6560 50 P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 51, 72, 73, 74, 77, 78 and 96 [ OAR 2003 0053; FRL ]

[ RIN 2060 AL76]

Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone ( Clean Air Interstate Rule); Revisions to Acid Rain Program; Revisions to the NOx SIP Call AGENCY: Environmental Protection Agency ( EPA).

ACTION: Final Rule.

SUMMARY: In today's action, EPA finds that 28 States and the District of Columbia contribute significantly to nonattainment of the national ambient air quality standards ( NAAQS) for fine particles ( PM2.5) and/ or 8 hour ozone in downwind States. The EPA is requiring these upwind States to revise their State implementation plans ( SIPs) to include control measures to reduce emissions of sulfur dioxide ( SO2)

and/ or nitrogen oxides ( NOx). Sulfur dioxide is a precursor to PM2.5 formation, and NOx is a precursor to both ozone and PM2.5 formation. Reducing upwind precursor emissions will assist the downwind PM2.5 and 8 hour ozone nonattainment areas in achieving the NAAQS. Moreover, attainment will be achieved in a more equitable, cost effective manner than if each nonattainment area attempted to achieve attainment by implementing local emissions reductions alone. 2 Based on State obligations to address interstate transport of pollutants under section 110( a)( 2)( D) of the Clean Air Act ( CAA), EPA is specifying statewide emissions reduction requirements for SO2 and NOx. The EPA is specifying that the emissions reductions be implemented in two phases. The first phase of NOx reductions starts in 2009 ( covering 2009 2014) and the first phase of SO2 reductions starts in 2010 ( covering 2010 2014); the second phase of reductions for both NOx and SO2 starts in 2015 ( covering 2015 and thereafter). The required emissions reductions requirements are based on controls that are known to be highly cost effective for electric generating units ( EGUs).

Today's action also includes model rules for multi

State cap and trade programs for annual SO2 and NOx emissions for PM2.5 and seasonal NOx emissions for ozone that States can choose to adopt to meet the required emissions reductions in a flexible and cost effective manner.

Today's action also includes revisions to the Acid Rain Program regulations under title IV of the CAA, particularly the regulatory provisions governing the SO2 cap and trade program. The revisions are made because they streamline the operation of the Acid Rain SO2 cap and trade program and/ or 3 facilitate the interaction of that cap and trade program with the model SO2 cap and trade program included in today's action. In addition, today's action provides for the NOx SIP Call cap and trade program to be replaced by the CAIR ozone season NOx trading program.

DATES: The effective date of today's action, except for the revisions to 40 CFR parts 72, 73, 74, and 77 of the Acid Rain Program regulations, is [ INSERT DATE 60 DAYS FROM PUBLICATION]. States must submit to EPA for approval enforceable plans for complying with the requirements of this rule by [ INSERT DATE 18 MONTHS FROM SIGNATURE]. The effective date for today's revisions to 40 CFR parts 72, 73,

74, and 77 of the Acid Rain Program regulations is July 1,

2006.

ADDRESSES: The EPA has established a docket for this action under Docket ID No. OAR 2003 0053. All documents in the docket are listed in the EDOCKET index at http:// www. epa. gov/ edocket. Although listed in the index,

some information is not publicly available, i. e.,

Confidential Business Information ( 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 4 either electronically in EDOCKET or in hard copy at the EPA Docket Center, EPA West, Room B102, 1301 Constitution Avenue, NW, Washington, DC. The Public Reading Room is open from 8: 30 a. m. to 4: 30 p. m., Monday through Friday,

excluding legal holidays. The telephone number for the Public Reading Room is ( 202) 566 1744, and the telephone number for the Air Docket is ( 202) 566 1742.

FOR FURTHER INFORMATION CONTACT: For general questions concerning today's action, please contact Carla Oldham, U. S.

EPA, Office of Air Quality Planning and Standards, Air Quality Strategies and Standards Division, Mail Code C539

02, Research Triangle Park, NC, 27711, telephone ( 919) 541

3347, e mail at oldham. carla@ epa. gov. For legal questions,

please contact Elliott Zenick, U. S. EPA, Office of General Counsel, Mail Code 2344A, 1200 Pennsylvania Avenue, NW,

Washington, DC, 20460, telephone ( 202) 564 1822, e mail at zenick. elliott@ epa. gov. For questions regarding air quality analyses, please contact Norm Possiel, U. S. EPA, Office of Air Quality Planning and Standards, Emissions Monitoring and Analysis Division, Mail Code D243 01, Research Triangle Park, NC, 27711, telephone ( 919) 541 5692, e mail at possiel. norm@ epa. gov. For questions regarding the EGU cost analyses, emissions inventories, and budgets, please contact Roman Kramarchuk, U. S. EPA, Office of Atmospheric Programs, 5 Clean Air Markets Division, Mail Code 6204J, 1200 Pennsylvania Avenue, NW, Washington, DC, 20460, telephone ( 202) 343 9089, e mail at kramarchuk. roman@ epa. gov. For questions regarding statewide emissions inventories, please contact Ron Ryan, U. S. EPA, Office of Air Quality Planning and Standards, Emissions Monitoring and Analysis Division,

Mail Code D205 01, Research Triangle Park, NC, 27711,

telephone ( 919) 541 4330, e mail at ryan. ron@ epa. gov. For questions regarding emissions reporting requirements, please contact Bill Kuykendal, U. S. EPA, Office of Air Quality Planning and Standards, Emissions Monitoring and Analysis Division, Mail Code D205 01, Research Triangle Park, NC,

27711, telephone ( 919) 541 5372, e mail at kuykendal. bill@ epa. gov. For questions regarding the model cap and trade programs, please contact Sam Waltzer, U. S.

EPA, Office of Atmospheric Programs, Clean Air Markets Division, Mail Code 6204J, 1200 Pennsylvania Avenue, NW,

Washington, DC, 20460, telephone ( 202) 343 9175, e mail at waltzer. sam@ epa. gov. For questions regarding analyses required by statutes and executive orders, please contact Linda Chappell, U. S. EPA, Office of Air Quality Planning and Standards, Air Quality Strategies and Standards Division,

Mail Code C339 01, Research Triangle Park, NC, 27711,

telephone ( 919) 541 2864, e mail at chappell. linda@ epa. gov. 6 For questions regarding the Acid Rain Program regulation revisions, please contact Dwight C. Alpern, U. S. EPA, Office of Atmospheric Programs, Clean Air Markets Division, Mail Code 6204J, 1200 Pennsylvania Avenue, NW, Washington, DC,

20460, telephone ( 202) 343 9151, e mail at alpern. dwight@ epa. gov.

SUPPLEMENTARY INFORMATION:

Regulated Entities Except for the revisions to the Acid Rain Program regulations, this action does not directly regulate emissions sources. Instead, it requires States to revise their SIPs to include control measures to reduce emissions of NOx and SO2. The emissions reductions requirement assigned to the States are based on controls that are known to be highly cost effective for EGUs.

Entities potentially regulated by the revisions to the Acid Rain Program regulations in this action are fossilfuel fired boilers, turbines, and internal combustion engines, including those that serve generators producing electricity, generate steam, or cogenerate electricity and steam. Regulated categories and entities include: 7 Category NAICS code1 Examples of potentially regulated entities Industry 221112 and others Electric service providers, boilers, turbines, and internal combustion engines from a wide range of industries.

Federal government 221122 Fossil fuel fired electric utility steam generating units owned by the Federal government.

State/ local/ Tribal government 221122 921150 Fossil fuel fired electric utility steam generating units owned by municipalities. Fossil fuel fired electric utility steam generating units in Indian Country.

1 North American Industry Classification System. 2 Federal, State, or local government owned and operated establishments are classified according to the activity in which they are engaged.

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by the revisions to the Acid Rain Program regulations in this action. This table lists the types of entities that EPA is aware could potentially be regulated.

Other types of entities not listed in the table could also be regulated. To determine whether your facility is regulated, you should carefully examine the applicability criteria in 40 CFR § § 72.6 and 74.2 and the exemptions in 40 CFR § § 72.7 and 72.8. If you have questions regarding the applicability of the revisions to the Acid Rain Program 8 regulations in this action to a particular entity, consult persons listed in the preceding FOR FURTHER INFORMATION section.

Website for Rulemaking Information The EPA has also established a website for this rulemaking at http:// www. epa. gov/ cleanairinterstaterule/

( formerly at http:// www. epa. gov/ interstateairquality/) which includes the rulemaking actions and certain other related information that the public may find useful.

Outline I. Overview A. What Are the Central Requirements of this Rule? B. Why Is EPA Taking this Action? 1. Policy Rationale for Addressing Transported Pollution Contributing to PM2.5 and Ozone Problems a. The PM2.5 Problem b. The 8 hour Ozone Problem c. Other Environmental Effects Associated with SO2 and NOx Emissions 2. The CAA Requires States to Act as Good Neighbors by Limiting Downwind Impacts 3. Today's Rule Will Improve Air Quality C. What was the Process for Developing this Rule? D. What Are the Major Changes Between the Proposals and the Final Rule?

II. EPA's Analytical Approach A. How Did EPA Interpret the Clean Air Act's Pollution Transport Provisions in the NOx SIP Call? 1. Clean Air Act Requirements 2. The NOx SIP Call Rulemaking a. Analytical Approach of NOx SIP Call b. Regulatory Requirements c. SIP Submittal and Implementation Requirements 3. Michigan v. EPA Court Case 4. Implementation of the NOx SIP Call B. How Does EPA Interpret the Clean Air Act's Pollution Transport Provisions in Today's Rule? 1. CAIR Analytical Approach a. Nature of Nonattainment Problem and Overview of Today's Approach b. Air Quality Factor c. Cost Factor d. Other Factors e. Regulatory Requirements f. SIP Submittal and Implementation Requirements 2. What Did Commenters Say and What Is EPA's Response? a. Aspects of Contribute Significantly Test III. Why Does This Rule Focus on SO2 and NOx, and How Were Significant Downwind Impacts Determined? A. What is the Basis for EPA's Decision to Require Reductions in Upwind Emissions of SO2 and NOx to Address PM2.5 related transport? 1. How did EPA determine which pollutants were necessary to control to address interstate transport for PM2.5? a. What did EPA propose regarding this issue in the NPR? b. How does EPA address public comments on its proposal to address SO2 and NOx emissions and not other pollutants?

