In today's final rule, EPA is adopting, with minor modifications, the proposed rule revisions implementing source by source compliance with the allowance holding requirement. As explained in detail in the SNPR ( 69 FR 32698 32701), EPA finds that: title IV is ambiguous with regard to whether unit by unit compliance is required and so EPA has discretion in this matter; it is important to provide additional compliance flexibility by allowing a unit at a 662 source to use allowances from any other unit at the same source; and many other, non allowance holding provisions of title IV evidence a unit by unit orientation. Further, as discussed in the SNPR, EPA concludes that the adoption of source level compliance reasonably balances these considerations. In balancing these considerations, EPA also concludes that company level compliance is not appropriate because it represents too much of a deviation from the unitby unit orientation in the non allowance holding provisions of title IV and is likely to require much more dramatic changes in the operation of the Acid Rain Program. See 69 FR 32699 700. It is important to note that the final rule revisions, like the proposed revisions, change only the allowance holding requirement and not the emissions monitoring and reporting requirements, which continue to be applied unit by unit.

In today's action, EPA is making the source

levelcompliance rule revisions effective July 1, 2006, which is 1 year later than proposed. The shift from unit level to source level compliance will require software changes and testing to ensure that the Allowance Tracking System operates properly. Currently, EPA is in the process of conducting a general review and re engineering of the Allowance Tracking System and Emissions Tracking System and anticipates completing the process in 2006. The process of shifting the 663 Allowance Tracking System to source level compliance will be much more efficient and less likely to have adverse results on the system if the shift is coordinated with the general review and re engineering and therefore implemented starting July 1, 2006. Further, as discussed below, this delay of implementation for 1 additional year will give owners additional time to make changes that they determine are necessary in order to adapt to source level compliance.

Some commenters support the shift to source by source allowance holding, and some oppose the change. One commenter opposing the change claims that a source by source allowanceholding requirement is " contrary to market based principles."

According to the commenter, market based systems give operators the tools for achieving compliance through allowance transfers, but with source level compliance the operators do not have to take any action to maintain sufficient allowances because EPA will move the allowances around for them.

The commenter's argument is based on an incorrect premise. Whether compliance is unit by unit or source

bysource the owner or owners of the affected units at each source must take the same types of actions in order to comply with the applicable allowance holding requirement. In particular, under source level compliance, such owner or owners must reduce emissions, retain allowances allocated to 664 such units, obtain additional allowances, or take a combination of these actions to ensure that the Allowance Tracking System account for the source holds enough allowances to cover the total emissions of the affected units at the source. The owner or owners also have the option of reducing emissions below allocations so that there are extra allowances available to hold for future use or sale. If the owner or owners do not have enough allowances to cover the emissions from the source, EPA will not move, on its own initiative, allowances into the source's compliance account from other sources' accounts or from general accounts, even if there are extra allowances in the other accounts. The only difference between the types of actions owners must take under the unit level and source level approaches is that,

under unit level compliance, the owners must transfer allowances from one unit at a source to a second unit at that source in order to use the first unit's allowances for compliance by the second unit while, under source level compliance, any allowance held for compliance for the first unit can be used  without a transfer  for compliance by the second unit. This difference is reflected in the Allowance Tracking System, which, under the unit level approach, includes a separate account for each unit and,

under the source level approach, includes a single account for all the affected units at a single source. 665 In summary, the mechanism, and the owners'

responsibilities, for achieving compliance with the allowance holding requirements are analogous under unit

byunit and source by source compliance, except that, under source by source compliance, allowances need not be transferred among units at the same source. The EPA does not believe that the source by source approach is any less market based than the unit by unit approach. Owners will still have the ability to reduce emissions or purchase or sell allowances and the responsibility to take actions ( including the holding of extra allowances) to ensure they have enough allowances to cover emissions. Moreover, the market price of allowances will still play a crucial role in owners' decisions on what actions to take. The EPA's adoption of source by source compliance preserves marketbased principles, while reasonably balancing of the ambiguity of title IV, the need for additional compliance flexibility,

and the unit by unit orientation of many provisions in title IV. See 69 FR 32699 700.

