitoring system has been previously certified in 
accordance with part 75 of this chapter; and
    (2) The applicable quality-assurance and quality-control 
requirements of Sec.  75.21 of this chapter and appendix B, appendix D, 
and appendix E to part 75 of this chapter are fully met for the 
certified monitoring system described in paragraph (a)(1) of this 
section.
    (b) The recertification provisions of this section shall apply to a 
monitoring system under Sec.  97.170(a)(1) exempt from initial 
certification requirements under paragraph (a) of this section.
    (c) If the Administrator has previously approved a petition under 
Sec.  75.17(a) or (b) of this chapter for apportioning the 
NOX emission rate measured in a common stack or a petition 
under Sec.  75.66 of this chapter for an alternative to a requirement 
in Sec.  75.12 or Sec.  75.17 of this chapter, the CAIR designated 
representative shall resubmit the petition to the Administrator under 
Sec.  97.175 to determine whether the approval applies under the CAIR 
NOX Annual Trading Program.
    (d) Except as provided in paragraph (a) of this section, the owner 
or operator of a CAIR NOX unit shall comply with the 
following initial certification and recertification procedures for a 
continuous monitoring system (i.e., a continuous emission monitoring 
system and an excepted monitoring system under appendices D and E to 
part 75 of this chapter) under Sec.  97.170(a)(1). The owner or 
operator of a unit that qualifies to use the low mass emissions 
excepted monitoring methodology under Sec.  75.19 of this chapter or 
that qualifies to use an alternative monitoring system under subpart E 
of part 75 of this chapter shall comply with the procedures in 
paragraph (e) or (f) of this section respectively.
    (1) Requirements for initial certification. The owner or operator 
shall ensure that each continuous monitoring system under Sec.  
97.170(a)(1) (including the automated data acquisition and handling 
system) successfully completes all of the initial certification testing 
required under Sec.  75.20 of this chapter by the applicable deadline 
in Sec.  97.170(b). In addition, whenever the owner or operator 
installs a monitoring system to meet the requirements of this subpart 
in a location where no such monitoring system was previously installed, 
initial certification in accordance with Sec.  75.20 of this chapter is 
required.
    (2) Requirements for recertification. Whenever the owner or 
operator makes a replacement, modification, or change in any certified 
continuous emission monitoring system under Sec.  97.170(a)(1) that may 
significantly affect the ability of the system to accurately measure or 
record NOX mass emissions or heat input rate or to meet the 
quality-assurance and quality-control requirements of Sec.  75.21 of 
this chapter or appendix B to part 75 of this chapter, the owner or 
operator shall recertify the monitoring system in accordance with Sec.  
75.20(b) of this chapter. Furthermore, whenever the owner or operator 
makes a replacement, modification, or change to the flue gas handling 
system or the unit's operation that may significantly change the stack 
flow or concentration profile, the owner or operator shall recertify 
each continuous emission monitoring system whose accuracy is 
potentially affected by the change, in accordance with Sec.  75.20(b) 
of this chapter. Examples of changes to a continuous emission 
monitoring system that require recertification include replacement of 
the analyzer, complete replacement of an existing continuous emission 
monitoring system, or change in location or orientation of the sampling 
probe or site. Any fuel flowmeter system, and any excepted 
NOX monitoring system under appendix E to part 75 of this 
chapter, under Sec.  97.170(a)(1) are subject to the recertification 
requirements in Sec.  75.20(g)(6) of this chapter.
    (3) Approval process for initial certification and recertification. 
Paragraphs (d)(3)(i) through (iv) of this section apply to both initial 
certification and recertification of a continuous monitoring system 
under Sec.  97.170(a)(1). For recertifications, replace the words 
``certification'' and ``initial certification'' with the word 
``recertification'', replace the word ``certified'' with the word 
``recertified,'' and follow the procedures in Sec. Sec.  75.20(b)(5) 
and (g)(7) of this chapter in lieu of the procedures in paragraph 
(d)(3)(v) of this section.
    (i) Notification of certification. The CAIR designated 
representative shall submit to the appropriate EPA Regional Office and 
the Administrator written notice of the dates of certification testing, 
in accordance with Sec.  97.173.
    (ii) Certification application. The CAIR designated representative 
shall submit to the Administrator a certification application for each 
monitoring system. A complete certification application shall include 
the information specified in Sec.  75.63 of this chapter.
    (iii) Provisional certification date. The provisional certification 
date for a monitoring system shall be determined in accordance with 
Sec.  75.20(a)(3) of this chapter. A provisionally certified monitoring 
system may be used under the CAIR NOX Annual Trading Program 
for a period not to exceed 120 days after receipt by the Administrator 
of the complete certification application for the monitoring system 
under paragraph (d)(3)(ii) of this section. Data measured and recorded 
by the provisionally certified monitoring system, in accordance with 
the requirements of part 75 of this chapter, will be considered valid 
quality-assured data (retroactive to the date and time of provisional 
certification), provided that the Administrator does not invalidate the 
provisional certification by issuing a notice of disapproval within 120 
days of the date of receipt of the complete certification application 
by the Administrator.
    (iv) Certification application approval process. The Administrator 
will issue a written notice of approval or disapproval of the 
certification application to the owner or operator within 120 days of 
receipt of the complete certification application under paragraph 
(d)(3)(ii) of this section. In the event the Administrator does not 
issue such a notice within such 120-day period, each monitoring system 
that meets the applicable performance requirements of part 75 of this 
chapter and is included in the certification application will be deemed 
certified for use under the CAIR NOX Annual Trading Program.
    (A) Approval notice. If the certification application is complete 
and shows that each monitoring system meets the applicable performance 
requirements of part 75 of this chapter,

[[Page 49782]]

then the Administrator will issue a written notice of approval of the 
certification application within 120 days of receipt.
    (B) Incomplete application notice. If the certification application 
is not complete, then the Administrator will issue a written notice of 
incompleteness that sets a reasonable date by which the CAIR designated 
representative must submit the additional information required to 
complete the certification application. If the CAIR designated 
representative does not comply with the notice of incompleteness by the 
specified date, then the Administrator may issue a notice of 
disapproval under paragraph (d)(3)(iv)(C) of this section. The 120-day 
review period shall not begin before receipt of a complete 
certification application.
    (C) Disapproval notice. If the certification application shows that 
any monitoring system does not meet the performance requirements of 
part 75 of this chapter or if the certification application is 
incomplete and the requirement for disapproval under paragraph 
(d)(3)(iv)(B) of this section is met, then the Administrator will issue 
a written notice of disapproval of the certification application. Upon 
issuance of such notice of disapproval, the provisional certification 
is invalidated by the Administrator and the data measured and recorded 
by each uncertified monitoring system shall not be considered valid 
quality-assured data beginning with the date and hour of provisional 
certification (as defined under Sec.  75.20(a)(3) of this chapter). The 
owner or operator shall follow the procedures for loss of certification 
in paragraph (d)(3)(v) of this section for each monitoring system that 
is disapproved for initial certification.
    (D) Audit decertification. The Administrator may issue a notice of 
disapproval of the certification status of a monitor in accordance with 
Sec.  97.172(b).
    (v) Procedures for loss of certification. If the Administrator 
issues a notice of disapproval of a certification application under 
paragraph (d)(3)(iv)(C) of this section or a notice of disapproval of 
certification status under paragraph (d)(3)(iv)(D) of this section, 
then:
    (A) The owner or operator shall substitute the following values, 
for each disapproved monitoring system, for each hour of unit operation 
during the period of invalid data specified under Sec.  
75.20(a)(4)(iii), Sec.  75.20(g)(7), or Sec.  75.21(e) of this chapter 
and continuing until the applicable date and hour specified under Sec.  
75.20(a)(5)(i) or (g)(7) of this chapter:
    (1) For a disapproved NOX emission rate (i.e., 
NOX-diluent) system, the maximum potential NOX 
emission rate, as defined in Sec.  72.2 of this chapter.
    (2) For a disapproved NOX pollutant concentration 
monitor and disapproved flow monitor, respectively, the maximum 
potential concentration of NOX and the maximum potential 
flow rate, as defined in sections 2.1.2.1 and 2.1.4.1 of appendix A to 
part 75 of this chapter.
    (3) For a disapproved moisture monitoring system and disapproved 
diluent gas monitoring system, respectively, the minimum potential 
moisture percentage and either the maximum potential CO2 
concentration or the minimum potential O2 concentration (as 
applicable), as defined in sections 2.1.5, 2.1.3.1, and 2.1.3.2 of 
appendix A to part 75 of this chapter.
    (4) For a disapproved fuel flowmeter system, the maximum potential 
fuel flow rate, as defined in section 2.4.2.1 of appendix D to part 75 
of this chapter.
    (5) For a disapproved excepted NOX monitoring system 
under appendix E to part 75 of this chapter, the fuel-specific maximum 
potential NOX emission rate, as defined in Sec.  72.2 of 
this chapter.
    (B) The CAIR designated representative shall submit a notification 
of certification retest dates and a new certification application in 
accordance with paragraphs (d)(3)(i) and (ii) of this section.
    (C) The owner or operator shall repeat all certification tests or 
other requirements that were failed by the monitoring system, as 
indicated in the Administrator's notice of disapproval, no later than 
30 unit operating days after the date of issuance of the notice of 
disapproval.
    (e) Initial certification and recertification procedures for units 
using the low mass emission excepted methodology under Sec.  75.19 of 
this chapter. The owner or operator of a unit qualified to use the low 
mass emissions (LME) excepted methodology under Sec.  75.19 of this 
chapter shall meet the applicable certification and recertification 
requirements in Sec. Sec.  75.19(a)(2) and 75.20(h) of this chapter. If 
the owner or operator of such a unit elects to certify a fuel flowmeter 
system for heat input determination, the owner or operator shall also 
meet the certification and recertification requirements in Sec.  
75.20(g) of this chapter.
    (f) Certification/recertification procedures for alternative 
monitoring systems. The CAIR designated representative of each unit for 
which the owner or operator intends to use an alternative monitoring 
system approved by the Administrator under subpart E of part 75 of this 
chapter shall comply with the applicable notification and application 
procedures of Sec.  75.20(f) of this chapter.


Sec.  97.172  Out of control periods.

    (a) Whenever any monitoring system fails to meet the quality-
assurance and quality-control requirements or data validation 
requirements of part 75 of this chapter, data shall be substituted 
using the applicable missing data procedures in subpart D or subpart H 
of, or appendix D or appendix E to, part 75 of this chapter.
    (b) Audit decertification. Whenever both an audit of a monitoring 
system and a review of the initial certification or recertification 
application reveal that any monitoring system should not have been 
certified or recertified because it did not meet a particular 
performance specification or other requirement under Sec.  97.171 or 
the applicable provisions of part 75 of this chapter, both at the time 
of the initial certification or recertification application submission 
and at the time of the audit, the Administrator will issue a notice of 
disapproval of the certification status of such monitoring system. For 
the purposes of this paragraph, an audit shall be either a field audit 
or an audit of any information submitted to the permitting authority or 
the Administrator. By issuing the notice of disapproval, the 
Administrator revokes prospectively the certification status of the 
monitoring system. The data measured and recorded by the monitoring 
system shall not be considered valid quality-assured data from the date 
of issuance of the notification of the revoked certification status 
until the date and time that the owner or operator completes 
subsequently approved initial certification or recertification tests 
for the monitoring system. The owner or operator shall follow the 
applicable initial certification or recertification procedures in Sec.  
97.171 for each disapproved monitoring system.


Sec.  97.173  Notifications.

    The CAIR designated representative for a CAIR NOX unit 
shall submit written notice to the Administrator in accordance with 
Sec.  75.61 of this chapter.


Sec.  97.174  Recordkeeping and reporting.

    (a) General provisions. The CAIR designated representative shall 
comply with all recordkeeping and reporting requirements in this 
section, the applicable recordkeeping and reporting requirements under 
Sec.  75.73 of this

[[Page 49783]]

chapter, and the requirements of Sec.  97.110(e)(1).
    (b) Monitoring plans. The owner or operator of a CAIR 
NOX unit shall comply with requirements of Sec.  75.73(c) 
and (e) of this chapter .
    (c) Certification Applications. The CAIR designated representative 
shall submit an application to the Administrator within 45 days after 
completing all initial certification or recertification tests required 
under Sec.  97.171, including the information required under Sec.  
75.63 of this chapter.
    (d) Quarterly reports. The CAIR designated representative shall 
submit quarterly reports, as follows:
    (1) The CAIR designated representative shall report the 
NOX mass emissions data and heat input data for the CAIR 
NOX unit, in an electronic quarterly report in a format 
prescribed by the Administrator, for each calendar quarter beginning 
with:
    (i) For a unit that commences commercial operation before July 1, 
2007, the calendar quarter covering January 1, 2008 through March 31, 
2008;
    (ii) For a unit that commences commercial operation on or after 
July 1, 2007, the calendar quarter corresponding to the earlier of the 
date of provisional certification or the applicable deadline for 
initial certification under Sec.  97.170(b), unless that quarter is the 
third or fourth quarter of 2007, in which case reporting shall commence 
in the quarter covering January 1, 2008 through March 31, 2008;
    (iii) Notwithstanding paragraphs (d)(1)(i) and (ii) of this 
section, for a unit for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied under subpart II of this part, the calendar quarter 
corresponding to the date specified in Sec.  97.184(b); and
    (iv) Notwithstanding paragraphs (d)(1)(i) and (ii) of this section, 
for a CAIR NOX opt-in unit under subpart II of this part, 
the calendar quarter corresponding to the date on which the CAIR 
NOX opt-in unit enters the CAIR NOX Annual 
Trading Program as provided in Sec.  97.184(g).
    (2) The CAIR designated representative shall submit each quarterly 
report to the Administrator within 30 days following the end of the 
calendar quarter covered by the report. Quarterly reports shall be 
submitted in the manner specified in Sec.  75.73(f) of this chapter.
    (3) For CAIR NOX units that are also subject to an Acid 
Rain emissions limitation or the CAIR NOX Ozone Season 
Trading Program, CAIR SO2 Trading Program, or the Hg Budget 
Trading Program, quarterly reports shall include the applicable data 
and information required by subparts F through I of part 75 of this 
chapter as applicable, in addition to the NOX mass emission 
data, heat input data, and other information required by this subpart.
    (e) Compliance certification. The CAIR designated representative 
shall submit to the Administrator a compliance certification (in a 
format prescribed by the Administrator) in support of each quarterly 
report based on reasonable inquiry of those persons with primary 
responsibility for ensuring that all of the unit's emissions are 
correctly and fully monitored. The certification shall state that:
    (1) The monitoring data submitted were recorded in accordance with 
the applicable requirements of this subpart and part 75 of this 
chapter, including the quality assurance procedures and specifications; 
and
    (2) For a unit with add-on NOX emission controls and for 
all hours where NOX data are substituted in accordance with 
Sec.  75.34(a)(1) of this chapter, the add-on emission controls were 
operating within the range of parameters listed in the quality 
assurance/quality control program under appendix B to part 75 of this 
chapter and the substitute data values do not systematically 
underestimate NOX emissions.


Sec.  97.175  Petitions.

    The CAIR designated representative of a CAIR NOX unit 
may submit a petition under Sec.  75.66 of this chapter to the 
Administrator requesting approval to apply an alternative to any 
requirement of this subpart. Application of an alternative to any 
requirement of this subpart is in accordance with this subpart only to 
the extent that the petition is approved in writing by the 
Administrator, in consultation with the permitting authority.


Sec.  97.176  Additional requirements to provide heat input data.

    The owner or operator of a CAIR NOX unit that monitors 
and reports NOX mass emissions using a NOX 
concentration system and a flow system shall also monitor and report 
heat input rate at the unit level using the procedures set forth in 
part 75 of this chapter.

Subpart II--CAIR NOX Opt-in Units


Sec.  97.180  Applicability.

    A CAIR NOX opt-in unit must be a unit that:
    (a) Is located in a State that submits, and for which the 
Administrator approves, a State implementation plan revision in 
accordance with Sec.  51.123(p)(3)(i), (ii), or (iii) of this chapter 
establishing procedures concerning CAIR opt-in units;
    (b) Is not a CAIR NOX unit under Sec.  97.104 and is not 
covered by a retired unit exemption under Sec.  97.105 that is in 
effect;
    (c) Is not covered by a retired unit exemption under Sec.  72.8 of 
this chapter that is in effect;
    (d) Has or is required or qualified to have a title V operating 
permit or other federally enforceable permit; and
    (e) Vents all of its emissions to a stack and can meet the 
monitoring, recordkeeping, and reporting requirements of subpart HH of 
this part.


Sec.  97.181  General.

    (a) Except as otherwise provided in Sec. Sec.  97.101 through 
97.104, Sec. Sec.  97.106 through 97.108, and subparts BB and CC and 
subparts FF through HH of this part, a CAIR NOX opt-in unit 
shall be treated as a CAIR NOX unit for purposes of applying 
such sections and subparts of this part.
    (b) Solely for purposes of applying, as provided in this subpart, 
the requirements of subpart HH of this part to a unit for which a CAIR 
opt-in permit application is submitted and not withdrawn and a CAIR 
opt-in permit is not yet issued or denied under this subpart, such unit 
shall be treated as a CAIR NOX unit before issuance of a 
CAIR opt-in permit for such unit.


Sec.  97.182  CAIR designated representative.

    Any CAIR NOX opt-in unit, and any unit for which a CAIR 
opt-in permit application is submitted and not withdrawn and a CAIR 
opt-in permit is not yet issued or denied under this subpart, located 
at the same source as one or more CAIR NOX units shall have 
the same CAIR designated representative and alternate CAIR designated 
representative as such CAIR NOX units.


Sec.  97.183  Applying for CAIR opt-in permit.

    (a) Applying for initial CAIR opt-in permit. The CAIR designated 
representative of a unit meeting the requirements for a CAIRNO 
X opt-in unit in Sec.  97.180 may apply for an initial CAIR 
opt-in permit at any time, except as provided under Sec.  97.186(f) and 
(g), and, in order to apply, must submit the following:
    (1) A complete CAIR permit application under Sec.  97.122;
    (2) A certification, in a format specified by the permitting 
authority, that the unit:
    (i) Is not a CAIR NOX unit under Sec.  97.104 and is not 
covered by a retired

[[Page 49784]]

unit exemption under Sec.  97.105 that is in effect;
    (ii) Is not covered by a retired unit exemption under Sec.  72.8 of 
this chapter that is in effect;
    (iii) Vents all of its emissions to a stack, and
    (iv) Has documented heat input for more than 876 hours during the 6 
months immediately preceding submission of the CAIR permit application 
under Sec.  97.122;
    (3) A monitoring plan in accordance with subpart HH of this part;
    (4) A complete certificate of representation under Sec.  97.113 
consistent with Sec.  97.182, if no CAIR designated representative has 
been previously designated for the source that includes the unit; and
    (5) A statement, in a format specified by the permitting authority, 
whether the CAIR designated representative requests that the unit be 
allocated CAIR NOX allowances under Sec.  97.180(b) or Sec.  
97.188(c) (subject to the conditions in Sec. Sec.  97.184(h) and 
97.186(g)), to the extent such allocation is provided in a State 
implementation plan revision submitted in accordance with Sec.  
51.123(p)(3)(i), (ii), or (iii) of this chapter and approved by the 
Administrator.
    (b) Duty to reapply. (1) The CAIR designated representative of a 
CAIR NOX opt-in unit shall submit a complete CAIR permit 
application under Sec.  97.122 to renew the CAIR opt-in unit permit in 
accordance with the permitting authority's regulations for title V 
operating permits, or the permitting authority's regulations for other 
federally enforceable permits if applicable, addressing permit renewal.
    (2) Unless the permitting authority issues a notification of 
acceptance of withdrawal of the CAIR NOX opt-in unit from 
the CAIR NOX Annual Trading Program in accordance with Sec.  
97.186 or the unit becomes a CAIR NOX unit under Sec.  
97.104, the CAIR NOX opt-in unit shall remain subject to the 
requirements for a CAIR NOX opt-in unit, even if the CAIR 
designated representative for the CAIR NOX opt-in unit fails 
to submit a CAIR permit application that is required for renewal of the 
CAIR opt-in permit under paragraph (b)(1) of this section.


Sec.  97.184  Opt-in process.

    The permitting authority will issue or deny a CAIR opt-in permit 
for a unit for which an initial application for a CAIR opt-in permit 
under Sec.  97.183 is submitted in accordance with the following, to 
the extent provided in a State implementation plan revision submitted 
in accordance with Sec.  51.123(p)(3)(i), (ii), or (iii) of this 
chapter and approved by the Administrator:
    (a) Interim review of monitoring plan. The permitting authority and 
the Administrator will determine, on an interim basis, the sufficiency 
of the monitoring plan accompanying the initial application for a CAIR 
opt-in permit under Sec.  97.183. A monitoring plan is sufficient, for 
purposes of interim review, if the plan appears to contain information 
demonstrating that the NOX emissions rate and heat input of 
the unit and all other applicable parameters are monitored and reported 
in accordance with subpart HH of this part. A determination of 
sufficiency shall not be construed as acceptance or approval of the 
monitoring plan.
    (b) Monitoring and reporting. (1)(i) If the permitting authority 
and the Administrator determines that the monitoring plan is sufficient 
under paragraph (a) of this section, the owner or operator shall 
monitor and report the NOX emissions rate and the heat input 
of the unit and all other applicable parameters, in accordance with 
subpart HH of this part, starting on the date of certification of the 
appropriate monitoring systems under subpart HH of this part and 
continuing until a CAIR opt-in permit is denied under Sec.  97.184(f) 
or, if a CAIR opt-in permit is issued, the date and time when the unit 
is withdrawn from the CAIR NOX Annual Trading Program in 
accordance with Sec.  97.186.
    (ii) The monitoring and reporting under paragraph (b)(1)(i) of this 
section shall include the entire control period immediately before the 
date on which the unit enters the CAIR NOX Annual Trading 
Program under Sec.  97.184(g), during which period monitoring system 
availability must not be less than 90 percent under subpart HH of this 
part and the unit must be in full compliance with any applicable State 
or Federal emissions or emissions-related requirements.
    (2) To the extent the NOX emissions rate and the heat 
input of the unit are monitored and reported in accordance with subpart 
HH of this part for one or more control periods, in addition to the 
control period under paragraph (b)(1)(ii) of this section, during which 
control periods monitoring system availability is not less than 90 
percent under subpart HH of this part and the unit is in full 
compliance with any applicable State or Federal emissions or emissions-
related requirements and which control periods begin not more than 3 
years before the unit enters the CAIR NOX Annual Trading 
Program under Sec.  97.184(g), such information shall be used as 
provided in paragraphs (c) and (d) of this section.
    (c) Baseline heat input. The unit's baseline heat rate shall equal:
    (1) If the unit's NOX emissions rate and heat input are 
monitored and reported for only one control period, in accordance with 
paragraph (b)(1) of this section, the unit's total heat input (in 
mmBtu) for the control period; or
    (2) If the unit's NOX emissions rate and heat input are 
monitored and reported for more than one control period, in accordance 
with paragraphs (b)(1) and (2) of this section, the average of the 
amounts of the unit's total heat input (in mmBtu) for the control 
periods under paragraphs (b)(1)(ii) and (b)(2) of this section.
    (d) Baseline NOX emission rate. The unit's baseline 
NOX emission rate shall equal:
    (1) If the unit's NOX emissions rate and heat input are 
monitored and reported for only one control period, in accordance with 
paragraph (b)(1) of this section, the unit's NOX emissions 
rate (in lb/mmBtu) for the control period;
    (2) If the unit's NOX emissions rate and heat input are 
monitored and reported for more than one control period, in accordance 
with paragraphs (b)(1) and (2) of this section, and the unit does not 
have add-on NOX emission controls during any such control 
periods, the average of the amounts of the unit's NOX 
emissions rate (in lb/mmBtu) for the control periods under paragraphs 
(b)(1)(ii) and (b)(2) of this section; or
    (3) If the unit's NOX emissions rate and heat input are 
monitored and reported for more than one control period, in accordance 
with paragraphs (b)(1) and (2) of this section, and the unit has add-on 
NOX emission controls during any such control periods, the 
average of the amounts of the unit's NOX emissions rate (in 
lb/mmBtu) for such control periods during which the unit has add-on 
NOX emission controls.
    (e) Issuance of CAIR opt-in permit. After calculating the baseline 
heat input and the baseline NOX emissions rate for the unit 
under paragraphs (c) and (d) of this section and if the permitting 
authority determines that the CAIR designated representative shows that 
the unit meets the requirements for a CAIR NOX opt-in unit 
in Sec.  97.180 and meets the elements certified in Sec.  97.183(a)(2), 
the permitting authority will issue a CAIR opt-in permit. The 
permitting authority will provide a copy of the CAIR opt-in permit to 
the Administrator, who will then establish a compliance account for the 
source that includes the CAIR NOX opt-in unit

[[Page 49785]]

unless the source already has a compliance account.
    (f) Issuance of denial of CAIR opt-in permit. Notwithstanding 
paragraphs (a) through (e) of this section, if at any time before 
issuance of a CAIR opt-in permit for the unit, the permitting authority 
determines that the CAIR designated representative fails to show that 
the unit meets the requirements for a CAIR NOX opt-in unit 
in Sec.  97.180 or meets the elements certified in Sec.  97.183(a)(2), 
the permitting authority will issue a denial of a CAIR opt-in permit 
for the unit.
    (g) Date of entry into CAIR NOX Annual Trading Program. A unit for 
which an initial CAIR opt-in permit is issued by the permitting 
authority shall become a CAIR NOX opt-in unit, and a CAIR 
NOX unit, as of the later of January 1, 2009 or January 1 of 
the first control period during which such CAIR opt-in permit is 
issued.
    (h) Repowered CAIR NOX opt-in unit. (1) If CAIR designated 
representative requests, and the permitting authority issues a CAIR 
opt-in permit providing for, allocation to a CAIR NOX opt-in 
unit of CAIR NOX allowances under Sec.  97.188(c) and such 
unit is repowered after its date of entry into the CAIR NOX 
Annual Trading Program under paragraph (g) of this section, the 
repowered unit shall be treated as a CAIR NOX opt-in unit 
replacing the original CAIR NOX opt-in unit, as of the date 
of start-up of the repowered unit's combustion chamber.
    (2) Notwithstanding paragraphs (c) and (d) of this section, as of 
the date of start-up under paragraph (h)(1) of this section, the 
repowered unit shall be deemed to have the same date of commencement of 
operation, date of commencement of commercial operation, baseline heat 
input, and baseline NOX emission rate as the original CAIR 
NOX opt-in unit, and the original CAIR NOX opt-in 
unit shall no longer be treated as a CAIR NOX opt-in unit or 
a CAIR NOX unit.


Sec.  97.185  CAIR opt-in permit contents.

    (a) Each CAIR opt-in permit will contain:
    (1) All elements required for a complete CAIR permit application 
under Sec.  97.122;
    (2) The certification in Sec.  97.183(a)(2);
    (3) The unit's baseline heat input under Sec.  97.184(c);
    (4) The unit's baseline NOX emission rate under Sec.  
97.184(d);
    (5) A statement whether the unit is to be allocated CAIR 
NOX allowances under Sec.  97.180(b) or Sec.  97.188(c) 
(subject to the conditions in Sec. Sec.  97.184(h) and 97.186(g));
    (6) A statement that the unit may withdraw from the CAIR 
NOX Annual Trading Program only in accordance with Sec.  
97.186; and
    (7) A statement that the unit is subject to, and the owners and 
operators of the unit must comply with, the requirements of Sec.  
97.187.
    (b) Each CAIR opt-in permit is deemed to incorporate automatically 
the definitions of terms under Sec.  97.102 and, upon recordation by 
the Administrator under subpart FF, GG, or II of this part or this 
subpart, every allocation, transfer, or deduction of CAIR 
NOX allowances to or from the compliance account of the 
source that includes a CAIR NOX opt-in unit covered by the 
CAIR opt-in permit.
    (c) The CAIR opt-in permit shall be included, in a format 
prescribed by the permitting authority, in the CAIR permit for the 
source where the CAIR NOX opt-in unit is located.


Sec.  97.186  Withdrawal from CAIR NOX Annual Trading Program.

    Except as provided under paragraph (g) of this section, a CAIR 
NOX opt-in unit may withdraw from the CAIR NOX 
Annual Trading Program, but only if the permitting authority issues a 
notification to the CAIR designated representative of the CAIR 
NOX opt-in unit of the acceptance of the withdrawal of the 
CAIR NOX opt-in unit in accordance with paragraph (d) of 
this section.
    (a) Requesting withdrawal. In order to withdraw a CAIR 
NOX opt-in unit from the CAIR NOX Annual Trading 
Program, the CAIR designated representative of the CAIR NOX 
opt-in unit shall submit to the permitting authority a request to 
withdraw effective as of midnight of December 31 of a specified 
calendar year, which date must be at least 4 years after December 31 of 
the year of entry into the CAIR NOX Annual Trading Program 
under Sec.  97.184(g). The request must be submitted no later than 90 
days before the requested effective date of withdrawal.
    (b) Conditions for withdrawal. Before a CAIR NOX opt-in 
unit covered by a request under paragraph (a) of this section may 
withdraw from the CAIR NOX Annual Trading Program and the 
CAIR opt-in permit may be terminated under paragraph (e) of this 
section, the following conditions must be met:
    (1) For the control period ending on the date on which the 
withdrawal is to be effective, the source that includes the CAIR 
NOX opt-in unit must meet the requirement to hold CAIR 
NOX allowances under Sec.  97.106(c) and cannot have any 
excess emissions.
    (2) After the requirement for withdrawal under paragraph (b)(1) of 
this section is met, the Administrator will deduct from the compliance 
account of the source that includes the CAIR NOX opt-in unit 
CAIR NOX allowances equal in amount to and allocated for the 
same or a prior control period as any CAIR NOX allowances 
allocated to the CAIR NOX opt-in unit under Sec.  97.188 for 
any control period for which the withdrawal is to be effective. If 
there are no remaining CAIR NOX units at the source, the 
Administrator will close the compliance account, and the owners and 
operators of the CAIR NOX opt-in unit may submit a CAIR 
NOX allowance transfer for any remaining CAIR NOX 
allowances to another CAIR NOX Allowance Tracking System in 
accordance with subpart GG of this part.
    (c) Notification. (1) After the requirements for withdrawal under 
paragraphs (a) and (b) of this section are met (including deduction of 
the full amount of CAIR NOX allowances required), the 
permitting authority will issue a notification to the CAIR designated 
representative of the CAIR NOX opt-in unit of the acceptance 
of the withdrawal of the CAIR NOX opt-in unit as of midnight 
on December 31 of the calendar year for which the withdrawal was 
requested.
    (2) If the requirements for withdrawal under paragraphs (a) and (b) 
of this section are not met, the permitting authority will issue a 
notification to the CAIR designated representative of the CAIR 
NOX opt-in unit that the CAIR NOX opt-in unit's 
request to withdraw is denied. Such CAIR NOX opt-in unit 
shall continue to be a CAIR NOX opt-in unit.
    (d) Permit amendment. After the permitting authority issues a 
notification under paragraph (c)(1) of this section that the 
requirements for withdrawal have been met, the permitting authority 
will revise the CAIR permit covering the CAIR NOX opt-in 
unit to terminate the CAIR opt-in permit for such unit as of the 
effective date specified under paragraph (c)(1) of this section. The 
unit shall continue to be a CAIR NOX opt-in unit until the 
effective date of the termination and shall comply with all 
requirements under the CAIR NOX Annual Trading Program 
concerning any control periods for which the unit is a CAIR 
NOX opt-in unit, even if such requirements arise or must be 
complied with after the withdrawal takes effect.
    (e) Reapplication upon failure to meet conditions of withdrawal. If 
the permitting authority denies the CAIR NOX opt-in unit's 
request to withdraw,

[[Page 49786]]

the CAIR designated representative may submit another request to 
withdraw in accordance with paragraphs (a) and (b) of this section.
    (f) Ability to reapply to the CAIR NOX Annual Trading 
Program. Once a CAIR NOX opt-in unit withdraws from the CAIR 
NOX Annual Trading Program and its CAIR opt-in permit is 
terminated under this section, the CAIR designated representative may 
not submit another application for a CAIR opt-in permit under Sec.  
97.183 for such CAIR NOX opt-in unit before the date that is 
4 years after the date on which the withdrawal became effective. Such 
new application for a CAIR opt-in permit will be treated as an initial 
application for a CAIR opt-in permit under Sec.  97.184.
    (g) Inability to withdraw. Notwithstanding paragraphs (a) through 
(f) of this section, a CAIR NOX opt-in unit shall not be 
eligible to withdraw from the CAIR NOX Annual Trading 
Program if the CAIR designated representative of the CAIR 
NOX opt-in unit requests, and the permitting authority 
issues a CAIR NOX opt-in permit providing for, allocation to 
the CAIR NOX opt-in unit of CAIR NOX allowances 
under Sec.  97.188(c).


Sec.  97.187  Change in regulatory status.

    (a) Notification. If a CAIR NOX opt-in unit becomes a 
CAIR NOX unit under Sec.  97.104, then the CAIR designated 
representative shall notify in writing the permitting authority and the 
Administrator of such change in the CAIR NOX opt-in unit's 
regulatory status, within 30 days of such change.
    (b) Permitting authority's and Administrator's actions. (1) If a 
CAIR NOX opt-in unit becomes a CAIR NOX unit 
under Sec.  97.104, the permitting authority will revise the CAIR 
NOX opt-in unit's CAIR opt-in permit to meet the 
requirements of a CAIR permit under Sec.  97.123 as of the date on 
which the CAIR NOX opt-in unit becomes a CAIR NOX 
unit under Sec.  97.104.
    (2)(i) The Administrator will deduct from the compliance account of 
the source that includes the CAIR NOX opt-in unit that 
becomes a CAIR NOX unit under Sec.  97.104, CAIR 
NOX allowances equal in amount to and allocated for the same 
or a prior control period as:
    (A) Any CAIR NOX allowances allocated to the CAIR 
NOX opt-in unit under Sec.  97.188 for any control period 
after the date on which the CAIR NOX opt-in unit becomes a 
CAIR NOX unit under Sec.  97.104; and
    (B) If the date on which the CAIR NOX opt-in unit 
becomes a CAIR NOX unit under Sec.  97.104 is not December 
31, the CAIR NOX allowances allocated to the CAIR 
NOX opt-in unit under Sec.  97.188 for the control period 
that includes the date on which the CAIR NOX opt-in unit 
becomes a CAIR NOX unit under Sec.  97.104, multiplied by 
the ratio of the number of days, in the control period, starting with 
the date on which the CAIR NOX opt-in unit becomes a CAIR 
NOX unit under Sec.  97.104 divided by the total number of 
days in the control period and rounded to the nearest whole allowance 
as appropriate.
    (ii) The CAIR designated representative shall ensure that the 
compliance account of the source that includes the CAIR NOX 
unit that becomes a CAIR NOX unit under Sec.  97.104 
contains the CAIR NOX allowances necessary for completion of 
the deduction under paragraph (b)(2)(i) of this section.
    (3)(i) For every control period after the date on which the CAIR 
NOX opt-in unit becomes a CAIR NOX unit under 
Sec.  97.104, the CAIR NOX opt-in unit will be treated, 
solely for purposes of CAIR NOX allowance allocations under 
Sec.  97.142, as a unit that commences operation on the date on which 
the CAIR NOX opt-in unit becomes a CAIR NOX unit 
under Sec.  97.104 and will be allocated CAIR NOX allowances 
under Sec.  97.142.
    (ii) Notwithstanding paragraph (b)(3)(i) of this section, if the 
date on which the CAIR NOX opt-in unit becomes a CAIR 
NOX unit under Sec.  97.104 is not January 1, the following 
amount of CAIR NOX allowances will be allocated to the CAIR 
NOX opt-in unit (as a CAIR NOX unit) under Sec.  
97.142 for the control period that includes the date on which the CAIR 
NOX opt-in unit becomes a CAIR NOX unit under 
Sec.  97.104:
    (A) The amount of CAIR NOX allowances otherwise 
allocated to the CAIR NOX opt-in unit (as a CAIR 
NOX unit) under Sec.  97.142 for the control period 
multiplied by;
    (B) The ratio of the number of days, in the control period, 
starting with the date on which the CAIR NOX opt-in unit 
becomes a CAIR NOX unit under Sec.  97.104, divided by the 
total number of days in the control period; and
    (C) Rounded to the nearest whole allowance as appropriate.


Sec.  97.188  CAIR NOX allowance allocations to CAIR NOX opt-in units.

    (a) Timing requirements. (1) When the CAIR opt-in permit is issued 
under Sec.  97.184(e), the permitting authority will allocate CAIR 
NOX allowances to the CAIR NOX opt-in unit, and 
submit to the Administrator the allocation for the control period in 
which a CAIR NOX opt-in unit enters the CAIR NOX 
Annual Trading Program under Sec.  97.184(g), in accordance with 
paragraph (b) or (c) of this section.
    (2) By no later than October 31 of the control period in which a 
CAIR opt-in unit enters the CAIR NOX Annual Trading Program 
under Sec.  97.184(g) and October 31 of each year thereafter, the 
permitting authority will allocate CAIR NOX allowances to 
the CAIR NOX opt-in unit, and submit to the Administrator 
the allocation for the control period that includes such submission 
deadline and in which the unit is a CAIR NOX opt-in unit, in 
accordance with paragraph (b) or (c) of this section.
    (b) Calculation of allocation. For each control period for which a 
CAIR NOX opt-in unit is to be allocated CAIR NOX 
allowances, the permitting authority will allocate in accordance with 
the following procedures, if provided in a State implementation plan 
revision submitted in accordance with Sec.  51.123(p)(3)(i), (ii), or 
(iii) of this chapter and approved by the Administrator:
    (1) The heat input (in mmBtu) used for calculating the CAIR 
NOX allowance allocation will be the lesser of:
    (i) The CAIR NOX opt-in unit's baseline heat input 
determined under Sec.  97.184(c); or
    (ii) The CAIR NOX opt-in unit's heat input, as 
determined in accordance with subpart HH of this part, for the 
immediately prior control period, except when the allocation is being 
calculated for the control period in which the CAIR NOX opt-
in unit enters the CAIR NOX Annual Trading Program under 
Sec.  97.184(g).
    (2) The NOX emission rate (in lb/mmBtu) used for 
calculating CAIR NOX allowance allocations will be the 
lesser of:
    (i) The CAIR NOX opt-in unit's baseline NOX 
emissions rate (in lb/mmBtu) determined under Sec.  97.184(d) and 
multiplied by 70 percent; or
    (ii) The most stringent State or Federal NOX emissions 
limitation applicable to the CAIR NOX opt-in unit at any 
time during the control period for which CAIR NOX allowances 
are to be allocated.
    (3) The permitting authority will allocate CAIR NOX 
allowances to the CAIR NOX opt-in unit in an amount equaling 
the heat input under paragraph (b)(1) of this section, multiplied by 
the NOX emission rate under paragraph (b)(2) of this 
section, divided by 2,000 lb/ton, and rounded to the nearest whole 
allowance as appropriate.
    (c) Notwithstanding paragraph (b) of this section and if the CAIR 
designated representative requests, and the permitting authority issues 
a CAIR opt-in permit providing for, allocation to a

[[Page 49787]]

CAIR NOX opt-in unit of CAIR NOX allowances under 
this paragraph (subject to the conditions in Sec. Sec.  97.184(h) and 
97.186(g)), the permitting authority will allocate to the CAIR 
NOX opt-in unit as follows, if provided in a State 
implementation plan revision submitted in accordance with Sec.  
51.123(p)(3)(i), (ii), or (iii) of this chapter and approved by the 
Administrator:
    (1) For each control period in 2009 through 2014 for which the CAIR 
NOX opt-in unit is to be allocated CAIR NOX 
allowances,
    (i) The heat input (in mmBtu) used for calculating CAIR 
NOX allowance allocations will be determined as described in 
paragraph (b)(1) of this section.
    (ii) The NOX emission rate (in lb/mmBtu) used for 
calculating CAIR NOX allowance allocations will be the 
lesser of:
    (A) The CAIR NOX opt-in unit's baseline NOX 
emissions rate (in lb/mmBtu) determined under Sec.  97.184(d); or
    (B) The most stringent State or Federal NOX emissions 
limitation applicable to the CAIR NOX opt-in unit at any 
time during the control period in which the CAIR NOX opt-in 
unit enters the CAIR NOX Annual Trading Program under Sec.  
97.184(g).
    (iii) The permitting authority will allocate CAIR NOX 
allowances to the CAIR NOX opt-in unit in an amount equaling 
the heat input under paragraph (c)(1)(i) of this section, multiplied by 
the NOX emission rate under paragraph (c)(1)(ii) of this 
section, divided by 2,000 lb/ton, and rounded to the nearest whole 
allowance as appropriate.
    (2) For each control period in 2015 and thereafter for which the 
CAIR NOX opt-in unit is to be allocated CAIR NOX 
allowances,
    (i) The heat input (in mmBtu) used for calculating the CAIR 
NOX allowance allocations will be determined as described in 
paragraph (b)(1) of this section.
    (ii) The NOX emission rate (in lb/mmBtu) used for 
calculating the CAIR NOX allowance allocation will be the 
lesser of:
    (A) 0.15 lb/mmBtu;
    (B) The CAIR NOX opt-in unit's baseline NOX 
emissions rate (in lb/mmBtu) determined under Sec.  97.184(d); or
    (C) The most stringent State or Federal NOX emissions 
limitation applicable to the CAIR NOX opt-in unit at any 
time during the control period for which CAIR NOX allowances 
are to be allocated.
    (iii) The permitting authority will allocate CAIR NOX 
allowances to the CAIR NOX opt-in unit in an amount equaling 
the heat input under paragraph (c)(2)(i) of this section, multiplied by 
the NOX emission rate under paragraph (c)(2)(ii) of this 
section, divided by 2,000 lb/ton, and rounded to the nearest whole 
allowance as appropriate.
    (d) Recordation. If provided in a State implementation plan 
revision submitted in accordance with Sec.  51.123(p)(3)(i), (ii), or 
(iii) of this chapter and approved by the Administrator:
    (1) The Administrator will record, in the compliance account of the 
source that includes the CAIR NOX opt-in unit, the CAIR 
NOX allowances allocated by the permitting authority to the 
CAIR NOX opt-in unit under paragraph (a)(1) of this section.
    (2) By December 1 of the control period in which a CAIR 
NOX opt-in unit enters the CAIR NOX Annual 
Trading Program under Sec.  97.184(g) and December 1 of each year 
thereafter, the Administrator will record, in the compliance account of 
the source that includes the CAIR NOX opt-in unit, the CAIR 
NOX allowances allocated by the permitting authority to the 
CAIR NOX opt-in unit under paragraph (a)(2) of this section.

