[Federal Register: September 25, 2007 (Volume 72, Number 185)]
[Proposed Rules]
[Page 54385-54390]
[DOCID:fr25se07-20]

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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2007-0381; FRL-8472-9]

Approval and Promulgation of Air Quality Implementation Plans;
Virginia; Clean Air Interstate Rule Budget Trading Programs

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve a revision to the Virginia State
Implementation Plan (SIP) submitted on March 30, 2007 and supplemented
on April 30, 2007 and June 11, 2007. This revision addresses the
requirements of EPA's Clean Air Interstate Rule (CAIR), promulgated on
May 12, 2005 and subsequently revised on April 28, 2006 and December
13, 2006. EPA is proposing to determine that the SIP revision fully
implements the CAIR requirements for Virginia. Therefore, as a
consequence of the SIP approval, EPA will also withdraw the CAIR
Federal Implementation Plans (FIP) that address sulfur dioxide
(SO2), nitrogen oxides (NOX) annual, and NOX
ozone season emissions in Virginia. The CAIR FIPs for all States in the
CAIR region were promulgated on April 28, 2006 and subsequently revised
on December 13, 2006. The CAIR requires affected States to reduce
emissions of SO2 and NOX that significantly
contribute to, and interfere with maintenance of, the national ambient
air quality standards (NAAQS) for fine particulates and/or ozone in any
downwind state. The CAIR establishes State budgets for SO2
and NOX and requires States to submit SIP revisions that
implement these budgets in States that EPA determined contribute to
nonattainment in downwind states. States have the flexibility to choose
which control measures to adopt to achieve the budgets, and may choose
whether or not to participate in the EPA-administered cap-and-trade
programs. In the SIP revision that EPA is proposing to approve,
Virginia would meet CAIR requirements by participating in the EPA-
administered cap-and-trade programs addressing SO2, NOX
annual, and NOX ozone season emissions.

DATES: Written comments must be received on or before October 25, 2007.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R03-OAR-2007-0381 by one of the following methods:
    A. http://www.regulations.gov. Follow the on-line instructions for
submitting comments.
    B. E-mail<EMAIL_ADDRESS>    C. Mail: EPA-R03-OAR-2007-0381, Marilyn Powers, Acting Chief, Air
Quality Planning Branch, Mailcode 3AP21, U.S. Environmental Protection
Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.
    D. Hand Delivery: At the previously-listed EPA Region III address.
Such deliveries are only accepted during the Docket's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-R03-OAR-
2007-0381. 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, any form of encryption, and be free of
any defects or viruses.
    Docket: All documents in the electronic docket are listed in the
http://www.regulations.gov index. Although listed in the index, some
information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically in http://
www.regulations.gov or in hard copy during normal business hours at the
Air Protection Division, U.S. Environmental Protection Agency, Region
III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the
State submittal are available at the Virginia Department of
Environmental Quality, 629 East Main Street, Richmond, Virginia 23219.

FOR FURTHER INFORMATION CONTACT: Marilyn Powers,<PHONE_NUMBER>, or by
e-mail at<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Table of Contents

I. What Action Is EPA Proposing To Take?
II. What Is the Regulatory History of CAIR and the CAIR FIPs?
III. What Are the General Requirements of CAIR and the CAIR FIPs?
IV. What Are the Types of CAIR SIP Submittals?
V. Analysis of Virginia's CAIR SIP Submittal
    A. State Budgets for Allowance Allocations
    B. CAIR Cap-and-Trade Programs
    C. Applicability Provisions for Non-EGU NOX SIP Call
Sources
    D. NOX Allowance Allocations
    E. Allocation of NOX Allowances From Compliance
Supplement Pool (CSP)
    F. Individual Opt-in Units
VI. Information Pertaining to SIP Submittals From the Commonwealth
of Virginia
VII. Proposed Actions
VIII. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing To Take?