The commenter also argues that having a source level allowance holding requirement in the Acid Rain Program ( and the CAIR model cap and trade program) is inconsistent with unit level compliance in the NOx SIP Call cap and trade program. However, other than pointing out this difference,

the commenter fails to explain why the programs must be 666 identical in this regard. Based on experience with the Acid Rain Program ( as well as the NOx SIP Call trading program),

EPA concludes that a source level allowance holding requirement will result in a somewhat less complicated program and a reduced likelihood of inadvertent, minor errors, while achieving the program's environmental goals.

See 69 FR 32699 700.

The commenter suggests that, instead of adopting sourcelevel compliance, EPA revise the Acid Rain Program regulations to allow for source over draft accounts, like those allowed in the NOx SIP Call cap and trade program.

Under the NOx SIP Call program, each source may have a source over draft account, in which may be held extra allowances that may be used for compliance by any affected unit at the source. However, EPA believes that source level compliance is a better approach than unit level compliance with overdraft accounts. Relatively few owners in the NOx SIP Call cap and trade program actually put allowances in over draft accounts, and achievement of compliance is made more complicated by the ability of all units at a source to draw on the over draft account ( if any allowances are put in it)

but the inability of any unit to use extra allowances held instead by another unit at the source. Consequently, rather than adopting in the Acid Rain Program the unit level approach with over draft accounts, EPA is today adopting the 667 source level approach in the Acid Rain Program and may consider in the future, as appropriate, adopting the sourcelevel approach in other programs using unit level compliance.

One commenter states that EPA should revise the Acid Rain Program regulations to allow owners, each year, the option of choosing whether to use unit level or source level compliance. According to the commenter, significant investments have been made to monitor and report emissions and surrender allowances under the existing Acid Rain Program regulations, and shifting to source level compliance will require substantial resources and time. The commenter also states that unit based compliance should be retained as an option " to accommodate joint ownership and other special arrangements that may not affect an entire facility."

The EPA rejects the suggestion of allowing each owner the option, for each year and for each source, of choosing between unit level and source level compliance. Such an approach would significantly complicate the achievement by sources, and the determination by EPA, of compliance. The potential for error ( e. g., due to erroneous assumptions about whether unit or source level compliance would be applicable to a particular source for a particular year) on the part of owners or EPA would be significantly increased. Moreover,

this complicated approach would result in inconsistent 668 treatment from source to source and year to year. Further,

the commenter provided only vague assertions about the benefits of unit based compliance in certain circumstances and did not assert  much less show  that source level compliance cannot be accommodated under those circumstances.

The EPA maintains that the only reasonable options for the allowance holding requirement in the Acid Rain Program are either generally requiring compliance by all sources each year on a unit level basis ( as in the existing regulations)

or requiring compliance by all sources each year on a sourcelevel basis ( as in the proposed revisions to the regulations). For the reasons discussed above, EPA believes that source level compliance for the allowance holding requirement is preferable. By postponing until July 1, 2006 the effective date of the rule revisions shifting to sourcelevel compliance ( with the result that 2006 is the first year of source level compliance), EPA is providing owners a reasonable amount of time to make any necessary adjustments,

such as those claimed by the commenter. Further, as noted above, the rule revisions change only the allowance holding requirement and not the emissions monitoring and reporting requirements. This should limit the scope of adjustments necessary for owners to implement source level compliance and will preserve the availability of reliable, unit level emissions data. 669 14 This approach is consistent with the SNPR, where EPA proposed to convert all references, including any initially missed in the SNPR, from unit to source level compliance ( 69 FR 32700). Because unit level compliance is reflected throughout the Acid Rain Program regulations, numerous revisions of the regulations are necessary to implement source level compliance. ( None of these changes are to the emissions monitoring and reporting provisions in part 75 since monitoring and reporting continue to be on a unit basis.)

