[Federal Register Volume 83, Number 218 (Friday, November 9, 2018)]
[Proposed Rules]
[Pages 55994-56002]
[FR Doc No: 2018-24482]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 49 and 52

[EPA-R09-OAR-2018-0590; FRL-9986-21-Region 9]

Revisions to the Source-Specific Federal Implementation Plan for
Navajo Generating Station, Navajo Nation

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing limited
revisions to the source-specific federal implementation plan (FIP) that
regulates emissions from the Navajo Generating Station (NGS), a coal-
fired power plant located on the reservation lands of the Navajo Nation
near Page, Arizona. We are proposing to lower the emission limitation
for particulate matter (PM) to conform to the most stringent emission
limitation currently applicable to NGS under another EPA regulation,
and to replace the opacity limitation and annual PM source testing
requirement with a requirement to demonstrate compliance with the lower
PM emission limitation using a continuous emission monitoring system
for particulate matter.

DATES: Any comments on this proposal must arrive by December 10, 2018.

ADDRESSES: Submit your comments, identified by Docket ID number EPA-
R09-OAR-2018-0590, at http://www.regulations.gov, or via email to
[email protected]. For comments submitted at Regulations.gov, follow
the online instructions for submitting comments. Once submitted,
comments cannot be edited or removed from Regulations.gov. For either
manner of submission, the EPA may publish any comment received to its
public docket. Do not submit electronically any information you
consider to be Confidential Business Information (CBI) or other
information whose disclosure is restricted by statute. Multimedia
submissions (audio, video, etc.) must be accompanied by a written
comment. The written comment is considered the official comment and
should include discussion of all points you wish to make. The EPA will
generally not consider comments or comment contents located outside of
the primary submission (i.e., on the Web, cloud, or other file sharing
system). For additional submission methods, please contact the person
identified in the FOR FURTHER INFORMATION CONTACT section. For the
EPA's full public comment policy, information about CBI or multimedia
submissions, and general guidance on making effective comments, please
visit http://www2.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: Anita Lee, EPA Region IX, (415) 972-
3958, [email protected].

SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us'' and
``our'' refer to the EPA.

Table of Contents

I. Background
    A. Action
    B. Facility
    C. Attainment Status
    D. The EPA's Authority To Promulgate a FIP in Indian Country
    E. Historical Overview of NGS FIP Actions
II. Basis for Proposed Action
III. Summary of FIP Provisions
    A. Proposed FIP Revisions
    B. Justification for Proposed FIP Revisions
IV. Solicitation of Comments
V. Environmental Justice Considerations
VI. Statutory and Executive Order Reviews

I. Background

A. Action

    In this action, the EPA is proposing limited revisions to the FIP
for NGS that we promulgated on October 3, 1991 (``1991 FIP''), March 5,
2010 (``2010 FIP''), and August 8, 2014 (``2014 FIP'').\1\ The
provisions of the 1991 action are codified in the Code of Federal
Regulations (CFR) at 40 CFR 52.145(d), and the 2010 and 2014
regulations are codified at 40 CFR 49.5513. We refer collectively to
the provisions from the 1991, 2010, and 2014 actions as the ``FIP'' or
the ``NGS FIP.'' The NGS FIP includes federally enforceable emission
limitations for PM, opacity, sulfur dioxide (SO2), and
oxides of nitrogen (NOX).
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    \1\ See 56 FR 50172 (October 3, 1991), 75 FR 10174 (March 5,
2010), and 79 FR 46552 (August 8, 2014).
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    Generally, the EPA is proposing to move provisions from the 1991
FIP to a different section of the CFR and to

update certain provisions in the 1991 FIP to be consistent with recent
national rulemakings. Specifically, we are proposing to move the 1991
FIP provisions from 40 CFR 52.145(d) to 40 CFR 49.5513. If finalized,
the effect of our action will be to move requirements for NGS from
subpart D of part 52, which contains the state implementation plan
(SIP) provisions for Arizona, to subpart L of part 49, which contains
source-specific FIP requirements for NGS, to consolidate all of the
applicable requirements for NGS in one section of the CFR. We are
proposing to update the definition of ``boiler operating day'' in the
1991 FIP to be consistent with the definition in the 2014 FIP.\2\
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    \2\ See 40 CFR 52.145(d)(1) and 40 CFR 49.5513(j)(2)(iii).
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    In addition, we are proposing to revise the PM compliance
demonstration from annual source testing to the use of PM continuous
emissions monitoring systems (PM CEMS), which were installed and
calibrated on each of the three units at the facility in 2016. We are
also proposing to lower the PM emission limitation in the 2010 FIP from
0.060 pounds per million British thermal units (lb/MMBtu) to 0.030 lb/
MMBtu. This lower emission limitation already applies to NGS pursuant
to the EPA's Mercury and Air Toxics Standard (MATS) Rule.\3\ Because
the operator of NGS will be using PM CEMS to demonstrate compliance
with the 0.030 lb/MMBtu emission limitation for PM, the EPA is also
proposing to remove the opacity emission limitation and associated
continuous opacity monitoring system (COMS) requirements from the NGS
FIP. The opacity limitation and COMS have generally functioned as
surrogates for ensuring compliance with PM emission limitations. This
proposed revision is consistent with the provisions related to PM CEMS
and opacity in the New Source Performance Standard for Electric Utility
Steam Generating Units (``NSPS for EGUs'') and the Acid Rain Program
requirements at 40 CFR 75.14(e), which generally provide that any owner
or operator that elects to install, calibrate, maintain, and operate a
PM CEMS for demonstrating compliance with a sufficiently stringent PM
emission limitation (i.e., 0.030 lb/MMBtu or lower) need not meet the
opacity limit and monitoring requirements.\4\
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    \3\ See 77 FR 9303 (February 16, 2012) and 81 FR 20172 (April 6,
2016) (Final Technical Corrections).
    \4\ See NSPS for EGUs at 40 CFR 60.42Da and the Acid Rain
Program requirements at 40 CFR part 75. Subpart Da to part 60 is the
``Standard of Performance for Electric Utility Steam Generating
Units'' and applies to units that are capable of combusting more
than 73 MW heat input of fossil fuel and for which construction,
modification, or reconstruction commenced after September 18, 1978.
The units at NGS were constructed prior to 1978 and are not subject
to part 60 subpart Da. The NGS units are subject to the Acid Rain
Program requirements of CAA Title IV, but are eligible for an
exemption from the requirement for COMS in CAA section 412(a),
pursuant to 40 CFR 75.14.
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    Finally, we are proposing to clarify requirements that have already
been satisfied (e.g., a one-time requirement that has been met to
submit a description of dust suppression methods to the Regional
Administrator) and update the addresses to which the owner or operator
must submit reports.

B. Facility

    NGS is a coal-fired power plant located on the reservation lands of
the Navajo Nation, just east of Page, Arizona, and approximately 135
miles north of Flagstaff. NGS is co-owned by several entities and
operated by Salt River Project (SRP).\5\ The facility currently
operates three units, each with a capacity of 750 megawatts (MW) net
generation, providing a total capacity of 2250 MW. Operations at the
facility produce air pollutant emissions, including emissions of
SO2, NOX, and PM. Existing pollution control
equipment at NGS includes wet flue gas desulfurization units for
SO2 and PM removal, electrostatic precipitators for PM
removal, and low-NOX burners with separated over-fire air to
reduce NOX formation during the combustion process. In the
future, the owner or operator of NGS will be taking steps to reduce
emissions of NOX further, pursuant to the requirements of
the 2014 FIP.
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    \5\ Currently, the participants in NGS are the United States
Bureau of Reclamation, SRP, Arizona Public Service Company, Tucson
Electric Company, and NV Energy. SRP, which serves as the facility
operator, recently increased its ownership share after it purchased
the shares previously owned by the Los Angeles Department of Water
and Power.
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C. Attainment Status

    The area around NGS is designated attainment, unclassifiable/
attainment or unclassifiable for all criteria pollutants under the
Act.\6\
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    \6\ See 40 CFR 81.303.
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D. The EPA's Authority To Promulgate a FIP in Indian Country

    When the CAA was amended in 1990, Congress included a new
provision, section 301(d), granting the EPA authority to treat tribes
in the same manner as states where appropriate.\7\ In 1998, the EPA
promulgated regulations known as the Tribal Authority Rule (TAR).\8\
The EPA's promulgation of the TAR clarified, among other things, that
state air quality regulations generally do not, under the CAA, apply to
facilities located anywhere within the exterior boundaries of Indian
reservations.\9\ Prior to the addition of section 301(d) and the
promulgation of the TAR, some states had mistakenly included emission
limitations in their SIPs that they may have believed could apply under
the CAA to private facilities operating on adjacent Indian
reservations.
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    \7\ See 40 U.S.C. 7601(d).
    \8\ See 40 CFR parts 9, 35, 49, 50, and 81. See also 63 FR 7254
(February 12, 1998).
    \9\ See 63 FR 7254 at 7258 (noting that unless a state has
explicitly demonstrated its authority and has been expressly
approved by the EPA to implement CAA programs in Indian country, the
EPA is the appropriate entity to implement CAA programs prior to
tribal primacy), Arizona Public Service Company v. EPA., 211 F.3d
1280 (D.C. Cir. 2000), cert. denied sub nom, Michigan v. EPA., 532
U.S. 970 (2001) (upholding the TAR); see also Alaska v. Native
Village of Venetie Tribal Government, 533 U.S. 520, 526 n.1 (1998)
(primary jurisdiction over Indian country generally lies with
federal government and tribes, not with states).
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    In the preambles to the proposed and final 1998 TAR, the EPA
generally discussed the legal basis in the CAA that authorizes the EPA
to regulate sources of air pollution in Indian country.\10\ The EPA
concluded that the CAA authorizes the EPA to protect air quality
throughout Indian country.\11\ The TAR, therefore, provides that the
EPA ``[s]hall promulgate without unreasonable delay such federal
implementation plan provisions as are necessary or appropriate to
protect air quality, consistent with the provisions of sections
[301](a) and 301(d)(4), if a tribe does not submit a tribal
implementation plan meeting the completeness criteria of 40 CFR part
51, Appendix V, or does not receive EPA approval of a submitted tribal
implementation plan.'' \12\
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    \10\ See 59 FR 43956 (August 25, 1994); 63 FR 7253 (February 12,
1998).
    \11\ See 63 FR 7253 at 7262 (February 12, 1998); 59 FR 43956 at
43960-43961 (August 25, 1994) (citing, among other things, to CAA
sections 101(b)(1), 301(a), and 301(d)).
    \12\ See 63 FR at 7273 (codified at 40 CFR 49.11(a)). In the
preamble to the final TAR, the EPA explained that it was
inappropriate to treat tribes in the same manner as states with
respect to section 110(c) of the Act, which directs the EPA to
promulgate a FIP within 2 years after the EPA finds a state has
failed to submit a complete state plan or within 2 years after the
EPA disapproval of a state plan. Although the EPA is not required to
promulgate a FIP within the 2-year period for tribes, the EPA
promulgated 40 CFR 49.11(a) to clarify that the EPA will continue to
be subject to the basic requirement to issue any necessary or
appropriate FIP provisions for affected tribal areas within some
reasonable time. See 63 FR at 7264-65.
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E. Historical Overview of NGS FIP Actions

