covered by the program emitted less than 27,500 tons of SO2
in 2016 and are not projected to significantly increase from this
level. Any new units would be required to be well controlled and,
similar to the existing units not covered by the program, they would
not significantly increase total emissions of SO2.
Furthermore, as discussed above, any load shifting to these new non-
participating units would be projected to result in a net decrease in
emissions per unit of electricity generated and at most a small
increase in total SO2 emissions compared to them not having
been brought into operation. We note that total emissions of
SO2 from all EGU sources in Texas in 2016 were 245,737 tons.
---------------------------------------------------------------------------

    \90\ We note the trading program does allow non-participating
sources that previously had CSAPR allocations to opt-in to the
trading program and receive an allocation equivalent to the CSAPR
level allocation. Should some sources choose to opt-in to the
program, the total number of allowances will increase by that
amount.
    \91\ For the projected annual SO2 emissions from
Texas EGUs, see 2011 CSAPR/BART Technical Support Document, at Table
2-4, available in the docket for this action. Certain CSAPR budgets
were increased after promulgation of the CSAPR final rule (and the
increases were addressed in the 2012 CSAPR/BART sensitivity analysis
memo), See memo titled ``Sensitivity Analysis Accounting for
Increases in Texas and Georgia Transport Rule State Emissions
Budgets,'' Docket ID No. EPA-HQ-OAR-2011-0729-0323 (May 29, 2012),
available in the docket for this action. The increase in the Texas
SO2 budget was 50,517 tons which, when added to the Texas
SO2 emissions projected in the CSAPR + BART-elsewhere
scenario of 266,600 tons, yields total potential SO2
emissions from Texas EGUs of approximately 317,100 tons.
---------------------------------------------------------------------------

    We also note that state-wide EGU SO2 emissions in Texas
have decreased considerably since the 2002 baseline period, reflecting
market changes and reductions due to requirements such as CAIR/CSAPR.
In 2002, Texas EGU emissions were 560,860 tons of SO2
compared to emissions of 245,737 tons in 2016, a reduction of over 56%.
The Texas SO2 trading program locks in the large majority of
these reductions by limiting allocation of allowances to 248,393 tons
per year for participating sources. While the Texas program does not
include all EGU sources in the State, as discussed above, the EGUs
outside of the program contribute relatively little to the total state
emissions and these units on average are better controlled for
SO2 than the units subject to the Texas program.
    In sum, we propose to affirm and request comment on the
determination that the Texas Trading Program will result in
SO2 emissions from Texas EGUs similar to emissions
anticipated under CSAPR and thus that the weight of evidence supports
the conclusion that the SO2 Trading Program meets the
requirements of a BART alternative. The differences in source coverage
are either not significant, or, in some cases, work to demonstrate the
relative stringency of the Program compared to CSAPR.

C. Specific Texas SO2 Trading Program Features

    The Texas SO2 Trading Program is an intrastate cap-and-
trade program for listed covered sources in the State of Texas. The EPA
is proposing to affirm our promulgation of the Texas SO2
Trading Program under 40 CFR 52.2312 and subpart FFFFF of part 97. The
State of Texas may choose to remain under the Texas SO2
Trading Program in our FIP or replace it with an appropriate SIP if it
chooses to develop and submit one to EPA and EPA is able to approve it.
If the State of Texas is interested in pursuing delegation of the Texas
SO2 Trading Program, the request would need to provide a
demonstration of the State's statutory authority to implement any
delegated elements.
    The Texas SO2 Trading Program is modeled after the EPA's
CSAPR SO2 Group 2 Trading Program, and we are proposing to
affirm that the Program satisfies the requirements of 51.308(e)(2)(vi).
Similar to the CSAPR SO2 Group 2 Trading Program, the Texas
SO2 Trading Program sets an SO2 emission budget
for affected units and sources in the State of Texas. Authorizations to
emit SO2, known as allowances, are allocated to affected
units. The Texas SO2 Trading Program provides flexibility to
affected units and sources by allowing units and sources to determine
their own compliance path; this includes adding or operating control
technologies, upgrading or improving controls, switching fuels, and
using allowances. Sources can buy and sell allowances and bank (save)
allowances for future use as so long as each source holds enough
allowances to account for its emissions of SO2 by the
allowance transfer deadline shortly after the end of the compliance
period.
    Pursuant to the requirements of 51.308(e)(2)(vi)(A), the
applicability of the Texas SO2 Trading Program is defined in
40 CFR 97.904. Section 97.904(a) identifies the subject units, which
include all BART-eligible coal-fired EGUs, additional coal-fired EGUs,
and several BART-eligible gas-fired and gas/fuel oil-fired EGUs, all of
which were previously covered by the CSAPR SO2 Group 2
Trading Program. Additionally, pursuant to 40 CFR 97.904(b), the
Trading Program provides an opportunity for any other unit in the State
of Texas that was subject to the CSAPR SO2 Group 2 Trading
Program to opt-in to the Texas SO2 Trading Program. We
discuss in Section IV.B how the applicability results in coverage of
the Texas SO2 trading program representing 81% of the total
CSAPR allocation for Texas and 85% of the CSAPR allocations for
existing units, and how potential shifts in generation would result in
a reduction of emissions or, at worst, an insignificant increase in
emissions. The Texas SO2 Trading Program establishes the
statewide SO2 budget for the subject units at 40 CFR
97.910(a). This budget is equal to the sum of the allowances for each
subject unit identified under 97.904(a) and 97.911(a). As units opt-in
to the Texas SO2 Trading under 97.904(b), the allowances for
each of these units will equal their CSAPR SO2 Group 2
allowances under 97.911(b). We specifically solicit comment on
retention or elimination of the provision that provides opportunity for
certain units to opt-in to the Texas SO2 trading Program.
    Additionally, the EPA has established a Supplemental Allowance Pool
with a budget of 10,000 tons of SO2 to provide compliance
assistance to subject units and sources. Section 40 CFR 97.912
establishes how allowances are allocated from the Supplemental
Allowance Pool to sources (collections of participating units at a
facility) that have reported total emissions for that control period
exceeding the total amounts of allowances allocated to the
participating units at the source for that control period (before any
allocation from the Supplemental Allowance Pool). For any control
period, the maximum supplemental allocation from the Supplemental
Allowance Pool that a source may receive is the amount by which the
total emissions reported for its participating units exceed the total
allocations to its participating units (before any allocation from the
Supplemental Allowance Pool). If the total amount of allowances
available for allocation from the Supplemental Allowance Pool for a
control period is less than the sum of these maximum allocations,
sources will receive less than the maximum supplemental allocation from
the Supplemental Allowance Pool, where the amount of supplemental
allocations for each source is determined in proportion to the source's
respective maximum allocations, with one exception. While all other
sources required to participate in the trading program have flexibility
to transfer allowances among multiple participating units under the
same owner/operator when planning operations, Coleto Creek consists of
only one coal-fired unit and, as of the issuance of the October 2017
final action, was the only coal-fired unit in Texas owned and operated
by Dynegy. It was conceivable that insufficient incentives would exist
to compel Dynegy's competitors in the electric market to make their
additional allowances available for purchase by Dynegy. To provide this
source additional flexibility, Coleto Creek will be allocated its
maximum supplemental

allocation from the Supplemental Allowance Pool as long as there are
sufficient allowances in the Supplemental Allowance Pool available for
this allocation, and its actual allocation will not be reduced in
proportion with any reductions made to the supplemental allocations to
other sources. We note that Dynegy and Vistra--which owns other units
that are subject to the trading program, some of which have ceased
operation and thus will not need to use their allowances--have recently
merged, and we specifically solicit comment on whether we should retain
or eliminate this additional flexibility for Coleto Creek in light of
this recent change in ownership.\92\
---------------------------------------------------------------------------