    EPA is proposing to approve a revision to Virginia's SIP, submitted
on March 30, 2007 and supplemented on April 30, 2007 and June 11, 2007.
In its SIP revision, Virginia would meet CAIR

requirements by requiring certain electric generating units (EGUs) to
participate in the EPA-administered CAIR cap-and-trade programs
addressing SO2, NOX annual, and NOX
ozone season emissions. EPA is proposing to determine that the Virginia
SIP, as revised, will meet the applicable requirements of CAIR. Any
final action approving Virginia's SIP revision will be taken by the
Regional Administrator for Region 3. As a consequence of the SIP
approval, the EPA Administrator will issue a final rule to withdraw the
FIPs addressing SO2, NOX annual, and NOX
ozone season emissions for Virginia, which will delete and reserve 40
CFR 52.2440 and 2441. The withdrawal of the CAIR FIPs for Virginia is a
conforming amendment that must be made once the SIP is approved because
EPA's authority to issue the FIPs was premised on a deficiency in the
SIP for Virginia. Once the SIP to implement CAIR is fully approved, EPA
no longer has authority for the FIPs. Thus, EPA will not have the
option of maintaining the FIPs following the full SIP approval.
Accordingly, EPA does not intend to offer an opportunity for a public
hearing or an additional opportunity for written public comment on the
withdrawal of the FIPs.

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

    The CAIR was published by EPA on May 12, 2005 (70 FR 25162). In
this rule, EPA determined that 28 States and the District of Columbia
contribute significantly to nonattainment and interfere with
maintenance of the NAAQS for fine particles (PM2.5) and/or
8-hour ozone in downwind States in the eastern part of the country. As
a result, EPA required those upwind States to revise their SIPs to
include control measures that reduce emissions of SO2, which
is a precursor to PM2.5 formation, and/or NOX,
which is a precursor to both ozone and PM2.5 formation. For
jurisdictions that contribute significantly to downwind PM2.5
nonattainment, CAIR sets annual State-wide emission reduction
requirements (i.e., budgets) for SO2 and annual State-wide
emission reduction requirements for NOX. Similarly, for
jurisdictions that contribute significantly to 8-hour ozone
nonattainment, CAIR sets State-wide emission reduction requirements for
NOX for the ozone season (May 1st to September 30th). Under
CAIR, States may implement these reduction requirements by
participating in the EPA-administered cap-and-trade programs or by
adopting any other control measures.
    Section 110(a)(2)(D) of the CAA requires states to reduce emissions
that significantly contribute to nonattainment or interfere with
maintenance of the NAAQS in downwind states. CAIR explains to subject
States what must be included in their SIPs to address the requirements
of section 110(a)(2)(D) with respect to the 8-hour ozone and PM2.5
NAAQS. EPA made national findings, effective on May 25, 2005, that the
States had failed to submit SIPs meeting the requirements of section
110(a)(2)(D). The SIPs were due in July 2000, three years after the
promulgation of the 8-hour ozone and PM2.5 NAAQS. These
findings started a 2-year clock for EPA to promulgate a FIP to address
the requirements of section 110(a)(2)(D). Under CAA section 110(c)(1),
EPA may issue a FIP anytime after such findings are made and must do so
within two years unless a SIP revision correcting the deficiency is
approved by EPA before the FIP is promulgated.
    On April 28, 2006 (71 FR 25328), EPA promulgated FIPs for all
States covered by CAIR in order to ensure the emissions reductions
required by CAIR are achieved on schedule. Each CAIR State is subject
to the FIPs until the State fully adopts, and EPA approves, a SIP
revision meeting the requirements of CAIR. The CAIR FIPs require EGUs
to participate in the EPA-administered CAIR SO2, NOX
annual, and NOX ozone season trading programs, as
appropriate. The SO2, NOX annual, and NOX
ozone season trading programs of the CAIR FIPs impose essentially the
same requirements as, and are integrated with, the respective CAIR SIP
trading programs. The integration of the FIP and SIP trading programs
means that these trading programs will work together to create,
effectively, a single trading program for each regulated pollutant
(SO2, NOX annual, and NOX ozone
season) in all States covered by the CAIR FIP or SIP trading program
for that pollutant. The CAIR FIP also allows States to submit
abbreviated SIP revisions that, if approved by EPA, will automatically
replace or supplement certain CAIR FIP provisions (e.g., the
methodology for allocating NOX allowances to sources in the
State), while the CAIR FIP remains in place for all other provisions.
    On April 28, 2006 (71 FR 25287 and 71 FR 25303), EPA published two
additional CAIR-related final rules that added the States of Delaware
and New Jersey to the list of States subject to CAIR for
PM2.5, and announced EPA's final decisions on
reconsideration of five issues, without making any substantive changes
to the CAIR requirements.

