[Federal Register Volume 73, Number 43 (Tuesday, March 4, 2008)]
[Proposed Rules]
[Pages 11565-11575]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4154]


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

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R05-OAR-2007-1096; FRL-8536-9]


Approval and Promulgation of Implementation Plans; Illinois; 
Voluntary Nitrogen Oxides Controls

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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

SUMMARY: On May 1, 2001, the Illinois Environmental Protection Agency 
(Illinois EPA) submitted a request for EPA approval of regulations 
governing Nitrogen Oxides (NOX) emission allowances granted 
for the implementation of voluntary control of NOX emissions 
from sources not otherwise covered under other Illinois NOX 
emission control regulations. Illinois requested incorporation of these 
voluntary NOX emission control and NOX emission 
allowance regulations into the Illinois State Implementation Plan 
(SIP). We are proposing to disapprove these regulations as an amendment 
of the Illinois SIP.

DATES: Comments must be received on or before April 3, 2008. Submit 
your comments, identified by Docket ID No. EPA-R05-OAR-2007-1096, by 
one of the following methods:
     http://www.regulations.gov: Follow the online instructions 
for submitting comments.
     E-mail: [email protected].
     Fax: (312) 886-5824.
     Mail: John M. Mooney, Chief, Criteria Pollutant Section, 
(AR-18J), U.S. Environmental Protection Agency, 77 West Jackson 
Boulevard, Chicago, Illinois 60604.
     Hand Delivery: John M. Mooney, Chief, Criteria Pollutant 
Section, (AR-18J), U.S. Environmental Protection Agency, 77 West 
Jackson Boulevard, Chicago, Illinois. Such deliveries are only accepted 
during the Regional Office's normal hours of operation, and special 
arrangements should be made for deliveries of boxed information. The 
Regional Office's official hours of operation are Monday through 
Friday, 8:30 a.m. to 4:30 p.m., excluding Federal holidays.
    Instructions: Direct your comments to Docket ID No. EPA-R05-OAR-
2007-1096. 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 whose 
disclosure is restricted by statute. Do not submit information that you 
consider to be CBI, or otherwise protected, through http://www.regulations.gov or e-mail. The http://www.regulations.gov Web site 
is an ``anonymous access'' system, 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 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 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 and any form of encryption, and should be 
free of any defects or viruses.
    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 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, will be publicly available only in hardcopy. 
Publicly available docket materials are available either electronically 
at http://www.regulations.gov or in hardcopy at the Environmental 
Protection Agency, Region 5, Air and Radiation Division, 77 West 
Jackson Boulevard, Chicago, Illinois 60604. This facility is open from 
8:30 a.m. to 4:30 p.m., Monday through Friday, excluding Federal 
holidays. It is recommended that you telephone Edward Doty, 
Environmental Scientist, at (312) 886-6057, before visiting the Region 
5 office.

FOR FURTHER INFORMATION CONTACT: Edward Doty, Environmental Scientist, 
Criteria Pollutant Section, Air Programs Branch (AR-18), Environmental 
Protection Agency, Region 5, 77 West Jackson Boulevard, Chicago, 
Illinois 60604, (312) 886-6057, [email protected].

SUPPLEMENTARY INFORMATION: Throughout this document whenever ``we,'' 
``us,'' or ``our'' is used, we mean the EPA (or U.S. EPA). This 
supplementary information section is arranged as follows:


[[Page 11566]]


I. What Action Are We Proposing for Illinois' Voluntary 
NOX Emissions Reduction Rule and Requested SIP Revision?
II. Background
III. Summary of the State's Submittal
    A. What are the components and requirements of the subject rule?
    B. What is Illinois' basis for supporting approval of the 
subject rule as a SIP revision?
    C. How does the subject rule interface with or relate to other 
Illinois NOX rules?
IV. EPA Technical Review of the Subject Rule and SIP Revision 
Request
    A. Is the Subpart X rule specifically required by any EPA 
regulations or policies or requirements of the Clean Air Act?
    B. What EPA policies and requirements are applicable to the 
subject rule?
    C. Is the subject rule allowed under EPA policy and 
requirements?
    D. What are the differences in the monitoring requirements of 
Subpart X and those of the NOX SIP call?
    E. Are there any source categories not covered by 40 CFR part 75 
that are covered by Subpart X?
    F. What technical problems and issues of concern have we found 
for the subject rule?
    G. What are our proposed actions regarding the approvability of 
the subject rule?
V. Statutory and Executive Order Reviews

I. What Action Are We Proposing for Illinois' Voluntary NOX 
Emissions Reduction Rule and Requested SIP Revision?

    Based on technical deficiencies and other technical concerns noted 
below for the Subpart X rule (35 Illinois Administrative Code (IAC), 
part 217, subpart X), we are proposing to disapprove the Subpart X rule 
as a revision to the Illinois SIP.

II. Background

    On October 27, 1998 (63 FR 57356), EPA published a finding of 
significant contribution of ozone and ozone precursor transport for 22 
States and the District of Columbia, and established state-specific 
NOX emission budgets for these States (the final EPA rule is 
referred to as the NOX SIP call). The October 27, 1998, 
final rule also established part 75 Continuous Emission Monitoring 
(CEM) requirements and part 96 NOX emission trading program 
provisions under Volume 40 of the Code of Federal Regulations (CFR)
    Illinois is included in the list of States covered by the 
NOX SIP call, and as such, has been assigned a 
NOX emissions budget for 2007 and subsequent years. 
Illinois, as required, has submitted a NOX SIP with 
NOX emission control regulations for Electrical Generating 
Units (EGUs), major non-EGU (industrial) boilers and turbines, and 
major cement kilns \1\ to achieve the NOX emission reduction 
needed to achieve the State's NOX emission budget. The State 
also established regulations to implement a NOX emissions 
cap-and-trade program and to provide for NOX emissions 
credit trading in a National NOX emissions trading program 
(the NOX Budget Trading Program).
---------------------------------------------------------------------------

    \1\ EPA approved Illinois' EGU NOX rule on November 
8, 2001 (66 FR 56454) and Illinois' NOX rules for major 
non-EGU boilers and turbines and major cement kilns on November 8, 
2001 (66 FR 56449).
---------------------------------------------------------------------------

    As part of its efforts to comply with the NOX SIP call, 
Illinois has established procedures for NOX emission 
allowance trading, and has established a set-aside of a portion of the 
State's total NOX emission allowances for new sources. To 
allow for additional NOX emissions growth and to provide 
additional emission allowances for existing sources and new sources, 
the State has established a rule to provide for NOX 
emissions control and NOX emission allowance generation 
through the voluntary implementation of emission controls on various 
NOX sources. The rule covering the NOX emissions 
control and the generation of NOX emission credits for 
sources voluntarily seeking these NOX emission credits is 
referred to by the State as the ``Subpart X Voluntary NOX 
Emissions Reduction Program,'' (35 IAC part 217, subpart X), the 
subject rule of this proposed action and referred to here simply as the 
Subpart X rule. This rule was submitted to the EPA on May 1, 2001, for 
approval into the Illinois SIP.

III. Summary of the State's Submittal

    The Subpart X rule covers the State's voluntary NOX 
emission control and emissions credit program for sources not covered 
in the State's other NOX emission control rules. Generally, 
sources that elect to be covered under the Subpart X rule are smaller 
NOX sources with relatively low NOX emissions 
during the ozone control period (May through September).