    \92\ https://www.vistraenergy.com/vistra-dynegy-merger/.
---------------------------------------------------------------------------

    Section 97.921 establishes how the Administrator will record the
allowances for the Texas SO2 Trading Program and ensures
that the Administrator will not record more allowances than are
available under the program consistent with 40 CFR 51.308(e)(2)(vi)(B).
The monitoring, recordkeeping, and reporting provisions for the Texas
SO2 Trading Program at 40 CFR 97.930-97.935 are consistent
with those requirements in the CSAPR SO2 Group 2 Trading
Program. The provisions in 40 CFR 97.930-97.935 require the subject
units to comply with the monitoring, recordkeeping, and reporting
requirements for SO2 emissions in 40 CFR part 75; thereby
satisfying the requirements of 51.308(e)(2)(vi)(C)-(E). The EPA will
implement the Texas SO2 Trading Program using the Allowance
Management System, which will provide a consistent approach to
implementation and tracking of allowances and emissions for the EPA,
subject sources, and the public consistent with the requirements of 40
CFR 51.308(e)(2)(vi)(F). The requirements at 40 CFR 97.913-97.918 for
designated and alternate designated representatives are consistent with
the requirements of 40 CFR 51.308(e)(2)(vi)(G) and are also consistent
with the EPA's other trading programs under 40 CFR part 97. Allowance
transfer provisions for the Texas SO2 Trading Program at 40
CFR 97.922 and 97.923 provide procedures that allow timely transfer and
recording of allowances; these provisions will minimize administrative
barriers to the operation of the allowance market and ensure that such
procedures apply uniformly to all sources and other potential
participants in the allowance market, consistent with 40 CFR
51.308(e)(2)(vi)(H). Compliance provisions for the Texas SO2
Trading Program at 40 CFR 97.924 prohibit a source from emitting a
total tonnage of SO2 that exceeds the tonnage value of its
SO2 allowance holdings as required by 40 CFR
51.308(e)(2)(vi)(I). The Texas SO2 Trading Program includes
automatic allowance surrender provisions at 40 CFR 97.924(d) that apply
consistently from source to source and the tonnage value of the
allowances deducted shall equal at least three times the tonnage of the
excess emissions, consistent with the penalty provisions at 40 CFR
51.308(e)(2)(vi)(J). The Texas SO2 Trading Program provides
for banking of allowances under 40 CFR 97.926; Texas SO2
Trading Program allowances are valid for compliance in the control
period of issuance or may be banked for future use, consistent with 40
CFR 51.308(e)(2)(vi)(K). 40 CFR 51.308(e)(2)(vi)(L) requires periodic
program evaluation to assess whether the program is accomplishing its
goals and whether modifications to the program are needed to enhance
performance of the program. The CAA and EPA's implementing regulations
require comprehensive periodic revisions of implementation plans for
regional haze under 40 CFR 51.308(f) and periodic review of the state's
regional haze approach under 40 CFR 51.308(g) to evaluate progress
towards the reasonable progress goals for Class I areas located within
the State and Class I areas located outside the State affected by
emissions from within the State. Because the Texas SO2
Trading Program is a BART-alternative and part of the long-term
strategy for Texas' Regional Haze obligations, this program will be
reviewed in each comprehensive periodic revision and progress report.
We anticipate these revisions and progress reports will provide the
information needed to assess program performance, as required by 40 CFR
51.308(e)(2)(vi)(L). In sum, the EPA is proposing to affirm our
determination that the promulgation of the Texas SO2 Trading
Program meets the requirements of 40 CFR 51.308(e)(2) as a BART
alternative for Texas' Regional Haze obligations.
    As previously discussed, the EPA modeled the Texas SO2
Trading Program after the EPA's CSAPR SO2 Group 2 Trading
Program. Relying on a trading program structure that is already in
effect enables the EPA, the subject sources, and the public to benefit
from the use of the Allowance Management System's forms, and of
familiar and tested monitoring, recordkeeping, and reporting
requirements. However, there are a few features of the Texas
SO2 Trading Program that are separate and unique from the
EPA's CSAPR. First, the program does not address new units that are
built after the inception of the program; these units would be
permitted and constructed using emission control technology determined
under either BACT or LAER review, as applicable, and would emit at
emission rates much lower than the average emission rate of those units
participating in the program. Second, the Texas SO2 Trading
Program provides that Texas sources that were previously covered under
the CSAPR SO2 Group 2 Trading Program, but that are not
subject to the requirements of subpart FFFFF of part 97, can opt-in to
the Texas SO2 Trading Program at the allocation level
established under CSAPR. Finally, the Texas SO2 Trading
Program includes a Supplemental Allowance Pool to provide some
compliance assistance to units whose emissions exceed their
allocations. The amount of allocations to the Supplemental Allowance
Pool each year is less than the portion of the Texas budget under the
CSAPR SO2 Group 2 Trading Program that would have been set
aside each year for new units (and which would have been allocated to
existing units to the extent not needed by new units).

D. Recent Retirements

    Vistra permanently retired Big Brown,\93\ Monticello,\94\ and
Sandow \95\ this year. This is new information that arose after we
issued our October 2017 FIP. There are now a significant amount of
allowances that would be allocated to retired units. We also note that
Welsh Unit 2 shut down in 2016 \96\ and the JT Deely units have been
announced for retirement at the end of 2018. After all these recent and
planned shutdowns, 74,313 tons of allowances would be allocated to
retired units. In 2017, these units emitted 105,844 tons of
SO2. We

specifically solicit comment on how these shutdowns should impact the
provision at 40 CFR 97.911(a)(2) regarding allocations to retired units
for a period of five years, including comment on the alternative
proposal described below.
---------------------------------------------------------------------------

    \93\ See letter dated March 27, 2018 from Kim Mireles of
Luminant to the TCEQ requesting to cancel certain air permits and
registrations for Big Brown available in the docket for this action.
    \94\ See letter dated February 8, 2018 from Kim Mireles of
Luminant to the TCEQ requesting to cancel certain air permits and
registrations for Monticello available in the docket for this
action.
    \95\ See letter dated February 14, 2018 from Kim Mireles of
Luminant to the TCEQ requesting to cancel certain air permits and
registrations for Sandow 5 Units 5A and 5B available in the docket
for this action.
    \96\ Welsh Unit 2 was retired on April 16, 2016 pursuant to a
Consent Decree (No. 4:10-cv-04017-RGK) and subsequently removed from
the Title V permit (permit no. O26). We have included the Consent
Decree, permitting notes, and new Title V permit showing that the
Unit is removed in the docket for this action.
---------------------------------------------------------------------------