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

    The CAIR establishes State-wide emission budgets for SO2
and NOX and is to be implemented in two phases. The first
phase of NOX reductions starts in 2009 and continues through
2014, while the first phase of SO2 reductions starts in 2010
and continues through 2014. The second phase of reductions for both
NOX and SO2 starts in 2015 and continues
thereafter. The CAIR requires States to implement the budgets by
either: (1) Requiring EGUs to participate in the EPA-administered cap-
and-trade programs; or (2) adopting other control measures of the
State's choosing and demonstrating that such control measures will
result in compliance with the applicable State SO2 and
NOX budgets.
    The May 12, 2005 and April 28, 2006 CAIR rules provide model rules
that States must adopt (with certain limited changes, if desired) if
they want to participate in the EPA-administered trading programs. With
two exceptions, only States that choose to meet the requirements of
CAIR through methods that exclusively regulate EGUs are allowed to
participate in the EPA-administered trading programs. One exception is
for States that adopt the opt-in provisions of the model rules to allow
non-EGUs individually to opt into the EPA-administered trading
programs. The other exception is for States that include all non-EGUs
from their NOX SIP Call trading programs in their CAIR
NOX ozone season trading programs.

IV. What Are the Types of CAIR SIP Submittals?

    States have the flexibility to choose the type of control measures
they will use to meet the requirements of CAIR. EPA anticipates that
most States will choose to meet the CAIR requirements by selecting an
option that requires EGUs to participate in the EPA-administered CAIR
cap-and-trade programs. For such States, EPA has provided two
approaches for submitting and obtaining approval for CAIR SIP
revisions. States may submit full SIP revisions that adopt the model
CAIR cap-and-trade rules. If approved, these SIP revisions will fully
replace the CAIR FIPs. Alternatively, States may submit abbreviated SIP
revisions. These SIP revisions will not replace the CAIR FIPs; however,
the CAIR FIPs provide that, when approved, the provisions in these
abbreviated SIP revisions will be used instead of or in conjunction
with, as appropriate, the corresponding

provisions of the CAIR FIPs (e.g., the NOX allowance
allocation methodology).
    A State submitting a full SIP revision may either adopt regulations
that are substantively identical to the model rules or incorporate by
reference the model rules. The CAIR provides that States may only make
limited changes to the model rules if the States want to participate in
the EPA-administered trading programs. A full SIP revision may change
the model rules only by altering their applicability and allowance
allocation provisions to:
    1. Include NOX SIP Call trading sources that are not
EGUs under CAIR in the CAIR NOX ozone season trading
program;
    2. Provide for State allocation of NOX annual or ozone
season allowances using a methodology chosen by the State;
    3. Provide for State allocation of NOX annual allowances
from the compliance supplement pool (CSP) using the State's choice of
allowed, alternative methodologies; or
    4. Allow units that are not otherwise CAIR units to opt
individually into the CAIR SO2, NOX annual, or
NOX ozone season trading programs under the opt-in
provisions in the model rules.
    An approved CAIR full SIP revision addressing EGUs' SO2,
NOX annual, or NOX ozone season emissions will
replace the CAIR FIP for that State for the respective EGU emissions.

V. Analysis of Virginia's CAIR SIP Submittal

    EPA believes that Virginia clearly intends, by this SIP submittal,
to replace the CAIR FIP with a State plan that is based on the CAIR
model rule and allow subject sources, non-EGUs from its NOX
SIP Call budget trading program, and opt-in units meeting the CAIR opt-
in criteria to participate in the EPA-administered regional CAIR
trading program. However, EPA also believes that there are some
provisions of the amendments to Virginia regulations (9 VAC 5-140) that
could be interpreted in a way that might be inconsistent with the
Commonwealth's intent. These specific provisions pertain to definitions
associated with Virginia's participation in the regional CAIR trading
program, definitions associated with the State's decision to bring its
non-EGUs from its NOX SIP Call budget trading program into
the CAIR trading program, and a definition of the term ``most stringent
state of federal NOX emissions limitation'' that is based
upon the model rule but has been expanded to include the situation
where more than one fuel is allowed by a permit.
    On September 12, 2007, EPA sent a letter to the Virginia Department
of Environmental Quality (VADEQ) asking the Commonwealth to confirm
that EPA correctly understood how Virginia intended to interpret and
implement these regulatory definitions. In response to EPA's letter,
VADEQ sent a letter dated September 17, 2007, confirming in writing its
interpretations of these regulatory provisions. EPA has reviewed
VADEQ's interpretations and has determined that they clarify the
language of the Virginia regulations and are also consistent with
having the EPA-administered CAIR trading program become effective in
Virginia. In addition, the letter accepts EPA's recommendation that the
Commonwealth promulgate and codify clarifying amendments to these
provisions of its regulations at the earliest opportunity.