A. What are the components and requirements of the subject rule?

    The Subpart X rule is divided into the following sections, whose 
requirements and provisions are summarized here.
Section 217.800 Purpose
    The purpose of the Subpart X rule is to provide a method 
(procedure) and source requirements by which ``additional'' 
NOX emission allowances may be generated for use (through 
the NOX Budget Trading Program) by emission units subject to 
the requirements of 35 IAC part 217, subpart U (NOX Control 
and Trading Program For Specified NOX Generating Units) and 
subpart W (NOX Trading Program For Electrical Generating 
Units). Note that Subpart X sources would not be opt-in sources covered 
under Subpart U or Subpart W, which must meet different requirements. 
Sources subject to the Subpart X rule would generate additional 
NOX emission allowances through NOX emission 
reductions not otherwise required in Illinois' NOX control 
rules. See additional discussions of this issue below.
Section 217.805 Emission Unit Eligibility
    This section allows any owner or operator of a stationary 
NOX source (with the exceptions/exclusions noted below) to 
submit a proposal for voluntarily reducing NOX emissions 
during the ozone control period. The emission units seeking the 
NOX emission reduction credits must meet the following 
criteria:
    (1) They must discharge their NOX emissions through a 
stack(s);
    (2) They must be fossil fuel-fired;
    (3) They must not be subject to the requirements of 35 IAC part 
217, subparts T, U, V, or W;
    (4) They must not be retired units pursuant to 40 CFR 96.5;
    (5) Their owners/operators must not have elected to make the units 
``opt-in units'' pursuant to 35 IAC part 217, subpart W; and,
    (6) they may not be stationary internal combustion engines that 
emit more than 1 ton of NOX per day during the ozone control 
period.
Section 217.810 Participation Requirements
    Any owner or operator of a NOX emissions unit meeting 
the source requirements of 35 IAC section 217.805 that seeks voluntary 
NOX emission reduction allowances under this rule must:
    (1) Submit a NOX emission reduction proposal that meets 
the requirements of section 217.835;
    (2) Request a NOX emissions cap for all NOX 
emission units at the source facility that are not subject to the 
requirements of 217 IAC part 217, subpart U or subpart W and that are 
that are of the same or similar source type as the units for which 
voluntary emission reduction allowances are sought. The owner or 
operator, however, may submit a demonstration that any emission unit(s) 
should not be included in the NOX emission cap;

[[Page 11567]]

    (3) Obtain a source permit, or an amendment to an existing source 
permit, for the emission source (collection of applicable emission 
units to be included in the emissions cap), with Federally enforceable 
conditions, containing the commitments in the NOX emissions 
reduction proposal and implementing the emissions cap by the later of 
May 1, 2003, or the date on which the reduction in NOX 
emissions will commence. If the emission reduction allowance will be 
generated by ceasing operation of a unit, the owner or operator must 
withdraw the applicable source permit for the unit or must request a 
revision to the source permit to reflect the shutdown of the unit by 
the later of May 1, 2003, or the date specified in the NOX 
emission reduction proposal;
    (4) Submit an emission baseline determination for each emissions 
unit subject to the NOX emissions cap in compliance with the 
requirements of 35 IAC section 217.820; and,
    (5) Meet the following monitoring requirements:
    (a) Each emission reduction unit must comply with the monitoring 
requirements in 35 IAC section 217.850;
    (b) The emission measurements recorded and reported (to the State) 
will be used to determine compliance of the emission reduction unit 
with the emission limitation specified in the source's emission 
reduction proposal, with the source's emission reduction proposal, and 
with the Federally enforceable permit conditions for the unit; and,
    (c) The emission measurements recorded and reported will be used to 
determine compliance by the source with the emissions cap set forth in 
the NOX emission reduction proposal and with the Federally 
enforceable permit conditions for the source facility.
    The owner or operator of the emission reduction source facility 
must submit an annual certification to the Illinois Environmental 
Protection Agency (Illinois EPA) that demonstrates that the source 
facility has complied with the NOX emissions cap and that 
the source facility has complied with the requirements of 35 IAC 
section 217.850.
Section 217.815 NOX Emission Reductions and the Subpart X 
NOX Trading Budget
    NOX emission reductions credited under the Subpart X 
rule must be quantifiable, verifiable, and Federally enforceable, and 
must meet one or more of the following criteria:
    (1) NOX emissions from the emission reduction unit for 
any ozone control period beginning in 2003 or after the implementation 
of the voluntary NOX emission control, whichever comes 
later, are lower than the unit's NOX emissions baseline. The 
amount of NOX emissions reduction must be determined in 
compliance with 35 IAC section 217.820, and the amount of creditable 
NOX emission reduction must be determined to be in 
compliance with 35 IAC section 217.825;
    (2) The emission reduction unit is permanently shut down after 
January 1, 1995, and the owner or operator requests a revision to the 
source operating permit to reflect the unit shutdown; or,
    (3) During any ozone control period beginning in 2003, the emission 
reduction unit's control period (ozone control period) NOX 
emission rate or hours of operation is reduced pursuant to Federally 
enforceable conditions in a source permit for such unit, resulting in 
an actual NOX emission reduction relative to the unit's 
NOX emissions baseline.
    In the Federal NOX Budget Trading Program, the EPA must 
adjust the State's trading portion of the State's NOX 
emissions budget, as established in the NOX SIP call, and 
create allowances for the creditable portion or the NOX 
emissions reduction. NOX emission allowances generated by 
Subpart X will be allocated to the recipient emission source facilities 
in accordance with Subpart X.
    The Illinois EPA will submit an allocation to the EPA, and this 
allocation may be used for the purposes of demonstrating compliance 
with the requirements of 35 IAC part 217, subparts U and W. In other 
words, a source can trade allocated emission allowances to sources 
needing such emission allowances to meet the requirements of the 
State's NOX SIP and EPA's NOX SIP call and 
emissions trading program.
    If EPA adjusts or fails to adjust the NOX emissions 
trading budget for any applicable emission reduction unit, the Subpart 
X
Section 217.820 Baseline Emission Determination
    An emission unit's NOX emissions baseline will be 
determined by using one of the following procedures:
    (1) By multiplying the unit's actual NOX emissions 
during the 1995 calendar year by 5/12ths; or,
    (2) If the NOX emissions from the unit were not 
characterized in the annual emissions report for 1995, by determining 
the base-case amount included for such unit in EPA's NOX SIP 
call emissions inventory, as specified in the ``Technical Support 
Document for Illinois Statewide NOX Budget'' (63 FR 17349).
    If the NOX baseline emissions for the 1995 ozone control 
period cannot be determined by either of the above methods, the 
emissions baseline will be determined based on the average emissions 
rate multiplied by the average number of hours of operation from two of 
the three ozone control periods, as selected by the emission reduction 
source owner/operator, prior to the year the emission reduction 
proposal is effective. The NOX emission rate and hours of 
operation shall be determined based on the source unit's reported 
NOX emission rate and hours of operation in the most recent 
annual emissions reports for the source unit.
Section 217.825 Calculation of Creditable NOX Emission 
Reductions
    The gross amount of ozone control period actual NOX 
emission reductions will be determined pursuant to Section 217.820 
(discussed above). Eighty percent of the actual NOX 
emissions reduction achieved will be ``creditable.'' Twenty percent of 
the actual NOX emission reduction will be retired (non-
creditable) for the benefit of air quality.
Section 217.830 Limitations on NOX Emission Reductions
    Each NOX emission allowance issued is a limited 
authorization to emit one (1) ton of NOX in accordance with 
the Federal NOX Trading Program as set forth in 35 IAC part 
217, subpart U. Either the EPA or the State has the authority to 
terminate or limit the issuance of such an emission allowance. Such an 
emission allowance does not constitute a property right for the source 
facility.
Section 217.835 NOX Emission Reduction Proposal
    The NOX emission reduction proposal, to be filed by the 
owner or operator of the emission reduction unit must include the 
following in the emission reduction proposal:
    (1) Information identifying each NOX emissions unit at 
the source facility and the baseline NOX emissions for each 
unit subject to the NOX emissions cap;
    (2) Information identifying each emission reduction unit for which 
the emission reductions have been or will be achieved;
    (3) An explanation of the methods used to achieve the 
NOX emission reductions;
    (4) Documentation of the NOX emission reductions, 
including supporting calculations and input data;
    (5) Identification of the emission units subject to the 
NOX emissions cap, and,

