[Federal Register Volume 72, Number 145 (Monday, July 30, 2007)]
[Rules and Regulations]
[Pages 41453-41459]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14485]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 52 and 97

[EPA-R06-OAR-2007-0252; FRL-8446-3]


Approval and Promulgation of Implementation Plans; Texas; Clean 
Air Interstate Rule Nitrogen Oxides Annual Trading Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: EPA is taking a direct final action to approve a revision to 
the Texas State Implementation Plan (SIP) submitted by the State of 
Texas on August 4, 2006, as the Texas Clean Air Interstate Rule (CAIR) 
Nitrogen Oxides (NOX) Annual Abbreviated SIP. The 
abbreviated SIP revision EPA is approving includes the Texas 
methodologies for allocation of annual NOX allowances for 
Phase 1 of CAIR, the control periods 2009 through 2014, and for 
allocating allowances from the compliance supplement pool (CSP) in the 
CAIR NOX annual trading program. EPA has determined that the 
Texas CAIR NOX Annual Abbreviated SIP revision satisfies the 
applicable requirements of a CAIR abbreviated SIP revision. Upon the 
effective date of approval of the Texas CAIR NOX Annual 
Abbreviated SIP revision, EPA by ministerial action will note in the 
Texas CAIR NOX Annual Federal Implementation Plan's (FIP) 
incorporated regulations that the Texas rules for annual NOX 
allowances under Phase 1 of CAIR and allocating allowances from the CSP 
apply, rather than the Federal FIP rules.
    The intended effect of this action is to reduce NOX 
emissions from the State of Texas that are contributing to 
nonattainment of the PM2.5 National Ambient Air Quality 
Standard (NAAQS or standard) in downwind states. This action is being 
taken under section 110 of the Federal Clean Air Act (the Act or CAA).

DATES: This rule is effective on September 28, 2007 without further 
notice, unless EPA receives relevant adverse comment by August 29, 
2007. If EPA receives such comment, EPA will publish a timely 
withdrawal in the Federal Register informing the public that this rule 
will not take effect.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R06-
OAR-2007-0252, by one of the following methods:
    (1) http://www.regulations.gov : Follow the on-line instructions 
for submitting comments.
    (2) E-mail: Mr. Jeff Robinson at [email protected]. Please 
also cc the person listed in the FOR FURTHER INFORMATION CONTACT 
paragraph below.
    (3) U.S. EPA Region 6 ``Contact Us'' Web site: http://epa.gov/region6/r6coment.htm. Please click on ``6PD'' (Multimedia) and select 
``Air'' before submitting comments.
    (4) Fax: Mr. Jeff Robinson, Chief, Air Permits Section (6PD-R), at 
fax number 214-665-6762.
    (5) Mail: Mr. Jeff Robinson, Chief, Air Permits Section (6PD-R), 
Environmental Protection Agency, 1445 Ross Avenue, Suite 1200, Dallas, 
Texas 75202-2733.
    (6) Hand or Courier Delivery: Mr. Jeff Robinson, Chief, Air Permits 
Section (6PD-R), Environmental Protection Agency, 1445 Ross Avenue, 
Suite 1200, Dallas, Texas 75202-2733. Such deliveries are accepted only 
between the hours of 8:30 a.m. and 4:30 p.m. weekdays except for legal 
holidays. Special arrangements should be made for deliveries of boxed 
information.
    Instructions: Direct your comments to Docket ID No. EPA-R06-OAR-
2007-0252. 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.regulations.gov, including any personal information 
provided, unless the comment includes information claimed to be 
Confidential Business Information (CBI) or other information the 
disclosure of which is restricted by statute. Do not submit information 
through http://www.regulations.gov or e-mail, if you believe that it is 
CBI or otherwise protected from disclosure. The http://www.regulations.gov Web site is an ``anonymous access'' system, which 
means that 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 http://www.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 along with any disk or CD-ROM 
submitted. 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 and any form of encryption and should be free of any 
defects or viruses. For additional information about EPA's public 
docket, visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm.
    Docket: All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some 
information is not publicly available, e.g., CBI or other information 
the disclosure of which is restricted by statute. Certain other 
material, such as copyrighted material, will be publicly available only 
in hard copy. Publicly available docket materials are available either 
electronically in http;//www.regulations.gov or in hard copy at the Air 
Permits Section (6PD-R), Environmental Protection Agency, 1445 Ross 
Avenue, Suite 700, Dallas, Texas 75202-2733. The file will be made 
available by appointment for public inspection in the Region 6 FOIA 
Review Room between the hours of 8:30 a.m. and 4:30 p.m. weekdays 
except for legal holidays. Contact the person listed in the FOR FURTHER 
INFORMATION CONTACT paragraph below to make an appointment. If 
possible, please make the appointment at least two working days in 
advance of your visit. A 15 cent per page fee will be charged for 
making photocopies of documents. On the day of the visit, please check 
in at the EPA

[[Page 41454]]

Region 6 reception area on the seventh floor at 1445 Ross Avenue, Suite 
700, Dallas, Texas.
    The State submittal related to this SIP revision, and which is part 
of the EPA docket, is also available for public inspection at the State 
Air Agency listed below during official business hours by appointment:
    Texas Commission on Environmental Quality, Office of Air Quality, 
12124 Park 35 Circle, Austin, Texas 78753.