A. State Budgets for Allowance Allocations

    The CAIR NOX annual and NOX ozone season
budgets were developed from historical heat input data for EGUs. Using
these data, EPA calculated annual and ozone season regional heat input
values, which were multiplied by 0.15 lb/MMBtu, for phase 1, and 0.125
lb/MMBtu, for phase 2, to obtain regional NOX budgets for
2009-2014 and for 2015 and thereafter, respectively. EPA derived the
State NOX annual and NOX ozone season budgets
from the regional budgets using State heat input data adjusted by fuel
factors.
    The CAIR State SO2 budgets were derived by discounting
the tonnage of emissions authorized by annual allowance allocations
under the Acid Rain Program under title IV of the CAA. Under CAIR, each
allowance allocated in the Acid Rain Program for the years in phase 1
of CAIR (2010 through 2014) authorizes 0.5 ton of SO2
emissions in the CAIR trading program, and each Acid Rain Program
allowance allocated for the years in phase 2 of CAIR (2015 and
thereafter) authorizes 0.35 ton of SO2 emissions in the CAIR
trading program.
    In today's action, EPA is proposing approval of Virginia's SIP
revision that adopts the budgets established for the Commonwealth in
CAIR. These budgets are: 36,074 tons for NOX annual
emissions from 2009 through 2014, and 30,062 tons from 2015 and
thereafter; 20,098 tons for NOX ozone season emissions from
2009 through 2014, and 17,432 tons from 2015 and thereafter; and 63,478
tons for SO2 emissions from 2010 through 2014, and 44,435
tons from 2015 and thereafter. Virginia's SIP revision sets these
budgets as the total amounts of allowances available for allocation for
each year under the EPA-administered cap-and-trade programs. The
NOX ozone season budget properly reflects the inclusion of
NOX SIP Call trading program units in the CAIR
NOX ozone season program.

B. CAIR Cap-and-Trade Programs

    The CAIR NOX annual and ozone-season model trading rules
both largely mirror the structure of the NOX SIP Call model
trading rule in 40 CFR part 96, subparts A through I. While the
provisions of the NOX annual and NOX ozone-season
model rules are similar, there are some differences. For example, the
NOX annual model rule (but not the NOX ozone
season model rule) provides for a CSP under which allowances may be
awarded for early reductions of NOX annual emissions. As a
further example, the NOX ozone season model rule reflects
the fact that the CAIR NOX ozone season trading program
replaces the NOX SIP Call trading program after the 2008
ozone season and is coordinated with the NOX SIP Call
program. The NOX ozone season model rule provides incentives
for early emissions reductions by allowing banked, pre-2009
NOX SIP Call allowances to be used for compliance in the
CAIR NOX ozone-season trading program.
    In addition, States have the option of continuing to meet their
NOX SIP Call requirement by participating in the CAIR
NOX ozone season trading program and including all their
NOX SIP Call trading sources in that program.
    The provisions of the CAIR SO2 model rule are also
similar to the provisions of the NOX annual and
NOX ozone season model rules. However, the SO2
model rule is coordinated with the ongoing Acid Rain SO2
cap-and-trade program under title IV of the CAA. The SO2
model rule uses the title IV allowances for compliance, with each title
IV allowance allocated for 2010-2014 authorizing only 0.50 ton of
emissions and each allowance allocated for 2015 and thereafter
authorizing only 0.35 ton of emissions. Banked title IV allowances
allocated for years before 2010 can be used at any time in the CAIR
SO2 cap-and-trade program, with each such allowance
authorizing 1 ton of emissions. Title IV allowances are to be freely
transferable among sources covered by the Acid Rain Program and sources
covered by the CAIR SO2 cap-and-trade program.
    EPA also used the CAIR model trading rules as the basis for the
trading programs in the CAIR FIPs. The CAIR FIP trading rules are
virtually identical to the CAIR model trading rules, with

changes made to account for federal rather than state implementation.
The CAIR model SO2, NOX annual, and
NOX ozone season trading rules and the respective CAIR FIP
trading rules are designed to work together as integrated
SO2, NOX annual, and NOX ozone season
trading programs.
    In its SIP revision, Virginia chooses to implement its CAIR budgets
by requiring EGUs to participate in the EPA-administered cap-and-trade
programs for SO2, NOX annual, and NOX
ozone season emissions. Virginia's full CAIR SIP revision adopts, with
certain allowed changes, the CAIR model cap-and-trade rules for
SO2, NOX annual, and NOX ozone season
emissions.