    On December 2, 1980, EPA issued regulations addressing visibility

impairment that is traceable or ``reasonably attributable'' to a single
source or small group of sources.\13\ These regulations required a
number of states to submit SIPs no later than September 2, 1981. Most
states, including Arizona, failed to submit SIPs as called for by the
regulations. Accordingly, in 1987, the EPA issued visibility FIPs
consisting of general plan requirements and long-term strategies for 29
states including Arizona.\14\
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    \13\ 45 FR 80084 (December 2, 1980), codified at 40 CFR 51.300-
51.307.
    \14\ See 52 FR 45132 (November 24, 1987).
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    In 1989, based on a report submitted by the National Park Service,
the EPA proposed to find that a portion of the visibility impairment in
Grand Canyon National Park was reasonably attributable to NGS.\15\
Under the 1991 FIP, NGS was required to phase-in compliance with the
SO2 emission limit, by installing scrubbers in 1997, 1998,
and 1999.\16\ In establishing the SO2 emission limit for NGS
in the final 1991 FIP, the EPA determined that the FIP would provide
for greater reasonable progress toward the national visibility goal
than implementation of Best Available Retrofit Technology (BART).\17\
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    \15\ 56 FR 50172 (October 3, 1991), codified at 40 CFR 52.145.
    \16\ 40 CFR 52.145(d)(7).
    \17\ 56 FR 50172 (October 3, 1991).
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    On September 8, 1999, the EPA proposed a source-specific FIP for
NGS.\18\ The 1999 proposed FIP stated: ``Although the facility has been
historically regulated by Arizona since its construction, the state
lacks jurisdiction over the facility or its owners or operations for
CAA compliance or enforcement purposes.'' The EPA intended for the
proposed action in 1999 to ``federalize'' the emission limitations that
Arizona had erroneously included in its SIP.\19\ The EPA received
comments on the proposed FIP but did not finalize the proposal.
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    \18\ See 64 FR 48725 (September 8, 1999).
    \19\ 64 FR 48725 at 48727.
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    In 2006, the EPA published a new proposed rule to promulgate
federally enforceable numerical emission limitations for PM and
SO2 and took action to finalize it in 2010.\20\ The 2010 FIP
also established an opacity limit and a requirement for specific
control measures to limit dust emissions. In the 2010 FIP, the EPA
determined that the emission limitations for PM and SO2 were
more stringent than, or at least as stringent as, the emission
limitations that had historically applied at NGS pursuant to an
operating permit issued by Arizona. Therefore, the EPA concluded that
air quality in this area would be positively impacted by the 2010
FIP.\21\
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    \20\ 75 FR 10179 (March 5, 2010) codified at 40 CFR 49.24(a)
through (i) and redesignated to 40 CFR 49.5513(a) through (i). See
76 FR 23879 (April 29, 2011).
    \21\ 75 FR 10174 (March 5, 2010).
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    On August 8, 2014, the EPA promulgated a final rule that
established limits for NOX emissions from NGS under BART
provisions of the Regional Haze Rule.\22\ We finalized an alternative
to BART based on agreed-upon recommendations developed by a group of
diverse stakeholders. The 2014 FIP limits emissions of NOX
from NGS by establishing a long-term facility-wide cap on total
NOX emissions from 2009 to 2044 and requires the
implementation of one of several alternative operating scenarios to
ensure that the 2009 to 2044 cap is met.
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    \22\ 79 FR 46514 (August 8, 2014).
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II. Basis for Proposed Action

    In this proposed FIP revision, the EPA is exercising its
discretionary authority under sections 301(a) and 301(d)(4) of the CAA
and 40 CFR 49.11(a). The EPA is proposing that it is necessary or
appropriate to revise the FIP for NGS to be more consistent with the
MATS Rule and the NSPS for EGUs. In particular, we are proposing to
require the use of PM CEMS to demonstrate compliance with a lower PM
emission limitation and remove the opacity limitation and COMS
monitoring requirement, which has served as a surrogate for a
compliance demonstration for the PM emission limitation. As explained
in the preamble to the 2010 FIP establishing the opacity limitation and
COMS requirement, water droplets, which are present in the NGS stacks
because of the SO2 scrubbers, can cause inaccurate excess
emission readings from the COMS.\23\ Therefore, the PM CEMS would
provide a better continuous demonstration of compliance with the PM
emission limitation than an opacity limit and COMS.
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    \23\ See 75 FR 10175. We also explained that, ``NGS will
continue to have a requirement to operate COMs on each stack since
the COMs do operate properly during start-up and at other times when
the SO2 scrubbers are bypassed for maintenance purposes .
. . Therefore, in the final rule excess opacity due to uncombined
water droplets in the stack does not constitute an exceedance, but
it will be reported on the quarterly excess emissions reports.'' 75
FR 10177. See also, 40 CFR 49.5113(f)(4).
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    For the reasons set forth above, we are proposing to find that
limited revisions to the FIP for NGS are necessary or appropriate to
further protect air quality on the Navajo Nation.

III. Summary of FIP Provisions

A. Proposed FIP Revisions

    The EPA is proposing the following limited revisions to the FIP for
NGS at 40 CFR 52.145(d) and 40 CFR 49.5513. We have included two
documents in the docket for this proposed rulemaking that show the
original text of 40 CFR 52.145(d) and 40 CFR 49.5513 and the EPA's
proposed revisions to those provisions.\24\
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    \24\ See documents titled ``2018 NGS part 49 FIP RLSO.docx'' and
``2018 part 52 FIP RLSO.docx'' in the docket for this rulemaking.
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1. Revisions to 40 CFR 52.145(d)
    The EPA is proposing to move the 1991 FIP promulgated at 40 CFR
52.145(d) to 40 CFR 49.5513(k) to consolidate the NGS FIP requirements
in a single section of the CFR. We are also proposing to revise 40 CFR
52.145(d) by changing internal citations referring to paragraph (d) to
refer instead to paragraph (k). For clarity, in this action we continue
to refer to the 1991 FIP as designated in 40 CFR 52.145(d).
    In addition, we are proposing to revise the definition of boiler
operating day in paragraph 52.145(d)(1) to be consistent with its
definition in the 2014 FIP.
2. Revisions to 40 CFR 49.5513(b)
    Under paragraph (b) of 40 CFR 49.5513, we are proposing to clarify
that the applicable compliance date for this section is April 5, 2010,
which was the original effective date for this section, unless
otherwise specified within specific provisions in 40 CFR 49.5513.
3. Revisions to 40 CFR 49.5513(d)
    In 40 CFR 49.5513(d)(2), we are proposing to revise the emission
limitation for PM from 0.060 lb/MMBtu to 0.030 lb/MMBtu, add a
compliance date for this revised limit, and remove specifications
related to PM testing. In 40 CFR 49.5513(d)(3), we are proposing to
remove the compliance date for submitting to the EPA a dust suppression
plan and to clarify the status of this plan, which the owner or
operator submitted on June 4, 2010 and revised on February 2, 2015.\25\
The final revision we are proposing to 40 CFR 49.5513(d) is to remove
the opacity limit and exclusions for water vapor in paragraph (4).
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    \25\ See Part 71 Federal Operating Permit Draft Statement Of
Basis Navajo Generating Station Permit No. NN-OP-15-06 (September
2015), p. 15.
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4. Revisions to 40 CFR 49.5513(e)
    In 40 CFR 49.5513(e)(1), we are proposing to delete the requirement
to

operate COMS. In 40 CFR 49.5513(e)(2), we are proposing to replace the
existing specifications related to annual PM testing with a requirement
to demonstrate compliance with the PM emission limit in 40 CFR
49.5513(d)(2) using PM CEMS in accordance with 40 CFR part 63 subpart
UUUUU and add a compliance date for this requirement. Under 40 CFR
49.5513(e)(4), we are proposing to remove the provision related to
COMS. Under 40 CFR 49.5513(e)(8), we are proposing to correct an
outdated reference.
5. Revisions to 40 CFR 49.5513(f)
    The EPA is proposing revisions to the reporting and recordkeeping
requirements to provide additional clarity that all reports and
notifications required in 40 CFR 49.5513(f), (f)(2), and (f)(4), should
be reported to the Navajo Nation Environmental Protection Agency
(NNEPA) and the EPA. We are also revising 40 CFR 49.5513(f) to update
addresses for reporting to the EPA. In addition, in 40 CFR
49.5513(f)(4), consistent with the proposed removal of the opacity
emission limitation and COMS requirement in 40 CFR 49.5513(d) and (e),
we are proposing to replace a requirement to submit excess opacity
reports as recorded by COMS with a requirement to submit excess
emission reports for PM as recorded by CEMS, and to remove additional
provisions related to the COMS.
6. Revisions to 40 CFR 49.5513(j)
    Under 40 CFR 49.5513(j)(8), we are proposing to remove addresses
for the NNEPA and the EPA that are already provided in 40 CFR
49.5513(f) and to require that all reports and notifications under 40
CFR 49.5513(j) be submitted to the NNEPA and the EPA in accordance with
40 CFR 49.5513(f).