b. How Did EPA Determine That Reductions in Interstate Transport, as Well as Reductions in Local Emissions, Are Warranted to Help Ozone Nonattainment Areas to Meet the 8 hour Ozone Standard? 1. What Did EPA Say in its Proposal Notice? 2. What Did Commenters Say? a. The Need for Reductions in Interstate Ozone Transport b. Magnitude of Ozone Reductions Achieved c. Why Is EPA Addressing Ozone Transport in this Rule, Given That EPA Already Issued the NOx SIP Call? 1. EPA's Legal Authority to Require Controls Beyond the NOx SIP Call 2. Authority to Revisit NOx SIP Call Requirements C. Comments on Excluding Future Case Measures from the Emissions Baselines Used to Estimate Downwind Ambient Contribution D. What Criteria Should Be Used to Determine Which States 10 are Subject to this Rule Because They Contribute to PM2.5 Nonattainment? 1. What is the Appropriate Metric for Assessing Downwind PM2.5 Contribution? a. Notice of Proposed Rulemaking b. Comments and EPA's Responses c. Today's Action 2. What is the Level of the PM2.5 Contribution Threshold? a. Notice of Proposed Rulemaking b. Comments and EPA's Responses c. Today's Action E. What Criteria Should be Used to Determine Which States are Subject to this Rule Because They Contribute to Ozone Nonattainment? 1. Notice of Proposed Rulemaking 2. Comments and EPA Responses 3. Today's Action F. Issues Related to Timing of the CAIR Controls IV. What Amounts of SO2 and NOx Emissions Did EPA Determine Should Be Reduced? A. What Methodology Did EPA Use to Determine the Amounts of SO2 and NOx Emissions that Must Be Eliminated? 1. The EPA's Cost Modeling Methodology 2. EPA's Proposed Methodology to Determine Amounts of Emissions that Must be Eliminated a. Overview of EPA Proposal for the Levels of Reductions and Resulting Caps, and their Timing b. Regulatory History: NOx SIP Call c. Proposed Criteria for Emissions Reduction Requirements 3. What Are the Most Significant Comments that EPA Received about its Proposed Methodology for Determining the Amounts of SO2 and NOx Emissions that Must Be Eliminated, and What Are EPA's Responses? 4. EPA's Evaluation of Highly Cost Effective SO2 and NOx Emissions Reductions Based on Controlling EGUs a. SO2 Emissions Reductions Requirements b. NOx Emissions Reductions Requirements B. What Other Sources Did EPA Consider when Determining Emission Reduction Requirements? 1. Potential Sources of Highly Cost Effective Emissions Reductions a. Mobile and Area Sources b. Non EGU Boilers and Turbines c. Other Non EGU Stationary Sources C. Schedule for Implementing SO2 and NOx Emissions Reduction Requirements for PM2.5 and Ozone 1. Overview 11 2. Engineering Factors Affecting Timing for Control Retrofits a. NPR b. Comments c. Responses 3. Assure Financial Stability D. Control Requirements in Today's Final Rule 1. Criteria Used to Determine Final Control Requirements 2. Final Control Requirements V. Determination of State Emissions Budgets A. What Is the Approach for Setting State by State Annual Emissions Reductions Requirements and EGU Budgets? 1. SO2 Emissions Budgets a. State Annual SO2 Emission Budget Methodology b. Final SO2 State Emission Budget Methodology. c. Use of SO2 budgets 2. NOx Annual Emissions Budgets a. Overview b. State Annual NOx Emissions Budget Methodology c. Final Annual State NOx Emission Budgets d. Use of Annual NOx Budgets e. NOx Compliance Supplement Pool B. What Is the Approach for Setting State by State Emissions Reductions Requirements and EGU Budgets for States with NOx Ozone Season Reduction Requirements? 1. States Subject to Ozone season Requirements VI. Air Quality Modeling Approach and Results A. What Air Quality Modeling Platform Did EPA Use? 1. Air Quality Models a. The PM2.5 Air Quality Model and Evaluation b. Ozone Air Quality Modeling Platform and Model Evaluation c. Model Grid Cell Configuration 2. Emissions Inventory Data 3. Meteorological Data B. How did EPA Project Future Nonattainment for PM2.5 and 8 Hour Ozone? 1. Projection of Future PM2.5 Nonattainment a. Methodology for Projecting Future PM2.5 Nonattainment b. Projected 2010 and 2015 Base Case PM2.5 Nonattainment Counties 2. Projection of Future 8 Hour Ozone Nonattainment a. Methodology for Projecting Future 8 Hour Ozone Nonattainment b. Projected 2010 and 2015 Base Case 8 Hour Ozone Nonattainment Counties 12 C. How did EPA Assess Interstate Contributions to Nonattainment? 1. PM2.5 Contribution Modeling Approach 2. 8 Hour Ozone Contribution Modeling Approach D. What Are the Estimated Interstate Contributions to PM2.5 and 8 Hour Ozone Nonattainment? 1. Results of PM2.5 Contribution Modeling 2. Results of 8 Hour Ozone Contribution Modeling E. What are the Estimated Air Quality Impacts of the Final Rule? 1. Estimated Impacts on PM2.5 Concentrations and Attainment 2. Estimated Impacts on 8 Hour Ozone Concentrations and Attainment F. What are the Estimated Visibility Impacts of the Final Rule? 1. Methods for Calculating Projected Visibility in Class I Areas 2. Visibility Improvements in Class I Areas VII. SIP Criteria and Emissions Reporting Requirements A. What Criteria Will EPA Use to Evaluate the Approvability of a Transport SIP? 1. Introduction 2. Requirements for States Choosing to Control EGUs a. Emissions Caps and Monitoring b. Using the Model Trading Rules c. Using a Mechanism Other than the Model Trading Rules d. Retirement of Excess Title IV Allowances 3. Requirements for States Choosing to Control Sources Other than EGUs a. Overview of Requirements b. Eligibility of Non EGU Reductions c. Emissions Controls and Monitoring d. Emissions Inventories and Demonstrating Reductions 4. Controls on Non EGUs Only 5. Use of Banked Allowances and the Compliance Supplement Pool B. State Implementation Plan Schedules 1. State Implementation Plan Submission Schedule a. EPA's Authority to Require Section 110( a)( 2)( D) Submissions in Accordance with the Schedule of Section 110( a)( 1) b. EPA's Authority to Require Section 110( a)( 2)( D) Submissions Prior to Formal Designation of Nonattainment Areas under Section 107 c. EPA's Authority to Require Section 110( a)( 2)( D) Submissions Prior to State Submission of Nonattainment 13 Area Plans Under Section 172 d. EPA's Authority to Require Section 110( a)( 2)( D) Submissions Prior to Completion of the Next Review of the PM2.5 and 8 hour Ozone NAAQS e. EPA's Authority to Require States to Make Section 110( a)( 2)( D) Submissions within 18 Months of this Final Rule C. What Happens If a State Fails to Submit a Transport SIP or EPA Disapproves the Submitted SIP? 1. Under What Circumstances Is EPA Required to Promulgate a FIP? 2. What Are the Completeness Criteria? 3. When Would EPA Promulgate the CAIR Transport FIP? D. What Are the Emissions Reporting Requirements for States? 1. Purpose and Authority 2. Pre existing Emission Reporting Requirements 3. Summary of the Proposed Emissions Reporting Requirements 4. Summary of Comments Received and EPA's Responses 5. Summary of the Emissions Reporting Requirements VIII. Model NOx and SO2 Cap and Trade Programs A. What Is the Overall Structure of the Model NOx and SO2 Cap and Trade Programs? B. What Is the Process for States to Adopt the Model Cap and Trade Programs and How Will It Interact with Existing Programs? 1. Adopting the Model Cap and Trade Programs 2. Flexibility in Adopting Model Cap and Trade Rules C. What Sources Are Affected under the Model Cap and Trade Rules? 1. 25 MW Cut off 2. Definition of Fossil Fuel fired 3. Exemption for Cogeneration Units a. Efficiency Standard for Cogeneration Units b. One third Potential Electric Output Capacity c. Clarifying " For Sale" d. Multiple Cogeneration Units D. How Are Emission Allowances Allocated to Sources? 1. Allocation of NOx and SO2 Allowances a. Required Aspects of a State NOx Allocation Approach b. Flexibility and Options for a State NOx Allowance Allocations Approach E. What Mechanisms Affect the Trading of Emission Allowances? 1. Banking a. The CAIR NPR and SNPR Proposal for the Model Rules and 14 Input from Commenters b. The Final CAIR Model Rules and Banking 2. Interpollutant Trading Mechanisms a. The CAIR NPR Proposal for the Model Rules and Input from Commenters b. Interpollutant Trading and the Final CAIR Model Rules F. Are There Incentives for Early Reductions? 1. Incentives for Early SO2 Reductions a. The CAIR NPR and SNPR Proposal for the Model Rules and Input from Commenters b. SO2 Early Reduction Incentives in the Final CAIR Model Rules 2. Incentives for Early NOx Reductions a. The CAIR NPR and SNPR Proposal for the Model Rules and Input from Commenters b. NOx Early Reduction Incentives in the Final CAIR Model Rules G. Are There Individual Unit " Opt In" Provisions? 1. Applicability 2. Allowing Single Pollutant 3. Allocation Method for Opt Ins 4. Alternative Opt In Approach 5. Opting Out 6. Treatment of Units that Permanently Shutdown 7. Regulatory Relief for Opt in Units H. What Are the Source Level Emissions Monitoring and Reporting Requirements? I. What is Different between CAIR's Annual and Seasonal NOx Model Cap and Trade Rules? J. Are There Additional Changes to Proposed Model Cap and Trade Rules Reflected in the Regulatory Language?

IX. Interactions with Other Clean Air Act Requirements A. How Does this Rule Interact with the NOx SIP Call? B. How Does this Rule Interact with the Acid Rain Program? 1. Legal Authority for Using Title IV Allowances in CAIR Model SO2 Cap and Trade Program 2. Legal Authority for Requiring Retirement of Excess Title IV Allowances if State Does Not Use CAIR Model SO2 Cap and Trade Program 3. Revisions to Acid Rain Regulations C. How Does the Rule Interact with the Regional Haze Program? 1. How Does this Rule Relate to Requirements for Best Available Retrofit Technology ( Bart) under the Visibility Provisions of the CAA? a. Supplemental Notice of Proposed Rulemaking b. Comments and EPA's Responses 15 c. Today's Action 2. What improvements did EPA make to the BART versus CAIR modeling, and what are the new results? a. Supplemental Notice of Proposed Rulemaking b. Comments and EPA Responses c. Today's Action D. How Will EPA Handle State Petitions Under Section 126 of the CAA? E. Will Sources Subject to CAIR Also Be Subject To New Source Review?

X. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review 1. What Economic Analyses Were Conducted for the Rulemaking? 2. What Are the Benefits and Costs of this Rule? a. Control Scenario b. Cost Analysis and Economic Impacts c. Human Health Benefit Analysis d. Quantified and Monetized Welfare Benefits 3. How Do the Benefits Compare to the Costs of This Final Rule? 4. What are the Unquantified and Unmonetized Benefits of CAIR Emissions Reductions? a. What are the Benefits of Reduced Deposition of Sulfur and Nitrogen to Aquatic, Forest, and Coastal Ecosystems? b. Are There Health or Welfare Disbenefits of CAIR That Have Not Been Quantified? B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks H. Executive Order 13211: Actions that Significantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer Advancement Act J. Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low Income Populations K. Congressional Review Act L. Judicial Review CFR Revisions and Additions ( Rule Text) Part 51 16 1" Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone ( Interstate Air Quality Rule); Proposed Rule," ( 69 FR 4566, January 30, 2004) ( NPR or January Proposal); " Supplemental Proposal for the Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone ( Clean Air Interstate Rule); Proposed Rule," ( 69 FR 32684, June 10, 2004) ( SNPR or Supplemental Proposal). Part 72 Part 73 Part 74 Part 77 Part 78 Part 96 I. Overview By notice of proposed rulemaking dated January 30, 2004 and by notice of supplemental rulemaking dated June 10,

2004, EPA proposed to find that certain States must reduce emissions of SO2 and/ or NOx because those emissions contribute significantly to downwind areas in other States that are not meeting the annual PM2.5 NAAQS or the 8 hour ozone NAAQS. 1 Today, EPA takes final action requiring 28 States and the District of Columbia to adopt and submit revisions to their State implementation plans ( SIPs), under the requirements of CAA section 110( a)( 2)( D), that would eliminate specified amounts of SO2 and/ or NOx emissions.

Each State may independently determine which emissions sources to subject to controls, and which control measures to adopt. The EPA's analysis indicates that emissions reductions from electric generating units ( EGUs) are highly 17 2These data are from EPA's most recent IPM modeling reflecting the final CAIR of today's notice. These results may differ slightly from those appearing in elsewhere in this preamble and the RIA, which were largely based upon a model run that included Arkansas, Delaware, and New Jersey in the annual CAIR requirements and also did not apply an ozone season cap on any States ( the modeling was completed before EPA had determined the final scope of CAIR because of the length of time necessary to perform air quality modeling).

3These values represent reductions from future projected emissions without CAIR. In 2010 CAIR will reduce SO2 by 4.3 million tons from 2003 levels and in 2015, it will reduce SO2 emissions by 5.4 million tons from 2003 levels. In 2009, CAIR will reduce NOx levels by 1.7 million tons from 2003 levels and in 2010 it will reduce NOx levels by 2.0 million tons from 2003 levels. cost effective, and EPA encourages States to adopt controls for EGUs. States that do so must place an enforceable limit, or cap, on EGU emissions ( see section VII for discussion). The EPA has calculated the amount of each State's EGU emissions cap, or budget, based on reductions that EPA has determined are highly cost effective. States may allow their EGUs to participate in an EPA administered cap and trade program as a way to reduce the cost of compliance, and to provide compliance flexibility. The cap and trade programs are described in more detail in section VIII.

The EPA estimates that today's action will reduce SO2 emissions by 3.5 million tons2 in 2010 and by 3.8 million tons in 2015; and would reduce annual NOx emissions by 1.2 million tons in 2009 and by 1.5 million tons in 2015.3 18 4It should be noted that the banking provisions of the cap and trade program which encourage sources to make significant reductions before 2010 also allow sources to operate above these cap levels until all of the banked allowances are used, therefore EPA does not project that these caps will be met in 2010 or 2015. ( These numbers are for the 23 States and the District of Columbia that are affected by the annual SO2 and NOx requirements of CAIR.) If all the affected States choose to achieve these reductions through EGU controls, then EGU SO2 emissions in the affected States would be capped at 3.6 million tons in 2010 and 2.5 million tons in 20154; and EGU annual NOx emissions would be capped at 1.5 million tons in 2009 and 1.3 million tons in 2015. The EPA estimates that the required SO2 and NOx emissions reductions would, by themselves, bring into attainment 52 of the 79 counties that are otherwise projected to be in nonattainment for PM2.5 in 2010, and 57 of the 74 counties that are otherwise projected to be in nonattainment for PM2.5 in 2015. The EPA further estimates that the required NOx emissions reductions would, by themselves, bring into attainment 3 of the 40 counties that are otherwise projected to be in nonattainment for 8 hour ozone in 2010, and 6 of the 22 counties that are projected to be in nonattainment for 8

hour ozone in 2015. In addition, today's rule will improve PM2.5 and 8 hour ozone air quality in the areas that would remain nonattainment for those two NAAQS after 19 implementation of today's rule. Because of today's rule,

the States with those remaining nonattainment areas will find it less burdensome and less expensive to reach attainment by adopting additional local controls. The Clean Air Interstate Rule ( CAIR) will also reduce PM2.5 and 8 hour ozone levels in attainment areas, providing significant health and environmental benefits in all areas of the eastern US.

