[Federal Register Volume 75, Number 222 (Thursday, November 18, 2010)]
[Proposed Rules]
[Pages 70654-70657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29146]



[[Page 70654]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R06-OAR-2005-TX-0013; FRL-9228-4]


Approval and Promulgation of Air Quality Implementation Plans; 
Texas; System Cap Trading Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to disapprove severable portions of two 
revisions to the Texas State Implementation Plan (SIP) submitted by the 
State of Texas on May 1, 2001, and August 16, 2007, that create and 
amend the System Cap Trading (SCT) Program at Title 30 of the Texas 
Administrative Code, Chapter 101--General Air Quality Rules, Subchapter 
H--Emissions Banking and Trading, Division 5, sections 101.380, 
101.382, 101.383, and 101.385. EPA is proposing disapproval of the SCT 
program because the program lacks several necessary components for 
emissions trading programs as outlined in EPA's Economic Incentive 
Program Guidance. This action is being taken under section 110 and 
parts C and D of the Federal Clean Air Act (the Act or CAA).

DATES: Comments must be received on or before December 20, 2010.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R06-
OAR-2005-TX-0013, 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-
2005-TX-0013. 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 Region 6 reception area on the seventh floor at 1445 Ross 
Avenue, Suite 700, Dallas, Texas.
    The State submittals related to this SIP revision, and which are 
part of the EPA docket, are 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 proposed rule, 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 proposing?
II. What did Texas submit?
III. What is the System Cap Trading Program?
IV. What is EPA's evaluation of the System Cap Trading Program?
V. TCEQ's Planned Withdrawal of the System Cap Trading Program
VI. Proposed Action
VII. Statutory and Executive Order Reviews

I. What action is EPA proposing?

    EPA is proposing to disapprove severable portions of two revisions 
to the Texas SIP submitted by the State of Texas on May 1, 2001, and 
August 16, 2007, specific to the System Cap Trading (SCT) Program. 
Specifically, we are proposing to disapprove 30 TAC sections 101.380, 
101.382, 101.383, and 101.385 submitted on May 1, 2001; and the 
amendments to 30 TAC sections 101.383 and 101.385 submitted on August 
16, 2007. Our analysis as presented in this proposed rulemaking action 
finds the SCT Program to be inconsistent with EPA's Economic Incentive 
Program Guidance, ``Improving Air Quality with Economic Incentive 
Programs'' (EPA-452/R-01-001, January 2001) and our past

[[Page 70655]]

approval actions on Texas trading programs.

II. What did Texas submit?

    We are proposing to disapprove severable portions of two revisions 
to the Texas SIP specific to the SCT Program. The first SIP submission 
we are proposing to disapprove was adopted by the Texas Commission on 
Environmental Quality (TCEQ) on March 21, 2001, and submitted to EPA on 
May 1, 2001, at 30 TAC sections 101.380, 101.382, 101.383, and 101.385. 
The second revision upon which we are proposing disapproval was adopted 
by the TCEQ on July 25, 2007, and submitted to EPA on August 16, 2007, 
at 30 TAC sections 101.383 and 101.385. The May 1, 2001, and August 16, 
2007, SIP submittals create and amend the SCT Program.
    In addition to the sections identified above as the subject of 
today's proposed disapproval, the TCEQ's submissions on May 1, 2001, 
and August 16, 2007, also included other provisions for which we are 
not proposing action today. Specifically, on May 1, 2001, the TCEQ also 
adopted and submitted revisions to 30 TAC Chapter 117, Control of Air 
Pollution from Nitrogen Compounds, sections 117.109, 117.110, and 
117.139. We are not proposing action today on the revisions to Chapter 
117 because these revisions are severable from the SCT Program and EPA 
has already taken a separate approval action (see 73 FR 73562 on 
December 3, 2008). On August 16, 2007, the TCEQ also adopted and 
submitted revisions to the general air quality definitions, the 
Emission Credit Banking and Trading Program (referred to as the 
Emission Reduction Credit (ERC) Program elsewhere in this document) and 
the Discrete Emission Credit Banking and Trading Program (referred to 
as the Discrete Emission Reduction Credit (DERC) Program elsewhere in 
this document). We are not proposing action today upon revisions to the 
general air quality definitions at 30 TAC Chapter 101, Subchapter A, 
section 101.1 because the SCT Program does not rely upon them 
(therefore the revisions are severable from the SCT Program) and 
previous revisions to section 101.1 are still pending for review by 
EPA. We are not proposing action today upon the revisions to the ERC 
Program at 30 TAC Chapter 101, Subchapter H, Division 1, sections 
101.302 and 101.306 because these revisions are severable from the SCT 
Program and EPA has already taken a separate approval action (see 75 FR 
27647 on May 15, 2010). We are also not proposing action today upon the 
revisions to the DERC Program at 30 TAC Chapter 101, Subchapter H, 
Division 4, sections 101.372 and 101.376 because these revisions are 
severable from the SCT Program and EPA has already taken a separate 
approval action (see 75 FR 27644 on May 15, 2010).
    A copy of the May 1, 2001, and August 16, 2007, SIP submittals can 
be obtained from the Docket, as discussed in the ``Docket'' section 
above. A discussion of the specific Texas rule changes that we are 
proposing to disapprove is included below.