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

    In general, the CAIR model trading rules apply to any stationary,
fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion
turbine serving at any time, since the later of November 15, 1990 or
the start-up of the unit's combustion chamber, a generator with
nameplate capacity of more than 25 MWe producing electricity for sale.
    States have the option of bringing in, for the CAIR NOX
ozone season program only, those units in the State's NOX
SIP Call trading program that are not EGUs as defined under CAIR. EPA
advises States exercising this option to add the applicability
provisions in the State's NOX SIP Call trading rule for non-
EGUs to the applicability provisions in 40 CFR 96.304 in order to
include in the CAIR NOX ozone season trading program all
units required to be in the State's NOX SIP Call trading
program that are not already included under 40 CFR 96.304. Under this
option, the CAIR NOX ozone season program must cover all
large industrial boilers and combustion turbines, as well as any small
EGUs (i.e., units serving a generator with a nameplate capacity of 25
MWe or less) that the State currently requires to be in the
NOX SIP Call trading program.
    Virginia has chosen to expand the applicability provisions of the
CAIR NOX ozone season trading program to include all non-
EGUs in the Commonwealth's NOX SIP Call trading program, and
has incorporated into CAIR the definitions from its NOX SIP
Call trading program that are required in order to cover all the large
industrial boilers and combustion turbines that are currently or may
become subject to the rule.

D. NOX Allowance Allocations

    Under the NOX allowance allocation methodology in the
CAIR model trading rules and in the CAIR FIP, NOX annual and
NOX ozone season allowances are allocated to units that have
operated for five years, based on heat input data from a three-year
period that are adjusted for fuel type by using fuel factors of 1.0 for
coal, 0.6 for oil, and 0.4 for other fuels. The CAIR model trading
rules and the CAIR FIP also provide a new unit set-aside from which
units without five years of operation are allocated allowances based on
the units' prior year emissions.
    States may establish in their SIP submissions a different
NOX allowance allocation methodology that will be used to
allocate allowances to sources in the States if certain requirements
are met concerning the timing of submission of units' allocations to
the Administrator for recordation and the total amount of allowances
allocated for each control period. In adopting alternative
NOX allowance allocation methodologies, States have
flexibility with regard to:
    1. The cost to recipients of the allowances, which may be
distributed for free or auctioned;
    2. The frequency of allocations;
    3. The basis for allocating allowances, which may be distributed,
for example, based on historical heat input or electric and thermal
output; and
    4. The use of allowance set-asides and, if used, their size.
    Virginia has retained most aspects of the NOX annual and
NOX ozone season model trading rules pertaining to allowance
allocations, but has changed the basis for allocating allowances, and
the use and size of the allowance set-asides, within the flexibilities
described. The Commonwealth uses a commencement of operation date of
January 1, 2006 for purposes of calculating the average baseline heat
input. The CAIR NOX units that commenced operation prior to
this date receive allowance allocations in accordance with the model
rule. The CAIR NOX units that commence operation after this
date receive allocations in accordance with expanded provisions that
allow for computation of an average heat input for units operating from
between one to five years. Virginia chose not to adjust for fuel type
in its computation of average heat input.
    Virginia has also chosen to modify the NOX annual and
NOX ozone season model rule provisions pertaining to the set
aside. It has established a new unit set aside that consists of four
percent of the total Commonwealth budget from 2009 through 2013 and one
percent from 2014 and after. It has also established an annual,
voluntary public health set-aside that will be retired, and a one
percent energy efficiency/renewable energy set-aside for each control
period.