One commenter requested that EPA provide " more in depth detail" on the proposed revisions. However, in the SNPR, EPA described the types of, and reasons for, revisions that are necessary for source level compliance ( 69 FR 32700 01) and set forth all of the specific, proposed changes ( 69 FR 3273

41). Moreover, no commenters stated that they did not understand any specific, proposed revision or the reason for any specific revision. The EPA notes that in reviewing the proposed Acid Rain rule revisions in light of the comments,

EPA found some additional references in the Acid Rain rule to unit level compliance that should be revised to reflect source level compliance. In today's action, EPA is adopting revisions of these additional references ( e. g., changing references to a " unit's account" or a " unit account" to a source's " compliance account") that are analogous to the revisions specifically identified in the SNPR. 150 670 Another commenter opposed the rule revisions implementing source level compliance on several other grounds. The commenter claims, without citing any statutory support, that the Acid Rain Program is based on " control of emissions at the unit level" so that, in the event of excess emissions, the " source as a whole would not be punished" and " corrective action could take place" at the particular unit.

According to the commenter, source level compliance will:

make it harder to determine which unit caused excess emissions; make the existing Acid Rain permits meaningless;

make the individual unit allowance allocations meaningless;

and cause confusion over which units at a source are affected units.

While there are many non allowance holding provisions in title IV that have a unit by unit orientation, EPA disagrees with the commenter's basic assertion that the purpose of the Acid Rain Program is to control emissions on a unit by unit basis and that there is a need to " distinguish" the compliance of each individual unit. The provisions concerning application of the allowance holding requirement are ambiguous as to whether EPA must implement the requirement on a unit level or a source level, and the environmental benefits of the Acid Rain Program will still be realized with source level compliance. See 69 FR 32699 700.

Further, while EPA will determine compliance on a source by 671 source basis, nothing in the regulations prevents owners ( e. g., owners of units at sources with multiple units and multiple owners or owners of units with multiple owners and exhausting through a common stack) from determining by agreement which owners will bear any excess emissions penalties that occur at the plant and have to take correction actions. Indeed, owners are likely to already have these types of agreements in cases of units or sources with multiple owners. This is because the Acid Rain Program regulations already allow a unit at a multi unit source to use some allowances from other units at the source ( albeit to cover most but not all of the potential excess emissions) and already allow one unit exhausting from a common stack to use allowances from another unit at that stack ( without any limitation on such use). See 40 CFR 73.35( b)( 3) and ( e). In addition, while the Acid Rain permits will have to be revised in the future to reflect source level compliance, today's rule does not make source level compliance effective until 2006. Permits will not have to be revised until around the end of 2006, which should provide States a reasonable opportunity to amend the permits. Contrary to the claims of the commenter, source level compliance does not make the unit by unit allocations meaningless; the unit by unit allocations ( set forth in Table 2 of § 72.10) will determine the amount of allocations reflected in each Allowance 672 Tracking System source account, which amount will equal the sum of the allocations for all affected units at the source.

Finally, the commenter failed to explain how the source level allowance holding requirement could cause " confusion" over which units are affected units. This source level requirement does not change the applicability provisions,

which are still applied unit by unit.

As discussed in the SNPR, EPA proposed  in addition to the rule revisions to implement source level compliance

other revisions of the Acid Rain Program regulations in order to facilitate coordination of the Acid Rain Program and the CAIR SO2 cap and trade program. These additional revisions were described and explained in the SNPR ( 69 FR 32701). The EPA is adopting these revisions for the reasons in the SNPR,

as amplified below. Most of these revisions are supported,

or not opposed, by commenters, but some commenters objected to certain revisions.