The EPA's CAIR and the previously promulgated NOx SIP Call reflect EPA's determination that the required SO2 and NOx reductions are sufficient to eliminate upwind States'

significant contribution to downwind nonattainment. These programs are not designed to eliminate all contributions to transport, but rather to balance the burden for achieving attainment between regional scale and local scale control programs.

The EPA conducted a regulatory impact analysis ( RIA),

entitled " Regulatory Impact Analysis for the Final Clean Air Interstate Rule ( March 2005)" that estimates the annual private compliance costs ( 1999$) of $ 2.4 billion for 2010 and $ 3.6 billion for 2015, if all States make the required emissions reductions through the power industry.

Additionally, the RIA includes a benefit cost analysis demonstrating that substantial net economic benefits to 20 5 Benefit and cost estimates reflect annual SO2 and NOx controls for Arkansas that are not a part of the final CAIR program. For this reason, these estimates are slightly overstated. society will be achieved from the emissions reductions required in this rulemaking. For determination of net benefits, the above private costs were converted to social costs that are lower since transfer payments, such as taxes,

are removed from the estimates. The EPA analysis shows that today's action inclusive of the concurrent New Jersey and Delaware proposal will generate annual net benefits of approximately $ 71.4 or $ 60.4 billion in 2010 and $ 98.5 or $ 83.2 billion in 2015.5 These alternate net benefit estimates reflect differing assumptions about the social discount rate used to estimate the benefits and costs of the rule. The lower estimates reflect a discount rate of 7 percent and the higher estimates a discount rate of 3 percent. In 2015, the total annual quantified benefits are $ 101 or $ 86.3 billion and the annual social costs are $ 2.6 or $ 3.1 billion   benefits outweigh costs in 2015 by a ratio of 39 to 1 or 28 to 1 ( 3 percent and 7 percent discount rates, respectively). These estimates do not include the value of benefits or costs that we cannot monetize.

In 2015, we estimate that PM related annual benefits include approximately 17,000 fewer premature fatalities,

8,700 fewer cases of chronic bronchitis, 22,000 fewer non 21 fatal heart attacks, 10,500 fewer hospitalization admissions ( for respiratory and cardiovascular disease combined) and result in significant reductions in days of restricted activity due to respiratory illness ( with an estimate of 9.9 million fewer minor restricted activity days) and approximately 1,700,000 fewer work loss days. We also estimate substantial health improvements for children from reduced upper and lower respiratory illness, acute bronchitis, and asthma attacks.

Ozone health related benefits are expected to occur during the summer ozone season ( usually ranging from May to September in the Eastern U. S.). Based upon modeling for 2015, annual ozone related health benefits are expected to include 2,800 fewer hospital admissions for respiratory illnesses, 280 fewer emergency room admissions for asthma,

690,000 fewer days with restricted activity levels, and 510,000 fewer days where children are absent from school due to illnesses.

In addition to these significant health benefits, the rule will result in ecological and welfare benefits. These benefits include visibility improvements; reductions in acidification in lakes, streams, and forests; reduced eutrophication in water bodies; and benefits from reduced ozone levels for forests and agricultural production. 22 6Technical support document: " Regional and State SO2 and NOx Emissions Budgets" is included in the docket.

Technical support document: " Air Quality Modeling" is included in the docket.

7" Response to Significant Comments on the Proposed Clean Air Interstate Rule" is included in the docket. Several other documents containing detailed explanations of other key elements of today's rule are also included in the docket. These include a detailed explanation of how EPA calculated the State by State EGU emissions budgets, and a detailed explanation of the air quality modeling analyses which support this rule. 6 Responses to comments that are not addressed in the preamble to today's rule are included in a separate document. 7 The remaining sections of the preamble describe the final CAIR requirements and our responses to comments on many of the most important features of the CAIR. Section II, " EPA's Analytical Approach," summarizes EPA's overall analytical approach and responds to general comments on that approach. Section III, " What Pollutants and States Are Covered By This Rule?," outlines the rationale for the CAIR focus on SO2 and NOX, which are precursors that contribute to PM2.5 ( SO2, NOx) or ozone ( NOx) transport, and the analytic approach EPA used to determine which States had large enough downwind ambient air quality impacts to become subject to today's requirements. Section IV, " What Amounts 23 of SO2 and NOX Emissions Did EPA Determine Should Be Reduced?," describes EPA's methodology for determining the amounts of SO2 and NOX emissions reductions required under today's rule. Section V, " Determination of State Emissions Budgets," describes how EPA determined the State by State emissions reductions requirements and, in the event States elect to control EGUs, the State by State EGU emissions budgets. Section VI, " Air Quality Modeling Approach and Results," describes the technical aspects of the air quality modeling and summarizes the numerical results of that modeling. Section VII, " SIP Criteria and Emissions Reporting Requirements," describes the SIP submission date and other SIP requirements associated with the emissions controls that States might adopt. Section VIII, " NOX and SO2 Model Cap and Trade Programs," describes the EPA administered cap and trade programs that States electing to control emissions from EGUs are encouraged to adopt.

Section IX, " Interactions with Other Clean Air Act Requirements," discusses how this rule interacts with the acid rain provisions in CAA title IV, the NOX SIP Call, the best available retrofit technology ( BART) requirements, and other CAA or regulatory requirements. Finally, section X,

" Statutory and Executive Order Reviews," describes the applicability of various administrative requirements for 24 8In today's final rule, when we use the term " transport" we mean to include the transport of both fine particles ( PM2.5) and their precursor emissions and/ or transport of both ozone and its precursor emissions. today's rule and how EPA addressed these requirements.

A. What Are the Central Requirements of this Rule?

In today's action, we establish SIP requirements for the affected upwind States under CAA section 110( a)( 2).

Clean Air Act section 110( a)( 2)( D) requires SIPs to contain adequate provisions prohibiting air pollutant emissions from sources or activities in those States that contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to a NAAQS.

Based on air quality modeling analyses and cost analyses,

EPA has concluded that SO2 and NOX emissions in certain States in the eastern part of the country, through the phenomenon of air pollution transport, 8 contribute significantly to downwind nonattainment, or interfere with maintenance, of the PM2.5 and 8 hour ozone NAAQS. The EPA is requiring SIP revisions in 28 States and the District of Columbia to reduce SO2 and/ or NOX emissions, which are important precursors of PM2.5 ( NOX and SO2) and ozone ( NOX).

The 23 States along with the District of Columbia that must reduce annual SO2 and NOX emissions for the purposes of the PM2.5 NAAQS are: Alabama, Florida, Georgia, Illinois, 25 Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan,

Minnesota, Mississippi, Missouri, New York, North Carolina,

Ohio, Pennsylvania, South Carolina, Tennessee, Texas,

Virginia, West Virginia, and Wisconsin.

The 25 States along with the District of Columbia that must reduce NOX emissions for the purposes of the 8 hour ozone NAAQS are: Alabama, Arkansas, Connecticut, Delaware,

Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana,

Maryland, Massachusetts, Michigan, Mississippi, Missouri,

New Jersey, New York, North Carolina, Ohio, Pennsylvania,

South Carolina, Tennessee, Virginia, West Virginia, and Wisconsin. In addition to making the findings of significant contribution to nonattainment or interference with maintenance, EPA is requiring each State to make specified amounts of SO2 and/ or NOX emissions reductions to eliminate their significant contribution to downwind States.

The affected States and the District of Columbia are required to adopt and submit the required SIP revision with the necessary control measures by 18 months from the signature date of today's rule.

The emissions reductions requirements are based on controls that EPA has determined to be highly cost effective for EGUs. However, States have the flexibility to choose the measures to adopt to achieve the specified emissions 26 reductions. If the State chooses to control EGUs, then it must establish a budget  that is, an emissions cap  for those sources. Today's rule defines the EGU budgets for each affected State if a State chooses to control only EGUs.

The rule also explains the emission reduction requirements if a State chooses to achieve some or all of its required emission reductions by controlling sources other than EGUs.

Due to feasibility constraints, EPA is requiring emissions reductions be implemented in two phases. The first phase of NOX reductions starts in 2009 ( covering 2009 2014) and the first phase of SO2 reductions starts in 2010 ( covering 2010

2014); the second phase of reductions for both NOX and SO2 starts in 2015 ( covering 2015 and thereafter). For States subject to findings of significant contribution for PM2.5,

EPA is establishing annual emissions budgets. For States subject to findings of significant contribution for 8 hour ozone, the CAIR specifies ozone season NOX emissions budgets. States subject to findings for both PM2.5 and ozone will have both an annual and an ozone season NOX budget.

The EPA is providing, as an option to States, model cap and trade programs for EGUs. The EPA will administer these programs, which will be governed by rules provided by EPA that States may adopt or incorporate by reference. 27 With respect to federally recognized Indian Tribes, the applicability of this rule is governed by three factors: the flexible regulatory framework for Tribes provided by the CAA and the Tribal Authority Rule ( TAR); the absence of any existing EGUs on Tribal lands in the CAIR region; and the existence of reservations within the geographic areas which we determined to contribute significantly to nonattainment areas.

Under CAA section 301( d) as implemented by the TAR,

eligible Indian Tribes may implement all, but are not required to implement any, programs under the CAA for which EPA has determined that it is appropriate to treat Tribes similarly to States. Tribes may also implement " reasonably severable" elements of programs ( 40 CFR 49.7( c)). In the absence of Tribal implementation of a CAA program or programs, EPA will utilize Federal implementation for the relevant area of Indian country as necessary or appropriate to protect air quality, in consultation with the Tribal government.

The TAR contains a list of provisions for which it is not appropriate to treat Tribes in the same manner as States ( 40 CFR 49.4). The CAIR is based on the States' obligations under CAA section 110( a)( 2)( D) to prohibit emissions which would contribute significantly to nonattainment in, or 28 interfere with maintenance by, other States due to pollution transport. Because CAA section 110( a)( 2)( D) is not among the provisions we determined to be inappropriate to apply to Tribes in the same manner as States, that section is applicable, where necessary and appropriate, to Tribes.

However, among the CAA provisions not appropriate for Tribes are "[ s] pecific plan submittal and implementation deadlines for NAAQS related requirements..." ( 40 CFR 49.4( a)). Therefore, Tribes are not required to submit implementation plans under section 110( a)( 2)( D). Moreover,

because no Tribal lands in the CAIR region currently contain any of the sources ( EGUs) on which we based the emissions reductions requirements applicable to States, there are no emission reduction requirements applicable to Tribes.

At the same time, the existence of the CAIR cap and trade program in some or all of the affected States will have implications for any future construction of EGUs on Tribal lands. The geographic scope of the CAIR cap and trade program is being determined by a two step process: the EPA's determination of which States significantly contribute to downwind areas, and the decision by those affected States whether to satisfy their emission reduction requirement by participating in the CAIR cap and trade program.

With respect to the first step of this process 29 9In this regard, the construction of a new EGU on a reservation would be analogous to the construction of a new EGU within a county or region of a CAIR affected State that does not presently contain any EGUs. This is not meant to imply that Tribes are in any way legally similar to counties, only that, within the CAIR region, the geographic scale of reservations is more similar to counties than to States.

10Although it is possible that the CAIR cap and trade program may cover a discontinuous area depending on which States participate, the failure of a State to participate ( significant contribution test), notwithstanding the political autonomy of Tribes, we view the zero out modeling as representing the entire geographic area within the State being considered, regardless of the jurisdictional status of areas within the State. Therefore, any EGU constructed in the future on a reservation within a CAIR affected State would be located in an area which we have already determined to significantly contribute to downwind nonattainment. 9 With respect to decisions by States to participate in the CAIR cap and trade program, because Tribal governments are autonomous, such a decision would not be directly binding for any Tribe located within the State.

Nonetheless, as a matter of a policy, cap and trade programs by their nature must apply consistently throughout the geographic region of the program in order to be effective. Otherwise, the existence of areas not covered by the cap could create incentives to locate sources there, and thereby undermine the environmental goals of the program. 10 30 does not raise the same environmental integrity concern. A state that does not participate in the cap and trade program must still submit a SIP that limits emissions to the levels mandated by the CAIR emission reduction requirements, taking into account any emissions from new sources. In light of these considerations, in the event of any future planned construction of EGUs on Tribal lands within the CAIR region, EPA intends to work with the relevant Tribal government to regulate the EGU through either a Tribal implementation plan ( TIP) or a Federal implementation plan ( FIP). We anticipate that at a minimum, a proposed EGU on a reservation within a State participating in the CAIR cap and trade program would need to be made subject to the cap and trade program. In the case of a new EGU on a reservation in a CAIR affected State which chose not to participate in the cap and trade program, the new EGU might also be required, through a TIP or FIP, to participate in the program. This would depend on the potential for emissions shifting and other specific circumstances ( e. g.,

whether the EGU would service the electric grid of States involved in the cap and trade program.) Again, EPA will work with the relevant Tribal government to determine the appropriate application of the CAIR.