E. Allocation of NOX Allowances From Compliance Supplement Pool (CSP)

    The CAIR establishes a CSP to provide an incentive for early
reductions in NOX annual emissions. The CSP consists of
200,000 CAIR NOX annual allowances of vintage 2009 for the
entire CAIR region, and a State's share of the CSP is based upon the
projected magnitude of the emission reductions required by CAIR in that
State. States may distribute CSP allowances, one allowance for each ton
of early reduction, to sources that make NOX reductions
during 2007 or 2008 beyond what is required by any applicable State or
Federal emission limitation. States also may distribute CSP allowances
based upon a demonstration of need for an extension of the 2009
deadline for implementing emission controls.
    The CAIR NOX annual model trading rule establishes
specific methodologies for allocations of CSP allowances. States may
choose an allowed, alternative CSP allocation methodology to be used to
allocate CSP allowances to sources in the States.
    The CSP for Virginia is comprised of 5,134 tons of NOX.
Virginia has chosen to distribute the CSP, but has modified the
provisions of the CAIR NOX annual model trading rule
concerning the allocation of allowances from the CSP. Virginia requires
that CAIR NOX units that are part of a group of units under
single ownership, with combined emissions of NOX that
exceeded 40,000 tons in 2004, collectively reduce emissions in 2007
and/or 2008 by an amount equal in number to the CSP, and establishes a
methodology for allocating to such units from the CSP. This change is
within the flexibility of the CAIR NOX annual model rule.

F. Individual Opt-in Units

    The opt-in provisions of the CAIR SIP model trading rules allow
certain non-EGUs (i.e., boilers, combustion turbines, and other
stationary fossil-fuel-fired devices) that do not meet the
applicability criteria for a CAIR trading program to participate
voluntarily in (i.e., opt into) the CAIR trading program. A non-EGU may
opt into one or more of the CAIR trading programs. In order to qualify
to opt into a CAIR trading program, a unit must vent all emissions
through a stack and be able to meet monitoring, recordkeeping, and
recording requirements of 40 CFR part 75. The owners and operators
seeking to opt a unit into a CAIR trading program

must apply for a CAIR opt-in permit. If the unit is issued a CAIR opt-
in permit, the unit becomes a CAIR unit, is allocated allowances, and
must meet the same allowance-holding and emissions monitoring and
reporting requirements as other units subject to the CAIR trading
program. The opt-in provisions provide for two methodologies for
allocating allowances for opt-in units, one methodology that applies to
opt-in units in general and a second methodology that allocates
allowances only to opt-in units that the owners and operators intend to
repower before January 1, 2015.
    States have several options concerning the opt-in provisions.
States may adopt the CAIR opt-in provisions entirely or may adopt them
but exclude one of the methodologies for allocating allowances. States
may also decline to adopt the opt-in provisions at all.
    For the CAIR NOX annual trading program, the CAIR
NOX ozone season trading program, and the CAIR
SO2 trading program, Virginia has chosen to allow non-EGUs
meeting certain requirements to opt into the CAIR NOX annual
trading program. Virginia has adopted both of the methodologies for
allocating allowances that are in the model rule.

VI. Information Pertaining to SIP Submittals From the Commonwealth of
Virginia

    In 1995, Virginia adopted legislation that provides, subject to
certain conditions, for an environmental assessment (audit)
``privilege''' for voluntary compliance evaluations performed by a
regulated entity. The legislation further addresses the relative burden
of proof for parties either asserting the privilege or seeking
disclosure of documents for which the privilege is claimed. Virginia's
legislation also provides, subject to certain conditions, for a penalty
waiver for violations of environmental laws when a regulated entity
discovers such violations pursuant to a voluntary compliance evaluation
and voluntarily discloses such violations to the Commonwealth and takes
prompt and appropriate measures to remedy the violations. Virginia's
Voluntary Environmental Assessment Privilege Law, Va. Code Sec. 10.1-
1198, provides a privilege that protects from disclosure documents and
information about the content of those documents that are the product
of a voluntary environmental assessment. The Privilege Law does not
extend to documents or information (1) that are generated or developed
before the commencement of a voluntary environmental assessment; (2)
that are prepared independently of the assessment process; (3) that
demonstrate a clear, imminent and substantial danger to the public
health or environment; or (4) that are required by law.
    On January 12, 1998, the Commonwealth of Virginia Office of the
Attorney General provided a legal opinion that states that the
Privilege law, Va. Code Sec. 10.1-1198, precludes granting a privilege
to documents and information ``required by law,'' including documents
and information ``required by Federal law to maintain program
delegation, authorization or approval,'' since Virginia must ``enforce
Federally authorized environmental programs in a manner that is no less
stringent than their Federal counterparts * * *.'' The opinion
concludes that ``[r]egarding Sec.  10.1-1198, therefore, documents or
other information needed for civil or criminal enforcement under one of
these programs could not be privileged because such documents and
information are essential to pursuing enforcement in a manner required
by Federal law to maintain program delegation, authorization or
approval.''
    Virginia's Immunity law, Va. Code Sec. 10.1-1199, provides that
``[t]o the extent consistent with requirements imposed by Federal
law,'' any person making a voluntary disclosure of information to a
state agency regarding a violation of an environmental statute,
regulation, permit, or administrative order is granted immunity from
administrative or civil penalty. The Attorney General's January 12,
1998 opinion states that the quoted language renders this statute
inapplicable to enforcement of any Federally authorized programs, since
``no immunity could be afforded from administrative, civil, or criminal
penalties because granting such immunity would not be consistent with
Federal law, which is one of the criteria for immunity.''
    Therefore, EPA has determined that Virginia's Privilege and
Immunity statutes will not preclude the Commonwealth from enforcing its
program consistent with the Federal requirements. In any event, because
EPA has also determined that a state audit privilege and immunity law
can affect only state enforcement and cannot have any impact on Federal
enforcement authorities, EPA may at any time invoke its authority under
the CAA, including, for example, sections 113, 167, 205, 211 or 213, to
enforce the requirements or prohibitions of the state plan,
independently of any state enforcement effort. In addition, citizen
enforcement under section 304 of the CAA is likewise unaffected by
this, or any, state audit privilege or immunity law.