    In light of these shutdowns, we solicit comment on a different
approach to calculating the total number of allowances that can be
allocated in a control period from the supplemental allowance pool. The
54,711-ton value discussed above is equal to 10,000 tons annually
allocated to the pool plus 18% of the total annual allocation for
participating units, mirroring the variability limit from CSAPR (40 CFR
97.912(b)). In this alternative approach, the total limit would be
41,335 tons, calculated as 10,000 tons annually allocated to the pool
plus 18% of the total annual allocation for participating units minus
the annual allocation for the participating units that have been
permanently retired as of January 1, 2019. The total number of
allowances that can be allocated in a single year would therefore be
not 293,104, but rather 279,728, which is the sum of the 238,393 budget
for existing units plus 41,335.\97\ Annual average emissions for the
covered sources will be less than or equal to 248,393 tons, and
although there will be with some year-to-year variability, that
variability will be constrained by the number of banked allowances and
allowances available to be allocated during a control period from the
Supplemental Allowance pool.
---------------------------------------------------------------------------

    \97\ See ``Texas EGUs 2016 and 2017 annual emissions.xlsx,''
available in the docket for this action.
---------------------------------------------------------------------------

E. Interstate Visibility Transport

    In our October 2017 final action, we determined that the BART
alternatives to address SO2 and NOX BART at
Texas' EGUs provided measures that are adequate to ensure that
emissions from the State do not interfere with measures to protect
visibility in nearby states, and thus the October 2017 final action
satisfies the interstate visibility transport requirements. An EPA
guidance document (2013 Guidance) on infrastructure SIP elements states
that CAA section 110(a)(2)(D)(i)(II)'s interstate visibility transport
requirements can be satisfied by approved SIP provisions that the EPA
has found to adequately address a state's contribution to visibility
impairment in other states.\98\ The EPA interprets interstate
visibility transport to be pollutant-specific, such that the
infrastructure SIP submission need only address the potential for
interference with protection of visibility caused by the pollutant
(including precursors) to which the new or revised NAAQS applies.\99\
The 2013 Guidance lays out two ways in which a state's infrastructure
SIP submittal may satisfy interstate visibility transport. One way is
through a state's confirmation in its infrastructure SIP submittal that
it has an EPA approved regional haze SIP in place. In the absence of a
fully approved regional haze SIP, a demonstration that emissions within
a state's jurisdiction do not interfere with other states' plans to
protect visibility meets this requirement. Such a demonstration should
point to measures that limit visibility-impairing pollutants and ensure
that the resulting reductions conform with any mutually agreed emission
reductions under the relevant regional haze regional planning
organization (RPO) process.\100\
---------------------------------------------------------------------------

    \98\ See ``Guidance on Infrastructure State Implementation Plan
(SIP) Elements under Clean Air Act Sections 110(a)(1) and (2)''
included in the docket for this action.
    \99\ See id. at 33.
    \100\ See id., at 34; 76 FR 22036 (April 20, 2011) (containing
EPA's approval of the visibility requirement of 110(a)(2)(D)(i)(II)
based on a demonstration by Colorado that did not rely on the
Colorado Regional Haze SIP).
---------------------------------------------------------------------------

    To develop its 2009 Regional Haze SIP, TCEQ worked through its RPO,
the Central Regional Air Planning Association (CENRAP), to develop
strategies to address regional haze, which at that time were based on
emissions reductions from CAIR. To help states in establishing
reasonable progress goals for improving visibility in Class I areas,
the CENRAP modeled future visibility conditions based on the mutually
agreed emissions reductions from each state. The CENRAP states then
relied on this modeling in setting their respective reasonable progress
goals.
    We are proposing to affirm our determination that the October 2017
final action is adequate to ensure that emissions from Texas do not
interfere with measures to protect visibility in nearby states because
the BART FIP emission reductions are consistent with the level of
emission reductions relied upon by other states during consultation.
The 2009 Texas Regional Haze SIP relied on CAIR to meet SO2
and NOX BART requirements for EGUs. Under CAIR, Texas EGU
sources were projected to emit approximately 350,000 tpy of
SO2. As discussed elsewhere, Texas EGU SO2
emissions for sources covered by the trading program will be
constrained by the number of available allowances. Average annual
emissions for the covered sources will be less than or equal to 248,393
tons with some year to year variability constrained by the number of
banked allowances and number of allowances that can be allocated in a
control period from the supplemental pool. Sources not covered by the
program emitted less than 27,500 tons of SO2 in 2016 and are
not projected to significantly increase from this level. Any new units
would be required to be well controlled and similar to the existing
units not covered by the program, they would not significantly increase
total emissions of SO2. Additionally, the FIP relies on
CSAPR as an alternative to EGU BART for NOX, which exceeds
the emission reductions relied upon by other states during
consultation. As such, we are proposing to affirm that the BART
alternatives in the October 2017 final action are sufficient to address
the interstate visibility transport requirement under CAA section
110(a)(2)(D)(i)(II) for the six NAAQS, and request comment on this
determination.

V. Proposed Action

A. Regional Haze

    We are proposing to affirm our approval of the portion of the Texas
Regional Haze SIP that addresses the BART requirement for EGUs for PM.
To address the SO2 BART requirements for EGUs, we are
proposing to affirm our FIP to replace Texas' reliance on CAIR with
reliance on an intrastate SO2 trading program for certain
EGUs identified in Table 9. This proposed action would also be part of
the long-term strategy to address the reasonable progress requirements
for Texas EGUs, which remain outstanding after the remand of our
reasonable progress FIP by the Fifth Circuit Court of Appeals.
    In this proposed action we are also specifically soliciting comment
on whether we should retain or eliminate the additional flexibility for
Coleto Creek in Section 40 CFR 97.912 that establishes how allowances
are allocated from the Supplemental Allowance Pool to this source in
light of this recent change in ownership after the merger of Dynegy and
Vistra. In light of recent and planned shutdowns, we specifically
solicit comment on how these shutdowns should impact the provision at
40 CFR 97.911(a)(2) regarding allocations to retired units for a period
of five years. We also solicit comment on a different approach to
calculating the total number of allowances that can be allocated in a
control period from the supplemental allowance pool pursuant to 40 CFR
97.912(b). In addition, we are specifically soliciting comment on

retention or elimination of the provision under 40 CFR 97.904(b) that
provides opportunity for certain units to opt-in to the Texas
SO2 trading Program.

       Table 9--Texas EGUs Subject to the FIP SO2 Trading Program
------------------------------------------------------------------------
            Owner/ operator                           Units
------------------------------------------------------------------------
AEP....................................  Welsh Power Plant Units 1, 2,
                                          and 3.
                                         H W Pirkey Power Plant Unit 1.
                                         Wilkes Units 1*, 2*, and 3*.
CPS Energy.............................  JT Deely Units 1 and 2, Sommers
                                          Units 1* and 2*.
Dynegy.................................  Coleto Creek Unit 1.
LCRA...................................  Fayette/Sam Seymour Units 1 and
                                          2.
Luminant/Vistra........................  Big Brown Units 1 and 2.
                                         Martin Lake Units 1, 2, and 3.
                                         Monticello Units 1, 2, and 3.
                                         Sandow Unit 4.
                                         Stryker ST2*.
                                         Graham Unit 2*.
NRG....................................  Limestone Units 1 and 2.
                                         WA Parish Units WAP4*, WAP5,
                                          WAP6, WAP7.
Xcel...................................  Tolk Station Units 171B and
                                          172B.
                                         Harrington Units 061B, 062B,
                                          and 063B.
El Paso Electric.......................  Newman Units 2*, 3*, and 4*.
------------------------------------------------------------------------
* Gas-fired or gas/fuel oil-fired units.