Appendix A to Subpart II of Part 97--States With Approved State 
Implementation Plan Revisions Concerning CAIR NOX Opt-In 
Units

    1. The following States have State Implementation Plan revisions 
under Sec.  51.123(p)(3) of this chapter approved by the 
Administrator and establishing procedures providing for CAIR 
NOX opt-in units under subpart II of this part and 
allocation of CAIR NOX allowances to such units under 
Sec.  97.188(b):
    2. The following States have State Implementation Plan revisions 
under Sec.  51.123(p)(3) of this chapter approved by the 
Administrator and establishing procedures providing for CAIR 
NOX opt-in units under subpart II of this part and 
allocation of CAIR NOX allowances to such units under 
Sec.  97.188(c):

    4. Part 97 is amended by adding subparts AAA through CCC, adding 
and reserving subparts DDD and EEE and adding subparts FFF through III 
to read as follows:

Subpart AAA--CAIR SO2 Trading Program General Provisions
Sec.
97.201 Purpose.
97.202 Definitions.
97.203 Measurements, abbreviations, and acronyms.
97.204 Applicability.
97.205 Retired unit exemption.
97.206 Standard requirements.
97.207 Computation of time.
97.208 Appeal procedures.
Subpart BBB--CAIR Designated Representative for CAIR SO2 Sources
97.210 Authorization and responsibilities of CAIR designated 
representative.
97.211 Alternate CAIR designated representative.
97.212 Changing CAIR designated representative and alternate CAIR 
designated representative; changes in owners and operators.
97.213 Certificate of representation.
97.214 Objections concerning CAIR designated representative.
Subpart CCC--Permits
97.220 General CAIR SO2 Trading Program permit 
requirements.
97.221 Submission of CAIR permit applications.
97.222 Information requirements for CAIR permit applications.
97.223 CAIR permit contents and term.
97.224 CAIR permit revisions.
Subpart DDD--[Reserved]
Subpart EEE--[Reserved]
Subpart FFF--CAIR SO2 Allowance Tracking System
97.250 [Reserved]
97.251 Establishment of accounts.
97.252 Responsibilities of CAIR authorized account representative.
97.253 Recordation of CAIR SO2 allowances.
97.254 Compliance with CAIR SO2 emissions limitation.
97.255 Banking.
97.256 Account error.
97.257 Closing of general accounts.
Subpart GGG--CAIR SO2 Allowance Transfers
97.260 Submission of CAIR SO2 allowance transfers.
97.261 EPA recordation.
97.262 Notification.
Subpart HHH--Monitoring and Reporting
97.270 General requirements.
97.271 Initial certification and recertification procedures.
97.272 Out of control periods.
97.273 Notifications.
97.274 Recordkeeping and reporting.
97.275 Petitions.
97.276 Additional requirements to provide heat input data.
Subpart III--CAIR SO2 Opt-in Units
97.280 Applicability.
97.281 General.
97.282 CAIR designated representative.
97.283 Applying for CAIR opt-in permit.
97.284 Opt-in process.
97.285 CAIR opt-in permit contents.
97.286 Withdrawal from CAIR SO2 Trading Program.
97.287 Change in regulatory status.
97.288 CAIR SO2 allowance allocations to CAIR 
SO2 opt-in units.

[[Page 49788]]

Appendix A to Subpart III of Part 97--States With Approved State 
Implementation Plan Revisions Concerning CAIR SO2 Opt-In Units

Subpart AAA--CAIR SO2 Trading Program General Provisions


Sec.  97.201  Purpose.

    This subpart and subparts BBB through III set forth the general 
provisions and the designated representative, permitting, allowance, 
monitoring, and opt-in provisions for the Federal Clean Air Interstate 
Rule (CAIR) SO2 Trading Program, under section 110 of the 
Clean Air Act and Sec.  52.36 of this chapter, as a means of mitigating 
interstate transport of fine particulates and sulfur dioxide.


Sec.  97.202  Definitions.

    The terms used in this subpart and subparts BBB through III shall 
have the meanings set forth in this section as follows:
    Account number means the identification number given by the 
Administrator to each CAIR SO2 Allowance Tracking System 
account.
    Acid Rain emissions limitation means a limitation on emissions of 
sulfur dioxide or nitrogen oxides under the Acid Rain Program.
    Acid Rain Program means a multi-state sulfur dioxide and nitrogen 
oxides air pollution control and emission reduction program established 
by the Administrator under title IV of the CAA and parts 72 through 78 
of this chapter.
    Administrator means the Administrator of the United States 
Environmental Protection Agency or the Administrator's duly authorized 
representative.
    Allocate or allocation means, with regard to CAIR SO2 
allowances issued under the Acid Rain Program, the determination by the 
Administrator of the amount of such CAIR SO2 allowances to 
be initially credited to a CAIR SO2 unit and, with regard to 
CAIR SO2 allowances issued under Sec.  97.288, the 
determination by the permitting authority of the amount of such CAIR 
SO2 allowances to be initially credited to a CAIR 
SO2 unit.
    Allowance transfer deadline means, for a control period, midnight 
of March 1, if it is a business day, or, if March 1 is not a business 
day, midnight of the first business day thereafter immediately 
following the control period and is the deadline by which a CAIR 
SO2 allowance transfer must be submitted for recordation in 
a CAIR SO2 source's compliance account in order to be used 
to meet the source's CAIR SO2 emissions limitation for such 
control period in accordance with Sec.  97.254.
    Alternate CAIR designated representative means, for a CAIR 
SO2 source and each CAIR SO2 unit at the source, 
the natural person who is authorized by the owners and operators of the 
source and all such units at the source in accordance with subparts BBB 
and III of this part, to act on behalf of the CAIR designated 
representative in matters pertaining to the CAIR SO2 Trading 
Program. If the CAIR SO2 source is also a CAIR 
NOX source, then this natural person shall be the same 
person as the alternate CAIR designated representative under the CAIR 
NOX Annual Trading Program. If the CAIR SO2 
source is also a CAIR NOX Ozone Season source, then this 
natural person shall be the same person as the alternate CAIR 
designated representative under the CAIR NOX Ozone Season 
Trading Program. If the CAIR SO2 source is also subject to 
the Acid Rain Program, then this natural person shall be the same 
person as the alternate designated representative under the Acid Rain 
Program. If the CAIR SO2 source is also subject to the Hg 
Budget Trading Program, then this natural person shall be the same 
person as the alternate designated representative under the Hg Budget 
Trading Program.
    Automated data acquisition and handling system or DAHS means that 
component of the continuous emission monitoring system, or other 
emissions monitoring system approved for use under subpart HHH of this 
part, designed to interpret and convert individual output signals from 
pollutant concentration monitors, flow monitors, diluent gas monitors, 
and other component parts of the monitoring system to produce a 
continuous record of the measured parameters in the measurement units 
required by subpart HHH of this part.
    Boiler means an enclosed fossil- or other-fuel-fired combustion 
device used to produce heat and to transfer heat to recirculating 
water, steam, or other medium.
    Bottoming-cycle cogeneration unit means a cogeneration unit in 
which the energy input to the unit is first used to produce useful 
thermal energy and at least some of the reject heat from the useful 
thermal energy application or process is then used for electricity 
production.
    CAIR authorized account representative means, with regard to a 
general account, a responsible natural person who is authorized, in 
accordance with subparts BBB and III of this part, to transfer and 
otherwise dispose of CAIR SO2 allowances held in the general 
account and, with regard to a compliance account, the CAIR designated 
representative of the source.
    CAIR designated representative means, for a CAIR SO2 
source and each CAIR SO2 unit at the source, the natural 
person who is authorized by the owners and operators of the source and 
all such units at the source, in accordance with subparts BBB and III 
of this part, to represent and legally bind each owner and operator in 
matters pertaining to the CAIR SO2 Trading Program. If the 
CAIR SO2 source is also a CAIR NOX source, then 
this natural person shall be the same person as the CAIR designated 
representative under the CAIR NOX Annual Trading Program. If 
the CAIR SO2 source is also a CAIR NOX Ozone 
Season source, then this natural person shall be the same person as the 
CAIR designated representative under the CAIR NOX Ozone 
Season Trading Program. If the CAIR SO2 source is also 
subject to the Acid Rain Program, then this natural person shall be the 
same person as the designated representative under the Acid Rain 
Program. If the CAIR SO2 source is also subject to the Hg 
Budget Trading Program, then this natural person shall be the same 
person as the designated representative under the Hg Budget Trading 
Program.
    CAIR NOX Annual Trading Program means a multi-state nitrogen oxides 
air pollution control and emission reduction program established by the 
Administrator in accordance with subparts AA through II of this part 
and Sec.  52.35 of this chapter or administered by the Administrator 
under provisions of a State implementation plan that are approved under 
Sec.  51.123(o)(1) or (2) of this chapter, as a means of mitigating 
interstate transport of fine particulates and nitrogen oxides.
    CAIR NOX Ozone Season source means a source that includes one or 
more CAIR NOX Ozone Season units.
    CAIR NOX Ozone Season Trading Program means a multi-state nitrogen 
oxides air pollution control and emission reduction program established 
by the Administrator in accordance with subparts AAAA through IIII of 
this part and Sec.  52.35 of this chapter or administered by the 
Administrator under provisions of a State implementation plan that are 
approved under Sec.  51.123(aa)(1) or (2) (and (bb)(1)), (bb)(2), or 
(dd) of this chapter, as a means of mitigating interstate transport of 
ozone and nitrogen oxides.
    CAIR NOX Ozone Season unit means a unit that is subject to the CAIR 
NOX Ozone Season Trading Program under Sec.  97.304 and a 
CAIR NOX Ozone Season opt-in unit under subpart IIII of this 
part.

[[Page 49789]]

    CAIR NOX source means a source that includes one or more CAIR 
NOX units.
    CAIR NOX unit means a unit that is subject to the CAIR 
NOX Annual Trading Program under Sec.  97.104 and a CAIR 
NOX opt-in unit under subpart II of this part.
    CAIR permit means the legally binding and federally enforceable 
written document, or portion of such document, issued by the permitting 
authority under subpart CCC of this part, including any permit 
revisions, specifying the CAIR SO2 Trading Program 
requirements applicable to a CAIR SO2 source, to each CAIR 
SO2 unit at the source, and to the owners and operators and 
the CAIR designated representative of the source and each such unit.
    CAIR SO2 allowance means a limited authorization issued by the 
Administrator under the Acid Rain Program, by a permitting authority 
under Sec.  97.288, or by the permitting authority under provisions of 
a State implementation plan that are approved under Sec.  51.124(o)(1) 
or (2) of this chapter, to emit sulfur dioxide during the control 
period of the specified calendar year for which the authorization is 
allocated or of any calendar year thereafter under the CAIR 
SO2 Trading Program as follows:
    (1) For one CAIR SO2 allowance allocated for a control 
period in a year before 2010, one ton of sulfur dioxide, except as 
provided in Sec.  97.254(b);
    (2) For one CAIR SO2 allowance allocated for a control 
period in 2010 through 2014, 0.50 ton of sulfur dioxide, except as 
provided in Sec.  97.254(b); and
    (3) For one CAIR SO2 allowance allocated for a control 
period in 2015 or later, 0.35 ton of sulfur dioxide, except as provided 
in Sec.  97.254(b).
    (4) An authorization to emit sulfur dioxide that is not issued 
under the Acid Rain Program, Sec.  97.288, or provisions of a State 
implementation plan that are approved under Sec.  51.124(o)(1) or (2) 
of this chapter shall not be a CAIR SO2 allowance.
    CAIR SO2 allowance deduction or deduct CAIR SO2 
allowances means the permanent withdrawal of CAIR SO2 
allowances by the Administrator from a compliance account, e.g., in 
order to account for a specified number of tons of total sulfur dioxide 
emissions from all CAIR SO2 units at a CAIR SO2 
source for a control period, determined in accordance with subpart HHH 
of this part, or to account for excess emissions.
    CAIR SO2 Allowance Tracking System means the system by which the 
Administrator records allocations, deductions, and transfers of CAIR 
SO2 allowances under the CAIR SO2 Trading 
Program. This is the same system as the Allowance Tracking System under 
Sec.  72.2 of this chapter by which the Administrator records 
allocations, deduction, and transfers of Acid Rain SO2 
allowances under the Acid Rain Program.
    CAIR SO2 Allowance Tracking System account means an account in the 
CAIR SO2 Allowance Tracking System established by the 
Administrator for purposes of recording the allocation, holding, 
transferring, or deducting of CAIR SO2 allowances. Such 
allowances will be allocated, held, deducted, or transferred only as 
whole allowances.
    CAIR SO2 allowances held or hold CAIR SO2 allowances 
means the CAIR SO2 allowances recorded by the Administrator, 
or submitted to the Administrator for recordation, in accordance with 
subparts FFF, GGG, and III of this part or part 73 of this chapter, in 
a CAIR SO2 Allowance Tracking System account.
    CAIR SO2 emissions limitation means, for a CAIR SO2 
source, the tonnage equivalent of the CAIR SO2 allowances 
available for deduction for the source under Sec.  97.254(a) and (b) 
for a control period.
    CAIR SO2 source means a source that includes one or more CAIR 
SO2 units.
    CAIR SO2 Trading Program means a multi-state sulfur dioxide air 
pollution control and emission reduction program established by the 
Administrator in accordance with subparts AAA through III of this part 
and Sec.  52.36 of this chapter or administered by the Administrator 
under provisions of a State implementation plan that are approved under 
Sec.  51.124(o)(1) or (2) of this chapter, as a means of mitigating 
interstate transport of fine particulates and sulfur dioxide.
    CAIR SO2 unit means a unit that is subject to the CAIR 
SO2 Trading Program under Sec.  97.204 and, except for 
purposes of Sec.  97.205, a CAIR SO2 opt-in unit under 
subpart III of this part.
    Certifying official means:
    (1) For a corporation, a president, secretary, treasurer, or vice-
president or the corporation in charge of a principal business function 
or any other person who performs similar policy or decision-making 
functions for the corporation;
    (2) For a partnership or sole proprietorship, a general partner or 
the proprietor respectively; or
    (3) For a local government entity or State, Federal, or other 
public agency, a principal executive officer or ranking elected 
official.
    Clean Air Act or CAA means the Clean Air Act, 42 U.S.C. 7401, et 
seq.
    Coal means any solid fuel classified as anthracite, bituminous, 
subbituminous, or lignite.
    Coal-derived fuel means any fuel (whether in a solid, liquid, or 
gaseous state) produced by the mechanical, thermal, or chemical 
processing of coal.
    Coal-fired means combusting any amount of coal or coal-derived 
fuel, alone, or in combination with any amount of any other fuel.
    Cogeneration unit means a stationary, fossil-fuel-fired boiler or 
stationary, fossil-fuel-fired combustion turbine:
    (1) Having equipment used to produce electricity and useful thermal 
energy for industrial, commercial, heating, or cooling purposes through 
the sequential use of energy; and
    (2) Producing during the 12-month period starting on the date the 
unit first produces electricity and during any calendar year after the 
calendar year in which the unit first produces electricity--
    (i) For a topping-cycle cogeneration unit,
    (A) Useful thermal energy not less than 5 percent of total energy 
output; and
    (B) Useful power that, when added to one-half of useful thermal 
energy produced, is not less then 42.5 percent of total energy input, 
if useful thermal energy produced is 15 percent or more of total energy 
output, or not less than 45 percent of total energy input, if useful 
thermal energy produced is less than 15 percent of total energy output.
    (ii) For a bottoming-cycle cogeneration unit, useful power not less 
than 45 percent of total energy input.
    Combustion turbine means:
    (1) An enclosed device comprising a compressor, a combustor, and a 
turbine and in which the flue gas resulting from the combustion of fuel 
in the combustor passes through the turbine, rotating the turbine; and
    (2) If the enclosed device under paragraph (1) of this definition 
is combined cycle, any associated heat recovery steam generator and 
steam turbine.
    Commence commercial operation means, with regard to a unit serving 
a generator:
    (1) To have begun to produce steam, gas, or other heated medium 
used to generate electricity for sale or use, including test 
generation, except as provided in Sec.  97.205.
    (i) For a unit that is a CAIR SO2 unit under Sec.  
97.204 on the later of November 15, 1990 or the date the unit commences 
commercial operation as defined in paragraph (1) of this definition and 
that subsequently undergoes a physical change (other than replacement 
of the

[[Page 49790]]

unit by a unit at the same source), such date shall remain the unit's 
date of commencement of commercial operation.
    (ii) For a unit that is a CAIR SO2 unit under Sec.  
97.204 on the later of November 15, 1990 or the date the unit commences 
commercial operation as defined in paragraph (1) of this definition and 
that is subsequently replaced by a unit at the same source (e.g., 
repowered), the replacement unit shall be treated as a separate unit 
with a separate date for commencement of commercial operation as 
defined in paragraph (1), (2), or (3) of this definition as 
appropriate.
    (2) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  97.205, for a unit that is not a CAIR SO2 
unit under Sec.  97.204 on the later of November 15, 1990 or the date 
the unit commences commercial operation as defined in paragraph (1) of 
this definition and is not a unit under paragraph (3) of this 
definition, the unit's date for commencement of commercial operation 
shall be the date on which the unit becomes a CAIR SO2 unit 
under Sec.  97.204.
    (i) For a unit with a date for commencement of commercial operation 
as defined in paragraph (2) of this definition and that subsequently 
undergoes a physical change (other than replacement of the unit by a 
unit at the same source), such date shall remain the unit's date of 
commencement of commercial operation.
    (ii) For a unit with a date for commencement of commercial 
operation as defined in paragraph (2) of this definition and that is 
subsequently replaced by a unit at the same source (e.g., repowered), 
the replacement unit shall be treated as a separate unit with a 
separate date for commencement of commercial operation as defined in 
paragraph (1), (2), or (3) of this definition as appropriate.
    (3) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  97.284(h) or Sec.  97.287(b)(3), for a CAIR 
SO2 opt-in unit or a unit for which a CAIR opt-in permit 
application is submitted and not withdrawn and a CAIR opt-in permit is 
not yet issued or denied under subpart III of this part, the unit's 
date for commencement of commercial operation shall be the date on 
which the owner or operator is required to start monitoring and 
reporting the SO2 emissions rate and the heat input of the 
unit under Sec.  97.284(b)(1)(i).
    (i) For a unit with a date for commencement of commercial operation 
as defined in paragraph (3) of this definition and that subsequently 
undergoes a physical change (other than replacement of the unit by a 
unit at the same source), such date shall remain the unit's date of 
commencement of commercial operation.
    (ii) For a unit with a date for commencement of commercial 
operation as defined in paragraph (3) of this definition and that is 
subsequently replaced by a unit at the same source (e.g., repowered), 
the replacement unit shall be treated as a separate unit with a 
separate date for commencement of commercial operation as defined in 
paragraph (1), (2), or (3) of this definition as appropriate.
    (4) Notwithstanding paragraphs (1) through (3) of this definition, 
for a unit not serving a generator producing electricity for sale, the 
unit's date of commencement of operation shall also be the unit's date 
of commencement of commercial operation.
    Commence operation means:
    (1) To have begun any mechanical, chemical, or electronic process, 
including, with regard to a unit, start-up of a unit's combustion 
chamber, except as provided in Sec.  97.205.
    (i) For a unit that undergoes a physical change (other than 
replacement of the unit by a unit at the same source) after the date 
the unit commences operation as defined in paragraph (1) of this 
definition, such date shall remain the unit's date of commencement of 
operation.
    (ii) For a unit that is replaced by a unit at the same source 
(e.g., repowered) after the date the unit commences operation as 
defined in paragraph (1) of this definition, the replacement unit shall 
be treated as a separate unit with a separate date for commencement of 
operation as defined in paragraph (1) or (2) of this definition as 
appropriate.
    (2) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  97.284(h) or Sec.  97.287(b)(3), for a CAIR 
SO2 opt-in unit or a unit for which a CAIR opt-in permit 
application is submitted and not withdrawn and a CAIR opt-in permit is 
not yet issued or denied under subpart III of this part, the unit's 
date for commencement of operation shall be the date on which the owner 
or operator is required to start monitoring and reporting the 
SO2 emissions rate and the heat input of the unit under 
Sec.  97.284(b)(1)(i).
    (i) For a unit with a date for commencement of operation as defined 
in paragraph (2) of this definition and that subsequently undergoes a 
physical change (other than replacement of the unit by a unit at the 
same source), such date shall remain the unit's date of commencement of 
operation.
    (ii) For a unit with a date for commencement of operation as 
defined in paragraph (2) of this definition and that is subsequently 
replaced by a unit at the same source (e.g., repowered), the 
replacement unit shall be treated as a separate unit with a separate 
date for commencement of operation as defined in paragraph (1) or (2) 
of this definition as appropriate.
    Common stack means a single flue through which emissions from 2 or 
more units are exhausted.
    Compliance account means a CAIR SO2 Allowance Tracking 
System account, established by the Administrator for a CAIR 
SO2 source subject to an Acid Rain emissions limitations 
under Sec.  73.31(a) or (b) of this chapter or for any other CAIR 
SO2 source under subpart FFF or III of this part, in which 
any CAIR SO2 allowance allocations for the CAIR 
SO2 units at the source are initially recorded and in which 
are held any CAIR SO2 allowances available for use for a 
control period in order to meet the source's CAIR SO2 
emissions limitation in accordance with Sec.  97.254.
    Continuous emission monitoring system or CEMS means the equipment 
required under subpart HHH of this part to sample, analyze, measure, 
and provide, by means of readings recorded at least once every 15 
minutes (using an automated data acquisition and handling system 
(DAHS)), a permanent record of sulfur dioxide emissions, stack gas 
volumetric flow rate, stack gas moisture content, and oxygen or carbon 
dioxide concentration (as applicable), in a manner consistent with part 
75 of this chapter. The following systems are the principal types of 
continuous emission monitoring systems required under subpart HHH of 
this part:
    (1) A flow monitoring system, consisting of a stack flow rate 
monitor and an automated data acquisition and handling system and 
providing a permanent, continuous record of stack gas volumetric flow 
rate, in standard cubic feet per hour (scfh);
    (2) A sulfur dioxide monitoring system, consisting of a 
SO2 pollutant concentration monitor and an automated data 
acquisition handling system and providing a permanent, continuous 
record of SO2 emissions, in parts per million (ppm);
    (3) A moisture monitoring system, as defined in Sec.  75.11(b)(2) 
of this chapter and providing a permanent, continuous record of the 
stack gas moisture content, in percent H2O;
    (4) A carbon dioxide monitoring system, consisting of a 
CO2 pollutant concentration monitor (or an oxygen monitor 
plus suitable mathematical

[[Page 49791]]

equations from which the CO2 concentration is derived) and 
an automated data acquisition and handling system and providing a 
permanent, continuous record of CO2 emissions, in percent 
CO2; and
    (5) An oxygen monitoring system, consisting of an O2 
concentration monitor and an automated data acquisition and handling 
system and providing a permanent, continuous record of O2 in 
percent O2.
    Control period means the period beginning January 1 of a calendar 
year, except as provided in Sec.  97.206(c)(2), and ending on December 
31 of the same year, inclusive.
    Emissions means air pollutants exhausted from a unit or source into 
the atmosphere, as measured, recorded, and reported to the 
Administrator by the CAIR designated representative and as determined 
by the Administrator in accordance with subpart HHH of this part.
    Excess emissions means any ton, or portion of a ton, of sulfur 
dioxide emitted by the CAIR SO2 units at a CAIR 
SO2 source during a control period that exceeds the CAIR 
SO2 emissions limitation for the source, provided that any 
portion of a ton of excess emissions shall be treated as one ton of 
excess emissions.
    Fossil fuel means natural gas, petroleum, coal, or any form of 
solid, liquid, or gaseous fuel derived from such material.
    Fossil fuel-fired means, with regard to a unit, combusting any 
amount of fossil fuel in any calendar year.
    General account means a CAIR SO2 Allowance Tracking 
System account, established under subpart FFF of this part, that is not 
a compliance account.
    Generator means a device that produces electricity.
    Heat input means, with regard to a specified period of time, the 
product (in mmBtu/time) of the gross calorific value of the fuel (in 
Btu/lb) divided by 1,000,000 Btu/mmBtu and multiplied by the fuel feed 
rate into a combustion device (in lb of fuel/time), as measured, 
recorded, and reported to the Administrator by the CAIR designated 
representative and determined by the Administrator in accordance with 
subpart HHH of this part and excluding the heat derived from preheated 
combustion air, recirculated flue gases, or exhaust from other sources.
    Heat input rate means the amount of heat input (in mmBtu) divided 
by unit operating time (in hr) or, with regard to a specific fuel, the 
amount of heat input attributed to the fuel (in mmBtu) divided by the 
unit operating time (in hr) during which the unit combusts the fuel.
    Hg Budget Trading Program means a multi-state Hg air pollution 
control and emission reduction program approved and administered by the 
Administrator in accordance with subpart HHHH of part 60 of this 
chapter and Sec.  60.24(h)(6), or established by the Administrator, as 
a means of reduction in national Hg emissions.
    Life-of-the-unit, firm power contractual arrangement means a unit 
participation power sales agreement under which a utility or industrial 
customer reserves, or is entitled to receive, a specified amount or 
percentage of nameplate capacity and associated energy generated by any 
specified unit and pays its proportional amount of such unit's total 
costs, pursuant to a contract:
    (1) For the life of the unit;
    (2) For a cumulative term of no less than 30 years, including 
contracts that permit an election for early termination; or
    (3) For a period no less than 25 years or 70 percent of the 
economic useful life of the unit determined as of the time the unit is 
built, with option rights to purchase or release some portion of the 
nameplate capacity and associated energy generated by the unit at the 
end of the period.
    Maximum design heat input means, starting from the initial 
installation of a unit, the maximum amount of fuel per hour (in Btu/hr) 
that a unit is capable of combusting on a steady state basis as 
specified by the manufacturer of the unit, or, starting from the 
completion of any subsequent physical change in the unit resulting in a 
decrease in the maximum amount of fuel per hour (in Btu/hr) that a unit 
is capable of combusting on a steady state basis, such decreased 
maximum amount as specified by the person conducting the physical 
change.
    Monitoring system means any monitoring system that meets the 
requirements of subpart HHH of this part, including a continuous 
emissions monitoring system, an alternative monitoring system, or an 
excepted monitoring system under part 75 of this chapter.
    Most stringent State or Federal SO2 emissions limitation 
means, with regard to a unit, the lowest SO2 emissions 
limitation (in terms of lb/mmBtu) that is applicable to the unit under 
State or Federal law, regardless of the averaging period to which the 
emissions limitation applies.
    Nameplate capacity means, starting from the initial installation of 
a generator, the maximum electrical generating output (in MWe) that the 
generator is capable of producing on a steady state basis and during 
continuous operation (when not restricted by seasonal or other 
deratings) as specified by the manufacturer of the generator or, 
starting from the completion of any subsequent physical change in the 
generator resulting in an increase in the maximum electrical generating 
output (in MWe) that the generator is capable of producing on a steady 
state basis and during continuous operation (when not restricted by 
seasonal or other deratings), such increased maximum amount as 
specified by the person conducting the physical change.
    Operator means any person who operates, controls, or supervises a 
CAIR SO2 unit or a CAIR SO2 source and shall 
include, but not be limited to, any holding company, utility system, or 
plant manager of such a unit or source.
    Owner means any of the following persons:
    (1) With regard to a CAIR SO2 source or a CAIR 
SO2 unit at a source, respectively:
    (i) Any holder of any portion of the legal or equitable title in a 
CAIR SO2 unit at the source or the CAIR SO2 unit;
    (ii) Any holder of a leasehold interest in a CAIR SO2 
unit at the source or the CAIR SO2 unit; or
    (iii) Any purchaser of power from a CAIR SO2 unit at the 
source or the CAIR SO2 unit under a life-of-the-unit, firm 
power contractual arrangement; provided that, unless expressly provided 
for in a leasehold agreement, owner shall not include a passive lessor, 
or a person who has an equitable interest through such lessor, whose 
rental payments are not based (either directly or indirectly) on the 
revenues or income from such CAIR SO2 unit; or
    (2) With regard to any general account, any person who has an 
ownership interest with respect to the CAIR SO2 allowances 
held in the general account and who is subject to the binding agreement 
for the CAIR authorized account representative to represent the 
person's ownership interest with respect to CAIR SO2 
allowances.
    Permitting authority means the State air pollution control agency, 
local agency, other State agency, or other agency authorized by the 
Administrator to issue or revise permits to meet the requirements of 
the CAIR SO2 Trading Program in accordance with subpart CCC 
of this part or, if no such agency has been so authorized, the 
Administrator.
    Potential electrical output capacity means 33 percent of a unit's 
maximum design heat input, divided by 3,413 Btu/

[[Page 49792]]

kWh, divided by 1,000 kWh/MWh, and multiplied by 8,760 hr/yr.
    Receive or receipt of means, when referring to the permitting 
authority or the Administrator, to come into possession of a document, 
information, or correspondence (whether sent in hard copy or by 
authorized electronic transmission), as indicated in an official 
correspondence log, or by a notation made on the document, information, 
or correspondence, by the permitting authority or the Administrator in 
the regular course of business.
    Recordation, record, or recorded means, with regard to CAIR 
SO2 allowances, the movement of CAIR SO2 
allowances by the Administrator into or between CAIR SO2 
Allowance Tracking System accounts, for purposes of allocation, 
transfer, or deduction.
    Reference method means any direct test method of sampling and 
analyzing for an air pollutant as specified in Sec.  75.22 of this 
chapter.
    Repowered means, with regard to a unit, replacement of a coal-fired 
boiler with one of the following coal-fired technologies at the same 
source as the coal-fired boiler:
    (1) Atmospheric or pressurized fluidized bed combustion;
    (2) Integrated gasification combined cycle;
    (3) Magnetohydrodynamics;
    (4) Direct and indirect coal-fired turbines;
    (5) Integrated gasification fuel cells; or
    (6) As determined by the Administrator in consultation with the 
Secretary of Energy, a derivative of one or more of the technologies 
under paragraphs (1) through (5) of this definition and any other coal-
fired technology capable of controlling multiple combustion emissions 
simultaneously with improved boiler or generation efficiency and with 
significantly greater waste reduction relative to the performance of 
technology in widespread commercial use as of January 1, 2005.
    Sequential use of energy means:
    (1) For a topping-cycle cogeneration unit, the use of reject heat 
from electricity production in a useful thermal energy application or 
process; or
    (2) For a bottoming-cycle cogeneration unit, the use of reject heat 
from useful thermal energy application or process in electricity 
production.
    Serial number means, for a CAIR SO2 allowance, the 
unique identification number assigned to each CAIR SO2 
allowance by the Administrator.
    Solid waste incineration unit means a stationary, fossil-fuel-fired 
boiler or stationary, fossil-fuel-fired combustion turbine that is a 
``solid waste incineration unit'' as defined in section 129(g)(1) of 
the Clean Air Act.
    Source means all buildings, structures, or installations located in 
one or more contiguous or adjacent properties under common control of 
the same person or persons. For purposes of section 502(c) of the Clean 
Air Act, a ``source,'' including a ``source'' with multiple units, 
shall be considered a single ``facility.''
    State means one of the States or the District of Columbia that is 
subject to the CAIR SO2 Trading Program pursuant to Sec.  
52.35 of this chapter.
    Submit or serve means to send or transmit a document, information, 
or correspondence to the person specified in accordance with the 
applicable regulation:
    (1) In person;
    (2) By United States Postal Service; or
    (3) By other means of dispatch or transmission and delivery. 
Compliance with any ``submission'' or ``service'' deadline shall be 
determined by the date of dispatch, transmission, or mailing and not 
the date of receipt.
    Title V operating permit means a permit issued under title V of the 
Clean Air Act and part 70 or part 71 of this chapter.
    Title V operating permit regulations means the regulations that the 
Administrator has approved or issued as meeting the requirements of 
title V of the Clean Air Act and part 70 or 71 of this chapter.
    Ton means 2,000 pounds. For the purpose of determining compliance 
with the CAIR SO2 emissions limitation, total tons of sulfur 
dioxide emissions for a control period shall be calculated as the sum 
of all recorded hourly emissions (or the mass equivalent of the 
recorded hourly emission rates) in accordance with subpart HHH of this 
part, but with any remaining fraction of a ton equal to or greater than 
0.50 tons deemed to equal one ton and any remaining fraction of a ton 
less than 0.50 tons deemed to equal zero tons.
    Topping-cycle cogeneration unit means a cogeneration unit in which 
the energy input to the unit is first used to produce useful power, 
including electricity, and at least some of the reject heat from the 
electricity production is then used to provide useful thermal energy.
    Total energy input means, with regard to a cogeneration unit, total 
energy of all forms supplied to the cogeneration unit, excluding energy 
produced by the cogeneration unit itself.
    Total energy output means, with regard to a cogeneration unit, the 
sum of useful power and useful thermal energy produced by the 
cogeneration unit.
    Unit means a stationary, fossil-fuel-fired boiler or combustion 
turbine or other stationary, fossil-fuel-fired combustion device.
    Unit operating day means a calendar day in which a unit combusts 
any fuel.
    Unit operating hour or hour of unit operation means an hour in 
which a unit combusts any fuel.
    Useful power means, with regard to a cogeneration unit, electricity 
or mechanical energy made available for use, excluding any such energy 
used in the power production process (which process includes, but is 
not limited to, any on-site processing or treatment of fuel combusted 
at the unit and any on-site emission controls).
    Useful thermal energy means, with regard to a cogeneration unit, 
thermal energy that is:
    (1) Made available to an industrial or commercial process (not a 
power production process), excluding any heat contained in condensate 
return or makeup water;
    (2) Used in a heating application (e.g., space heating or domestic 
hot water heating); or
    (3) Used in a space cooling application (i.e., thermal energy used 
by an absorption chiller).
    Utility power distribution system means the portion of an 
electricity grid owned or operated by a utility and dedicated to 
delivering electricity to customers.


Sec.  97.203  Measurements, abbreviations, and acronyms.

    Measurements, abbreviations, and acronyms used in this subpart and 
subparts BBB through III are defined as follows:

Btu--British thermal unit.
CO2--carbon dioxide.
H2O--water.
Hg--mercury.
hr--hour.
kW--kilowatt electrical.
kWh--kilowatt hour.
lb--pound.
mmBtu--million Btu.
MWe--megawatt electrical.
MWh--megawatt hour.
NOX--nitrogen oxides.
O2--oxygen.
ppm--parts per million.
scfh--standard cubic feet per hour.
SO2--sulfur dioxide.
yr--year.


Sec.  97.204  Applicability.

    (a) Except as provided in paragraph (b) of this section:
    (1) The following units in a State shall be CAIR SO2 
units, and any source that

[[Page 49793]]

includes one or more such units shall be a CAIR SO2 source, 
subject to the requirements of this subpart and subparts BBB through 
HHH of this part: any stationary, fossil-fuel-fired boiler or 
stationary, fossil-fuel-fired combustion turbine serving at any time, 
since the later of November 15, 1990 or the start-up of the unit's 
combustion chamber, a generator with nameplate capacity of more than 25 
MWe producing electricity for sale.
    (2) If a stationary, fossil-fuel-fired boiler or stationary, 
fossil-fuel-fired combustion turbine that, under paragraph (a)(1) of 
this section, is not a CAIR SO2 unit begins to serve a 
generator with nameplate capacity of more than 25 MWe producing 
electricity for sale, the unit shall become a CAIR SO2 unit 
on the date on which it first serves such generator.
    (b) The units in a State that meet the requirements set forth in 
paragraph (b)(1)(i), (b)(2)(i), or (b)(2)(ii) of this section shall not 
be CAIR SO2 units:
    (1)(i) Any unit:
    (A) Qualifying as a cogeneration unit during the 12-month period 
starting on the date the unit first produces electricity and continuing 
to qualify as a cogeneration unit; and
    (B) Not serving at any time, since the later of November 15, 1990 
or the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe supplying in any calendar year 
more than one-third of the unit's potential electric output capacity or 
219,000 MWh, whichever is greater, to any utility power distribution 
system for sale.
    (ii) If a unit qualifies as a cogeneration unit during the 12-month 
period starting on the date the unit first produces electricity and 
meets the requirements of paragraphs (b)(1)(i) of this section for at 
least one calendar year, but subsequently no longer meets all such 
requirements, the unit shall become a CAIR SO2 unit starting 
on the earlier of January 1 after the first calendar year during which 
the unit first no longer qualifies as a cogeneration unit or January 1 
after the first calendar year during which the unit no longer meets the 
requirements of paragraph (b)(1)(i)(B) of this section.
    (2)(i) Any unit commencing operation before January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
1985-1987 exceeding 80 percent (on a Btu basis) and an average annual 
fuel consumption of non-fossil fuel for any 3 consecutive calendar 
years after 1990 exceeding 80 percent (on a Btu basis).
    (ii) Any unit commencing operation on or after January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
the first 3 calendar years of operation exceeding 80 percent (on a Btu 
basis) and an average annual fuel consumption of non-fossil fuel for 
any 3 consecutive calendar years after 1990 exceeding 80 percent (on a 
Btu basis).
    (iii) If a unit qualifies as a solid waste incineration unit and 
meets the requirements of paragraph (b)(2)(i) or (ii) of this section 
for at least 3 consecutive calendar years, but subsequently no longer 
meets all such requirements, the unit shall become a CAIR 
SO2 unit starting on the earlier of January 1 after the 
first calendar year during which the unit first no longer qualifies as 
a solid waste incineration unit or January 1 after the first 3 
consecutive calendar years after 1990 for which the unit has an average 
annual fuel consumption of fossil fuel of 20 percent or more.
    (c) A certifying official of an owner or operator of any unit may 
petition the Administrator at any time for a determination concerning 
the applicability, under paragraphs (a) and (b) of this section, of the 
CAIR SO2 Trading Program to the unit.
    (1) Petition content. The petition shall be in writing and include 
the identification of the unit and the relevant facts about the unit. 
The petition and any other documents provided to the Administrator in 
connection with the petition shall include the following certification 
statement, signed by the certifying official: ``I am authorized to make 
this submission on behalf of the owners and operators of the unit for 
which the submission is made. I certify under penalty of law that I 
have personally examined, and am familiar with, the statements and 
information submitted in this document and all its attachments. Based 
on my inquiry of those individuals with primary responsibility for 
obtaining the information, I certify that the statements and 
information are to the best of my knowledge and belief true, accurate, 
and complete. I am aware that there are significant penalties for 
submitting false statements and information or omitting required 
statements and information, including the possibility of fine or 
imprisonment.''
    (2) Submission. The petition and any other documents provided in 
connection with the petition shall be submitted to the Director of the 
Clean Air Markets Division, U.S. Environmental Protection Agency, who 
will act on the petition as the Administrator's duly authorized 
representative.
    (3) Response. The Administrator will issue a written response to 
the petition and may request supplemental information relevant to such 
petition. The Administrator's determination concerning the 
applicability, under paragraphs (a) and (b) of this section, of the 
CAIR SO2 Trading Program to the unit shall be binding on the 
permitting authority unless the petition or other information or 
documents provided in connection with the petition are found to have 
contained significant, relevant errors or omissions.


Sec.  97.205  Retired unit exemption.

    (a)(1) Any CAIR SO2 unit that is permanently retired and 
is not a CAIR SO2 opt-in unit under subpart III of this part 
shall be exempt from the CAIR SO2 Trading Program, except 
for the provisions of this section, Sec.  97.202, Sec.  97.203, Sec.  
97.204, Sec.  97.206(c)(4) through (7), Sec.  97.207, and subparts BBB, 
FFF, and GGG of this part.
    (2) The exemption under paragraph (a)(1) of this section shall 
become effective the day on which the CAIR SO2 unit is 
permanently retired. Within 30 days of the unit's permanent retirement, 
the CAIR designated representative shall submit a statement to the 
permitting authority otherwise responsible for administering any CAIR 
permit for the unit and shall submit a copy of the statement to the 
Administrator. The statement shall state, in a format prescribed by the 
permitting authority, that the unit was permanently retired on a 
specific date and will comply with the requirements of paragraph (b) of 
this section.
    (3) After receipt of the statement under paragraph (a)(2) of this 
section, the permitting authority will amend any permit under subpart 
CCC of this part covering the source at which the unit is located to 
add the provisions and requirements of the exemption under paragraphs 
(a)(1) and (b) of this section.
    (b) Special provisions. (1) A unit exempt under paragraph (a) of 
this section shall not emit any sulfur dioxide, starting on the date 
that the exemption takes effect.
    (2) For a period of 5 years from the date the records are created, 
the owners and operators of a unit exempt under paragraph (a) of this 
section shall retain, at the source that includes the unit, records 
demonstrating that the unit is permanently retired. The 5-year period 
for keeping records may be extended for cause, at any time before the 
end of the period, in writing by the permitting authority or the 
Administrator. The

[[Page 49794]]

owners and operators bear the burden of proof that the unit is 
permanently retired.
    (3) The owners and operators and, to the extent applicable, the 
CAIR designated representative of a unit exempt under paragraph (a) of 
this section shall comply with the requirements of the CAIR 
SO2 Trading Program concerning all periods for which the 
exemption is not in effect, even if such requirements arise, or must be 
complied with, after the exemption takes effect.
    (4) A unit exempt under paragraph (a) of this section and located 
at a source that is required, or but for this exemption would be 
required, to have a title V operating permit shall not resume operation 
unless the CAIR designated representative of the source submits a 
complete CAIR permit application under Sec.  97.222 for the unit not 
less than 18 months (or such lesser time provided by the permitting 
authority) before the later of January 1, 2010 or the date on which the 
unit resumes operation.
    (5) On the earlier of the following dates, a unit exempt under 
paragraph (a) of this section shall lose its exemption:
    (i) The date on which the CAIR designated representative submits a 
CAIR permit application for the unit under paragraph (b)(4) of this 
section;
    (ii) The date on which the CAIR designated representative is 
required under paragraph (b)(4) of this section to submit a CAIR permit 
application for the unit; or
    (iii) The date on which the unit resumes operation, if the CAIR 
designated representative is not required to submit a CAIR permit 
application for the unit.
    (6) For the purpose of applying monitoring, reporting, and 
recordkeeping requirements under subpart HHH of this part, a unit that 
loses its exemption under paragraph (a) of this section shall be 
treated as a unit that commences operation and commercial operation on 
the first date on which the unit resumes operation.