VII. Proposed Action

    EPA is proposing to approve Virginia's full CAIR SIP revision
submitted on March 30, 2007, and supplemented on April 30, 2007 and
June 11, 2007. Under the SIP revision, Virginia is choosing to
participate in the EPA-administered cap-and-trade programs for
SO2, NOX annual, and NOX ozone season
emissions. The SIP revision meets the applicable requirements in 40 CFR
51.123(o) and (aa), with regard to NOX annual and
NOX ozone season emissions, and 40 CFR 51.124(o), with
regard to SO2 emissions. EPA is proposing to determine that
the SIP revision will meet the requirements of CAIR. As a consequence
of the SIP approval, the Administrator of EPA will issue, without
providing an opportunity for a public hearing or an additional
opportunity for written public comment, a final rule to withdraw the
CAIR FIPs for SO2, NOX annual, and NOX
ozone season emissions for Virginia. EPA is soliciting public comments
on the issues discussed in this document. These comments will be
considered before taking final action.

VIII. Statutory and Executive Order Reviews

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this
proposed action is not a ``significant regulatory action'' and
therefore is not subject to review by the Office of Management and
Budget. For this reason, this action is also not subject to Executive
Order 13211, ``Actions Concerning Regulations That Significantly Affect
Energy Supply, Distribution, or Use'' (66 FR 28355 (May 22, 2001)).
This action merely 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.). 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). This proposed rule also does 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), nor
will it 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), because it merely proposes to approve a state rule
implementing a Federal requirement, and does not alter the relationship
or the distribution of power and responsibilities established in the
CAA. This proposed rule also is not subject to Executive Order 13045
(62 FR 19885, April 23, 1997), because it approves a state rule
implementing a Federal standard.
    In reviewing SIP submissions, EPA's role is to approve state
choices, provided that they meet the criteria of the CAA. In this
context, in the absence of a prior existing requirement for the State
to use voluntary consensus standards (VCS), EPA has no authority to
disapprove a SIP submission for failure to use VCS. It would thus be
inconsistent with applicable law for EPA, when it reviews a SIP
submission, to use VCS in place of a SIP submission that otherwise
satisfies the provisions of the Clean Air Act. Thus, the requirements
of section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3
of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing
this proposed rule, EPA has taken the necessary steps to eliminate
drafting errors and ambiguity, minimize potential litigation, and
provide a clear legal standard for affected conduct. EPA has complied
with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining
the takings implications of the rule in accordance with the ``Attorney
General's Supplemental Guidelines for the Evaluation of Risk and
Avoidance of Unanticipated Takings'' issued under the executive order.
This action proposing approval of Virginia's CAIR budget trading
program does not impose an information collection burden under the
provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et
seq.).

List of Subjects in 40 CFR Part 52

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

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

    Dated: September 19, 2007.
William T. Wisniewski,
Acting Regional Administrator, Region III.
 [FR Doc. E7-18849 Filed 9-24-07; 8:45 am]

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