[[Page 11568]]

if all like-kind or same-type emission units are not to be included in 
the emissions cap, an explanation of how the owner/operator will ensure 
that production shifting will not occur to interfere with the emission 
reductions at the capped units;
    (6) The ozone control period NOX emission cap to be 
achieved by the source facility, including the baseline NOX 
emissions for each emission reduction unit and the NOX 
emission reduction for each emission reduction unit;
    (7) The name and address of the owner or operator of each 
NOX emission unit to which the NOX emission 
allowances will be allocated, the subpart of 35 IAC part 217 to which 
each NOX emission unit is subject, and the account number 
(NOX trading account number) of the account representative 
for each such unit; and,
    (8) Certification that the emission reductions specified in the 
proposal have been or will be achieved.
    The owner or operator of an emission reduction unit must notify the 
Illinois EPA in writing within 30 days of any event or circumstance 
that makes the NOX emission reduction proposal incorrect or 
incomplete.
    The owner or operator of a source facility with an approved 
emission reduction proposal may request to withdraw the emission 
reduction proposal and to cease the creation of NOX emission 
reduction allowances, and must comply with the following:
    (1) Submit to the Illinois EPA a written request to withdraw from 
participation and to withdraw or revise the applicable source permit 
effective as of a specified date between (and not including) September 
30 and May 1 (outside of the ozone control period). This submission 
requesting to withdraw must be made no later than 90 days prior to the 
requested effective date of the withdrawal;
    (2) Submit to the Illinois EPA an annual compliance certification 
report for the control period immediately before the withdrawal is to 
be effective;
    (3) The emission reduction source that withdraws from the 
requirements of Subpart X must comply with all requirements under its 
approved emission reduction proposal and Federally enforceable source 
permit for all years during which the emission reduction source is in 
the program, even if such requirements arise or must be complied with 
after the withdrawal takes effect;
    (4) The effective date of the withdrawal will be specified by the 
State and will be prior to May 1 or after September 30 (the source 
withdrawal will not be made effective during an ozone control period);
    (5) If the State denies the request to withdraw, the owner or 
operator of the affected source may submit another request to withdraw 
in accordance with subsections (a) and (b) of 35 IAC section 217.835; 
and,
    (6) Upon successful withdrawal from the program (from the voluntary 
emission reduction program and from the NOX trading 
program), the source facility shall no longer be subject to the 
requirements of Subpart X.
Section 217.840 Agency Action
    The Illinois EPA will notify the owner/operator of an affected 
source facility in writing of its decision with respect to the 
NOX reduction proposal within 90 days after receipt of the 
proposal. The NOX emissions reduction proposal will not be 
effective until:
    (1) After the owner/operator of the emission reduction unit has 
obtained a source permit with Federally enforceable conditions 
addressing the requirements of Subpart X; or,
    (2) If the NOX emission reductions are being obtained by 
the shutdown of a unit, the owner/operator has either obtained a source 
permit with Federally enforceable conditions addressing the 
requirements of Subpart X or withdrawn the applicable source permit and 
the Illinois EPA has provided the EPA with a copy of the proposal and 
notice of Illinois EPA's proposed approval of the emission reduction 
proposal (and EPA has not disapproved such proposal) and has provided 
an opportunity for public comment on the permit withdrawal and on the 
State's proposed approval of the emission reduction proposal.
    Emission allowances generated pursuant to the Subpart X rule will 
be issued to the recipient emission unit identified in the proposal for 
each ozone/emission control period in which the NOX emission 
reductions are verified and the requirements of Subpart X continue to 
be met. The emission allowances shall be issued by May 1 after the 
ozone control period in which the NOX emission reduction has 
occurred, and may be used (traded or sold) in any future emission 
control period. Note that the emission allowances are not granted and 
used until after the emission reductions have actually occurred.
Section 217.845 Emissions Determination Methods
    The owner or operator of an emission reduction unit must 
demonstrate that the source facility has obtained the planned 
NOX emission reductions, and has not exceeded its 
NOX emission cap. If the NOX emission reduction 
is due to NOX emission reductions resulting from the use of 
emission reduction technology, the NOX emission rates for 
each emission reduction unit must be determined through the use of 
Continuous Emission Monitors (CEMs) in accordance with 35 IAC section 
217.850 or through the use of any test methods or procedures provided 
in 40 CFR part 60 and approved by the Illinois EPA, or any method 
approved by the Illinois EPA when included as Federally enforceable 
conditions in a source permit issued or revised pursuant to Subpart X. 
If a test based on 40 CFR part 60 is to be used, an initial test must 
be conducted 90 days prior to the date the specified emission 
reductions will be obtained, or within 45 days of Illinois EPA's 
request for such test for NOX emission reductions already 
obtained. The owner or operator of the emission reduction unit must 
notify the Illinois EPA in writing of any test performed to comply with 
the requirements of Subpart X, and must make this notification at least 
30 days prior to such test.
    If the NOX emission reduction is due to a reduction in 
operating hours or to a reduction of the NOX emission rate 
during the ozone control period, the owner/operator of the emissions 
unit must submit an initial compliance demonstration plan to the 
Illinois EPA 120 days prior to the date that the emission reduction 
will commence in compliance with the approved emission reduction 
proposal. Such a demonstration shall be based on the actual 
NOX emission rate measured in accordance with 35 IAC section 
217.850.
    By November 1 following each ozone control period in which 
NOX emission reductions are generated, the owner/operator of 
the emission reduction source must submit to the Illinois EPA a 
compliance certification, including supporting data, and must monitor 
and report the NOX emissions during each ozone control 
period from all NOX emission units subject to the 
NOX emission cap.
    At least 120 days prior to the date that the emission reduction 
source will commence NOX emission reductions in compliance 
with its emission reduction proposal, the owner/operator of the source 
must submit to the Illinois EPA a performance evaluation of each CEM 
using the performance specifications given in 40 CFR part 60, appendix 
B.
Section 217.850 Emissions Monitoring
    The owner/operator of an emission reduction source must install, 
calibrate, maintain, and operate CEMs during

[[Page 11569]]