Sec.  97.206  Standard requirements.

    (a) Permit requirements. (1) The CAIR designated representative of 
each CAIR SO2 source required to have a title V operating 
permit and each CAIR SO2 unit required to have a title V 
operating permit at the source shall:
    (i) Submit to the permitting authority a complete CAIR permit 
application under Sec.  97.222 in accordance with the deadlines 
specified in Sec.  97.221; and
    (ii) Submit in a timely manner any supplemental information that 
the permitting authority determines is necessary in order to review a 
CAIR permit application and issue or deny a CAIR permit.
    (2) The owners and operators of each CAIR SO2 source 
required to have a title V operating permit and each CAIR 
SO2 unit required to have a title V operating permit at the 
source shall have a CAIR permit issued by the permitting authority 
under subpart CCC of this part for the source and operate the source 
and the unit in compliance with such CAIR permit.
    (3) Except as provided under subpart III of this part, the owners 
and operators of a CAIR SO2 source that is not otherwise 
required to have a title V operating permit and each CAIR 
SO2 unit that is not otherwise required to have a title V 
operating permit are not required to submit a CAIR permit application, 
and to have a CAIR permit, under subpart CCC of this part for such CAIR 
SO2 source and such CAIR SO2 unit.
    (b) Monitoring, reporting, and recordkeeping requirements. (1) The 
owners and operators, and the CAIR designated representative, of each 
CAIR SO2 source and each CAIR SO2 unit at the 
source shall comply with the monitoring, reporting, and recordkeeping 
requirements of subpart HHH of this part.
    (2) The emissions measurements recorded and reported in accordance 
with subpart HHH of this part shall be used to determine compliance by 
each CAIR SO2 source with the CAIR SO2 emissions 
limitation under paragraph (c) of this section.
    (c) Sulfur dioxide emission requirements. (1) As of the allowance 
transfer deadline for a control period, the owners and operators of 
each CAIR SO2 source and each CAIR SO2 unit at 
the source shall hold, in the source's compliance account, a tonnage 
equivalent in CAIR SO2 allowances available for compliance 
deductions for the control period, as determined in accordance with 
Sec.  97.254(a) and (b), not less than the tons of total sulfur dioxide 
emissions for the control period from all CAIR SO2 units at 
the source, as determined in accordance with subpart HHH of this part.
    (2) A CAIR SO2 unit shall be subject to the requirements 
under paragraph (c)(1) of this section for the control period starting 
on the later of January 1, 2010 or the deadline for meeting the unit's 
monitor certification requirements under Sec.  97.270(b)(1), (2), or 
(5) and for each control period thereafter.
    (3) A CAIR SO2 allowance shall not be deducted, for 
compliance with the requirements under paragraph (c)(1) of this 
section, for a control period in a calendar year before the year for 
which the CAIR SO2 allowance was allocated.
    (4) CAIR SO2 allowances shall be held in, deducted from, 
or transferred into or among CAIR SO2 Allowance Tracking 
System accounts in accordance with subparts FFF and GGG of this part.
    (5) A CAIR SO2 allowance is a limited authorization to 
emit sulfur dioxide in accordance with the CAIR SO2 Trading 
Program. No provision of the CAIR SO2 Trading Program, the 
CAIR permit application, the CAIR permit, or an exemption under Sec.  
97.205 and no provision of law shall be construed to limit the 
authority of the United States to terminate or limit such 
authorization.
    (6) A CAIR SO2 allowance does not constitute a property 
right.
    (7) Upon recordation by the Administrator under subpart FFF, GGG, 
or III of this part, every allocation, transfer, or deduction of a CAIR 
SO2 allowance to or from a CAIR SO2 source's 
compliance account is incorporated automatically in any CAIR permit of 
the source.
    (d) Excess emissions requirements. If a CAIR SO2 source 
emits sulfur dioxide during any control period in excess of the CAIR 
SO2 emissions limitation, then:
    (1) The owners and operators of the source and each CAIR 
SO2 unit at the source shall surrender the CAIR 
SO2 allowances required for deduction under Sec.  
97.254(d)(1) and pay any fine, penalty, or assessment or comply with 
any other remedy imposed, for the same violations, under the Clean Air 
Act or applicable State law; and
    (2) Each ton of such excess emissions and each day of such control 
period shall constitute a separate violation of this subpart, the Clean 
Air Act, and applicable State law.
    (e) Recordkeeping and reporting requirements. (1) Unless otherwise 
provided, the owners and operators of the CAIR SO2 source 
and each CAIR SO2 unit at the source shall keep on site at 
the source each of the following documents for a period of 5 years from 
the date the document is created. This period may be extended for 
cause, at any time before the end of 5 years, in writing by the 
permitting authority or the Administrator.
    (i) The certificate of representation under Sec.  97.213 for the 
CAIR designated representative for the source and each CAIR 
SO2 unit at the source and all documents that demonstrate 
the truth of the statements in the certificate of representation; 
provided that the certificate and documents shall be retained on site 
at the source beyond such 5-year period until such documents are 
superseded because of

[[Page 49795]]

the submission of a new certificate of representation under Sec.  
97.213 changing the CAIR designated representative.
    (ii) All emissions monitoring information, in accordance with 
subpart HHH of this part, provided that to the extent that subpart HHH 
of this part provides for a 3-year period for recordkeeping, the 3-year 
period shall apply.
    (iii) Copies of all reports, compliance certifications, and other 
submissions and all records made or required under the CAIR 
SO2 Trading Program.
    (iv) Copies of all documents used to complete a CAIR permit 
application and any other submission under the CAIR SO2 
Trading Program or to demonstrate compliance with the requirements of 
the CAIR SO2 Trading Program.
    (2) The CAIR designated representative of a CAIR SO2 
source and each CAIR SO2 unit at the source shall submit the 
reports required under the CAIR SO2 Trading Program, 
including those under subpart HHH of this part.
    (f) Liability. (1) Each CAIR SO2 source and each CAIR 
SO2 unit shall meet the requirements of the CAIR 
SO2 Trading Program.
    (2) Any provision of the CAIR SO2 Trading Program that 
applies to a CAIR SO2 source or the CAIR designated 
representative of a CAIR SO2 source shall also apply to the 
owners and operators of such source and of the CAIR SO2 
units at the source.
    (3) Any provision of the CAIR SO2 Trading Program that 
applies to a CAIR SO2 unit or the CAIR designated 
representative of a CAIR SO2 unit shall also apply to the 
owners and operators of such unit.
    (g) Effect on other authorities. No provision of the CAIR 
SO2 Trading Program, a CAIR permit application, a CAIR 
permit, or an exemption under Sec.  97.205 shall be construed as 
exempting or excluding the owners and operators, and the CAIR 
designated representative, of a CAIR SO2 source or CAIR 
SO2 unit from compliance with any other provision of the 
applicable, approved State implementation plan, a federally enforceable 
permit, or the Clean Air Act.


Sec.  97.207  Computation of time.

    (a) Unless otherwise stated, any time period scheduled, under the 
CAIR SO2 Trading Program, to begin on the occurrence of an 
act or event shall begin on the day the act or event occurs.
    (b) Unless otherwise stated, any time period scheduled, under the 
CAIR SO2 Trading Program, to begin before the occurrence of 
an act or event shall be computed so that the period ends the day 
before the act or event occurs.
    (c) Unless otherwise stated, if the final day of any time period, 
under the CAIR SO2 Trading Program, falls on a weekend or a 
State or Federal holiday, the time period shall be extended to the next 
business day.


Sec.  97.208  Appeal procedures.

    The appeal procedures for decisions of the Administrator under the 
CAIR SO2 Trading Program are set forth in part 78 of this 
chapter.

Subpart BBB--CAIR designated representative for CAIR SO2 sources


Sec.  97.210  Authorization and responsibilities of CAIR designated 
representative.

    (a) Except as provided under Sec.  97.211, each CAIR SO2 
source, including all CAIR SO2 units at the source, shall 
have one and only one CAIR designated representative, with regard to 
all matters under the CAIR SO2 Trading Program concerning 
the source or any CAIR SO2 unit at the source.
    (b) The CAIR designated representative of the CAIR SO2 
source shall be selected by an agreement binding on the owners and 
operators of the source and all CAIR SO2 units at the source 
and shall act in accordance with the certification statement in Sec.  
97.213(a)(4)(iv).
    (c) Upon receipt by the Administrator of a complete certificate of 
representation under Sec.  97.213, the CAIR designated representative 
of the source shall represent and, by his or her representations, 
actions, inactions, or submissions, legally bind each owner and 
operator of the CAIR SO2 source represented and each CAIR 
SO2 unit at the source in all matters pertaining to the CAIR 
SO2 Trading Program, notwithstanding any agreement between 
the CAIR designated representative and such owners and operators. The 
owners and operators shall be bound by any decision or order issued to 
the CAIR designated representative by the permitting authority, the 
Administrator, or a court regarding the source or unit.
    (d) No CAIR permit will be issued, no emissions data reports will 
be accepted, and no CAIR SO2 Allowance Tracking System 
account will be established for a CAIR SO2 unit at a source, 
until the Administrator has received a complete certificate of 
representation under Sec.  97.213 for a CAIR designated representative 
of the source and the CAIR SO2 units at the source.
    (e)(1) Each submission under the CAIR SO2 Trading 
Program shall be submitted, signed, and certified by the CAIR 
designated representative for each CAIR SO2 source on behalf 
of which the submission is made. Each such submission shall include the 
following certification statement by the CAIR designated 
representative: ``I am authorized to make this submission on behalf of 
the owners and operators of the source or units for which the 
submission is made. I certify under penalty of law that I have 
personally examined, and am familiar with, the statements and 
information submitted in this document and all its attachments. Based 
on my inquiry of those individuals with primary responsibility for 
obtaining the information, I certify that the statements and 
information are to the best of my knowledge and belief true, accurate, 
and complete. I am aware that there are significant penalties for 
submitting false statements and information or omitting required 
statements and information, including the possibility of fine or 
imprisonment.''
    (2) The permitting authority and the Administrator will accept or 
act on a submission made on behalf of owner or operators of a CAIR 
SO2 source or a CAIR SO2 unit only if the 
submission has been made, signed, and certified in accordance with 
paragraph (e)(1) of this section.


Sec.  97.211  Alternate CAIR designated representative.

    (a) A certificate of representation under Sec.  97.213 may 
designate one and only one alternate CAIR designated representative, 
who may act on behalf of the CAIR designated representative. The 
agreement by which the alternate CAIR designated representative is 
selected shall include a procedure for authorizing the alternate CAIR 
designated representative to act in lieu of the CAIR designated 
representative.
    (b) Upon receipt by the Administrator of a complete certificate of 
representation under Sec.  97.213, any representation, action, 
inaction, or submission by the alternate CAIR designated representative 
shall be deemed to be a representation, action, inaction, or submission 
by the CAIR designated representative.
    (c) Except in this section and Sec. Sec.  97.202, 97.210(a) and 
(d), 97.212, 97.213, and 97.251 and Sec.  97.282, whenever the term 
``CAIR designated representative'' is used in subparts AAA through III 
of this part, the term shall be construed to include the CAIR 
designated representative or any alternate CAIR designated 
representative.

[[Page 49796]]

Sec.  97.212  Changing CAIR designated representative and alternate 
CAIR designated representative; changes in owners and operators.

    (a) Changing CAIR designated representative. The CAIR designated 
representative may be changed at any time upon receipt by the 
Administrator of a superseding complete certificate of representation 
under Sec.  97.213. Notwithstanding any such change, all 
representations, actions, inactions, and submissions by the previous 
CAIR designated representative before the time and date when the 
Administrator receives the superseding certificate of representation 
shall be binding on the new CAIR designated representative and the 
owners and operators of the CAIR SO2 source and the CAIR 
SO2 units at the source.
    (b) Changing alternate CAIR designated representative. The 
alternate CAIR designated representative may be changed at any time 
upon receipt by the Administrator of a superseding complete certificate 
of representation under Sec.  97.213. Notwithstanding any such change, 
all representations, actions, inactions, and submissions by the 
previous alternate CAIR designated representative before the time and 
date when the Administrator receives the superseding certificate of 
representation shall be binding on the new alternate CAIR designated 
representative and the owners and operators of the CAIR SO2 
source and the CAIR SO2 units at the source.
    (c) Changes in owners and operators. (1) In the event a new owner 
or operator of a CAIR SO2 source or a CAIR SO2 
unit is not included in the list of owners and operators in the 
certificate of representation under Sec.  97.213, such new owner or 
operator shall be deemed to be subject to and bound by the certificate 
of representation, the representations, actions, inactions, and 
submissions of the CAIR designated representative and any alternate 
CAIR designated representative of the source or unit, and the decisions 
and orders of the permitting authority, the Administrator, or a court, 
as if the new owner or operator were included in such list.
    (2) Within 30 days following any change in the owners and operators 
of a CAIR SO2 source or a CAIR SO2 unit, 
including the addition of a new owner or operator, the CAIR designated 
representative or any alternate CAIR designated representative shall 
submit a revision to the certificate of representation under Sec.  
97.213 amending the list of owners and operators to include the change.


Sec.  97.213  Certificate of representation.

    (a) A complete certificate of representation for a CAIR designated 
representative or an alternate CAIR designated representative shall 
include the following elements in a format prescribed by the 
Administrator:
    (1) Identification of the CAIR SO2 source, and each CAIR 
SO2 unit at the source, for which the certificate of 
representation is submitted.
    (2) The name, address, e-mail address (if any), telephone number, 
and facsimile transmission number (if any) of the CAIR designated 
representative and any alternate CAIR designated representative.
    (3) A list of the owners and operators of the CAIR SO2 
source and of each CAIR SO2 unit at the source.
    (4) The following certification statements by the CAIR designated 
representative and any alternate CAIR designated representative--
    (i) ``I certify that I was selected as the CAIR designated 
representative or alternate CAIR designated representative, as 
applicable, by an agreement binding on the owners and operators of the 
source and each CAIR SO2 unit at the source.''
    (ii) ``I certify that I have all the necessary authority to carry 
out my duties and responsibilities under the CAIR SO2 
Trading Program on behalf of the owners and operators of the source and 
of each CAIR SO2 unit at the source and that each such owner 
and operator shall be fully bound by my representations, actions, 
inactions, or submissions.''
    (iii) ``I certify that the owners and operators of the source and 
of each CAIR SO2 unit at the source shall be bound by any 
order issued to me by the Administrator, the permitting authority, or a 
court regarding the source or unit.''
    (iv) ``Where there are multiple holders of a legal or equitable 
title to, or a leasehold interest in, a CAIR SO2 unit, or 
where a customer purchases power from a CAIR SO2 unit under 
a life-of-the-unit, firm power contractual arrangement, I certify that: 
I have given a written notice of my selection as the `CAIR designated 
representative' or `alternate CAIR designated representative', as 
applicable, and of the agreement by which I was selected to each owner 
and operator of the source and of each CAIR SO2 unit at the 
source; and CAIR SO2 allowances and proceeds of transactions 
involving CAIR SO2 allowances will be deemed to be held or 
distributed in proportion to each holder's legal, equitable, leasehold, 
or contractual reservation or entitlement, except that, if such 
multiple holders have expressly provided for a different distribution 
of CAIR SO2 allowances by contract, CAIR SO2 
allowances and proceeds of transactions involving CAIR SO2 
allowances will be deemed to be held or distributed in accordance with 
the contract.''
    (5) The signature of the CAIR designated representative and any 
alternate CAIR designated representative and the dates signed.
    (b) Unless otherwise required by the permitting authority or the 
Administrator, documents of agreement referred to in the certificate of 
representation shall not be submitted to the permitting authority or 
the Administrator. Neither the permitting authority nor the 
Administrator shall be under any obligation to review or evaluate the 
sufficiency of such documents, if submitted.


Sec.  97.214  Objections concerning CAIR designated representative.

    (a) Once a complete certificate of representation under Sec.  
97.213 has been submitted and received, the permitting authority and 
the Administrator will rely on the certificate of representation unless 
and until a superseding complete certificate of representation under 
Sec.  97.213 is received by the Administrator.
    (b) Except as provided in Sec.  97.212(a) or (b), no objection or 
other communication submitted to the permitting authority or the 
Administrator concerning the authorization, or any representation, 
action, inaction, or submission, of the CAIR designated representative 
shall affect any representation, action, inaction, or submission of the 
CAIR designated representative or the finality of any decision or order 
by the permitting authority or the Administrator under the CAIR 
SO2 Trading Program.
    (c) Neither the permitting authority nor the Administrator will 
adjudicate any private legal dispute concerning the authorization or 
any representation, action, inaction, or submission of any CAIR 
designated representative, including private legal disputes concerning 
the proceeds of CAIR SO2 allowance transfers.

Subpart CCC--Permits


Sec.  97.220  General CAIR SO2 Trading Program permit requirements.

    (a) For each CAIR SO2 source required to have a title V 
operating permit or required, under subpart III of this part, to have a 
title V operating permit or other federally enforceable permit, such 
permit shall include a CAIR permit administered by the permitting

[[Page 49797]]

authority for the title V operating permit or the federally enforceable 
permit as applicable. The CAIR portion of the title V permit or other 
federally enforceable permit as applicable shall be administered in 
accordance with the permitting authority's title V operating permits 
regulations promulgated under part 70 or 71 of this chapter or the 
permitting authority's regulations for other federally enforceable 
permits as applicable, except as provided otherwise by this subpart and 
subpart III of this part.
    (b) Each CAIR permit shall contain, with regard to the CAIR 
SO2 source and the CAIR SO2 units at the source 
covered by the CAIR permit, all applicable CAIR SO2 Trading 
Program, CAIR NOX Annual Trading Program, and CAIR 
NOX Ozone Season Trading Program requirements and shall be a 
complete and separable portion of the title V operating permit or other 
federally enforceable permit under paragraph (a) of this section.


Sec.  97.221  Submission of CAIR permit applications.

    (a) Duty to apply. The CAIR designated representative of any CAIR 
SO2 source required to have a title V operating permit shall 
submit to the permitting authority a complete CAIR permit application 
under Sec.  97.222 for the source covering each CAIR SO2 
unit at the source at least 18 months (or such lesser time provided by 
the permitting authority) before the later of January 1, 2010 or the 
date on which the CAIR SO2 unit commences operation.
    (b) Duty to Reapply. For a CAIR SO2 source required to 
have a title V operating permit, the CAIR designated representative 
shall submit a complete CAIR permit application under Sec.  97.222 for 
the source covering each CAIR SO2 unit at the source to 
renew the CAIR permit in accordance with the permitting authority's 
title V operating permits regulations addressing permit renewal.


Sec.  97.222  Information requirements for CAIR permit applications.

    A complete CAIR permit application shall include the following 
elements concerning the CAIR SO2 source for which the 
application is submitted, in a format prescribed by the permitting 
authority:
    (a) Identification of the CAIR SO2 source;
    (b) Identification of each CAIR SO2 unit at the CAIR 
SO2 source; and
    (c) The standard requirements under Sec.  97.206.


Sec.  97.223  CAIR permit contents and term.

    (a) Each CAIR permit will contain, in a format prescribed by the 
permitting authority, all elements required for a complete CAIR permit 
application under Sec.  97.222.
    (b) Each CAIR permit is deemed to incorporate automatically the 
definitions of terms under Sec.  97.202 and, upon recordation by the 
Administrator under subpart FFF, GGG, or III of this part, every 
allocation, transfer, or deduction of a CAIR SO2 allowance 
to or from the compliance account of the CAIR SO2 source 
covered by the permit.
    (c) The term of the CAIR permit will be set by the permitting 
authority, as necessary to facilitate coordination of the renewal of 
the CAIR permit with issuance, revision, or renewal of the CAIR 
SO2 source's title V operating permit or other federally 
enforceable permit as applicable.


Sec.  97.224  CAIR permit revisions.

    Except as provided in Sec.  97.223(b), the permitting authority 
will revise the CAIR permit, as necessary, in accordance with the 
permitting authority's title V operating permits regulations or the 
permitting authority's regulations for other federally enforceable 
permits as applicable addressing permit revisions.

Subpart DDD--[Reserved]

Subpart EEE--[Reserved]

Subpart FFF--CAIR SO2 Allowance Tracking System


Sec.  97.250  [Reserved]


Sec.  97.251  Establishment of accounts.

    (a) Compliance accounts. Except as provided in Sec.  97.284(e), 
upon receipt of a complete certificate of representation under Sec.  
97.213, the Administrator will establish a compliance account for the 
CAIR SO2 source for which the certificate of representation 
was submitted, unless the source already has a compliance account.
    (b) General accounts--(1) Application for general account. (i) Any 
person may apply to open a general account for the purpose of holding 
and transferring CAIR SO2 allowances. An application for a 
general account may designate one and only one CAIR authorized account 
representative and one and only one alternate CAIR authorized account 
representative who may act on behalf of the CAIR authorized account 
representative. The agreement by which the alternate CAIR authorized 
account representative is selected shall include a procedure for 
authorizing the alternate CAIR authorized account representative to act 
in lieu of the CAIR authorized account representative.
    (ii) A complete application for a general account shall be 
submitted to the Administrator and shall include the following elements 
in a format prescribed by the Administrator:
    (A) Name, mailing address, e-mail address (if any), telephone 
number, and facsimile transmission number (if any) of the CAIR 
authorized account representative and any alternate CAIR authorized 
account representative;
    (B) Organization name and type of organization, if applicable;
    (C) A list of all persons subject to a binding agreement for the 
CAIR authorized account representative and any alternate CAIR 
authorized account representative to represent their ownership interest 
with respect to the CAIR SO2 allowances held in the general 
account;
    (D) The following certification statement by the CAIR authorized 
account representative and any alternate CAIR authorized account 
representative: ``I certify that I was selected as the CAIR authorized 
account representative or the alternate CAIR authorized account 
representative, as applicable, by an agreement that is binding on all 
persons who have an ownership interest with respect to CAIR 
SO2 allowances held in the general account. I certify that I 
have all the necessary authority to carry out my duties and 
responsibilities under the CAIR SO2 Trading Program on 
behalf of such persons and that each such person shall be fully bound 
by my representations, actions, inactions, or submissions and by any 
order or decision issued to me by the Administrator or a court 
regarding the general account.''
    (E) The signature of the CAIR authorized account representative and 
any alternate CAIR authorized account representative and the dates 
signed.
    (iii) Unless otherwise required by the permitting authority or the 
Administrator, documents of agreement referred to in the application 
for a general account shall not be submitted to the permitting 
authority or the Administrator. Neither the permitting authority nor 
the Administrator shall be under any obligation to review or evaluate 
the sufficiency of such documents, if submitted.
    (2) Authorization of CAIR authorized account representative. (i) 
Upon receipt by the Administrator of a complete application for a 
general account under paragraph (b)(1) of this section:
    (A) The Administrator will establish a general account for the 
person or persons for whom the application is submitted.

[[Page 49798]]

    (B) The CAIR authorized account representative and any alternate 
CAIR authorized account representative for the general account shall 
represent and, by his or her representations, actions, inactions, or 
submissions, legally bind each person who has an ownership interest 
with respect to CAIR SO2 allowances held in the general 
account in all matters pertaining to the CAIR SO2 Trading 
Program, notwithstanding any agreement between the CAIR authorized 
account representative or any alternate CAIR authorized account 
representative and such person. Any such person shall be bound by any 
order or decision issued to the CAIR authorized account representative 
or any alternate CAIR authorized account representative by the 
Administrator or a court regarding the general account.
    (C) Any representation, action, inaction, or submission by any 
alternate CAIR authorized account representative shall be deemed to be 
a representation, action, inaction, or submission by the CAIR 
authorized account representative.
    (ii) Each submission concerning the general account shall be 
submitted, signed, and certified by the CAIR authorized account 
representative or any alternate CAIR authorized account representative 
for the persons having an ownership interest with respect to CAIR 
SO2 allowances held in the general account. Each such 
submission shall include the following certification statement by the 
CAIR authorized account representative or any alternate CAIR authorized 
account representative: ``I am authorized to make this submission on 
behalf of the persons having an ownership interest with respect to the 
CAIR SO2 allowances held in the general account. I certify 
under penalty of law that I have personally examined, and am familiar 
with, the statements and information submitted in this document and all 
its attachments. Based on my inquiry of those individuals with primary 
responsibility for obtaining the information, I certify that the 
statements and information are to the best of my knowledge and belief 
true, accurate, and complete. I am aware that there are significant 
penalties for submitting false statements and information or omitting 
required statements and information, including the possibility of fine 
or imprisonment.''
    (iii) The Administrator will accept or act on a submission 
concerning the general account only if the submission has been made, 
signed, and certified in accordance with paragraph (b)(2)(ii) of this 
section.
    (3) Changing CAIR authorized account representative and alternate 
CAIR authorized account representative; changes in persons with 
ownership interest. (i) The CAIR authorized account representative for 
a general account may be changed at any time upon receipt by the 
Administrator of a superseding complete application for a general 
account under paragraph (b)(1) of this section. Notwithstanding any 
such change, all representations, actions, inactions, and submissions 
by the previous CAIR authorized account representative before the time 
and date when the Administrator receives the superseding application 
for a general account shall be binding on the new CAIR authorized 
account representative and the persons with an ownership interest with 
respect to the CAIR SO2 allowances in the general account.
    (ii) The alternate CAIR authorized account representative for a 
general account may be changed at any time upon receipt by the 
Administrator of a superseding complete application for a general 
account under paragraph (b)(1) of this section. Notwithstanding any 
such change, all representations, actions, inactions, and submissions 
by the previous alternate CAIR authorized account representative before 
the time and date when the Administrator receives the superseding 
application for a general account shall be binding on the new alternate 
CAIR authorized account representative and the persons with an 
ownership interest with respect to the CAIR SO2 allowances 
in the general account.
    (iii)(A) In the event a new person having an ownership interest 
with respect to CAIR SO2 allowances in the general account 
is not included in the list of such persons in the application for a 
general account, such new person shall be deemed to be subject to and 
bound by the application for a general account, the representation, 
actions, inactions, and submissions of the CAIR authorized account 
representative and any alternate CAIR authorized account representative 
of the account, and the decisions and orders of the Administrator or a 
court, as if the new person were included in such list.
    (B) Within 30 days following any change in the persons having an 
ownership interest with respect to CAIR SO2 allowances in 
the general account, including the addition of persons, the CAIR 
authorized account representative or any alternate CAIR authorized 
account representative shall submit a revision to the application for a 
general account amending the list of persons having an ownership 
interest with respect to the CAIR SO2 allowances in the 
general account to include the change.
    (4) Objections concerning CAIR authorized account representative. 
(i) Once a complete application for a general account under paragraph 
(b)(1) of this section has been submitted and received, the 
Administrator will rely on the application unless and until a 
superseding complete application for a general account under paragraph 
(b)(1) of this section is received by the Administrator.
    (ii) Except as provided in paragraph (b)(3)(i) or (ii) of this 
section, no objection or other communication submitted to the 
Administrator concerning the authorization, or any representation, 
action, inaction, or submission of the CAIR authorized account 
representative or any alternative CAIR authorized account 
representative for a general account shall affect any representation, 
action, inaction, or submission of the CAIR authorized account 
representative or any alternative CAIR authorized account 
representative or the finality of any decision or order by the 
Administrator under the CAIR SO2 Trading Program.
    (iii) The Administrator will not adjudicate any private legal 
dispute concerning the authorization or any representation, action, 
inaction, or submission of the CAIR authorized account representative 
or any alternative CAIR authorized account representative for a general 
account, including private legal disputes concerning the proceeds of 
CAIR SO2 allowance transfers.
    (c) Account identification. The Administrator will assign a unique 
identifying number to each account established under paragraph (a) or 
(b) of this section.


Sec.  97.252  Responsibilities of CAIR authorized account 
representative.

    Following the establishment of a CAIR SO2 Allowance 
Tracking System account, all submissions to the Administrator 
pertaining to the account, including, but not limited to, submissions 
concerning the deduction or transfer of CAIR SO2 allowances 
in the account, shall be made only by the CAIR authorized account 
representative for the account.


Sec.  97.253  Recordation of CAIR SO2 allowances.

    (a)(1) After a compliance account is established under Sec.  
97.251(a) or Sec.  73.31(a) or (b) of this chapter, the Administrator 
will record in the compliance account any CAIR SO2 allowance 
allocated to any CAIR SO2 unit at the source for each of the 
30 years starting the later of 2010 or the year in which the compliance 
account is

[[Page 49799]]

established and any CAIR SO2 allowance allocated for each of 
the 30 years starting the later of 2010 or the year in which the 
compliance account is established and transferred to the source in 
accordance with subpart GGG of this part or subpart D of part 73 of 
this chapter.
    (2) In 2011 and each year thereafter, after Administrator has 
completed all deductions under Sec.  97.254(b), the Administrator will 
record in the compliance account any CAIR SO2 allowance 
allocated to any CAIR SO2 unit at the source for the new 
30th year (i.e., the year that is 30 years after the calendar year for 
which such deductions are or could be made) and any CAIR SO2 
allowance allocated for the new 30th year and transferred to the source 
in accordance with subpart GGG of this part or subpart D of part 73 of 
this chapter.
    (b)(1) After a general account is established under Sec.  97.251(b) 
or Sec.  73.31(c) of this chapter, the Administrator will record in the 
general account any CAIR SO2 allowance allocated for each of 
the 30 years starting the later of 2010 or the year in which the 
general account is established and transferred to the general account 
in accordance with subpart GGG of this part or subpart D of part 73 of 
this chapter.
    (2) In 2011 and each year thereafter, after Administrator has 
completed all deductions under Sec.  97.254(b), the Administrator will 
record in the general account any CAIR SO2 allowance 
allocated for the new 30th year (i.e., the year that is 30 years after 
the calendar year for which such deductions are or could be made) and 
transferred to the general account in accordance with subpart GGG of 
this part or subpart D of part 73 of this chapter.
    (c) Serial numbers for allocated CAIR SO2 allowances. 
When recording the allocation of CAIR SO2 allowances issued 
by a permitting authority under Sec.  97.288, the Administrator will 
assign each such CAIR SO2 allowance a unique identification 
number that will include digits identifying the year of the control 
period for which the CAIR SO2 allowance is allocated.


Sec.  97.254  Compliance with CAIR SO2 emissions limitation.

    (a) Allowance transfer deadline. The CAIR SO2 allowances 
are available to be deducted for compliance with a source's CAIR 
SO2 emissions limitation for a control period in a given 
calendar year only if the CAIR SO2 allowances:
    (1) Were allocated for the control period in the year or a prior 
year;
    (2) Are held in the compliance account as of the allowance transfer 
deadline for the control period or are transferred into the compliance 
account by a CAIR SO2 allowance transfer correctly submitted 
for recordation under Sec.  97.260 by the allowance transfer deadline 
for the control period; and
    (3) Are not necessary for deductions for excess emissions for a 
prior control period under paragraph (d) of this section or for 
deduction under part 77 of this chapter.
    (b) Deductions for compliance. Following the recordation, in 
accordance with Sec.  97.261, of CAIR SO2 allowance 
transfers submitted for recordation in a source's compliance account by 
the allowance transfer deadline for a control period, the Administrator 
will deduct from the compliance account CAIR SO2 allowances 
available under paragraph (a) of this section in order to determine 
whether the source meets the CAIR SO2 emissions limitation 
for the control period as follows:
    (1) For a CAIR SO2 source subject to an Acid Rain 
emissions limitation, the Administrator will, in the following order:
    (i) Deduct the amount of CAIR SO2 allowances, available 
under paragraph (a) of this section and not issued by a permitting 
authority under Sec.  97.288, that is required under Sec. Sec.  
73.35(b) and (c) of this part. If there are sufficient CAIR 
SO2 allowances to complete this deduction, the deduction 
will be treated as satisfying the requirements of Sec. Sec.  73.35(b) 
and (c) of this chapter.
    (ii) Deduct the amount of CAIR SO2 allowances, available 
under paragraph (a) of this section and not issued by a permitting 
authority under Sec.  97.288, that is required under Sec. Sec.  
73.35(d) and 77.5 of this part. If there are sufficient CAIR 
SO2 allowances to complete this deduction, the deduction 
will be treated as satisfying the requirements of Sec. Sec.  73.35(d) 
and 77.5 of this chapter.
    (iii) Treating the CAIR SO2 allowances deducted under 
paragraph (b)(1)(i) of this section as also being deducted under this 
paragraph (b)(1)(iii), deduct CAIR SO2 allowances available 
under paragraph (a) of this section (including any issued by a 
permitting authority under Sec.  97.288) in order to determine whether 
the source meets the CAIR SO2 emissions limitation for the 
control period, as follows:
    (A) Until the tonnage equivalent of the CAIR SO2 
allowances deducted equals, or exceeds in accordance with paragraphs 
(c)(1) and (2) of this section, the number of tons of total sulfur 
dioxide emissions, determined in accordance with subpart HHH of this 
part, from all CAIR SO2 units at the source for the control 
period; or
    (B) If there are insufficient CAIR SO2 allowances to 
complete the deductions in paragraph (b)(1)(iii)(A) of this section, 
until no more CAIR SO2 allowances available under paragraph 
(a) of this section (including any issued by a permitting authority 
under Sec.  97.288) remain in the compliance account.
    (2) For a CAIR SO2 source not subject to an Acid Rain 
emissions limitation, the Administrator will deduct CAIR SO2 
allowances available under paragraph (a) of this section (including any 
issued by a permitting authority under Sec.  97.288) in order to 
determine whether the source meets the CAIR SO2 emissions 
limitation for the control period, as follows:
    (i) Until the tonnage equivalent of the CAIR SO2 
allowances deducted equals, or exceeds in accordance with paragraphs 
(c)(1) and (2) of this section, the number of tons of total sulfur 
dioxide emissions, determined in accordance with subpart HHH of this 
part, from all CAIR SO2 units at the source for the control 
period; or
    (ii) If there are insufficient CAIR SO2 allowances to 
complete the deductions in paragraph (b)(2)(i) of this section, until 
no more CAIR SO2 allowances available under paragraph (a) of 
this section (including any issued by a permitting authority Sec.  
97.288) remain in the compliance account.
    (c)(1) Identification of CAIR SO2 allowances by serial 
number. The CAIR authorized account representative for a source's 
compliance account may request that specific CAIR SO2 
allowances, identified by serial number, in the compliance account be 
deducted for emissions or excess emissions for a control period in 
accordance with paragraph (b) or (d) of this section. Such request 
shall be submitted to the Administrator by the allowance transfer 
deadline for the control period and include, in a format prescribed by 
the Administrator, the identification of the CAIR SO2 source 
and the appropriate serial numbers.
    (2) First-in, first-out. The Administrator will deduct CAIR 
SO2 allowances under paragraph (b) or (d) of this section 
from the source's compliance account, in the absence of an 
identification or in the case of a partial identification of CAIR 
SO2 allowances by serial number under paragraph (c)(1) of 
this section, on a first-in, first-out (FIFO) accounting basis in the 
following order:
    (i) Any CAIR SO2 allowances that were allocated to the 
units at the source for a control period before 2010, in the order of 
recordation;

[[Page 49800]]

    (ii) Any CAIR SO2 allowances that were allocated to any 
entity for a control period before 2010 and transferred and recorded in 
the compliance account pursuant to subpart GGG of this part or subpart 
D of part 73 of this chapter, in the order of recordation;
    (iii) Any CAIR SO2 allowances that were allocated to the 
units at the source for a control period during 2010 through 2014, in 
the order of recordation;
    (iv) Any CAIR SO2 allowances that were allocated to any 
entity for a control period during 2010 through 2014 and transferred 
and recorded in the compliance account pursuant to subpart GGG of this 
part or subpart D of part 73 of this chapter, in the order of 
recordation;
    (v) Any CAIR SO2 allowances that were allocated to the 
units at the source for a control period in 2015 or later, in the order 
of recordation; and
    (vi) Any CAIR SO2 allowances that were allocated to any 
entity for a control period in 2015 or later and transferred and 
recorded in the compliance account pursuant to subpart GGG of this part 
or subpart D of part 73 of this chapter, in the order of recordation.
    (d) Deductions for excess emissions. (1) After making the 
deductions for compliance under paragraph (b) of this section for a 
control period in a calendar year in which the CAIR SO2 
source has excess emissions, the Administrator will deduct from the 
source's compliance account the tonnage equivalent in CAIR 
SO2 allowances, allocated for the control period in the 
immediately following calendar year (including any issued by a 
permitting authority under Sec.  97.288), equal to, or exceeding in 
accordance with paragraphs (c)(1) and (2) of this section the sum of 
the following amounts:
    (i) The number of tons of the source's excess emissions minus, if 
the source is subject to an Acid Rain emissions limitation, the amount 
of the CAIR SO2 allowances required to be deducted under 
paragraph (b)(1)(ii) of this section; and
    (ii) Two times: (A) The number of tons of the source's excess 
emissions, if the source is not subject to an Acid Rain emissions 
limitation; or
    (B) The number of tons of the source's excess emissions minus the 
amount of the CAIR SO2 allowances required to be deducted 
under paragraph (b)(1)(ii) of this section, if the source is subject to 
an Acid Rain emissions limitation.
    (2) Any allowance deduction required under paragraph (d)(1) of this 
section shall not affect the liability of the owners and operators of 
the CAIR SO2 source or the CAIR SO2 units at the 
source for any fine, penalty, or assessment, or their obligation to 
comply with any other remedy, for the same violations, as ordered under 
the Clean Air Act or applicable State law.
    (e) Recordation of deductions. The Administrator will record in the 
appropriate compliance account all deductions from such an account 
under paragraph (b) or (d) of this section.
    (f) Administrator's action on submissions. (1) The Administrator 
may review and conduct independent audits concerning any submission 
under the CAIR SO2 Trading Program and make appropriate 
adjustments of the information in the submissions.
    (2) The Administrator may deduct CAIR SO2 allowances 
from or transfer CAIR SO2 allowances to a source's 
compliance account based on the information in the submissions, as 
adjusted under paragraph (f)(1) of this section.


Sec.  97.255  Banking.

    (a) CAIR SO2 allowances may be banked for future use or 
transfer in a compliance account or a general account in accordance 
with paragraph (b) of this section.
    (b) Any CAIR SO2 allowance that is held in a compliance 
account or a general account will remain in such account unless and 
until the CAIR SO2 allowance is deducted or transferred 
under Sec.  97.254, Sec.  97.256, or subpart GGG of this part.


Sec.  97.256  Account error.

    The Administrator may, at his or her sole discretion and on his or 
her own motion, correct any error in any CAIR SO2 Allowance 
Tracking System account. Within 10 business days of making such 
correction, the Administrator will notify the CAIR authorized account 
representative for the account.


Sec.  97.257  Closing of general accounts.

    (a) The CAIR authorized account representative of a general account 
may submit to the Administrator a request to close the account, which 
shall include a correctly submitted allowance transfer under Sec.  
97.260 for any CAIR SO2 allowances in the account to one or 
more other CAIR SO2 Allowance Tracking System accounts.
    (b) If a general account has no allowance transfers in or out of 
the account for a 12-month period or longer and does not contain any 
CAIR SO2 allowances, the Administrator may notify the CAIR 
authorized account representative for the account that the account will 
be closed following 20 business days after the notice is sent. The 
account will be closed after the 20-day period unless, before the end 
of the 20-day period, the Administrator receives a correctly submitted 
transfer of CAIR SO2 allowances into the account under Sec.  
97.260 or a statement submitted by the CAIR authorized account 
representative demonstrating to the satisfaction of the Administrator 
good cause as to why the account should not be closed.

Subpart GGG--CAIR SO2 Allowance Transfers


Sec.  97.260  Submission of CAIR SO2 allowance transfers.

    (a) A CAIR authorized account representative seeking recordation of 
a CAIR SO2 allowance transfer shall submit the transfer to 
the Administrator. To be considered correctly submitted, the CAIR 
SO2 allowance transfer shall include the following elements, 
in a format specified by the Administrator:
    (1) The account numbers of both the transferor and transferee 
accounts;
    (2) The serial number of each CAIR SO2 allowance that is 
in the transferor account and is to be transferred; and
    (3) The name and signature of the CAIR authorized account 
representatives of the transferor and transferee accounts and the dates 
signed.
    (b)(1) The CAIR authorized account representative for the 
transferee account can meet the requirements in paragraph (a)(3) of 
this section by submitting, in a format prescribed by the 
Administrator, a statement signed by the CAIR authorized account 
representative and identifying each account into which any transfer of 
allowances, submitted on or after the date on which the Administrator 
receives such statement, is authorized. Such authorization shall be 
binding on any CAIR authorized account representative for such account 
and shall apply to all transfers into the account that are submitted on 
or after such date of receipt, unless and until the Administrator 
receives a statement signed by the CAIR authorized account 
representative retracting the authorization for the account.
    (2) The statement under paragraph (b)(1) of this section shall 
include the following: ``By this signature I authorize any transfer of 
allowances into each account listed herein, except that I do not waive 
any remedies under State or Federal law to obtain correction of any 
erroneous transfers into such accounts. This authorization shall be 
binding on any CAIR authorized account representative for such account 
unless and until a statement signed by the CAIR authorized account 
representative retracting this authorization for the

[[Page 49801]]

account is received by the Administrator.''


Sec.  97.261  EPA recordation.