For example, EPA noted that it had recently changed the " cogeneration unit" definition in § 72.2 in June 2002 ( 67 FR 40394, 40420; June 12, 2002). The original definition in § 72.2 had been used since the commencement of the Acid Rain Program. The only significant difference between the original and revised definitions is that the former refers to a unit " having the equipment used to produce" electricity and useful thermal energy through sequential use of energy, while 673 the latter simply refers to a unit " that produces"

electricity and useful thermal energy in that manner. The reason that EPA gave for revising the definition in June 2002 was to conform with the definition in the Section 126 rule.

However, the Section 126 rule ( and the NOx SIP Call) did not actually specify a " cogeneration unit" definition.

Consequently, there is no reason to use the June 2002 revised definition. Moreover, EPA is concerned that the change in the definition of " cogeneration unit" as of June 2002 may cause confusion or raise question about what units qualify for exemptions for " cogeneration units" from the Acid Rain Program. Under these circumstances, EPA concludes that the definition should be changed back to the original definition in § 72.2 and, in any event, intends to interpret the June 2002 revised definition as having the same meaning as the original definition. One commenter raised concerns that EPA did not provide any " detailed analysis" of the implications of changing the " cogeneration unit" definition. However, as discussed above, the change simply reinstates the definition that had been used in the Acid Rain Program from the initial promulgation of implementing regulations in 1993 until 2002.

No commenter asserted that reverting to the longstanding,

original definition would be disruptive.

Another Acid Rain Program rule revision proposed in the SNPR is the elimination of the requirement for owners and 674 operators to submit an annual compliance certification report for each source. One commenter expressed concern, because the purpose of the annual certification is to ensure that the designated representative is " aware and has assured the quality of the data" being submitted to EPA. However, as noted in the SNPR, designated representatives must evidence such awareness and compliance by submitting, with each quarterly emissions report, a certification that the monitoring and reporting requirements under part 75 of the Acid Rain Program regulations have been met. See 40 CFR 75.64( c). Quarterly emissions reports are available on line to the public and the States. In addition, owners and operators of sources subject to the Acid Rain Program must submit, under title V of the CAA, annual compliance certification reports concerning all CAA requirements ( including Acid Rain Program requirements). Under these circumstances, EPA maintains that the separate Acid Rain Program annual compliance certification reports are duplicative and unnecessary. The EPA notes that it appears that few, if any, requests for copies of these Acid Rain Program reports have been made by States or any other persons since the commencement of the Acid Rain Program. Apparently,

other certifications and submissions required of owners and operators have been sufficient for the purposes cited by the commenter. 675 The SNPR also included proposed revisions eliminating the requirement under the Acid Rain Program for a 1 day newspaper notice for designation of designated representatives and authorized account representatives. One commenter suggests that this notice should be replaced by a requirement to notify the State permitting authority. The EPA notes that information on designated representatives and authorized account representatives is already available to State permitting authorities through on line access to the Allowance Tracking System. Moreover, EPA is in the process of developing, and anticipates establishing in the near future, the ability to send State permitting authorities ( at their request) on line notices of changes in designated representatives ( who are also the authorized account representatives for affected sources' accounts).

Other proposed Acid Rain Program rule revisions on which EPA received adverse comment are the removal of § 73.32 ( prescribing the contents of an allowance account) and § 73.51 ( prohibiting the transfer of allowances from a future year subaccount to a subaccount for an earlier year). Section 73.32 sets forth a rather self evident list of information that must be recorded in an allowance account in the Allowance Tracking System, such as the name of the authorized account representative, the persons represented by the authorized account representative, and the transfers of 676 15 In reviewing the proposed Acid Rain Program rule revisions, EPA found some additional references to " subaccounts" that were not specifically noted in the SNPR. For consistency and clarity in the Acid Rain Program rules, EPA is adopting in today's action revisions ( e. g., changing the term " subaccount" to " compliance account") of these additional references, which revisions are analogous to those specifically set forth in the SNPR. This approach is consistent with the SNPR, where EPA proposed to convert all references, including any initially missed in the SNPR, from subaccount to compliance account, ( 69 FR 32700). allowances in and out of the account. This section also references information on compliance or current year subaccounts and future year subaccounts, as well as emissions information. As discussed in the SNPR, several items on the list of informational contents for allowance accounts are out of date in that they do not reflect how the electronic Allowance Tracking System operates or will operate in the near future. For example, the electronic Allowance Tracking System does not currently use or refer to subaccounts, which will continue to be unnecessary in the context of sourcelevel compliance. 151 See 69 FR 32700 01. In addition, while § 73.32 states that emissions data are reflected in the Allowance Tracking System account, such data are currently available instead through the electronic Emissions Tracking System. Because the information list in § 73.32 contains either self evident items or items that are out of date and because the NOx Allowance Tracking System has been operating successfully even though the model NOx Budget cap and trade rule and State cap and trade rules under the NOx SIP Call 677 lack a provision analogous to § 73.32, EPA is removing § 73.32.