B. Justification for Proposed FIP Revisions

1. Revisions to 40 CFR 52.145(d)
    We are proposing to move the 1991 FIP from 40 CFR 52.145(d) to 40
CFR 49.5513(k). The 1991 FIP was originally codified in 40 CFR part 52
subpart D, which contains the SIP provisions for the state of Arizona.
The provisions at 52.145 relate to visibility protection and paragraph
(d) pertains to the control of SO2 emissions from NGS based
on the effects of those emissions on visibility at Grand Canyon
National Park. Because the EPA has subsequently promulgated FIP
requirements for NGS in 40 CFR part 49 subpart L, for regulatory
clarity, we are proposing to move the SO2 requirements from
the 1991 FIP to the same part of the CFR as the implementation plans in
Indian country, including the FIP requirements for NGS promulgated in
2010 and 2014. This move will not relax any existing FIP requirements
for NGS and will have no effect on air quality in the area surrounding
NGS.
    Throughout 40 CFR 52.145(d), the provisions include internal
citations referring to specific subparagraphs in paragraph (d).
Consistent with our proposal to move the provisions from the 1991 FIP
to 40 CFR 49.5513(k), we are also proposing to revise the internal
citations that currently refer to paragraph (d) (i.e., 40 CFR
52.145(d)) to refer instead to paragraph (k) (i.e., 40 CFR 49.5513(k)).
This proposed revision will not relax any existing FIP requirements for
NGS and will have no effect on air quality in the area surrounding NGS.
    We are also proposing to revise a definition of boiler operating
day in 40 CFR 52.145(d)(1). The term is currently defined as a 24-hour
calendar day during which coal is combusted in that unit for the entire
24-hours. We are proposing to revise the definition to mean a 24-hour
period between 12 midnight and the following midnight during which any
fuel is combusted at any time, such that it is not necessary for fuel
to be combusted the entire 24-hour period. This revised definition, if
finalized, would be identical to the definition of boiler operating day
promulgated in the 2014 FIP and would be consistent with the recent
changes to the definition promulgated by the EPA elsewhere (e.g., the
NSPS for EGUs).
2. Revisions to 40 CFR 49.5513(b)
    Under paragraph (b) of 40 CFR 49.5513, we are proposing to add a
statement to the compliance dates specifying that compliance with the
requirements of the section is required by April 5, 2010, which was the
original effective date for this section, unless otherwise specified
within specific provisions in 40 CFR 49.5513. Because the FIP
provisions for NGS promulgated in 1991, 2010, and 2014 all have
different compliance dates, we are proposing to revise this provision
for regulatory clarity. The compliance date for the FIP provisions for
NGS promulgated in 2010 would remain April 5, 2010, while the deadlines
for the 1991 and 2014 FIPs would remain as specified in paragraphs 40
CFR 52.145(d)(6) and 49.5513(j) respectively. The compliance dates for
the revised PM limit and PM CEMS requirements would be specified in
paragraphs 40 CFR 49.5513(d)(2) and (e)(2), as explained below. This
proposed revision would not relax any existing FIP requirements for NGS
and would have no effect on air quality in the area surrounding NGS.
3. Revisions to 40 CFR 49.5513(d)
    In 40 CFR 49.5513(d)(2), we are proposing to revise the PM emission
limitation from 0.060 lb/MMBtu to 0.030 lb/MMBtu for consistency with
the numerical PM emission limitation in the MATS Rule. The current
applicable emission limitation for PM in the 2010 FIP is higher than
the PM emission limitation in the MATS Rule. Revising the PM emission
limitation in 40 CFR 49.5513(d)(2) to 0.030 lb/MMBtu will make the PM
emission limitation in the FIP conform to the applicable, more
stringent emission limitation in the MATS Rule. The EPA anticipates
this will not result in any substantive change in the applicable
requirements or the method of PM control for this facility. We propose
to require compliance with this limitation in the FIP by the effective
date of the final FIP. In 40 CFR 49.5513(d)(2), we are also proposing
to delete the current provisions related to PM emissions testing. The
requirements for demonstrating compliance with the PM emission
limitation are instead addressed in 40 CFR 49.5513(e). In 40 CFR
49.5513(d)(3), we are proposing to clarify the requirement for
submitting to the EPA a dust suppression plan.
    In 40 CFR 49.5513, we are proposing to remove paragraph (d)(4),
which contains provisions related to the opacity limit. In 2016, SRP
installed and calibrated PM CEMS on each unit at NGS. We are proposing
to remove the opacity limit from the NGS FIP because in 40 CFR
49.5513(e)(2), we are proposing to add a new requirement to operate the
PM CEMS on each unit to demonstrate compliance with the PM emission
limitation of 0.030 lb/MMBtu. This provision is consistent with the
NSPS for EGUs at 40 CFR 60.42Da(b)(1) and the Acid Rain Program
requirements at 40 CFR 75.14(e), which generally provide that any owner
or operator that elects to install, calibrate, maintain, and operate a
PM CEMS for demonstrating compliance with a sufficiently stringent PM
emission limitation (i.e., 0.030 lb/MMBtu or lower) need not meet the
opacity limit and monitoring requirements.\26\ The PM

CEMS is a monitoring system that provides a continuous assessment of
compliance with a PM emission limitation. Generally, opacity limits and
COMS have been used as a surrogate to ensure compliance with a PM
emission standard that would otherwise be subject only to periodic
source testing.\27\ NGS is not subject to the NSPS for EGUs at 40 CFR
60.42Da. However, we are proposing to follow the same rationale from
Subpart Da to remove the opacity limit and COMS requirement because we
are concurrently proposing to revise the NGS FIP to require the
installation, calibration, operation, and maintenance of PM CEMS to
demonstrate compliance with the lower proposed PM emission limitation
of 0.030 lb/MMBtu. As explained in the preamble to our 2010 FIP, water
droplets, which are present in the NGS stacks because of the
SO2 scrubbers, can cause inaccurate excess emission readings
on the COMS.\28\ Because the PM CEMS provides a better continuous
demonstration of compliance with the revised and more stringent PM
emission limitation than an opacity limit and COMS, this proposed
revision would not relax any existing requirements in the NGS FIP with
respect to PM emissions and would not adversely affect air quality in
the surrounding area.
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    \26\ See NSPS for EGUs at 40 CFR 60.42Da and the Acid Rain
Program requirements at 40 CFR part 70. Subpart Da to part 60 is the
``Standard of Performance for Electric Utility Steam Generating
Units'' and applies to units that are capable of combusting more
than 73 MW heat input of fossil fuel and for which construction,
modification, or reconstruction commenced after September 18, 1978.
The units at NGS were constructed prior to 1978 and are not subject
to part 60 subpart Da.
    \27\ See, e.g., discussion of opacity in the 2007 FIP for the
Four Corners Power Plant, 72 FR 25698 at 25701 (May 7, 2007),
stating that opacity limits are generally applied to ensure a unit
is meeting its PM limit.
    \28\ See 75 FR 10175. We also explained that, ``NGS will
continue to have a requirement to operate COMs on each stack since
the COMs do operate properly during start-up and at other times when
the SO2 scrubbers are bypassed for maintenance purposes .
. . Therefore, in the final rule excess opacity due to uncombined
water droplets in the stack does not constitute an exceedance, but
it will be reported on the quarterly excess emissions reports.'' 75
FR 10177. See also, 40 CFR 49.5113(f)(4).
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4. Revisions to 40 CFR 49.5513(e)
    In 40 CFR 49.5513(e)(1) and (e)(4), we are proposing changes to
remove testing and monitoring requirements for opacity, consistent with
our proposed removal of the opacity limit in 40 CFR 49.5513(d)(4).
Because we are proposing to remove the opacity limit, the requirements
in 40 CFR 49.5513(e)(1) to operate COMS and in (e)(4) to maintain two
sets of opacity filters for the COMS are no longer necessary. In
paragraph (e)(2), we are proposing to replace the existing
specifications related to annual PM testing with a requirement to
install, calibrate, maintain, and operate PM CEMS to demonstrate
compliance with the 0.030 lb/MMBtu emission limit in accordance with
the specifications in the MATS Rule by the effective date of the final
FIP. The use of PM CEMS is a continuous measurement and is a better
method for ensuring compliance with the revised and more stringent PM
emission limit than annual source testing for the existing less
stringent PM emission limit combined with an opacity limit and COMS.
Therefore, these combined revisions would not relax existing
requirements with respect to PM emissions or result in adverse effects
on air quality in the surrounding area.
    Under 40 CFR 49.5513(e)(8), we are proposing to correct an outdated
reference to ``Section 49.24(d)(3),'' which has been recodified as 40
CFR 49.5513(d)(3).\29\
---------------------------------------------------------------------------

    \29\ 76 FR 23876 (April 29, 2011).
---------------------------------------------------------------------------

5. Revisions to 40 CFR 49.5513(f)
    The EPA is proposing revisions to the reporting and recordkeeping
requirements to specify that all reports and notifications required in
40 CFR 49.5513 should be sent to the NNEPA and the Regional
Administrator of the Region IX office of the EPA. Because 40 CFR
49.5513(f)(2) repeats addresses and other reporting details already
provided in paragraph (f), we are also proposing to delete the
redundant provisions in paragraph (f)(2). These proposed administrative
changes would not relax any requirements or have any effect on air
quality in the area surrounding NGS.
    In addition, consistent with the proposed removal of the COMS
requirement in paragraph (e), we are also proposing to remove the
reporting requirements related to the COMS in paragraph (f)(4). The use
of PM CEMS is a continuous measurement and is a better method for
ensuring compliance with the revised and more stringent PM emission
limit than annual source testing for the existing less stringent PM
emission limit combined with an opacity limit and COMS. Therefore,
these combined revisions would not relax existing requirements with
respect to PM emissions or result in adverse effects on air quality in
the surrounding area.
6. Revisions to 40 CFR 49.5513(j)
    In 40 CFR 49.5513(j)(8), we are proposing to remove addresses for
the NNEPA and the EPA that are already provided in 40 CFR 49.5513(f)
and to require that all reports and notifications under paragraph (j)
be submitted to the NNEPA and the EPA in accordance with 40 CFR
49.5513(f). This proposed revision removes redundant information and
requires reporting for 40 CFR 49.55153(j) to be consistent with the
reporting requirements in 40 CFR 49.5513(f). Therefore, these proposed
revisions would not adversely affect air quality in the surrounding
area. These proposed changes to 40 CFR 49.5513(j)(10) do not relax any
requirements or have any effect on air quality in the area surrounding
NGS.