FOR FURTHER INFORMATION CONTACT: If you have questions concerning 
today's proposal, please contact Ms. Adina Wiley (6PD-R), Air Permits 
Section, Environmental Protection Agency, Region 6, 1445 Ross Avenue 
(6PD-R), Suite 1200, Dallas, TX 75202-2733. The telephone number is 
(214) 665-2115. Ms. Wiley can also be reached via electronic mail at 
[email protected].

SUPPLEMENTARY INFORMATION: Throughout this document wherever, any 
reference to ``we,'' ``us,'' or ``our'' is used, we mean EPA.

Table of Contents

I. What Action is EPA Taking?
II. What is the Regulatory History of CAIR and the CAIR FIP?
III. What are the General Requirements of CAIR and the CAIR FIP?
IV. What are the Types of CAIR SIP Submittals?
V. What is EPA's Analysis of the Texas CAIR NOX Annual 
Abbreviated SIP Submittal?
    A. State Budget for NOX Annual Allowance Allocations
    B. CAIR NOX Annual Cap-and-Trade Programs
    C. Applicability Provisions for non-EGU NOX SIP Call 
Sources
    D. NOX Annual Allowance Allocations
    E. Allocation of NOX Allowances from the Compliance 
Supplement Pool
    F. Individual Opt-in Units
VI. Final Action
VII. Statutory and Executive Order Reviews

I. What Action is EPA Taking?

    On April 4, 2006, the State of Texas submitted a revision to the 
Texas SIP. The submittal consists of new regulations to implement the 
NOX Annual and SO2 CAIR programs in the state. 
The affected state regulations that we are approving today as part of 
the Texas CAIR NOX Annual Abbreviated SIP are 30 TAC, 
Chapter 101, Subchapter H, Division 7, sections 101.503, 101.504(a)(1), 
101.504(b), 101.506(a)(1), 101.506(b)(1), 101.506(c)-(f), and 101.508. 
EPA is taking a direct final action to approve the State's 
NOX annual allocation methodology for Phase 1 (the control 
periods 2009 through 2014) and the State's methodology for allocating 
the compliance supplement pool (CSP) in the CAIR NOX annual 
trading program, as an abbreviated revision to the Texas SIP. EPA is 
approving the Texas abbreviated SIP revision as meeting 40 CFR 
51.123(p)(1) and (p)(2). We will be taking action on the remaining 
parts of the Texas NOX Annual and SO2 CAIR SIP 
revision submittal at a later date and in future Federal Registers. 
Texas is not subject to the CAIR NOX ozone season trading 
program. Please see the Technical Support Document (TSD) for further 
information. The TSD is available as specified in the section of this 
document identified as ADDRESSES.
    The provisions of the Texas CAIR NOX Annual Federal 
Implementation Plan (FIP) at 40 CFR 52.2283 require owners and 
operators of NOX sources located in Texas to meet the 
Federal NOX annual trading program found at 40 CFR part 97. 
This Federal trading program's rules include provisions at 40 CFR 
97.144(a) and (b) that if EPA approves the Texas abbreviated SIP 
revision for NOX annual and CSP allocation methodologies, 
then the Federal NOX annual and CSP allocation methodologies 
no longer apply. Instead, if EPA approves the Texas NOX 
annual allocation methodology into the Texas SIP, then EPA under 40 CFR 
52.2283 and 97.144(a) will not make allocations for the CAIR 
NOX sources in Texas but will use the Texas SIP rules for 
allocating annual NOX allowances to sources in Texas for 
Phase 1 of CAIR (2009-2014). The Texas NOX methodology for 
allocating the CSP in the CAIR NOX Annual Trading Program 
will be used to allocate allowances from the CSP, instead of the 
federal methodology for allocating allowances from the CSP. EPA under 
40 CFR 52.2283 and 97.144(b) will not make allocations for the CSP for 
CAIR NOX sources in Texas and will record the allocations of 
the Texas CSP made under the approved SIP revision.
    If EPA's direct final action approving the Texas abbreviated SIP 
becomes effective, then EPA is not required to take any rulemaking 
action to change the Federal CAIR NOX annual trading program 
in 40 CFR part 97 or to change the Texas CAIR FIP for NOX 
annual emissions in 40 CFR 52.2283. Rather EPA, by ministerial action, 
simply notes in Appendix A, 1 and 2, to Subpart EE of 40 CFR part 97, 
that Texas has an approved SIP revision for NOX annual 
allowances for Phase 1 and for NOX allowance allocations 
from the Texas CSP. Since the Federal CAIR NOX annual 
trading program's rules at 40 CFR part 97 provide for automatic 
revision of the Texas CAIR FIP for annual NOX emissions upon 
approval of such an abbreviated SIP revision, the Texas rules for 
annual NOX allowances would apply, rather than the Federal 
rules, upon the effective date of approval.
    We are publishing this rule without prior proposal because we view 
this as a noncontroversial amendment and anticipate no relevant adverse 
comments. However, in the proposed rules section of this Federal 
Register publication, we are publishing a separate document that will 
serve as the proposal to approve the SIP revision if relevant adverse 
comments are received. This rule will be effective on September 28, 
2007 without further notice unless we receive relevant adverse comment 
by August 29, 2007. If we receive relevant adverse comments, we will 
publish a timely withdrawal in the Federal Register informing the 
public that the rule will not take effect. We will address all public 
comments in a subsequent final rule based on the proposed rule. We will 
not institute a second comment period on this action. Any parties 
interested in commenting must do so now. Please note that if we receive 
adverse comment on an amendment, paragraph, or section of this rule and 
if that provision may be severed from the remainder of the rule, we may 
adopt as final those provisions of the rule that are not the subject of 
an adverse comment.