B. Interstate Visibility Transport

    In our October 2017 final action, we determined that the BART
alternatives to address SO2 and NOX BART at
Texas' EGUs were adequate to satisfy the interstate visibility
transport requirements for these NAAQS: (1) 1997 8-hour ozone; (2) 1997
PM2.5 (annual and 24-hour); (3) 2006 PM2.5 (24-
hour); (4) 2008 8-hour ozone; (5) 2010 1-hour NO2; and (6)
2010 1-hour SO2. The emission reductions from Texas sources
associated with these BART alternatives are consistent with the level
of emission reductions relied upon by other states when setting their
reasonable progress goals. Consistent with our decision in the October
2017 rulemaking, we are proposing to affirm that the measures in the
FIP are therefore adequate to ensure that emissions from Texas do not
interfere with measures to protect visibility in nearby states with
respect to the NAAQS enumerated above in accordance with CAA section
110(a)(2)(D)(i)(II).

VI. Statutory and Executive Order Reviews

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

    This proposed action is not a ``significant regulatory action''
under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993)
and is therefore not subject to review under Executive Orders 12866 and
13563 (76 FR 3821, January 21, 2011).

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

    This proposed action is not an Executive Order 13771 regulatory
action because this action is not significant under Executive Order
12866.

C. Paperwork Reduction Act

    This proposed action does not impose any new information collection
burden under the PRA. The information collection activities in the
October 2017 final rule promulgating the Texas SO2 Trading
Program at 40 CFR part 97, subpart FFFFF are being submitted to the
Office of Management and Budget (OMB) under the PRA as part of the
current Information Collection Request (ICR) renewal for the CSAPR
trading programs. OMB has previously approved the information
collection activities for the CSAPR trading programs and has assigned
OMB control number 2060-0667. The ICR document that the EPA prepared
for the renewal has been assigned EPA ICR number 2391.05. You can find
a copy of the ICR at https://www.regulations.gov under Docket ID Number
EPA-HQ-OAR-2018-0209. An agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless it displays a currently valid OMB control number.

D. Regulatory Flexibility Act

    I certify that this proposed action will not have a significant
impact on a substantial number of small entities. In making this
determination, the impact of concern is any significant adverse
economic impact on small entities. An agency may certify that a rule
will not have a significant economic impact on a substantial number of
small entities if the rule relieves regulatory burden, has no net
burden or otherwise has a positive economic effect on the small
entities subject to the rule. This proposed rule does not impose any
requirements or create impacts on small entities. This proposed FIP
action under Section 110 of the CAA will not create any new requirement
with which small entities must comply. Accordingly, it affords no
opportunity for the EPA to fashion for small entities less burdensome
compliance or reporting requirements or timetables or exemptions from
all or part of the rule. The fact that the CAA prescribes that various
consequences (e.g., emission limitations) may or will flow from this
action does not mean that the EPA either can or must conduct a
regulatory flexibility analysis for this action. We have therefore
concluded that this proposed action will have no net regulatory burden
for all directly regulated small entities.

E. Unfunded Mandates Reform Act (UMRA)

    This proposed 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 proposed 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 proposed rule does not have tribal implications, as specified
in Executive Order 13175. It will not have substantial direct effects
on tribal governments. Thus, Executive Order 13175 does not apply to
this rule.

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

    Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks \101\ applies to any rule that: (1) Is
determined to be economically significant as defined under Executive
Order 12866; and (2) concerns an environmental health or safety risk
that we have reason to believe may have a disproportionate effect on
children. EPA interprets E.O. 13045 as applying only to those
regulatory actions that concern health or safety risks, such that the
analysis required under Section 5-501 of the E.O. has the potential to
influence the regulation. This proposed action is not subject to
Executive Order 13045 because it is not economically

significant as defined in Executive Order 12866, and because the EPA
does not believe the environmental health or safety risks addressed by
this proposed action present a disproportionate risk to children. This
proposed action is not subject to E.O. 13045 because it implements
specific standards established by Congress in statutes. However, to the
extent this proposed rule will limit emissions of SO2, the
proposed rule will have a beneficial effect on children's health by
reducing air pollution.
---------------------------------------------------------------------------

    \101\ 62 FR 19885 (Apr. 23, 1997).
---------------------------------------------------------------------------

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

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

J. National Technology Transfer and Advancement Act (NTTAA)

    This proposed action involves technical standards. The EPA has
decided to use the applicable monitoring requirements of 40 CFR part
75. Part 75 already incorporates a number of voluntary consensus
standards. Consistent with the Agency's Performance Based Measurement
System (PBMS), part 75 sets forth performance criteria that allow the
use of alternative methods to the ones set forth in part 75. The PBMS
approach is intended to be more flexible and cost-effective for the
regulated community; it is also intended to encourage innovation in
analytical technology and improved data quality. At this time, EPA is
not recommending any revisions to part 75; however, EPA periodically
revises the test procedures set forth in part 75. When EPA revises the
test procedures set forth in part 75 in the future, EPA will address
the use of any new voluntary consensus standards that are equivalent.
Currently, even if a test procedure is not set forth in part 75, EPA is
not precluding the use of any method, whether it constitutes a
voluntary consensus standard or not, as long as it meets the
performance criteria specified; however, any alternative methods must
be approved through the petition process under 40 CFR 75.66 before they
are used.

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

    The EPA believes that this proposed action does not have
disproportionately high and adverse human health or environmental
effects on minority populations, low-income populations and/or
indigenous peoples, as specified in Executive Order 12898 (59 FR 7629,
February 16, 1994). We have determined that this proposed rule will not
have disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it increases the
level of environmental protection for all affected populations without
having any disproportionately high and adverse human health or
environmental effects on any population, including any minority or low-
income population. The proposed rule limits emissions of SO2
from certain facilities in Texas.

List of Subjects

40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by
reference, Intergovernmental relations, Nitrogen dioxide, Ozone,
Particulate matter, Reporting and recordkeeping requirements, Sulfur
dioxides, Visibility, Interstate transport of pollution, Regional haze,
Best available retrofit technology.

40 CFR Part 97

    Environmental protection, Administrative practice and procedure,
Air pollution control, Intergovernmental relations, Nitrogen dioxide,
Reporting and recordkeeping requirements, Sulfur dioxides.

    Dated: August 17, 2018.
Anne Idsal,
Regional Administrator.
[FR Doc. 2018-18497 Filed 8-24-18; 8:45 am]
 BILLING CODE 6560-50-P


[Federal Register: October 23, 2006 (Volume 71, Number 204)]
[Proposed Rules]
[Page 62076-62077]
[DOCID:fr23oc06-9]

=======================================================================
-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[EPA-HQ-OAR-2003-0064; FRL-8233-4]
RIN 2060-AL75

Prevention of Significant Deterioration (PSD) and Nonattainment
New Source Review (NSR): Debottlenecking, Aggregation, and Project
Netting

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of public hearing.