IV. Solicitation of Comments

    As described above, the EPA is proposing the following revisions:
(1) Move the 1991 FIP provisions from 40 CFR 52.145(d) to 40 CFR
49.5513; (2) revise a definition of boiler operating day; (3) clarify
the compliance dates applicable to the FIP requirements; (4) lower the
PM emission limitation in the 2010 FIP from 0.060 lb/MMBtu to 0.030 lb/
MMBtu; (5) revise the PM compliance demonstration from annual source
testing to the use of PM CEMS; (6) and replace the existing opacity
limit and COMS requirement with a new requirement to demonstrate
compliance with the PM emission limitation of 0.030 lb/MMBtu using PM
CEMS.
    The EPA solicits comments on the limited provisions of the NGS FIP
that we are proposing to revise in this rulemaking. We are not
accepting comment on any provisions of the NGS FIP that we are not
proposing to revise. Accordingly, please limit your comments to those
specific provisions listed above that we are proposing to revise in
today's action.

V. Environmental Justice Considerations

    The Navajo Generating Station is located on the reservation lands
of the Navajo Nation, and the EPA recognizes there is significant
community interest in the emissions and environmental effects of this
facility. As discussed elsewhere in this document, the proposed
revisions to the NGS FIP would strengthen the FIP by requiring the use
of PM CEMS to demonstrate compliance with the lower PM emission
limitation of 0.030 lb/MMBtu. Because the proposed revisions strengthen
the NGS FIP, the EPA considers this action to be beneficial for human
health and the environment, and to have no potential disproportionately
high and adverse effects on minority, low-income, or indigenous
populations.

VI. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review

    This action is not a significant regulatory action and was
therefore not submitted to the Office of Management and Budget (OMB)
for review. This rule applies to only one facility and is therefore not
a rule of general applicability.

B. Executive Order 13771: Reducing Regulations and Controlling
Regulatory Costs

    This action is not expected to be an Executive Order 13771
regulatory action because this action is not significant under
Executive Order 12866.

C. Paperwork Reduction Act (PRA)

    This action does not impose an information collection burden under
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
This rule applies to only one facility. Therefore, its recordkeeping
and reporting provisions do not constitute a ``collection of
information'' as defined under 44 U.S.C. 3502(3) and 5 CFR 1320.3(c).

D. Regulatory Flexibility Act (RFA)

    I certify that this proposed action will not have a significant
economic impact on a substantial number of small entities. This action
will not impose any requirements on small entities. Firms primarily
engaged in the generation, transmission, and/or distribution of
electric energy for sale are small if, including affiliates, the total
electric output for the preceding fiscal year did not exceed four
million megawatt-hours. Each of the owners of the facility affected by
this rule, Salt River Project, the Bureau of Reclamation, Arizona
Public Service, Tucson Electric Power, and NV Energy, exceed this
threshold.

E. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded mandate of $100 million or
more as described in UMRA, 2 U.S.C. 1531-1538, and does not
significantly or uniquely affect small governments.

F. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government.

G. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments

    This action does not have tribal implications, as specified in
Executive Order 13175. Although this proposed action affects a facility
located in Indian country, the proposed limited revisions to existing
provisions in the NGS FIP will not have substantial direct effects on
any Indian tribes, on the relationship between the federal government
and Indian tribes, or on the distribution of power and responsibilities
between the federal government and Indian tribes. Thus, Executive Order
13175 does not apply to this action. However, we note that we have
engaged in numerous discussions with the NNEPA during the development
of this proposed rule and continue to invite consultation on this
proposed action.

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

    EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern health or safety risks that the EPA has
reason to believe may disproportionately affect children, per the
definition of ``covered regulatory action'' in section 2-202 of the
Executive Order. This action is not subject to Executive Order 13045
because it does not concern an environmental health risk or safety
risk.

I. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use

    This action is not subject to Executive Order 13211 because it is
not a significant regulatory action under Executive Order 12866.

J. National Technology Transfer and Advancement Act

    This action involves technical standards. The technical standards
in this action are based on the technical standards used in other
rulemakings promulgated by the EPA. We refer to the discussion of the
technical standards and voluntary consensus standards in the final rule
for 40 CFR part 60 subpart Da and 40 CFR part 63 subpart UUUUU at 77 FR
9304 at 9441 (February 16, 2012).

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

    The EPA believes the human health or environmental risk addressed
by this action will not have potential disproportionately high and
adverse human health or environmental effects on minority, low-income
or indigenous populations. If this rule is finalized as proposed, we
expect that the limited revisions to the FIP will strengthen
requirements for PM compliance demonstrations with a lower PM emission
limitation of 0.030 lb/MMBtu, and will not relax any other existing
requirements.

List of Subjects

40 CFR Part 49

    Environmental protection, Administrative practice and procedure,
Air pollution control, Incorporation by reference, Indians,
Intergovernmental relations, Reporting and recordkeeping requirements.

40 CFR Part 52

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

    Dated: October 26, 2018.
Deborah Jordan,
Acting Regional Administrator, Region IX.

    Chapter I, title 40, of the Code of Federal Regulations is proposed
to be amended as follows:

PART 49--INDIAN COUNTRY: AIR QUALITY PLANNING AND MANAGEMENT

0
1. The authority citation for part 49 continues to read as follows:

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

Subpart L--Implementation Plans for Tribes--Region IX

0
2. Section 49.5513 is amended by:
0
a. Revising paragraph (b);
0
b. Revising paragraphs (d)(2) and (3);
0
c. Removing paragraph (d)(4);
0
d. Revising paragraphs (e)(1) and (2);
0
e. Removing and reserving paragraph (e)(4);
0
f. Revising paragraph (8);
0
g. Revising paragraphs (f) introductory text and (f)(2) and (4);
0
h. Revising paragraphs (j)(8) introductory text; and
0
i. Adding paragraph (k).
    The revisions and additions read as follows:

Sec.  49.5513  Federal Implementation Plan Provisions for Navajo
Generating Station, Navajo Nation.

* * * * *
    (b) Compliance dates. Compliance with the requirements of this
section is required no later than April 5, 2010, unless otherwise
indicated by compliance dates contained in specific provisions.
* * * * *
    (d) * * *
    (2) Particulate matter. By [DATE 30 DAYS AFTER DATE OF PUBLICATION
OF FINAL RULE IN THE FEDERAL REGISTER], no owner or operator shall
discharge or cause the discharge of particulate matter into the
atmosphere in excess of 0.030 lb/MMBtu, on a plant-wide basis.
    (3) Dust. Each owner or operator shall operate and maintain the
existing dust suppression methods for controlling dust from the coal
handling and storage facilities, as documented in the dust suppression
plan submitted on February 2, 2015, or any subsequent revision thereto.
Each owner or operator shall not emit dust with an opacity greater than
20% from any crusher, grinding mill, screening operation, belt
conveyor, truck loading or unloading operation, or railcar unloading
station, as determined using 40 CFR part 60, Appendix A-4 Method 9.
    (e) Testing and monitoring. (1) On and after the effective date of
this regulation, the owner or operator shall maintain and operate
Continuous Emissions Monitoring Systems (CEMS) for NOX and
SO2 on Units 1, 2, and 3 in accordance with 40 CFR 60.8 and
60.13(e), (f), and (h), and Appendix B of Part 60. The owner or
operator shall comply with the quality assurance procedures for CEMS
found in 40 CFR part 75.
    (2) By [DATE 30 DAYS AFTER DATE OF PUBLICATION OF FINAL RULE IN THE
FEDERAL REGISTER], the owner or operator shall install, calibrate,
maintain, and operate particulate matter CEMS on Units 1, 2, and 3 to
assure continuous compliance with the particulate matter limits in
paragraph (d)(2) of this section, in accordance with 40 CFR part 63
subpart UUUUU.
* * * * *
    (8) A certified EPA Reference Method 9 of Appendix A-4 of 40 CFR
part 60 observer shall conduct a weekly visible emission observation
for the equipment and activities described under paragraph (d)(3) of
this section. If visible emissions are present at any of the equipment
and/or activities, a 6-minute EPA Reference Method 9 observation shall
be conducted. The name of the observer, date, and time of observation,
results of the observations, and any corrective actions taken shall be
noted in a log.
    (f) Reporting and recordkeeping requirements. All requests,
reports, submittals, notifications and other communications to the EPA,
Regional Administrator, or Administrator required by this section and
references therein shall be submitted to the Director, Navajo
Environmental Protection Agency, P.O. Box 339, Window Rock, Arizona
86515,<PHONE_NUMBER>,<PHONE_NUMBER> (facsimile); and to the Regional
Administrator, U.S. Environmental Protection Agency, Region IX, to the
attention of Mail Code: ORA-1, at 75 Hawthorne Street, San Francisco,
California 94105,<PHONE_NUMBER>. For each unit subject to the
emissions limitations in this section the owner or operator shall:
* * * * *
    (2) For excess emissions, notify the Regional Administrator by
telephone or in writing within one business day. A complete written
report of the incident shall be submitted to the Regional Administrator
within ten (10) working days after the event. This notification shall
include the following information:
* * * * *
    (4) Submit quarterly excess emissions reports for sulfur dioxide
and PM as recorded by CEMS together with a CEMS data assessment report
to the Regional Administrator no later than 30 days after each calendar
quarter. The owner or operator shall complete the excess emissions
reports according to the procedures in 40 CFR 60.7(c) and (d) and
include the Cylinder Gas Audit.
* * * * *
    (j) * * *
    (8) Reporting. All reports and notifications under this paragraph
(j) must be submitted as required by paragraph (f) of this section to
the Director, Navajo Nation Environmental Protection Agency and to the
Regional Administrator.
* * * * *
    (k) This paragraph (k) is applicable to the fossil fuel-fired,
steam-generating equipment designated as Units 1, 2, and 3 at the
Navajo Generating Station in the Northern Arizona Intrastate Air
Quality Control Region 40 CFR 81.270).
    (1) Definitions--(i) Administrator means the Administrator of EPA
or his/her designee.
    (ii) Affected unit(s) means the steam-generating unit(s) at the
Navajo Generating Station, all of which are subject to the emission
limitation in paragraph (k)(2) of this section, that has accumulated at
least 365 boiler operating days since the passage of the date defined
in paragraph (k)(6) of this section applicable to it.
    (iii) Boiler operating day means a 24-hour period between 12
midnight and the following midnight during which any fuel is combusted
at any time in the steam-generating unit. It is not necessary for fuel
to be combusted the entire 24-hour period.
    (iv) Owner or operator means the owner, participant in, or operator
of the Navajo Generating Station to which this paragraph (k) is
applicable.
    (v) Unit-week of maintenance means a period of 7 days during which
a fossil fuel-fired steam-generating unit is under repair, and no coal
is combusted in the unit.
    (2) Emission limitation. The following emission limitation shall
apply at all times. No owner or operator shall discharge or cause the
discharge of sulfur oxides into the atmosphere in excess of 42
nanograms per Joule (ng/J) [0.10 pound per million British thermal
units (lb/MMBtu)] heat input.
    (3) Compliance determination. Until at least one unit qualifies as
an affected unit, no compliance determination is appropriate. As each
unit qualifies for treatment as an affected unit, it shall be included
in the compliance determination. Compliance with this emission limit
shall be determined daily on a plant-wide rolling annual basis as
follows:
    (i) For each boiler operating day at each steam generating unit
subject to the emission limitation in paragraph (k)(2) of this section,
the owner or operator shall record the unit's hourly SO2
emissions using the data from the continuous emission monitoring
systems, required in paragraph (k)(4) of this section, and the daily
electric energy generated by the unit (in megawatt-hours) as measured
by the megawatt-hour meter for the unit.
    (ii) Compute the average daily SO2 emission rate in ng/J
(lb/MMBtu) following the procedures set out in method 19, appendix A,
40 CFR part 60 in effect on October 3, 1991.
    (iii) For each boiler operating day for each affected unit,
calculate the product of the daily SO2 emission rate
(computed according to paragraph (k)(3)(ii) of this section) and the
daily electric energy generated (recorded according to paragraph
(k)(3)(i) of this section) for each unit.
    (iv) For each affected unit, identify the previous 365 boiler
operating days to be used in the compliance determination. Except as
provided in paragraphs (k)(9) and (k)(10) of this section, all of the
immediately