    (a) Within 5 business days (except as necessary to perform a 
transfer in perpetuity of CAIR SO2 allowances allocated to a 
CAIR SO2 unit or as provided in paragraph (b) of this 
section) of receiving a CAIR SO2 allowance transfer, the 
Administrator will record a CAIR SO2 allowance transfer by 
moving each CAIR SO2 allowance from the transferor account 
to the transferee account as specified by the request, provided that:
    (1) The transfer is correctly submitted under Sec.  97.260;
    (2) The transferor account includes each CAIR SO2 
allowance identified by serial number in the transfer; and
    (3) The transfer is in accordance with the limitation on transfer 
under Sec.  74.42 of this chapter and Sec.  74.47(c) of this chapter, 
as applicable.
    (b) A CAIR SO2 allowance transfer that is submitted for 
recordation after the allowance transfer deadline for a control period 
and that includes any CAIR SO2 allowances allocated for any 
control period before such allowance transfer deadline will not be 
recorded until after the Administrator completes the deductions under 
Sec.  97.254 for the control period immediately before such allowance 
transfer deadline.
    (c) Where a CAIR SO2 allowance transfer submitted for 
recordation fails to meet the requirements of paragraph (a) of this 
section, the Administrator will not record such transfer.


Sec.  97.262  Notification.

    (a) Notification of recordation. Within 5 business days of 
recordation of a CAIR SO2 allowance transfer under Sec.  
97.261, the Administrator will notify the CAIR authorized account 
representatives of both the transferor and transferee accounts.
    (b) Notification of non-recordation. Within 10 business days of 
receipt of a CAIR SO2 allowance transfer that fails to meet 
the requirements of Sec.  97.261(a), the Administrator will notify the 
CAIR authorized account representatives of both accounts subject to the 
transfer of:
    (1) A decision not to record the transfer, and
    (2) The reasons for such non-recordation.
    (c) Nothing in this section shall preclude the submission of a CAIR 
SO2 allowance transfer for recordation following 
notification of non-recordation.

Subpart HHH--Monitoring and Reporting


Sec.  97.270  General requirements.

    The owners and operators, and to the extent applicable, the CAIR 
designated representative, of a CAIR SO2 unit, shall comply 
with the monitoring, recordkeeping, and reporting requirements as 
provided in this subpart and in subparts F and G of part 75 of this 
chapter. For purposes of complying with such requirements, the 
definitions in Sec.  97.202 and in Sec.  72.2 of this chapter shall 
apply, and the terms ``affected unit,'' ``designated representative,'' 
and ``continuous emission monitoring system'' (or ``CEMS'') in part 75 
of this chapter shall be deemed to refer to the terms ``CAIR 
SO2 unit,'' ``CAIR designated representative,'' and 
``continuous emission monitoring system'' (or ``CEMS'') respectively, 
as defined in Sec.  97.202. The owner or operator of a unit that is not 
a CAIR SO2 unit but that is monitored under Sec.  
75.16(b)(2) of this chapter shall comply with the same monitoring, 
recordkeeping, and reporting requirements as a CAIR SO2 
unit.
    (a) Requirements for installation, certification, and data 
accounting. The owner or operator of each CAIR SO2 unit 
shall:
    (1) Install all monitoring systems required under this subpart for 
monitoring SO2 mass emissions and individual unit heat input 
(including all systems required to monitor SO2 
concentration, stack gas moisture content, stack gas flow rate, 
CO2 or O2 concentration, and fuel flow rate, as 
applicable, in accordance with Sec. Sec.  75.11 and 75.16 of this 
chapter);
    (2) Successfully complete all certification tests required under 
Sec.  97.271 and meet all other requirements of this subpart and part 
75 of this chapter applicable to the monitoring systems under paragraph 
(a)(1) of this section; and
    (3) Record, report, and quality-assure the data from the monitoring 
systems under paragraph (a)(1) of this section.
    (b) Compliance deadlines. The owner or operator shall meet the 
monitoring system certification and other requirements of paragraphs 
(a)(1) and (2) of this section on or before the following dates. The 
owner or operator shall record, report, and quality-assure the data 
from the monitoring systems under paragraph (a)(1) of this section on 
and after the following dates.
    (1) For the owner or operator of a CAIR SO2 unit that 
commences commercial operation before July 1, 2008, by January 1, 2009.
    (2) For the owner or operator of a CAIR SO2 unit that 
commences commercial operation on or after July 1, 2008, by the later 
of the following dates:
    (i) January 1, 2009; or
    (ii) 90 unit operating days or 180 calendar days, whichever occurs 
first, after the date on which the unit commences commercial operation.
    (3) For the owner or operator of a CAIR SO2 unit for 
which construction of a new stack or flue or installation of add-on 
SO2 emission controls is completed after the applicable 
deadline under paragraph (b)(1), (2), (4), or (5) of this section, by 
90 unit operating days or 180 calendar days, whichever occurs first, 
after the date on which emissions first exit to the atmosphere through 
the new stack or flue or add-on SO2 emissions controls.
    (4) Notwithstanding the dates in paragraphs (b)(1) and (2) of this 
section, for the owner or operator of a unit for which a CAIR opt-in 
permit application is submitted and not withdrawn and a CAIR opt-in 
permit is not yet issued or denied under subpart III of this part, by 
the date specified in Sec.  97.284(b).
    (5) Notwithstanding the dates in paragraphs (b)(1) and (2) of this 
section, for the owner or operator of a CAIR SO2 opt-in unit 
under subpart III of this part, by the date on which the CAIR 
SO2 opt-in unit enters the CAIR SO2 Trading 
Program as provided in Sec.  97.284(g).
    (c) Reporting data. (1) Except as provided in paragraph (c)(2) of 
this section, the owner or operator of a CAIR SO2 unit that 
does not meet the applicable compliance date set forth in paragraph (b) 
of this section for any monitoring system under paragraph (a)(1) of 
this section shall, for each such monitoring system, determine, record, 
and report maximum potential (or, as appropriate, minimum potential) 
values for SO2 concentration, SO2 emission rate, 
stack gas flow rate, stack gas moisture content, fuel flow rate, and 
any other parameters required to determine SO2 mass 
emissions and heat input in accordance with Sec.  75.31(b)(2) or (c)(3) 
of this chapter or section 2.4 of appendix D to part 75 of this 
chapter, as applicable.
    (2) The owner or operator of a CAIR SO2 unit that does 
not meet the applicable compliance date set forth in paragraph (b)(3) 
of this section for any monitoring system under paragraph (a)(1) of 
this section shall, for each such monitoring system, determine, record, 
and report substitute data using the applicable missing data procedures 
in subpart D of or appendix D to part 75 of this chapter, in lieu of 
the maximum potential (or, as appropriate, minimum potential) values, 
for a parameter if the

[[Page 49802]]

owner or operator demonstrates that there is continuity between the 
data streams for that parameter before and after the construction or 
installation under paragraph (b)(3) of this section.
    (d) Prohibitions. (1) No owner or operator of a CAIR SO2 
unit shall use any alternative monitoring system, alternative reference 
method, or any other alternative to any requirement of this subpart 
without having obtained prior written approval in accordance with Sec.  
97.275.
    (2) No owner or operator of a CAIR SO2 unit shall 
operate the unit so as to discharge, or allow to be discharged, 
SO2 emissions to the atmosphere without accounting for all 
such emissions in accordance with the applicable provisions of this 
subpart and part 75 of this chapter.
    (3) No owner or operator of a CAIR SO2 unit shall 
disrupt the continuous emission monitoring system, any portion thereof, 
or any other approved emission monitoring method, and thereby avoid 
monitoring and recording SO2 mass emissions discharged into 
the atmosphere, except for periods of recertification or periods when 
calibration, quality assurance testing, or maintenance is performed in 
accordance with the applicable provisions of this subpart and part 75 
of this chapter.
    (4) No owner or operator of a CAIR SO2 unit shall retire 
or permanently discontinue use of the continuous emission monitoring 
system, any component thereof, or any other approved monitoring system 
under this subpart, except under any one of the following 
circumstances:
    (i) During the period that the unit is covered by an exemption 
under Sec.  97.205 that is in effect;
    (ii) The owner or operator is monitoring emissions from the unit 
with another certified monitoring system approved, in accordance with 
the applicable provisions of this subpart and part 75 of this chapter, 
by the Administrator for use at that unit that provides emission data 
for the same pollutant or parameter as the retired or discontinued 
monitoring system; or
    (iii) The CAIR designated representative submits notification of 
the date of certification testing of a replacement monitoring system 
for the retired or discontinued monitoring system in accordance with 
Sec.  97.271(d)(3)(i).
    (e) Long-term cold storage. The owner or operator of a CAIR 
SO2 unit is subject to the applicable provisions of part 75 
of this chapter concerning units in long-term cold storage.


Sec.  97.271  Initial certification and recertification procedures.

    (a) The owner or operator of a CAIR SO2 unit shall be 
exempt from the initial certification requirements of this section for 
a monitoring system under Sec.  97.270(a)(1) if the following 
conditions are met:
    (1) The monitoring system has been previously certified in 
accordance with part 75 of this chapter; and
    (2) The applicable quality-assurance and quality-control 
requirements of Sec.  75.21 of this chapter and appendix B and appendix 
D to part 75 of this chapter are fully met for the certified monitoring 
system described in paragraph (a)(1) of this section.
    (b) The recertification provisions of this section shall apply to a 
monitoring system under Sec.  97.270(a)(1) exempt from initial 
certification requirements under paragraph (a) of this section.
    (c) [Reserved]
    (d) Except as provided in paragraph (a) of this section, the owner 
or operator of a CAIR SO2 unit shall comply with the 
following initial certification and recertification procedures, for a 
continuous monitoring system (i.e., a continuous emission monitoring 
system and an excepted monitoring system under appendix D to part 75 of 
this chapter) under Sec.  97.270(a)(1). The owner or operator of a unit 
that qualifies to use the low mass emissions excepted monitoring 
methodology under Sec.  75.19 of this chapter or that qualifies to use 
an alternative monitoring system under subpart E of part 75 of this 
chapter shall comply with the procedures in paragraph (e) or (f) of 
this section respectively.
    (1) Requirements for initial certification. The owner or operator 
shall ensure that each continuous monitoring system under Sec.  
97.270(a)(1) (including the automated data acquisition and handling 
system) successfully completes all of the initial certification testing 
required under Sec.  75.20 of this chapter by the applicable deadline 
in Sec.  97.270(b). In addition, whenever the owner or operator 
installs a monitoring system to meet the requirements of this subpart 
in a location where no such monitoring system was previously installed, 
initial certification in accordance with Sec.  75.20 of this chapter is 
required.
    (2) Requirements for recertification. Whenever the owner or 
operator makes a replacement, modification, or change in any certified 
continuous emission monitoring system under Sec.  97.270(a)(1) that may 
significantly affect the ability of the system to accurately measure or 
record SO2 mass emissions or heat input rate or to meet the 
quality-assurance and quality-control requirements of Sec.  75.21 of 
this chapter or appendix B to part 75 of this chapter, the owner or 
operator shall recertify the monitoring system in accordance with Sec.  
75.20(b) of this chapter. Furthermore, whenever the owner or operator 
makes a replacement, modification, or change to the flue gas handling 
system or the unit's operation that may significantly change the stack 
flow or concentration profile, the owner or operator shall recertify 
each continuous emission monitoring system whose accuracy is 
potentially affected by the change, in accordance with Sec.  75.20(b) 
of this chapter. Examples of changes to a continuous emission 
monitoring system that require recertification include: replacement of 
the analyzer, complete replacement of an existing continuous emission 
monitoring system, or change in location or orientation of the sampling 
probe or site. Any fuel flowmeter system under Sec.  97.270(a)(1) is 
subject to the recertification requirements in Sec.  75.20(g)(6) of 
this chapter.
    (3) Approval process for initial certification and recertification. 
Paragraphs (d)(3)(i) through (iv) of this section apply to both initial 
certification and recertification of a continuous monitoring system 
under Sec.  97.270(a)(1). For recertifications, replace the words 
``certification'' and ``initial certification'' with the word 
``recertification'', replace the word ``certified'' with the word 
``recertified,'' and follow the procedures in Sec. Sec.  75.20(b)(5) 
and (g)(7) of this chapter in lieu of the procedures in paragraph 
(d)(3)(v) of this section.
    (i) Notification of certification. The CAIR designated 
representative shall submit to the appropriate EPA Regional Office and 
the Administrator written notice of the dates of certification testing, 
in accordance with Sec.  97.273.
    (ii) Certification application. The CAIR designated representative 
shall submit to the Administrator a certification application for each 
monitoring system. A complete certification application shall include 
the information specified in Sec.  75.63 of this chapter.
    (iii) Provisional certification date. The provisional certification 
date for a monitoring system shall be determined in accordance with 
Sec.  75.20(a)(3) of this chapter. A provisionally certified monitoring 
system may be used under the CAIR SO2 Trading Program for a 
period not to exceed 120 days after receipt by the Administrator of the 
complete certification application for the monitoring system under 
paragraph (d)(3)(ii) of this section. Data measured and recorded by the 
provisionally certified monitoring system, in

[[Page 49803]]

accordance with the requirements of part 75 of this chapter, will be 
considered valid quality-assured data (retroactive to the date and time 
of provisional certification), provided that the Administrator does not 
invalidate the provisional certification by issuing a notice of 
disapproval within 120 days of the date of receipt of the complete 
certification application by the Administrator.
    (iv) Certification application approval process. The Administrator 
will issue a written notice of approval or disapproval of the 
certification application to the owner or operator within 120 days of 
receipt of the complete certification application under paragraph 
(d)(3)(ii) of this section. In the event the Administrator does not 
issue such a notice within such 120-day period, each monitoring system 
that meets the applicable performance requirements of part 75 of this 
chapter and is included in the certification application will be deemed 
certified for use under the CAIR SO2 Trading Program.
    (A) Approval notice. If the certification application is complete 
and shows that each monitoring system meets the applicable performance 
requirements of part 75 of this chapter, then the Administrator will 
issue a written notice of approval of the certification application 
within 120 days of receipt.
    (B) Incomplete application notice. If the certification application 
is not complete, then the Administrator will issue a written notice of 
incompleteness that sets a reasonable date by which the CAIR designated 
representative must submit the additional information required to 
complete the certification application. If the CAIR designated 
representative does not comply with the notice of incompleteness by the 
specified date, then the Administrator may issue a notice of 
disapproval under paragraph (d)(3)(iv)(C) of this section. The 120-day 
review period shall not begin before receipt of a complete 
certification application.
    (C) Disapproval notice. If the certification application shows that 
any monitoring system does not meet the performance requirements of 
part 75 of this chapter or if the certification application is 
incomplete and the requirement for disapproval under paragraph 
(d)(3)(iv)(B) of this section is met, then the Administrator will issue 
a written notice of disapproval of the certification application. Upon 
issuance of such notice of disapproval, the provisional certification 
is invalidated by the Administrator and the data measured and recorded 
by each uncertified monitoring system shall not be considered valid 
quality-assured data beginning with the date and hour of provisional 
certification (as defined under Sec.  75.20(a)(3) of this chapter). The 
owner or operator shall follow the procedures for loss of certification 
in paragraph (d)(3)(v) of this section for each monitoring system that 
is disapproved for initial certification.
    (D) Audit decertification. The Administrator may issue a notice of 
disapproval of the certification status of a monitor in accordance with 
Sec.  97.272(b).
    (v) Procedures for loss of certification. If the Administrator 
issues a notice of disapproval of a certification application under 
paragraph (d)(3)(iv)(C) of this section or a notice of disapproval of 
certification status under paragraph (d)(3)(iv)(D) of this section, 
then:
    (A) The owner or operator shall substitute the following values, 
for each disapproved monitoring system, for each hour of unit operation 
during the period of invalid data specified under Sec.  
75.20(a)(4)(iii), Sec.  75.20(g)(7), or Sec.  75.21(e) of this chapter 
and continuing until the applicable date and hour specified under Sec.  
75.20(a)(5)(i) or (g)(7) of this chapter:
    (1) For a disapproved SO2 pollutant concentration 
monitor and disapproved flow monitor, respectively, the maximum 
potential concentration of SO2 and the maximum potential 
flow rate, as defined in sections 2.1.1.1 and 2.1.4.1 of appendix A to 
part 75 of this chapter.
    (2) For a disapproved moisture monitoring system and disapproved 
diluent gas monitoring system, respectively, the minimum potential 
moisture percentage and either the maximum potential CO2 
concentration or the minimum potential O2 concentration (as 
applicable), as defined in sections 2.1.5, 2.1.3.1, and 2.1.3.2 of 
appendix A to part 75 of this chapter.
    (3) For a disapproved fuel flowmeter system, the maximum potential 
fuel flow rate, as defined in section 2.4.2.1 of appendix D to part 75 
of this chapter.
    (B) The CAIR designated representative shall submit a notification 
of certification retest dates and a new certification application in 
accordance with paragraphs (d)(3)(i) and (ii) of this section.
    (C) The owner or operator shall repeat all certification tests or 
other requirements that were failed by the monitoring system, as 
indicated in the Administrator's notice of disapproval, no later than 
30 unit operating days after the date of issuance of the notice of 
disapproval.
    (e) Initial certification and recertification procedures for units 
using the low mass emission excepted methodology under Sec.  75.19 of 
this chapter. The owner or operator of a unit qualified to use the low 
mass emissions (LME) excepted methodology under Sec.  75.19 of this 
chapter shall meet the applicable certification and recertification 
requirements in Sec. Sec.  75.19(a)(2) and 75.20(h) of this chapter. If 
the owner or operator of such a unit elects to certify a fuel flowmeter 
system for heat input determination, the owner or operator shall also 
meet the certification and recertification requirements in Sec.  
75.20(g) of this chapter.
    (f) Certification/recertification procedures for alternative 
monitoring systems. The CAIR designated representative of each unit for 
which the owner or operator intends to use an alternative monitoring 
system approved by the Administrator under subpart E of part 75 of this 
chapter shall comply with the applicable notification and application 
procedures of Sec.  75.20(f) of this chapter.


Sec.  97.272  Out of control periods.

    (a) Whenever any monitoring system fails to meet the quality-
assurance and quality-control requirements or data validation 
requirements of part 75 of this chapter, data shall be substituted 
using the applicable missing data procedures in subpart D of or 
appendix D to part 75 of this chapter.
    (b) Audit decertification. Whenever both an audit of a monitoring 
system and a review of the initial certification or recertification 
application reveal that any monitoring system should not have been 
certified or recertified because it did not meet a particular 
performance specification or other requirement under Sec.  97.271 or 
the applicable provisions of part 75 of this chapter, both at the time 
of the initial certification or recertification application submission 
and at the time of the audit, the Administrator will issue a notice of 
disapproval of the certification status of such monitoring system. For 
the purposes of this paragraph, an audit shall be either a field audit 
or an audit of any information submitted to the permitting authority or 
the Administrator. By issuing the notice of disapproval, the 
Administrator revokes prospectively the certification status of the 
monitoring system. The data measured and recorded by the monitoring 
system shall not be considered valid quality-assured data from the date 
of issuance of the notification of the revoked certification status 
until the date and time that the

[[Page 49804]]

owner or operator completes subsequently approved initial certification 
or recertification tests for the monitoring system. The owner or 
operator shall follow the applicable initial certification or 
recertification procedures in Sec.  97.271 for each disapproved 
monitoring system.


Sec.  97.273  Notifications.

    The CAIR designated representative for a CAIR SO2 unit 
shall submit written notice to the Administrator in accordance with 
Sec.  75.61 of this chapter.


Sec.  97.274  Recordkeeping and reporting.

    (a) General provisions. The CAIR designated representative shall 
comply with all recordkeeping and reporting requirements in this 
section, the applicable recordkeeping and reporting requirements in 
subparts F and G of part 75 of this chapter, and the requirements of 
Sec.  97.210(e)(1).
    (b) Monitoring plans. The owner or operator of a CAIR 
SO2 unit shall comply with requirements of Sec.  75.62 of 
this chapter .
    (c) Certification applications. The CAIR designated representative 
shall submit an application to the Administrator within 45 days after 
completing all initial certification or recertification tests required 
under Sec.  97.271, including the information required under Sec.  
75.63 of this chapter.
    (d) Quarterly reports. The CAIR designated representative shall 
submit quarterly reports, as follows:
    (1) The CAIR designated representative shall report the 
SO2 mass emissions data and heat input data for the CAIR 
SO2 unit, in an electronic quarterly report in a format 
prescribed by the Administrator, for each calendar quarter beginning 
with:
    (i) For a unit that commences commercial operation before July 1, 
2008, the calendar quarter covering January 1, 2009 through March 31, 
2009;
    (ii) For a unit that commences commercial operation on or after 
July 1, 2008, the calendar quarter corresponding to the earlier of the 
date of provisional certification or the applicable deadline for 
initial certification under Sec.  97.270(b), unless that quarter is the 
third or fourth quarter of 2008, in which case reporting shall commence 
in the quarter covering January 1, 2009 through March 31, 2009;
    (iii) Notwithstanding paragraphs (d)(1)(i) and (ii) of this 
section, for a unit for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied under subpart III of this part, the calendar quarter 
corresponding to the date specified in Sec.  97.284(b); and
    (iv) Notwithstanding paragraphs (d)(1)(i) and (ii) of this section, 
for a CAIR NOX opt-in unit under subpart III of this part, 
the calendar quarter corresponding to the date on which the CAIR 
NOX opt-in unit enters the CAIR SO2 Trading 
Program as provided in Sec.  97.284(g).
    (2) The CAIR designated representative shall submit each quarterly 
report to the Administrator within 30 days following the end of the 
calendar quarter covered by the report. Quarterly reports shall be 
submitted in the manner specified in Sec.  75.64 of this chapter.
    (3) For CAIR SO2 units that are also subject to an Acid 
Rain emissions limitation or the CAIR NOX Annual Trading 
Program, CAIR NOX Ozone Season Trading Program, or Hg Budget 
Trading Program, quarterly reports shall include the applicable data 
and information required by subparts F through I of part 75 of this 
chapter as applicable, in addition to the SO2 mass emission 
data, heat input data, and other information required by this subpart.
    (e) Compliance certification. The CAIR designated representative 
shall submit to the Administrator a compliance certification (in a 
format prescribed by the Administrator) in support of each quarterly 
report based on reasonable inquiry of those persons with primary 
responsibility for ensuring that all of the unit's emissions are 
correctly and fully monitored. The certification shall state that:
    (1) The monitoring data submitted were recorded in accordance with 
the applicable requirements of this subpart and part 75 of this 
chapter, including the quality assurance procedures and specifications; 
and
    (2) For a unit with add-on SO2 emission controls and for 
all hours where SO2 data are substituted in accordance with 
Sec.  75.34(a)(1) of this chapter, the add-on emission controls were 
operating within the range of parameters listed in the quality 
assurance/quality control program under appendix B to part 75 of this 
chapter and the substitute data values do not systematically 
underestimate SO2 emissions.


Sec.  97.275  Petitions.

    The CAIR designated representative of a CAIR SO2 unit 
may submit a petition under Sec.  75.66 of this chapter to the 
Administrator requesting approval to apply an alternative to any 
requirement of this subpart. Application of an alternative to any 
requirement of this subpart is in accordance with this subpart only to 
the extent that the petition is approved in writing by the 
Administrator, in consultation with the permitting authority.


Sec.  97.276  Additional requirements to provide heat input data.

    The owner or operator of a CAIR SO2 unit that monitors 
and reports SO2 mass emissions using a SO2 
concentration system and a flow system shall also monitor and report 
heat input rate at the unit level using the procedures set forth in 
part 75 of this chapter.

Subpart III--CAIR SO2 Opt-in Units


Sec.  97.280  Applicability.

    A CAIR SO2 opt-in unit must be a unit that:
    (a) Is located in a State that submits, and for which the 
Administrator approves, a State implementation plan revision in 
accordance with Sec.  51.124(r)(1), (2), or (3) of this chapter 
establishing procedures concerning CAIR opt-in units;
    (b) Is not a CAIR SO2 unit under Sec.  97.204 and is not 
covered by a retired unit exemption under Sec.  97.205 that is in 
effect;
    (c) Is not covered by a retired unit exemption under Sec.  72.8 of 
this chapter that is in effect and is not an opt-in source under part 
74 of this chapter;
    (d) Has or is required or qualified to have a title V operating 
permit or other federally enforceable permit; and
    (e) Vents all of its emissions to a stack and can meet the 
monitoring, recordkeeping, and reporting requirements of subpart HH of 
this part.


Sec.  97.281  General.

    (a) Except as otherwise provided in Sec. Sec.  97.201 through 
97.204, Sec. Sec.  97.206 through 97.208, and subparts BBB and CCC and 
subparts FFF through HHH of this part, a CAIR SO2 opt-in 
unit shall be treated as a CAIR SO2 unit for purposes of 
applying such sections and subparts of this part.
    (b) Solely for purposes of applying, as provided in this subpart, 
the requirements of subpart HHH of this part to a unit for which a CAIR 
opt-in permit application is submitted and not withdrawn and a CAIR 
opt-in permit is not yet issued or denied under this subpart, such unit 
shall be treated as a CAIR SO2 unit before issuance of a 
CAIR opt-in permit for such unit.


Sec.  97.282  CAIR designated representative.

    Any CAIR SO2 opt-in unit, and any unit for which a CAIR 
opt-in permit application is submitted and not withdrawn and a CAIR 
opt-in permit is not yet issued or denied under this

[[Page 49805]]

subpart, located at the same source as one or more CAIR SO2 
units shall have the same CAIR designated representative and alternate 
CAIR designated representative as such CAIR SO2 units.


Sec.  97.283  Applying for CAIR opt-in permit.

    (a) Applying for initial CAIR opt-in permit. The CAIR designated 
representative of a unit meeting the requirements for a CAIR 
NOX opt-in unit in Sec.  97.280 may apply for an initial 
CAIR opt-in permit at any time, except as provided under Sec.  
97.286(f) and (g), and, in order to apply, must submit the following:
    (1) A complete CAIR permit application under Sec.  97.222;
    (2) A certification, in a format specified by the permitting 
authority, that the unit:
    (i) Is not a CAIR SO2 unit under Sec.  97.204 and is not 
covered by a retired unit exemption under Sec.  97.205 that is in 
effect;
    (ii) Is not covered by a retired unit exemption under Sec.  72.8 of 
this chapter that is in effect;
    (iii) Is not, and so long as the unit is a CAIR SO2 opt-
in unit, will not become, an opt-in source under part 74 of this 
chapter;
    (iv) Vents all of its emissions to a stack, and
    (v) Has documented heat input for more than 876 hours during the 6 
months immediately preceding submission of the CAIR permit application 
under Sec.  97.222;
    (3) A monitoring plan in accordance with subpart HHH of this part;
    (4) A complete certificate of representation under Sec.  97.213 
consistent with Sec.  97.282, if no CAIR designated representative has 
been previously designated for the source that includes the unit; and
    (5) A statement, in a format specified by the permitting authority, 
whether the CAIR designated representative requests that the unit be 
allocated CAIR NOX allowances under Sec.  97.280(b) or Sec.  
97.288(c) (subject to the conditions in Sec. Sec.  97.284(h) and 
97.286(g)), to the extent such allocation is provided in a State 
implementation plan revision submitted in accordance with Sec.  
51.124(r)(1), (2), or (3) of this chapter and approved by the 
Administrator.
    (b) Duty to reapply. (1) The CAIR designated representative of a 
CAIR SO2 opt-in unit shall submit a complete CAIR permit 
application under Sec.  97.222 to renew the CAIR opt-in unit permit in 
accordance with the permitting authority's regulations for title V 
operating permits, or the permitting authority's regulations for other 
federally enforceable permits if applicable, addressing permit renewal.
    (2) Unless the permitting authority issues a notification of 
acceptance of withdrawal of the CAIR SO2 opt-in unit from 
the CAIR SO2 Annual Trading Program in accordance with Sec.  
97.286 or the unit becomes a CAIR SO2 unit under Sec.  
97.204, the CAIR SO2 opt-in unit shall remain subject to the 
requirements for a CAIR SO2 opt-in unit, even if the CAIR 
designated representative for the CAIR SO2 opt-in unit fails 
to submit a CAIR permit application that is required for renewal of the 
CAIR opt-in permit under paragraph (b)(1) of this section.


Sec.  97.284  Opt-in process.

    The permitting authority will issue or deny a CAIR opt-in permit 
for a unit for which an initial application for a CAIR opt-in permit 
under Sec.  97.183 is submitted in accordance with the following, to 
the extent provided in a State implementation plan revision submitted 
in accordance with Sec.  51.124(r)(1), (2) or (3) of this chapter and 
approved by the Administrator:
    (a) Interim review of monitoring plan. The permitting authority and 
the Administrator will determine, on an interim basis, the sufficiency 
of the monitoring plan accompanying the initial application for a CAIR 
opt-in permit under Sec.  97.283. A monitoring plan is sufficient, for 
purposes of interim review, if the plan appears to contain information 
demonstrating that the NOX emissions rate and heat input of 
the unit and all other applicable parameters are monitored and reported 
in accordance with subpart HH of this part. A determination of 
sufficiency shall not be construed as acceptance or approval of the 
monitoring plan.
    (b) Monitoring and reporting. (1)(i) If the permitting authority 
and the Administrator determines that the monitoring plan is sufficient 
under paragraph (a) of this section, the owner or operator shall 
monitor and report the SO2 emissions rate and the heat input 
of the unit and all other applicable parameters, in accordance with 
subpart HHH of this part, starting on the date of certification of the 
appropriate monitoring systems under subpart HH of this part and 
continuing until a CAIR opt-in permit is denied under Sec.  97.284(f) 
or, if a CAIR opt-in permit is issued, the date and time when the unit 
is withdrawn from the CAIR SO2 Trading Program in accordance 
with Sec.  97.286.
    (ii) The monitoring and reporting under paragraph (b)(1)(i) of this 
section shall include the entire control period immediately before the 
date on which the unit enters the CAIR SO2 Trading Program 
under Sec.  97.284(g), during which period monitoring system 
availability must not be less than 90 percent under subpart HHH of this 
part and the unit must be in full compliance with any applicable State 
or Federal emissions or emissions-related requirements.
    (2) To the extent the SO2 emissions rate and the heat 
input of the unit are monitored and reported in accordance with subpart 
HHH of this part for one or more control periods, in addition to the 
control period under paragraph (b)(1)(ii) of this section, during which 
control periods monitoring system availability is not less than 90 
percent under subpart HHH of this part and the unit is in full 
compliance with any applicable State or Federal emissions or emissions-
related requirements and which control periods begin not more than 3 
years before the unit enters the CAIR SO2 Trading Program 
under Sec.  97.284(g), such information shall be used as provided in 
paragraphs (c) and (d) of this section.
    (c) Baseline heat input. The unit's baseline heat rate shall equal:
    (1) If the unit's SO2 emissions rate and heat input are 
monitored and reported for only one control period, in accordance with 
paragraph (b)(1) of this section, the unit's total heat input (in 
mmBtu) for the control period; or
    (2) If the unit's SO2 emissions rate and heat input are 
monitored and reported for more than one control period, in accordance 
with paragraphs (b)(1) and (2) of this section, the average of the 
amounts of the unit's total heat input (in mmBtu) for the control 
periods under paragraphs (b)(1)(ii) and (b)(2) of this section.
    (d) Baseline SO2 emission rate. The unit's baseline 
SO2 emission rate shall equal:
    (1) If the unit's SO2 emissions rate and heat input are 
monitored and reported for only one control period, in accordance with 
paragraph (b)(1) of this section, the unit's NOX emissions 
rate (in lb/mmBtu) for the control period;
    (2) If the unit's SO2 emissions rate and heat input are 
monitored and reported for more than one control period, in accordance 
with paragraphs (b)(1) and (2) of this section, and the unit does not 
have add-on SO2 emission controls during any such control 
periods, the average of the amounts of the unit's SO2 
emissions rate (in lb/mmBtu) for the control periods under paragraphs 
(b)(1)(ii) and (b)(2) of this section; or
    (3) If the unit's SO2 emissions rate and heat input are 
monitored and reported for more than one control period, in accordance 
with paragraphs (b)(1) and (2) of this section, and the unit has add-on 
SO2 emission controls during any

[[Page 49806]]

such control periods, the average of the amounts of the unit's 
SO2 emissions rate (in lb/mmBtu) for such control periods 
during which the unit has add-on SO2 emission controls.
    (e) Issuance of CAIR opt-in permit. After calculating the baseline 
heat input and the baseline SO2 emissions rate for the unit 
under paragraphs (c) and (d) of this section and if the permitting 
authority determines that the CAIR designated representative shows that 
the unit meets the requirements for a CAIR SO2 opt-in unit 
in Sec.  97.280 and meets the elements certified in Sec.  97.283(a)(2), 
the permitting authority will issue a CAIR opt-in permit. The 
permitting authority will provide a copy of the CAIR opt-in permit to 
the Administrator, who will then establish a compliance account for the 
source that includes the CAIR SO2 opt-in unit unless the 
source already has a compliance account.
    (f) Issuance of denial of CAIR opt-in permit. Notwithstanding 
paragraphs (a) through (e) of this section, if at any time before 
issuance of a CAIR opt-in permit for the unit, the permitting authority 
determines that the CAIR designated representative fails to show that 
the unit meets the requirements for a CAIR SO2 opt-in unit 
in Sec.  97.280 or meets the elements certified in Sec.  97.283(a)(2), 
the permitting authority will issue a denial of a CAIR opt-in permit 
for the unit.
    (g) Date of entry into CAIR SO2 Annual Trading Program. A unit for 
which an initial CAIR opt-in permit is issued by the permitting 
authority shall become a CAIR SO2 opt-in unit, and a CAIR 
SO2 unit, as of the later of January 1, 2009 or January 1 of 
the first control period during which such CAIR opt-in permit is 
issued.
    (h) Repowered CAIR SO2 opt-in unit. (1) If CAIR designated 
representative requests, and the permitting authority issues a CAIR 
opt-in permit providing for, allocation to a CAIR SO2 opt-in 
unit of CAIR SO2 allowances under Sec.  97.288(c) and such 
unit is repowered after its date of entry into the CAIR SO2 
Trading Program under paragraph (g) of this section, the repowered unit 
shall be treated as a CAIR SO2 opt-in unit replacing the 
original CAIR SO2 opt-in unit, as of the date of start-up of 
the repowered unit's combustion chamber.
    (2) Notwithstanding paragraphs (c) and (d) of this section, as of 
the date of start-up under paragraph (h)(1) of this section, the 
repowered unit shall be deemed to have the same date of commencement of 
operation, date of commencement of commercial operation, baseline heat 
input, and baseline NOX emission rate as the original CAIR 
SO2 opt-in unit, and the original CAIR SO2 opt-in 
unit shall no longer be treated as a CAIR SO2 opt-in unit or 
a CAIR SO2 unit.


Sec.  97.285  CAIR opt-in permit contents.

    (a) Each CAIR opt-in permit will contain:
    (1) All elements required for a complete CAIR permit application 
under Sec.  97.222;
    (2) The certification in Sec.  97.283(a)(2);
    (3) The unit's baseline heat input under Sec.  97.284(c);
    (4) The unit's baseline SO2 emission rate under Sec.  
97.284(d);
    (5) A statement whether the unit is to be allocated CAIR 
SO2 allowances under Sec.  97.280(b) or Sec.  97.288(c) 
(subject to the conditions in Sec. Sec.  97.284(h) and 97.286(g));
    (6) A statement that the unit may withdraw from the CAIR 
SO2 Trading Program only in accordance with Sec.  97.286; 
and
    (7) A statement that the unit is subject to, and the owners and 
operators of the unit must comply with, the requirements of Sec.  
97.287.
    (b) Each CAIR opt-in permit is deemed to incorporate automatically 
the definitions of terms under Sec.  97.202 and, upon recordation by 
the Administrator under subpart FFF, GGG, or III of this part or this 
subpart, every allocation, transfer, or deduction of CAIR 
SO2 allowances to or from the compliance account of the 
source that includes a CAIR SO2 opt-in unit covered by the 
CAIR opt-in permit.
    (c) The CAIR opt-in permit shall be included, in a format 
prescribed by the permitting authority, in the CAIR permit for the 
source where the CAIR SO2 opt-in unit is located.


Sec.  97.286  Withdrawal from CAIR SO2 Trading Program.

    Except as provided under paragraph (g) of this section, a CAIR 
SO2 opt-in unit may withdraw from the CAIR SO2 
Trading Program, but only if the permitting authority issues a 
notification to the CAIR designated representative of the CAIR 
SO2 opt-in unit of the acceptance of the withdrawal of the 
CAIR SO2 opt-in unit in accordance with paragraph (d) of 
this section.
    (a) Requesting withdrawal. In order to withdraw a CAIR 
SO2 opt-in unit from the CAIR SO2 Trading 
Program, the CAIR designated representative of the CAIR SO2 
opt-in unit shall submit to the permitting authority a request to 
withdraw effective as of midnight of December 31 of a specified 
calendar year, which date must be at least 4 years after December 31 of 
the year of entry into the CAIR SO2 Trading Program under 
Sec.  97.284(g). The request must be submitted no later than 90 days 
before the requested effective date of withdrawal.
    (b) Conditions for withdrawal. Before a CAIR SO2 opt-in 
unit covered by a request under paragraph (a) of this section may 
withdraw from the CAIR SO2 Trading Program and the CAIR opt-
in permit may be terminated under paragraph (e) of this section, the 
following conditions must be met:
    (1) For the control period ending on the date on which the 
withdrawal is to be effective, the source that includes the CAIR 
SO2 opt-in unit must meet the requirement to hold CAIR 
SO2 allowances under Sec.  97.206(c) and cannot have any 
excess emissions.
    (2) After the requirement for withdrawal under paragraph (b)(1) of 
this section is met, the Administrator will deduct from the compliance 
account of the source that includes the CAIR SO2 opt-in unit 
CAIR SO2 allowances equal in amount to and allocated for the 
same or a prior control period as any CAIR SO2 allowances 
allocated to the CAIR SO2 opt-in unit under Sec.  97.288 for 
any control period for which the withdrawal is to be effective. If 
there are no remaining CAIR SO2 units at the source, the 
Administrator will close the compliance account, and the owners and 
operators of the CAIR SO2 opt-in unit may submit a CAIR 
SO2 allowance transfer for any remaining CAIR SO2 
allowances to another CAIR SO2 Allowance Tracking System in 
accordance with subpart GGG of this part.
    (c) Notification. (1) After the requirements for withdrawal under 
paragraphs (a) and (b) of this section are met (including deduction of 
the full amount of CAIR SO2 allowances required), the 
permitting authority will issue a notification to the CAIR designated 
representative of the CAIR SO2 opt-in unit of the acceptance 
of the withdrawal of the CAIR SO2 opt-in unit as of midnight 
on December 31 of the calendar year for which the withdrawal was 
requested.
    (2) If the requirements for withdrawal under paragraphs (a) and (b) 
of this section are not met, the permitting authority will issue a 
notification to the CAIR designated representative of the CAIR 
SO2 opt-in unit that the CAIR SO2 opt-in unit's 
request to withdraw is denied. Such CAIR SO2 opt-in unit 
shall continue to be a CAIR SO2 opt-in unit.
    (d) Permit amendment. After the permitting authority issues a 
notification under paragraph (c)(1) of this section that the 
requirements for withdrawal have been met, the permitting authority 
will revise the

[[Page 49807]]

CAIR permit covering the CAIR SO2 opt-in unit to terminate 
the CAIR opt-in permit for such unit as of the effective date specified 
under paragraph (c)(1) of this section. The unit shall continue to be a 
CAIR SO2 opt-in unit until the effective date of the 
termination and shall comply with all requirements under the CAIR 
SO2 Trading Program concerning any control periods for which 
the unit is a CAIR SO2 opt-in unit, even if such 
requirements arise or must be complied with after the withdrawal takes 
effect.
    (e) Reapplication upon failure to meet conditions of withdrawal. If 
the permitting authority denies the CAIR SO2 opt-in unit's 
request to withdraw, the CAIR designated representative may submit 
another request to withdraw in accordance with paragraphs (a) and (b) 
of this section.
    (f) Ability to reapply to the CAIR SO2 Annual Trading 
Program. Once a CAIR SO2 opt-in unit withdraws from the CAIR 
SO2 Trading Program and its CAIR opt-in permit is terminated 
under this section, the CAIR designated representative may not submit 
another application for a CAIR opt-in permit under Sec.  97.283 for 
such CAIR SO2 opt-in unit before the date that is 4 years 
after the date on which the withdrawal became effective. Such new 
application for a CAIR opt-in permit will be treated as an initial 
application for a CAIR opt-in permit under Sec.  97.284.
    (g) Inability to withdraw. Notwithstanding paragraphs (a) through 
(f) of this section, a CAIR SO2 opt-in unit shall not be 
eligible to withdraw from the CAIR SO2 Trading Program if 
the CAIR designated representative of the CAIR SO2 opt-in 
unit requests, and the permitting authority issues a CAIR 
SO2 opt-in permit providing for, allocation to the CAIR 
SO2 opt-in unit of CAIR SO2 allowances under 
Sec.  97.288(c).


Sec.  97.287  Change in regulatory status.

    (a) Notification. If a CAIR SO2 opt-in unit becomes a 
CAIR SO2 unit under Sec.  7.204, then the CAIR designated 
representative shall notify in writing the permitting authority and the 
Administrator of such change in the CAIR SO2 opt-in unit's 
regulatory status, within 30 days of such change.
    (b) Permitting authority's and Administrator's actions. (1) If a 
CAIR SO2 opt-in unit becomes a CAIR SO2 unit 
under Sec.  97.204, the permitting authority will revise the CAIR 
SO2 opt-in unit's CAIR opt-in permit to meet the 
requirements of a CAIR permit under Sec.  97.223 as of the date on 
which the CAIR SO2 opt-in unit becomes a CAIR SO2 
unit under Sec.  97.204.
    (2)(i) The Administrator will deduct from the compliance account of 
the source that includes the CAIR SO2 opt-in unit that 
becomes a CAIR SO2 unit under Sec.  97.204, CAIR 
SO2 allowances equal in amount to and allocated for the same 
or a prior control period as:
    (A) Any CAIR SO2 allowances allocated to the CAIR 
SO2 opt-in unit under Sec.  97.288 for any control period 
after the date on which the CAIR SO2 opt-in unit becomes a 
CAIR SO2 unit under Sec.  97.204; and
    (B) If the date on which the CAIR SO2 opt-in unit 
becomes a CAIR SO2 unit under Sec.  97.204 is not December 
31, the CAIR SO2 allowances allocated to the CAIR 
SO2 opt-in unit under Sec.  97.288 for the control period 
that includes the date on which the CAIR SO2 opt-in unit 
becomes a CAIR SO2 unit under Sec.  97.204, multiplied by 
the ratio of the number of days, in the control period, starting with 
the date on which the CAIR SO2 opt-in unit becomes a CAIR 
SO2 unit under Sec.  97.204 divided by the total number of 
days in the control period and rounded to the nearest whole allowance 
as appropriate.
    (ii) The CAIR designated representative shall ensure that the 
compliance account of the source that includes the CAIR SO2 
unit that becomes a CAIR SO2 unit under Sec.  97.204 
contains the CAIR SO2 allowances necessary for completion of 
the deduction under paragraph (b)(2)(i) of this section.