II. What Is the Regulatory History of the CAIR and the CAIR FIP?

    EPA promulgated the CAIR on May 12, 2005 (70 FR 25162). In this 
rule, EPA determined that 28 States and the District of Columbia 
contribute significantly to nonattainment and interfere with 
maintenance of the national ambient air quality standards (NAAQS) for 
fine particles (PM2.5) and/or 8-hour ozone in downwind 
States in the eastern part of the country. As a result, EPA required 
those upwind States to revise their SIPs to include control measures 
that reduce emissions of SO2, which is a precursor to 
PM2.5 formation, and/or NOX, which is a precursor 
to both ozone and PM2.5 formation. For jurisdictions that 
contribute significantly to downwind PM2.5 nonattainment, 
CAIR sets annual State-wide emission reduction requirements (i.e., 
budgets) for SO2 and annual State-wide emission reduction 
requirements for NOX. Similarly, for jurisdictions that 
contribute significantly to 8-hour ozone nonattainment, CAIR sets 
statewide emission reduction requirements for NOX for the 
ozone season (defined at 40 CFR 97.302 as May 1st to September 30th). 
Under CAIR, States may implement these emission budgets by 
participating in the EPA-administered

[[Page 41455]]

cap-and-trade programs or by adopting and submitting for EPA approval 
any other control measures.
    EPA found that Texas significantly contributed to nonattainment of 
the PM2.5 standard in Illinois, resulting in Texas being 
subject to the SO2 and annual NOX requirements of 
CAIR. There are no punitive consequences for Texas failing to submit 
SO2 and NOX Annual CAIR SIPs.
    CAIR sets forth what must be included in SIPs to address the 
requirements of section 110(a)(2)(D) of the Act with regard to 
interstate transport for the 8-hour ozone and PM2.5 NAAQS. 
EPA made national findings, effective May 25, 2005, that the affected 
States had failed to submit SIPs meeting the requirements of section 
110(a)(2)(D). The SIPs were due in July 2000, 3 years after the 
promulgation of the 8-hour ozone and PM2.5 NAAQS. These May 
25, 2005, findings started a 2-year clock for EPA to promulgate a FIP 
to address the requirements of section 110(a)(2)(D). Under CAA section 
110(c)(1), EPA may issue a FIP anytime after such findings are made and 
must do so within two years unless a SIP revision correcting the 
deficiency is approved by EPA before the FIP is promulgated.
    On April 28, 2006, EPA promulgated FIPs for all States covered by 
CAIR in order to ensure the emissions reductions required by CAIR are 
achieved on schedule. See 40 CFR 52.35 and 52.36. Each CAIR State is 
subject to the FIP until the State fully adopts, and EPA approves, a 
SIP revision meeting the requirements of CAIR. The CAIR FIPs require 
certain EGUs to participate in the EPA-administered CAIR 
SO2, NOX annual, and NOX ozone-season 
trading programs, as appropriate, found at 40 CFR part 97. The CAIR 
FIPs' SO2, NOX annual, and NOX ozone 
season trading programs impose essentially the same requirements as, 
and are integrated with, the respective CAIR SIP trading programs. The 
integration of the CAIR FIP and SIP trading programs means that these 
trading programs will work together to create effectively a single 
trading program for each regulated pollutant (SO2, 
NOX annual, and NOX ozone season) in all States 
covered by the CAIR FIPs' or SIPs' trading program for that pollutant. 
The CAIR FIPs also allow States to submit abbreviated SIP revisions 
that, if approved by EPA, will automatically replace or supplement the 
corresponding CAIR FIP provisions (e.g., the methodology for allocating 
NOX allowances to sources in the state), while the CAIR FIPs 
remain in place for all other provisions. See 40 CFR 51.123(p)(1)-(3), 
71 FR 25328 and 25339 (April 28, 2006).
    On April 28, 2006, EPA published two more CAIR-related final rules 
that added the States of Delaware and New Jersey to the list of States 
subject to CAIR for PM2.5 and announced EPA's final 
decisions on reconsideration of five issues without making any 
substantive changes to the CAIR requirements. On December 13, 2006, EPA 
published minor, non-substantive revisions that serve to clarify CAIR 
and the CAIR FIP.