preceding 365 boiler operating days will be used for compliance
determinations.
    (v) Sum, for all affected units, the products of the daily
SO2 emission rate-electric energy generated (as calculated
according to paragraph (k)(3)(iii) of this section) for the boiler
operating days identified in paragraph (k)(3)(iv) of this section.
    (vi) Sum, for all affected units, the daily electric energy
generated (recorded according to paragraph (k)(3)(i) of this section)
for the boiler operating days identified in paragraph (k)(3)(iv) of
this section.
    (vii) Calculate the weighted plant-wide annual average
SO2 emission rate by dividing the sum of the products
determined according to paragraph (k)(3)(v) of this section by the sum
of the electric energy generated determined according to paragraph
(k)(3)(vi) of this section.
    (viii) The weighted plant-wide annual average SO2
emission rate shall be used to determine compliance with the emission
limitation in paragraph (k)(2) of this section.
    (4) Continuous emission monitoring. The owner or operator shall
install, maintain, and operate continuous emission monitoring systems
to determine compliance with the emission limitation in paragraph
(k)(2) of this section as calculated in paragraph (k)(3) of this
section. This equipment shall meet the specifications in appendix B of
40 CFR part 60 in effect on October 3, 1991. The owner or operator
shall comply with the quality assurance procedures for continuous
emission monitoring systems found in appendix F of 40 CFR part 60 in
effect on October 3, 1991.
    (5) Reporting requirements. For each steam generating unit subject
to the emission limitation in paragraph (k)(2) of this section, the
owner or operator:
    (i) Shall furnish the Administrator written notification of the
SO2, oxygen, and carbon dioxide emissions according to the
procedures found in 40 CFR 60.7 in effect on October 3, 1991;
    (ii) Shall furnish the Administrator written notification of the
daily electric energy generated in megawatt-hours;
    (iii) Shall maintain records according to the procedures in 40 CFR
60.7 in effect on October 3, 1991; and
    (iv) Shall notify the Administrator by telephone or in writing
within one business day of any outage of the control system needed for
compliance with the emission limitation in paragraph (k)(2) of this
section and shall submit a follow-up written report within 30 days of
the repairs stating how the repairs were accomplished and justifying
the amount of time taken for the repairs.
    (6) Compliance dates. The requirements of this paragraph shall be
applicable to one unit at the Navajo Generating Station beginning
November 19, 1997, to two units beginning November 19, 1998, and to all
units beginning on August 19, 1999.
    (7) Schedule of compliance. The owner or operator shall take the
following actions by the dates specified, but the interim deadlines
will be extended if the owner or operators can demonstrate to the
Administrator that compliance with the deadlines in paragraph (k)(6) of
this section will not be affected:
    (i) By June 1, 1992, award binding contracts to an architectural
and engineering firm to design and procure the control system needed
for compliance with the emission limitation in paragraph (k)(2) of this
section.
    (ii) By January 1, 1995, initiate on-site construction or
installation of a control system for the first unit.
    (iii) By May 1, 1997, initiate start-up testing of the control
system for the first unit.
    (iv) By May 1, 1998, initiate start-up testing of the control
system for the second unit.
    (v) By February 1, 1999, initiate start-up testing of the control
system for the third unit.
    (8) Reporting on compliance schedule. Within 30 days after the
specified date for each deadline in the schedule of compliance in
paragraph (k)(7) of this section, the owner or operator shall notify
the Administrator in writing whether the deadline was met. If it was
not met, the notice shall include an explanation why it was not met and
the steps which shall be taken to ensure future deadlines will be met.
    (9) Exclusion for equipment failure during initial operation. (i)
For each unit, in determining compliance for the first year that such
unit is required to meet the emission limitation in paragraph (k)(2) of
this section, periods during which one of the following conditions are
met shall be excluded.
    (A) Equipment or systems do not meet designer's or manufacturer's
performance expectations.
    (B) Field installation including engineering or construction
precludes equipment or systems from performing as designed.
    (ii) The periods to be excluded shall be determined by the
Administrator based on the periodic reports of compliance with the
emission limitation in paragraph (k)(2) of this section which shall
identify the times proposed for exclusion and provide the reasons for
the exclusion, including the reasons for the control system outage. The
report also shall describe the actions taken to avoid the outage, to
minimize its duration, and to reduce SO2 emissions at the
plant to the extent practicable while the control system was not fully
operational. Whenever the time to be excluded exceeds a cumulative
total of 30 days for any control system for any affected unit, the
owner or operators shall submit a report within 15 days addressing the
history of and prognosis for the performance of the control system.
    (10) Exclusion for catastrophic failure. In addition to the
exclusion of periods allowed in paragraph (d)(9) of this section, any
periods of emissions from an affected unit for which the Administrator
finds that the control equipment or system for such unit is out of
service because of catastrophic failure of the control system which
occurred for reasons beyond the control of the owner or operators and
could not have been prevented by good engineering practices will be
excluded from the compliance determination. Events which are the
consequence of lack of appropriate maintenance or of intentional or
negligent conduct or omissions of the owner or operators or the control
system design, construction, or operating contractors do not constitute
catastrophic failure.
    (11) Equipment operation. The owner or operator shall optimally
operate all equipment or systems needed to comply with the requirements
of this paragraph consistent with good engineering practices to keep
emissions at or below the emission limitation in paragraph (k)(2) of
this section, and following outages of any control equipment or systems
the control equipment or system will be returned to full operation as
expeditiously as practicable.
    (12) Maintenance scheduling. On March 16 of each year starting in
1993, the owner or operator shall prepare and submit to the
Administrator a long-term maintenance plan for the Navajo Generating
Station that accommodates the maintenance requirements for the other
generating facilities on the Navajo Generating Station grid covering
the period from March 16 to March 15 of the next year and showing at
least 6 unit-weeks of maintenance for the Navajo Generating Station
during the November 1 to March 15 period, except as provided in
paragraph (k)(13) of this section. This plan shall be developed
consistent with the criteria established by the Western States
Coordinating Council of the North American Electric Reliability Council
to ensure an adequate reserve margin of electric

generating capacity. At the time that a plan is transmitted to the
Administrator, the owner or operator shall notify the Administrator in
writing if less than the full scheduled unit-weeks of maintenance were
conducted for the period covered by the previous plan and shall furnish
a written report stating how that year qualified for one of the
exceptions identified in paragraph (k)(13) of this section.
    (13) Exceptions for maintenance scheduling. The owner or operator
shall conduct a full 6 unit-weeks of maintenance in accordance with the
plan required in paragraph (k)(12) of this section unless the owner or
operator can demonstrate to the satisfaction of the Administrator that
a full 6 unit-weeks of maintenance during the November 1 to March 15
period should not be required because one of the conditions in
paragraph (k)(13)(i) through (iv) of this section are met. If the
Administrator determines that a full 6 unit-weeks of maintenance during
the November 1 to March 15 period should not be required, the owner or
operator shall nevertheless conduct that amount of scheduled
maintenance that is not precluded by the Administrator. Generally, the
owner or operator shall make best efforts to conduct as much scheduled
maintenance as practicable during the November 1 to March 15 period.
    (i) There is no need for 6 unit-weeks of scheduled periodic
maintenance in the year covered by the plan;
    (ii) The reserve margin on any electrical system served by the
Navajo Generating Station would fall to an inadequate level, as defined
by the criteria referred to in paragraph (k)(12) of this section;
    (iii) The cost of compliance with this requirement would be
excessive. The cost of compliance would be excessive when the economic
savings to the owner or operator of moving maintenance out of the
November 1 to March 15 period exceeds $50,000 per unit-day of
maintenance moved; and
    (iv) A major forced outage at a unit occurs outside of the November
1 to March 15 period, and necessary periodic maintenance occurs during
the period of forced outage.