Finally, as discussed in the SNPR, Tribes have objected to emissions trading programs that allocate allowances based on historic emissions, on the grounds that this rewards 31 first in time emitters at the expense of those who have not yet enjoyed a fair opportunity to pursue economic development. Comments on the CAIR proposal from Tribes requested a Federal set aside of allowances for Tribes, or other special Tribal allowance provisions. The few comments received from States on the issue generally opposed allocations based on Indian country status. One State expressed a willingness to share its emissions budget with Tribes in the event an EGU locates in Indian country.

The EPA does not believe there is sufficient information to design Tribal allocation provisions at this time. A program designed to address concerns which remain largely speculative is likely to create more problems through unintended consequences than it solves. Therefore,

rather than create a Federal allowance set aside for Tribes,

EPA will work with Tribes and potentially affected States to address concerns regarding the equity of allowance allocations on a case by case basis as the need arises. The EPA may choose to revisit this issue through a separate rulemaking in the future.

B. Why Is EPA Taking this Action?

Emissions reductions to eliminate transported pollution are required by the CAA, as noted above. There are strong policy reasons for addressing interstate pollution 32 transport.

1. Policy Rationale for Addressing Transported Pollution Contributing to PM2.5 and Ozone Problems Emissions from upwind States can alone, or in combination with local emissions, result in air quality levels that exceed the NAAQS and jeopardize the health of residents in downwind communities. Control of PM2.5 and ozone requires a reasonable balance between local and regional controls. If significant contributions of pollution from upwind States that can be abated by highly cost effective controls are unabated, the downwind area must achieve greater local emissions reductions, thereby incurring extra clean up costs. Requiring reasonable controls for both upwind and local emissions sources should result in achieving air quality standards at a lesser cost than a strategy that relies solely on local controls. For all these reasons, addressing interstate transport in advance of the time that States must adopt local nonattainment plans, will make it easier for States to develop their nonattainment plans because the States will know the degree to which the pollution flowing into their nonattainment areas will be reduced.

The EPA addressed interstate pollution transport for 33 11" 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). ozone in the NOX SIP Call rule published in 1998.11 Today's rulemaking is EPA's first attempt to address interstate pollution transport for PM2.5. The NOX SIP Call is substantially reducing ozone transport, helping downwind areas meet the 1 hour and 8 hour ozone standards. The EPA has reassessed ozone transport in this rulemaking for two reasons. First, several years have passed since promulgation of the NOX SIP Call and updated air quality and emissions data are available. Second, some areas are expected to face substantial difficulty in meeting the 8

hour ozone standards. As a result, EPA has determined it is important to assess the degree to which ozone transport will remain a problem after full implementation of the NOX SIP Call, and to assess whether further controls are warranted to ensure continued progress toward attainment. The modeling for the CAIR includes the NOX SIP Call in the baseline and examines later years than the NOX SIP Call analyses.

a. The PM2.5 Problem By action dated July 18, 1997, we revised the NAAQS for particulate matter ( PM) to add new standards for fine 34 particles, using as the indicator particles with aerodynamic diameters smaller than a nominal 2.5 micrometers, termed PM2.5 ( 62 FR 38652). We established health and welfarebased ( primary and secondary) annual and 24 hour standards for PM2.5. The annual standards are 15 micrograms per cubic meter, based on the 3 year average of annual mean PM2.5 concentrations. The 24 hour standard is a level of 65 micrograms per cubic meter, based on the 3 year average of the annual 98th percentile of 24 hour concentrations. The annual standard is generally considered the most limiting.

Fine particles are associated with a number of serious health effects including premature mortality, aggravation of respiratory and cardiovascular disease ( as indicated by increased hospital admissions, emergency room visits,

absences from school or work, and restricted activity days),

lung disease, decreased lung function, asthma attacks, and certain cardiovascular problems such as heart attacks and cardiac arrhythmia. The EPA has estimated that attainment of the PM2.5 standards would prolong tens of thousands of lives and would prevent, each year, tens of thousands of hospital admissions as well as hundreds of thousands of doctor visits, absences from work and school, and respiratory illnesses in children.

Individuals particularly sensitive to fine particle 35 exposure include older adults, people with heart and lung disease, and children. More detailed information on health effects of fine particles can be found on EPA's website at:

http:// www. epa. gov/ ttn/ naaqs/ standards/ pm/ s_ pm_ index. html.

At the time EPA established the PM2.5 primary NAAQS in 1997, we also established welfare based ( secondary) NAAQS identical to the primary standards. The secondary standards are designed to protect against major environmental effects caused by PM such as visibility impairment   including in Class I areas which include national parks and wilderness areas across the country   soiling, and materials damage.

As discussed in other sections of this preamble, SO2 and NOX emissions both contribute to fine particle concentrations. In addition, NOX emissions contribute to ozone problems, described in the next section. We believe the CAIR will significantly reduce SO2 and NOX emissions that contribute to the PM2.5 and 8 hour ozone problems described here.

The PM2.5 ambient air quality monitoring for the 2001

2003 period shows that areas violating the standards are located across much of the eastern half of the United States and in parts of California, and Montana. Based on these nationwide data, 82 counties have at least one monitor that violates either the annual or the 24 hour PM2.5 standard. 36 Most areas violate only the annual standard; a small number of areas violate both the annual and 24 hour standards; and no areas violate just the 24 hour standard. The population of these 82 counties totals over 56 million people.

Only two States in the western part of the U. S.,

California and Montana, have counties that exceeded the PM2.5 standards. On the other hand, in the eastern part of the U. S., 124 sites in 69 counties ( with total population of 34 million) violated the annual PM2.5 standard of 15.0 micrograms per cubic meter (

g/ m3) over the 3 year period from 2001 to 2003, while 469 sites met the annual standard.

No sites in the eastern part of the United States exceeded the daily PM2.5 standard of 65

g/ m3. The 69 violating counties are located in a region made up of 16 States ( plus the District of Columbia), extending eastward from St. Louis County, Missouri, the western most violating county and including the following States: Alabama, Delaware, Georgia,

Illinois, Indiana, Kentucky, Maryland, Missouri, Michigan,

New Jersey, New York, North Carolina, Ohio, Pennsylvania,

Tennessee, West Virginia, and the District of Columbia.

The EPA published the PM2.5 attainment and nonattainment designations on January 5, 2005 ( 70 FR 944). The designations will be effective on April 5, 2005.

Because interstate transport is not believed to be a 37 significant contributor to exceedances of the PM2.5 standards in California or Montana, today's final CAIR does not cover these States.

b. The 8 hour Ozone Problem By action dated July 18, 1997, we promulgated identical revised primary and secondary ozone standards that specified an 8 hour ozone standard of 0.08 parts per million ( ppm).

Specifically, under the standards, the 3 year average of the fourth highest daily maximum 8 hour average ozone concentration may not exceed 0.08 ppm. In general, the revised 8 hour standards are more protective of public health and the environment and more stringent than the preexisting 1 hour ozone standards. All areas that were violating the 1 hour ozone standard at the time of the 8

hour ozone designations were also designated as nonattainment for the 8 hour ozone standard. More areas do not meet the 8 hour standard than do not meet the 1 hour standard. The EPA published the 8 hour ozone attainment and nonattainment designations in the Federal Register on April 30, 2004 ( 69 FR 23858). The designations were effective on June 15, 2004. Pursuant to EPA's final rule to implement the 8 hour ozone standard ( 69 FR 23951; April 30, 2004), EPA will revoke the 1 hour ozone standard on June 15, 2005, 1 year after the effective date of the 8 hour designations. 38 Short term ( 1 to 3 hour) and prolonged ( 6 to 8 hour)

exposures to ambient ozone have been linked to a number of adverse health effects. Short term exposure to ozone can irritate the respiratory system, causing coughing, throat irritation, and chest pain. Ozone can reduce lung function and make it more difficult to breathe deeply. Breathing may become more rapid and shallow than normal, thereby limiting a person's normal activity. Ozone also can aggravate asthma, leading to more asthma attacks that require a doctor's attention and the use of additional medication.

Increased hospital admissions and emergency room visits for respiratory problems have been associated with ambient ozone exposures. Longer term ozone exposure can inflame and damage the lining of the lungs, which may lead to permanent changes in lung tissue and irreversible reductions in lung function. A lower quality of life may result if the inflammation occurs repeatedly over a long time period ( such as months, years, a lifetime).

People who are particularly susceptible to the effects of ozone include children and adults who are active outdoors, people with respiratory diseases, such as asthma,

and people with unusual sensitivity to ozone.

In addition to causing adverse health effects, ozone affects vegetation and ecosystems, leading to reductions in 39 agricultural crop and commercial forest yields; reduced growth and survivability of tree seedlings; and increased plant susceptibility to disease, pests, and other environmental stresses ( e. g., harsh weather). In long lived species, these effects may become evident only after several years or even decades and have the potential for long term adverse impacts on forest ecosystems. Ozone damage to the foliage of trees and other plants can also decrease the aesthetic value of ornamental species used in residential landscaping, as well as the natural beauty of our national parks and recreation areas. The economic value of some welfare losses due to ozone can be calculated, such as crop yield loss from both reduced seed production ( e. g., soybean)

and visible injury to some leaf crops ( e. g., lettuce,

spinach, tobacco), as well as visible injury to ornamental plants ( i. e., grass, flowers, shrubs). Other types of welfare loss may not be quantifiable ( e. g., reduced aesthetic value of trees growing in heavily visited national parks). More detailed information on health effects of ozone can be found at the following EPA website:

http:// www. epa. gov/ ttn/ naaqs/ standards/ ozone/ s_ o3_ index. html .

Almost all areas of the country have experienced some progress in lowering ozone concentrations over the last 20 40 12 EPA 454/ K 04 001, April 2004. years. As reported in the EPA's report, " The Ozone Report:

Measuring Progress Through 2003," 12 national average levels of 1 hour ozone improved by 29 percent between 1980 and 2003 while 8 hour levels improved by 21 percent over the same time period. The Northeast and West regions have shown the greatest improvement since 1980. However, most of that improvement occurred during the first part of the period.

In fact, during the most recent 10 years, ozone levels have been relatively constant reflecting little if any air quality improvement. For this reason, ozone has exhibited the slowest progress of the six major pollutants tracked nationally.

Although ambient ozone levels remained relatively constant over the past decade, additional control requirements have reduced emissions of the two major ozone precursors, VOC and NOX, although at different rates.

Emissions of VOCs were reduced by 32 percent from 1990 levels, while emissions of NOX declined by 22 percent.

Ozone remains a significant public health concern.

Presently, wide geographic areas, including most of the nation's major population centers, experience unhealthy ozone levels, that is, concentrations violating the NAAQS for 8 hour ozone. These areas include much of the eastern 41 part of the United States and large areas of California.

More specifically, 297 counties with a total population of over 124 million people currently violate the 8 hour ozone standard. Most of these ozone violations occur in the eastern half of the United States: 268 counties with a population of over 93 million.

When ozone and PM2.5 are examined jointly, 322 counties with 131 million people are violating at least one of the standards while 57 counties nationwide have concentrations violating both standards with a total population of over 49 million people. Of these, 46 counties with a population of over 28 million are in the Eastern United States.

c. Other Environmental Effects Associated with SO2 and NOX Emissions Today's action will result in benefits in addition to the enumerated human health and welfare benefits resulting from reductions in ambient levels of PM2.5 and ozone.

Reductions in NOX and SO2 will contribute to substantial visibility improvements in many parts of the Eastern U. S.

where people live, work, and recreate, including Federal Class I areas such as the Great Smoky Mountains. Reductions in these pollutants will also reduce acidification and eutrophication of water bodies in the region. In addition,

reduced mercury emissions are anticipated as a result of 42 this rule. Reduced mercury emissions will lessen mercury contamination in lakes and thereby potentially decrease both human and wildlife exposure to mercury contaminated fish.

2. The CAA Requires States to Act as Good Neighbors by Limiting Downwind Impacts The CAA includes the " good neighbor" provision of section 110( a)( 2)( D), which requires that every SIP prohibit emissions from any source or other type of emissions activity in amounts that will contribute significantly to nonattainment in any downwind State, or that will interfere with maintenance in any downwind State. In today's action,

EPA is determining that 28 States and the District of Columbia, all in the eastern part of the United States, have emissions of SO2 and/ or NOX that will contribute significantly to nonattainment, or interfere with maintenance, of the PM2.5 NAAQS and/ or the 8 hour ozone NAAQS in another State. Under EPA's general authority to clarify the applicability of CAA requirements, as provided in CAA section 301( a)( 1), EPA is establishing the amount of SO2 and NOX emissions that each affected State must prohibit by submitting appropriate SIP provisions to EPA. The improvements in air quality will assist downwind States in developing their SIPs to provide for attainment and maintenance in those nonattainment areas. 43 3. Today's Rule Will Improve Air Quality The EPA has estimated the improvements in emissions and air quality that would result from implementing the CAIR.

These improvements, which are substantial, are summarized earlier in this section.

C. What was the Process for Developing this Rule?

By action dated January 30, 2004, EPA issued a proposal that included many of the components of today's action.

" Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone ( Interstate Air Quality Rule); Proposed Rule," ( 69 FR 4566). The Administrator signed the proposed rule   termed, at that time, the Interstate Air Quality Rule   on December 17, 2003, and EPA posted it on its website for this rule on that date. The website address at that time was http:// www. epa. gov/ interstateairquality. ( The address has since changed to http:// www. epa. gov/ cleanairinterstaterule/.)

The EPA held public hearings on the proposal, in conjunction with a proposed rulemaking concerning mercury and other hazardous air pollutants from EGUs, on February 25 26, 2004, in Chicago, Illinois; Philadelphia,

Pennsylvania; and Research Triangle Park, North Carolina.

The comment period for the NPR closed on March 30, 2004.

The EPA received over 6,700 comments on the proposal. 44 By action dated June 10, 2004, EPA issued a supplemental notice of proposed rulemaking ( SNPR),

" Supplemental Proposal for the Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone ( Clean Air Interstate Rule); Proposed Rule," ( 69 FR 32684). The Administrator signed the SNPR for this rule   now called the Clean Air Interstate Rule   on May 18, 2004, and EPA placed it on the website on that date. The SNPR included, among other things, proposed regulatory language for the rule,

revised proposals concerning State level emissions budgets,

proposed State reporting requirements and SIP approvability criteria, and proposed model cap and trade rules. The SNPR also proposed that under certain circumstances the CAIR requirements could replace the BART requirements of CAA sections 169A and 169B. The EPA held a public hearing on the SNPR on June 3, 2004, in Alexandria, Virginia. The comment period for the SNPR closed on July 26, 2004. The EPA received over 400 comments on the SNPR.

By a notice of data availability ( NODA) dated August 6,

2004, EPA announced the availability of additional documents for this action. " Availability of Additional Information Supporting the Rule To Reduce Interstate Transport of Fine Particulate Matter and Ozone ( Clean Air Interstate Rule),"

( 69 FR 47828). The documents had been placed on the website 45 on or about July 27, 2004, and in the EDOCKET on that date,

or shortly thereafter. The EPA allowed public comment on those additional documents until August 27, 2004. Around 30 comments were received on the NODA.

The EPA has responded to all significant public comments either in this preamble or in the response to comment document which is contained in the docket.

Comments on Rulemaking Process Some commenters expressed concerns about certain aspects of this process. One concern was that EPA did not allow sufficient time to comment on the SNPR. Commenters noted that important program elements   including regulatory language   appeared for the first time in the SNPR, but EPA held a public hearing on the SNPR 7 days before the SNPR was published in the Federal Register and only 16 days after the SNPR had been posted on the website. The EPA believes that the 16 day period preceding the public hearing, and the total of 45 days to comment on the SNPR following its publication in the Federal Register, constituted an adequate opportunity for members of the public to comment on the SNPR.

Commenters also expressed concern that certain technical documents were not made available in sufficient time to comment. However, EPA had placed all technical 46 support documents for the NPR in the EDOCKET as of the date of publication of the NPR, and all technical support documents for the SNPR had been placed in the EDOCKET as of the date of publication of the SNPR.

Commenters also expressed concern that in the SNPR, EPA proposed significant changes to other regulatory programs.

The EPA agrees that the SNPR did include proposed changes to certain regulatory programs, i. e., the requirements for BART under CAA sections 169A and 169B ( concerning visibility),

certain provisions ( primarily concerning the allowanceholding requirement) in the title IV ( Acid Rain Program)

rules, and certain emissions reporting rules under the NOX SIP Call ( 40 CFR 51.122) and Consolidated Emissions Reporting Rule ( CERR) ( title 40, part 51, subpart A). The EPA believes that to the extent the requirements for BART and emissions reporting rule revisions are tied to the CAIR,

affected members of the public had adequate notice of those revisions. ( These revisions are described in section VII.)

However, the SNPR contained some revisions to the emissions reporting rules that were not tied to the transport provisions. The EPA is not taking final action today on the proposal for the emissions reporting rules that were not tied to the transport provisions and instead is issuing a new proposal for them, which will provide additional notice 47 and opportunity to comment.

Further, the Acid Rain Program rule revisions, although connected to the CAIR, apply to all persons subject to the Acid Rain Program, including persons who are not affected by the CAIR. ( These revisions are described in section IX.)

Specifically, as explained in section IX, the revisions to the Acid Rain Program rules are aimed at facilitating coordination of the Acid Rain Program and the CAIR model SO2 cap and trade rule and/ or are being adopted on their own merits, independently of the need to coordinate with the CAIR. Most of the proposed revisions involve changing from unit by unit to source by source compliance with the allowance holding requirement of the Acid Rain Program and therefore affect every source subject to the Acid Rain Program, whether or not the source is also in a State covered by the CAIR. The change to source by source compliance increases a source's flexibility to use  in meeting the allowance holding requirement  allowances held by any unit at the source. This flexibility reduces the likelihood that sources will incur large excess emissions penalties from inadvertent, minor errors ( e. g., in how allowances are distributed among the units at the source),

while preserving the environmental goals of the Acid Rain Program. The remaining revisions to the Acid Rain Program 48 rules similarly cover all Acid Rain Program sources.

Indeed, none of the comments on the proposed Acid Rain Program rule revisions stated that the revisions would apply only to certain Acid Rain Program sources, but rather seemed to treat the revisions as applying program wide. As discussed in section IX, EPA is finalizing, with minor modifications, the Acid Rain Program rule revisions.

Commenters also expressed concern that between the NPR and the SNPR, EPA had proposed program elements in a piecemeal fashion, which made it more difficult to comprehend and comment on the rule, and that the SNPR's comment period was too short to allow the public adequate opportunity to comment on the numerous and complex issues raised in that proposal. The EPA recognizes the challenges faced by commenters in this rulemaking, however, we believe that the comment periods for the NPR and SNPR were adequate,

and note that we did receive extensive and highly detailed,

technical comments on both proposals.

D. What Are the Major Changes Between the Proposals and the Final Rule?

The EPA is finalizing a number of revisions to the proposed elements of the CAIR. These revisions are in response to information received in public comments and new analyses conducted by EPA. The following is a summary list 49 of those changes:

° The first phase of NOX reductions starts in 2009 ( covering 2009 2014) instead of 2010. The first phase of the SO2 reductions still starts in 2010 ( covering 2010

2014).

° The emissions inventories used for PM2.5 and 8 hour ozone air quality modeling have been updated and improved;

we modeled PM2.5 using the Community Multiscale Air Quality Model ( CMAQ) and meteorology for 2001 instead of the Regional Model for Simulating Aerosols and Deposition ( REMSAD) and meteorology for 1996.

° The final CAIR does not cover Kansas based on new analyses of its contribution to downwind PM2.5 nonattainment.

° Arkansas, Delaware, Massachusetts, and New Jersey are not subject to the CAIR based on their contribution to PM2.5 nonattainment and maintenance. However, they remain subject to NOX emissions reductions requirements on the basis of their contribution to downwind 8 hour ozone nonattainment.

This requirement is for the ozone season rather than the entire year. The EPA is issuing a new proposal to include Delaware and New Jersey for the PM2.5 NAAQS based on additional considerations.

° The change in States covered by the rule necessitates a 50 re analysis of the NOX budgets for all covered States. This changes the amount of the budget, but not the procedure EPA used to calculate it.

° The SIP approval criteria have been changed to no longer exclude measures otherwise required by the CAA from being included in the State's compliance with CAIR.

° A 200,000 ton compliance supplement pool was added for NOX. Allowances from this pool can either be awarded to sources that make early reductions or to sources that demonstrate need.

° All States for which EPA has made a finding with respect to ozone are subject to an ozone season cap. In order to implement this ozone season cap, EPA has finalized an ozone season NOX trading program in addition to the annual NOX and SO2 trading programs that were proposed.

° A number of changes were made to the trading rule including: changes to the model NOX allocation methodology ( to fuel weight allocations) and the addition of opt in provisions.

° The EPA is not finalizing some of the emissions reporting requirements in response to public comments indicating we gave inadequate notice of the changes that were proposed to be applicable to all States, not just those affected by the CAIR emission reduction requirements. These 51 are being reproposed, with modifications, in a separate action to allow additional opportunity for public comment by all affected States and other parties.

II. EPA's Analytical Approach Overview Today's rulemaking is based on the " good neighbor"

provision of CAA section 110( a)( 2)( D), which requires States to develop SIP provisions assuring that emissions from their sources do not contribute significantly to downwind nonattainment, or interfere with maintenance, of the NAAQS.

The EPA interpreted this provision, and developed a detailed methodology for applying it, in the NOx SIP Call rulemaking,

which concerned interstate transport of ozone precursors.

Today's rule requires upwind States to submit SIP revisions requiring their sources to reduce emissions of certain precursors that significantly contribute to nonattainment in, or interfere with maintenance of, the PM2.5 and 8 hour ozone national ambient air quality standards in downwind States. The EPA developed today's rule relying heavily on the NOx SIP Call approach.

This section of the preamble outlines the key aspects of today's approach, some of which are described in greater detail in other sections of the preamble. The EPA received comments on today's approach that we respond to either in 52 this section or in the other sections of the preamble. This section also describes how today's approach varies from the NOx SIP Call, which variations result from, among other things, the fact that today's action regulates a different pollutant ( PM2.5) with a different precursor ( SO2).

A. How Did EPA Interpret the Clean Air Act's Pollution Transport Provisions in the NOx SIP Call?

1. Clean Air Act Requirements The central CAA provisions concerning pollutant transport, for purposes of today's action, are found in section 110( a)( 2)( D). Under these provisions, each SIP must   ( D) contain adequate provisions ( i) prohibiting ... any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will   ( I) contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any ... national primary or secondary ambient air quality standard ....

2. The NOx SIP Call Rulemaking Promulgated by action dated October 27, 1998, the NOx SIP Call was EPA's principal effort to reduce interstate transport of precursors for both the 1 hour ozone NAAQS and 53 13 In the NOx SIP Call, because the same criteria applied, the discussion of the " contribute significantly to nonattainment" test generally also applied to the " interfere with maintenance" test. However, in the NOx SIP Call, EPA stated that the " interfere with maintenance" test applied with respect to only the 8 hour ozone NAAQS ( 63 FR 57379 80). the 8 hour ozone NAAQS. ( See " 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).) In that rulemaking, EPA imposed seasonal NOx reduction requirements on 22 States and the District of Columbia in the eastern part of the country.

a. Analytical Approach of NOx SIP Call In the NOx SIP Call, EPA interpreted section 110( a)( 2)( D) to authorize EPA to determine the amount of emissions in upwind States that " contribute significantly"

to downwind nonattainment or " interfere with" downwind maintenance, and to require those States to eliminate that amount of emissions. The EPA recognized that States must retain full authority to choose the sources to control, and the control mechanisms, to achieve those reductions.

The EPA set out several criteria or factors for the " contribute significantly" test, and further indicated that the same criteria should apply to the " interfere with maintenance" provision: 13 54 ... EPA determined the amount of emissions that significantly contribute to downwind nonattainment from sources in a particular upwind State primarily by ( i) evaluating, with respect to each upwind State, several air quality related factors,

including determining that all emissions from the State have a sufficiently great impact downwind ( in the context of the collective contribution nature of the ozone problem); and ( ii) determining the amount of that State's emissions that can be eliminated through the application of costeffective controls. Before reaching a conclusion,

EPA evaluated several secondary, and more general,

considerations. These include:

 The consistency of the regional reductions with the attainment needs of the downwind areas with nonattainment problems  The overall fairness of the control regimes required of the downwind and upwind areas,

including the extent of the controls required or implemented by the downwind and upwind areas  General cost considerations, including the 55 relative cost effectiveness of additional downwind controls compared to upwind controls 63 FR 57403.

i. Air Quality Factor The first factor concerns evaluating the impact on downwind air quality of the upwind State's emissions. As EPA stated in the NOx SIP Call:

... EPA specifically considered three air quality factors with respect to each upwind State....

 The overall nature of the ozone problem ( i. e., " collective contribution")

 The extent of the downwind nonattainment problems to which the upwind State's emissions are linked, including the ambient impact of controls required under the CAA or otherwise implemented in the downwind areas  The ambient impact of the emissions from the upwind State's sources on the downwind nonattainment problems 63 FR 57376.

The EPA explained the first factor, collective contribution, by noting,

[ V] irtually every nonattainment problem is caused by numerous sources over a wide geographic area...[. This] factor suggest[ s] that the solution to the problem is the implementation over a wide area of controls on many sources, each of which may have a small or unmeasureable ambient impact by itself.

63 FR 57377.

The second air quality factor   the extent of downwind 56 14 Although EPA's air quality modeling techniques examined all of the upwind State's emissions of ozone precursors ( including VOC and NOx), only the NOx emissions had meaningful interstate impacts. nonattainment problems   concerns whether downwind areas should be considered to be in nonattainment. This determination took into account the then current air quality of the area, the predicted future air quality ( assuming the implementation of required controls, but not the transport requirements that were the subject of the NOx SIP Call), and the boundaries of the area in light of designation status ( 63 FR 57377).