III. What Are the General Requirements of CAIR and the CAIR FIP?

    CAIR establishes State-wide emission budgets for SO2 and 
NOX and is to be implemented in two phases. The first phase 
of NOX reductions starts in 2009 and continues through 2014, 
while the first phase of SO2 reductions starts in 2010 and 
continues through 2014. The second phase of reductions for both 
NOX and SO2 starts in 2015 and continues 
thereafter. CAIR requires States to implement the budgets by either: 
(1) Requiring EGUs to participate in the EPA-administered cap-and-trade 
programs: or, (2) adopting other control measures of the State's 
choosing and demonstrating that such control measures will result in 
compliance with the applicable State SO2 and NOX 
budgets.
    The May 12, 2005 and April 28, 2006 CAIR rules provide model rules 
that States must adopt (with certain limited changes, if desired) if 
they want to participate in the EPA-administered trading programs. The 
December 13, 2006, revisions to CAIR and the CAIR FIPs were non-
substantive and, therefore, do not affect EPA's evaluation of a State's 
SIP revision.
    With two exceptions, only States that choose to meet the 
requirements of CAIR through methods that exclusively regulate EGUs are 
allowed to participate in the EPA-administered trading programs. One 
exception is for States that adopt the opt-in provisions of the model 
rules to allow non-EGUs individually to opt into the EPA-administered 
trading programs. The other exception is for States that include all 
non-EGUs from their NOX SIP Call trading programs in their 
CAIR NOX ozone season trading programs. Texas was not 
subject to the NOX SIP Call and is not subject to the 
NOX ozone season requirements of CAIR; therefore, the second 
exception is not applicable.

IV. What Are the Types of CAIR SIP Submittals?

    States have the flexibility to choose the type of control measures 
they will use to meet the requirements of CAIR. EPA anticipates that 
most States will choose to meet the CAIR requirements by selecting an 
option that requires EGUs to participate in the EPA-administered CAIR 
cap-and-trade programs. For such States, EPA has provided two 
approaches for submitting and obtaining approval for CAIR SIP 
revisions. States may submit full SIP revisions that adopt the model 
CAIR cap-and-trade rules. If approved, these SIP revisions will fully 
replace the CAIR FIPs. Alternatively, States may submit abbreviated SIP 
revisions. The provisions in the abbreviated SIP revision, if approved 
into a State's SIP, will not replace that State's CAIR FIP; however, 
the requirements for the CAIR FIPs at 40 CFR part 52 incorporate the 
provisions of the Federal CAIR trading programs in 40 CFR part 97. The 
Federal CAIR trading programs in 40 CFR part 97 provide that whenever 
EPA approves an abbreviated SIP revision, the provisions in the 
abbreviated SIP revision will be used in place of or in conjunction 
with, as appropriate, the corresponding provisions in 40 CFR part 97 of 
the State's CAIR FIP (e.g., the NOX allowance allocation 
methodology).
    A State submitting an abbreviated SIP revision, may submit limited 
SIP revisions to tailor the CAIR FIP's cap-and-trade programs to the 
state submitting the revision. An abbreviated SIP revision may 
establish certain applicability and allowance allocation provisions 
instead of or in conjunction with the corresponding provisions in the 
CAIR FIP's rules in that State. Specifically, an abbreviated SIP 
revision may:
    (1) Include NOX SIP Call trading sources that are not 
EGUs under CAIR in the CAIR FIP's NOX ozone season trading 
program;
    (2) Provide for allocation of NOX annual or ozone season 
allowances by the State, rather than the Administrator, and using a 
methodology chosen by the State;
    (3) Provide for allocation of NOX annual allowances from 
the CSP by the State, rather than by the Administrator, and using the 
State's choice of allowed, alternative methodologies; or
    (4) Allow units that are not otherwise CAIR units to opt 
individually into the CAIR FIP's cap-and-trade programs under the opt-
in provisions in the CAIR FIP's rules.

With approval of an abbreviated SIP revision, the State's CAIR FIP 
remains in place, as tailored to sources in that State by the approved 
SIP revision.
    Abbreviated SIP revisions can be submitted in lieu of, or as part 
of, CAIR full SIP revisions. States may want to designate part of their 
full SIP as an

[[Page 41456]]

abbreviated SIP for EPA to act on first when the timing of the State's 
submission might not provide EPA with sufficient time to approve the 
full SIP prior to the deadline for recording NOX 
allocations. This will help ensure that the elements of the trading 
programs where flexibility is allowed are implemented according to the 
State's decisions. Submission of an abbreviated SIP revision does not 
preclude future submission of a CAIR full SIP revision. In this case, 
Texas asked EPA to process the submittal as an abbreviated SIP revision 
while the Texas Legislature considered changes in the State's CAIR 
authority. Texas anticipates submitting a revised NOX and 
SO2 CAIR SIP later for full approval by EPA.

V. What Is EPA's Analysis of Texas's CAIR NOX Annual 
Abbreviated SIP Submittal?

A. State Budget for NOX Annual Allowance Allocations

    The CAIR NOX annual budget for Texas was developed from 
historical heat input data for EGUs. Using these data, EPA calculated 
annual regional heat input values, which were multiplied by 0.15 lb/
mmBtu, for phase 1, and 0.125 lb/mmBtu, for phase 2, to obtain regional 
NOX budgets for 2009-2014 and for 2015 and thereafter, 
respectively. EPA derived the Texas NOX annual budget from 
the regional budgets using Texas heat input data adjusted by fuel 
factors.
    The CAIR SIP requirements and the Texas CAIR NOX annual 
FIP establish the budgets for Texas as 181,014 tons of NOX 
annual emissions for 2009-2014 and 150,845 tons of NOX 
annual emissions in 2015 and thereafter. Texas's submitted rules at 30 
TAC, Chapter 101, Subchapter H, Division 7, section 101.503(a) 
establish that the Texas NOX annual budgets are as listed in 
40 CFR 51.123 and 96.140 (181,014 tons in 2009-2014 and 150,845 tons in 
2015 and thereafter). The Texas abbreviated SIP revision, being 
approved today, does not affect these budgets, which are total amounts 
of allowances available for allocation for each year under the EPA-
administered cap-and-trade programs under the Texas CAIR NOX 
Annual FIP. In short, the Texas abbreviated SIP revision only affects 
allocations of NOX annual allowances under the established 
budget for 2009-2014.