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

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

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

Subpart D--Arizona

Sec.  52.145   [Amended]

0
4. Section 52.145 amended by removing and reserving paragraph (d).

[FR Doc. 2018-24482 Filed 11-8-18; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register: November 17, 2006 (Volume 71, Number 222)]
[Notices]
[Page 66993-66998]
[DOCID:fr17no06-90]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54739; File No. SR-Amex-2006-78]

Self-Regulatory Organizations; American Stock Exchange LLC; Order
Granting Accelerated Approval to Proposed Rule Change and Amendment No.
1 Thereto and Notice of Filing and Order Granting Accelerated Approval
to Amendment No. 2 Thereto Relating to Generic Listing Standards for
Series of Portfolio Depositary Receipts and Index Fund Shares Based on
International or Global Indexes

November 9, 2006.

I. Introduction

    On August 18, 2006, the American Stock Exchange LLC (``Amex'' or

``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'' or ``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt generic listing
standards pursuant to Rule 19b-4(e) \3\ for series of portfolio deposit
receipts (``PDRs'') and index fund shares (``IFSs'') based on
international or global indexes. On October 12, 2006, Amex submitted
Amendment No. 1 to the proposal.\4\ The proposed rule change and
Amendment No. 1 thereto were published for comment in the Federal
Register on October 19, 2006 for a 15-day comment period.\5\ The
Commission received one comment letter.\6\ On November 6, 2006, Amex
submitted Amendment No. 2 to the proposal.\7\ This order approves the
proposed rule change, as amended, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240. 19b-4.
    \3\ 17 CFR 240.19b-4(e).
    \4\ In Amendment No. 1, Amex revised the proposed rule text and
clarified certain aspects of its proposal.
    \5\ See Securities Exchange Act Release No. 54595 (October 12,
2006), 71 FR 61811.
    \6\ See letter from Ira P. Shapiro, Principal and Associate
General Counsel, Barclays Global Investors (``BGI''), dated October
29, 2006 (``BGI Comment Letter'').
    \7\ In Amendment No. 2, Amex clarified the nature of its
surveillance procedures applicable to ETFs that may be listed and
traded pursuant to the proposed rule change.
---------------------------------------------------------------------------

II. Description of Proposal

    As explained more fully in the notice of the proposed rule change,
the Exchange proposes to revise Amex Rules 1000 and 1000A to include
generic listing standards for series of PDRs and IFSs that are based on
international or global indexes.\8\ Additionally, the Exchange proposes
to revise Amex Rules 1000 and 1000A to include generic listing
standards for PDRs and IFSs (PDRs and IFSs together referred to as
``exchange-traded funds'' or ``ETFs'') that are based on indexes or
portfolios previously approved by the Commission as an underlying
benchmark for the trading of PDRs, IFSs, options or other specified
index-based securities. Finally, Amex proposes other minor clarifying
changes to Amex Rules 1000, 1002, 1000A and 1002A.\9\
---------------------------------------------------------------------------

    \8\ 8 Amex Rules 1000 et seq. allow for the listing and trading
on the Exchange of PDRs, which represent interests in a unit
investment trust registered under the Investment Company Act of 1940
(``1940 Act'') that operates on an open-end basis and that holds the
securities that comprise an index or portfolio. Amex Rules 1000A et
seq. provide standards for the listing and trading of IFSs, which
are securities issued by an open-end management investment company
based on a portfolio of stocks or fixed income securities that seeks
to provide investment results that correspond generally to the price
and yield performance of a specified foreign or domestic stock index
or fixed income securities index.
    \9\ The standards set out in Commentary .03(a)(A) to Rule 1000
and Commentary .02(a)(A) to Rule 1000A are being modified to make
the wording of each requirement consistent; in addition, standard
(5) of these Commentaries has been modified to reflect the
Commission's adoption of Regulation NMS, 17 CFR 242.600 et seq.
Proposed Commentary .03(b)(iv) to Rule 1000 and Commentary
.02(b)(iv) to Rule 1000A have been added to require that entities
that advise index providers or calculators and related entities have
in place procedures designed to prevent the use and dissemination of
material non-public information regarding the index underlying the
ETF.
---------------------------------------------------------------------------

    Specifically, the Exchange proposes to revise Commentary .03 to
Rule 1000 and Commentary .02 to Rule 1000A to include generic listing
standards for series of ETFs that are based on international or global
indexes, or on indexes previously approved by the Commission under
Section 19(b)(2) of the Exchange Act for the trading of ETFs, options
or other index-based securities. This proposal will enable the Exchange
to list and trade ETFs pursuant to Rule 19b-4(e) \10\ of the Exchange
Act if each of the conditions set forth in Commentary .03 to Rule 1000
or Commentary .02 to Rule 1000A is satisfied. Rule 19b-4(e) provides
that the listing and trading of a new derivative securities product by
a self-regulatory organization (``SRO'') shall not be deemed a proposed
rule change, pursuant to paragraph (c)(1) of Rule 19b-4, if the
Commission has approved, pursuant to Section 19(b) of the Exchange Act,
the SRO's trading rules, procedures and listing standards for the
product class that would include the new derivatives securities
product, and the SRO has a surveillance program for the product
class.\11\
---------------------------------------------------------------------------

    \10\ 17 CFR 240.19b-4(e).
    \11\ When relying on Rule 19b-4(e), the SRO must submit Form
19b-4(e) to the Commission within five business days after the SRO
begins trading the new derivative securities products. See
Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR
70952 (December 22, 1998).
---------------------------------------------------------------------------

    To list a PDR or an IFS pursuant to the proposed generic listing
standards for international or global indexes, the index underlying the
PDR or IFS must satisfy all the conditions in Commentary .03 to Rule
1000 (for PDRs) or proposed Commentary .02 to Rule 1000A (for IFSs). As
with the existing generic listing standards for ETFs based on domestic
indexes, the Exchange states that these generic listing standards are
intended to ensure that stocks with substantial market capitalization
and trading volume account for a substantial portion of the weight of
an index or portfolio.
    As proposed, the definition section of each of Rule 1000 and Rule
1000A would be revised to include definitions of U.S. Component Stock
and Non-US Component Stock. These new definitions would provide the
basis for the standards for indexes with either domestic or
international stocks, or a combination of both. A ``Non-US Component
Stock'' would mean an equity security issued by an entity that: (a) Is
not organized, domiciled or incorporated in the United States; (b) is
not registered under Section 12(b) or 12(g) of the Exchange Act; and
(c) is an operating company (including Real Estate Investment Trusts
(REITS) and income trusts, but excluding investment trusts, unit
trusts, mutual funds, and derivatives). This definition is designed to
create a category of component stocks that are issued by companies that
are not based in the U.S., but that also are not subject to oversight
through Commission registration, and would include sponsored Global
Depositary Receipts (``GDRs'') and European Depositary Receipts
(``EDRs''). A ``US Component Stock'' would mean an equity security that
is registered under Section 12(b) or 12(g) of the Exchange Act.
    The Exchange proposes that to list an ETF based on an international
or global index or portfolio pursuant to the generic listing standards,
such index or portfolio must meet the following criteria:
     Component stocks that in the aggregate account for at
least 90% of the weight of the index or portfolio shall have a minimum
market value \12\ of at least $100 million (Rule 1000, Commentary
.03(a)(B)(1) and Rule 1000A, Commentary .02(a)(B)(1)); \13\
---------------------------------------------------------------------------

    \12\ The Exchange stated for purposes of this filing that
``market value'' is calculated by multiplying the total shares
outstanding by the price per share of the component stock.
    \13\ The BGI Comment Letter notes that certain no-action relief
provided by Commission staff under the Exchange Act (the ``ETF No-
Action Letters'') uses a public float standard, rather than this
market value standard, and suggests consistency. The Exchange notes
that the ETF No-Action Letters address separate regulatory
objectives but is willing to examine modifications to its listing
standards in the future. Telephone conference among Marija Willen,
Vice President and Associate General Counsel, Amex, Scott Ebner,
Vice President, Amex, Florence Harmon, Senior Special Counsel,
Division of Market Regulation (``Division''), Commission, and Brian
Trackman, Special Counsel, Division, Commission, on November 6, 2006
(``November 6 Telephone Conference'').
---------------------------------------------------------------------------

     Component stocks representing at least 90% of the weight
of the index or portfolio shall have a minimum worldwide monthly
trading volume \14\

during each of the last six months of at least 250,000 shares \15\
(Rule 1000, Commentary .03(a)(B)(2) and Rule 1000A, Commentary
.02(a)(B)(2)); \16\
---------------------------------------------------------------------------

    \14\ The BGI Comment Letter requested clarification that
``worldwide monthly trading volume'' includes any shares underlying
American Depositary Receipts (``ADRs'') traded in the U.S. In
response, the Exchange states that any trading of shares represented
by ADRs, GDRs, or EDRs, which are traded on a market with last sale
reporting, would be included in the calculation of worldwide monthly
trading volume. See November 6 Telephone Conference, supra note 13.
    \15\ The BGI Comment Letter asserts that it would be less
arbitrary to measure trading volume in terms of dollars rather than
shares. The Exchange notes that the share trading volume criteria is
consistent with the existing generic listing standards for ETFs
based on domestic indexes and other listing standards for derivative
products, and the Commission believes the Exchange's choice is
consistent with the Act. Nevertheless, the Exchange is willing to
examine the dollar volume criteria in the future. See November 6
Telephone Conference, supra note 13.
    \16\ 16 The BGI Comment Letter notes that the ETF No-Action
Letters measure liquidity of components in the index or portfolio
differently than Amex's proposed rules measure liquidity. The
Exchange notes that the ETF No-Action Letters address separate
regulatory objectives but is willing to examine modifications to its
listing standards in the future. See November 6 Telephone
Conference, supra note 13.
---------------------------------------------------------------------------