III. What is the System Cap Trading Program?

    The SCT Program was designed by the TCEQ to provide additional 
compliance flexibility to source owners and operators subject to the 
system caps established in 30 TAC Chapter 117. Under this program, 
sources under common ownership or control may be voluntarily grouped 
together in a system with a system cap on total emissions from the 
sources in the system. The Chapter 117 system caps establish daily, 
rolling 30-day average, and annual average emission caps depending upon 
the source's location. The Chapter 117 system caps enable participating 
sources to transfer emission allowables (the amount greater than zero 
that a source owner or operator's allowable emissions exceed the actual 
emissions over the applicable averaging time period) from source to 
source within the same system, provided the overall cap is not 
exceeded. The SCT Program at 30 TAC Chapter 101 provides an additional 
layer of compliance flexibility by allowing owners or operators of 
units subject to the Chapter 117 system caps to trade surplus emission 
allowables (the amount greater than zero that a source owner or 
operator's allowable emissions in a system cap emission limit specified 
in Chapter 117 is greater than the actual emissions in that system over 
the applicable averaging time period) with other system caps within the 
same attainment or nonattainment area to exceed the applicable Chapter 
117 system cap limits. The SCT Program also streamlined the reporting 
requirements for the participating sources by only requiring 
notification to the TCEQ after the trades of surplus emission 
allowables between system caps were completed. The SCT Program has not 
been used by any source since the program was established in March 
2001.

IV. What is EPA's evaluation of the System Cap Trading Program?

    We reviewed the SCT program with respect to EPA's EIP Guidance 
``Improving Air Quality with Economic Incentive Programs'' (EPA-452/R-
01-001, January 2001) (EIP Guidance) (available in the docket for this 
rulemaking) and for consistency with our past approval actions on the 
Texas SIP-approved trading programs. Our analysis finds that the SCT 
Program is not consistent with the EIP Guidance or with our past 
actions on Texas trading programs. Namely, the SCT Program fails to:
     Satisfy the fundamental element of Surplus at 4.1(a) and 
(b) of the EIP Guidance because the participating sources are not 
clearly identified, and therefore EPA and the public are unable to 
determine that all emission reductions under the SCT program are 
surplus. It is essential that a trading program have a clearly 
identified group of participating sources to ensure that the reductions 
from these sources are surplus to all federal and state requirements, 
and to facilitate trading among participating sources to promote a 
robust market. Therefore, the SCT Program must clearly identify sources 
subject to the program. Currently, 30 TAC section 101.380(2) includes 
an incorrect citation and 30 TAC section 101.382 broadly references all 
of 30 TAC Chapter 117 instead of identifying the subject sections.
     Satisfy the fundamental element of Enforceability at 
4.1(a) and (b) of the EIP Guidance because the SCT Program does not 
clearly identify violations and outline the penalties for the 
participating sources as described in Sections 5.1(c) and 6.1 of the 
EIP Guidance. Currently 30 TAC section 101.385 requires a source owner 
or operator to notify the TCEQ when a Chapter 117 system cap emission 
limit is exceeded as a result of participating in the SCT Program. 
However, there are no penalty provisions or other mechanisms to provide 
a disincentive for violating the emission limits.
     Provide an environmental benefit as described in Sections 
5.1(a) and 6.5 of the EIP Guidance.
     Provide a program evaluation as described in Section 
5.3(b) of the EIP Guidance. Such a program evaluation must occur every 
3 years and provide remedies if the trading program does not have the 
intended results, per Section 5.3(c) of the EIP Guidance. A program 
evaluation or audit is an essential feature of a trading program 
because it provides the TCEQ the time and authority to review the 
functionality of the program and suggest remedies. Additionally, EPA 
has SIP-approved audit provisions in the ERC, Mass Emissions Cap and 
Trade (MECT), and DERC programs that specifically require