The EPA applied the third air quality factor   the ambient impact of emissions from the upwind sources   by projecting the amount of the upwind State's entire inventory of anthropogenic emissions to the year 2007, and then quantifying, through the appropriate air quality modeling techniques, the impact of those emissions on downwind nonattainment. 14 Specifically, ( i) EPA determined the minimum threshold impact that the upwind State's emissions must have on a downwind nonattainment area to be considered potentially to contribute significantly to nonattainment;

and then ( ii) for States with impacts above that threshold,

EPA developed a set of metrics for further evaluating the contribution of the upwind State's emissions on a downwind nonattainment area ( 63 FR 57378). The EPA considered a 57 State with emissions that had a sufficiently great impact to contribute significantly to the downwind area ( depending on application of the cost factor). In general, EPA established the thresholds at a relatively low level, which reflected the collective contribution phenomenon. That is,

because the ozone problem is caused by many relatively small contributions, even relatively small contributors must participate in the solution.

ii. Cost Factor The cost factor is the second major factor that EPA applied to determine the significant contribution to nonattainment: " EPA ... determined whether any amounts of the NOx emissions may be eliminated through controls that,

on a cost per ton basis, may be considered to be highly cost effective." ( See 63 FR 57377.)

( I) Choice of Highly Cost effective Standard The EPA selected the standard of highly cost effective in order to assure State flexibility in selecting control strategies to meet the emissions reduction requirements of the rulemaking. That is, the rulemaking required the States to achieve specified levels of emissions reductions   the levels achievable if States implemented the control strategies that EPA identified as highly cost effective   but the rulemaking did not mandate those highly cost 58 effective control strategies, or any other control strategy.

Indeed, in calculating the amount of the required emissions reductions by assuming the implementation of highly costeffective control strategies, EPA assured that other control strategies   ones that were cost effective, if not highly cost effective  remained available to the States.

( II) Determination of Highly Cost Effective Amount The EPA determined the dollar amount considered to be highly cost effective by reference to the cost effectiveness of recently promulgated or proposed NOx controls. The EPA determined that the average cost effectiveness of controls in the reference list ranged up to approximately $ 1,800 per ton of NOx removed ( 1990$), on an annual basis. The EPA considered the controls in the reference list to be cost effective.

The EPA established $ 2,000 ( 1990$) in average cost effectiveness for summer ozone season emissions reductions as, at least directionally, the highly cost effective amount. Identifying this amount on an ozone season basis was appropriate because the NOx SIP Call concerned the ozone standard, for which emissions reductions during only the summer ozone season are necessary. This level of costs reflected the fact that in general, States with downwind ozone nonattainment areas had already implemented extensive 59 controls. Accordingly, it was evident that the level of upwind controls EPA selected would prove necessary for the downwind areas to reach attainment.

( III) Source Categories The EPA then determined that the source categories for which highly cost effective controls were available included EGUs, large industrial boilers and turbines, and cement kilns. At the same time, EPA determined, for those source categories, the level of controls that would cost an amount consistent with the highly cost effective amount and that would be feasible. The EPA considered other source categories, but found that highly cost effective controls were not available from them for various reasons, including the size of the sources, the relatively small amount of emissions from the sources, or the control costs.

iii. Other Factors The EPA also relied on several other, secondary considerations before concluding that the identified amount of emissions reductions were required. The first concerned the consistency of regional reductions with downwind attainment needs. The EPA ascertained the ozone air quality impacts of the required emissions reductions, and determined that those impacts improved air quality downwind, but not to the point that would raise questions about whether the 60 amount of reductions was more than necessary ( 63 FR 57379).

The second general consideration was " the overall fairness of the control regimes" to which the downwind and upwind areas were subject. The EPA explained:

Most broadly, EPA believes that overall notions of fairness suggest that upwind sources which contribute significant amounts to the nonattainment problem should implement cost effective reductions. When upwind emitters exacerbate their downwind neighbors' ozone nonattainment problems, and thereby visit upon their downwind neighbors additional health risks and potential clean up costs, EPA considers it fair to require the upwind neighbors to reduce at least the portion of their emissions for which highly costeffective controls are available. In addition, EPA recognizes that in many instances, areas designated as nonattainment under the 1 hour NAAQS have incurred ozone control costs since the early 1970s. Moreover, virtually all components of their NOx and VOC inventories are subject to SIPrequired or Federal controls designed to reduce ozone. Furthermore, these areas have complied with almost all of the specific control requirements under the CAA, and generally are moving towards compliance with their remaining obligations. The CAA's sanctions and FIP provisions provide assurance that these remaining controls will be implemented. By comparison, many upwind States in the midwest and south have had fewer nonattainment problems and have incurred fewer control obligations.

( 63 FR 57379.)

The third general consideration was " general cost considerations." The EPA noted that " in general, areas that currently have, or that in the past have had, nonattainment problems ... have already incurred ozone control costs."

The next set of controls available to these nonattainment areas would be more expensive than the controls available to 61 the upwind areas. The EPA found that this cost scenario further confirmed the reasonableness of the upwind control obligations ( 63 FR 57379).

In the NOx SIP Call, EPA considered all of these factors together in determining the level of controls considered to be highly cost effective. This level of controls reflected the then present state of ozone controls:

Within the region, the nonattainment areas were already required to   and had already implemented   VOC and NOx controls that covered much of their inventory. However, the upwind States in the region generally had not done so ( except to the extent of their ozone nonattainment areas).

In this context, EPA considered it reasonable to impose an additional control burden on the upwind States. Air quality modeling showed that even with this additional level of upwind controls, residual nonattainment remained, so that further reductions from downwind and/ or upwind areas would be necessary.

b. Regulatory Requirements After ascertaining the controls that qualified as highly cost effective, EPA developed a methodology for calculating the amount of NOx emissions that each State was required to reduce on grounds that those emissions contribute significantly to nonattainment downwind. The 62 total amount of required NOx emissions reductions was the sum of the amounts that would be reduced by application of highly cost effective controls to each of the source categories for which EPA determined that such controls were available ( 63 FR 57378).

The largest of these source categories was EGUs. The EPA determined the amount of reductions associated with EGU controls by applying the control rate that EPA considered to reflect highly cost effective controls to each State's EGU heat input. That heat input, in turn, was adjusted to reflect projected growth.

Each affected State retained the authority to achieve the required level of reductions by implementing whatever controls on whatever sources it wished, and EPA determined that there were other source categories for which costeffective if not highly cost effective, controls were available ( 63 FR 57378). If the States chose to control EGUs, then the NOx SIP Call mandated certain requirements   including a statewide cap on EGU NOx emissions   but also made available an EPA administered regionwide EGU allowance trading program that the States could choose to adopt.

c. SIP Submittal and Implementation Requirements At the time EPA promulgated the NOx SIP Call, States already had SIPs for the 1 hour ozone NAAQS in place. In 63 the NOx SIP Call, EPA determined that the 1 hour SIPs for the affected States were deficient, and EPA called on these States, under CAA section 110( k)( 5), to submit, within 12 months of promulgation of the NOx SIP Call, SIP revisions to cure the deficiency by complying with the NOx SIP Call regulatory requirements. The EPA further required that the NOx SIP Call required controls be implemented as expeditiously as practicable. The EPA determined this date to be within 3 years of the SIP submittal date ( with that period extended to the beginning of the next ozone season),

in light of the various constraints that EGUs would confront in implementing controls.

For the SIPs due under the 8 hour ozone NAAQS, in the NOx SIP Call, EPA did not incorporate a section 110( k)( 5)

SIP call, but instead required States to submit, under section 110( a)( 1)( 2), SIP revisions to fulfill the requirements of section 110( a)( 2)( D). The EPA required these 8 hour ozone SIPs to be submitted   and the controls mandated therein to be implemented   on the same schedule as the 1 hour SIPs.

However, EPA stayed the 8 hour ozone requirements of the NOx SIP Call, due to litigation concerning the 8 hour ozone NAAQS. To date, EPA has not lifted that stay.

3. Michigan v. EPA Court Case 64 15 By action dated January 18, 2000, EPA promulgated another rulemaking that was related to the NOx SIP Call, known as the Section 126 Rule ( 65 FR 2674). The D. C. Circuit generally upheld this rule, although it remanded for better explanation the EGU heat input growth methodology. Appalachian Power Co. v. EPA, 249 F. 3d 1032 ( D. C. Cir., 2001). Petitioners brought legal challenges to various components of the NOx SIP Call's analytical approach in the United States Court of Appeals for the District of Columbia Circuit, in Michigan v. EPA, 213 F. 3d 663 ( D. C. Cir., 2000),

cert. denied, 532 U. S. 904 ( 2001). The Court upheld the essential features of the air quality modeling part of EPA's approach, id. at 673; as well as EPA's definition of " contribute significantly" to include the factor of highly cost effective controls, id. at 679. The Court did vacate or remand certain specific applications of EPA's approach,

and delayed the implementation date to May 31, 2004. See,

e. g., id. at 67,681 85, 692 94. In addition, in a subsequent case that reviewed separate EPA rulemakings making technical corrections to the NOx SIP Call, the D. C.

Circuit remanded for a better explanation EPA's methodology for computing the growth component in the EGU heat input calculation. Appalachian Power Co. v. EPA, 251 F. 3d 1026 ( D. C. Cir., 2001). 15 4. Implementation of the NOx SIP Call The court decisions left intact most of the NOx SIP 65 Call requirements. All States subject to those requirements   which EPA has termed the NOx SIP Call Phase I requirements   submitted SIPs incorporating them, and requiring control implementation by May 31, 2004 or earlier. The EPA has approved those SIPs.

The EPA responded to the D. C. Circuit's EGU growth remand decisions through a Federal Register action that provided a more detailed explanation and other supporting information for the EGU growth methodology ( 67 FR 21868; May 1, 2002). The Court subsequently upheld that explanation.

West Virginia v. EPA, 362 F. 3d 861 ( D. C. Cir. 2004). In addition, by action dated April 21, 2004, EPA promulgated a rulemaking that responded to other remanded and vacated issues, and included the remaining requirements   termed the NOx SIP Call Phase II requirements  for the affected States ( 69 FR 21604).

B. How Does EPA Interpret the Clean Air Act's Pollution Transport Provisions in Today's Rule?

1. CAIR Analytical Approach Today, EPA adopts much the same interpretation and application of section 110( a)( 2)( D) for regulating downwind transport of precursors of PM2.5 and 8 hour ozone as EPA adopted for the NOx SIP Call. We are adjusting some aspects of the NOx SIP Call analytic approach for various reasons, 66 including the need to account for regulation of a different pollutant ( PM2.5) with an additional precursor ( SO2).

a. Nature of Nonattainment Problem and Overview of Today's Approach As described in section I, above, the interstate transport component of current nonattainment of the PM2.5 and 8 hour ozone NAAQS is primarily confined to the eastern part of the country, although in an area that is larger, by several States, than the area that EPA focused on in the NOx SIP Call for only ozone. As described in section III, it is evident that local controls alone cannot be counted on to solve the nonattainment problems, although uncertainties remain in the state of knowledge of these nonattainment problems as well as the precise role interstate and local controls should play. As in the case of the NOx SIP Call,

it is not reasonable to expect a local area to bear the entire burden of solving the air quality problems, even if doing so were technically possible.

Turning to the interstate component of the nonattainment problems, as discussed in section III below,

for PM2.5, we find sufficient information is available to address the adverse downwind impacts caused by SO2 and NOx,

and to develop emissions reductions requirements for SO2 and NOx. However, we do not have sufficient information to 67 address other precursors. As discussed in section III below, for 8 hour ozone, we reiterate the finding of the NOx SIP Call that NOx emissions, and not VOC emissions, are of primary importance for interstate transport purposes.

We interpret CAA section 110( a)( 2)( D) to require SIPs in upwind States to eliminate the amounts of emissions that contribute significantly to downwind nonattainment or interfere with downwind maintenance. As described below, in today's rule, EPA determines that upwind States' emissions contribute significantly to nonattainment or interfere with maintenance of the PM2.5 NAAQS.

To quantify the amounts of those emissions that contribute significantly to nonattainment, we primarily focus on the air quality factor reflecting the upwind State's ambient impact on downwind nonattainment areas, and the cost factor of highly cost effective controls. However,

as with the NOx SIP Call, EPA also considers other factors,

which serve to establish the broad context for applying the air quality and cost factors. Today, we adopt the formulation of those factors as described in the CAIR NPR,

which has little conceptual difference from EPA's application of those factors in the NOx SIP Call.

Discussion of issues relating to maintenance are found in section III below. 68 b. Air Quality Factor i. PM2.5 With respect to the PM2.5 NAAQS, as described in section VI, we employed air quality modeling techniques to assess the impact of each upwind State's entire inventory of anthropogenic SO2 and NOx emissions on downwind nonattainment and maintenance. For air quality and technical reasons described below, EPA determined that upwind SO2 and NOx emissions contribute significantly to nonattainment as of the year 2010. Therefore, EPA projected SO2 and NOx emissions to the year 2010, assuming certain required controls ( but not controls required under CAIR),

and then modeled the impact of those projected emissions ( termed the base case inventory) on downwind PM2.5 nonattainment in that year.