Sec.  97.288  CAIR SO2 allowance allocations to CAIR SO2 opt-in units.

    (a) Timing requirements. (1) When the CAIR opt-in permit is issued 
under Sec.  97.284(e), the permitting authority will allocate CAIR 
SO2 allowances to the CAIR SO2 opt-in unit, and 
submit to the Administrator the allocation for the control period in 
which a CAIR SO2 opt-in unit enters the CAIR SO2 
Trading Program under Sec.  97.284(g), in accordance with paragraph (b) 
or (c) of this section.
    (2) By no later than October 31 of the control period in which a 
CAIR opt-in unit enters the CAIR SO2 Trading Program under 
Sec.  97.284(g) and October 31 of each year thereafter, the permitting 
authority will allocate CAIR SO2 allowances to the CAIR 
SO2 opt-in unit, and submit to the Administrator the 
allocation for the control period that includes such submission 
deadline and in which the unit is a CAIR SO2 opt-in unit, in 
accordance with paragraph (b) or (c) of this section.
    (b) Calculation of allocation. For each control period for which a 
CAIR SO2 opt-in unit is to be allocated CAIR SO2 
allowances, the permitting authority will allocate in accordance with 
the following procedures, if provided in a State implementation plan 
revision submitted in accordance with Sec.  51.124(r)(1), (2), or (3) 
of this chapter and approved by the Administrator:
    (1) The heat input (in mmBtu) used for calculating the CAIR 
SO2 allowance allocation will be the lesser of:
    (i) The CAIR SO2 opt-in unit's baseline heat input 
determined under Sec.  97.284(c); or
    (ii) The CAIR SO2 opt-in unit's heat input, as 
determined in accordance with subpart HHH of this part, for the 
immediately prior control period, except when the allocation is being 
calculated for the control period in which the CAIR SO2 opt-
in unit enters the CAIR SO2 Trading Program under Sec.  
97.284(g).
    (2) The SO2 emission rate (in lb/mmBtu) used for 
calculating CAIR SO2 allowance allocations will be the 
lesser of:
    (i) The CAIR SO2 opt-in unit's baseline SO2 
emissions rate (in lb/mmBtu) determined under Sec.  97.284(d) and 
multiplied by 70 percent; or
    (ii) The most stringent State or Federal SO2 emissions 
limitation applicable to the CAIR SO2 opt-in unit at any 
time during the control period for which CAIR SO2 allowances 
are to be allocated.
    (3) The permitting authority will allocate CAIR SO2 
allowances to the CAIR SO2 opt-in unit in an amount equaling 
the heat input under paragraph (b)(1) of this section, multiplied by 
the SO2 emission rate under paragraph (b)(2) of this 
section, divided by 2,000 lb/ton, and rounded to the nearest whole 
allowance as appropriate.
    (c) Notwithstanding paragraph (b) of this section and if the CAIR 
designated representative requests, and the permitting authority issues 
a CAIR opt-in permit providing for, allocation to a CAIR SO2 
opt-in unit of CAIR SO2 allowances under this paragraph 
(subject to the conditions in Sec. Sec.  97.284(h) and 97.286(g)), the 
permitting authority will allocate to the CAIR SO2 opt-in 
unit as follows, if provided in a State implementation plan revision 
submitted in accordance with Sec.  51.124(r)(1), (2), or (3) of this 
chapter and approved by the Administrator:
    (1) For each control period in 2010 through 2014 for which the CAIR 
SO2 opt-in unit is to be allocated CAIR SO2 
allowances,
    (i) The heat input (in mmBtu) used for calculating CAIR 
SO2 allowance allocations will be determined as described in 
paragraph (b)(1) of this section.

[[Page 49808]]

    (ii) The SO2 emission rate (in lb/mmBtu) used for 
calculating CAIR SO2 allowance allocations will be the 
lesser of:
    (A) The CAIR SO2 opt-in unit's baseline SO2 
emissions rate (in lb/mmBtu) determined under Sec.  97.284(d); or
    (B) The most stringent State or Federal SO2 emissions 
limitation applicable to the CAIR SO2 opt-in unit at any 
time during the control period in which the CAIR SO2 opt-in 
unit enters the CAIR SO2 Trading Program under Sec.  
97.284(g).
    (iii) The permitting authority will allocate CAIR SO2 
allowances to the CAIR SO2 opt-in unit in an amount equaling 
the heat input under paragraph (c)(1)(i) of this section, multiplied by 
the SO2 emission rate under paragraph (c)(1)(ii) of this 
section, divided by 2,000 lb/ton, and rounded to the nearest whole 
allowance as appropriate.
    (2) For each control period in 2015 and thereafter for which the 
CAIR SO2 opt-in unit is to be allocated CAIR SO2 
allowances,
    (i) The heat input (in mmBtu) used for calculating the CAIR 
SO2 allowance allocations will be determined as described in 
paragraph (b)(1) of this section.
    (ii) The SO2 emission rate (in lb/mmBtu) used for 
calculating the CAIR NOX allowance allocation will be the 
lesser of:
    (A) The CAIR SO2 opt-in unit's baseline SO2 
emissions rate (in lb/mmBtu) determined under Sec.  97.284(d) 
multiplied by 10 percent; or
    (B) The most stringent State or Federal SO2 emissions 
limitation applicable to the CAIR SO2 opt-in unit at any 
time during the control period for which CAIR SO2 allowances 
are to be allocated.
    (iii) The permitting authority will allocate CAIR SO2 
allowances to the CAIR SO2 opt-in unit in an amount equaling 
the heat input under paragraph (c)(2)(i) of this section, multiplied by 
the SO2 emission rate under paragraph (c)(2)(ii) of this 
section, divided by 2,000 lb/ton, and rounded to the nearest whole 
allowance as appropriate.
    (d) Recordation. If provided in a State implementation plan 
revision submitted in accordance with Sec.  51.124(r)(1), (2), or (3) 
of this chapter and approved by the Administrator:
    (1) The Administrator will record, in the compliance account of the 
source that includes the CAIR SO2 opt-in unit, the CAIR 
SO2 allowances allocated by the permitting authority to the 
CAIR SO2 opt-in unit under paragraph (a)(1) of this section.
    (2) By December 1 of the control period in which a CAIR 
SO2 opt-in unit enters the CAIR SO2 Trading 
Program under Sec.  97.284(g) and December 1 of each year thereafter, 
the Administrator will record, in the compliance account of the source 
that includes the CAIR SO2 opt-in unit, the CAIR 
SO2 allowances allocated by the permitting authority to the 
CAIR SO2 opt-in unit under paragraph (a)(2) of this section.

Appendix A to Subpart III of Part 97--States With Approved State 
Implementation Plan Revisions Concerning CAIR SO2 Opt-in Units

    1. The following States have State Implementation Plan revisions 
under Sec.  51.124(r) of this chapter approved by the Administrator 
and establishing procedures providing for CAIR SO2 opt-in 
units under subpart III of this part and allocation of CAIR 
SO2 allowances to such units under Sec.  97.288(b):

[Reserved]

    2. The following States have State Implementation Plan revisions 
under Sec.  51.124(r) of this chapter approved by the Administrator 
and establishing procedures providing for CAIR SO2 opt-in 
units under subpart III of this part and allocation of CAIR 
SO2 allowances to such units under Sec.  97.288(c):

[Reserved]

    5. Part 97 is amended by adding subparts AAAA through CCCC, adding 
and reserving subpart DDDD and adding subparts EEEE through IIII to 
read as follows:
Subpart AAAA--CAIR NOX Ozone Season Trading Program General Provisions
Sec.
97.301 Purpose.
97.302 Definitions.
97.303 Measurements, abbreviations, and acronyms.
97.304 Applicability.
97.305 Retired unit exemption.
97.306 Standard requirements.
97.307 Computation of time.
97.308 Appeal procedures.
Appendix A to Subpart AAAA of Part 97--States With Approved State 
Implementation Plan Revisions Concerning Applicability
Subpart BBBB--CAIR Designated Representative for CAIR NOX Ozone Season 
Sources
97.310 Authorization and responsibilities of CAIR designated 
representative.
97.311 Alternate CAIR designated representative.
97.312 Changing CAIR designated representative and alternate CAIR 
designated representative; changes in owners and operators.
97.313 Certificate of representation.
97.314 Objections concerning CAIR designated representative.
Subpart CCCC--Permits
97.320 General CAIR NOX Ozone Season Trading Program 
permit requirements.
97.321 Submission of CAIR permit applications.
97.322 Information requirements for CAIR permit applications.
97.323 CAIR permit contents and term.
97.324 CAIR permit revisions.
Subpart DDDD--[Reserved]
Subpart EEEE--CAIR NOX Ozone Season Allowance Allocations
97.340 State trading budgets.
97.341 Timing requirements for CAIR NOX Ozone Season 
allowance allocations.
97.342 CAIR NOX Ozone Season allowance allocations.
97.343 Alternative of allocation of CAIR NOX Ozone Season 
allowances by permitting authority.
Appendix A to Subpart EEEE of Part 97--States With Approved State 
Implementation Plan Revisions Concerning Allocations
Subpart FFFF--CAIR NOX Ozone Season Allowance Tracking System
97.350 [Reserved]
97.351 Establishment of accounts.
97.352 Responsibilities of CAIR authorized account representative.
97.353 Recordation of CAIR NOX Ozone Season allowance 
allocations.
97.354 Compliance with CAIR NOX emissions limitation.
97.355 Banking.
97.356 Account error.
97.357 Closing of general accounts.
Subpart GGGG--CAIR NOX Ozone Season Allowance Transfers
97.360 Submission of CAIR NOX Ozone Season allowance 
transfers.
97.361 EPA recordation.
97.362 Notification.
Subpart HHHH--Monitoring and Reporting
97.370 General requirements.
97.371 Initial certification and recertification procedures.
97.372 Out of control periods.
97.373 Notifications.
97.374 Recordkeeping and reporting.
97.375 Petitions.
97.376 Additional requirements to provide heat input data.
Subpart IIII--CAIR NOX Ozone Season Opt-in Units
97.380 Applicability.
97.381 General.
97.382 CAIR designated representative.
97.383 Applying for CAIR opt-in permit.
97.384 Opt-in process.
97.385 CAIR opt-in permit contents.
97.386 Withdrawal from CAIR NOX Ozone Season Trading 
Program.
97.387 Change in regulatory status.
97.388 CAIR NOX Ozone Season allowance allocations to 
CAIR NOX Ozone Season opt-in units.
Appendix A to Subpart IIII of Part 97--States With Approved State 
Implementation Plan Revisions Concerning CAIR NOX Ozone 
Season Opt-In Units

[[Page 49809]]

Subpart AAAA--CAIR NOX Ozone Season Trading Program General 
Provisions


Sec.  97.301  Purpose.

    This subpart and subparts BBBB through HHHH set forth the general 
provisions and the designated representative, permitting, allowance, 
monitoring, and opt-in provisions for the--Federal Clean Air Interstate 
Rule (CAIR) NOX Ozone Season Trading Program, under section 
110 of the Clean Air Act and Sec.  52.35 of this chapter, as a means of 
mitigating interstate transport of ozone and nitrogen oxides.


Sec.  97.302  Definitions.

    The terms used in this subpart and subparts BBBB through IIII shall 
have the meanings set forth in this section as follows:
    Account number means the identification number given by the 
Administrator to each CAIR NOX Ozone Season Allowance 
Tracking System account.
    Acid Rain emissions limitation means a limitation on emissions of 
sulfur dioxide or nitrogen oxides under the Acid Rain Program.
    Acid Rain Program means a multi-state sulfur dioxide and nitrogen 
oxides air pollution control and emission reduction program established 
by the Administrator under title IV of the CAA and parts 72 through 78 
of this chapter.
    Administrator means the Administrator of the United States 
Environmental Protection Agency or the Administrator's duly authorized 
representative.
    Allocate or allocation means, with regard to CAIR NOX 
Ozone Season allowances issued under subpart EEEE, the determination by 
the permitting authority or the Administrator of the amount of such 
CAIR NOX Ozone Season allowances to be initially credited to 
a CAIR NOX Ozone Season unit or a new unit set-aside and, 
with regard to CAIR NOX Ozone Season allowances issued under 
Sec.  97.388, the determination by the permitting authority of the 
amount of such CAIR NOX Ozone Season allowances to be 
initially credited to a CAIR NOX Ozone Season unit.
    Allowance transfer deadline means, for a control period, midnight 
of November 30, if it is a business day, or, if November 30 is not a 
business day, midnight of the first business day thereafter immediately 
following the control period and is the deadline by which a CAIR 
NOX Ozone Season allowance transfer must be submitted for 
recordation in a CAIR NOX Ozone Season source's compliance 
account in order to be used to meet the source's CAIR NOX 
Ozone Season emissions limitation for such control period in accordance 
with Sec.  97.354.
    Alternate CAIR designated representative means, for a CAIR 
NOX Ozone Season source and each CAIR NOX Ozone 
Season unit at the source, the natural person who is authorized by the 
owners and operators of the source and all such units at the source in 
accordance with subparts BBBB and IIII of this part, to act on behalf 
of the CAIR designated representative in matters pertaining to the CAIR 
NOX Ozone Season Trading Program. If the CAIR NOX 
Ozone Season source is also a CAIR NOX source, then this 
natural person shall be the same person as the alternate CAIR 
designated representative under the CAIR NOX Annual Trading 
Program. If the CAIR NOX Ozone Season source is also a CAIR 
SO2 source, then this natural person shall be the same 
person as the alternate CAIR designated representative under the CAIR 
SO2 Trading Program. If the CAIR NOX Ozone Season 
source is also subject to the Acid Rain Program, then this natural 
person shall be the same person as the alternate designated 
representative under the Acid Rain Program. If the CAIR NOX 
Ozone Season source is also subject to the Hg Budget Trading Program, 
then this natural person shall be the same person as the alternate 
designated representative under the Hg Budget Trading Program.
    Automated data acquisition and handling system or DAHS means that 
component of the continuous emission monitoring system, or other 
emissions monitoring system approved for use under subpart HHHH of this 
part, designed to interpret and convert individual output signals from 
pollutant concentration monitors, flow monitors, diluent gas monitors, 
and other component parts of the monitoring system to produce a 
continuous record of the measured parameters in the measurement units 
required by subpart HHHH of this part.
    Boiler means an enclosed fossil- or other-fuel-fired combustion 
device used to produce heat and to transfer heat to recirculating 
water, steam, or other medium.
    Bottoming-cycle cogeneration unit means a cogeneration unit in 
which the energy input to the unit is first used to produce useful 
thermal energy and at least some of the reject heat from the useful 
thermal energy application or process is then used for electricity 
production.
    CAIR authorized account representative means, with regard to a 
general account, a responsible natural person who is authorized, in 
accordance with subparts BBBB and IIII of this part, to transfer and 
otherwise dispose of CAIR NOX Ozone Season allowances held 
in the general account and, with regard to a compliance account, the 
CAIR designated representative of the source.
    CAIR designated representative means, for a CAIR NOX 
Ozone Season source and each CAIR NOX Ozone Season unit at 
the source, the natural person who is authorized by the owners and 
operators of the source and all such units at the source, in accordance 
with subparts BBBB and IIII of this part, to represent and legally bind 
each owner and operator in matters pertaining to the CAIR 
NOX Ozone Season Trading Program. If the CAIR NOX 
Ozone Season source is also a CAIR NOX source, then this 
natural person shall be the same person as the CAIR designated 
representative under the CAIR NOX Annual Trading Program. If 
the CAIR NOX Ozone Season source is also a CAIR 
SO2 source, then this natural person shall be the same 
person as the CAIR designated representative under the CAIR 
SO2 Trading Program. If the CAIR NOX Ozone Season 
source is also subject to the Acid Rain Program, then this natural 
person shall be the same person as the designated representative under 
the Acid Rain Program. If the CAIR NOX Ozone Season source 
is also subject to the Hg Budget Trading Program, then this natural 
person shall be the same person as the designated representative under 
the Hg Budget Trading Program.
    CAIR NOX Annual Trading Program means a multi-state nitrogen oxides 
air pollution control and emission reduction program established by the 
Administrator in accordance with subparts AA through II of this part 
and Sec.  52.35 of this chapter or administered by the Administrator 
under provisions of a State implementation plan that are approved under 
Sec.  51.123(o)(1) or (2) of this chapter, as a means of mitigating 
interstate transport of fine particulates and nitrogen oxides.
    CAIR NOX Ozone Season allowance means a limited authorization 
issued by the permitting authority or the Administrator under subpart 
EEEE of this part, Sec.  97.388, or provisions of a State 
implementation plan that are approved under Sec.  51.123(aa)(1) or (2) 
(and (bb)(1)), (bb)(2), or (dd) of this chapter to emit one ton of 
nitrogen oxides during a control period of the specified calendar year 
for which the authorization is allocated or of any calendar year 
thereafter under the CAIR NOX Ozone Season Trading Program 
or

[[Page 49810]]

a limited authorization issued by the permitting authority for a 
control period during 2003 through 2008 under the NOX Budget 
Trading Program in accordance with Sec.  51.121(p) of this chapter to 
emit one ton of nitrogen oxides during a control period, provided that 
the provision in Sec.  51.121(b)(2)(i)(E) of this chapter shall not be 
used in applying this definition. An authorization to emit nitrogen 
oxides that is not issued under subpart EEEE of this part, Sec.  
97.388, or provisions of a State implementation plan that are approved 
under Sec.  51.123(aa)(1) or (2) (and (bb)(1)), (bb)(2), or (dd) of 
this chapter or that meet the requirements of Sec.  51.121(p) of this 
chapter shall not be a CAIR NOX Ozone Season allowance.
    CAIR NOX Ozone Season allowance deduction or deduct CAIR NOX Ozone 
Season allowances means the permanent withdrawal of CAIR NOX 
Ozone Season allowances by the Administrator from a compliance account, 
e.g., in order to account for a specified number of tons of total 
nitrogen oxides emissions from all CAIR NOX Ozone Season 
units at a CAIR NOX Ozone Season source for a control 
period, determined in accordance with subpart HHHH of this part, or to 
account for excess emissions.
    CAIR NOX Ozone Season Allowance Tracking System means the system by 
which the Administrator records allocations, deductions, and transfers 
of CAIR NOX Ozone Season allowances under the CAIR 
NOX Ozone Season Trading Program. Such allowances will be 
allocated, held, deducted, or transferred only as whole allowances.
    CAIR NOX Ozone Season Allowance Tracking System account means an 
account in the CAIR NOX Ozone Season Allowance Tracking 
System established by the Administrator for purposes of recording the 
allocation, holding, transferring, or deducting of CAIR NOX 
Ozone Season allowances.
    CAIR NOX Ozone Season allowances held or hold CAIR NOX Ozone Season 
allowances means the CAIR NOX Ozone Season allowances 
recorded by the Administrator, or submitted to the Administrator for 
recordation, in accordance with subparts FFFF, GGGG, and IIII of this 
part, in a CAIR NOX Ozone Season Allowance Tracking System 
account.
    CAIR NOX Ozone Season emissions limitation means, for a CAIR 
NOX Ozone Season source, the tonnage equivalent of the CAIR 
NOX Ozone Season allowances available for deduction for the 
source under Sec.  97.354(a) and (b) for a control period.
    CAIR NOX Ozone Season Trading Program means a multi-state nitrogen 
oxides air pollution control and emission reduction program established 
by the Administrator in accordance with subparts AAAA through IIII of 
this part and Sec.  52.35 of this chapter or administered by the 
Administrator under provisions of a State implementation plan that are 
approved under Sec.  51.123(aa)(1) or (2) (and (bb)(1)), (bb)(2), or 
(dd) of this chapter, as a means of mitigating interstate transport of 
ozone and nitrogen oxides.
    CAIR NOX Ozone Season source means a source that includes one or 
more CAIR NOX Ozone Season units.
    CAIR NOX Ozone Season unit means a unit that is subject to the CAIR 
NOX Ozone Season Trading Program under Sec.  97.304 and, 
except for purposes of Sec.  97.305 and subpart EEEE of this part, a 
CAIR NOX Ozone Season opt-in unit under subpart IIII of this 
part.
    CAIR NOX source means a source that includes one or more CAIR 
NOX units.
    CAIR NOX unit means a unit that is subject to the CAIR 
NOX Annual Trading Program under Sec.  97.104 and a CAIR 
NOX opt-in unit under subpart II of this part.
    CAIR permit means the legally binding and federally enforceable 
written document, or portion of such document, issued by the permitting 
authority under subpart CCCC of this part, including any permit 
revisions, specifying the CAIR NOX Ozone Season Trading 
Program requirements applicable to a CAIR NOX Ozone Season 
source, to each CAIR NOX Ozone Season unit at the source, 
and to the owners and operators and the CAIR designated representative 
of the source and each such unit.
    CAIR SO2 source means a source that includes one or more 
CAIR SO2 units.
    CAIR SO2 Trading Program means a multi-state sulfur dioxide air 
pollution control and emission reduction program established by the 
Administrator in accordance with subparts AAA through III of this part 
and Sec.  52.36 of this chapter or administered by the Administrator 
under provisions of a State implementation plan that are approved under 
Sec.  51.124(o)(1) or (2) of this chapter, as a means of mitigating 
interstate transport of fine particulates and sulfur dioxide.
    CAIR SO2 unit means a unit that is subject to the CAIR 
SO2 Trading Program under Sec.  97.204 and a CAIR 
SO2 opt-in unit under subpart III of this part.
    Certifying official means:
    (1) For a corporation, a president, secretary, treasurer, or vice-
president or the corporation in charge of a principal business function 
or any other person who performs similar policy or decision-making 
functions for the corporation;
    (2) For a partnership or sole proprietorship, a general partner or 
the proprietor respectively; or
    (3) For a local government entity or State, Federal, or other 
public agency, a principal executive officer or ranking elected 
official.
    Clean Air Act or CAA means the Clean Air Act, 42 U.S.C. 7401, et 
seq.
    Coal means any solid fuel classified as anthracite, bituminous, 
subbituminous, or lignite.
    Coal-derived fuel means any fuel (whether in a solid, liquid, or 
gaseous state) produced by the mechanical, thermal, or chemical 
processing of coal.
    Coal-fired means: (1) Except for purposes of subpart EEEE of this 
part, combusting any amount of coal or coal-derived fuel, alone or in 
combination with any amount of any other fuel, during any year; or
    (2) For purposes of subpart EEEE of this part, combusting any 
amount of coal or coal-derived fuel, alone or in combination with any 
amount of any other fuel, during a specified year.
    Cogeneration unit means a stationary, fossil-fuel-fired boiler or 
stationary, fossil-fuel-fired combustion turbine:
    (1) Having equipment used to produce electricity and useful thermal 
energy for industrial, commercial, heating, or cooling purposes through 
the sequential use of energy; and
    (2) Producing during the 12-month period starting on the date the 
unit first produces electricity and during any calendar year after the 
calendar year in which the unit first produces electricity--
    (i) For a topping-cycle cogeneration unit,
    (A) Useful thermal energy not less than 5 percent of total energy 
output; and
    (B) Useful power that, when added to one-half of useful thermal 
energy produced, is not less then 42.5 percent of total energy input, 
if useful thermal energy produced is 15 percent or more of total energy 
output, or not less than 45 percent of total energy input, if useful 
thermal energy produced is less than 15 percent of total energy output.
    (ii) For a bottoming-cycle cogeneration unit, useful power not less 
than 45 percent of total energy input.
    Combustion turbine means: (1) An enclosed device comprising a 
compressor, a combustor, and a turbine and in which the flue gas 
resulting from the combustion of fuel in the combustor passes through 
the turbine, rotating the turbine; and
    (2) If the enclosed device under paragraph (1) of this definition 
is

[[Page 49811]]

combined cycle, any associated heat recovery steam generator and steam 
turbine.
    Commence commercial operation means, with regard to a unit serving 
a generator:
    (1) To have begun to produce steam, gas, or other heated medium 
used to generate electricity for sale or use, including test 
generation, except as provided in Sec.  97.305.
    (i) For a unit that is a CAIR NOX Ozone Season unit 
under Sec.  97.304 on the later of November 15, 1990 or the date the 
unit commences commercial operation as defined in paragraph (1) of this 
definition and that subsequently undergoes a physical change (other 
than replacement of the unit by a unit at the same source), such date 
shall remain the unit's date of commencement of commercial operation.
    (ii) For a unit that is a CAIR NOX Ozone Season unit 
under Sec.  97.304 on the later of November 15, 1990 or the date the 
unit commences commercial operation as defined in paragraph (1) of this 
definition and that is subsequently replaced by a unit at the same 
source (e.g., repowered), the replacement unit shall be treated as a 
separate unit with a separate date for commencement of commercial 
operation as defined in paragraph (1), (2), or (3) of this definition 
as appropriate.
    (2) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  97.305, for a unit that is not a CAIR NOX 
Ozone Season unit under Sec.  97.304 on the later of November 15, 1990 
or the date the unit commences commercial operation as defined in 
paragraph (1) of this definition and is not a unit under paragraph (3) 
of this definition, the unit's date for commencement of commercial 
operation shall be the date on which the unit becomes a CAIR 
NOX Ozone Season unit under Sec.  97.304.
    (i) For a unit with a date for commencement of commercial operation 
as defined in paragraph (2) of this definition and that subsequently 
undergoes a physical change (other than replacement of the unit by a 
unit at the same source), such date shall remain the unit's date of 
commencement of commercial operation.
    (ii) For a unit with a date for commencement of commercial 
operation as defined in paragraph (2) of this definition and that is 
subsequently replaced by a unit at the same source (e.g., repowered), 
the replacement unit shall be treated as a separate unit with a 
separate date for commencement of commercial operation as defined in 
paragraph (1), (2), or (3) of this definition as appropriate.
    (3) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  97.384(h) or Sec.  97.387(b)(3), for a CAIR 
NOX Ozone Season opt-in unit or a unit for which a CAIR opt-
in permit application is submitted and not withdrawn and a CAIR opt-in 
permit is not yet issued or denied under subpart IIII of this part, the 
unit's date for commencement of commercial operation shall be the date 
on which the owner or operator is required to start monitoring and 
reporting the NOX emissions rate and the heat input of the 
unit under Sec.  97.384(b)(1)(i).
    (i) For a unit with a date for commencement of commercial operation 
as defined in paragraph (3) of this definition and that subsequently 
undergoes a physical change (other than replacement of the unit by a 
unit at the same source), such date shall remain the unit's date of 
commencement of commercial operation.
    (ii) For a unit with a date for commencement of commercial 
operation as defined in paragraph (3) of this definition and that is 
subsequently replaced by a unit at the same source (e.g., repowered), 
the replacement unit shall be treated as a separate unit with a 
separate date for commencement of commercial operation as defined in 
paragraph (1), (2), or (3) of this definition as appropriate.
    (4) Notwithstanding paragraphs (1) through (3) of this definition, 
for a unit not serving a generator producing electricity for sale, the 
unit's date of commencement of operation shall also be the unit's date 
of commencement of commercial operation.
    Commence operation means: (1) To have begun any mechanical, 
chemical, or electronic process, including, with regard to a unit, 
start-up of a unit's combustion chamber, except as provided in Sec.  
97.305.
    (i) For a unit that undergoes a physical change (other than 
replacement of the unit by a unit at the same source) after the date 
the unit commences operation as defined in paragraph (1) of this 
definition, such date shall remain the unit's date of commencement of 
operation.
    (ii) For a unit that is replaced by a unit at the same source 
(e.g., repowered) after the date the unit commences operation as 
defined in paragraph (1) of this definition, the replacement unit shall 
be treated as a separate unit with a separate date for commencement of 
operation as defined in paragraph (1), (2), or (3) of this definition 
as appropriate.
    (2) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  97.305, for a unit that is a CAIR NOX 
Ozone Season unit under Sec.  97.304(d), but not on the later of 
November 15, 1990 or the date the unit commences operation as defined 
in paragraph (1) of this definition, and is not a unit under paragraph 
(3) of this definition, the unit's date for commencement of operation 
shall be the date on which the unit becomes a CAIR NOX Ozone 
Season unit under Sec.  97.304(d).
    (i) For a unit with a date for commencement of commercial operation 
as defined in paragraph (2) of this definition and that subsequently 
undergoes a physical change (other than replacement of the unit by a 
unit at the same source), such date shall remain the unit's date of 
commencement of commercial operation.
    (ii) For a unit with a date for commencement of commercial 
operation as defined in paragraph (2) of this definition and that is 
subsequently replaced by a unit at the same source (e.g., repowered), 
the replacement unit shall be treated as a separate unit with a 
separate date for commencement of commercial operation as defined in 
paragraph (1), (2), or (3) of this definition as appropriate.
    (3) Notwithstanding paragraph (1) of this definition and except as 
provided in Sec.  97.384(h) or Sec.  97.387(b)(3), for a CAIR 
NOX Ozone Season opt-in unit or a unit for which a CAIR opt-
in permit application is submitted and not withdrawn and a CAIR opt-in 
permit is not yet issued or denied under subpart IIII of this part, the 
unit's date for commencement of operation shall be the date on which 
the owner or operator is required to start monitoring and reporting the 
NOX emissions rate and the heat input of the unit under 
Sec.  97.384(b)(1)(i).
    (i) For a unit with a date for commencement of operation as defined 
in paragraph (3) of this definition and that subsequently undergoes a 
physical change (other than replacement of the unit by a unit at the 
same source), such date shall remain the unit's date of commencement of 
operation.
    (ii) For a unit with a date for commencement of operation as 
defined in paragraph (3) of this definition and that is subsequently 
replaced by a unit at the source (e.g., repowered), the replacement 
unit shall be treated as a separate unit with a separate date for 
commencement of operation as defined in paragraph (1), (2), or (3) of 
this definition as appropriate.
    Common stack means a single flue through which emissions from 2 or 
more units are exhausted.
    Compliance account means a CAIR NOX Ozone Season 
Allowance Tracking

[[Page 49812]]

System account, established by the Administrator for a CAIR 
NOX Ozone Season source under subpart FFFF or IIII of this 
part, in which any CAIR NOX Ozone Season allowance 
allocations for the CAIR NOX Ozone Season units at the 
source are initially recorded and in which are held any CAIR 
NOX Ozone Season allowances available for use for a control 
period in order to meet the source's CAIR NOX Ozone Season 
emissions limitation in accordance with Sec.  97.354.
    Continuous emission monitoring system or CEMS means the equipment 
required under subpart HHHH of this part to sample, analyze, measure, 
and provide, by means of readings recorded at least once every 15 
minutes (using an automated data acquisition and handling system 
(DAHS)), a permanent record of nitrogen oxides emissions, stack gas 
volumetric flow rate, stack gas moisture content, and oxygen or carbon 
dioxide concentration (as applicable), in a manner consistent with part 
75 of this chapter. The following systems are the principal types of 
continuous emission monitoring systems required under subpart HHHH of 
this part:
    (1) A flow monitoring system, consisting of a stack flow rate 
monitor and an automated data acquisition and handling system and 
providing a permanent, continuous record of stack gas volumetric flow 
rate, in standard cubic feet per hour (scfh);
    (2) A nitrogen oxides concentration monitoring system, consisting 
of a NOX pollutant concentration monitor and an automated 
data acquisition and handling system and providing a permanent, 
continuous record of NOX emissions, in parts per million 
(ppm);
    (3) A nitrogen oxides emission rate (or NOX-diluent) 
monitoring system, consisting of a NOX pollutant 
concentration monitor, a diluent gas (CO2 or O2) 
monitor, and an automated data acquisition and handling system and 
providing a permanent, continuous record of NOX 
concentration, in parts per million (ppm), diluent gas concentration, 
in percent CO2 or O2, and NOX emission 
rate, in pounds per million British thermal units (lb/mmBtu);
    (4) A moisture monitoring system, as defined in Sec.  75.11(b)(2) 
of this chapter and providing a permanent, continuous record of the 
stack gas moisture content, in percent H2O;
    (5) A carbon dioxide monitoring system, consisting of a 
CO2 pollutant concentration monitor (or an oxygen monitor 
plus suitable mathematical equations from which the CO2 
concentration is derived) and an automated data acquisition and 
handling system and providing a permanent, continuous record of 
CO2 emissions, in percent CO2; and
    (6) An oxygen monitoring system, consisting of an O2 
concentration monitor and an automated data acquisition and handling 
system and providing a permanent, continuous record of O2,in 
percent O2.
    Control period or ozone season means the period beginning May 1 of 
a calendar year, except as provided in Sec.  97.306(c)(2) and ending on 
September 30 of the same year, inclusive.
    Emissions means air pollutants exhausted from a unit or source into 
the atmosphere, as measured, recorded, and reported to the 
Administrator by the CAIR designated representative and as determined 
by the Administrator in accordance with subpart HHHH of this part.
    Excess emissions means any ton of nitrogen oxides emitted by the 
CAIR NOX Ozone Season units at a CAIR NOX Ozone 
Season source during a control period that exceeds the CAIR 
NOX Ozone Season emissions limitation for the source.
    Fossil fuel means natural gas, petroleum, coal, or any form of 
solid, liquid, or gaseous fuel derived from such material.
    Fossil-fuel-fired means, with regard to a unit, combusting any 
amount of fossil fuel in any calendar year.
    Fuel oil means any petroleum-based fuel (including diesel fuel or 
petroleum derivatives such as oil tar) and any recycled or blended 
petroleum products or petroleum by-products used as a fuel whether in a 
liquid, solid, or gaseous state.
    General account means a CAIR NOX Ozone Season Allowance 
Tracking System account, established under subpart FFFF of this part, 
that is not a compliance account.
    Generator means a device that produces electricity.
    Gross electrical output means, with regard to a cogeneration unit, 
electricity made available for use, including any such electricity used 
in the power production process (which process includes, but is not 
limited to, any on-site processing or treatment of fuel combusted at 
the unit and any on-site emission controls).
    Heat input means, with regard to a specified period of time, the 
product (in mmBtu/time) of the gross calorific value of the fuel (in 
Btu/lb) divided by 1,000,000 Btu/mmBtu and multiplied by the fuel feed 
rate into a combustion device (in lb of fuel/time), as measured, 
recorded, and reported to the Administrator by the CAIR designated 
representative and determined by the Administrator in accordance with 
subpart HHHH of this part and excluding the heat derived from preheated 
combustion air, recirculated flue gases, or exhaust from other sources.
    Heat input rate means the amount of heat input (in mmBtu) divided 
by unit operating time (in hr) or, with regard to a specific fuel, the 
amount of heat input attributed to the fuel (in mmBtu) divided by the 
unit operating time (in hr) during which the unit combusts the fuel.
    Hg Budget Trading Program means a multi-state Hg air pollution 
control and emission reduction program approved and administered by the 
Administrator in accordance with subpart HHHH of part 60 of this 
chapter and Sec.  60.24(h)(6), or established by the Administrator, as 
a means of reducing national Hg emissions.
    Life-of-the-unit, firm power contractual arrangement means a unit 
participation power sales agreement under which a utility or industrial 
customer reserves, or is entitled to receive, a specified amount or 
percentage of nameplate capacity and associated energy generated by any 
specified unit and pays its proportional amount of such unit's total 
costs, pursuant to a contract:
    (1) For the life of the unit;
    (2) For a cumulative term of no less than 30 years, including 
contracts that permit an election for early termination; or
    (3) For a period no less than 25 years or 70 percent of the 
economic useful life of the unit determined as of the time the unit is 
built, with option rights to purchase or release some portion of the 
nameplate capacity and associated energy generated by the unit at the 
end of the period.
    Maximum design heat input means, starting from the initial 
installation of a unit, the maximum amount of fuel per hour (in Btu/hr) 
that a unit is capable of combusting on a steady state basis as 
specified by the manufacturer of the unit, or, starting from the 
completion of any subsequent physical change in the unit resulting in a 
decrease in the maximum amount of fuel per hour (in Btu/hr) that a unit 
is capable of combusting on a steady state basis, such decreased 
maximum amount as specified by the person conducting the physical 
change.
    Monitoring system means any monitoring system that meets the 
requirements of subpart HHHH of this part, including a continuous 
emissions monitoring system, an alternative monitoring system, or an 
excepted

[[Page 49813]]

monitoring system under part 75 of this chapter.
    Most stringent State or Federal NOX emissions limitation means, 
with regard to a unit, the lowest NOX emissions limitation 
(in terms of lb/mmBtu) that is applicable to the unit under State or 
Federal law, regardless of the averaging period to which the emissions 
limitation applies.
    Nameplate capacity means, starting from the initial installation of 
a generator, the maximum electrical generating output (in MWe) that the 
generator is capable of producing on a steady state basis and during 
continuous operation (when not restricted by seasonal or other 
deratings) as specified by the manufacturer of the generator or, 
starting from the completion of any subsequent physical change in the 
generator resulting in an increase in the maximum electrical generating 
output (in MWe) that the generator is capable of producing on a steady 
state basis and during continuous operation (when not restricted by 
seasonal or other deratings), such increased maximum amount as 
specified by the person conducting the physical change.
    Oil-fired means, for purposes of subpart EEEE of this part, 
combusting fuel oil for more than 15.0 percent of the annual heat input 
in a specified year and not qualifying as coal-fired.
    Operator means any person who operates, controls, or supervises a 
CAIR NOX Ozone Season unit or a CAIR NOX Ozone 
Season source and shall include, but not be limited to, any holding 
company, utility system, or plant manager of such a unit or source.
    Owner means any of the following persons:
    (1) With regard to a CAIR NOX Ozone Season source or a 
CAIR NOX Ozone Season unit at a source, respectively:
    (i) Any holder of any portion of the legal or equitable title in a 
CAIR NOX Ozone Season unit at the source or the CAIR 
NOX Ozone Season unit;
    (ii) Any holder of a leasehold interest in a CAIR NOX 
Ozone Season unit at the source or the CAIR NOX Ozone Season 
unit; or
    (iii) Any purchaser of power from a CAIR NOX Ozone 
Season unit at the source or the CAIR NOX Ozone Season unit 
under a life-of-the-unit, firm power contractual arrangement; provided 
that, unless expressly provided for in a leasehold agreement, owner 
shall not include a passive lessor, or a person who has an equitable 
interest through such lessor, whose rental payments are not based 
(either directly or indirectly) on the revenues or income from such 
CAIR NOX Ozone Season unit; or
    (2) With regard to any general account, any person who has an 
ownership interest with respect to the CAIR NOX Ozone Season 
allowances held in the general account and who is subject to the 
binding agreement for the CAIR authorized account representative to 
represent the person's ownership interest with respect to CAIR 
NOX Ozone Season allowances.
    Permitting authority means the State air pollution control agency, 
local agency, other State agency, or other agency authorized by the 
Administrator to issue or revise permits to meet the requirements of 
the CAIR NOX Ozone Season Trading Program in accordance with 
subpart CCCC of this part or, if no such agency has been so authorized, 
the Administrator.
    Potential electrical output capacity means 33 percent of a unit's 
maximum design heat input, divided by 3,413 Btu/kWh, divided by 1,000 
kWh/MWh, and multiplied by 8,760 hr/yr.
    Receive or receipt of means, when referring to the permitting 
authority or the Administrator, to come into possession of a document, 
information, or correspondence (whether sent in hard copy or by 
authorized electronic transmission), as indicated in an official 
correspondence log, or by a notation made on the document, information, 
or correspondence, by the permitting authority or the Administrator in 
the regular course of business.
    Recordation, record, or recorded means, with regard to CAIR 
NOX Ozone Season allowances, the movement of CAIR 
NOX Ozone Season allowances by the Administrator into or 
between CAIR NOX Ozone Season Allowance Tracking System 
accounts, for purposes of allocation, transfer, or deduction.
    Reference method means any direct test method of sampling and 
analyzing for an air pollutant as specified in Sec.  75.22 of this 
chapter.
    Repowered means, with regard to a unit, replacement of a coal-fired 
boiler with one of the following coal-fired technologies at the same 
source as the coal-fired boiler:
    (1) Atmospheric or pressurized fluidized bed combustion;
    (2) Integrated gasification combined cycle;
    (3) Magnetohydrodynamics;
    (4) Direct and indirect coal-fired turbines;
    (5) Integrated gasification fuel cells; or
    (6) As determined by the Administrator in consultation with the 
Secretary of Energy, a derivative of one or more of the technologies 
under paragraphs (1) through (5) of this definition and any other coal-
fired technology capable of controlling multiple combustion emissions 
simultaneously with improved boiler or generation efficiency and with 
significantly greater waste reduction relative to the performance of 
technology in widespread commercial use as of January 1, 2005.
    Sequential use of energy means:
    (1) For a topping-cycle cogeneration unit, the use of reject heat 
from electricity production in a useful thermal energy application or 
process; or
    (2) For a bottoming-cycle cogeneration unit, the use of reject heat 
from useful thermal energy application or process in electricity 
production.
    Serial number means, for a CAIR NOX Ozone Season 
allowance, the unique identification number assigned to each CAIR 
NOX Ozone Season allowance by the Administrator.
    Solid waste incineration unit means a stationary, fossil-fuel-fired 
boiler or stationary, fossil-fuel-fired combustion turbine that is a 
``solid waste incineration unit'' as defined in section 129(g)(1) of 
the Clean Air Act.
    Source means all buildings, structures, or installations located in 
one or more contiguous or adjacent properties under common control of 
the same person or persons. For purposes of section 502(c) of the Clean 
Air Act, a ``source,'' including a ``source'' with multiple units, 
shall be considered a single ``facility.''
    State means one of the States or the District of Columbia that is 
subject to the CAIR NOX Ozone Season Trading Program 
pursuant to Sec.  52.35 of this chapter.
    Submit or serve means to send or transmit a document, information, 
or correspondence to the person specified in accordance with the 
applicable regulation:
    (1) In person;
    (2) By United States Postal Service; or
    (3) By other means of dispatch or transmission and delivery. 
Compliance with any ``submission'' or ``service'' deadline shall be 
determined by the date of dispatch, transmission, or mailing and not 
the date of receipt.
    Title V operating permit means a permit issued under title V of the 
Clean Air Act and part 70 or part 71 of this chapter.
    Title V operating permit regulations means the regulations that the 
Administrator has approved or issued as meeting the requirements of 
title V of the Clean Air Act and part 70 or 71 of this chapter.
    Ton means 2,000 pounds. For the purpose of determining compliance 
with the CAIR NOX Ozone Season emissions limitation, total tons of

[[Page 49814]]

nitrogen oxides emissions for a control period shall be calculated as 
the sum of all recorded hourly emissions (or the mass equivalent of the 
recorded hourly emission rates) in accordance with subpart HHHH of this 
part, but with any remaining fraction of a ton equal to or greater than 
0.50 tons deemed to equal one ton and any remaining fraction of a ton 
less than 0.50 tons deemed to equal zero tons.
    Topping-cycle cogeneration unit means a cogeneration unit in which 
the energy input to the unit is first used to produce useful power, 
including electricity, and at least some of the reject heat from the 
electricity production is then used to provide useful thermal energy.
    Total energy input means, with regard to a cogeneration unit, total 
energy of all forms supplied to the cogeneration unit, excluding energy 
produced by the cogeneration unit itself.
    Total energy output means, with regard to a cogeneration unit, the 
sum of useful power and useful thermal energy produced by the 
cogeneration unit.
    Unit means a stationary, fossil-fuel-fired boiler or combustion 
turbine or other stationary, fossil-fuel-fired combustion device.
    Unit operating day means a calendar day in which a unit combusts 
any fuel.
    Unit operating hour or hour of unit operation means an hour in 
which a unit combusts any fuel.
    Useful power means, with regard to a cogeneration unit, electricity 
or mechanical energy made available for use, excluding any such energy 
used in the power production process (which process includes, but is 
not limited to, any on-site processing or treatment of fuel combusted 
at the unit and any on-site emission controls).
    Useful thermal energy means, with regard to a cogeneration unit, 
thermal energy that is:
    (1) Made available to an industrial or commercial process (not a 
power production process), excluding any heat contained in condensate 
return or makeup water;
    (2) Used in a heating application (e.g., space heating or domestic 
hot water heating); or
    (3) Used in a space cooling application (i.e., thermal energy used 
by an absorption chiller).
    Utility power distribution system means the portion of an 
electricity grid owned or operated by a utility and dedicated to 
delivering electricity to customers.