B. CAIR NOX Annual Cap-and-Trade Program

    The CAIR NOX annual FIPs for the States largely mirror 
the structure of the NOX SIP Call model-trading rule in 40 
CFR part 96 subparts A through I. While the provisions of the 
NOX annual FIPs are similar, there are some differences. For 
example, the NOX Annual FIPs provide for a CSP, which is 
discussed below and under which allowances may be awarded for early 
reductions of NOX annual emissions.
    EPA used the CAIR model trading rules as the basis for the 
SO2, NOX annual, and NOX ozone season 
trading programs incorporated by reference into the States' CAIR FIPs. 
The CAIR FIPs' trading programs' rules are virtually identical to the 
CAIR model trading rules, with changes made to account for federal 
rather than state implementation. The CAIR model SO2, 
NOX annual trading, and NOX ozone season trading 
rules and the respective CAIR FIPs' trading programs are designed to 
work together as integrated SO2, NOX annual, and 
NOX ozone season trading programs.
    Texas is subject to the CAIR FIP for PM2.5. This 
PM2.5 CAIR FIP for Texas, 40 CFR 52.2283 and 52.2284, 
requires owners or operators of each NOX and SO2 
source located in Texas to meet the requirements of the Federal CAIR 
NOX Annual and SO2 Trading Programs in 40 CFR 
part 97. Consistent with the flexibility given to States, States may 
submit abbreviated SIP revisions that will replace or supplement, as 
appropriate, certain provisions of its CAIR FIP's trading programs. The 
August 4, 2006, submission from Texas is such an abbreviated SIP 
revision and is for the NOX annual trading program.

C. Applicability Provisions for Non-EGU NOX SIP Call Sources

    In general, the CAIR FIPs' trading programs apply to 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. 
Because Texas was not included in the NOX SIP Call trading 
program and is not subject to the NOX ozone season 
provisions of CAIR, Texas does not have or need the option of expanding 
the applicability provisions of the CAIR NOX Ozone Season 
Trading Program.

D. NOX Annual Allowance Allocations

    Under the NOX allowance allocation methodology in the 
CAIR model trading rules and in the CAIR FIPs' NOX annual 
trading program, NOX annual allowances are allocated to 
units that have operated for five years, based on heat input data from 
a three-year period that are adjusted for fuel type by using fuel 
factors of 1.0 for coal, 0.6 for oil, and 0.4 for other fuels. The CAIR 
model trading rules and the CAIR FIPs' NOX annual trading 
program also provide a new unit set-aside from which units without five 
years of operation are allocated allowances based on the units' prior 
year emissions.
    The CAIR FIPs' provisions provide States with the flexibility to 
establish a different NOX allowance allocation methodology 
that will be used to allocate allowances to sources in a State if 
certain requirements are met concerning the timing of submission of 
units' allocations to the Administrator for recordation and the total 
amount of allowances allocated for each control period. In adopting 
alternative NOX allowance allocation methodologies, States 
have flexibility with regard to:
    (1) The cost to recipients of the allowances, which may be 
distributed for free or auctioned;
    (2) The frequency of allocations;
    (3) The basis for allocating allowances, which may be distributed, 
for example, based on historical heat input or electric and thermal 
output; and
    (4) The use of allowance set-asides and, if used, their size.
    Consistent with the flexibility given to States in their CAIR FIPs' 
provisions, Texas has chosen to replace the provisions of the Texas 
CAIR NOX Annual FIP concerning the allocation of 
NOX annual allowances for Phase 1 (2009-2014) with its own 
methodology. The Texas Commission on Environmental Quality was directed 
by House Bill 2481 of the 79th Texas Legislature to establish 
regulations that will allocate NOX allowances at no cost to 
the CAIR subject units in Texas. Accordingly, the TCEQ has adopted 
provisions establishing the annual NOX allocation 
methodology at 30 TAC, Chapter 101, Subchapter H, Division 7, sections 
101.503, 101.504, and 101.506.
    Section 101.503(a) establishes that the Texas NOX Annual 
budgets are as listed in 40 CFR 96.140 (181,014 tons in 2009-2014 and 
150,845 tons in 2015 and thereafter). Additionally, section 101.503(b) 
establishes that the Texas NOX Annual Trading Program will 
have a new unit set-aside of 9.5 percent of the NOX trading 
budget for both Phase 1 and Phase 2 of CAIR. (We are not taking action 
today on the Phase 2 allowance allocation methodology. Please see the 
TSD for further information.)
    Section 101.504 establishes the dates by which the TCEQ Executive 
Director must submit NOX annual allocations to EPA for 
recordation in CAIR compliance accounts. Per section 101.504(a)(1), the 
TCEQ Executive Director will submit