As discussed in section III, we adopt today a threshold air quality impact of 0.2

g/ m3, so that an upwind State with contributions to downwind nonattainment below this level would not be subject to regulatory requirements, but a State with contributions at or higher than this level would be subject to further evaluation.

Because of the inherent differences between the PM2.5 and ozone NAAQS, this threshold necessarily differs from the threshold chosen for the NOx SIP Call in terms of: ( i) the 69 16 The second air quality factor described in the NOx SIP Call   the extent of downwind nonattainment   is reflected in the identification of downwind PM2.5 nonattainment areas, discussed elsewhere in today's final action. The third air quality factor   the ambient impact of upwind emissions   is reflected in the threshold level. metrics selected to evaluate the threshold, and ( ii) the specific level of the threshold. Even so, the threshold EPA proposed for PM2.5 is generally consistent with the approach taken in the NOx SIP Call for the threshold level for ozone in that both are relatively low. This level reflects the fact that PM2.5 nonattainment, like ozone, is caused by many sources in a broad region, and therefore may be solved only by controlling sources throughout the region. As with the NOx SIP Call, the collective contribution condition of PM2.5 air quality is reflected in the proposed relatively low threshold. 16 The EPA determined that as of 2010, 23 upwind States and the District of Columbia will have contributions to downwind PM2.5 nonattainment areas that are sufficiently high to meet the air quality factor of the transport test.

ii. 8 Hour Ozone With respect to the 8 hour ozone NAAQS, we also employed, as described in section VI, air quality modeling techniques to assess the impact of each upwind State's entire inventory of NOx and VOC emissions on downwind 70 nonattainment. The EPA determined that upwind NOx emissions contribute significantly to 8 hour ozone nonattainment as of the year 2010. Therefore, EPA projected NOx emissions to the year 2010, assuming certain required controls ( but not controls required under CAIR), and then modeled the impact of those projected emissions ( termed the base case inventory) on downwind 8 hour ozone nonattainment in that year.

For the 8 hour ozone air quality factor, EPA employs the same threshold amounts and metrics that it used in the NOx SIP Call. That is, as described in section VI,

emissions from an upwind State contribute significantly to nonattainment if the maximum contribution is at least 2 parts per billion, the average contribution is greater than one percent, and certain other numerical criteria are met.

The EPA determined that as of 2010, 25 upwind States and the District of Columbia will have contributions to downwind nonattainment areas that are sufficiently high to meet the air quality factor of the transport test.

c. Cost Factor The second major factor that EPA applies is the cost factor. As in the case of the NOx SIP Call, EPA interprets this factor as mandating emissions reductions in amounts that would result from application of highly cost effective 71 controls. We ascertain the level of costs as highly cost effective by reference to the cost effectiveness of recent controls. As we stated in the CAIR NPR, in determining the appropriate level of controls, we considered feasibility issues    as we did in the NOx SIP Call  specifically,

" the applicability, performance, and reliability of different types of pollution control technologies for different types of sources; ... and other implementation costs of a regulatory program for any particular group of sources." ( See CAIR NPR, 69 FR 4585.)

As described in section IV, today we conclude that at present, EGUs are the only source category for which highly cost effective SO2 and NOx controls are available. In making this determination, we examined what information is available concerning which source categories emit relatively large amounts of emissions, and what difficulties sources have in implementing controls. These criteria are similar to those considered in the NOx SIP Call.

As discussed in section IV, for PM2.5, today's action finalizes our proposal to identify as highly cost effective the dollar amount of cost effectiveness that falls near the low end of the reference range for both annual SO2 controls and annual NOx controls. We identify this level based on the overall context of the PM2.5 implementation program, 72 discussed below.

For upwind States affecting downwind 8 hour ozone nonattainment areas, we apply the cost factor for ozoneseason NOx controls in much the same manner as for the NOx SIP Call, although some aspects of the analysis have been updated. The level of NOx control identified as highly cost effective is more stringent than in the NOx SIP Call.

d. Other Factors As with the NOx SIP Call, EPA considers other factors that influence the application of the air quality and cost factors, and that confirm the conclusions concerning the amounts of emissions that upwind States must eliminate as contributing significantly to downwind nonattainment.

Specifically, as we stated in the CAIR NPR, " We are striving in this proposal to set up a reasonable balance of regional and local controls to provide a cost effective and equitable governmental approach to attainment with the NAAQS for fine particles and ozone." ( See 69 FR 4612.) In this manner, we broadly incorporate the fairness concept and relative

costof control ( regional costs compared to local costs) concept that we generally considered in the NOx SIP Call.

i. PM2.5 Controls For PM2.5, we promulgated the NAAQS in 1997, we issued designations of areas in December 2004 ( 70 FR 944; January 73 5, 2005), and we intend to promulgate implementation requirements during 2005. We project that by 2010, without CAIR or other controls not already adopted, 80 counties in the CAIR region would be in nonattainment of the annual standard.

Our state of knowledge is incomplete as to the best control regime to achieve attainment and maintenance of this NAAQS in individual areas, but we do know that transported SO2 and NOx emissions are important contributors to PM2.5 nonattainment. In addition, we have concluded that available controls for at least the portion of these emissions from EGUs are feasible and relatively inexpensive on a cost per ton basis, and generate significant ambient benefits. These ambient benefits include bringing many areas into attainment and decreasing PM2.5 levels in the rest of the nonattainment areas. Moreover, available information indicates that local controls are likely to be relatively more expensive on a per ton basis, and will not reduce emissions sufficiently to bring many areas into attainment.

In light of this information, we plan to proceed by requiring the level of regulatory control specified today on upwind SO2 and NOx emissions. We consider today's action to be both prudent and effective within the circumstances of 74 the developing PM2.5 implementation program. This action is one of the initial steps in implementing the PM2.5 NAAQS.

States, localities, and Tribes, as well as EPA, will continue to evaluate the efficacy of local controls.

Finally, as discussed in section VI, air quality modeling confirms that these regional controls are not more than is necessary for downwind areas to attain.

This overall plan is well within the ambit of EPA's authority to proceed with regulation on a step by step basis. The time frame for section 110( a)( 2)( D) SIPs,

described in section VII, makes clear that EPA has the authority to establish the upwind reduction obligations before having full information about how best to achieve attainment goals, including having full information about downwind control costs and the efficacy of downwind control measures.

ii. Ozone Controls The EPA determined the level of required NOx reductions for purposes of 8 hour ozone transport through much the same process as for purposes of PM2.5 transport.

e. Regulatory Requirements i. Annual SO2 and NOx Emissions Reductions Although EPA determined that upwind emissions will contribute significantly to both PM2.5 nonattainment and 8 75 hour ozone nonattainment in 2010, the amount of requisite emissions controls cannot feasibly be implemented by 2009 for NOx, or 2010 for SO2. Instead, EPA has determined to implement the reductions in two phases for each pollutant:

2009 for NOx, and 2010 for SO2 initially, with lower caps for both in 2015.

As described in section IV, EPA evaluated the cost of emissions reductions under consideration against the level of highly cost effective controls. Through a multi year process involving studies and other regulatory and legislative efforts, as well as involvement with citizen,

industry, and State stakeholders, EPA arrived at an amount of SO2 emissions reductions for evaluation purposes for the CAIR region. The EPA ascertained the costs of these reductions and today determines that they should be considered highly cost effective. These amounts correspond to reducing Title IV SO2 allowances for utilities by 65 percent in 2015 and 50 percent in 2010 in CAIR States.

As described in section V, EPA further determined that these emissions reductions requirements should be allocated to the States in proportion to the title IV SO2 allowances allocated under the CAA to their EGUs. This approach is consistent with the system Congress established for allocating title IV allowances and facilitates 76 implementation of the SO2 interstate trading program.

For annual NOx emissions, EPA determined a target regionwide amount of both emissions reductions and the EGU budget by multiplying current heat input by emission rates of 0.125 lb/ mmBtu and 0.15 lb/ mmBtu for 2015 and 2010,

respectively. The EPA then evaluated those amounts through the Integrated Planning Model ( IPM), which indicated the associated amounts of heat input and emission rates projected for those years. The IPM indicated that the amounts of heat input for 2015 and 2010 were higher than current heat input ( in light of the increased electricity demand for 2015 and 2010), and that the emissions rates were lower than 0.125 lb/ mmBtu ( 2015) and 0.15 lb/ mmBtu ( 2010).

The IPM calculated the costs to achieve those emissions reductions and EGU budget ( assuming EGU controls) by 2015 and 2009, which costs EPA determined were highly cost effective and feasible, respectively. The EPA used this same approach to determine the seasonal budget for NOx reductions for purposes of the ozone standard.

As described in section V, we allocated this regionwide amount to the individual States in accordance with their average heat input from EGUs both subject to and not subject to title IV. We adjusted heat input for type of fuel used.

The EPA believes that this method is a reasonable indicator 77 of each State's appropriate share of the requirements. This method differs from what EPA used in the NOx SIP Call, which relied on State specific projections of growth in heat input.

We require implementation of the PM2.5 and 8 hour ozone reductions in two phases, in 2009 and 2015. As discussed in section IV, these dates are the most expeditious that are practicable   the same standard for the implementation period in the NOx SIP Call   based on engineering and financial factors; the performance and applicability of control measures; and the impact of implementation on, in the case of EGUs, electricity reliability. The EPA considered these same factors in determining the implementation period for the NOx SIP Call requirements, but factual differences lead to the two phase approach adopted in today's action.

As discussed in section VII, each upwind State may achieve the required reductions by regulating any sources of SO2 or NOx that it wishes. However, if the State chooses to regulate certain source categories ( such as EGUs), it must comply with certain requirements ( such as capping EGU emissions), and it may take advantage of certain opportunities ( such as participation in the EPA administered EGU cap and trade program). Some aspects of these 78 requirements and the cap and trade program differ from those in the NOx SIP Call, as explained in section VIII. However,

like the NOx SIP Call, the State may allow sources to opt in to the CAIR trading program, as described in section VIII.

f. SIP Submittal and Implementation Requirements Today EPA requires that the PM2.5 and 8 hour ozone SIPs be submitted within 18 months of promulgation of today's action. This period is 6 months longer than the SIPs due under the NOx SIP Call. This difference is due to the fact that PM2.5 implementation is only now beginning, and it makes sense to keep the NOx SIPs due under the 8 hour ozone requirements on the same schedule as the NOx and SO2 SIPs due under the PM2.5 requirements.

2. What Did Commenters Say and What Is EPA's Response?

Many of the comments on today's action concern various aspects of EPA's analytical approach. Most of those comments are discussed elsewhere in today's action.

Comments on the most basic elements of EPA's approach are discussed here.

a. Aspects of Contribute Significantly Test i. Date for Evaluation of Downwind Impacts Comment: Some commenters took issue with EPA's approach of determining the upwind State's air quality impact on downwind areas by modeling only the State's 2010 base case 79 emissions ( that is, projected 2010 emissions before the 2010 CAIR controls). These commenters stated that although evaluating the upwind State's base case emissions in 2010 might indicate whether that State's air quality impact on downwind areas is sufficiently high to justify imposition of the 2010 ( Phase I) controls, it does not justify imposition of the 2015 ( Phase II) controls. Rather, according to the commenters, EPA should conduct further air quality modeling that evaluates the upwind State's 2015 base case emissions   taking into account the CAIR 2010 controls but not the CAIR 2015 controls   to determine whether the State continues ( even after imposition of the CAIR 2010 controls) to have a sufficient downwind ambient impact to justify the 2015 controls.

Commenters added that, in their view, PM2.5 precursors generally were decreasing after 2010, the PM2.5 nonattainment problem was generally diminishing as well, and the contribution of some upwind States to downwind areas was relatively small. These facts, according to the commenters,

indicated that some upwind States should not be subject to the 2015 reductions requirement.

Some commenters stated, more broadly, that the threshold contribution level selected by EPA should be considered a floor, so that upwind States should be obliged 80 to reduce their emissions only to the level at which their contribution to downwind nonattainment does not exceed that threshold level.

Response: The EPA views the CAIR emission reduction requirements as a single action, but one that cannot be fully implemented in 2009 ( for NOx) or 2010 ( for SO2), and must instead be partially deferred until 2015, solely for reasons of feasibility. Under these circumstances, EPA does not believe it appropriate to re evaluate the 2015 component, as commenters have suggested.

Under EPA's approach, which mirrors that of the NOx SIP Call, EPA projects, for each upwind State, SO2 and NOx inventories, as of 2010, taking into account controls required under other CAA provisions and controls adopted by State and local agencies. The EPA then uses air quality modeling techniques to determine the impact of these emissions on downwind air quality. The EPA then requires upwind States whose emissions have a sufficiently high impact to eliminate the amount of their emissions that could be eliminated through application of highly cost effective controls. These emissions reductions must be implemented as expeditiously as practicable. Were it feasible to implement all the reductions by 2009 ( for NOx) or 2010 ( for SO2), EPA would so require. Because part of the emissions reductions 81 cannot feasibly be implemented until 2015, EPA is requiring today's two phase approach. This analytic method is the same as for the NOx SIP Call, except that in that rulemaking all of the required emissions reductions could feasibly be implemented in one phase.