each NOX control period, or an alternative approved by the 
Illinois EPA and included in a Federally enforceable permit, for 
measuring NOX emissions. The CEMs must be operated and data 
recorded during all periods of operation of the emission units. The 
owner/operator must also collect and record CEM quality assurance data 
during calibration checks and zero and span adjustments. The procedures 
under 40 CFR part 60.13 (incorporated by reference into Subpart X) must 
be followed in the installation, evaluation, and operation of each CEM.
    If NOX emission rates, in pounds/hour, are not 
obtainable during CEM breakdowns, repairs, calibration checks, or zero 
and span adjustments, NOX emission data must be obtained 
using the data substitution procedures contained in 40 CFR part 75, 
subpart D. If NOX emission rates, in pounds per million 
British thermal unit (Btu) of heat input, are not obtainable during CEM 
breakdowns, repairs, calibration checks, or zero and span adjustments, 
NOX emissions data must be obtained by using the rolling 
hourly average of the NOX emissions recorded for the 
previous 30 day period of operation if the data capture of such period 
is 95 percent or greater and the period of missing data is equal to or 
less than 24 consecutive hours. If the data capture for the previous 30 
day period is less than 95 percent or the period of missing data is 
greater than 24 hours, the NOX emission data must be 
obtained using the highest hourly NOX emission average 
recorded during the previous 30 days of operation.
    The CEM data must be subject to the quality assurance procedures 
and requirements of 40 CFR part 60, appendix F.
Section 217.855 Reporting
    By November 1 of each year beginning in the first year 
NOX emission reductions are generated, an owner/operator of 
an emission reduction unit must, as a seasonal component of the source 
facility's annual emission report, report to the Illinois EPA the total 
ozone control period NOX emissions for each NOX 
emission unit subject to the NOX emissions cap.
    Within 30 days after receipt of performance test data from initial 
performance tests for emission units and CEMs, the owner/operator of a 
subject emission source must report the test data to the Illinois EPA.
Section 217.860 Recordkeeping
    For each NOX emission unit subject to a NOX 
emissions cap, the owner/operator must keep the following records:
    (1) Daily, monthly, and control period operating hours;
    (2) Type and quantity of each fuel used daily during the ozone 
control period;
    (3) Ozone control period capacity of fuels fired;
    (4) Monitoring records; and,
    (5) The performance test data from the initial performance test for 
emission reduction unit and the performance evaluation for each CEM.
    The owner/operator of an emission reduction source must maintain 
records of the following information for each operating day and for 
each NOX emissions unit subject to a NOX 
emissions cap:
    (1) Date;
    (2) Average hourly NOX mass emissions rate in pounds per 
hour;
    (3) Control period total NOX mass emissions to date;
    (4) Identification of periods when emission data have been excluded 
from the calculation of NOX mass emissions, the reasons for 
excluding the data, and corrective actions taken;
    (5) Identification of the time when the NOX emissions 
concentrations exceeded the full spans of the CEMs;
    (6) Descriptions of any modifications of the CEMs that could affect 
the ability of the CEMs to comply with performance specifications; and,
    (7) Results of daily CEM drift tests and quarterly accuracy 
assessment as required under 40 CFR part 60, subpart F.
    The owner/operator of any NOX emission reduction source 
subject to the CEM requirements of Subpart X must submit a compliance 
certification by November 1 following each ozone control period in 
which NOX emission reductions are generated.
    Data records are to be maintained for a period of 5 years after 
their creation.
Section 217.865 Enforcement
    If a NOX emission reduction source experiences excess 
NOX emissions during an ozone control period, the owner/
operator of the source must purchase NOX emission allowances 
through the NOX trading program to compensate for the excess 
NOX emissions. The following NOX allowance 
purchase levels are required:
    (1) For one control period of excess NOX emissions, the 
owner/operator must purchase NOX emission allowances to 
cover two (2) times the NOX emission excess;
    (2) For two control periods of excess NOX emissions, the 
owner/operator must purchase NOX emission allowance to cover 
three (3) times the total NOX emission excess for the two 
control periods; and,
    (3) For three control periods of excess NOX emissions, 
the owner/operator must purchase NOX emission allowances to 
cover four (4) times the total NOX emission excess for the 
three control periods.
    The purchased NOX emission allowances must be 
surrendered to the Illinois EPA by December 31 following the ozone 
control period in which the emission reduction source has excess 
NOX emissions.
    After three consecutive ozone control periods of excess 
NOX emissions, the source may not generate NOX 
emission reduction credits to qualify for NOX emission 
reduction allowances. All surrendered NOX emission 
allowances are retired for the benefit of air quality.

B. What is Illinois' basis for supporting approval of the subject rule 
as a SIP revision?

    On October 26, 2001, EPA met with the Illinois EPA to discuss a 
number of pending issues. Included in this discussion was a discussion 
concerning the basis for supporting the approval of the Subpart X rule 
as a SIP revision. The following presents points raised by the Illinois 
EPA to support the approval of the Subpart X rule.
General Points
    The Illinois EPA notes that the Subpart X rule is an innovative 
regulatory effort to obtain additional NOX emission 
reductions from sources that would otherwise not be controlled. This 
will provide for more reductions in regional NOX emissions 
than would otherwise be obtained solely through compliance with 
Illinois' other NOX emission control rules under the 
NOX SIP call. The Illinois EPA expects Subpart X to provide 
NOX emission reductions within the State of Illinois even 
though sources complying with Subpart X will be able to trade away the 
granted NOX emission allowances. This is due to the 
retirement of 20 percent of the Subpart X NOX emission 
reductions as a benefit for improved air quality.\2\
---------------------------------------------------------------------------

    \2\ Review of an Illinois Pollution Control Board (IPCB) hearing 
record also shows that the State also views the retirement of 20 
percent of the generated NOX emission allowances as 
giving the EPA a further reason for accepting 40 CFR part 60 
monitoring requirements for Subpart X sources in lieu of 40 CFR part 
75 monitoring requirements, as required under the NOX SIP 
call.
---------------------------------------------------------------------------

    The Illinois EPA believes that Subpart X meets EPA's Economic 
Incentive Program (EIP) guidance (``Improving Air Quality with Economic 
Incentive Programs,'' EPA-452/R-01-001, January

[[Page 11570]]

2001), and, therefore, is approvable based on this policy. The EIP 
guidance provides for the use of EIPs to comply with the NOX 
SIP call.
    The Illinois EPA notes that Subpart X has the potential to reduce 
costs of compliance for sources involved in the NOX trading 
program. Under the NOX trading program, some sources will be 
forced to purchase NOX emission allowances. Providing for 
additional tradable NOX emission allowances through Subpart 
X may provide lower cost NOX emission allowances than may be 
available from EGUs and major non-EGU sources participating in the 
NOX trading program.
NOX Emission Reductions
    The Illinois EPA points out that Subpart X will benefit the 
environment by retiring 20 percent of the NOX emission 
reductions resulting from this rule. Sources complying with Subpart X 
will only be able to obtain tradable NOX emission allowances 
for 80 percent of the NOX emission reductions they have 
achieved.
    The NOX emission reductions must be quantifiable, 
verifiable, and Federally enforceable. This distinguishes Subpart X 
from the type of emission reduction program expected under EPA's 
stationary source voluntary measures policy.
    The Illinois EPA notes that the requirement for an emissions cap on 
``similar'' units at a NOX emission reduction source is also 
a very important feature of the Subpart X rule. Since reduction of 
operating hours or shutdown of an emissions unit are an acceptable 
procedure for obtaining NOX emission reductions, the 
emissions cap prevents a source from shifting operations or production 
between source units, producing artificial emission reduction credits.
    The Illinois EPA also notes that the Subpart X emission reductions 
are Federally enforceable since all source-specific emission reduction 
plans must be incorporated into Federally Enforceable State Operating 
Permits (FESOPs). Adequate emission recordkeeping and reporting 
requirements are provided to allow such enforcement.
Compliance and Enforcement Mechanisms
    The State asserts that non-compliance deterrence mechanisms are 
built into the Subpart X rule. These mechanisms include:
    (1) Sources subject to Subpart X must verify emission reductions at 
the end of each ozone control season;
    (2) The EPA must recognize the NOX emission reductions 
as real before it creates NOX emission allowances for the 
complying source's use in the NOX trading program;
    (3) NOX emission allowances granted by the EPA cannot be 
used until the ozone control period following their generation (the 
source cannot trade or use projected future NOX emission 
allowances);
    (4) Failure to comply leads to increasingly stringent penalties 
(each succeeding ozone control period of noncompliance leads to more 
stringent emission reduction penalties), including the surrendering of 
NOX emission allowances; and,
    (5) The State also has its standard mechanisms available to enforce 
the NOX emission reductions for sources complying with 
Subpart X.
Subpart X Meets Requirements of EPA's EIP Guidance
    The Illinois EPA notes that there are three fundamental principles 
to all EIPs: Integrity; equity; and, environmental benefit. The 
Illinois EPA believes that the Subpart X rule complies with these 
principles, and, therefore, would qualify as an EIP.
    From the standpoint of integrity, the Illinois EPA notes that 
emission reductions resulting from an EIP emissions control program 
must be: Surplus; quantifiable; enforceable; and, permanent. The 
Illinois EPA believes that the Subpart X rule would produce 
NOX emission reductions meeting these requirements. The 
resulting NOX emission reductions are surplus because they 
are not otherwise relied on for attainment purposes in the SIP, and are 
not required by other SIP-related emission control requirements, 
consent decrees, or Federal rules or requirements.
    The NOX emission reductions that would result from the 
Subpart X rule are enforceable because: They are independently 
verifiable; program violations are defined through the identification 
of excess emissions and FESOP violations; those sources and owner/
operators liable for violations can be identified; both the State and 
EPA maintain the ability to apply penalties and secure appropriate 
corrective actions where applicable; citizens have access to all 
emissions-related information obtained from the sources; citizens can 
file suits against the sources; and, the NOX emission 
reductions are enforceable in accordance with other EPA guidance on 
practicable enforceability.
    The emission reductions are quantifiable because they can be 
reliably measured and determined. Subpart X requires source monitoring 
and recordkeeping of NOX emissions and NOX 
emission reductions.
    The Illinois EPA believes that the NOX emission 
reductions can be considered to be permanent if the State is able to 
ensure that no emission increases (compared to emissions if there was 
no EIP) occur over the time period defined in the SIP. The State 
believes that Subpart X sources are similar to opt-in units under the 
NOX Budget Trading Program, but with even more stringent 
requirements due to the emissions cap requirement of the Subpart X 
rule. Emission allowances are earned annually due to retrospective 
emission reductions (therefore, they are equivalent to permanent 
emission reductions). The NOX emission allowances to be 
traded by Subpart X sources are not based on ``future'' NOX 
emission reductions. Generated emission allowances are verified 
annually, and cannot be granted if the emission reductions have not 
already occurred. Withdrawal of a source from the program and its 
emission reductions are controlled by the State, who must approve such 
a withdrawal. A withdrawing source cannot generate new NOX 
emission allowances subsequent to withdrawal from the Subpart X 
program. Subpart X should most appropriately be viewed as a one-year 
emission reduction program that is subject to annual renewal.
    The State views the Subpart X rule as a compliance flexibility EIP. 
Thus, emission reductions are permanent if the State is able to ensure 
that no emission increases occur over the time period that Subpart X 
exists within the SIP.
    The State views Subpart X as providing equity. All segments of the 
population are protected from localized public health problems since 
the Subpart X rule applies throughout the State. No segment of the 
population receives a disproportionate share of the program's benefits 
and non-benefits. Sources will volunteer to provide the NOX 
emission reductions, and may potentially benefit economically from the 
sale of the NOX emission allowances, or, at minimum, defray 
emission control costs.
    The Subpart X rule will provide environmental benefits. The 
application of the rule will provide additional NOX emission 
reductions not already required by existing NOX control 
rules. Retiring 20 percent of the NOX emission reductions 
will provide additional environmental benefits. Application of the rule 
should reduce regional NOX