     The most heavily weighted component stock may not exceed
25% of the weight of the index or portfolio and the five most heavily
weighted component stocks may not exceed 60% of the weight of the index
or portfolio (Rule 1000, Commentary .03(a)(B)(3) and Rule 1000A,
Commentary .02(a)(B)(3));
     The index or portfolio shall include a minimum of 20
component stocks (Rule 1000, Commentary .03(a)(B)(4) and Rule 1000A,
Commentary .02(a)(B)(4)); and
     Each US Component Stock in the index or portfolio shall be
listed on a national securities exchange and shall be an NMS Stock as
defined in Rule 600 of Regulation NMS under the Exchange Act, and each
Non-US Component Stock in the index or portfolio shall be listed on an
exchange that has last-sale reporting (Rule 1000, Commentary
.03(a)(B)(5) and Rule 1000A, Commentary .02(a)(B)(5)).\17\
---------------------------------------------------------------------------

    \17\ The BGI Comment Letter questioned which non-U.S. exchanges
have systems for ``last-sale reporting.'' In this regard, the
Exchange states, when considering whether an ETF meets its listing
standards, that it will use several methods to determine whether a
non-U.S. exchange has last-sale reporting. For example, the Exchange
states that it will evaluate whether execution prices are available
for transactions in securities listed and traded on such exchange.
The Exchange further states that last-sale reporting is easily
verified through major market data vendors and other entities. In
addition, the Exchange states that many index providers have
policies to include index components only from foreign exchanges
where pricing, transaction reporting, and corporate news are
sufficiently transparent and widely disseminated. See November 6
Telephone Conference, supra note 13.
---------------------------------------------------------------------------

    The Exchange also proposes to include in the generic listing
standards for the listing of ETFs, in new Commentary .03(a)(C) to Rule
1000 and Commentary .02(a)(C) to Rule 1000A, indexes that have been
approved by the Commission as underlying benchmarks in connection with
the listing of options, PDRs, IFSs, Index-Linked Exchangeable Notes, or
Index-Linked Securities.\18\
---------------------------------------------------------------------------

    \18\ BGI questions requiring comprehensive surveillance sharing
agreements (``CSSAs'') with the home country market for the
underlying index components in proposed Commentary .03(a)(C) to Amex
Rule 1000 and Commentary .02(a)(C) to Amex Rule 1000A. The standards
set out in paragraph (B) of both Commentaries do not require a CSSA
with the home country market because they provide for minimum levels
of liquidity, concentration and pricing transparency for index
components. If an ETF is based on an index whose components do not
satisfy these composition criteria, it may be listed pursuant to
paragraph (C) of both Commentaries if the Commission has previously
approved the index or portfolio in connection with the listing and
trading of another derivative product. To the extent that the
Commission's approval of that index or portfolio required CSSAs,
that requirement must also be satisfied. See November 6 Telephone
Conference, supra note 13.
---------------------------------------------------------------------------

    The Exchange also proposes to modify Commentary .03(b)(iii) to Rule
1000 and Commentary .02(b)(iii) to Rule 1000A to require that the index
value for all ETFs listed pursuant to the proposed standards for
international and global indexes (or otherwise approved by the
Commission) be widely disseminated by one or more major market data
vendors at least every 60 seconds during the time when the ETF trades
on the Exchange. If the index value does not change during some or all
of the period when trading is occurring on the Exchange, the last
official calculated index value must remain available throughout
Exchange trading hours. Index values for ETFs listed pursuant to the
standards for domestic indexes (or otherwise approved by the
Commission) must be disseminated at least every 15 seconds during the
trading day. The proposed modification to this requirement for ETFs
based on international or global indexes reflects that, in some
instances, the frequency of intra-day trading information is limited
with respect to Non-US Component Stocks and that, in many cases,
trading hours for overseas markets overlap only in part, or not at all,
with Exchange trading hours.
    In addition, Commentary .03(c) to Rule 1000 and Commentary .02(c)
to Rule 1000A are being modified to define the term ``Intraday
Indicative Value'' as the estimate that is updated at least every 15
seconds of the value of a share of each ETF, for ease of reference in
these rules. A similar change is also proposed in Rules 1002 and 1002A,
which are the continued listing standards for these and other ETFs. The
Exchange also proposes to clarify in Commentary .03(c) to Rule 1000 and
Commentary .02(c) to Rule 1000A that the Intraday Indicative Value will
be updated during the hours the ETF shares trade on the Exchange to
reflect changes in the exchange rate between the U.S. dollar and the
currency in which any component stock is denominated for all ETFs based
on global or international indexes.
    The Exchange is also proposing to add a subsection (i) to
Commentary .03 to Rule 1000 and a subsection (j) to Commentary .02 to
Rule 1000A regarding the creation and redemption process for ETFs and
compliance with Federal securities laws for ETFs listed pursuant to the
generic listing standards for international and global indexes. These
new subsections will apply to PDRs listed pursuant to Commentary
.03(a)(B) or (C) and for IFSs listed pursuant to Commentary .02(a)(B)
or (C).
    For the listing and trading of all ETFs, whether or not by generic
listing standards, the Exchange is also proposing to include
additional, continued listing standards relating to ETFs that
substitute new indexes, either in the instance where the value of the
index or portfolio of securities on which the ETF is based is no longer
calculated or available, or in the event that the ETF chooses to
substitute a new index or portfolio for the existing index or
portfolio. In both instances, the Exchange would commence delisting
proceedings if the new index or portfolio does not meet the standards
set forth in Rules 1000 et seq. or Rules 1000A et seq., as
applicable.\19\ If, for example, an ETF chose to substitute an index
that did not meet any of the generic listing standards for listing of

ETFs pursuant to Rule 19b-4(e),\20\ then for continued listing,
approval by the Commission of a separate filing pursuant to Section
19(b)(2) \21\ to list and trade that ETF would be required.\22\
---------------------------------------------------------------------------

    \19\ The BGI Comment Letter requested clarification of when an
index is ``no longer calculated or available'' and in such event,
why a ``substantially similar'' substituted index could not satisfy
the dissemination requirements of the listing standards. In
response, the Exchange notes that many indexes change components
periodically based on a specified methodology. Index turnover,
consistent with such an index methodology, may not constitute an
index substitution triggering possible delisting of the ETF.
However, if the index underlying the ETF is substituted with a new
index or the specified index methodology is substantially changed
from the announced methodology under which the product was listed,
the Exchange acknowledges that it must either file a new Form 19b-
4(e) or the listing and trading of the derivative product is a
proposed rule change pursuant to Section 19(b)(2) of the Exchange
Act, 15 U.S.C. 78s(b)(2). See November 6 Telephone Conference, supra
note 13.
    \20\ 17 CFR 240.19b-4(e).
    \21\ 15 U.S.C. 78s(b)(2).
    \22\ The Exchange notes that this is not a new requirement under
the Exchange Act. The Exchange acknowledges that transparency of the
index methodology is necessary for effective pricing of the
derivative product and investor protection. See November 6 Telephone
Conference, supra note 13.
---------------------------------------------------------------------------

    The Exchange proposes to modify the initial and continued listing
standards for all ETFs relating to disseminated information to
formalize in the rules existing best practices for providing equal
access to material information about the value of ETFs. Pursuant to
Rules 1002(a)(ii) and 1002A(a)(ii), prior to approving an ETF for
listing, the Exchange will obtain a representation from the ETF issuer
that the net asset value (``NAV'') per share will be calculated daily
and made available to all market participants at the same time.
    In addition, proposed Rules 1002(b)(ii) and 1002A(b)(ii) establish
that if the Intraday Indicative Value (as defined in Commentary .03 to
Rule 1000 and Commentary .02 to Rule 1000A) or the index value
applicable to that series of ETFs is not being disseminated as
required, the Exchange may halt trading during the day in which the
interruption to the dissemination of the Intraday Indicative Value or
the index value occurs. If the interruption to the dissemination of the
Intraday Indicative Value or the index value persists past the trading
day in which it occurred, the Exchange will halt trading no later than
the beginning of the trading day following the interruption.
    With regard to trading, ETFs listed under the proposed standards
will be subject to Amex rules and procedures that govern the trading of
ETFs and the trading of equity securities on the Amex, including among
others, rules and procedures governing trading halts, disclosures to
members, responsibilities of the specialist, account opening and
customer suitability requirements, the election of a stop or limit
order, and margin.\23\
---------------------------------------------------------------------------

    \23\ See Amex Rules 1000 through 1006 and 1000A through 1005A.
---------------------------------------------------------------------------

    The Exchange represents that its surveillance procedures are
adequate to properly monitor the trading of the PDRs and IFSs listed
pursuant to the proposed new listing standards. Specifically, the Amex
will rely on its existing surveillance procedures governing PDRs and
IFSs. In addition, the Exchange has a general policy prohibiting the
distribution of material, non-public information by its employees.