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

SUMMARY: The EPA is announcing a public hearing to be held on November
6, 2006, for the proposed rule on ``Prevention of Significant
Deterioration (PSD) and Nonattainment New Source Review (NSR):
Debottlenecking, Aggregation, and Project Netting.'' This rulemaking
action was published in the Federal Register on September 14, 2006 and
proposes to revise the regulations governing the NSR programs mandated
by parts C and D of title I of the Clean Air Act. The public hearing
will provide interested parties the opportunity to

present data, views, or arguments concerning these proposed changes.

DATES: The public hearing will convene at 9 a.m. on November 6, 2006,
and continue until 1 hour after the last registered speaker has spoken.
People wishing to present oral testimony must pre-register by 5 p.m. on
November 3, 2006. The EPA is willing to keep the public hearing open
into the evening hours of November 6, 2006, if speakers are pre-
registered by the registration deadline of 5 p.m. on November 3, 2006,
and have registered to speak during evening hours. For updates and
additional information on the public hearing, please check EPA's Web
site for this rulemaking at http://www.epa.gov.nsr/.

ADDRESSES: The public hearing will be held at U.S. Environmental
Protection Agency, 109 TW Alexander Drive, Research Triangle Park,
North Carolina 27709, Building C, Classroom C112. Because this hearing
is being held at U.S. Government facilities, everyone planning to
attend the hearing should be prepared to show valid picture
identification to the security staff in order to gain access to the
meeting room. In addition, you will need to obtain a property pass for
any personal belongings you bring with you. Upon leaving the building,
you will be required to return this property pass to the security desk.
No large signs will be allowed in the building, cameras may only be
used inside the classroom and outside of the building, and
demonstrations will not be allowed on Federal property for security
reasons. Directions to the EPA Campus are available on the Internet at
http://www.epa.gov/rtp/facilities/maindirections.htm, along with a map

showing the area designated for visitor parking. From there, walk
toward the main facility and enter the center building (by the U.S. and
EPA flags).

FOR FURTHER INFORMATION CONTACT: If you would like to speak at the
public hearing or have questions concerning the public hearing, please
contact Ms. Pamela Long, U.S. Environmental Protection Agency, OAQPS,
Air Quality Planning Division, (C504-03), Research Triangle Park, NC
27711, telephone<PHONE_NUMBER>, fax number<PHONE_NUMBER>, e-mail
address<EMAIL_ADDRESS>    Questions concerning the September 14, 2006, proposed rule should
be addressed to Mr. David Svendsgaard, U.S. EPA, Office of Air Quality
Planning and Standards, Air Quality Policy Division, (C504-03),
Research Triangle Park, NC 27711, telephone number<PHONE_NUMBER>, e-
mail at<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: The September 14, 2006, proposed rule
changes reflect EPA's consideration of the Agency's 2002 Report to the
President and its associated recommendations as well as discussions
with various stakeholders including representatives of environmental
groups, State and local governments, and industry. It proposes to
change how emissions from units upstream or downstream from the unit(s)
undergoing a physical change or change in the method of operation are
included in the calculation of an emissions increase for the project.
It also proposes to clarify and codify our policy of when emissions
increases from multiple projects are to be aggregated together to
determine NSR applicability. Finally, it proposes to clarify how
emissions decreases from a project may be included in the calculation
to determine if a significant emissions increase will result from a
project. The EPA expects that these proposed rule changes will improve
implementation of the program by articulating and codifying principles
for determining major NSR applicability that we currently address
through guidance only.
    Public hearing: The proposal for which EPA is holding the public
hearing was published in the Federal Register on September 14, 2006,
(71 FR 54235) and is available at: http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/E6-15248.pdf.
 The

public hearing will provide interested parties the opportunity to
present data, views, or arguments concerning the proposed rule. The EPA
may ask clarifying questions during the oral presentations, but will
not respond to the presentations at that time. Written statements and
supporting information submitted during the comment period will be
considered with the same weight as any oral comments and supporting
information presented at the public hearing. Written comments on the
proposed rule must be postmarked by November 13, 2006, which is the
closing date for the comment period, as specified in the proposal for
the rule. However, the record will remain open until December 6, 2006,
to allow 30 days for submittal of additional information related to the
hearing.
    Commenters should notify Ms. Long if they will need specific
equipment, or if there are other special needs related to providing
comments at the hearing. The EPA will provide equipment for commenters
to show overhead slides or make computerized slide presentations if we
receive special requests in advance. Oral testimony will be limited to
5 minutes for each commenter. The EPA encourages commenters to provide
EPA with a copy of their oral testimony electronically (via e-mail,
computer disk, or CD) or in hard copy form.
    The hearing schedule, including lists of speakers, will be posted
on EPA's Web site http://www.epa.gov/nsr/. Verbatim transcripts of the

hearing and written statements will be included in the docket for the
rulemaking.

How Can I Get Copies of This Document and Other Related Information?

    The EPA has established the official public docket for the proposed
rule entitled ``Prevention of Significant Deterioration (PSD) and
Nonattainment New Source Review (NSR): Debottlenecking, Aggregation,
and Project Netting'' under Docket ID No. EPA-HQ-OAR-2003-0064. Note:
The EPA Docket Center suffered damage due to flooding during the last
week of June 2006. The Docket Center is continuing to operate. However,
during the cleanup, there will be temporary changes to Docket Center
telephone numbers, addresses, and hours of operation for people who
wish to make hand deliveries or visit the Public Reading Room to view
documents. Consult EPA's Federal Register notice at 71 FR 38147 (July
5, 2006) or the EPA Web site at http://www.epa.gov/epahome/dockets.htm

for current information on docket operations, locations and telephone
numbers. The Docket Center's mailing address for U.S. mail and the
procedure for submitting comments to http://www.regulations.gov are not

affected by the flooding and will remain the same.
    As stated previously, the proposed rule was published in the
Federal Register on September 14, 2006 (71 FR 54235) and is available
at http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/E6-15248.pdf
.

    Dated: October 11, 2006.
Jeffrey S. Clark,
Acting Director, Office of Air Quality Planning and Standards.
[FR Doc. 06-8842 Filed 10-20-06; 8:45 am]

BILLING CODE 6560-50-P


Table 6.5 Emission Reductions in VMT from 1999 to 2015 NOx VOC Five County MSA Five County MSA TTI VMT TTI VMT Year No Control Measures No Control Measures 1999 32,506,000 32,506,000 2007 27,677,756 22,332,084 2015 9,796,164 15,907,780 VMT is expected to increase in the five county region by 36% from 1999 to 2007 and 79.3% from 1999 to 2015. Without I/ M in the five county region, NOx from VMT is expected to decline by 33.3% from 1999 to 2007 and 69.9% from 1999 to 2015. The VOC will also decline ( 31.3% and 51.1%). Again, the expected increases in population and the planned roadway system that will contribute to an increase in VMT will not contribute to emissions exceeding the amount of 1999 on road emissions.