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the TCEQ to evaluate the impact of the program on the state's ozone 
attainment demonstrations and authorizes the TCEQ to suspend trading in 
whole or in part if problems are identified. Because the SCT Program 
operates in attainment and nonattainment areas, we find that analysis 
of the program impacts on the state's ozone attainment demonstrations 
is an essential feature that must be included.
     Address requirements for monitoring, recordkeeping, and 
reporting consistent with Section 5.3(a) of the EIP Guidance.
     Provide TCEQ visibility of the trading process or 
establish reliable tracking mechanism for emissions trading consistent 
with Section 6.5(d) of the EIP Guidance. Participating sources in the 
SCT Program only notify the TCEQ after the trades between system caps 
occur. The TCEQ must have knowledge and visibility of the trading under 
this program to anticipate and respond to issues that result from 
trading between system caps.

V. TCEQ's Planned Withdrawal of the System Cap Trading Program

    During the preparation of this proposed rule notice, Region 6 staff 
had several discussions with TCEQ staff about the SCT program, EPA's 
evaluation of it, and the possibility of EPA proposing a conditional 
approval of the program under section 110(k)(4) of the Clean Air 
Act.\1\ In response, Mr. Mark Vickery, the TCEQ Executive Director, 
submitted a letter to EPA Region 6 on November 2, 2010, available in 
the docket for this rulemaking. In this letter, the TCEQ stated that 
they are unable to address EPA's concerns with the SCT Program through 
rulemaking action within the time period specified under section 
110(k)(4) of the Clean Air Act. Moreover, TCEQ noted that its review of 
the SCT Program indicated no use of the program by affected companies. 
Finally, the TCEQ stated that it will seek approval from the 
Commissioners to withdraw the SCT Program SIP submittals from EPA's 
consideration and complete rulemaking to repeal the rules.
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    \1\ Section 110(k)(4) authorizes EPA to approve a plan revision 
based on a commitment by a state to adopt specific enforceable 
measures by a date certain, but not later than one year after the 
date of the conditional approval.
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    Notwithstanding TCEQ's planned withdrawal, because that withdrawal 
may not occur before December 31, 2010 (when EPA is scheduled to take 
final action on these submissions under the consent decree in BCCA 
Appeal Group v. EPA, No. 3-08CV1491 (N.D. Tex.)), EPA is proposing 
action on these submissions at this time. If the submissions are not 
withdrawn, and if the December 31, 2010 deadline remains in place, EPA 
will take final action in December 2010.

VI. Proposed Action

    EPA is proposing to disapprove severable revisions to the Texas SIP 
submitted on May 1, 2001, and August 16, 2007. Specifically from the 
May 1, 2001, submittal, EPA is disapproving 30 TAC sections 101.380, 
101.382, 101.383, and 101.385 that create the SCT Program. EPA is also 
proposing to disapprove provisions revisions to the SCT Program at 30 
TAC sections 101.383 and 101.385 as submitted on August 16, 2007. We 
note that if TCEQ formally withdraws these two SCT Program SIP 
submittals as discussed in the November 2, 2010, letter from TCEQ, 
before EPA takes final action we will not need to take final action on 
these submissions.
    Under section 179(a) of the CAA, final disapproval of a submittal 
that addresses a mandatory requirement of the Act starts a sanctions 
clock and a Federal Implementation Plan (FIP) clock. The provisions in 
May 1, 2001, and August 16, 2007, SIP submittals creating and amending 
the SCT Program were not submitted to meet a mandatory requirement of 
the Act. Therefore, if EPA takes final action to disapprove the 
submitted SCT Program SIP submittals, no sanctions and FIP clocks will 
be triggered.

VII. Statutory and Executive Order Reviews

A. Executive Order 12866, Regulatory Planning and Review

    This action is not a ``significant regulatory action'' under the 
terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and is 
therefore not subject to review under the Executive Order.

B. Paperwork Reduction Act

    This action does not impose an information collection burden under 
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., 
because this proposed SIP disapproval under section 110 and subchapter 
I, part D of the Clean Air Act will not in-and-of itself create any new 
information collection burdens but simply disapproves certain State 
requirements for inclusion into the SIP. Burden is defined at 5 CFR 
1320.3(b).