As in the case of the NOx SIP Call, EPA takes the view that once a State's emissions are determined to contribute to downwind nonattainment by at least a threshold amount,

then the upwind State should reduce its emissions by the amount that would result from implementation of highly costeffective controls. This approach is justified by the benefits of reducing the upwind contribution to downwind nonattainment, coupled with the relatively low costs.

However, EPA does consider the ambient impacts of the required emissions reductions. For today's action, air quality modeling indicates that the regionwide emissions reductions do not reduce PM2.5 levels beyond what is needed for attainment and maintenance. ( See also section III below.) Most important for present purposes, as long as the controls yield downwind benefits needed to reduce the extent of nonattainment, the controls should not be lessened simply because they may have the effect of reducing the upwind State's contribution to below the initial threshold.

The D. C. Circuit, in upholding the NOx SIP Call, 82 rejected similar arguments to those raised by commenters ( Michigan v. EPA, 213 F. 3d at 679). In the NOx SIP Call rulemaking, commenters argued that EPA's analytic approach to the " contribute significantly" test was flawed because it meant that States with different impacts downwind would nevertheless have to implement the same level of controls ( i. e., those that were highly cost effective). Commenters urged EPA to recast its approach by limiting an upwind State's emissions reductions to the point at which the remaining emissions no longer caused a downwind ambient impact above the threshold level for significance.

(" Responses to Significant Comments on the Proposed Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group ( OTAG) Region for Purposes of Reducing Regional Transport of Ozone ( 62 FR 60318; November 7, 1997 and 63 FR 25902; May 11, 1998),"

U. S. E. P. A. ( September 1998), Docket Number A 96 56 VI C 1,

at 213 16.)

Petitioners challenging the NOx SIP Call in Michigan v.

EPA used the same arguments to contend that EPA's analytic approach in the NOx SIP Call was arbitrary and capricious.

The Court dismissed these arguments, stating:

... EPA required that all of the covered jurisdictions, regardless of amount of contribution, reduce their NOx by an amount achievable with " highly cost effective controls." 83 Petitioners claim that EPA's uniform control strategy is irrational.... [ T] hey observe that where two states differ considerably in the amount of their respective NOx contributions to downwind nonattainment, under the EPA rule even the small contributors must make reductions equivalent to those achievable by highly cost effective measures. This of course flows ineluctably from the EPA's decision to draw the " significant contribution" line on a basis of cost differentials. Our upholding of that decision logically entails upholding this consequence.

( Michigan v. EPA, 213 F. 3d at 679.)

Thus, the Court approved EPA's approach of requiring the same control level on all affected States, without concern as to the arguably inconsistent ambient impacts that may result. By the same token, in today's action, EPA's approach should be accepted notwithstanding that the upwind controls could, at least in theory, result in an ambient impact that is below the initial threshold. For this reason, there is no basis to conduct a separate evaluation of the 2015 controls.

ii. Residual Nonattainment Comment: A commenter expressed concern that too many areas will remain out of attainment for the PM2.5 and 8 hour ozone NAAQS even after implementation of the CAIR rule.

Response: Section 110( a)( 2)( D) of the CAA requires upwind States to prohibit the amount of emissions that contribute significantly to downwind nonattainment, but does not require the upwind States to prohibit sufficient 84 emissions to assure that the downwind areas attain. Rather,

downwind areas continue to bear the responsibility of addressing remaining nonattainment.

iii. Relationship of Reductions to Attainment Dates Comment: Some commenters, who viewed the CAIR as imposing unduly light obligations on upwind States, argued that because States with nonattainment areas must develop SIPs that provide for attainment regardless of the cost of the requisite controls, and because the courts have viewed attainment deadlines as central to the CAA, EPA should require that upwind emissions contributing to downwind nonattainment must be eliminated by the downwind attainment dates, and not later.

Other commenters, who viewed the CAIR as imposing unduly heavy obligations on upwind States, argued that EPA had no authority to require upwind emissions reductions after the downwind attainment dates because by that time,

the upwind emissions were no longer contributing to nonattainment. These commenters further argued that EPA has no authority to accelerate the emissions reductions because the controls could not feasibly be implemented by an earlier date.

Response: We note first that part of this issue is moot since EPA is requiring NOx controls in 2009, within the 85 statutory time periods for attainment. With respect to remaining issues, EPA's interpretation and application of the " contribute significantly to nonattainment" standard of section 110( a)( 2)( D) is not necessarily constrained by the downwind area's attainment date in either manner suggested by the commenters.

First, although it is true that the nonattainment area requirements and deadlines in CAA title I, part D, mean that the downwind area must achieve attainment by its attainment date without regard to the feasibility of emissions reductions from sources in that nonattainment area, section 110( a)( 2)( D) by its terms does not apply those constraints to sources in the upwind States. Rather, EPA's interpretation of the " contribute significantly to nonattainment" standard    which incorporates feasibility considerations in determining the implementation period for the upwind emissions controls  continues to apply.

Often, upwind emissions reductions affect at least several downwind areas with different attainment dates. The EPA does not read section 110( a)( 2)( D) to require that the pace of upwind reductions be controlled by the earliest downwind attainment date. Rather, EPA views the pace of reductions as being determined by the time within which they may feasibly be achieved. In some cases, upwind sources are 86 themselves in a nonattainment area that has a longer attainment date than the downwind area, and it may not be feasible for those upwind sources to implement reductions prior to the downwind attainment date. Therefore, the upwind emissions may be projected to continue to affect adversely nonattainment in the downwind area even after the downwind attainment date, in the manner described above.

Further, emissions reductions after the attainment date may be important to prevent interference with maintenance of the standards.

The CAIR will achieve substantial reductions in time to help many nonattainment areas attain the standards by the applicable attainment dates. The design of the SO2 program,

including the declining caps in 2010 and 2015 and the banking provisions, will steadily reduce SO2 emissions over time, achieving reductions in advance of the cap dates; and the 2009 and 2015 NOx reductions will be timely for many downwind nonattainment areas. Although many of today's nonattainment areas will attain before all the reductions required by CAIR will be achieved, it is clear that CAIR's reductions will still be needed through 2015 and beyond.

EPA has determined that each upwind State's 2010 and 2015 emissions reductions will be necessary because, for purposes of both PM2.5 and 8 hour ozone, we reasonably predict that a 87 downwind receptor linked to that upwind State will either:

( i) remain in nonattainment and continue to experience significant contribution to nonattainment from the upwind State's emissions; or ( ii) attain the relevant NAAQS but later revert to nonattainment due, for example, to continued growth of the emissions inventory. This is discussed in detail in section III below.

iv. Factors to Consider in Future Rulemaking In the January and June CAIR proposals, we discussed regional control requirements and budgets based on a showing of " significant contribution" by upwind States to nonattainment in downwind States ( 69 FR at 4611 13, 32720).

The CAA section 110( a)( 2)( D), which provides the authority for CAIR, states among other things that SIPs must contain adequate provisions prohibiting, consistent with the CAA,

sources or other types of emissions activity within a State from emitting pollutants in amounts that will " contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to" the NAAQS.

In CAIR, EPA has interpreted section 110( a)( 2)( D) to require that certain States reduce emissions by specified amounts, and has determined those amounts based on the availability of highly cost effective controls for identified source categories. Following this 88 interpretation, EPA has calculated CAIR's emissions reduction requirements based on the availability of highly cost effective reductions of SO2 and NOx from EGUs in States that meet EPA's proposed inclusion criteria.

One approach cited in the January 2004 CAIR proposal for ensuring that both the air quality component and the cost effectiveness component of the section 110 " contribute significantly" determination is met, is to consider a source category's contribution to ambient concentrations above the attainment level in all nonattainment areas in affected downwind states. Id. In the June supplemental proposal, we requested comment on a further refinement of this concept   i. e., whether a source category should be included in a broad regional rule promulgated pursuant to section 110( a)( 2)( D) only if the proposed level of additional control of that category would meet a specified threshold.

Under that approach, EPA said it might determine, for example, that in the context of a broad multi state SIP call, emissions reductions from particular source category are " highly cost effective" only if emissions reductions from that source category would result in at least 0.5 percent of U. S. counties and/ or parishes coming into attainment with a NAAQS. The EPA noted that, given the number of counties and parishes in the United States, this 89 requirement would be met if at least 16 counties were brought into attainment with a NAAQS as a result of the proposed level of control on a particular source category.

The Agency received comments both supporting and opposing the adoption of this test as a part of the " highly cost effective" component of the " contribute significantly"

requirement of CAA section 110( a)( 2)( d). Commenters supporting this test asserted that it was consistent with the Clean Air Act's overall focus on State, rather than federal, control over which sources should be regulated, and also was consistent with ensuring that broad, regional SIP calls, such as the one at issue in this case, focus only on source categories the control of which will result in substantial overall improvements in air quality. Commenters opposing this screen with respect to the application of section 110( a)( 2)( D) asserted, in general, that the test would be inconsistent with the analysis used by the Agency in the NOx SIP call and with the language of section 110( a)( 2)( D).

We have determined that it is not appropriate to adopt a statutory interpretation embodying a " bright line" rule that 0.5 percent of the U. S. counties and/ or parishes must be brought from nonattainment into attainment from controlling emissions from a particular source category, in 90 order for reductions from that source category to be considered highly cost effective. We continue to believe,

however, that broad multi state rules under section 110( a)( 2)( D), such as the one we are finalizing today,

should play a limited role under the Clean Air Act and must be justified by a careful evaluation of the air quality improvement that will result from the controls under consideration. Therefore, we intend to undertake any future broad, multi state rulemakings under section 110( a)( 2)( D)

regarding transported emissions only when, as here, they produce substantial air quality benefits across a broad area and have beneficial air quality impacts on a significant number of downwind nonattainment areas, including bringing many areas into attainment. We do not at this time anticipate the need for any such rulemakings in the future.

We believe that today's action, coupled with current and upcoming national rules and local or subregional programs adopted by States, will be sufficient to address the remaining nonattainment problems.

In evaluating whether to undertake national or regional transport rulemakings in the future, we believe it is not only appropriate but necessary to consider the effectiveness of the proposed emissions reductions in improving downwind air quality. We believe it will be reasonable to initiate a 91 broad multi state rulemaking under section 110( a)( 2)( D)

based on a determination that particular emissions reductions are highly cost effective only when those reductions will bring a significant number of downwind areas into attainment. In adopting this approach for determining whether a future broad, multi state SIP call is appropriate,

we note that other CAA mechanisms, such as SIP disapproval authority and State petitions under section 126, are available to address more isolated instances of the interstate transport of pollutants.

The EPA projects that control of SO2 and NOx through CAIR will bring 72 counties into attainment with the PM2.5 and ozone NAAQS. The total number represents approximately 3 percent of the counties/ parishes in the United States, and is clearly a significant number of areas. What will be considered a significant number of areas in any future cases will need to be determined on a case by case basis.

III. Why Does This Rule Focus on SO2 and NOx, and How Were Significant Downwind Impacts Determined?

This section discusses the basis for EPA's decision to require reductions in upwind emissions of SO2 and NOx to address PM2.5 transport and to require reductions in upwind emissions of NOx to address ozone related transport. In addition, this section discusses how EPA determined which 92 States are subject to today's rule because their sources'

emissions will significantly contribute to nonattainment of the PM2.5 or 8 hour ozone standards, or interfere with maintenance of those standards, in downwind States. The EPA assessed individual upwind States' ambient impacts on downwind States and established a threshold value to identify those States whose impact constitutes a significant contribution to air quality violations in the downwind States. The EPA used air quality modeling of emissions in each State to estimate the ambient impacts. The technical issues concerning the modeling platform and approach are discussed in section VI, Air Quality Modeling Approach and Results. EPA also considered the potential for upwind state emissions to interfere with maintenance of the PM2.5 and 8

hour ozone NAAQS in downwind areas.

A. What is the Basis for EPA's Decision to Require Reductions in Upwind Emissions of SO2 and NOx to Address PM2.5 related transport?

1. How did EPA determine which pollutants were necessary to control to address interstate transport for PM2.5?

a. What did EPA propose regarding this issue in the NPR?

Section II of the January 2004 proposal summarized key scientific and technical aspects of the occurrence,

formation, and origins of PM2.5, as well as findings and 93 17More complete discussions of the key scientific underpinnings that form the basis of these conclusions in the proposal and the discussion of these issues in this section of today's notice can be found in the recently completed EPA Criteria Document ( USEPA, National Center for Environmental Assessment, Air Quality Criteria for Particulate Matter, October 2004) and the NARTSO assessment of fine particles ( NARSTO, Particulate Matter Science for Policy Makers  A NARSTO Assessment, February 2003). observations relevant to formulating control approaches for reducing the contribution of transport to fine particle problems ( 69 FR 4575 87). Key concepts and provisional conclusions drawn from this discussion can be summarized as follows: 17 ( 1) Fine particles ( measured as PM2.5 for the NAAQS) consist of a diverse mixture of substances that vary in size,