[[Page 41457]]

NOX allowances for units commencing operation before January 
1, 2001 (referred to as existing units), by October 31, 2006 for the 
2009-2014 control periods. Allocations for these existing units will be 
distributed proportionally based on the unit's share of the total 
baseline heat input according to section 101.506(c). The baseline heat 
input, calculated per section 101.506(b)(1), for each unit is the 
average of the three highest amounts of the unit's adjusted control 
period heat input for 2000-2004. A unit's adjusted control period heat 
input is found by multiplying the control period heat input by a fuel-
adjustment factor as follows: 0.90 if the unit is coal-fired during the 
year; 0.50 if the unit is natural gas-fired during the year; and 0.30 
if the unit is not coal or natural gas-fired during the year. Section 
101.506(f) provides that a unit's control period heat input, and a 
unit's status as coal-fired or natural gas-fired for a calendar year 
must be determine in accordance with the monitoring, recordkeeping, and 
reporting requirements of 40 CFR part 75 to the extent the unit was 
otherwise subject to the requirements of part 75 for the year. Or, if a 
unit was not otherwise subject to part 75, the best available data 
reported to the TCEQ Executive Director can be used.
    Under section 101.504(b), the TCEQ Executive Director will submit 
NOX allowances for units commencing operation on or after 
January 1, 2001 (referred to as new units), by October 31 of the 
applicable control period, beginning in 2009. Section 101.506(b)(1) 
specifies that for each control period in 2009-2014, allowances for new 
units are allocated from the 9.5 percent new unit set-aside. The new 
unit set aside allocation methodology is outlined in section 
101.506(d). For the first control period in which a CAIR NOX 
unit commences commercial operation, such unit will not receive a 
NOX allocation from the new unit set-aside. The CAIR 
designated representative of a new unit must submit a written request 
for new unit allowances by July 1 of the first control period for which 
the allowance is requested and after the date that the unit commences 
commercial operation. The request for allowances from the new unit set-
aside cannot exceed the unit's total tons of NOX emissions 
as reported to EPA for the calendar year immediately preceding such 
control period. The TCEQ Executive Director will review all requests 
for allowances from the new unit set-aside and distribute 
proportionally based on a unit's share of the total requested 
allowances. If allowances remain in the new unit set-aside after the 
TCEQ Executive Director has made allocations to the new units, the 
Executive Director will proportionally allocate the remaining 
allowances to existing units according to the provisions of section 
101.506(e). Like the requirements for the existing units, the Texas 
allocation methodology at 101.506(f) requires that the part 75 
monitoring, recordkeeping, and reporting requirements be used to 
determine a unit's total tons of NOX emissions during a 
calendar year to the extent the unit was otherwise subject to part 75. 
Or, if a unit was not otherwise subject to part 75, the best available 
data reported to the TCEQ Executive Director can be used.

E. Allocation of NOX Allowances From the Compliance Supplement Pool

    The CSP provides an incentive for early reductions in NOX 
annual emissions. The CSP consists of 200,000 CAIR NOX 
annual allowances of vintage 2009 for the entire CAIR region, and a 
State's share of the CSP is based upon the State's share of the 
projected emission reductions under CAIR; Texas's share of the CSP is 
772 NOX allowances. States may distribute CSP allowances, 
one allowance for each ton of early reduction, to sources that make 
NOX reductions during 2007 or 2008 beyond what is required 
by any applicable State or Federal emission limitation. States also may 
distribute CSP allowances based upon a demonstration of need for an 
extension of the 2009 deadline for implementing emission controls.
    The CAIR and the Texas CAIR NOX Annual FIP's provisions 
allocate 772 NOX allowances to the Texas CSP (40 CFR 51.123 
and 97.143) and establish specific methodologies for allocations of CSP 
allowances. States may choose an allowed, alternative CSP allocation 
methodology to be used to allocate CSP allowances to sources in those 
States.
    Consistent with the flexibility given to States in the CAIR FIPs, 
Texas has chosen to modify the provisions of the Texas CAIR NOX 
Annual FIP concerning the allocation of allowances from the CSP. The 
Texas rules distribute CSP allowances using an allocation methodology 
that is substantively identical to the provisions in 40 CFR 96.143. The 
provisions for the allocation of CSP allowances in the Texas program 
are found at section 101.508 of 30 TAC Chapter 101. Section 101.508 
authorizes the Texas Commission on Environmental Quality Executive 
Director to allocate for the control period in 2009 up to the amount of 
CSP allowances designated for Texas in 40 CFR 96.143 (772 tons of 
NOX). The CSP allowances may be allocated, upon request by a 
CAIR unit's designated representative, to (1) A unit that has made 
early NOX emission reductions in 2007 and 2008, or (2) to a 
CAIR unit whose compliance during the 2009 control period would create 
an undue risk to the reliability of electricity supply during such 
control period. In each instance, the CAIR designated representative of 
a CAIR unit must submit a written request for CSP allowances to the 
TCEQ Executive Director by July 1, 2009. The TCEQ Executive Director 
will determine allocations of the CSP and submit this information to 
EPA by November 30, 2009.