[[Page 11571]]

emissions within Illinois and ozone transport to downwind States.

C. How does the subject rule interface with or relate to other Illinois 
NOX rules?

    Under Illinois' existing NOX control rules, EGUs and 
other covered sources may choose to reduce NOX emissions 
below State-required levels (below levels needed to meet the State's 
NOX emission budget) to produce tradable NOX 
emission allowances sold through EPA's NOX Budget Trading 
Program. Other EGUs may find it necessary to purchase NOX 
emission allowances through the trading program to meet Illinois' 
emission budget and facility-specific NOX emission limits. 
The sale and purchase of NOX emission allowances through the 
trading program allows a large number of sources to more economically 
meet NOX emission limits and allows the NOX SIP 
call (and CAIR) States to meet required NOX emission limits.
    As noted above, the Subpart X sources producing NOX 
emission allowances would be able to trade/sell the emission allowances 
to sources subject to Illinois' Subpart U and Subpart W NOX 
rules. The Subpart U and Subpart W sources would be able to use the 
purchased NOX emission allowances to meet the State's 
required NOX emission limits.
    To make sure that generated NOX emission allowances are 
truly surplus and not double counted, Subpart X sources may not be 
subject to the NOX emission control requirements of 
Illinois' Subparts T (Cement Kilns), U (NOX Control and 
Trading Program for Specified NOX Generating Units), V 
(Electric Power Generation), or W (NOX Trading Program for 
Electrical Generating Units) of 35 IAC part 217 (Nitrogen Oxides 
Emissions). Other than these source restrictions, Subpart X does not 
further limit the types of NOX sources that could be 
included under Subpart X (as long as the NOX emission 
reductions can be quantified, enforced, and can be demonstrated to 
exist throughout the ozone control periods).
    Subpart X requirements are clearly meant to provide supplemental 
NOX emission reductions aimed at compliance with EPA's 
NOX SIP call, and, thus, are directed at the control of 
inter-state transported ozone. Subpart X emission controls may also 
provide additional reductions of transported ozone and NOX 
within the State of Illinois, reducing peak ozone concentrations in 
Illinois' ozone nonattainment areas. This is particularly true if 
Subpart X sources trade generated NOX emission allowances to 
sources downwind of the ozone nonattainment areas (St. Louis/Metro-East 
St. Louis and Chicago) or located outside of the State of Illinois. 
Although the State intends to support the trading of NOX 
emission allowances generated under Subpart X to sources controlled 
under Subparts U and W of 35 IAC part 217, the State has placed no 
restrictions on the trading of Subpart X-generated NOX 
emission allowances to sources only within the State of Illinois. 
Subpart X sources are free to trade emission allowances to sources 
outside of Illinois. Such trades would benefit Illinois ozone 
nonattainment areas by effectively removing NOX emissions 
from the State of Illinois.

IV. EPA Technical Review of the Subject Rule and SIP Revision Request

A. Is the Subpart X rule specifically required by any EPA regulations 
or policies or requirements of the Clean Air Act?

    The subject rule is not needed to meet the requirements of an ozone 
attainment plan or to meet other specific NOX emission 
control requirements of the CAA or EPA regulations.

B. What EPA policies and requirements are applicable to the subject 
rule?

    Review of the EPA NOX policies and the language and 
intent of the Subpart X rule and its supporting documentation shows 
that three separate EPA policies may be relevant to some extent in the 
review of the Subpart X rule. First, since the primary purpose of the 
Subpart X rule is to provide sources with tradable NOX 
emission allowances for participation in EPA's NOX Budget 
Trading Program, those portions of EPA's NOX SIP call policy 
dealing with NOX emission allowances and NOX 
allowance trading, as well as NOX SIP call source monitoring 
requirements, must be considered (Federal Register, ``40 CFR parts 51, 
72, 75, and 96 Finding of Significant Contribution and Rulemaking for 
Certain States in the Ozone Transport Assessment Group Region for 
Purposes of Reducing Regional Transport of Ozone; Rule,'' 63 FR 57356, 
October 27, 1998). This policy has the most significant impact on our 
view of the approvability of the Subpart X rule.
    Second, since the Subpart X rule involves the voluntary control of 
stationary sources and the incorporation of that rule into the Illinois 
SIP, one must consider EPA's policy regarding the incorporation of 
voluntary stationary source emission reduction programs into SIPs 
(Memorandum, from John Seitz, Director, Office of Air Quality Planning 
and Standards, to Air Division Directors, Regions 1-10, United States 
Environmental Protection Agency, ``Incorporating Voluntary Stationary 
Source Emission Reduction Programs Into State Implementation Plans--
FINAL POLICY,'' January 19, 2001). It is concluded, however, that this 
policy is generally not applicable in this situation.
    The voluntary measures policy was designed with the assumption that 
the emission reduction credits would be applied to achieve compliance 
with SIP attainment, maintenance, and Rate-Of-Progress (ROP) 
requirements (particularly those for ozone SIPs), and that the 
voluntary measures program would provide emission reductions that are 
quantifiable, surplus, permanent, and enforceable (by the State). This 
policy, however, does not address the NOX emission reduction 
requirements of EPA's NOX SIP call. Therefore, this policy 
is of minimal relevance to the intended use of the Subpart X rule, and, 
therefore, to the Subpart X rule itself.
    Finally, as noted above, the Illinois EPA views Subpart X as a rule 
that provides for an EIP. Therefore, we need to consider EPA's policy 
addressing EIPs. Due to the real intent of Subpart X (to produce 
tradable NOX emission allowances for sale in EPA's 
NOX trading program), this policy is not as relevant as the 
NOX SIP call policy. Although the EIP policy clearly 
indicates that the EIPs may be used to comply with EPA's NOX 
SIP call policy, the EIP policy also clearly notes that the use of an 
EIP does not override the requirements of the NOX SIP call 
itself. Any requested NOX SIP revision failing to meet the 
requirements of the NOX SIP call would also fail to comply 
with the requirements of the EIP policy. In this case, the more 
critical policy/requirements of concern are those of the NOX 
SIP call itself rather than other aspects of the EIP policy. For this 
reason, the EIP policy is not given further consideration here.