One conclusion from this analysis is that the currently planned roadway system will not exacerbate the production of ozone in the MSA through 2015. The details of all calculations are included in Appendix 6 2b. Austin/ Round Rock MSA Clean Air Action Plan ( CAAP)

58 Emissions Comparisons: Another way to evaluate VMT and associated emissions is to compare the estimated emissions for future years to the base year emissions. Multiplying the emission factor by the VMT results in an estimate of the daily emissions associated with on road travel. This evaluation shows a decrease in both NOx and VOC emissions, despite an increase in VMT.

Emission factors for each year were calculated by CAMPO staff using MOBILE6 and included appropriate local data where available. Emissions factors are typically expressed in grams/ mile. Multiplying the emissions factor times the VMT results in the grams of emissions, either NOx or VOC. Because the emissions inventory is expressed in tons per day, the resultant grams of onroad emissions were converted to tons by dividing the number of grams by 454 grams/ lb and then by 2000 lbs/ ton. Please refer to Appendix 6 2 a & b for more details.

Table 6.6 Emission Reductions from 1999 to 2015 TTI, Five County, No Controls NOx VOC Year VMT ( miles) EF ( g/ mi) VMT X EF ( tons) Year VMT ( miles) EF ( g/ mi) VMT X EF ( tons) 1999 32,506,000 2.433 87 1999 32,506,000 1.425 51 2007 44,508,000 1.185 58 2007 44,508,000 0.715 35 2015 58,274,000 0.409 26 2015 58,274,000 0.389 25 Both evaluation techniques, the VMT screen and comparison of emissions, show large enough decreases in on road emissions to more than offset the anticipated growth in VMT through 2015. These decreases in emissions will be even greater once the I/ M program is implemented.

Point Sources TCEQ provided emission data for point sources in the CAPCO region for the 1999 EI. In the 1999 EI, the point source was sub categorized into major point source and minor point source. CAPCO developed the following point source information for 1999 and 2007.

Table 6.4 Point Source Emissions from EGU, A/ RR MSA and Surrounding Area EGUs Point Source Emissions ( tpd) A/ RR MSA and Surrounding Area 1999 2007 County Facility Name NOx VOC NOx VOC Bastrop Sim Gideon Electric Power Plant 7.10 0.33 3.94 0.11 Bastrop Lost Pines 1 Power Plant n/ a n/ a 1.50 0.23 Bastrop Bastrop Clean Energy Center n/ a n/ a 2.21 0.12 Fayette Fayette Power Project 60.82 0.55 28.12 0.78 Hays Hays Energy Facility n/ a n/ a 3.70 0.96 Milam Sandow Steam Electric 24.20 0.33 13.19 0.32 Travis Decker Lake Power Plant 8.15 0.44 3.80 0.12 Travis Holly Street Power Plant 2.88 0.12 2.98 0.01 Travis Sand Hills n/ a n/ a 1.03 0.20 Travis Hal C Weaver Power Plant 1.99 0.03 1.86 0.05 Total 105.14 1.80 62.32 2.91 Total MSA 20.12 0.92 21.01 1.81 Austin/ Round Rock MSA Clean Air Action Plan ( CAAP)

59 A uniform change for 2002 and 2005 was assumed and 2012 is expected to stay unchanged based on feedback from power plant stakeholders.

Table 6.5 Point Source Emissions from NEGU NEGUs Point Source Emissions ( tpd) A/ RR MSA and Sourranding Area 1999 2007 County Facility Name NOx VOC NOx VOC Caldwell Durol Western Manufacturing, Inc. 0.00 0.01 0.00 0.00 Caldwell Luling Gas Plant 0.89 0.26 0.29 0.04 Caldwell Maxwell Facility 0.00 0.15 0.00 0.06 Caldwell Prairie Lea Compressor Station 2.66 0.04 2.23 0.03 Caldwell Teppco Crude Oil LLC, Luling Station 0.00 0.01 n/ a n/ a Comal APG Lime Corp 1.15 0.00 1.15 0.00 Comal Sunbelt Cemebt of Texas LP 7.61 0.12 3.79 0.13 Comal TXI Operations LP 3.34 0.14 3.43 0.15 Hays Parkview Metal Products, Inc. 0.00 0.10 0.00 0.03 Hays Southern Post Co. Commercial Metal 0.00 0.06 0.00 0.01 Hays Southwest Solvents and Chemicals 0.00 0.00 0.00 0.00 Hays Texas LeHigh Cement 7.20 0.18 5.24 0.55 Milam Aluminum Company of America 54.26 4.25 4.64 0.38 Travis RIN3M Austin Center 0.15 0.03 0.15 0.03 Travis Advanced Micro Devices, Inc. 0.00 0.00 0.23 0.17 Travis Austin White Lime Co. 0.89 0.00 0.94 0.02 Travis IBM Corporation 0.09 0.04 0.01 0.04 Travis Lithoprint Co., Inc. 0.00 0.05 n/ a n/ a Travis Motorola Ed Bluestein 0.46 0.17 0.01 0.04 Travis Motorola Integrated Circuit Division 0.09 0.08 0.02 0.02 Travis Multilayer TEK, L. P. 0.00 0.18 0.01 0.21 Travis Raytheon Systems, Co. 0.02 0.02 0.01 0.00 Travis Twomey Welch Aerocorp, Inc. 0.00 0.00 0.00 0.00 Williamson Aquatic Industries, Inc. 0.00 0.11 0.00 0.04 Total 78.82 6.02 22.14 1.95 Total MSA 12.46 1.50 9.13 1.28 Backup documentation for the above may be found in Appendix 6 4.

THE CONTINUING PLANNING PROCESS CAPCO and CAMPO staff will analyze air quality and related data and perform necessary modeling updates annually. In addition to the data sources used for the above analyses, staff may add information from The Central Texas Sustainability Indicators Project ( CTSIP). The CTSIP is a nonprofit organization that tracks 40 key indicators ( e. g., water pollution, air quality, density of new development) that show the economic, environmental and social health of our Austin/ Round Rock MSA Clean Air Action Plan ( CAAP)

60 MSA. The results of all these analyses will be reported in the June semi annual reports beginning in June 2005.

Using similar methods as for the above maintenance for growth analysis, staff will evaluate: 1. future transportation patterns; 2. all relevant actual new point sources; and 3. impacts from potential new source growth.

Future Transportation Patterns: As part of the Mobility 2030 plan development process CAMPO staff will perform the VMT screen for years 2007 and 2017. The screen will test to be sure that any expected increase in VMT over the planning horizons will be offset by technology and control measures, that is, that the expected associated emissions will not exceed the associated emissions of the base year ( 1999).

As part of this analysis, the emission factors will be reviewed and updated as necessary. Review of the emission factors includes checking and updating the fleet mix.

This test will also be performed prior to adoption of any CAMPO long range transportation plan update or amendment that significantly increases VMT.

New Point Sources and Potential New Point Sources: In addition to the VMT screen and review of area sources, staff will include a list and impact analysis of the relevant new and potential new point sources. Staff will obtain data on these relevant new and potential new point sources from TCEQ.