F. Individual Opt-In Units

    The opt-in provisions of the CAIR and the States FIPs' provisions 
allow for certain non-EGUs (i.e., boilers, combustion turbines, and 
other stationary fossil-fuel-fired devices) that do not meet the 
applicability criteria for a CAIR trading program to participate 
voluntarily in (i.e., opt into) the CAIR trading programs. A non-EGU 
may opt into one or more of the CAIR trading programs. In order to 
qualify to opt into a CAIR trading program, a unit must vent all 
emissions through a stack and be able to meet monitoring, 
recordkeeping, and reporting requirements of 40 CFR part 75. The owners 
and operators seeking to opt a unit into a CAIR trading program must 
apply for a CAIR opt-in permit. If the unit is issued a CAIR opt-in 
permit, the unit becomes a CAIR unit, is allocated allowances, and must 
meet the same allowance holding and emissions monitoring and reporting 
requirements as other units subject to that CAIR trading program. The 
opt-in provisions provide for two methodologies for allocating 
allowances for opt-in units, one methodology that applies to opt-in 
units in general and a second methodology that allocates allowances 
only to opt-in units that the owners and operators intend to repower 
before January 1, 2015.
    States have several options concerning the opt-in provisions. The 
rules for each of the States' CAIR FIPs' trading programs include opt-
in provisions that are essentially the same as those in the respective 
CAIR SIP model rules, except that the States' CAIR FIPs' opt-in 
provisions become effective in a State only if the State's abbreviated 
SIP revision adopts the opt-in provisions. The State may adopt the opt-
in provisions entirely or may adopt them but exclude one of the 
allowance allocation methodologies. The State also has the option of 
not adopting any opt-

[[Page 41458]]

in provisions in the abbreviated SIP revision and thereby providing for 
its CAIR FIP's trading programs to be implemented in the State without 
the ability for units to opt into the programs.
    Consistent with the flexibility given to States in the FIPs' 
provisions, Texas has chosen not to allow non-EGUs to participate in 
the Texas CAIR FIP NOX annual trading program. Texas is not 
subject to the CAIR NOX ozone season FIP so the opt-in 
provisions for the CAIR FIP NOX ozone season trading program 
are not applicable. We are not taking any action today on the Texas 
CAIR SO2 SIP submittal.

VI. Final Action

    EPA is approving a revision to the Texas SIP, the Texas CAIR 
NOX Annual Abbreviated SIP revision, submitted on August 4, 
2006, by the State of Texas (Texas regulations, 30 TAC, Chapter 101, 
Subchapter H, Division 7, sections 101.503, 101.504(a)(1), 101.504(b), 
101.506(a)(1), 101.506(b)(1), and 101.506(c)-(f), and 101.508. Texas is 
covered by the PM2.5 CAIR FIP, which requires participation 
in the EPA-administered CAIR FIP cap-and-trade programs for SO2 
and NOX annual emissions. Under this abbreviated SIP 
revision and consistent with the flexibility given to Texas in its CAIR 
NOX Annual FIP's provisions, the Texas provisions for 
allocating allowances under the Texas CAIR FIP's NOX annual 
trading program for Phase 1 (2009-2014) of CAIR are approved as part of 
the Texas SIP. In addition, Texas provisions that establish a 
methodology for allocating NOX allowances in the CSP are 
approved as part of the Texas SIP. The abbreviated SIP revision meets 
the applicable requirements in 40 CFR 51.123(p)(1) and (2) with regard 
to NOX annual emissions and NOX CSP allocations. 
EPA is not making any changes to the Texas CAIR NOX Annual 
FIP's provisions, except to the extent that if EPA's direct final 
action on the Texas abbreviated SIP revision becomes effective, then 
EPA, by ministerial action, will note in Appendix A, 1 and 2, to 
Subpart EE of part 97, that Texas has an approved SIP revision for 
NOX annual allowance allocations for Phase 1 and for 
NOX allowance allocations from the Texas CSP.