C. Is the subject rule allowed under EPA policy and requirements?

    As noted above, the NOX SIP call is the most relevant 
policy considered here. The NOX SIP call does not 
specifically address SIP revisions that provide for voluntary 
NOX emission controls in the manner covered in Illinois' 
Subpart X rule. Nonetheless, the NOX SIP call does encourage 
States to use whatever NOX emission reductions they deem 
necessary to achieve their NOX state NOX emission 
budgets in a cost-effective and reasonable manner. In addition, the 
NOX SIP call does not rule out the possibility of achieving 
the NOX

[[Page 11572]]

emission reductions through the use of voluntary controls as long as 
such resulting emission reductions are quantifiable, monitorable, and 
achieve valid NOX emission reductions during the 
NOX control period. It is concluded that the NOX 
SIP call does not directly forbid the generation of NOX 
emission allowances using voluntary emission controls and, therefore, 
may allow such emission control measures.
    The monitoring aspects of Subpart X, as more thoroughly discussed 
below, are the main issue of interest and concern in this case. The 
NOX SIP call is very specific about the types of emissions 
monitoring and reporting that are required to meet the NOX 
SIP call and emissions trading requirements. Subpart X, as discussed 
below, contains monitoring requirements which differ from those 
discussed in 40 CFR part 75.

D. What are the differences in the monitoring requirements of Subpart X 
and those of the NOX SIP call?

    As noted above, Subpart X requires major NOX emission 
sources to install and operate CEMs. Subpart X, however, would also 
allow sources to use alternative monitoring techniques approved by the 
State and included in Federally enforceable source permits. Subpart X 
requires the use of CEMs to follow requirements in 40 CFR part 60, and 
does not require the use and reporting of CEM data to comply with 40 
CFR part 75. The failure of Subpart X to require strict adherence to 
the requirements of 40 CFR part 75 for CEM data is a significant 
shortfall in the rule.
    With regard to non-CEM monitoring techniques, 40 CFR part 75 does 
permit the use of an optional non-CEM approach to determine hourly 
sulfur dioxide, carbon dioxide, and NOX emissions based on 
default or fuel- and unit-specific emission rates (per unit of heat 
input) and hourly fuel usage (heat input) rates for low-mass emission 
units. This approach is not allowed for coal-fired (solid fuel-fired) 
units. For NOX, the ``low mass emissions unit'' cannot emit 
NOX at a level exceeding 50 tons annually and 25 tons during 
the ozone control period to qualify for the use of the non-CEM 
monitoring procedures. All coal-fired units, regardless of the 
NOX emission rates, must use CEMs meeting the requirements 
of 40 CFR part 75 to qualify for inclusion in the NOX Budget 
Trading Program.
    Subpart X places no emissions size limit on the sources seeking to 
use monitoring methods other than the use of CEMs. In addition, Subpart 
X would not restrict the use of alternative monitoring techniques to 
natural gas-fired or fuel oil-fired units as would 40 CFR part 75.
    Based on these observations, Subpart X could lead to monitoring 
techniques that are incompatible with the requirements of 40 CFR part 
75 and may produce results which may not meet the expressed ``level 
playing field'' goal of the NOX SIP call and NOX 
Budget Trading program.
    With regard to the requirements for CEMs (assuming a source cannot 
find or chooses not to pursue an ``acceptable'' alternative), it is 
noted that the CEM requirements in 40 CFR part 60 are not as 
prescriptive as the CEM requirements in 40 CFR part 75. The 40 CFR part 
60 CEM monitoring requirements are not directed at the needs of the 
NOX Budget Trading Program. Based on the restrictive wording 
of the NOX SIP call and 40 CFR part 96 regarding the need 
for monitoring, recordkeeping, and reporting to comply with the 
requirements of 40 CFR part 75, EPA believes that the monitoring 
requirements of Subpart X are not sufficient to assure the adequacy of 
the Subpart X NOX emission allowances meeting the 
requirements of the NOX allowance trading program as 
specified in 40 CFR part 96.
    The Illinois EPA has indicated that, given the relatively small 
source size of sources likely to pursue Subpart X NOX 
emission reductions and tradable NOX emission allowances, it 
is not cost-effective for these sources to be required to comply with 
the monitoring requirements of 40 CFR part 75. Information contained in 
an Illinois Pollution Control Board hearing record for Subpart X 
indicates that the State expects most Subpart X sources to have 
NOX emission levels at or below 25 tons per ozone season 
(April through October). Given the low NOX emissions 
expected, it is unclear why the State has not adopted the small-source 
procedures of 40 CFR part 75. It is recognized that some Subpart X 
sources would be coal-burning sources, and, thus, excluded from the use 
of the small-source provisions of 40 CFR part 75.
    Illinois has not provided cost-effectiveness estimates for these 
sources to demonstrate that the 40 CFR part 75 CEM requirements are 
significantly less cost-effective than the CEM requirements of 40 CFR 
part 60. Illinois has also not demonstrated that 40 CFR part 60 
monitoring requirements would provide NOX emission estimates 
comparable to those of 40 CFR part 75.

E. Are there any source categories not covered by 40 CFR part 75 that 
are covered by Subpart X?

    The requirements of 40 CFR part 75, and particularly those dealing 
with low mass emission sources, are primarily directed at sources that 
operate and generate tradable NOX emission allowances 
through emission reductions on a ongoing basis. The requirements of 40 
CFR part 75 cannot be applied to the crediting of source closures as 
NOX emission allowances in the NOX trading 
program. Review of the Subpart X rule and documentation of the 
NOX emission allowances it would generate shows that Subpart 
X would produce such NOX emission allowances.
    A source category not addressed by 40 CFR part 75, but which may be 
addressed through Subpart X is NOX emission reductions 
resulting from NOX emission controls at small solid fuel-
fired combustion units. The ``small source'' provisions of 40 CFR part 
75 cannot be applied for such sources. It is not clear at this time 
what the total NOX emission reduction potential is for such 
sources.

F. What technical problems and issues of concern have we found for the 
subject rule?

1. General Comments and Concerns
    We have several major areas of concern regarding the Subpart X rule 
and its intended use. First, the rule does not guarantee that 
NOX emission allowances would only be awarded for emission 
reductions that are real and that are additional NOX 
emission reductions beyond those that would have occurred anyway, i.e., 
even in the absence of Subpart X. By providing credit for source 
shutdowns or reduced utilization of units claiming credit under Subpart 
X (Subpart X units) and for NOX emission reductions made as 
long ago as 1996, the Subpart X rule would lead to NOX 
emission allowances for NOX emission reductions occurring 
before the Subpart X rule was adopted by the State. In addition, 
despite an emissions cap on all similar source units at a source 
facility, this rule could still allow NOX emission 
allowances for shifting of utilization/production from Subpart X units 
to unregulated units within the same source facility or to units in 
another source facility and so could lead to crediting of source 
changes with no real NOX emission reductions.
    Second, we are concerned that the Subpart X rule would not require 
the same level of monitoring required of sources participating in the 
NOX Budget Trading Program. This raises questions