The annual analysis will determine the adequacy of the selected control measures. After review by the appropriate elected officials, these measures will be adjusted if necessary. Austin/ Round Rock MSA Clean Air Action Plan ( CAAP)

61 CHAPTER 7: TRACKING AND REPORTING All signatories and implementing agencies will review EAC activities twice yearly. The semiannual review will track and document, at a minimum, control strategy implementation and results, monitoring data and future plans. CAPCO, or its designee, will file reports with TCEQ and EPA by June 30 and December 31 of each reporting year. Reporting periods will be May 1 to October 31, and November 1 to April 30, to allow for adequate public notice and comment. CAPCO has primary responsibility for report generation.

CAPCO will provide appropriately detailed technical analysis for all semi annual review reporting. The metrics detailed in Appendix 7 1 provide an example, but their use is subject to staffing and funding constraints.


[Federal Register Volume 77, Number 165 (Friday, August 24, 2012)]
[Notices]
[Pages 51602-51604]
[FR Doc No: 2012-20818]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67685; File No. SR-BATS-2012-023]

Self-Regulatory Organizations; BATS Exchange, Inc.; Order
Granting Approval of a Proposed Rule Change to Amend BATS Rules 14.2
and 14.3 To Adopt Additional Listing Requirements for Reverse Merger
Companies and To Align BATS Rules With the Rules of Other Self-
Regulatory Organizations

August 17, 2012.

I. Introduction

    On June 15, 2012, BATS Exchange, Inc. (``BATS'' 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'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule
change to amend BATS Rules 14.2 and 14.3 to adopt additional listing
requirements for companies that become a reporting company under the
Exchange Act by combining with a public shell, whether through a
reverse merger, exchange offer, or otherwise (a ``Reverse Merger'') and
to align BATS Rules with the rules of other self-regulatory
organizations. The proposed rule change was published for comment in
the Federal Register on July 5, 2012.\3\ The Commission received no
comments on the proposed rule change. This order approves the proposed
rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 67304 (June 28,
2012), 77 FR 39781 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposal

    BATS proposed to adopt more stringent listing requirements for
operating companies that become Exchange Act reporting companies
through a Reverse Merger. In a Reverse Merger, an existing public shell
company merges with a private operating company in a transaction in
which the shell company is the surviving legal entity.
    Significant regulatory concerns, including accounting fraud
allegations, have arisen with respect to a number of Reverse Merger
companies in recent times. The Commission has taken direct action
against Reverse Merger companies. During 2011, the Commission suspended
trading in, and revoked the securities registration of, a number of
Reverse Merger companies.\4\ The Commission also brought an enforcement
proceeding against an audit firm relating to its work for Reverse
Merger companies.\5\ In addition, the Commission issued a bulletin on
the risks of investing in Reverse Merger companies, noting potential
market and regulatory risks related to investing in Reverse Merger
companies.\6\
---------------------------------------------------------------------------

    \4\ See Letter from Mary L. Schapiro to Hon. Patrick T. McHenry,
dated April 27, 2011 (``Schapiro Letter''), at pages 3-4.
    \5\ See Schapiro Letter at page 4.
    \6\ See ``Investor Bulletin: Reverse Mergers'' 2011-123.
---------------------------------------------------------------------------

    In light of the well-documented concerns related to some Reverse
Merger companies described above, BATS stated its belief that it is
appropriate to codify in its rules specific requirements with respect
to the initial listing qualification of Reverse Merger companies. As
proposed, a Reverse Merger company would not be eligible for listing
unless the combined entity had, immediately preceding the filing of the
initial listing application:
    (1) Traded for at least one year in the U.S. over-the-counter
market, on another national securities exchange, or on a regulated
foreign exchange following the consummation of the Reverse Merger and
(i) in the case of a domestic issuer, filed with the Commission a form
8-K including all of the information required by Item 2.01(f) of Form
8-K, including all required audited financial statements; or (ii) in
the case of a foreign private issuer, filed the information described
in (i) above on Form 20-F;
    (2) Maintained on both an absolute and an average basis for a
sustained period a minimum stock price of at least $4, but in no event
for less than 30 of the most recent 60 trading days prior to each of
the filing of the initial listing application and the date of the
Reverse Merger company's listing on the Exchange, except that a Reverse
Merger company that has satisfied the one-year trading requirement
described in paragraph (1) above and has filed at least four annual
reports with the Commission which each contain all required audited
financial statements for a full fiscal year commencing after filing the
information described in paragraph (1) above will not be subject to
this price requirement; and
    (3) Timely filed with the Commission all required reports since the
consummation of the Reverse Merger, including the filing of at least
one annual report containing audited financial statements for a full
fiscal year commencing on a date after the date of filing with the
Commission of the filing described in paragraph (1) above.
    In addition, a Reverse Merger company would be required to maintain
on both an absolute and an average basis a minimum stock price of at
least $4 through listing.
    BATS stated that requiring a ``seasoning'' period prior to listing
for Reverse Merger companies should provide great assurance that the
company's operations and financial reporting are reliable, and will
also provide time for its independent auditor to detect any potential
irregularities, as well as for the company to identify and implement
enhancements to address any internal control weaknesses. The seasoning
period would also provide time for regulatory and market scrutiny of
the company and for any concerns that would preclude listing
eligibility to be identified.
    BATS stated its belief that the proposed rule change would increase
transparency to issuers and market participants with respect to the
factors considered by the Exchange in assessing Reverse Merger
companies for listing and should generally reduce the risk of
regulatory concerns with respect to these companies being discovered
after listing. BATS further noted that, while it believes that the
proposed requirements would be a meaningful additional safeguard, it is
not possible to guarantee that a Reverse Merger company (or any other
listed company) is not engaged in undetected accounting fraud or
subject to other concealed and undisclosed legal or regulatory
problems.
    For purposes of the proposal amending BATS Rules 14.2(c) and
14.3(b)(9) (which will both be applicable to Reverse Merger companies
which qualify to list under BATS Rules) and as defined above, a Reverse
Merger would mean any transaction whereby an operating company became
an Exchange Act reporting company by combining either directly or
indirectly with a shell company that was an Exchange Act reporting
company, whether through a Reverse Merger, exchange offer, or
otherwise. However, a Reverse Merger would not include the acquisition
of an operating company by a listed company that qualified for initial
listing under BATS Rule 14.2(b) (the Exchange's standard for companies
whose business plan is to complete one or more acquisitions). In
determining whether a company was a shell company, BATS would consider,
among other factors:

whether the company was considered a ``shell company'' as defined in
Rule 12b-2 under the Exchange Act; what percentage of the company's
assets were active versus passive; whether the company generates
revenues, and if so, whether the revenues were passively or actively
generated; whether the company's expenses were reasonably related to
the revenues being generated; how many employees worked in the
company's revenue-generating business operations; how long the company
had been without material business operations; and whether the company
had publicly announced a plan to begin operating activities or generate
revenues, including through a near-term acquisition or transaction.
    In order to qualify for initial listing, a Reverse Merger company
would be required to comply with one of the initial listing standards
set forth in BATS Rule 14.4 or 14.5 and the stock price and market
value requirements of BATS Rule 14.8 or 14.9, as appropriate. Proposed
Rules 14.2(c)(3) and 14.3(b)(9) would supplement and not replace any
applicable requirements of Chapter XIV of BATS Rules. In addition to
the otherwise applicable requirements of BATS Rules, a Reverse Merger
company would be eligible to submit an application for an initial
listing only if it meets the additional criteria specified above.
    BATS would continue to have the discretion to impose more stringent
requirements than those set forth above if the Exchange believed that
it was warranted in the case of a particular Reverse Merger company,
based on, among other things, an inactive trading market in the Reverse
Merger company's securities, the existence of a low number of publicly
held shares that were not subject to transfer restrictions, if the
Reverse Merger company had not had a Securities Act registration
statement or other filing subjected to a comprehensive review by the
Commission, or if the Reverse Merger company had disclosed that it had
material weaknesses in its internal controls which had been identified
by management and/or the Reverse Merger company's independent auditor
and had not yet implemented an appropriate corrective action plan.
    BATS further stated that any Reverse Merger company would have to
comply with all listing standards set forth in BATS Rules, including
corporate governance standards. BATS also noted that it would monitor
the compliance with applicable BATS Rules by any Reverse Merger company
and would investigate any issues that indicate that a Reverse Merger
company is non-compliant with BATS Rules.
    A Reverse Merger company would not be subject to the requirements
of proposed BATS Rules 14.2(c)(3) and 14.3(b)(9) if, in connection with
its listing, it completes a firm commitment underwritten public
offering where the gross proceeds to the Reverse Merger company will be
at least $40 million.\7\ In that case, the Reverse Merger company would
only need to meet the initial listing standards. BATS stated that it
believes that it is appropriate to exempt Reverse Merger companies from
the proposed rule where they are listing in conjunction with a sizable
offering, as those companies would be subject to the same Commission
review and due diligence by underwriters as a company listing in
conjunction with its IPO or any other company listing in conjunction
with an initial firm commitment underwritten public offering, so it
would be inequitable to subject them to more stringent requirements.
---------------------------------------------------------------------------

    \7\ The prospectus and registration statement covering the
offering would thus need to relate to the combined financial
statements and operations of the Reverse Merger Company.
---------------------------------------------------------------------------

    BATS further noted that the proposal is based on and consistent
with recent Commission approvals of analogous rules for the New York
Stock Exchange LLC (``NYSE''), NYSE Amex LLC (``AMEX'') and the NASDAQ
Stock Market LLC (``Nasdaq'').\8\
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release Nos. 65709 (November 8,
2011), 76 FR 70795 (November 15, 2011) (File No. SR-NYSE-2011-38);
65710 (November 8, 2011), 76 FR 70790 (November 15, 2011) (File No.
SR-NYSEAmex-2011-55); 65708 (November 8, 2011), 76 FR 70799
(November 15, 2011) (File No. SR-NASDAQ-2011-073).
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of the Act and the
rule and regulations thereunder applicable to a national securities
exchange,\9\ and, in particular, Section 6(b)(5) of the Act,\10\ which,
among other things, requires that the rules of a national securities
exchange be 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 regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.
---------------------------------------------------------------------------

    \9\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The development and enforcement of meaningful listing standards for
an exchange is of substantial importance to financial markets and the
investing public. Among other things, listing standards provide the
means for an exchange to screen issuers that seek to become listed, and
to provide listed status only to those that are bona fide companies
with sufficient public float, investor base, and trading interest
likely to generate depth and liquidity sufficient to promote fair and
orderly markets. Meaningful listing standards also are important given
investor expectations regarding the nature of securities that have
achieved an exchange listing, and the role of an exchange in overseeing
its market and assuring compliance with its listing standards.
    BATS proposed to make more rigorous its listing standards for
Reverse Merger companies, given the significant regulatory concerns,
including accounting fraud allegations, that have recently arisen with
respect to these companies. As noted above, the Commission previously
approved similar filings by Nasdaq, NYSE and NYSE Amex.\11\ The
proposal, and those previously filed by Nasdaq, NYSE and NYSE Amex,
among other things, are intended to improve the reliability of the
reported financial results of Reverse Merger companies by requiring a
pre-listing ``seasoning period'' during which the post-merger public
company would have produced financial and other information in
connection with its required Commission filings. The current proposal
is also intended to address concerns that some might attempt to meet
the minimum price test required for exchange listing through a quick
manipulative scheme in the securities of a Reverse Merger company, by
requiring that minimum price to be sustained for a meaningful period of
time.
---------------------------------------------------------------------------

    \11\ See supra note 8.
---------------------------------------------------------------------------

    The Commission believes the proposed one-year seasoning requirement
for Reverse Merger companies that seek to list on the Exchange is
reasonably designed to address concerns that the potential for
accounting fraud and other regulatory issues is more pronounced for
this type of issuer. As discussed above, these additional listing
requirements will assure that a Reverse Merger company has produced and
filed with the Commission at least one full year of all

required audited financial statements following the Reverse Merger
transaction before it is eligible to list on BATS. The Reverse Merger
company also must have filed all required Commission reports since the
consummation of the Reverse Merger, which should help assure that
material information about the issuer have been filed with the
Commission and that the issuer has a demonstrated track record of
meeting its Commission filing and disclosure obligations. In addition,
the requirement that the Reverse Merger company has traded for at least
one year in the over-the-counter market or on another exchange could
make it more likely that analysts have followed the company for a
sufficient period of time to provide an additional check on the
validity of the financial and other information made available to the
public.
    The Commission also believes the proposed requirement for a Reverse
Merger company to maintain the specified minimum share price for a
sustained period, and for at least 30 of the most recent 60 trading
days, prior to the date of the initial listing application and the date
of listing, is reasonably designed to address concerns that the
potential for manipulation of the security to meet the minimum price
requirements is more pronounced for this type of issuer. By requiring
that minimum price to be maintained for a meaningful period of time,
the proposal should make it more difficult for a manipulative scheme to
be successfully used to meet the Exchange's minimum share price
requirements.
    In addition, the Commission believes that the proposed exceptions
to the enhanced listing requirements for Reverse Merger companies that
(1) complete a substantial firm commitment underwritten public offering
in connection with its listing, or (2) have filed at least four annual
reports containing all required audited financial statements with the
Commission following the filing of all required information about the
Reverse Merger transaction, and satisfying the one-year trading
requirement, reasonably accommodate issuers that may present a lower
risk of fraud or other illegal activity. The Commission believes it is
reasonable for the Exchange to conclude that, although formed through a
Reverse Merger, an issuer that (1) undergoes the due diligence and
vetting required in connection with a sizeable underwritten public
offering, or (2) has prepared and filed with the Commission four years
of all required audited financial statements following the Reverse
Merger, presents less risk and warrants the same treatment as issuers
that were not formed through a Reverse Merger. Nevertheless, the
Commission expects the Exchange to monitor any issuers that qualify for
these exceptions and, if fraud or other abuses are detected, to propose
appropriate changes to its listing standards.
    For the reasons discussed above, the Commission believes that
BATS's proposal will further the purposes of Section 6(b)(5) of the Act
by, among other things, helping prevent fraud and manipulation
associated with Reverse Merger companies, and protecting investors and
the public interest.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-BATS-2012-023) is approved.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-20818 Filed 8-23-12; 8:45 am]
BILLING CODE 8011-01-P