Sec.  97.303  Measurements, abbreviations, and acronyms.

    Measurements, abbreviations, and acronyms used in this subpart and 
subparts BBBB through IIII are defined as follows:

Btu--British thermal unit.
CO2--carbon dioxide.
H2O--water.
Hg--mercury.
hr--hour.
kW--kilowatt electrical.
kWh--kilowatt hour.
lb--pound.
mmBtu--million Btu.
MWe--megawatt electrical.
MWh--megawatt hour.
NOX--nitrogen oxides.
O2--oxygen.
ppm--parts per million.
scfh--standard cubic feet per hour.
SO2--sulfur dioxide.
yr--year.


Sec.  97.304  Applicability.

    (a) Except as provided in paragraph (b) of this section:
    (1) The following units in a State shall be CAIR NOX 
Ozone Season units, and any source that includes one or more such units 
shall be a CAIR NOX Ozone Season source, subject to the 
requirements of this subpart and subparts BBBB through HHHH of this 
part: any stationary, fossil-fuel-fired boiler or stationary, fossil-
fuel-fired combustion turbine serving at any time, since the later of 
November 15, 1990 or the start-up of the unit's combustion chamber, a 
generator with nameplate capacity of more than 25 MWe producing 
electricity for sale.
    (2) If a stationary, fossil-fuel-fired boiler or stationary, 
fossil-fuel-fired combustion turbine that, under paragraph (a)(1) of 
this section, is not a CAIR NOX Ozone Season unit begins to 
serve a generator with nameplate capacity of more than 25 MWe producing 
electricity for sale, the unit shall become a CAIR NOX Ozone 
Season unit on the date on which it first serves such generator.
    (b) The units in a State that meet the requirements set forth in 
paragraph (b)(1)(i), (2)(i), or (2)(ii) of this section shall not be 
CAIR NOX Ozone Season units:
    (1)(i) Any unit:
    (A) Qualifying as a cogeneration unit during the 12-month period 
starting on the date the unit first produces electricity and continuing 
to qualify as a cogeneration unit; and
    (B) Not serving at any time, since the later of November 15, 1990 
or the start-up of the unit's combustion chamber, a generator with 
nameplate capacity of more than 25 MWe supplying in any calendar year 
more than one-third of the unit's potential electric output capacity or 
219,000 MWh, whichever is greater, to any utility power distribution 
system for sale.
    (ii) If a unit qualifies as a cogeneration unit during the 12-month 
period starting on the date the unit first produces electricity and 
meets the requirements of paragraphs (b)(1)(i) of this section for at 
least one calendar year, but subsequently no longer meets all such 
requirements, the unit shall become a CAIR NOX Ozone Season 
unit starting on the earlier of January 1 after the first calendar year 
during which the unit first no longer qualifies as a cogeneration unit 
or January 1 after the first calendar year during which the unit no 
longer meets the requirements of paragraph (b)(1)(i)(B) of this 
section.
    (2)(i) Any unit commencing operation before January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
1985-1987 exceeding 80 percent (on a Btu basis) and an average annual 
fuel consumption of non-fossil fuel for any 3 consecutive calendar 
years after 1990 exceeding 80 percent (on a Btu basis).
    (ii) Any unit commencing operation on or after January 1, 1985:
    (A) Qualifying as a solid waste incineration unit; and
    (B) With an average annual fuel consumption of non-fossil fuel for 
the first 3 calendar years of operation exceeding 80 percent (on a Btu 
basis) and an average annual fuel consumption of non-fossil fuel for 
any 3 consecutive calendar years after 1990 exceeding 80 percent (on a 
Btu basis).
    (iii) If a unit qualifies as a solid waste incineration unit and 
meets the requirements of paragraph (b)(2)(i) or (ii) of this section 
for at least 3 consecutive calendar years, but subsequently no longer 
meets all such requirements, the unit shall become a CAIR 
NOX Ozone Season unit starting on the earlier of January 1 
after the first calendar year during which the unit first no longer 
qualifies as a solid waste incineration unit or January 1 after the 
first 3 consecutive calendar years after 1990 for which the unit has an 
average annual fuel consumption of fossil fuel of 20 percent or more.
    (c) A certifying official of an owner or operator of any unit may 
petition the Administrator at any time for a determination concerning 
the applicability, under paragraphs (a) and (b) of this section, of the 
CAIR NOX Ozone Season Trading Program to the unit.

[[Page 49815]]

    (1) Petition content. The petition shall be in writing and include 
the identification of the unit and the relevant facts about the unit. 
The petition and any other documents provided to the Administrator in 
connection with the petition shall include the following certification 
statement, signed by the certifying official: ``I am authorized to make 
this submission on behalf of the owners and operators of the unit for 
which the submission is made. I certify under penalty of law that I 
have personally examined, and am familiar with, the statements and 
information submitted in this document and all its attachments. Based 
on my inquiry of those individuals with primary responsibility for 
obtaining the information, I certify that the statements and 
information are to the best of my knowledge and belief true, accurate, 
and complete. I am aware that there are significant penalties for 
submitting false statements and information or omitting required 
statements and information, including the possibility of fine or 
imprisonment.''
    (2) Submission. The petition and any other documents provided in 
connection with the petition shall be submitted to the Director of the 
Clean Air Markets Division, U.S. Environmental Protection Agency, who 
will act on the petition as the Administrator's duly authorized 
representative.
    (3) Response. The Administrator will issue a written response to 
the petition and may request supplemental information relevant to such 
petition. The Administrator's determination concerning the 
applicability, under paragraphs (a) and (b) of this section, of the 
CAIR NOX Ozone Season Trading Program to the unit shall be 
binding on the permitting authority unless the petition or other 
information or documents provided in connection with the petition are 
found to have contained significant, relevant errors or omissions.
    (d) Notwithstanding paragraphs (a) and (b) of this section, if a 
State submits, and the Administrator approves, a State implementation 
plan revision in accordance with Sec.  51.123(ee)(1) of this chapter 
providing for the inclusion in the CAIR NOX Ozone Season 
Trading Program of all units that are not otherwise CAIR NOX 
Ozone Season units under paragraphs (a) and (b) of this section and 
that are NOX Budget units covered by the State's emissions 
trading program approved under Sec.  51.121(p) of this chapter, such 
units shall be CAIR NOX Ozone Season units as of the first 
date that they are NOX Budget units under the NOX 
Budget Trading Program under Sec.  51.121(p) of this chapter.


Sec.  97.305  Retired unit exemption.

    (a)(1) Any CAIR NOX Ozone Season unit that is 
permanently retired and is not a CAIR NOX Ozone Season opt-
in unit shall be exempt from the CAIR NOX Ozone Season 
Trading Program, except for the provisions of this section, Sec.  
97.302, Sec.  97.303, Sec.  97.304, Sec.  97.306(c)(4) through (7), 
Sec.  97.307, and subparts BBBB and EEEE through GGGG of this part.
    (2) The exemption under paragraph (a)(1) of this section shall 
become effective the day on which the CAIR NOX Ozone Season 
unit is permanently retired. Within 30 days of the unit's permanent 
retirement, the CAIR designated representative shall submit a statement 
to the permitting authority otherwise responsible for administering any 
CAIR permit for the unit and shall submit a copy of the statement to 
the Administrator. The statement shall state, in a format prescribed by 
the permitting authority, that the unit was permanently retired on a 
specific date and will comply with the requirements of paragraph (b) of 
this section.
    (3) After receipt of the statement under paragraph (a)(2) of this 
section, the permitting authority will amend any permit under subpart 
CCCC of this part covering the source at which the unit is located to 
add the provisions and requirements of the exemption under paragraphs 
(a)(1) and (b) of this section.
    (b) Special provisions. (1) A unit exempt under paragraph (a) of 
this section shall not emit any nitrogen oxides, starting on the date 
that the exemption takes effect.
    (2) The permitting authority will allocate CAIR NOX 
Ozone Season allowances under subpart EEEE of this part to a unit 
exempt under paragraph (a) of this section.
    (3) For a period of 5 years from the date the records are created, 
the owners and operators of a unit exempt under paragraph (a) of this 
section shall retain at the source that includes the unit, records 
demonstrating that the unit is permanently retired. The 5-year period 
for keeping records may be extended for cause, at any time before the 
end of the period, in writing by the permitting authority or the 
Administrator. The owners and operators bear the burden of proof that 
the unit is permanently retired.
    (4) The owners and operators and, to the extent applicable, the 
CAIR designated representative of a unit exempt under paragraph (a) of 
this section shall comply with the requirements of the CAIR 
NOX Ozone Season Trading Program concerning all periods for 
which the exemption is not in effect, even if such requirements arise, 
or must be complied with, after the exemption takes effect.
    (5) A unit exempt under paragraph (a) of this section and located 
at a source that is required, or but for this exemption would be 
required, to have a title V operating permit shall not resume operation 
unless the CAIR designated representative of the source submits a 
complete CAIR permit application under Sec.  97.322 for the unit not 
less than 18 months (or such lesser time provided by the permitting 
authority) before the later of January 1, 2009 or the date on which the 
unit resumes operation.
    (6) On the earlier of the following dates, a unit exempt under 
paragraph (a) of this section shall lose its exemption:
    (i) The date on which the CAIR designated representative submits a 
CAIR permit application for the unit under paragraph (b)(5) of this 
section;
    (ii) The date on which the CAIR designated representative is 
required under paragraph (b)(5) of this section to submit a CAIR permit 
application for the unit; or
    (iii) The date on which the unit resumes operation, if the CAIR 
designated representative is not required to submit a CAIR permit 
application for the unit.
    (7) For the purpose of applying monitoring, reporting, and 
recordkeeping requirements under subpart HHHH of this part, a unit that 
loses its exemption under paragraph (a) of this section shall be 
treated as a unit that commences operation and commercial operation on 
the first date on which the unit resumes operation.


Sec.  97.306  Standard requirements.

    (a) Permit requirements. (1) The CAIR designated representative of 
each CAIR NOX Ozone Season source required to have a title V 
operating permit and each CAIR NOX Ozone Season unit 
required to have a title V operating permit at the source shall:
    (i) Submit to the permitting authority a complete CAIR permit 
application under Sec.  97.322 in accordance with the deadlines 
specified in Sec.  97.321; and
    (ii) Submit in a timely manner any supplemental information that 
the permitting authority determines is necessary in order to review a 
CAIR permit application and issue or deny a CAIR permit.
    (2) The owners and operators of each CAIR NOX Ozone 
Season source required to have a title V operating permit and each CAIR 
NOX Ozone Season unit required to have a title V operating 
permit at the source shall

[[Page 49816]]

have a CAIR permit issued by the permitting authority under subpart 
CCCC of this part for the source and operate the source and the unit in 
compliance with such CAIR permit.
    (3) Except as provided under subpart IIII of this part, the owners 
and operators of a CAIR NOX Ozone Season source that is not 
otherwise required to have a title V operating permit and each CAIR 
NOX Ozone Season unit that is not otherwise required to have 
a title V operating permit are not required to submit a CAIR permit 
application, and to have a CAIR permit, under subpart CCCC of this part 
for such CAIR NOX Ozone Season source and such CAIR 
NOX Ozone Season unit.
    (b) Monitoring, reporting, and recordkeeping requirements. (1) The 
owners and operators, and the CAIR designated representative, of each 
CAIR NOX Ozone Season source and each CAIR NOX 
Ozone Season unit at the source shall comply with the monitoring, 
reporting, and recordkeeping requirements of subpart HHHH of this part.
    (2) The emissions measurements recorded and reported in accordance 
with subpart HHHH of this part shall be used to determine compliance by 
each CAIR NOX Ozone Season source with the CAIR 
NOX Ozone Season emissions limitation under paragraph (c) of 
this section.
    (c) Nitrogen oxides ozone season emission requirements. (1) As of 
the allowance transfer deadline for a control period, the owners and 
operators of each CAIR NOX Ozone Season source and each CAIR 
NOX Ozone Season unit at the source shall hold, in the 
source's compliance account, CAIR NOX Ozone Season 
allowances available for compliance deductions for the control period 
under Sec.  97.354(a) in an amount not less than the tons of total 
nitrogen oxides emissions for the control period from all CAIR 
NOX Ozone Season units at the source, as determined in 
accordance with subpart HHHH of this part.
    (2) A CAIR NOX Ozone Season unit shall be subject to the 
requirements under paragraph (c)(1) of this section for the control 
period starting on the later of May 1, 2009 or the deadline for meeting 
the unit's monitor certification requirements under Sec.  
97.370(b)(1),(2), (3), or (7) and for each control period thereafter.
    (3) A CAIR NOX Ozone Season allowance shall not be 
deducted, for compliance with the requirements under paragraph (c)(1) 
of this section, for a control period in a calendar year before the 
year for which the CAIR NOX Ozone Season allowance was 
allocated.
    (4) CAIR NOX Ozone Season allowances shall be held in, 
deducted from, or transferred into or among CAIR NOX Ozone 
Season Allowance Tracking System accounts in accordance with subpart 
EEEE of this part.
    (5) A CAIR NOX Ozone Season allowance is a limited 
authorization to emit one ton of nitrogen oxides in accordance with the 
CAIR NOX Ozone Season Trading Program. No provision of the 
CAIR NOX Ozone Season Trading Program, the CAIR permit 
application, the CAIR permit, or an exemption under Sec.  97.305 and no 
provision of law shall be construed to limit the authority of the 
United States to terminate or limit such authorization.
    (6) A CAIR NOX Ozone Season allowance does not 
constitute a property right.
    (7) Upon recordation by the Administrator under subpart FFFF, GGGG, 
or IIII of this part, every allocation, transfer, or deduction of a 
CAIR NOX Ozone Season allowance to or from a CAIR 
NOX Ozone Season source's compliance account is incorporated 
automatically in any CAIR permit of the source.
    (d) Excess emissions requirements. If a CAIR NOX Ozone 
Season source emits nitrogen oxides during any control period in excess 
of the CAIR NOX Ozone Season emissions limitation, then:
    (1) The owners and operators of the source and each CAIR 
NOX Ozone Season unit at the source shall surrender the CAIR 
NOX Ozone Season allowances required for deduction under 
Sec.  97.354(d)(1) and pay any fine, penalty, or assessment or comply 
with any other remedy imposed, for the same violations, under the Clean 
Air Act or applicable State law; and
    (2) Each ton of such excess emissions and each day of such control 
period shall constitute a separate violation of this subpart, the Clean 
Air Act, and applicable State law.
    (e) Recordkeeping and reporting requirements. (1) Unless otherwise 
provided, the owners and operators of the CAIR NOX Ozone 
Season source and each CAIR NOX Ozone Season unit at the 
source shall keep on site at the source each of the following documents 
for a period of 5 years from the date the document is created. This 
period may be extended for cause, at any time before the end of 5 
years, in writing by the permitting authority or the Administrator.
    (i) The certificate of representation under Sec.  97.313 for the 
CAIR designated representative for the source and each CAIR 
NOX Ozone Season unit at the source and all documents that 
demonstrate the truth of the statements in the certificate of 
representation; provided that the certificate and documents shall be 
retained on site at the source beyond such 5-year period until such 
documents are superseded because of the submission of a new certificate 
of representation under Sec.  97.313 changing the CAIR designated 
representative.
    (ii) All emissions monitoring information, in accordance with 
subpart HHHH of this part, provided that to the extent that subpart 
HHHH of this part provides for a 3-year period for recordkeeping, the 
3-year period shall apply.
    (iii) Copies of all reports, compliance certifications, and other 
submissions and all records made or required under the CAIR 
NOX Ozone Season Trading Program.
    (iv) Copies of all documents used to complete a CAIR permit 
application and any other submission under the CAIR NOX 
Ozone Season Trading Program or to demonstrate compliance with the 
requirements of the CAIR NOX Ozone Season Trading Program.
    (2) The CAIR designated representative of a CAIR NOX 
Ozone Season source and each CAIR NOX Ozone Season unit at 
the source shall submit the reports required under the CAIR 
NOX Ozone Season Trading Program, including those under 
subpart HHHH of this part.
    (f) Liability. (1) Each CAIR NOX Ozone Season source and 
each CAIR NOX Ozone Season unit shall meet the requirements 
of the CAIR NOX Ozone Season Trading Program.
    (2) Any provision of the CAIR NOX Ozone Season Trading 
Program that applies to a CAIR NOX Ozone Season source or 
the CAIR designated representative of a CAIR NOX Ozone 
Season source shall also apply to the owners and operators of such 
source and of the CAIR NOX Ozone Season units at the source.
    (3) Any provision of the CAIR NOX Ozone Season Trading 
Program that applies to a CAIR NOX Ozone Season unit or the 
CAIR designated representative of a CAIR NOX Ozone Season 
unit shall also apply to the owners and operators of such unit.
    (g) Effect on other authorities. No provision of the CAIR 
NOX Ozone Season Trading Program, a CAIR permit application, 
a CAIR permit, or an exemption under Sec.  97.305 shall be construed as 
exempting or excluding the owners and operators, and the CAIR 
designated representative, of a CAIR NOX Ozone Season source 
or CAIR NOX Ozone Season unit from compliance with any other 
provision of the applicable, approved State

[[Page 49817]]

implementation plan, a federally enforceable permit, or the Clean Air 
Act.


Sec.  97.307  Computation of time.

    (a) Unless otherwise stated, any time period scheduled, under the 
CAIR NOX Ozone Season Trading Program, to begin on the 
occurrence of an act or event shall begin on the day the act or event 
occurs.
    (b) Unless otherwise stated, any time period scheduled, under the 
CAIR NOX Ozone Season Trading Program, to begin before the 
occurrence of an act or event shall be computed so that the period ends 
the day before the act or event occurs.
    (c) Unless otherwise stated, if the final day of any time period, 
under the CAIR NOX Ozone Season Trading Program, falls on a 
weekend or a State or Federal holiday, the time period shall be 
extended to the next business day.


Sec.  97.308  Appeal procedures.

    The appeal procedures for decisions of the Administrator under the 
CAIR NOX Ozone Season Trading Program are set forth in part 
78 of this chapter.

Appendix A to Subpart AAAA of Part 97--States with Approved State 
Implementation Plan Revisions Concerning Applicability

    The following States have State Implementation Plan revisions 
under Sec.  51.123(ee)(1) of this chapter approved by the 
Administrator and providing for expansion of the applicability 
provisions to include all non-EGUs subject to the respective State's 
emission trading program approved under Sec.  51.121(p) of this 
chapter:

[Reserved]

Subpart BBBB--CAIR Designated Representative for CAIR NOX Ozone 
Season Sources


Sec.  97.310  Authorization and responsibilities of CAIR designated 
representative.

    (a) Except as provided under Sec.  97.311, each CAIR NOX 
Ozone Season source, including all CAIR NOX Ozone Season 
units at the source, shall have one and only one CAIR designated 
representative, with regard to all matters under the CAIR 
NOX Ozone Season Trading Program concerning the source or 
any CAIR NOX Ozone Season unit at the source.
    (b) The CAIR designated representative of the CAIR NOX 
Ozone Season source shall be selected by an agreement binding on the 
owners and operators of the source and all CAIR NOX Ozone 
Season units at the source and shall act in accordance with the 
certification statement in Sec.  97.313(a)(4)(iv).
    (c) Upon receipt by the Administrator of a complete certificate of 
representation under Sec.  97.313, the CAIR designated representative 
of the source shall represent and, by his or her representations, 
actions, inactions, or submissions, legally bind each owner and 
operator of the CAIR NOX Ozone Season source represented and 
each CAIR NOX Ozone Season unit at the source in all matters 
pertaining to the CAIR NOX Ozone Season Trading Program, 
notwithstanding any agreement between the CAIR designated 
representative and such owners and operators. The owners and operators 
shall be bound by any decision or order issued to the CAIR designated 
representative by the permitting authority, the Administrator, or a 
court regarding the source or unit.
    (d) No CAIR permit will be issued, no emissions data reports will 
be accepted, and no CAIR NOX Ozone Season Allowance Tracking 
System account will be established for a CAIR NOX Ozone 
Season unit at a source, until the Administrator has received a 
complete certificate of representation under Sec.  97.313 for a CAIR 
designated representative of the source and the CAIR NOX 
Ozone Season units at the source.
    (e)(1) Each submission under the CAIR NOX Ozone Season 
Trading Program shall be submitted, signed, and certified by the CAIR 
designated representative for each CAIR NOX Ozone Season 
source on behalf of which the submission is made. Each such submission 
shall include the following certification statement by the CAIR 
designated representative: ``I am authorized to make this submission on 
behalf of the owners and operators of the source or units for which the 
submission is made. I certify under penalty of law that I have 
personally examined, and am familiar with, the statements and 
information submitted in this document and all its attachments. Based 
on my inquiry of those individuals with primary responsibility for 
obtaining the information, I certify that the statements and 
information are to the best of my knowledge and belief true, accurate, 
and complete. I am aware that there are significant penalties for 
submitting false statements and information or omitting required 
statements and information, including the possibility of fine or 
imprisonment.''
    (2) The permitting authority and the Administrator will accept or 
act on a submission made on behalf of owner or operators of a CAIR 
NOX Ozone Season source or a CAIR NOX Ozone 
Season unit only if the submission has been made, signed, and certified 
in accordance with paragraph (e)(1) of this section.


Sec.  97.311  Alternate CAIR designated representative.

    (a) A certificate of representation under Sec.  97.313 may 
designate one and only one alternate CAIR designated representative, 
who may act on behalf of the CAIR designated representative. The 
agreement by which the alternate CAIR designated representative is 
selected shall include a procedure for authorizing the alternate CAIR 
designated representative to act in lieu of the CAIR designated 
representative.
    (b) Upon receipt by the Administrator of a complete certificate of 
representation under Sec.  97.313, any representation, action, 
inaction, or submission by the alternate CAIR designated representative 
shall be deemed to be a representation, action, inaction, or submission 
by the CAIR designated representative.
    (c) Except in this section and Sec. Sec.  97.302, 97.310(a) and 
(d), 97.312, 97.313, 97.351, and 97.382, whenever the term ``CAIR 
designated representative'' is used in subparts AAAA through HHHH of 
this part, the term shall be construed to include the CAIR designated 
representative or any alternate CAIR designated representative.


Sec.  97.312  Changing CAIR designated representative and alternate 
CAIR designated representative; changes in owners and operators.

    (a) Changing CAIR designated representative. The CAIR designated 
representative may be changed at any time upon receipt by the 
Administrator of a superseding complete certificate of representation 
under Sec.  97.313. Notwithstanding any such change, all 
representations, actions, inactions, and submissions by the previous 
CAIR designated representative before the time and date when the 
Administrator receives the superseding certificate of representation 
shall be binding on the new CAIR designated representative and the 
owners and operators of the CAIR NOX Ozone Season source and 
the CAIR NOX Ozone Season units at the source.
    (b) Changing alternate CAIR designated representative. The 
alternate CAIR designated representative may be changed at any time 
upon receipt by the Administrator of a superseding complete certificate 
of representation under Sec.  97.313. Notwithstanding any such change, 
all representations, actions, inactions, and submissions by the 
previous alternate CAIR designated representative before the time and 
date when the Administrator receives the

[[Page 49818]]

superseding certificate of representation shall be binding on the new 
alternate CAIR designated representative and the owners and operators 
of the CAIR NOX Ozone Season source and the CAIR 
NOX Ozone Season units at the source.
    (c) Changes in owners and operators. (1) In the event a new owner 
or operator of a CAIR NOX Ozone Season source or a CAIR 
NOX Ozone Season unit is not included in the list of owners 
and operators in the certificate of representation under Sec.  97.313, 
such new owner or operator shall be deemed to be subject to and bound 
by the certificate of representation, the representations, actions, 
inactions, and submissions of the CAIR designated representative and 
any alternate CAIR designated representative of the source or unit, and 
the decisions and orders of the permitting authority, the 
Administrator, or a court, as if the new owner or operator were 
included in such list.
    (2) Within 30 days following any change in the owners and operators 
of a CAIR NOX Ozone Season source or a CAIR NOX 
Ozone Season unit, including the addition of a new owner or operator, 
the CAIR designated representative or any alternate CAIR designated 
representative shall submit a revision to the certificate of 
representation under Sec.  97.313 amending the list of owners and 
operators to include the change.


Sec.  97.313  Certificate of representation.

    (a) A complete certificate of representation for a CAIR designated 
representative or an alternate CAIR designated representative shall 
include the following elements in a format prescribed by the 
Administrator:
    (1) Identification of the CAIR NOX Ozone Season source, 
and each CAIR NOX Ozone Season unit at the source, for which 
the certificate of representation is submitted.
    (2) The name, address, e-mail address (if any), telephone number, 
and facsimile transmission number (if any) of the CAIR designated 
representative and any alternate CAIR designated representative.
    (3) A list of the owners and operators of the CAIR 
NOXOzone Season source and of each CAIR NOX Ozone 
Season unit at the source.
    (4) The following certification statements by the CAIR designated 
representative and any alternate CAIR designated representative--
    (i) ``I certify that I was selected as the CAIR designated 
representative or alternate CAIR designated representative, as 
applicable, by an agreement binding on the owners and operators of the 
source and each CAIR NOX Ozone Season unit at the source.''
    (ii) ``I certify that I have all the necessary authority to carry 
out my duties and responsibilities under the CAIR NOX Ozone 
Season Trading Program on behalf of the owners and operators of the 
source and of each CAIR NOX Ozone Season unit at the source 
and that each such owner and operator shall be fully bound by my 
representations, actions, inactions, or submissions.''
    (iii) ``I certify that the owners and operators of the source and 
of each CAIR NOX Ozone Season unit at the source shall be 
bound by any order issued to me by the Administrator, the permitting 
authority, or a court regarding the source or unit.''
    (iv) ``Where there are multiple holders of a legal or equitable 
title to, or a leasehold interest in, a CAIR NOX Ozone 
Season unit, or where a customer purchases power from a CAIR 
NOX Ozone Season unit under a life-of-the-unit, firm power 
contractual arrangement, I certify that: I have given a written notice 
of my selection as the ``CAIR designated representative'' or 
``alternate CAIR designated representative'', as applicable, and of the 
agreement by which I was selected to each owner and operator of the 
source and of each CAIR NOX Ozone Season unit at the source; 
and CAIR NOX Ozone Season allowances and proceeds of 
transactions involving CAIR NOX Ozone Season allowances will 
be deemed to be held or distributed in proportion to each holder's 
legal, equitable, leasehold, or contractual reservation or entitlement, 
except that, if such multiple holders have expressly provided for a 
different distribution of CAIR NOX Ozone Season allowances 
by contract, CAIR NOX Ozone Season allowances and proceeds 
of transactions involving CAIR NOX Ozone Season allowances 
will be deemed to be held or distributed in accordance with the 
contract.''
    (5) The signature of the CAIR designated representative and any 
alternate CAIR designated representative and the dates signed.
    (b) Unless otherwise required by the permitting authority or the 
Administrator, documents of agreement referred to in the certificate of 
representation shall not be submitted to the permitting authority or 
the Administrator. Neither the permitting authority nor the 
Administrator shall be under any obligation to review or evaluate the 
sufficiency of such documents, if submitted.


Sec.  97.314  Objections concerning CAIR designated representative.

    (a) Once a complete certificate of representation under Sec.  
97.313 has been submitted and received, the permitting authority and 
the Administrator will rely on the certificate of representation unless 
and until a superseding complete certificate of representation under 
Sec.  97.313 is received by the Administrator.
    (b) Except as provided in Sec.  97.312(a) or (b), no objection or 
other communication submitted to the permitting authority or the 
Administrator concerning the authorization, or any representation, 
action, inaction, or submission, of the CAIR designated representative 
shall affect any representation, action, inaction, or submission of the 
CAIR designated representative or the finality of any decision or order 
by the permitting authority or the Administrator under the CAIR 
NOX Ozone Season Trading Program.
    (c) Neither the permitting authority nor the Administrator will 
adjudicate any private legal dispute concerning the authorization or 
any representation, action, inaction, or submission of any CAIR 
designated representative, including private legal disputes concerning 
the proceeds of CAIR NOX Ozone Season allowance transfers.

Subpart CCCC--Permits


Sec.  97.320  General CAIR NOX Ozone Season Trading Program permit 
requirements.

    (a) For each CAIR NOX Ozone Season source required to 
have a title V operating permit or required, under subpart IIII of this 
part, to have a title V operating permit or other federally enforceable 
permit, such permit shall include a CAIR permit administered by the 
permitting authority for the title V operating permit or the federally 
enforceable permit as applicable. The CAIR portion of the title V 
permit or other federally enforceable permit as applicable shall be 
administered in accordance with the permitting authority's title V 
operating permits regulations promulgated under part 70 or 71 of this 
chapter or the permitting authority's regulations for other federally 
enforceable permits as applicable, except as provided otherwise by this 
subpart and subpart IIII of this part.
    (b) Each CAIR permit shall contain, with regard to the CAIR 
NOX Ozone Season source and the CAIR NOX Ozone 
Season units at the source covered by the CAIR permit, all applicable 
CAIR NOX Ozone Season Trading Program, CAIR NOX 
Annual Trading Program,

[[Page 49819]]

and CAIR SO2 Trading Program requirements and shall be a 
complete and separable portion of the title V operating permit or other 
federally enforceable permit under paragraph (a) of this section.


Sec.  97.321  Submission of CAIR permit applications.

    (a) Duty to apply. The CAIR designated representative of any CAIR 
NOX Ozone Season source required to have a title V operating 
permit shall submit to the permitting authority a complete CAIR permit 
application under Sec.  97.322 for the source covering each CAIR 
NOX Ozone Season unit at the source at least 18 months (or 
such lesser time provided by the permitting authority) before the later 
of January 1, 2009 or the date on which the CAIR NOX Ozone 
Season unit commences operation.
    (b) Duty to reapply. For a CAIR NOX Ozone Season source 
required to have a title V operating permit, the CAIR designated 
representative shall submit a complete CAIR permit application under 
Sec.  97.322 for the source covering each CAIR NOX Ozone 
Season unit at the source to renew the CAIR permit in accordance with 
the permitting authority's title V operating permits regulations 
addressing permit renewal.


Sec.  97.322  Information requirements for CAIR permit applications.

    A complete CAIR permit application shall include the following 
elements concerning the CAIR NOX Ozone Season source for 
which the application is submitted, in a format prescribed by the 
permitting authority:
    (a) Identification of the CAIR NOX Ozone Season source;
    (b) Identification of each CAIR NOX Ozone Season unit at 
the CAIR NOX Ozone Season source; and
    (c) The standard requirements under Sec.  97.306.


Sec.  97.323  CAIR permit contents and term.

    (a) Each CAIR permit will contain, in a format prescribed by the 
permitting authority, all elements required for a complete CAIR permit 
application under Sec.  97.322.
    (b) Each CAIR permit is deemed to incorporate automatically the 
definitions of terms under Sec.  97.302 and, upon recordation by the 
Administrator under subpart FFFF, GGGG, or IIII of this part, every 
allocation, transfer, or deduction of a CAIR NOX Ozone 
Season allowance to or from the compliance account of the CAIR 
NOX Ozone Season source covered by the permit.
    (c) The term of the CAIR permit will be set by the permitting 
authority, as necessary to facilitate coordination of the renewal of 
the CAIR permit with issuance, revision, or renewal of the CAIR 
NOX Ozone Season source's title V operating permit or other 
federally enforceable permit as applicable.


Sec.  97.324  CAIR permit revisions.

    Except as provided in Sec.  97.323(b), the permitting authority 
will revise the CAIR permit, as necessary, in accordance with the 
permitting authority's title V operating permits regulations or the 
permitting authority's regulations for other federally enforceable 
permits as applicable addressing permit revisions.

Subpart DDDD--[Reserved]

Subpart EEEE--CAIR NOX Ozone Season Allowance Allocations


Sec.  97.340  State trading budgets.

    (a) Except as provided in paragraph (b) of this section, the State 
trading budgets for annual allocations of CAIR NOX Ozone 
Season allowances for the control periods in 2009 through 2014 and in 
2015 and thereafter are respectively as follows:

------------------------------------------------------------------------
                                                          State trading
                                         State trading      budget for
                 State                     budget for        2015 and
                                           2009-2014        thereafter
                                             (tons)           (tons)
------------------------------------------------------------------------
Alabama...............................           32,182           26,818
Arkansas..............................           11,515            9,597
Connecticut...........................            2,559            2,559
Delaware..............................            2,226            1,855
District of Columbia..................              112               94
Florida...............................           47,912           39,926
Illinois..............................           30,701           28,981
Indiana...............................           45,952           39,273
Iowa..................................           14,263           11,886
Kentucky..............................           36,045           30,587
Louisiana.............................           17,085           14,238
Maryland..............................           12,834           10,695
Massachusetts.........................            7,551            6,293
Michigan..............................           28,971           24,142
Mississippi...........................            8,714            7,262
Missouri..............................           26,678           22,231
New Jersey............................            6,654            5,545
New York..............................           20,632           17,193
North Carolina........................           28,392           23,660
Ohio..................................           45,664           39,945
Pennsylvania..........................           42,171           35,143
South Carolina........................           15,249           12,707
Tennessee.............................           22,842           19,035
Virginia..............................           15,994           13,328
West Virginia.........................           26,859           26,525
Wisconsin.............................           17,987           14,989
------------------------------------------------------------------------

    (b) Upon approval by the Administrator of a State's State 
implementation plan revision under Sec.  51.123(ee)(1) of this chapter 
providing for the inclusion in the CAIR NOX Ozone Season 
Trading Program of all units that are not otherwise CAIR NOX 
Ozone Season units under Sec.  97.304(a) and (b) and that are 
NOX Budget units

[[Page 49820]]

covered by the State's emissions trading program approved under Sec.  
51.121(p), the State's State trading budget shall be treated, for 
purposes of Sec. Sec.  97.342 and 97.344, as comprising the sum of:
    (1) The applicable amount for the State for the year under 
paragraph (a) of this section; and
    (2) An amount not exceeding the portion of the State's State 
trading program budget, under such emissions trading program approved 
under Sec.  51.121(p) of this chapter, attributed to the units that the 
applicability provisions in Sec.  97.304(a) and (b) are expanded to 
include under such State implementation plan revision.


Sec.  97.341  Timing requirements for CAIR NOX Ozone Season allowance 
allocations.

    (a) The Administrator will determine by order the CAIR 
NOX Ozone Season allowance allocations, in accordance with 
Sec.  97.342(a) and (b), for the control periods in 2009, 2010, 2011, 
2012, 2013, and 2014.
    (b) By July 31, 2011 and July 31 of each year thereafter, the 
Administrator will determine by order the CAIR NOX Ozone 
Season allowance allocations, in accordance with Sec.  97.342(a) and 
(b), for the control period in the fourth year after the year of the 
applicable deadline for determination under this paragraph.
    (c) By April 30, 2009 and April 30 of each year thereafter, the 
Administrator will determine by order the CAIR NOX Ozone 
Season allowance allocations, in accordance with Sec.  97.342(a), (c), 
and (d), for the control period in the year of the applicable deadline 
for submission under this paragraph.
    (d) The Administrator will make available to the public each 
determination of CAIR NOX Ozone Season allowances under 
paragraph (a), (b), or (c) of this section and will provide an 
opportunity for submission of objections to the determination. 
Objections shall be limited to addressing whether the determination is 
in accordance with Sec.  97.342. Based on any such objections, the 
Administrator will adjust each determination to the extent necessary to 
ensure that it is in accordance with Sec.  97.342.


Sec.  97.342  CAIR NOX Ozone Season allowance allocations.