[[Page 11573]]

concerning the equity of Subpart X-generated NOX emission 
allowances versus those generated by sources following the monitoring 
requirements of 40 CFR part 75. Although the State has argued that the 
20 percent set-aside of NOX emission reductions from Subpart 
X units to benefit the environment should offset this concern, we 
propose that the State has not provided a basis for concluding that the 
20 percent set-aside actually addresses this deficiency.
    Finally, even though the State has argued that Subpart X 
constitutes an EIP and EIPs may be used to provide NOX SIP 
call emission credits, we again note that the EIP guidance also states 
that NOX SIP call requirements supersede EIP requirements. 
This means that rules meeting EIP requirements may not be adequate to 
meet NOX SIP call/NOX allowance trading 
requirements. We believe that this is the situation with the Subpart X 
rule.
2. Comments on Specific Subpart X Rule Provisions
Section 217.810
    This section provides for a source emission cap to prevent shifting 
of utilization from the Subpart X units to other units of the same type 
at the source facility. This emissions cap does not address shifting of 
utilization from the Subpart X unit(s) to other units at other source 
facilities or at the same facility. There is no basis for assuming that 
this type of shifting cannot occur, e.g., for small electric generating 
units not covered in the State's current NOX rules for 
electric generating units. In addition, the Subpart X rule provides for 
requests for exceptions from the requirement to include other units at 
the source facility in the emissions cap, but provides no standard for 
resolving such requests. (Section 217.835(a)(5) suggests what showing 
should be made, but does not make this the standard for approval.) 
Moreover, in light of the importance of not crediting utilization 
shifting, exceptions to inclusion in the source emissions cap allowed 
in this section is not acceptable because this section of the Subpart X 
rule does not require such exceptions to be approved by both the State 
and the EPA.
    The rule does not specify how the emissions cap is to be 
calculated. This needs to be specified explicitly or must be subject to 
State and EPA approval if done on a case-by-case basis. We believe that 
the rule errs in not requiring the use of the same methodology for 
setting the baseline for the Subpart X unit and for setting the 
emissions cap for all non-NOX SIP call units (all 
NOX emission units not covered by the State's NOX 
emission control rules in the State's NOX SIP) at the source 
facility.
    This section also provides for the crediting of NOX 
emission reductions resulting from source shutdowns. As noted in 
comments below regarding section 217.815 of the rule, we have serious 
concerns about granting such NOX emission allowances.
Section 217.815
    The rule allows for NOX emission reduction credits where 
a unit: uses an emission reduction technology; permanently shuts down; 
or reduces the NOX emission rate or operating hours where 
this is reflected in the unit's source permit. We have the following 
concerns about such NOX emission reduction credits:
    a. We believe that this section is unacceptable because it would 
result in the granting of emission credits for source shutdowns. The 
source shutdown credit would allow a source owner to shut down a unit 
and shift its utilization to another unit at a different source 
facility. The source emissions cap provision of the Subpart X rule does 
not address this potential. In addition, this section also would allow 
the source owner to shut down a unit that is at or near the end of its 
useful life and to get an emission reduction credit for every year 
after the shutdown of the unit. In this situation, it is likely that 
the source shutdown would have occurred even without the existence of 
the Subpart X rule. This is particularly problematic since the Subpart 
X baseline for NOX emission reduction credits resulting from 
source shutdowns is 1995. This means that units shut down prior to the 
State adoption of the Subpart X rule would be given NOX 
reduction credits. This is unacceptable;
    b. Credit for lowering the NOX emission rate is 
generally acceptable, provided that the total NOX emissions 
from a source facility actually decrease. This section is unacceptable, 
however, because it would result in the granting of NOX 
emission allowances even though a source owner/operator may simply 
shift utilization from the Subpart X unit to a unit at another 
facility. The source emission cap of Subpart X does not address this 
potential;
    c. The rule states that the NOX emission reductions must 
be quantifiable, verifiable, and Federally enforceable. It is unclear 
whether these requirements are in addition to other requirements in the 
rule, which, as discussed below, do not ensure that the NOX 
emission reductions are properly quantifiable and verifiable. In 
addition, the Subpart X rule does not specify what showing must be made 
by the source owner or operator to satisfy these requirements; and,
    d. The Subpart X rule states that credited NOX emission 
reductions (other than those due to unit shutdowns) may start in 2003. 
This is in conflict with the NOX Budget Trading Program and 
NOX SIP call requirements, which would not credit 
NOX emission reductions occurring prior to 2004. 
NOX emission credits should not be credited for 
NOX emission reductions occurring prior to the start of the 
NOX Budget Trading Program.
Section 217.820
    To establish the emissions baseline from which NOX 
emission reductions are determined, the rule allows the source owner/
operator to use the unit's 1995 NOX emissions multiplied by 
\5/12\ or its 1995 ozone season emissions as reflected in EPA's 
NOX SIP call emissions inventory. We consider this baseline 
period to be too far into the past. The rule fails to require the 
source owner/operator to use the most current unit emissions (those 
determined just prior to the implementation of the Subpart X 
NOX emission reduction) for the baseline emissions. We are 
concerned about this issue for the following reasons:
    a. Using a 1995 baseline allows the source owner/operator to get 
credit for NOX emission reductions that occurred several 
years in the past prior to the implementation of the State's 
NOX control rules and prior to the adoption of Subpart X. 
Allowing credit for NOX emission reductions that have 
already occurred and allowing these credits to be traded to sources 
that need such credits to meet NOX SIP call-based emission 
limits would jeopardize Illinois' ability to meet the NOX 
SIP call emission reduction requirements;
    b. Some NOX emission reductions from 1995 for EGUs and 
non-EGUs are already reflected in the State's NOX emission 
budget established in the NOX SIP call. For example, the 
State emissions budget for EGUs used 1995 heat input adjusted for 
growth, with growth reflecting new units and increases and decreases in 
heat input for existing units occurring through 2004, the 
implementation year for the NOX SIP call. Giving credit for 
NOX emission reductions since 1995 through Subpart X could 
double count emission reductions that are reflected in the State's 
NOX emission budget; and,
    c. It may be reasonable to allow some averaging of recent years' 
ozone season emissions data since the most recent year may not be 
representative of normal unit operation. The Subpart X

[[Page 11574]]