VII. Statutory and Executive Order Reviews

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
action is not a ``significant regulatory action'' and therefore is not 
subject to review by the Office of Management and Budget. For this 
reason and because this action will not have a significant, adverse 
effect on the supply, distribution, or use of energy, this action is 
also not subject to Executive Order 13211, ``Actions Concerning 
Regulations That Significantly Affect Energy Supply, Distribution, or 
Use'' (66 FR 28355, May 22, 2001). This action merely approves state 
law as meeting Federal requirements and imposes no additional 
requirements beyond those imposed by state law. Accordingly, the 
Administrator certifies that this rule will not have a significant 
economic impact on a substantial number of small entities under the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because this rule 
approves pre-existing requirements under state law and does not impose 
any additional enforceable duty beyond that required by state law, it 
does not contain any unfunded mandate or significantly or uniquely 
affect small governments, as described in the Unfunded Mandates Reform 
Act of 1995 (Pub. L. 104-4).
    This rule also does not have tribal implications because it will 
not have a substantial direct effect on one or more Indian tribes, on 
the relationship between the Federal Government and Indian tribes, or 
on the distribution of power and responsibilities between the Federal 
Government and Indian tribes, as specified by Executive Order 13175 (65 
FR 67249, November 9, 2000). This action also does not have Federalism 
implications because it does not have substantial direct effects on the 
states, on the relationship between the national government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government, as specified in Executive Order 13132 (64 
FR 43255, August 10, 1999). This action merely approves a state rule 
implementing a Federal standard and indicates that approval will result 
in ministerial changes to the appropriate appendices of the CAIR FIP's 
trading rules and does not alter the relationship or the distribution 
of power and responsibilities established in the Act. The EPA 
interprets Executive Order 13045, ``Protection of Children from 
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23, 
1997), as applying only to those regulatory actions that concern health 
or safety risks such that the analysis required under section 5-501 of 
the Executive Order has the potential to influence the regulation. This 
rule is not subject to Executive Order 13045 because it would approve a 
State program. Executive Order 12898 (59 FR 7629, February 16, 1994) 
establishes federal executive policy on environmental justice. Because 
this rule merely approves a state rule implementing a Federal standard, 
EPA lacks the discretionary authority to modify today's regulatory 
decision on the basis of environmental justice considerations.
    In reviewing SIP submissions, EPA's role is to approve State 
choices, provided that they meet the criteria of the Act. In this 
context, in the absence of a prior existing requirement for the State 
to use voluntary consensus standards (VCS), EPA has no authority to 
disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission that otherwise 
satisfies the provisions of the Act. Thus, the requirements of section 
12(d) of the National Technology Transfer and Advancement Act of 1995 
(15 U.S.C. 272 note) do not apply. This rule does not impose an 
information collection burden under the provisions of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

List of Subjects

40 CFR Part 52

    Environmental protection, Air pollution control, Intergovernmental 
relations, Nitrogen dioxide, Ozone, Particulate matter, Reporting and 
recordkeeping requirements, Sulfur oxides.

40 CFR Part 97

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

    Dated: July 16, 2007.
Richard E. Greene,
Regional Administrator, EPA Region 6.

0
40 CFR parts 52 and 97 are amended as follows:

PART 52--[AMENDED]

0
1. The authority citation for part 52 continues to read as follows:

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

Subpart SS--Texas

0
2. Section 52.2270 is amended as follows:
0
a. In paragraph (c) the table entitled ``EPA Approved Regulations in 
the Texas SIP'' is amended under Chapter 101--General Air Quality 
Rules, Subchapter H--Emissions Banking and Trading, by adding in 
numerical order a new entry for Division 7--Clean Air Interstate Rule.

[[Page 41459]]

0
b. In paragraph (e) the table entitled ``EPA Approved Nonregulatory 
Provisions and Quasi-Regulatory Measures in the Texas SIP'' is amended 
by adding a new entry at the end for the Texas Clean Air Interstate 
Rule Nitrogen Oxides Annual Trading Program Abbreviated SIP Revision.


Sec.  52.2270  Identification of plan.

* * * * *
    (c) * * *

                                                        EPA Approved Regulations in the Texas SIP
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           State
                                                                         approval/
            State citation                       Title/subject           submittal               EPA approval date                     Explanation
                                                                            date
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Chapter 101--General Air Quality Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Subchapter H--Emissions Banking and Trading
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Division 7--Clean Air Interstate Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Section 101.503.......................  Clean Air Interstate Rule          07/12/06  07/30/07 [Insert FR page number where
                                         Oxides of Nitrogen Annual                    document begins]
                                         Trading Budget.
Section 101.504.......................  Timing Requirements for Clean      07/12/06  07/30/07 [Insert FR page number where      Subsections
                                         Air Interstate Rule Oxides of                document begins]                           101.504(a)(2),
                                         Nitrogen Allowance                                                                      101.504(a)(3),
                                         Allocations.                                                                            101.504(a)(4),
                                                                                                                                 101.504(c), and
                                                                                                                                 101.504(d) NOT IN SIP.
Section 101.506.......................  Clean Air Interstate Rule          07/12/06  07/30/07 [Insert FR page number where      Subsections
                                         Oxides of Nitrogen Allowance                 document begins]                           101.506(a)(2),
                                         Allocations.                                                                            101.506(b)(2),
                                                                                                                                 101.506(b)(3), and
                                                                                                                                 101.506(g) NOT IN SIP.
Section 101.508.......................  Compliance Supplement Pool....     07/12/06  07/30/07 [Insert FR page number where
                                                                                      document begins]
 
                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *
    (e) * * *

                                  EPA Approved Nonregulatory Provisions and Quasi-Regulatory Measures in the Texas SIP
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           State
                                           Applicable geographic or      submittal/
         Name of SIP provision                nonattainment area         effective               EPA approval date                      Comments
                                                                            date
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Texas Clean Air Interstate Rule         Statewide.....................     07/12/06  07/30/07 [Insert FR page number where      Only CAIR Phase I NOX
 Nitrogen Oxides Annual Trading                                                       document begins]                           Annual and CSP
 Program Abbreviated SIP Revision.                                                                                               Allocations approved
                                                                                                                                 into SIP.
 
                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *

PART 97--[AMENDED]

0
3. The authority citation for part 97 continues to read as follows:

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

0
4. Appendix A to Subpart EE is amended by adding an entry for ``Texas'' 
to paragraphs 1. and 2. to read as follows:

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

    1. * * *
    Texas (for control periods 2009-2014)
    2. * * *
    Texas

 [FR Doc. E7-14485 Filed 7-27-07; 8:45 am]
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