III. Discussion and Commission Findings

    After careful review, including consideration of the BGI Comment
Letter, the Commission finds that the proposed rule change, as amended,
is consistent with the requirements of the Exchange Act, in general,
and the rules and regulations thereunder applicable to a national
securities exchange.\24\ In particular, the Commission finds that the
proposed rule change, as amended, is consistent with Section 6(b)(5) of
the Exchange Act,\25\ in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------

    \24\ In approving this rule change, the Commission notes that it
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
    \25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

Generic Listing Standards for Exchange-Traded Funds

    To list ETFs based on international or global indexes, or on
indexes or portfolios previously approved by the Commission as an
underlying benchmark for a derivative security, the Amex currently must
file a proposed rule change with the Commission pursuant to Section
19(b)(1) of the Exchange Act and Rule 19b-4 thereunder. However, Rule
19b-4(e) provides that the listing and trading of a new derivative
securities product by a SRO will not be deemed a proposed rule change
pursuant to Rule 19b-4(c)(1) if the Commission has approved, pursuant
to Section 19(b) of the Act, the SRO's trading rules, procedures, and
listing standards for the product class that would include the new
derivative securities product, and the SRO has a surveillance program
for the product class. The Exchange's proposed rules for the listing
and trading of ETFs based on international or global indexes pursuant
to Rule 19b-4(e) fulfills these requirements.
    The Amex's ability to rely on Rule 19b-4(e) to list ETFs that meet
the requirements of Commentary .03 to Amex Rule 1000 or Commentary .02
to Amex Rule 1000A potentially reduces the time frame for bringing
these securities to the market, thereby reducing the burdens on issuers
and other market participants and promoting competition and making ETFs
based on global or international indexes available to investors more
quickly.
    The Commission has previously approved generic listing standards
pursuant to Rule 19b-4(e) \26\ of the Exchange Act for ETFs based on
indexes that consist of stocks listed and traded on U.S. exchanges.\27\
The Commission has also previously approved the listing and trading by
the Exchange of several ETFs based on a variety of international and
global market indexes.\28\ In approving these securities for Exchange
trading, the Commission considered applicable Amex rules that govern
their trading. The Commission believes that generic listing standards
for these securities should fulfill the intended objective of Rule 19b-
4(e) under the Act \29\ and allow those ETFs that satisfy the generic
listing standards to commence trading without the need for public
comment and Commission approval.\30\
---------------------------------------------------------------------------

    \26\ 17 CFR 240.19b-4(e).
    \27\ See Commentary .03 to Amex Rule 1000 and Commentary .02 to
Amex Rule 1000A. See also Securities Exchange Act Release No. 42787
(May 15, 2000), 65 FR 33598 (May 24, 2000).
    \28\ See, e.g., Securities Exchange Act Release Nos. 50189
(August 12, 2004), 69 FR 51723 (August 20, 2004) (approving the
listing and trading of certain Vanguard International Equity Index
Funds); 44700 (August 14, 2001), 66 FR 43927 (August 21, 2001)
(approving the listing and trading of series of the iShares Trust
based on certain S&P global indexes). Likewise, the Commission has
approved listing standards that permit the listing and trading of
index-based derivative securities where the same index had been
considered in connection with the Commission's approval of another
derivative security. See, e.g., Amex Company Guide Section 107D
(Index-Linked Securities), Securities Exchange Act Release No. 51563
(April 15, 2005), 70 FR 21257 (April 25, 2005).
    \29\ 17 CFR 240.19b-4(e).
    \30\ The Commission notes that the failure of a particular index
to comply with the proposed generic listing standards under Rule
19b-4(e), however, would not preclude the Exchange from submitting a
separate filing pursuant to Section 19(b)(2), requesting Commission
approval to list and trade a particular index-linked product.
---------------------------------------------------------------------------

ETF Listing and Trading

    The Commission finds that the Amex proposal contains adequate rules
and procedures to govern the listing of ETFs based on international or
global indexes listed pursuant to Rule 19b-4(e) on the Exchange or
trading pursuant to unlisted trading privileges (``UTP'').\31\
---------------------------------------------------------------------------

    \31\ An exchange trading ETFs pursuant to UTP must comply with
applicable trading rules and surveillance requirements for the
derivative product. See Securities Exchange Act Release No. 35637
(April 21, 1995), 60 FR 20891 (April 28, 1995).
---------------------------------------------------------------------------

    As proposed, Commentary .03 to Amex Rule 1000 and Commentary .02 to
Amex Rule 1000A establish standards

for the composition of an index or portfolio underlying an ETF. These
requirements are designed, among other things, to require that
components of an index or portfolio underlying an ETF are adequately
capitalized and sufficiently liquid, and that no one stock dominates
the index.
    Taken together, the Commission finds that these standards are
reasonably designed to ensure that stocks with substantial market
capitalization and trading volume account for a substantial portion of
any underlying index or portfolio, and that when applied in conjunction
with the other applicable listing requirements, will permit the listing
only of ETFs that are sufficiently broad-based in scope to minimize
potential manipulation. Similarly, the Commission finds that the
proposed listing standards are designed to preclude ETFs from becoming
surrogates for trading in unregistered securities. The Commission
further believes that the requirement that each component security
underlying an ETF be listed on an exchange and subject to last-sale
reporting should contribute to the transparency of the market for ETFs.
    The proposed generic listing standards will, alternatively, permit
listing of an ETF if the Commission has previously approved the
underlying index for trading in connection with another derivative
product and the underlying index or portfolio constituents are all
either U.S. Component Stocks, which must be listed on a national
securities exchange and be an NMS stock as defined in Rule 600(b)(47)
of Regulation NMS under the Act,\32\ or Non-US Component Stocks listed
on an exchange that has last-sale reporting.\33\ The Commission
believes that if it has previously determined that such index and its
components were sufficiently transparent, then the Exchange may rely on
this finding, provided that the Exchange complies with the rules and
conditions set forth by the Commission in its prior approval order,
including surveillance sharing arrangements with the foreign market, if
any.\34\
---------------------------------------------------------------------------

    \32\ 17 CFR 242.600(b)(47).
    \33\ See proposed Commentary .03(a)(C) to Amex Rule 1000 and
Commentary .02(a)(C) to Amex Rule 1000A.
    \34\ The Commission notes that it has taken this position
connection with listing standards for ILSs. See supra note 28.
---------------------------------------------------------------------------

    Regardless of whether the ETF is listed and/or traded pursuant to
these generic listing standards, the Exchange's proposal also requires
the value of an index or portfolio underlying an ETF based on a global
or international index to be disseminated at least once every 60
seconds.\35\ In addition, an Intraday Indicative Value, which
represents an estimate of the value of a share of each ETF, must be
updated and disseminated at least once every 15 seconds during the time
an ETF trades on the Exchange.\36\ The Commission believes that by
requiring pricing information for both the relevant underlying index
\37\ and the ETF to be readily available and disseminated, the proposal
is designed to ensure a fair and orderly market for ETFs listed and
traded pursuant to Amex Rules 1000 and 1000A.
---------------------------------------------------------------------------

    \35\ See proposed Commentary .03(b)(iii) to Amex Rule 1000 and
Commentary .02(b)(iii) to Amex Rule 1000A. To the extent an index or
portfolio value does not change during some of the time that a
foreign ETF trades on the Exchange, the last official calculated
value must remain available throughout Exchange trading hours.
    \36\ See Commentary .03(c) to Amex Rule 1000 and Commentary
.02(c) to Amex Rule 1000A. The Intraday Indicative Value will be
updated to reflect changes in the exchange rate between the U.S.
dollar and the currency in which any index or portfolio component
stock is denominated.
    \37\ The requirement contemplates that one composite index value
would be disseminated in accordance with this rule for any ETF based
on several indexes.
---------------------------------------------------------------------------

    The Exchange proposes continued listing standards for all ETFs,
whether listed pursuant to generic listing standards or by Commission
approval of the specific product. In the event that an underlying index
or portfolio value is no longer calculated on at least a 15 second
basis or is substituted with an index that does not meet the applicable
requirements, the Exchange will commence delisting proceedings. The
Commission believes that this is an important safeguard to help assure
that ETFs listed and traded on the Exchange meet applicable listing
standards on an ongoing basis and do not, for example, trade without
key pricing information available.
    The Commission notes that each ETF will be required to represent
that it will calculate and make available daily the NAV to all market
participants at the same time. Furthermore, proposed Amex Rules
1002(b)(ii) and 1000A(b)(ii) require that, if the Intraday Indicative
Value or index value applicable to an ETF is not disseminated as
required, the Exchange may halt trading during the day in which the
interruption occurs. If the interruption continues, then the Exchange
will halt trading no later than the beginning of the next trading day.
Similarly, if the Exchange deems further dealings in the product
inadvisable, trading will be halted. The Commission believes that the
delisting criteria, NAV dissemination requirements, and trading halt
rules will help ensure an appropriate level of transparency exists with
respect to each foreign ETF to allow for the maintenance of fair and
orderly markets.

Surveillance

    The Commission notes that any foreign ETFs approved for listing and
trading would be subject to Amex's existing surveillance program for
ETFs, which the Exchange has represented are adequate to properly
monitor the trading of ETFs listed pursuant to these proposed generic
listing standards.

Acceleration

    The Commission finds good cause for approving the proposed rule
change, as amended, prior to the 30th day after the date of publication
of the notice of filing in the Federal Register. The Exchange has
requested accelerated approval of the proposal to facilitate the prompt
listing and trading of ETFs based on global or international indexes or
portfolios meeting the specified criteria and ETFs based on indexes or
portfolios underlying derivative securities that were previously
approved by the Commission. The Commission notes that the Exchange's
listing standards are based, in part, on previously approved ETF
listing standards relating to indexes or portfolios made up of U.S.
Component Stocks or on Commission orders approving the listing and
trading of ETFs based on global or international indexes. The
Commission believes that accelerated approval of the proposal should
expedite the listing and trading of additional ETFs, subject to
consistent and reasonable standards, to the benefit of the investing
public. Therefore, the Commission finds good cause, consistent with
Section 19(b)(2) of the Act,\38\ to approve the proposed rule change on
an accelerated basis.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 2
is consistent with the Act. Comments may be submitted by any of the
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to<EMAIL_ADDRESS>Please include

File Number SR-Amex-2006-78 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary,

Securities and Exchange Commission, 100 F Street, NE., Washington, DC
20549-1090.
    All submissions should refer to File Number SR-Amex-2006-78. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments,

all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of the Amex. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-Amex-2006-78 and should be submitted on or before
December 8, 2006.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\39\ that the proposed rule change (SR-Amex-2006-78), as modified
by Amendments No. 1 and 2, is hereby approved on an accelerated basis.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, pursuant
to delegated authority.\40\
---------------------------------------------------------------------------

    \40\ 17 CFR 200.30-3(a)(12).

Nancy M. Morris,
Secretary.
 [FR Doc. E6-19415 Filed 11-16-06; 8:45 am]

BILLING CODE 8011-01-P