rule fails to specify a short period for such averaging, and errs in 
leaving the averaging period to the discretion of the source owner/
operator.
Section 217.835
    We believe that this section is deficient in that it does not 
require the source owner/operator to define how the source's emission 
cap is determined. The source owner/operator simply has to declare the 
emissions cap and which source units are covered by the emissions cap.
    Subsection (a)(7) of this rule section allows the source owner/
operator to specify which source units are to be granted NOX 
emission allowances. The purpose of this subsection is unclear. 
NOX emission allowances should only be allocated to the 
Subpart X unit, with the source owner/operator then given the ability 
to transfer the NOX emission allowances to units subject to 
the NOX Budget Trading Program. This subsection could be 
incorrectly interpreted as allowing the source owner/operator to assign 
the NOX emission allowances to non-Subpart X sources (those 
not achieving new NOX emission reductions).
Section 217.840
    We disagree with the granting of emission reduction credits for 
source shutdowns as allowed in this section of the Subpart X rule. We 
particularly disagree with the granting of NOX emission 
allowances for source shutdowns occurring prior to the adoption of 
Subpart X and prior to the approval of the Subpart X rule as a SIP 
revision.
Section 217.845
    As noted in our comments on sections 217.815 and 217.840 above, 
there should be no NOX emission allowances granted for a 
source shutdown or reduced utilization. This section is unacceptable 
because it allows the State to approve such emission allowances.
    This section allows the use of emission monitoring under 40 CFR 
part 60. As discussed elsewhere in this proposed rule, this requirement 
is unacceptable for the granting of NOX emission allowances 
to be used in EPA's NOX Budget Trading Program. 
NOX emission reductions supporting such NOX 
emission allowances must be confirmed through source monitoring meeting 
the requirements of 40 CFR part 75.
Section 217.850
40 CFR Part 60 Versus 40 CFR Part 75 Monitoring
    This section would require compliance with 40 CFR part 60 for 
monitoring of source emissions from a Subpart X unit. Because the 
Subpart X units are generating NOX emission allowances that 
will be traded to and used by other units that are subject to the 
NOX Budget Trading Program, the Subpart X units should meet 
the same monitoring requirements as other units subject to the 
NOX Budget Trading Program. Therefore, the Subpart X unit 
does not meet the monitoring requirements of 40 CFR part 75.
    If source caps are used for other units at a facility subject to 
Subpart X, the units subject to the emissions cap must also be 
monitored using the 40 CFR part 75 requirements to ensure the integrity 
of the source emissions cap. This section of the Subpart X rule errs in 
not requiring such source monitoring.
    The 40 CFR part 60 monitoring requirements are significantly less 
stringent than the monitoring requirements of 40 CFR part 75. 
Therefore, emission reductions generated by sources using 40 CFR part 
60 monitoring techniques are assumed to be less accurate than those 
generated by sources using 40 CFR part 75 monitoring requirements. 
There is no showing that artificially reducing the emission reduction 
credits by 20 percent is sufficient to account for the possible 
inaccuracy of emission reductions determined using 40 CFR part 60 
techniques.
Alternative Monitoring
    The Subpart X rule allows for alternative source monitoring with 
the approval of the State. However, the rule provides no standards for 
approval of the alternative monitoring techniques, e.g., that the 
alternative monitoring is consistent with the purposes of the required 
monitoring and that any adverse effect of approving the alternative 
monitoring is nonexistent or negligible. In addition, exceptions from 
the specified monitoring requirements must be explicitly subject to the 
approval of the EPA as well as the State, which is not the case for the 
adopted rule.
Substitute Data
    The Subpart X rule provides for the use of 40 CFR part 75 
substitute data when the 40 CFR part 60 continuous emission monitors 
are out of service or not properly functioning. However, because of 
record keeping and reporting differences between 40 CFR part 60 and 40 
CFR part 75, using 40 CFR part 75 substitute data procedures with 40 
CFR part 60 monitoring and data recording is not feasible. 40 CFR part 
60, unlike 40 CFR part 75, does not generally require mass emissions 
for every hour of operation. The data substitute procedures in 40 CFR 
part 75 rely heavily on the hourly data contained in the 40 CFR part 75 
data report. Data cannot be substituted for missing 40 CFR part 60 data 
without the hourly data record that would have been generated under 40 
CFR part 75, and checking the appropriate use of the substitute data 
procedures is impossible without such hourly data records.
Section 217.855
    The Subpart X rule provides for reporting of only ozone season 
total emissions through an annual emissions report for source units 
subject to a Subpart X emissions cap. This differs from the emissions 
reporting requirements for sources subject to the NOX Budget 
Trading Program, which are required to be covered by hourly emission 
reporting for the ozone season.
    Sources subject to the NOX Budget Trading Program are 
required to make quarterly emission reports in order to provide quality 
assurance of the emissions data on an on-going basis and so that 
monitoring problems or reporting errors are found early enough during 
the ozone season to be corrected before the end of the ozone season. 
Subpart X only requires annual reports of emissions data, and, 
therefore, fails to meet the reporting requirements for sources subject 
to the NOX Budget Trading Program.
Section 217.860
    This section fails to meet the detailed recordkeeping requirements 
of 40 CFR part 75. The detailed recordkeeping requirements of 40 CFR 
part 75 are designed to facilitate quality assurance of emissions data. 
The recordkeeping requirements of this section of the Subpart X rule 
will not provide for the emissions quality assurance required of other 
sources subject to the NOX Budget Trading Program. 
Therefore, we find this section of the Subpart X rule to be deficient 
for NOX allowance trading purposes.
Section 217.865
    The rule does not define ``excess emissions.'' Elsewhere in 
Illinois' NOX budget trading rules, in Subpart B, section 
211.2080, ``excess emissions'' is defined as any tonnage of 
NOX emitted by a NOX budget unit during a control 
period that exceeds the NOX emission allowances available 
for compliance

[[Page 11575]]

deduction for the source unit and for a control period. However, a 
Subpart X unit does not have a requirement to hold emission allowances 
equal to its NOX emissions. It is not clear whether ``excess 
emissions'' in section 217.865 means emissions in excess of the source 
emissions cap or in excess of the Subpart X unit's permitted emission 
rate. This ambiguity makes this section of the Subpart X rule 
unacceptable.

G. What are our proposed actions regarding the approvability of the 
subject rule?

    Based on the rule shortfalls and issues of concern discussed above, 
we propose that the Subpart X rule does not meet the requirements of 40 
CFR parts 75 and 96, and cannot be approved as a revision to the 
Illinois SIP. We have identified the following general problems exist 
with the Subpart X rule: (1) The rule unacceptably would grant 
NOX emission allowances for source closures; (2) the rule 
does not prevent shifting of production and NOX emissions 
from one facility to another; (3) the rule establishes an emission 
baseline (from which emission reduction/NOX emission 
allowances are earned through subsequent NOX emission 
reductions), 1995, that is too far in the past and prior to the State's 
adoption of the Subpart X rule and prior to the baseline used for other 
sources involved in the NOX Budget Trading Program; (4) the 
rule unacceptably would allow the use of 40 CFR part 60 emissions 
monitoring requirements rather than 40 CFR part 75 monitoring 
requirements required of other sources involved in the NOX 
Budget Trading Program; and, (5) the rule contains other minor 
deficiencies as noted above. Together, these problems lead us to 
propose that the Subpart X rule be disapproved as a revision to the 
Illinois SIP.

V. Statutory and Executive Order Reviews

Executive Order 12866: Regulatory Planning and Review

    Under Executive Order 12866 (58 FR 51735, September 30, 1993), this 
action is not a ``significant regulatory action'' and therefore is not 
subject to review by the Office of Management and Budget.

Paperwork Reduction Act

    This proposed 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.).

Regulatory Flexibility Act

    This proposed action merely proposes to approve state law as 
meeting Federal requirements and imposes no additional requirements 
beyond those imposed by state law. Accordingly, the Administrator 
certifies that this proposed 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.).

Unfunded Mandates Reform Act

    Because this rule proposes to approve 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).

Executive Order 13132: Federalism

    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 proposes to approve a state rule 
implementing a federal standard, and does not alter the relationship or 
the distribution of power and responsibilities established in the Clean 
Air Act.

Executive Order 13175: Consultation and Coordination With Indian Tribal 
Governments

    This proposed 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).

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

    This proposed rule also is not subject to Executive Order 13045 
``Protection of Children from Environmental Health Risks and Safety 
Risks'' (62 FR 19885, April 23, 1997), because it is not economically 
significant.

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

    Because it is not a ``significant regulatory action'' under 
Executive Order 12866 or a ``significant regulatory action,'' 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).

National Technology Transfer Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), 15 U.S.C. 272, requires Federal agencies to use 
technical standards that are developed or adopted by voluntary 
consensus to carry out policy objectives, so long as such standards are 
not inconsistent with applicable law or otherwise impractical. In 
reviewing SIP submissions, EPA's role is to approve state choices, 
provided that they meet the criteria of the Clean Air Act. Absent a 
prior existing requirement for the state to use voluntary consensus 
standards, EPA has no authority to disapprove a SIP submission for 
failure to use such standards, and it would thus be inconsistent with 
applicable law for EPA to use voluntary consensus standards in place of 
a program submission that otherwise satisfies the provisions of the 
Clean Air Act. Therefore, the requirements of section 12(d) of the NTTA 
do not apply.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Intergovernmental 
relations, Nitrogen dioxide, Ozone, Volatile organic compounds.

    Dated: February 15, 2008.
Bharat Mathur,
Acting Regional Administrator, Region 5.
 [FR Doc. E8-4154 Filed 3-3-08; 8:45 am]
BILLING CODE 6560-50-P