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. Small entities include small 
businesses, small not-for-profit enterprises, and small governmental 
jurisdictions. For purposes of assessing the impacts of today's rule on 
small entities, small entity is defined as: (1) A small business as 
defined by the Small Business Administration's (SBA) regulations at 13 
CFR 121.201; (2) a small governmental jurisdiction that is a government 
of a city, county, town, school district or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field.
    After considering the economic impacts of today's proposed rule on 
small entities, I certify that this action will not have a significant 
impact on a substantial number of small entities. This rule does not 
impose any requirements or create impacts on small entities. This 
proposed SIP disapproval under section 110 and subchapter I, part D of 
the Clean Air Act will not in-and-of itself create any new requirements 
but simply disapproves certain State requirements for inclusion into 
the SIP. Accordingly, it affords no opportunity for EPA to fashion for 
small entities less burdensome compliance or reporting requirements or 
timetables or exemptions from all or part of the rule. The fact that 
the Clean Air Act prescribes that various consequences (e.g., higher 
offset requirements) may, or will flow from this disapproval does not 
mean that EPA either can or must conduct a regulatory flexibility 
analysis for this action. Therefore, this action will not have a 
significant economic impact on a substantial number of small entities.

D. Unfunded Mandates Reform Act

    This action contains no Federal mandates under the provisions of 
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 
1531-1538 ``for State, local, or tribal governments or the private 
sector.'' EPA has determined that the proposed disapproval action does 
not include a Federal mandate that may result in estimated costs of 
$100 million or more to either State, local, or tribal governments in 
the aggregate, or to the private sector. This action proposes to 
disapprove pre-existing requirements under State or local law, and 
imposes no new requirements. Accordingly, no

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additional costs to State, local, or tribal governments, or to the 
private sector, result from this action.

E. Executive Order 13132, Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have federalism implications.'' 
``Policies that have federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    This action does not have federalism implications. It will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132, because it merely disapproves 
certain State requirements for inclusion into the SIP and does not 
alter the relationship or the distribution of power and 
responsibilities established in the Clean Air Act. Thus, Executive 
Order 13132 does not apply to this action.

F. Executive Order 13175, Coordination With Indian Tribal Governments

    This action does not have tribal implications, as specified in 
Executive Order 13175 (59 FR 22951, November 9, 2000), because the SIP 
EPA is proposing to disapprove would not apply in Indian country 
located in the State, and EPA notes that it will not impose substantial 
direct costs on tribal governments or preempt tribal law. Thus, 
Executive Order 13175 does not apply to this action.

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

    EPA interprets Executive Order 13045 (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 
action is not subject to Executive Order 13045 because it is not an 
economically significant regulatory action based on health or safety 
risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997). 
This proposed SIP disapproval under section 110 and subchapter I, part 
D of the Clean Air Act will not in-and-of itself create any new 
regulations but simply disapproves certain State requirements for 
inclusion into the SIP.

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

    This proposed rule is not subject to Executive Order 13211 (66 FR 
28355, May 22, 2001) because it is not a significant regulatory action 
under Executive Order 12866.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, section 12(d) (15 U.S.C. 
272 note) directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. NTTAA directs EPA to 
provide Congress, through OMB, explanations when the Agency decides not 
to use available and applicable voluntary consensus standards.
    The EPA believes that this action is not subject to requirements of 
Section 12(d) of NTTAA because application of those requirements would 
be inconsistent with the Clean Air Act.

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

    Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes 
federal executive policy on environmental justice. Its main provision 
directs federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the United States.
    EPA lacks the discretionary authority to address environmental 
justice in this proposed action. In reviewing SIP submissions, EPA's 
role is to approve or disapprove state choices, based on the criteria 
of the Clean Air Act. Accordingly, this action merely proposes to 
disapprove certain State requirements for inclusion into the SIP under 
section 110 and subchapter I, part D of the Clean Air Act and will not 
in-and-of itself create any new requirements. Accordingly, it does not 
provide EPA with the discretionary authority to address, as 
appropriate, disproportionate human health or environmental effects, 
using practicable and legally permissible methods, under Executive 
Order 12898.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by 
reference, Intergovernmental relations, Nitrogen dioxide, Ozone, 
Reporting and recordkeeping requirements.


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

    Dated: November 10, 2010.
Lawrence E. Starfield,
Acting Regional Administrator, Region 6.
[FR Doc. 2010-29146 Filed 11-17-10; 8:45 am]
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