    (a)(1) The baseline heat input (in mmBtu) used with respect to CAIR 
NOX Ozone Season allowance allocations under paragraph (b) 
of this section for each CAIR NOX Ozone Season unit will be:
    (i) For units commencing operation before January 1, 2001 the 
average of the 3 highest amounts of the unit's adjusted control period 
heat input for 2000 through 2004, with the adjusted control period heat 
input for each year calculated as follows:
    (A) If the unit is coal-fired during the year, the unit's control 
period heat input for such year is multiplied by 100 percent;
    (B) If the unit is oil-fired during the year, the unit's control 
period heat input for such year is multiplied by 60 percent; and
    (C) If the unit is not subject to paragraph (a)(1)(i)(A) or (B) of 
this section, the unit's control period heat input for such year is 
multiplied by 40 percent.
    (ii) For units commencing operation on or after January 1, 2001 and 
operating each calendar year during a period of 5 or more consecutive 
calendar years, the average of the 3 highest amounts of the unit's 
total converted control period heat input over the first such 5 years.
    (2)(i) A unit's control period heat input, and a unit's status as 
coal-fired or oil-fired, for a calendar year under paragraph (a)(1)(i) 
of this section, and a unit's total tons of NOX emissions 
during a control period in a calendar year under paragraph (c)(3) of 
this section, will be determined in accordance with part 75 of this 
chapter, to the extent the unit was otherwise subject to the 
requirements of part 75 of this chapter for the year, or will be 
determined based on the best available data reported to the 
Administrator for the unit, to the extent the unit was not otherwise 
subject to the requirements of part 75 of this chapter for the year.
    (ii) A unit's converted control period heat input for a calendar 
year specified under paragraph (a)(1)(ii) of this section equals:
    (A) Except as provided in paragraph (a)(2)(ii)(B) or (C) of this 
section, the control period gross electrical output of the generator or 
generators served by the unit multiplied by 7,900 Btu/kWh, if the unit 
is coal-fired for the year, or 6,675 Btu/kWh, if the unit is not coal-
fired for the year, and divided by 1,000,000 Btu/mmBtu, provided that 
if a generator is served by 2 or more units, then the gross electrical 
output of the generator will be attributed to each unit in proportion 
to the unit's share of the total control period heat input of such 
units for the year;
    (B) For a unit that is a boiler and has equipment used to produce 
electricity and useful thermal energy for industrial, commercial, 
heating, or cooling purposes through the sequential use of energy, the 
total heat energy (in Btu) of the steam produced by the boiler during 
the control period, divided by 0.8 and by 1,000,000 Btu/mmBtu; or
    (C) For a unit that is a combustion turbine and has equipment used 
to produce electricity and useful thermal energy for industrial, 
commercial, heating, or cooling purposes through the sequential use of 
energy, the control period gross electrical output of the enclosed 
device comprising the compressor, combustor, and turbine multiplied by 
3,413 Btu/kWh, plus the total heat energy (in Btu) of the steam 
produced by any associated heat recovery steam generator during the 
control period divided by 0.8, and with the sum divided by 1,000,000 
Btu/mmBtu.
    (iii) Gross electrical output and total heat energy under paragraph 
(a)(2)(ii) of this section will be determined based on the best 
available data reported to the Administrator.
    (3) The Administrator will determine what data are the best 
available data under paragraph (a)(2) of this section by weighing the 
likelihood that data are accurate and reliable and will give greater 
weight to data submitted to a governmental entity in compliance with 
legal requirements or substantiated by an independent entity.
    (b)(1) For each control period in 2009 and thereafter, the 
Administrator will allocate to all CAIR NOX Ozone Season 
units in a State that have a baseline heat input (as determined under 
paragraph (a) of this section) a total amount of CAIR NOX 
Ozone Season allowances equal to 95 percent for a control period during 
2009 through 2014, and 97 percent for a control period during 2015 and 
thereafter, of the tons of NOX emissions in the State 
trading budget for such State under Sec.  97.340 (except as provided in 
paragraphs (d) and (e) of this section).
    (2) The Administrator will allocate CAIR NOX Ozone 
Season allowances to each CAIR NOX Ozone Season unit under 
paragraph (b)(1) of this section in an amount determined by multiplying 
the total amount of CAIR NOX Ozone Season allowances 
allocated under paragraph (b)(1) of this section by the ratio of the 
baseline heat input of such CAIR NOX Ozone Season unit to 
the total amount of baseline heat input of all such CAIR NOX 
Ozone Season units in the State and rounding to the nearest whole 
allowance as appropriate.
    (c) For each control period in 2009 and thereafter, the 
Administrator will allocate CAIR NOX Ozone Season allowances 
to CAIR NOX Ozone Season units in a State that commenced 
operation on or after January 1, 2001 and do not yet have a baseline 
heat input (as determined under paragraph (a) of this section), in 
accordance with the following procedures:

[[Page 49821]]

    (1) The Administrator will establish a separate new unit set-aside 
for each control period. Each new unit set-aside will be allocated CAIR 
NOX Ozone Season allowances equal to 5 percent for a control 
period in 2009 through 2014, and 3 percent for a control period in 2015 
and thereafter, of the amount of tons of NOX emissions in 
the State trading budget for the State under Sec.  97.340.
    (2) The CAIR designated representative of such a CAIR 
NOX Ozone Season unit may submit to the Administrator a 
request, in a format specified by the the Administrator, to be 
allocated CAIR NOX Ozone Season allowances, starting with 
the later of the control period in 2009 or the first control period 
after the control period in which the CAIR NOX Ozone Season 
unit commences commercial operation and until the first control period 
for which the unit is allocated CAIR NOX Ozone Season 
allowances under paragraph (b) of this section. The CAIR NOX 
Ozone Season allowance allocation request must be submitted on or 
before February 1 before the first control period for which the CAIR 
NOX Ozone Season allowances are requested and after the date 
on which the CAIR NOX Ozone Season unit commences commercial 
operation.
    (3) In a CAIR NOX Ozone Season allowance allocation 
request under paragraph (c)(2) of this section, the CAIR designated 
representative may request for a control period CAIR NOX 
Ozone Season allowances in an amount not exceeding the CAIR 
NOX Ozone Season unit's total tons of NOX 
emissions during the control period immediately before such control 
period.
    (4) The Administrator will review each CAIR NOX Ozone 
Season allowance allocation request under paragraph (c)(2) of this 
section and will allocate CAIR NOX Ozone Season allowances 
for each control period pursuant to such request as follows:
    (i) The Administrator will accept an allowance allocation request 
only if the request meets, or is adjusted by the Administrator as 
necessary to meet, the requirements of paragraphs (c)(2) and (3) of 
this section.
    (ii) On or after February 1 before the control period, the 
Administrator will determine the sum of the CAIR NOX Ozone 
Season allowances requested (as adjusted under paragraph (c)(4)(i) of 
this section) in all allowance allocation requests accepted under 
paragraph (c)(4)(i) of this section for the control period.
    (iii) If the amount of CAIR NOX Ozone Season allowances 
in the new unit set-aside for the control period is greater than or 
equal to the sum under paragraph (c)(4)(ii) of this section, then the 
Administrator will allocate the amount of CAIR NOX Ozone 
Season allowances requested (as adjusted under paragraph (c)(4)(i) of 
this section) to each CAIR NOX Ozone Season unit covered by 
an allowance allocation request accepted under paragraph (c)(4)(i) of 
this section.
    (iv) If the amount of CAIR NOX Ozone Season allowances 
in the new unit set-aside for the control period is less than the sum 
under paragraph (c)(4)(ii) of this section, then the Administrator will 
allocate to each CAIR NOX Ozone Season unit covered by an 
allowance allocation request accepted under paragraph (c)(4)(i) of this 
section the amount of the CAIR NOX Ozone Season allowances 
requested (as adjusted under paragraph (c)(4)(i) of this section), 
multiplied by the amount of CAIR NOX Ozone Season allowances 
in the new unit set-aside for the control period, divided by the sum 
determined under paragraph (c)(4)(ii) of this section, and rounded to 
the nearest whole allowance as appropriate.
    (v) The Administrator will notify each CAIR designated 
representative that submitted an allowance allocation request of the 
amount of CAIR NOX Ozone Season allowances (if any) 
allocated for the control period to the CAIR NOX Ozone 
Season unit covered by the request.
    (d) If, after completion of the procedures under paragraph (c)(4) 
of this section for a control period, any unallocated CAIR 
NOX Ozone Season allowances remain in the new unit set-aside 
under paragraph (c) of this section for a State for the control period, 
the Administrator will allocate to each CAIR NOX Ozone 
Season unit that was allocated CAIR NOX Ozone Season 
allowances under paragraph (b) of this section an amount of CAIR 
NOX Ozone Season allowances equal to the total amount of 
such remaining unallocated CAIR NOX Ozone Season allowances, 
multiplied by the unit's allocation under paragraph (b) of this 
section, divided by 95 percent for a control period during 2009 through 
2014, and 97 percent for a control period during 2015 and thereafter, 
of the amount of tons of NOX emissions in the State trading 
budget for such State under Sec.  97.340, and rounded to the nearest 
whole allowance as appropriate.
    (e) If the Administrator determines that CAIR NOX Ozone 
Season allowances were allocated under paragraphs (a) and (b) of this 
section, paragraphs (a) and (c) of this section, or paragraph (d) or 
(e) of this section for a control period and that the recipient of the 
allocation is not actually a CAIR NOX Ozone Season unit 
under Sec.  97.304 in such control period, then the Administrator will 
notify the CAIR designated representative and will act in accordance 
with the following procedures:
    (1) Except as provided in paragraph (e)(2) or (3) of this section, 
the Administrator will not record such CAIR NOX Ozone Season 
allowances under Sec.  97.353.
    (2) If the Administrator already recorded such CAIR NOX 
Ozone Season allowances under Sec.  97.353 and if the Administrator 
makes such determinations before making deductions for the source that 
includes such recipient under Sec.  97.354(b) for the control period, 
then the Administrator will deduct from the account in which such CAIR 
NOX Ozone Season allowances were recorded under Sec.  97.353 
an amount of CAIR NOX Ozone Season allowances allocated for 
the same or a prior control period equal to the amount of such already 
recorded CAIR NOX Ozone Season allowances. The CAIR 
designated representative shall ensure that there are sufficient CAIR 
NOX Ozone Season allowances in such account for completion 
of the deduction.
    (3) If the Administrator already recorded such CAIR NOX 
Ozone Season allowances under Sec.  97.353 and if the Administrator 
makes such determinations after making deductions for the source that 
includes such recipient under Sec.  97.354(b) for the control period, 
then the Administrator will apply paragraph (e)(1) or (2) of this 
section, as appropriate, to any subsequent control period for which 
CAIR NOX Ozone Season allowances were allocated to such 
recipient.
    (4) The Administrator will transfer the CAIR NOX Ozone 
Season allowances that are not recorded, or that are deducted, in 
accordance with paragraphs (e)(1), (2), and (3) of this section to a 
new unit set-aside for the State in which such recipient is located.


Sec.  97.343  Alternative of allocation of CAIR NOX Ozone Season 
allowances by permitting authority.

    (a) Notwithstanding Sec. Sec.  97.341, 97.342, and 97.353 if a 
State submits, and the Administrator approves, a State implementation 
plan revision in accordance with Sec.  51.123(ee)(2) of this chapter 
providing for allocation of CAIR NOX Ozone Season allowances 
by the permitting authority, then the permitting authority shall make 
such allocations in accordance with such approved State implementation 
plan revision, the Administrator will not

[[Page 49822]]

make and record allocations under Sec. Sec.  97.341, 97.342, and 97.353 
for the CAIR NOX Ozone Season units in the State, and the 
Administrator will record allocations made under such approved State 
implementation plan revision.
    (b) In implementing paragraph(a) of this section and Sec. Sec.  
97.341, 97.342, and 97.353, the Administrator will ensure that the 
total amount of CAIR NOX Ozone Season allowances allocated, 
under such provisions and under a State's State implementation plan 
revision approved in accordance with Sec.  51.123(ee)(2) of this 
chapter, for a control period for CAIR NOX Ozone Season 
sources in the State or for other entities specified by the permitting 
authority will not exceed the State's State trading budget for the year 
of the control period.

Appendix A to Subpart EEEE of Part 97--States With Approved State 
Implementation Plan Revisions Concerning Allocations

    The following States have State Implementation Plan revisions 
under Sec.  51.123(ee)(2) of this chapter approved by the 
Administrator and providing for allocation of CAIR NOX 
Ozone Season allowances by the permitting authority under Sec.  
97.344(a):

[Reserved]

Subpart FFFF--CAIR NOX Ozone Season Allowance Tracking System


Sec.  97.350  [Reserved]


Sec.  97.351  Establishment of accounts.

    (a) Compliance accounts. Except as provided in Sec.  97.384(e), 
upon receipt of a complete certificate of representation under Sec.  
97.313, the Administrator will establish a compliance account for the 
CAIR NOX Ozone Season source for which the certificate of 
representation was submitted, unless the source already has a 
compliance account.
    (b) General accounts--(1) Application for general account. (i) Any 
person may apply to open a general account for the purpose of holding 
and transferring CAIR NOX Ozone Season allowances. An 
application for a general account may designate one and only one CAIR 
authorized account representative and one and only one alternate CAIR 
authorized account representative who may act on behalf of the CAIR 
authorized account representative. The agreement by which the alternate 
CAIR authorized account representative is selected shall include a 
procedure for authorizing the alternate CAIR authorized account 
representative to act in lieu of the CAIR authorized account 
representative.
    (ii) A complete application for a general account shall be 
submitted to the Administrator and shall include the following elements 
in a format prescribed by the Administrator:
    (A) Name, mailing address, e-mail address (if any), telephone 
number, and facsimile transmission number (if any) of the CAIR 
authorized account representative and any alternate CAIR authorized 
account representative;
    (B) Organization name and type of organization, if applicable;
    (C) A list of all persons subject to a binding agreement for the 
CAIR authorized account representative and any alternate CAIR 
authorized account representative to represent their ownership interest 
with respect to the CAIR NOX Ozone Season allowances held in 
the general account;
    (D) The following certification statement by the CAIR authorized 
account representative and any alternate CAIR authorized account 
representative: ``I certify that I was selected as the CAIR authorized 
account representative or the alternate CAIR authorized account 
representative, as applicable, by an agreement that is binding on all 
persons who have an ownership interest with respect to CAIR 
NOX Ozone Season allowances held in the general account. I 
certify that I have all the necessary authority to carry out my duties 
and responsibilities under the CAIR NOX Ozone Season Trading 
Program on behalf of such persons and that each such person shall be 
fully bound by my representations, actions, inactions, or submissions 
and by any order or decision issued to me by the Administrator or a 
court regarding the general account.''
    (E) The signature of the CAIR authorized account representative and 
any alternate CAIR authorized account representative and the dates 
signed.
    (iii) Unless otherwise required by the permitting authority or the 
Administrator, documents of agreement referred to in the application 
for a general account shall not be submitted to the permitting 
authority or the Administrator. Neither the permitting authority nor 
the Administrator shall be under any obligation to review or evaluate 
the sufficiency of such documents, if submitted.
    (2) Authorization of CAIR authorized account representative. (i) 
Upon receipt by the Administrator of a complete application for a 
general account under paragraph (b)(1) of this section:
    (A) The Administrator will establish a general account for the 
person or persons for whom the application is submitted.
    (B) The CAIR authorized account representative and any alternate 
CAIR authorized account representative for the general account shall 
represent and, by his or her representations, actions, inactions, or 
submissions, legally bind each person who has an ownership interest 
with respect to CAIR NOX Ozone Season allowances held in the 
general account in all matters pertaining to the CAIR NOX 
Ozone Season Trading Program, notwithstanding any agreement between the 
CAIR authorized account representative or any alternate CAIR authorized 
account representative and such person. Any such person shall be bound 
by any order or decision issued to the CAIR authorized account 
representative or any alternate CAIR authorized account representative 
by the Administrator or a court regarding the general account.
    (C) Any representation, action, inaction, or submission by any 
alternate CAIR authorized account representative shall be deemed to be 
a representation, action, inaction, or submission by the CAIR 
authorized account representative.
    (ii) Each submission concerning the general account shall be 
submitted, signed, and certified by the CAIR authorized account 
representative or any alternate CAIR authorized account representative 
for the persons having an ownership interest with respect to CAIR 
NOX Ozone Season allowances held in the general account. 
Each such submission shall include the following certification 
statement by the CAIR authorized account representative or any 
alternate CAIR authorized account representative: ``I am authorized to 
make this submission on behalf of the persons having an ownership 
interest with respect to the CAIR NOX Ozone Season 
allowances held in the general account. I certify under penalty of law 
that I have personally examined, and am familiar with, the statements 
and information submitted in this document and all its attachments. 
Based on my inquiry of those individuals with primary responsibility 
for obtaining the information, I certify that the statements and 
information are to the best of my knowledge and belief true, accurate, 
and complete. I am aware that there are significant penalties for 
submitting false statements and information or omitting required 
statements and information, including the possibility of fine or 
imprisonment.''
    (iii) The Administrator will accept or act on a submission 
concerning the general account only if the submission has been made, 
signed, and certified in accordance with paragraph (b)(2)(ii) of this 
section.
    (3) Changing CAIR authorized account representative and alternate 
CAIR authorized account representative; changes in persons with

[[Page 49823]]

ownership interest. (i) The CAIR authorized account representative for 
a general account may be changed at any time upon receipt by the 
Administrator of a superseding complete application for a general 
account under paragraph (b)(1) of this section. Notwithstanding any 
such change, all representations, actions, inactions, and submissions 
by the previous CAIR authorized account representative before the time 
and date when the Administrator receives the superseding application 
for a general account shall be binding on the new CAIR authorized 
account representative and the persons with an ownership interest with 
respect to the CAIR NOX Ozone Season allowances in the 
general account.
    (ii) The alternate CAIR authorized account representative for a 
general account may be changed at any time upon receipt by the 
Administrator of a superseding complete application for a general 
account under paragraph (b)(1) of this section. Notwithstanding any 
such change, all representations, actions, inactions, and submissions 
by the previous alternate CAIR authorized account representative before 
the time and date when the Administrator receives the superseding 
application for a general account shall be binding on the new alternate 
CAIR authorized account representative and the persons with an 
ownership interest with respect to the CAIR NOX Ozone Season 
allowances in the general account.
    (iii)(A) In the event a new person having an ownership interest 
with respect to CAIR NOX Ozone Season allowances in the 
general account is not included in the list of such persons in the 
application for a general account, such new person shall be deemed to 
be subject to and bound by the application for a general account, the 
representation, actions, inactions, and submissions of the CAIR 
authorized account representative and any alternate CAIR authorized 
account representative of the account, and the decisions and orders of 
the Administrator or a court, as if the new person were included in 
such list.
    (B) Within 30 days following any change in the persons having an 
ownership interest with respect to CAIR NOX Ozone Season 
allowances in the general account, including the addition of persons, 
the CAIR authorized account representative or any alternate CAIR 
authorized account representative shall submit a revision to the 
application for a general account amending the list of persons having 
an ownership interest with respect to the CAIR NOX Ozone 
Season allowances in the general account to include the change.
    (4) Objections concerning CAIR authorized account representative. 
(i) Once a complete application for a general account under paragraph 
(b)(1) of this section has been submitted and received, the 
Administrator will rely on the application unless and until a 
superseding complete application for a general account under paragraph 
(b)(1) of this section is received by the Administrator.
    (ii) Except as provided in paragraph (b)(3)(i) or (ii) of this 
section, no objection or other communication submitted to the 
Administrator concerning the authorization, or any representation, 
action, inaction, or submission of the CAIR authorized account 
representative or any alternative CAIR authorized account 
representative for a general account shall affect any representation, 
action, inaction, or submission of the CAIR authorized account 
representative or any alternative CAIR authorized account 
representative or the finality of any decision or order by the 
Administrator under the CAIR NOX Ozone Season Trading 
Program.
    (iii) The Administrator will not adjudicate any private legal 
dispute concerning the authorization or any representation, action, 
inaction, or submission of the CAIR authorized account representative 
or any alternative CAIR authorized account representative for a general 
account, including private legal disputes concerning the proceeds of 
CAIR NOX Ozone Season allowance transfers.
    (c) Account identification. The Administrator will assign a unique 
identifying number to each account established under paragraph (a) or 
(b) of this section.


Sec.  97.352  Responsibilities of CAIR authorized account 
representative.

    Following the establishment of a CAIR NOX Ozone Season 
Allowance Tracking System account, all submissions to the Administrator 
pertaining to the account, including, but not limited to, submissions 
concerning the deduction or transfer of CAIR NOX Ozone 
Season allowances in the account, shall be made only by the CAIR 
authorized account representative for the account.


Sec.  97.353  Recordation of CAIR NOX Ozone Season allowance 
allocations.

    (a) By December 1, 2007, the Administrator will record in the CAIR 
NOX Ozone Season source's compliance account the CAIR 
NOX Ozone Season allowances allocated for the CAIR 
NOX Ozone Season units at a source in accordance with Sec.  
97.342(a) and (b) for the control period in 2009.
    (b) By December 1, 2008, the Administrator will record in the CAIR 
NOX Ozone Season source's compliance account the CAIR 
NOX Ozone Season allowances allocated for the CAIR 
NOX Ozone Season units at the source in accordance with 
Sec.  97.342(a) and (b) for the control period in 2010.
    (c) By December 1, 2009, the Administrator will record in the CAIR 
NOX Ozone Season source's compliance account the CAIR Ozone 
Season NOX allowances allocated for the CAIR NOX 
Ozone Season units at the source in accordance with Sec.  97.342(a) and 
(b) for the control periods in 2011, 2012, and 2013.
    (d) By December 1, 2010 and December 1 of each year thereafter, the 
Administrator will record in the CAIR NOX Ozone Season 
source's compliance account the CAIR NOX Ozone Season 
allowances allocated for the CAIR NOX Ozone Season units at 
the source in accordance with Sec.  97.342(a) and (b) for the control 
period in the fourth year after the year of the applicable deadline for 
recordation under this paragraph.
    (e) By September 1, 2009 and September 1 of each year thereafter, 
the Administrator will record in the CAIR NOX Ozone Season 
source's compliance account the CAIR NOX Ozone Season 
allowances allocated for the CAIR NOX Ozone Season units at 
the source in accordance with Sec.  97.342(a) and (c) for the control 
period in the year of the applicable deadline for recordation under 
this paragraph.
    (f) Serial numbers for allocated CAIR NOX Ozone Season 
allowances. When recording the allocation of CAIR NOX Ozone 
Season allowances for a CAIR NOX Ozone Season unit in a 
compliance account, the Administrator will assign each CAIR 
NOX Ozone Season allowance a unique identification number 
that will include digits identifying the year of the control period for 
which the CAIR NOX Ozone Season allowance is allocated.


Sec.  97.354  Compliance with CAIR NOX emissions limitation.

    (a) Allowance transfer deadline. The CAIR NOX Ozone 
Season allowances are available to be deducted for compliance with a 
source's CAIR NOX Ozone Season emissions limitation for a 
control period in a given calendar year only if the CAIR NOX 
Ozone Season allowances:
    (1) Were allocated for the control period in the year or a prior 
year;
    (2) Are held in the compliance account as of the allowance transfer 
deadline for the control period or are

[[Page 49824]]

transferred into the compliance account by a CAIR NOX Ozone 
Season allowance transfer correctly submitted for recordation under 
Sec.  97.360 by the allowance transfer deadline for the control period; 
and
    (3) Are not necessary for deductions for excess emissions for a 
prior control period under paragraph (d) of this section.
    (b) Deductions for compliance. Following the recordation, in 
accordance with Sec.  97.361, of CAIR NOX Ozone Season 
allowance transfers submitted for recordation in a source's compliance 
account by the allowance transfer deadline for a control period, the 
Administrator will deduct from the compliance account CAIR 
NOX Ozone Season allowances available under paragraph (a) of 
this section in order to determine whether the source meets the CAIR 
NOX Ozone Season emissions limitation for the control 
period, as follows:
    (1) Until the amount of CAIR NOX Ozone Season allowances 
deducted equals the number of tons of total nitrogen oxides emissions, 
determined in accordance with subpart HHHH of this part, from all CAIR 
NOX Ozone Season units at the source for the control period; 
or
    (2) If there are insufficient CAIR NOX Ozone Season 
allowances to complete the deductions in paragraph (b)(1) of this 
section, until no more CAIR NOX Ozone Season allowances 
available under paragraph (a) of this section remain in the compliance 
account.
    (c)(1) Identification of CAIR NOX Ozone Season 
allowances by serial number. The CAIR authorized account representative 
for a source's compliance account may request that specific CAIR 
NOX Ozone Season allowances, identified by serial number, in 
the compliance account be deducted for emissions or excess emissions 
for a control period in accordance with paragraph (b) or (d) of this 
section. Such request shall be submitted to the Administrator by the 
allowance transfer deadline for the control period and include, in a 
format prescribed by the Administrator, the identification of the CAIR 
NOX Ozone Season source and the appropriate serial numbers.
    (2) First-in, first-out. The Administrator will deduct CAIR 
NOX Ozone Season allowances under paragraph (b) or (d) of 
this section from the source's compliance account, in the absence of an 
identification or in the case of a partial identification of CAIR 
NOX Ozone Season allowances by serial number under paragraph 
(c)(1) of this section, on a first-in, first-out (FIFO) accounting 
basis in the following order:
    (i) Any CAIR NOX Ozone Season allowances that were 
allocated to the units at the source, in the order of recordation; and 
then
    (ii) Any CAIR NOX Ozone Season allowances that were 
allocated to any entity and transferred and recorded in the compliance 
account pursuant to subpart GGGG of this part, in the order of 
recordation.
    (d) Deductions for excess emissions. (1) After making the 
deductions for compliance under paragraph (b) of this section for a 
control period in a calendar year in which the CAIR NOX 
Ozone Season source has excess emissions, the Administrator will deduct 
from the source's compliance account an amount of CAIR NOX 
Ozone Season allowances, allocated for the control period in the 
immediately following calendar year, equal to 3 times the number of 
tons of the source's excess emissions.
    (2) Any allowance deduction required under paragraph (d)(1) of this 
section shall not affect the liability of the owners and operators of 
the CAIR NOX Ozone Season source or the CAIR NOX 
Ozone Season units at the source for any fine, penalty, or assessment, 
or their obligation to comply with any other remedy, for the same 
violations, as ordered under the Clean Air Act or applicable State law.
    (e) Recordation of deductions. The Administrator will record in the 
appropriate compliance account all deductions from such an account 
under paragraph (b) or (d) of this section.
    (f) Administrator's action on submissions. (1) The Administrator 
may review and conduct independent audits concerning any submission 
under the CAIR NOX Ozone Season Trading Program and make 
appropriate adjustments of the information in the submissions.
    (2) The Administrator may deduct CAIR NOX Ozone Season 
allowances from or transfer CAIR NOX Ozone Season allowances 
to a source's compliance account based on the information in the 
submissions, as adjusted under paragraph (f)(1) of this section.


Sec.  97.355  Banking.

    (a) CAIR NOX Ozone Season allowances may be banked for 
future use or transfer in a compliance account or a general account in 
accordance with paragraph (b) of this section.
    (b) Any CAIR NOX Ozone Season allowance that is held in 
a compliance account or a general account will remain in such account 
unless and until the CAIR NOX Ozone Season allowance is 
deducted or transferred under Sec.  97.354, Sec.  97.356, or subpart 
GGGG of this part.


Sec.  97.356  Account error.

    The Administrator may, at his or her sole discretion and on his or 
her own motion, correct any error in any CAIR NOX Ozone 
Season Allowance Tracking System account. Within 10 business days of 
making such correction, the Administrator will notify the CAIR 
authorized account representative for the account.


Sec.  97.357  Closing of general accounts.

    (a) The CAIR authorized account representative of a general account 
may submit to the Administrator a request to close the account, which 
shall include a correctly submitted allowance transfer under Sec.  
97.360 for any CAIR NOX Ozone Season allowances in the 
account to one or more other CAIR NOX Ozone Season Allowance 
Tracking System accounts.
    (b) If a general account has no allowance transfers in or out of 
the account for a 12-month period or longer and does not contain any 
CAIR NOX Ozone Season allowances, the Administrator may 
notify the CAIR authorized account representative for the account that 
the account will be closed following 20 business days after the notice 
is sent. The account will be closed after the 20-day period unless, 
before the end of the 20-day period, the Administrator receives a 
correctly submitted transfer of CAIR NOX Ozone Season 
allowances into the account under Sec.  97.360 or a statement submitted 
by the CAIR authorized account representative demonstrating to the 
satisfaction of the Administrator good cause as to why the account 
should not be closed.

Subpart GGGG--CAIR NOX Ozone Season Allowance Transfers


Sec.  97.360  Submission of CAIR NOX Ozone Season allowance transfers.

    A CAIR authorized account representative seeking recordation of a 
CAIR NOX Ozone Season allowance transfer shall submit the 
transfer to the Administrator. To be considered correctly submitted, 
the CAIR NOX Ozone Season allowance transfer shall include 
the following elements, in a format specified by the Administrator:
    (a) The account numbers for both the transferor and transferee 
accounts;
    (b) The serial number of each CAIR NOX Ozone Season 
allowance that is in the transferor account and is to be transferred; 
and
    (c) The name and signature of the CAIR authorized account 
representative of the transferor account and the date signed.

[[Page 49825]]

Sec.  97.361  EPA recordation.

    (a) Within 5 business days (except as provided in paragraph (b) of 
this section) of receiving a CAIR NOX Ozone Season allowance 
transfer, the Administrator will record a CAIR NOX Ozone 
Season allowance transfer by moving each CAIR NOX Ozone 
Season allowance from the transferor account to the transferee account 
as specified by the request, provided that:
    (1) The transfer is correctly submitted under Sec.  97.360; and
    (2) The transferor account includes each CAIR NOX Ozone Season 
allowance identified by serial number in the transfer.
    (b) A CAIR NOX Ozone Season allowance transfer that is 
submitted for recordation after the allowance transfer deadline for a 
control period and that includes any CAIR NOX Ozone Season 
allowances allocated for any control period before such allowance 
transfer deadline will not be recorded until after the Administrator 
completes the deductions under Sec.  97.354 for the control period 
immediately before such allowance transfer deadline.
    (c) Where a CAIR NOX Ozone Season allowance transfer 
submitted for recordation fails to meet the requirements of paragraph 
(a) of this section, the Administrator will not record such transfer.


Sec.  97.362  Notification.

    (a) Notification of recordation. Within 5 business days of 
recordation of a CAIR NOX Ozone Season allowance transfer 
under Sec.  97.361, the Administrator will notify the CAIR authorized 
account representatives of both the transferor and transferee accounts.
    (b) Notification of non-recordation. Within 10 business days of 
receipt of a CAIR NOX Ozone Season allowance transfer that 
fails to meet the requirements of Sec.  97.361(a), the Administrator 
will notify the CAIR authorized account representatives of both 
accounts subject to the transfer of:
    (1) A decision not to record the transfer, and
    (2) The reasons for such non-recordation.
    (c) Nothing in this section shall preclude the submission of a CAIR 
NOX Ozone Season allowance transfer for recordation 
following notification of non-recordation.

Subpart HHHH--Monitoring and Reporting


Sec.  97.370  General Requirements.

    The owners and operators, and to the extent applicable, the CAIR 
designated representative, of a CAIR NOX Ozone Season unit, 
shall comply with the monitoring, recordkeeping, and reporting 
requirements as provided in this subpart and in subpart H of part 75 of 
this chapter. For purposes of complying with such requirements, the 
definitions in Sec.  97.302 and in Sec.  72.2 of this chapter shall 
apply, and the terms ``affected unit,'' ``designated representative,'' 
and ``continuous emission monitoring system'' (or ``CEMS'') in part 75 
of this chapter shall be deemed to refer to the terms ``CAIR 
NOX Ozone Season unit,'' ``CAIR designated representative,'' 
and ``continuous emission monitoring system'' (or ``CEMS'') 
respectively, as defined in Sec.  97.302. The owner or operator of a 
unit that is not a CAIR NOX Ozone Season unit but that is 
monitored under Sec.  75.72(b)(2)(ii) of this chapter shall comply with 
the same monitoring, recordkeeping, and reporting requirements as a 
CAIR NOX Ozone Season unit.
    (a) Requirements for installation, certification, and data 
accounting. The owner or operator of each CAIR NOX Ozone 
Season unit shall:
    (1) Install all monitoring systems required under this subpart for 
monitoring NOX mass emissions and individual unit heat input 
(including all systems required to monitor NOX emission 
rate, NOX concentration, stack gas moisture content, stack 
gas flow rate, CO2 or O2 concentration, and fuel 
flow rate, as applicable, in accordance with Sec. Sec.  75.71 and 75.72 
of this chapter);
    (2) Successfully complete all certification tests required under 
Sec.  97.371 and meet all other requirements of this subpart and part 
75 of this chapter applicable to the monitoring systems under paragraph 
(a)(1) of this section; and
    (3) Record, report, and quality-assure the data from the monitoring 
systems under paragraph (a)(1) of this section.
    (b) Compliance deadlines. The owner or operator shall meet the 
monitoring system certification and other requirements of paragraphs 
(a)(1) and (2) of this section on or before the following dates. The 
owner or operator shall record, report, and quality-assure the data 
from the monitoring systems under paragraph (a)(1) of this section on 
and after the following dates.
    (1) For the owner or operator of a CAIR NOX Ozone Season 
unit that commences commercial operation before July 1, 2007, by May 1, 
2008.
    (2) For the owner or operator of a CAIR NOX Ozone Season 
unit that commences commercial operation on or after July 1, 2007 and 
that reports on an annual basis under Sec.  97.374(d), by the later of 
the following dates:
    (i) 90 unit operating days or 180 calendar days, whichever occurs 
first, after the date on which the unit commences commercial operation; 
or
    (ii) May 1, 2008, if the compliance date under paragraph (b)(2)(i) 
is before May 1, 2008.
    (3) For the owner or operator of a CAIR NOX Ozone Season 
unit that commences operation on or after July 1, 2007 and that reports 
on a control period basis under Sec.  97.374(d)(2)(ii), by the later of 
the following dates:
    (i) 90 unit operating days or 180 calendar days, whichever occurs 
first, after the date on which the unit commences commercial operation; 
or
    (ii) If the compliance date under paragraph (b)(3)(i) of this 
section is not during a control period, May 1 immediately following the 
compliance date under paragraph (b)(3)(i) of this section.
    (4) For the owner or operator of a CAIR NOX Ozone Season 
unit for which construction of a new stack or flue or installation of 
add-on NOX emission controls is completed after the 
applicable deadline under paragraph (b)(1), (2), (6), or (7) of this 
section and that reports on an annual basis under Sec.  97.374(d), by 
90 unit operating days or 180 calendar days, whichever occurs first, 
after the date on which emissions first exit to the atmosphere through 
the new stack or flue or add-on NOX emissions controls.
    (5) For the owner or operator of a CAIR NOX Ozone Season 
unit for which construction of a new stack or flue or installation of 
add-on NOX emission controls is completed after the 
applicable deadline under paragraph (b)(1), (3), (6), or (7) of this 
section and that reports on a control period basis under Sec.  
97.374(d)(2)(ii), by the later of the following dates:
    (i) 90 unit operating days or 180 calendar days, whichever occurs 
first, after the date on which emissions first exit to the atmosphere 
through the new stack or flue or add-on NOX emissions 
controls; or
    (ii) If the compliance date under paragraph (b)(5)(i) of this 
section is not during a control period, May 1 immediately following the 
compliance date under paragraph (b)(5)(i) of this section.
    (6) Notwithstanding the dates in paragraphs (b)(1), (2), and (3) of 
this section, for the owner or operator of a unit for which a CAIR 
NOX Ozone Season opt-in permit application is submitted and 
not withdrawn and a CAIR opt-in permit is not yet issued or denied 
under subpart IIII of this part, by the date specified in Sec.  
97.384(b).

[[Page 49826]]

    (7) Notwithstanding the dates in paragraphs (b)(1), (2), and (3) of 
this section, for the owner or operator of a CAIR NOX Ozone 
Season opt-in unit under subpart III of this part, by the date on which 
the CAIR NOX Ozone Season opt-in unit enters the CAIR 
NOX Ozone Season Trading Program as provided in Sec.  
97.384(g).
    (c) Reporting data. (1) Except as provided in paragraph (c)(2) of 
this section, the owner or operator of a CAIR NOX Ozone 
Season unit that does not meet the applicable compliance date set forth 
in paragraph (b) of this section for any monitoring system under 
paragraph (a)(1) of this section shall, for each such monitoring 
system, determine, record, and report maximum potential (or, as 
appropriate, minimum potential) values for NOX 
concentration, NOX emission rate, stack gas flow rate, stack 
gas moisture content, fuel flow rate, and any other parameters required 
to determine NOX mass emissions and heat input in accordance 
with Sec.  75.31(b)(2) or (c)(3) of this chapter, section 2.4 of 
appendix D to part 75 of this chapter, or section 2.5 of appendix E to 
part 75 of this chapter, as applicable.
    (2) The owner or operator of a CAIR NOX unit that does 
not meet the applicable compliance date set forth in paragraph (b)(4) 
of this section for any monitoring system under paragraph (a)(1) of 
this section shall, for each such monitoring system, determine, record, 
and report substitute data using the applicable missing data procedures 
in Sec.  75.74(c)(7) of this chapter or subpart D or subpart H of, or 
appendix D or appendix E to, part 75 of this chapter, in lieu of the 
maximum potential (or, as appropriate, minimum potential) values, for a 
parameter if the owner or operator demonstrates that there is 
continuity between the data streams for that parameter before and after 
the construction or installation under paragraph (b)(4) of this 
section.
    (d) Prohibitions. (1) No owner or operator of a CAIR NOX 
Ozone Season unit shall use any alternative monitoring system, 
alternative reference method, or any other alternative to any 
requirement of this subpart without having obtained prior written 
approval in accordance with Sec.  97.375.
    (2) No owner or operator of a CAIR NOX Ozone Season unit 
shall operate the unit so as to discharge, or allow to be discharged, 
NOX emissions to the atmosphere without accounting for all 
such emissions in accordance with the applicable provisions of this 
subpart and part 75 of this chapter.
    (3) No owner or operator of a CAIR NOX Ozone Season unit 
shall disrupt the continuous emission monitoring system, any portion 
thereof, or any other approved emission monitoring method, and thereby 
avoid monitoring and recording NOX mass emissions discharged 
into the atmosphere, except for periods of recertification or periods 
when calibration, quality assurance testing, or maintenance is 
performed in accordance with the applicable provisions of this subpart 
and part 75 of this chapter.
    (4) No owner or operator of a CAIR NOX Ozone Season unit 
shall retire or permanently discontinue use of the continuous emission 
monitoring system, any component thereof, or any other approved 
monitoring system under this subpart, except under any one of the 
following circumstances:
    (i) During the period that the unit is covered by an exemption 
under Sec.  97.305 that is in effect;
    (ii) The owner or operator is monitoring emissions from the unit 
with another certified monitoring system approved, in accordance with 
the applicable provisions of this subpart and part 75 of this chapter, 
by the Administrator for use at that unit that provides emission data 
for the same pollutant or parameter as the retired or discontinued 
monitoring system; or
    (iii) The CAIR designated representative submits notification of 
the date of certification testing of a replacement monitoring system 
for the retired or discontinued monitoring system in accordance with 
Sec.  97.371(d)(3)(i).
    (e) Long-term cold storage. The owner or operator of a CAIR 
NOX Ozone Season unit is subject to the applicable 
provisions of part 75 of this chapter concerning units in long-term 
cold storage.


Sec.  97.371  Initial certification and recertification procedures.

    (a) The owner or operator of a CAIR NOX Ozone Season 
unit shall be exempt from the initial certification requirements of 
this section for a monitoring system under Sec.  97.370(a)(1) if the 
following conditions are met:
    (1) The monitoring system has been previously certified in 
accordance with part 75 of this chapter; and
    (2) The applicable quality-assurance and quality-control 
requirements of Sec.  75.21 of this chapter and appendix B, appendix D, 
and appendix E to part 75 of this chapter are fully met for the 
certified monitoring system described in paragraph (a)(1) of this 
section.
    (b) The recertification provisions of this section shall apply to a 
monitoring system under Sec.  97.370(a)(1) exempt from initial 
certification requirements under paragraph (a) of this section.
    (c) If the Administrator has previously approved a petition under 
Sec.  75.17(a) or (b) of this chapter for apportioning the 
NOX emission rate measured in a common stack or a petition 
under Sec.  75.66 of this chapter for an alternative to a requirement 
in Sec.  75.12 or Sec.  75.17 of this chapter, the CAIR designated 
representative shall resubmit the petition to the Administrator under 
Sec.  97.375 to determine whether the approval applies under the CAIR 
NOX Ozone Season Trading Program.
    (d) Except as provided in paragraph (a) of this section, the owner 
or operator of a CAIR NOX Ozone Season unit shall comply 
with the following initial certification and recertification procedures 
for a continuous monitoring system (i.e., a continuous emission 
monitoring system and an excepted monitoring system under appendices D 
and E to part 75 of this chapter) under Sec.  97.370(a)(1). The owner 
or operator of a unit that qualifies to use the low mass emissions 
excepted monitoring methodology under Sec.  75.19 of this chapter or 
that qualifies to use an alternative monitoring system under subpart E 
of part 75 of this chapter shall comply with the procedures in 
paragraph (e) or (f) of this section respectively.
    (1) Requirements for initial certification. The owner or operator 
shall ensure that each continuous monitoring system under Sec.  
97.370(a)(1) (including the automated data acquisition and handling 
system) successfully completes all of the initial certification testing 
required under Sec.  75.20 of this chapter by the applicable deadline 
in Sec.  97.370(b). In addition, whenever the owner or operator 
installs a monitoring system to meet the requirements of this subpart 
in a location where no such monitoring system was previously installed, 
initial certification in accordance with Sec.  75.20 of this chapter is 
required.
    (2) Requirements for recertification. Whenever the owner or 
operator makes a replacement, modification, or change in any certified 
continuous emission monitoring system under Sec.  97.370(a)(1) that may 
significantly affect the ability of the system to accurately measure or 
record NOX mass emissions or heat input rate or to meet the 
quality-assurance and quality-control requirements of Sec.  75.21 of 
this chapter or appendix B to part 75 of this chapter, the owner or 
operator shall recertify the monitoring system in accordance with Sec.  
75.20(b) of this chapter. Furthermore, whenever the owner or operator 
makes a replacement, modification, or change to the flue gas handling 
system or the unit's operation that may significantly

[[Page 49827]]

change the stack flow or concentration profile, the owner or operator 
shall recertify each continuous emission monitoring system whose 
accuracy is potentially affected by the change, in accordance with 
Sec.  75.20(b) of this chapter. Examples of changes to a continuous 
emission monitoring system that require recertification include: 
replacement of the analyzer, complete replacement of an existing 
continuous emission monitoring system, or change in location or 
orientation of the sampling probe or site. Any fuel flowmeter systems, 
and any excepted NOX monitoring system under appendix E to 
part 75 of this chapter, under Sec.  97.370(a)(1) are subject to the 
recertification requirements in Sec.  75.20(g)(6) of this chapter.
    (3) Approval process for initial certification and recertification. 
Paragraphs (d)(3)(i) through (iv) of this section apply to both initial 
certification and recertification of a continuous monitoring system 
under Sec.  97.370(a)(1). For recertifications, replace the words 
``certification'' and ``initial certification'' with the word 
``recertification'', replace the word ``certified'' with the word 
``recertified,'' and follow the procedures in Sec. Sec.  75.20(b)(5) 
and (g)(7) of this chapter in lieu of the procedures in paragraph 
(d)(3)(v) of this section.
    (i) Notification of certification. The CAIR designated 
representative shall submit to the appropriate EPA Regional Office and 
the Administrator written notice of the dates of certification testing, 
in accordance with Sec.  97.373.
    (ii) Certification application. The CAIR designated representative 
shall submit to the Administrator a certification application for each 
monitoring system. A complete certification application shall include 
the information specified in Sec.  75.63 of this chapter.
    (iii) Provisional certification date. The provisional certification 
date for a monitoring system shall be determined in accordance with 
Sec.  75.20(a)(3) of this chapter. A provisionally certified monitoring 
system may be used under the CAIR NOX Ozone Season Trading 
Program for a period not to exceed 120 days after receipt by the 
Administrator of the complete certification application for the 
monitoring system under paragraph (d)(3)(ii) of this section. Data 
measured and recorded by the provisionally certified monitoring system, 
in accordance with the requirements of part 75 of this chapter, will be 
considered valid quality-assured data (retroactive to the date and time 
of provisional certification), provided that the Administrator does not 
invalidate the provisional certification by issuing a notice of 
disapproval within 120 days of the date of receipt of the complete 
certification application by the Administrator.
    (iv) Certification application approval process. The Administrator 
will issue a written notice of approval or disapproval of the 
certification application to the owner or operator within 120 days of 
receipt of the complete certification application under paragraph 
(d)(3)(ii) of this section. In the event the Administrator does not 
issue such a notice within such 120-day period, each monitoring system 
that meets the applicable performance requirements of part 75 of this 
chapter and is included in the certification application will be deemed 
certified for use under the CAIR NOX Ozone Season Trading 
Program.
    (A) Approval notice. If the certification application is complete 
and shows that each monitoring system meets the applicable performance 
requirements of part 75 of this chapter, then the Administrator will 
issue a written notice of approval of the certification application 
within 120 days of receipt.
    (B) Incomplete application notice. If the certification application 
is not complete, then the Administrator will issue a written notice of 
incompleteness that sets a reasonable date by which the CAIR designated 
representative must submit the additional information required to 
complete the certification application. If the CAIR designated 
representative does not comply with the notice of incompleteness by the 
specified date, then the Administrator may issue a notice of 
disapproval under paragraph (d)(3)(iv)(C) of this section. The 120-day 
review period shall not begin before receipt of a complete 
certification application.
    (C) Disapproval notice. If the certification application shows that 
any monitoring system does not meet the performance requirements of 
part 75 of this chapter or if the certification application is 
incomplete and the requirement for disapproval under paragraph 
(d)(3)(iv)(B) of this section is met, then the Administrator will issue 
a written notice of disapproval of the certification application. Upon 
issuance of such notice of disapproval, the provisional certification 
is invalidated by the Administrator and the data measured and recorded 
by each uncertified monitoring system shall not be considered valid 
quality-assured data beginning with the date and hour of provisional 
certification (as defined under Sec.  75.20(a)(3) of this chapter). The 
owner or operator shall follow the procedures for loss of certification 
in paragraph (d)(3)(v) of this section for each monitoring system that 
is disapproved for initial certification.
    (D) Audit decertification. The Administrator may issue a notice of 
disapproval of the certification status of a monitor in accordance with 
Sec.  97.372(b).
    (v) Procedures for loss of certification. If the Administrator 
issues a notice of disapproval of a certification application under 
paragraph (d)(3)(iv)(C) of this section or a notice of disapproval of 
certification status under paragraph (d)(3)(iv)(D) of this section, 
then:
    (A) The owner or operator shall substitute the following values, 
for each disapproved monitoring system, for each hour of unit operation 
during the period of invalid data specified under Sec.  
75.20(a)(4)(iii), Sec.  75.20(g)(7), or Sec.  75.21(e) of this chapter 
and continuing until the applicable date and hour specified under Sec.  
75.20(a)(5)(i) or (g)(7) of this chapter:
    (1) For a disapproved NOX emission rate (i.e., 
NOX-diluent) system, the maximum potential NOX 
emission rate, as defined in Sec.  72.2 of this chapter.
    (2) For a disapproved NOX pollutant concentration 
monitor and disapproved flow monitor, respectively, the maximum 
potential concentration of NOX and the maximum potential 
flow rate, as defined in sections 2.1.2.1 and 2.1.4.1 of appendix A to 
part 75 of this chapter.
    (3) For a disapproved moisture monitoring system and disapproved 
diluent gas monitoring system, respectively, the minimum potential 
moisture percentage and either the maximum potential CO2 
concentration or the minimum potential O2 concentration (as 
applicable), as defined in sections 2.1.5, 2.1.3.1, and 2.1.3.2 of 
appendix A to part 75 of this chapter.
    (4) For a disapproved fuel flowmeter system, the maximum potential 
fuel flow rate, as defined in section 2.4.2.1 of appendix D to part 75 
of this chapter.
    (5) For a disapproved excepted NOX monitoring system 
under appendix E to part 75 of this chapter, the fuel-specific maximum 
potential NOX emission rate, as defined in Sec.  72.2 of 
this chapter.
    (B) The CAIR designated representative shall submit a notification 
of certification retest dates and a new certification application in 
accordance with paragraphs (d)(3)(i) and (ii) of this section.
    (C) The owner or operator shall repeat all certification tests or 
other requirements that were failed by the monitoring system, as 
indicated in the Administrator's notice of disapproval, no later than 
30 unit operating days

[[Page 49828]]

after the date of issuance of the notice of disapproval.
    (e) Initial certification and recertification procedures for units 
using the low mass emission excepted methodology under Sec.  75.19 of 
this chapter. The owner or operator of a unit qualified to use the low 
mass emissions (LME) excepted methodology under Sec.  75.19 of this 
chapter shall meet the applicable certification and recertification 
requirements in Sec. Sec.  75.19(a)(2) and 75.20(h) of this chapter. If 
the owner or operator of such a unit elects to certify a fuel flowmeter 
system for heat input determination, the owner or operator shall also 
meet the certification and recertification requirements in Sec.  
75.20(g) of this chapter.
    (f) Certification/recertification procedures for alternative 
monitoring systems. The CAIR designated representative of each unit for 
which the owner or operator intends to use an alternative monitoring 
system approved by the Administrator under subpart E of part 75 of this 
chapter shall comply with the applicable notification and application 
procedures of Sec.  75.20(f) of this chapter.


Sec.  97.372  Out of control periods.

    (a) Whenever any monitoring system fails to meet the quality-
assurance and quality-control requirements or data validation 
requirements of part 75 of this chapter, data shall be substituted 
using the applicable missing data procedures in subpart D or subpart H 
of, or appendix D or appendix E to, part 75 of this chapter.
    (b) Audit decertification. Whenever both an audit of a monitoring 
system and a review of the initial certification or recertification 
application reveal that any monitoring system should not have been 
certified or recertified because it did not meet a particular 
performance specification or other requirement under Sec.  97.371 or 
the applicable provisions of part 75 of this chapter, both at the time 
of the initial certification or recertification application submission 
and at the time of the audit, the Administrator will issue a notice of 
disapproval of the certification status of such monitoring system. For 
the purposes of this paragraph, an audit shall be either a field audit 
or an audit of any information submitted to the permitting authority or 
the Administrator. By issuing the notice of disapproval, the 
Administrator revokes prospectively the certification status of the 
monitoring system. The data measured and recorded by the monitoring 
system shall not be considered valid quality-assured data from the date 
of issuance of the notification of the revoked certification status 
until the date and time that the owner or operator completes 
subsequently approved initial certification or recertification tests 
for the monitoring system. The owner or operator shall follow the 
applicable initial certification or recertification procedures in Sec.  
97.371 for each disapproved monitoring system.


Sec.  97.373  Notifications.

    The CAIR designated representative for a CAIR NOX Ozone 
Season unit shall submit written notice to the Administrator in 
accordance with Sec.  75.61 of this chapter.


Sec.  97.374  Recordkeeping and reporting.

    (a) General provisions. The CAIR designated representative shall 
comply with all recordkeeping and reporting requirements in this 
section, the applicable recordkeeping and reporting requirements under 
Sec.  75.73 of this chapter, and the requirements of Sec.  
97.310(e)(1).
    (b) Monitoring plans. The owner or operator of a CAIR 
NOX Ozone Season unit shall comply with requirements of 
Sec.  75.73(c) and (e) of this chapter .
    (c) Certification applications. The CAIR designated representative 
shall submit an application to the Administrator within 45 days after 
completing all initial certification or recertification tests required 
under Sec.  97.371, including the information required under Sec.  
75.63 of this chapter.
    (d) Quarterly reports. The CAIR designated representative shall 
submit quarterly reports, as follows:
    (1) If the CAIR NOX Ozone Season unit is subject to an 
Acid Rain emissions limitation or a CAIR NOX emissions 
limitation or if the owner or operator of such unit chooses to report 
on an annual basis under this subpart, the CAIR designated 
representative shall meet the requirements of subpart H of part 75 of 
this chapter (concerning monitoring of NOX mass emissions) 
for such unit for the entire year and shall report the NOX 
mass emissions data and heat input data for such unit, in an electronic 
quarterly report in a format prescribed by the Administrator, for each 
calendar quarter beginning with:
    (i) For a unit that commences commercial operation before July 1, 
2007, the calendar quarter covering May 1, 2008 through June 30, 2008.
    (ii) For a unit that commences commercial operation on or after 
July 1, 2007, the calendar quarter corresponding to the earlier of the 
date of provisional certification or the applicable deadline for 
initial certification under Sec.  97.370(b), unless that quarter is the 
third or fourth quarter of 2007, in which case reporting shall commence 
in the quarter covering May 1, 2008 through June 30, 2008.
    (iii) Notwithstanding paragraphs (d)(1)(i) and (ii) of this 
section, for a unit for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied under subpart IIII of this part, the calendar quarter 
corresponding to the date specified in Sec.  97.384(b).
    (iv) Notwithstanding paragraphs (d)(1)(i) and (ii) of this section, 
for a CAIR NOX Ozone Season opt-in unit under subpart IIII 
of this part, the calendar quarter corresponding to the date on which 
the CAIR NOX Ozone Season opt-in unit enters the CAIR 
NOX Ozone Season Trading Program as provided in Sec.  
97.384(g).
    (2) If the CAIR NOX Ozone Season unit is not subject to 
an Acid Rain emissions limitation or a CAIR NOX emissions 
limitation, then the CAIR designated representative shall either:
    (i) Meet the requirements of subpart H of part 75 (concerning 
monitoring of NOX mass emissions) for such unit for the 
entire year and report the NOX mass emissions data and heat 
input data for such unit in accordance with paragraph (d)(1) of this 
section; or
    (ii) Meet the requirements of subpart H of part 75 for the control 
period (including the requirements in Sec.  75.74(c) of this chapter) 
and report NOX mass emissions data and heat input data 
(including the data described in Sec.  75.74(c)(6) of this chapter) for 
such unit only for the control period of each year and report, in an 
electronic quarterly report in a format prescribed by the 
Administrator, for each calendar quarter beginning with:
    (A) For a unit that commences commercial operation before July 1, 
2007, the calendar quarter covering May 1, 2008 through June 30, 2008.
    (B) For a unit that commences commercial operation on or after July 
1, 2007, the calendar quarter corresponding to the earlier of the date 
of provisional certification or the applicable deadline for initial 
certification under Sec.  97.370(b), unless that date is not during a 
control period, in which case reporting shall commence in the quarter 
that includes May 1 through June 30 of the first control period after 
such date.
    (iii) Notwithstanding paragraphs (d)(2)(i) and (ii) of this 
section, for a unit for which a CAIR opt-in permit application is 
submitted and not withdrawn and a CAIR opt-in permit is not yet issued 
or denied under subpart

[[Page 49829]]

IIII of this part, the calendar quarter corresponding to the date 
specified in Sec.  97.384(b).
    (iv) Notwithstanding paragraphs (d)(2)(i) and (ii) of this section, 
for a CAIR NOX Ozone Season opt-in unit under subpart IIII 
of this part, the calendar quarter corresponding to the date on which 
the CAIR NOX Ozone Season opt-in unit enters the CAIR 
NOX Ozone Season Trading Program as provided in Sec.  
97.384(g).
    (3) The CAIR designated representative shall submit each quarterly 
report to the Administrator within 30 days following the end of the 
calendar quarter covered by the report. Quarterly reports shall be 
submitted in the manner specified in Sec.  75.73(f) of this chapter.
    (4) For CAIR NOX Ozone Season units that are also 
subject to an Acid Rain emissions limitation or the CAIR NOX 
Annual Trading Program, CAIR SO2 Trading Program, or Hg 
Budget Trading Program, quarterly reports shall include the applicable 
data and information required by subparts F through I of part 75 of 
this chapter as applicable, in addition to the NOX mass 
emission data, heat input data, and other information required by this 
subpart.
    (e) Compliance certification. The CAIR designated representative 
shall submit to the Administrator a compliance certification (in a 
format prescribed by the Administrator) in support of each quarterly 
report based on reasonable inquiry of those persons with primary 
responsibility for ensuring that all of the unit's emissions are 
correctly and fully monitored. The certification shall state that:
    (1) The monitoring data submitted were recorded in accordance with 
the applicable requirements of this subpart and part 75 of this 
chapter, including the quality assurance procedures and specifications;
    (2) For a unit with add-on NOX emission controls and for 
all hours where NOX data are substituted in accordance with 
Sec.  75.34(a)(1) of this chapter, the add-on emission controls were 
operating within the range of parameters listed in the quality 
assurance/quality control program under appendix B to part 75 of this 
chapter and the substitute data values do not systematically 
underestimate NOX emissions; and
    (3) For a unit that is reporting on a control period basis under 
paragraph (d)(2)(ii) of this section, the NOX emission rate 
and NOX concentration values substituted for missing data 
under subpart D of part 75 of this chapter are calculated using only 
values from a control period and do not systematically underestimate 
NOX emissions.


Sec.  97.375  Petitions.

    The CAIR designated representative of a CAIR NOX Ozone 
Season unit may submit a petition under Sec.  75.66 of this chapter to 
the Administrator requesting approval to apply an alternative to any 
requirement of this subpart. Application of an alternative to any 
requirement of this subpart is in accordance with this subpart only to 
the extent that the petition is approved in writing by the 
Administrator, in consultation with the permitting authority.


Sec.  97.376  Additional requirements to provide heat input data.

    The owner or operator of a CAIR NOX Ozone Season unit 
that monitors and reports NOX mass emissions using a 
NOX concentration system and a flow system shall also 
monitor and report heat input rate at the unit level using the 
procedures set forth in part 75 of this chapter.

Subpart IIII--CAIR NOX Ozone Season Opt-in Units


Sec.  97.380  Applicability.

    A CAIR NOX Ozone Season opt-in unit must be a unit that:
    (a) Is located in a State that submits, and for which the 
Administrator approves, a State implementation plan revision in 
accordance with Sec.  51.123(ee)(3)(i), (ii), or (iii) of this chapter 
establishing procedures concerning CAIR Ozone Season opt-in units;
    (b) Is not a CAIR NOX Ozone Season unit under Sec.  
97.304 and is not covered by a retired unit exemption under Sec.  
97.305 that is in effect;
    (c) Is not covered by a retired unit exemption under Sec.  72.8 of 
this chapter that is in effect;
    (d) Has or is required or qualified to have a title V operating 
permit or other federally enforceable permit; and
    (e) Vents all of its emissions to a stack and can meet the 
monitoring, recordkeeping, and reporting requirements of subpart HH of 
this part.


Sec.  97.381  General.

    (a) Except as otherwise provided in Sec. Sec.  97.301 through 
97.304, Sec. Sec.  97.306 through 97.308, and subparts BBBB and CCCC 
and subparts FFFF through HHHH of this part, a CAIR NOX 
Ozone Season opt-in unit shall be treated as a CAIR NOX 
Ozone Season unit for purposes of applying such sections and subparts 
of this part.
    (b) Solely for purposes of applying, as provided in this subpart, 
the requirements of subpart HHHH of this part to a unit for which a 
CAIR opt-in permit application is submitted and not withdrawn and a 
CAIR opt-in permit is not yet issued or denied under this subpart, such 
unit shall be treated as a CAIR NOX Ozone Season unit before 
issuance of a CAIR opt-in permit for such unit.


Sec.  97.382  CAIR designated representative.

    Any CAIR NOX Ozone Season opt-in unit, and any unit for 
which a CAIR opt-in permit application is submitted and not withdrawn 
and a CAIR opt-in permit is not yet issued or denied under this 
subpart, located at the same source as one or more CAIR NOX 
Ozone Season units shall have the same CAIR designated representative 
and alternate CAIR designated representative as such CAIR 
NOX Ozone Season units.


Sec.  97.383  Applying for CAIR opt-in permit.

    (a) Applying for initial CAIR opt-in permit. The CAIR designated 
representative of a unit meeting the requirements for a CAIR 
NOX Ozone Season opt-in unit in Sec.  97.380 may apply for 
an initial CAIR opt-in permit at any time, except as provided under 
Sec.  97.386(f) and (g), and, in order to apply, must submit the 
following:
    (1) A complete CAIR permit application under Sec.  97.322;
    (2) A certification, in a format specified by the permitting 
authority, that the unit:
    (i) Is not a CAIR NOX Ozone Season unit under Sec.  
97.304 and is not covered by a retired unit exemption under Sec.  
97.305 that is in effect;
    (ii) Is not covered by a retired unit exemption under Sec.  72.8 of 
this chapter that is in effect;
    (iii) Vents all of its emissions to a stack, and
    (iv) Has documented heat input for more than 876 hours during the 6 
months immediately preceding submission of the CAIR permit application 
under Sec.  97.322;
    (3) A monitoring plan in accordance with subpart HHHH of this part;
    (4) A complete certificate of representation under Sec.  97.313 
consistent with Sec.  97.382, if no CAIR designated representative has 
been previously designated for the source that includes the unit; and
    (5) A statement, in a format specified by the permitting authority, 
whether the CAIR designated representative requests that the unit be 
allocated CAIR NOX Ozone Season allowances under Sec.  
97.380(b) or Sec.  97.388(c) (subject to the conditions in Sec. Sec.  
97.384(h) and 97.386(g)), to the extent such allocation is provided in 
a State implementation plan revision submitted in accordance

[[Page 49830]]

with Sec.  51.123(ee)(3)(i), (ii), or (iii) of this chapter and 
approved by the Administrator.
    (b) Duty to reapply. (1) The CAIR designated representative of a 
CAIR NOX Ozone Season opt-in unit shall submit a complete 
CAIR permit application under Sec.  97.322 to renew the CAIR opt-in 
unit permit in accordance with the permitting authority's regulations 
for title V operating permits, or the permitting authority's 
regulations for other federally enforceable permits if applicable, 
addressing permit renewal.
    (2) Unless the permitting authority issues a notification of 
acceptance of withdrawal of the CAIR NOX Ozone Season opt-in 
unit from the CAIR NOX Ozone Season Trading Program in 
accordance with Sec.  97.386 or the unit becomes a CAIR NOX 
Ozone Season unit under Sec.  97.304, the CAIR NOX Ozone 
Season opt-in unit shall remain subject to the requirements for a CAIR 
NOX Ozone Season opt-in unit, even if the CAIR designated 
representative for the CAIR NOX Ozone Season opt-in unit 
fails to submit a CAIR permit application that is required for renewal 
of the CAIR opt-in permit under paragraph (b)(1) of this section.


Sec.  97.384  Opt-in process.

    The permitting authority will issue or deny a CAIR opt-in permit 
for a unit for which an initial application for a CAIR opt-in permit 
under Sec.  97.383 is submitted in accordance with the following, to 
the extent provided in a State implementation plan revision submitted 
in accordance with Sec.  51.123(ee)(3)(i), (ii), or (iii) of this 
chapter and approved by the Administrator:
    (a) Interim review of monitoring plan. The permitting authority and 
the Administrator will determine, on an interim basis, the sufficiency 
of the monitoring plan accompanying the initial application for a CAIR 
opt-in permit under Sec.  97.383. A monitoring plan is sufficient, for 
purposes of interim review, if the plan appears to contain information 
demonstrating that the NOX emissions rate and heat input of 
the unit and all other applicable parameters are monitored and reported 
in accordance with subpart HH of this part. A determination of 
sufficiency shall not be construed as acceptance or approval of the 
monitoring plan.
    (b) Monitoring and reporting. (1)(i) If the permitting authority 
and the Administrator determines that the monitoring plan is sufficient 
under paragraph (a) of this section, the owner or operator shall 
monitor and report the NOX emissions rate and the heat input 
of the unit and all other applicable parameters, in accordance with 
subpart HHHH of this part, starting on the date of certification of the 
appropriate monitoring systems under subpart HH of this part and 
continuing until a CAIR opt-in permit is denied under Sec.  97.384(f) 
or, if a CAIR opt-in permit is issued, the date and time when the unit 
is withdrawn from the CAIR NOX Ozone Season Trading Program 
in accordance with Sec.  97.386.
    (ii) The monitoring and reporting under paragraph (b)(1)(i) of this 
section shall include the entire control period immediately before the 
date on which the unit enters the CAIR NOX Ozone Season 
Trading Program under Sec.  97.384(g), during which period monitoring 
system availability must not be less than 90 percent under subpart HHHH 
of this part and the unit must be in full compliance with any 
applicable State or Federal emissions or emissions-related 
requirements.
    (2) To the extent the NOX emissions rate and the heat 
input of the unit are monitored and reported in accordance with subpart 
HH of this part for one or more control periods, in addition to the 
control period under paragraph (b)(1)(ii) of this section, during which 
control periods monitoring system availability is not less than 90 
percent under subpart HHHH of this part and the unit is in full 
compliance with any applicable State or Federal emissions or emissions-
related requirements and which control periods begin not more than 3 
years before the unit enters the CAIR NOX Ozone Season 
Trading Program under Sec.  97.384(g), such information shall be used 
as provided in paragraphs (c) and (d) of this section.
    (c) Baseline heat input. The unit's baseline heat rate shall equal:
    (1) If the unit's NOX emissions rate and heat input are 
monitored and reported for only one control period, in accordance with 
paragraph (b)(1) of this section, the unit's total heat input (in 
mmBtu) for the control period; or
    (2) If the unit's NOX emissions rate and heat input are 
monitored and reported for more than one control period, in accordance 
with paragraphs (b)(1) and (2) of this section, the average of the 
amounts of the unit's total heat input (in mmBtu) for the control 
periods under paragraphs (b)(1)(ii) and (b)(2) of this section.
    (d) Baseline NOX emission rate. The unit's baseline NOX 
emission rate shall equal:
    (1) If the unit's NOX emissions rate and heat input are 
monitored and reported for only one control period, in accordance with 
paragraph (b)(1) of this section, the unit's NOX emissions 
rate (in lb/mmBtu) for the control period;
    (2) If the unit's NOX emissions rate and heat input are 
monitored and reported for more than one control period, in accordance 
with paragraphs (b)(1) and (2) of this section, and the unit does not 
have add-on NOX emission controls during any such control 
periods, the average of the amounts of the unit's NOX 
emissions rate (in lb/mmBtu) for the control periods under paragraphs 
(b)(1)(ii) and (b)(2) of this section; or
    (3) If the unit's NOX emissions rate and heat input are 
monitored and reported for more than one control period, in accordance 
with paragraphs (b)(1) and (2) of this section, and the unit has add-on 
NOX emission controls during any such control periods, the 
average of the amounts of the unit's NOX emissions rate (in 
lb/mmBtu) for such control periods during which the unit has add-on 
NOX emission controls.
    (e) Issuance of CAIR opt-in permit. After calculating the baseline 
heat input and the baseline NOX emissions rate for the unit 
under paragraphs (c) and (d) of this section and if the permitting 
authority determines that the CAIR designated representative shows that 
the unit meets the requirements for a CAIR NOX Ozone Season 
opt-in unit in Sec.  97.380 and meets the elements certified in Sec.  
97.383(a)(2), the permitting authority will issue a CAIR opt-in permit. 
The permitting authority will provide a copy of the CAIR opt-in permit 
to the Administrator, who will then establish a compliance account for 
the source that includes the CAIR NOX Ozone Season opt-in 
unit unless the source already has a compliance account.
    (f) Issuance of denial of CAIR opt-in permit. Notwithstanding 
paragraphs (a) through (e) of this section, if at any time before 
issuance of a CAIR opt-in permit for the unit, the permitting authority 
determines that the CAIR designated representative fails to show that 
the unit meets the requirements for a CAIR NOX Ozone Season 
opt-in unit in Sec.  97.380 or meets the elements certified in Sec.  
97.383(a)(2), the permitting authority will issue a denial of a CAIR 
opt-in permit for the unit.
    (g) Date of entry into CAIR NOX Ozone Season Trading Program. A 
unit for which an initial CAIR opt-in permit is issued by the 
permitting authority shall become a CAIR NOX Ozone Season 
opt-in unit, and a CAIR NOX Ozone Season unit, as of the 
later of January 1, 2009 or January 1 of the first control period 
during which such CAIR opt-in permit is issued.
    (h) Repowered CAIR NOX Ozone Season opt-in unit. (1) If CAIR 
designated representative requests, and

[[Page 49831]]

the permitting authority issues a CAIR opt-in permit providing for, 
allocation to a CAIR NOX Ozone Season opt-in unit of CAIR 
NOX Ozone Season allowances under Sec.  97.388(c) and such 
unit is repowered after its date of entry into the CAIR NOX 
Ozone Season Trading Program under paragraph (g) of this section, the 
repowered unit shall be treated as a CAIR NOX Ozone Season 
opt-in unit replacing the original CAIR NOX Ozone Season 
opt-in unit, as of the date of start-up of the repowered unit's 
combustion chamber.
    (2) Notwithstanding paragraphs (c) and (d) of this section, as of 
the date of start-up under paragraph (h)(1) of this section, the 
repowered unit shall be deemed to have the same date of commencement of 
operation, date of commencement of commercial operation, baseline heat 
input, and baseline NOX emission rate as the original CAIR 
NOX Ozone Season opt-in unit, and the original CAIR 
NOX Ozone Season opt-in unit shall no longer be treated as a 
CAIR NOX Ozone Season opt-in unit or a CAIR NOX 
Ozone Season unit.


Sec.  97.385  CAIR opt-in permit contents.

    (a) Each CAIR opt-in permit will contain:
    (1) All elements required for a complete CAIR permit application 
under Sec.  97.322;
    (2) The certification in Sec.  97.383(a)(2);
    (3) The unit's baseline heat input under Sec.  97.384(c);
    (4) The unit's baseline NOX emission rate under Sec.  
97.384(d);
    (5) A statement whether the unit is to be allocated CAIR 
NOX Ozone Season allowances under Sec.  97.380(b) or Sec.  
97.388(c) (subject to the conditions in Sec. Sec.  97.384(h) and 
97.386(g));
    (6) A statement that the unit may withdraw from the CAIR 
NOX Ozone Season Trading Program only in accordance with 
Sec.  97.386; and
    (7) A statement that the unit is subject to, and the owners and 
operators of the unit must comply with, the requirements of Sec.  
97.387.
    (b) Each CAIR opt-in permit is deemed to incorporate automatically 
the definitions of terms under Sec.  97.302 and, upon recordation by 
the Administrator under subpart FFFF, GGGG, or IIII of this part or 
this subpart, every allocation, transfer, or deduction of CAIR 
NOX Ozone Season allowances to or from the compliance 
account of the source that includes a CAIR NOX Ozone Season 
opt-in unit covered by the CAIR opt-in permit.
    (c) The CAIR opt-in permit shall be included, in a format 
prescribed by the permitting authority, in the CAIR permit for the 
source where the CAIR NOX Ozone Season opt-in unit is 
located.


Sec.  97.386  Withdrawal from CAIR NOX Ozone Season Trading Program.

    Except as provided under paragraph (g) of this section, a CAIR 
NOX Ozone Season opt-in unit may withdraw from the CAIR 
NOX Ozone Season Trading Program, but only if the permitting 
authority issues a notification to the CAIR designated representative 
of the CAIR NOX Ozone Season opt-in unit of the acceptance 
of the withdrawal of the CAIR NOX Ozone Season opt-in unit 
in accordance with paragraph (d) of this section.
    (a) Requesting withdrawal. In order to withdraw a CAIR 
NOX Ozone Season opt-in unit from the CAIR NOX 
Ozone Season Trading Program, the CAIR designated representative of the 
CAIR NOX Ozone Season opt-in unit shall submit to the 
permitting authority a request to withdraw effective as of midnight of 
December 31 of a specified calendar year, which date must be at least 4 
years after December 31 of the year of entry into the CAIR 
NOX Ozone Season Trading Program under Sec.  97.384(g). The 
request must be submitted no later than 90 days before the requested 
effective date of withdrawal.
    (b) Conditions for withdrawal. Before a CAIR NOX Ozone 
Season opt-in unit covered by a request under paragraph (a) of this 
section may withdraw from the CAIR NOX Ozone Season Trading 
Program and the CAIR opt-in permit may be terminated under paragraph 
(e) of this section, the following conditions must be met:
    (1) For the control period ending on the date on which the 
withdrawal is to be effective, the source that includes the CAIR 
NOX Ozone Season opt-in unit must meet the requirement to 
hold CAIR NOX Ozone Season allowances under Sec.  97.306(c) 
and cannot have any excess emissions.
    (2) After the requirement for withdrawal under paragraph (b)(1) of 
this section is met, the Administrator will deduct from the compliance 
account of the source that includes the CAIR NOX Ozone 
Season opt-in unit CAIR NOX Ozone Season allowances equal in 
amount to and allocated for the same or a prior control period as any 
CAIR NOX Ozone Season allowances allocated to the CAIR 
NOX Ozone Season opt-in unit under Sec.  97.388 for any 
control period for which the withdrawal is to be effective. If there 
are no remaining CAIR NOX Ozone Season units at the source, 
the Administrator will close the compliance account, and the owners and 
operators of the CAIR NOX Ozone Season opt-in unit may 
submit a CAIR NOX Ozone Season allowance transfer for any 
remaining CAIR NOX Ozone Season allowances to another CAIR 
NOX Ozone Season Allowance Tracking System in accordance 
with subpart GGGG of this part.
    (c) Notification. (1) After the requirements for withdrawal under 
paragraphs (a) and (b) of this section are met (including deduction of 
the full amount of CAIR NOX Ozone Season allowances 
required), the permitting authority will issue a notification to the 
CAIR designated representative of the CAIR NOX Ozone Season 
opt-in unit of the acceptance of the withdrawal of the CAIR 
NOX Ozone Season opt-in unit as of midnight on December 31 
of the calendar year for which the withdrawal was requested.
    (2) If the requirements for withdrawal under paragraphs (a) and (b) 
of this section are not met, the permitting authority will issue a 
notification to the CAIR designated representative of the CAIR 
NOX Ozone Season opt-in unit that the CAIR NOX 
Ozone Season opt-in unit's request to withdraw is denied. Such CAIR 
NOX Ozone Season opt-in unit shall continue to be a CAIR 
NOX Ozone Season opt-in unit.
    (d) Permit amendment. After the permitting authority issues a 
notification under paragraph (c)(1) of this section that the 
requirements for withdrawal have been met, the permitting authority 
will revise the CAIR permit covering the CAIR NOX Ozone 
Season opt-in unit to terminate the CAIR opt-in permit for such unit as 
of the effective date specified under paragraph (c)(1) of this section. 
The unit shall continue to be a CAIR NOX Ozone Season opt-in 
unit until the effective date of the termination and shall comply with 
all requirements under the CAIR NOX Ozone Season Trading 
Program concerning any control periods for which the unit is a CAIR 
NOX Ozone Season opt-in unit, even if such requirements 
arise or must be complied with after the withdrawal takes effect.
    (e) Reapplication upon failure to meet conditions of withdrawal. If 
the permitting authority denies the CAIR NOX Ozone Season 
opt-in unit's request to withdraw, the CAIR designated representative 
may submit another request to withdraw in accordance with paragraphs 
(a) and (b) of this section.
    (f) Ability to reapply to the CAIR NOX Ozone Season 
Trading Program. Once a CAIR NOX Ozone Season opt-in unit 
withdraws from the CAIR NOX Ozone Season Trading Program and 
its CAIR opt-in permit is terminated under this section, the CAIR 
designated

[[Page 49832]]

representative may not submit another application for a CAIR opt-in 
permit under Sec.  97.383 for such CAIR NOX Ozone Season 
opt-in unit before the date that is 4 years after the date on which the 
withdrawal became effective. Such new application for a CAIR opt-in 
permit will be treated as an initial application for a CAIR opt-in 
permit under Sec.  97.384.
    (g) Inability to withdraw. Notwithstanding paragraphs (a) through 
(f) of this section, a CAIR NOX Ozone Season opt-in unit 
shall not be eligible to withdraw from the CAIR NOX Ozone 
Season Trading Program if the CAIR designated representative of the 
CAIR NOX Ozone Season opt-in unit requests, and the 
permitting authority issues a CAIR NOX opt-in permit 
providing for, allocation to the CAIR NOX Ozone Season opt-
in unit of CAIR NOX Ozone Season allowances under Sec.  
97.388(c).


Sec.  97.387  Change in regulatory status.

    (a) Notification. If a CAIR NOX Ozone Season opt-in unit 
becomes a CAIR NOX Ozone Season unit under Sec.  97.304, 
then the CAIR designated representative shall notify in writing the 
permitting authority and the Administrator of such change in the CAIR 
NOX Ozone Season opt-in unit's regulatory status, within 30 
days of such change.
    (b) Permitting authority's and Administrator's actions. (1) If a 
CAIR NOX Ozone Season opt-in unit becomes a CAIR 
NOX Ozone Season unit under Sec.  97.304, the permitting 
authority will revise the CAIR NOX Ozone Season opt-in 
unit's CAIR opt-in permit to meet the requirements of a CAIR permit 
under Sec.  97.323 as of the date on which the CAIR NOX 
Ozone Season opt-in unit becomes a CAIR NOX Ozone Season 
unit under Sec.  97.304.
    (2)(i) The Administrator will deduct from the compliance account of 
the source that includes the CAIR NOX Ozone Season opt-in 
unit that becomes a CAIR NOX Ozone Season unit under Sec.  
97.304, CAIR NOX Ozone Season allowances equal in amount to 
and allocated for the same or a prior control period as:
    (A) Any CAIR NOX Ozone Season allowances allocated to 
the CAIR NOX Ozone Season opt-in unit under Sec.  97.388 for 
any control period after the date on which the CAIR NOX 
Ozone Season opt-in unit becomes a CAIR NOX Ozone Season 
unit under Sec.  97.304; and
    (B) If the date on which the CAIR NOX Ozone Season opt-
in unit becomes a CAIR NOX Ozone Season unit under Sec.  
97.304 is not December 31, the CAIR NOX Ozone Season 
allowances allocated to the CAIR NOX Ozone Season opt-in 
unit under Sec.  97.388 for the control period that includes the date 
on which the CAIR NOX Ozone Season opt-in unit becomes a 
CAIR NOX Ozone Season unit under Sec.  97.304, multiplied by 
the ratio of the number of days, in the control period, starting with 
the date on which the CAIR NOX Ozone Season opt-in unit 
becomes a CAIR NOX Ozone Season unit under Sec.  97.304 
divided by the total number of days in the control period and rounded 
to the nearest whole allowance as appropriate.
    (ii) The CAIR designated representative shall ensure that the 
compliance account of the source that includes the CAIR NOX 
Ozone Season unit that becomes a CAIR NOX Ozone Season unit 
under Sec.  97.304 contains the CAIR NOX Ozone Season 
allowances necessary for completion of the deduction under paragraph 
(b)(2)(i) of this section.
    (3)(i) For every control period after the date on which the CAIR 
NOX Ozone Season opt-in unit becomes a CAIR NOX 
Ozone Season unit under Sec.  97.304, the CAIR NOX Ozone 
Season opt-in unit will be treated, solely for purposes of CAIR 
NOX Ozone Season allowance allocations under Sec.  97.342, 
as a unit that commences operation on the date on which the CAIR 
NOX Ozone Season opt-in unit becomes a CAIR NOX 
Ozone Season unit under Sec.  97.304 and will be allocated CAIR 
NOX Ozone Season allowances under Sec.  97.342.
    (ii) Notwithstanding paragraph (b)(3)(i) of this section, if the 
date on which the CAIR NOX Ozone Season opt-in unit becomes 
a CAIR NOX Ozone Season unit under Sec.  97.304 is not 
January 1, the following amount of CAIR NOX Ozone Season 
allowances will be allocated to the CAIR NOX Ozone Season 
opt-in unit (as a CAIR NOX Ozone Season unit) under Sec.  
97.342 for the control period that includes the date on which the CAIR 
NOX Ozone Season opt-in unit becomes a CAIR NOX 
Ozone Season unit under Sec.  97.304:
    (A) The amount of CAIR NOX Ozone Season allowances 
otherwise allocated to the CAIR NOX Ozone Season opt-in unit 
(as a CAIR NOX Ozone Season unit) under Sec.  97.342 for the 
control period multiplied by;
    (B) The ratio of the number of days, in the control period, 
starting with the date on which the CAIR NOX Ozone Season 
opt-in unit becomes a CAIR NOX Ozone Season unit under Sec.  
97.304, divided by the total number of days in the control period; and
    (C) Rounded to the nearest whole allowance as appropriate.


Sec.  97.388  CAIR NOX Ozone Season allowance allocations to CAIR NOX 
Ozone Season opt-in units.

    (a) Timing requirements. (1) When the CAIR opt-in permit is issued 
under Sec.  97.384(e), the permitting authority will allocate CAIR 
NOX Ozone Season allowances to the CAIR NOX Ozone 
Season opt-in unit, and submit to the Administrator the allocation for 
the control period in which a CAIR NOX Ozone Season opt-in 
unit enters the CAIR NOX Ozone Season Trading Program under 
Sec.  97.384(g), in accordance with paragraph (b) or (c) of this 
section.
    (2) By no later than October 31 of the control period in which a 
CAIR Ozone Season opt-in unit enters the CAIR NOX Ozone 
Season Trading Program under Sec.  97.384(g) and October 31 of each 
year thereafter, the permitting authority will allocate CAIR 
NOX Ozone Season allowances to the CAIR NOX Ozone 
Season opt-in unit, and submit to the Administrator the allocation for 
the control period that includes such submission deadline and in which 
the unit is a CAIR NOX Ozone Season opt-in unit, in 
accordance with paragraph (b) or (c) of this section.
    (b) Calculation of allocation. For each control period for which a 
CAIR NOX Ozone Season opt-in unit is to be allocated CAIR 
NOX Ozone Season allowances, the permitting authority will 
allocate in accordance with the following procedures, if provided in a 
State implementation plan revision submitted in accordance with Sec.  
51.123(ee)(3)(i), (ii), or (iii) of this chapter and approved by the 
Administrator:
    (1) The heat input (in mmBtu) used for calculating the CAIR 
NOX Ozone Season allowance allocation will be the lesser of:
    (i) The CAIR NOX Ozone Season opt-in unit's baseline 
heat input determined under Sec.  97.384(c); or
    (ii) The CAIR NOX Ozone Season opt-in unit's heat input, 
as determined in accordance with subpart HHHH of this part, for the 
immediately prior control period, except when the allocation is being 
calculated for the control period in which the CAIR NOX 
Ozone Season opt-in unit enters the CAIR NOX Ozone Season 
Trading Program under Sec.  97.384(g).
    (2) The NOX emission rate (in lb/mmBtu) used for 
calculating CAIR NOX allowance allocations will be the 
lesser of:
    (i) The CAIR NOX Ozone Season opt-in unit's baseline 
NOX emissions rate (in lb/mmBtu) determined under Sec.  
97.384(d) and multiplied by 70 percent; or

[[Page 49833]]

    (ii) The most stringent State or Federal NOX emissions 
limitation applicable to the CAIR NOX Ozone Season opt-in 
unit at any time during the control period for which CAIR 
NOX Ozone Season allowances are to be allocated.
    (3) The permitting authority will allocate CAIR NOX 
Ozone Season allowances to the CAIR NOX Ozone Season opt-in 
unit in an amount equaling the heat input under paragraph (b)(1) of 
this section, multiplied by the NOX emission rate under 
paragraph (b)(2) of this section, divided by 2,000 lb/ton, and rounded 
to the nearest whole allowance as appropriate.
    (c) Notwithstanding paragraph (b) of this section and if the CAIR 
designated representative requests, and the permitting authority issues 
a CAIR opt-in permit providing for, allocation to a CAIR NOX 
Ozone Season opt-in unit of CAIR NOX Ozone Season allowances 
under this paragraph (subject to the conditions in Sec. Sec.  97.384(h) 
and 97.386(g)), the permitting authority will allocate to the CAIR 
NOX Ozone Season opt-in unit as follows, if provided in a 
State implementation plan revision submitted in accordance with Sec.  
51.123(ee)(3)(i), (ii), or (iii) of this chapter and approved by the 
Administrator:
    (1) For each control period in 2009 through 2014 for which the CAIR 
NOX Ozone Season opt-in unit is to be allocated CAIR 
NOX Ozone Season allowances,
    (i) The heat input (in mmBtu) used for calculating CAIR 
NOX Ozone Season allowance allocations will be determined as 
described in paragraph (b)(1) of this section.
    (ii) The NOX emission rate (in lb/mmBtu) used for 
calculating CAIR NOX Ozone Season allowance allocations will 
be the lesser of:
    (A) The CAIR NOX Ozone Season opt-in unit's baseline 
NOX emissions rate (in lb/mmBtu) determined under Sec.  
97.384(d); or
    (B) The most stringent State or Federal NOX emissions 
limitation applicable to the CAIR NOX Ozone Season opt-in 
unit at any time during the control period in which the CAIR 
NOX Ozone Season opt-in unit enters the CAIR NOX 
Ozone Season Trading Program under Sec.  97.384(g).
    (iii) The permitting authority will allocate CAIR NOX 
Ozone Season allowances to the CAIR NOX Ozone Season opt-in 
unit in an amount equaling the heat input under paragraph (c)(1)(i) of 
this section, multiplied by the NOX emission rate under 
paragraph (c)(1)(ii) of this section, divided by 2,000 lb/ton, and 
rounded to the nearest whole allowance as appropriate.
    (2) For each control period in 2015 and thereafter for which the 
CAIR NOX Ozone Season opt-in unit is to be allocated CAIR 
NOX Ozone Season allowances,
    (i) The heat input (in mmBtu) used for calculating the CAIR 
NOX Ozone Season allowance allocations will be determined as 
described in paragraph (b)(1) of this section.
    (ii) The NOX emission rate (in lb/mmBtu) used for 
calculating the CAIR NOX Ozone Season allowance allocation 
will be the lesser of:
    (A) 0.15 lb/mmBtu;
    (B) The CAIR NOX Ozone Season opt-in unit's baseline 
NOX emissions rate (in lb/mmBtu) determined under Sec.  
97.384(d); or
    (C) The most stringent State or Federal NOX emissions 
limitation applicable to the CAIR NOX Ozone Season opt-in 
unit at any time during the control period for which CAIR 
NOX Ozone Season allowances are to be allocated.
    (iii) The permitting authority will allocate CAIR NOX 
Ozone Season allowances to the CAIR NOX Ozone Season opt-in 
unit in an amount equaling the heat input under paragraph (c)(2)(i) of 
this section, multiplied by the NOX emission rate under 
paragraph (c)(2)(ii) of this section, divided by 2,000 lb/ton, and 
rounded to the nearest whole allowance as appropriate.
    (d) Recordation. If provided in a State implementation plan 
revision submitted in accordance with Sec.  51.123(ee)(3)(i), (ii), or 
(iii) of this chapter and approved by the Administrator:
    (1) The Administrator will record, in the compliance account of the 
source that includes the CAIR NOX Ozone Season opt-in unit, 
the CAIR NOX Ozone Season allowances allocated by the 
permitting authority to the CAIR NOX Ozone Season opt-in 
unit under paragraph (a)(1) of this section.
    (2) By December 1 of the control period in which a CAIR 
NOX Ozone Season opt-in unit enters the CAIR NOX 
Ozone Season Trading Program under Sec.  97.384(g) and December 1 of 
each year thereafter, the Administrator will record, in the compliance 
account of the source that includes the CAIR NOX Ozone 
Season opt-in unit, the CAIR NOX Ozone Season allowances 
allocated by the permitting authority to the CAIR NOX Ozone 
Season opt-in unit under paragraph (a)(2) of this section.

Appendix A to Subpart IIII of Part 97--States With Approved State 
Implementation Plan Revisions Concerning CAIR NOX Ozone Season Opt-IN 
Units

    1. The following States have State Implementation Plan revisions 
under Sec.  51.123(ee)(3) of this chapter approved by the 
Administrator and establishing procedures providing for CAIR 
NOX Ozone Season opt-in units under subpart IIII of this 
part and allocation of CAIR NOX Ozone Season allowances 
to such units under Sec.  97.388(b):

[Reserved]

    2. The following States have State Implementation Plan revisions 
under Sec.  51.123(ee)(3) of this chapter approved by the 
Administrator and establishing procedures providing for CAIR 
NOX Ozone Season opt-in units under subpart IIII of this 
part and allocation of CAIR NOX Ozone Season allowances 
to such units under Sec.  97.388(c):

[Reserved]

[FR Doc. 05-15529 Filed 8-23-05; 8:45 am]
BILLING CODE 6560-50-U