EPA notes that the removal of the section will not mean that the information contained in allowance accounts " can be changed at will." The format for allowance accounts is set forth in the electronic Allowance Tracking System and implements the requirements in the Acid Rain Program regulations concerning the holding, transferring, recording,

and deducting of allowances.

Section 73.51 prohibits the transfer of allowances from a future year subaccount to a subaccount for an earlier year.

The removal of this section is consistent with the elimination throughout the rest of the Acid Rain Program regulations, as discussed in the SNPR ( id.), of any references to such subaccounts. Further, the prohibition on using allowances allocated for a year to meet the allowanceholding requirement for a prior year is retained in other provisions of the Acid Rain Program regulations.

Consequently, EPA is removing § 73.51.

C. How Does the Rule Interact with the Regional Haze Program?

This section discusses the relationship of the CAIR cap and trade program for EGUs with the regional haze program under sections 169A & 169B of the CAA, in particular the requirements for Best Available Retrofit Technology ( BART)

for certain source categories including EGUs. The 678 legislative and regulatory background of the BART provisions were presented in some detail in the SNPR. ( See 69 FR 32684,

32702   704, June 10, 2004). In brief, BART regulations consist of two components. The first, promulgated in 1980,

addresses visibility impairment that can be " reasonably attributed" to a single source or small group of sources.

( 45 FR 80085; December 2, 1980, codified at 40 CFR 51.302.

The second component addresses BART in relation to regional haze ( visibility impairment caused by a multitude of broadly distributed sources) and was promulgated as part of the Regional Haze Rule. ( 64 FR 35714; July 1, 1999). Certain parts of the BART provisions in that rule were vacated by the U. S. Court of Appeals for the D. C. Circuit in American Corn Growers et al. v. EPA, 291 F. 3d 1 ( D. C. Cir., 2002). To address that decision, in May 2004, EPA proposed changes to the Regional Haze Rule and reproposed the Guidelines for BART Determinations ( originally proposed in 2001) ( 69 FR 25185,

May 5, 2004).

On February 18, 2005, the D. C. Circuit decided another case dealing with BART and a BART alternative program, Center for Energy and Economic Development v. EPA, No. 03 1222,( D. C.

Cir. Feb. 18, 2005)(" CEED"). In this case, the court granted a petition challenging provisions of the regional haze rule governing the optional emissions trading program for certain 679 152 Arizona, California, Colorado, Oregon, Idaho, Nevada, New Mexico, Utah, and Wyoming, 153 The trading program is referred to as a " backstop" because under the WRAP Annex, States have the opportunity to achieve specified emission milestones using voluntary measures, with the trading program coming into effect only if those milestones are exceeded. western States and Tribes ( the " WRAP Annex Rule"). The holdings of the case are relevant to today's action in several respects.

Most importantly for purposes of the CAIR, CEED affirmed EPA's interpretation of CAA 169A( b)( 2) as allowing for non

BART alternatives where those alternatives make greater progress than BART. ( CEED, slip. op. at 13)( finding that EPA's interpretation of CAA 169( a)( 2) as requiring BART only as necessary to make reasonable progress passes the twopronged Chevron test).

The particular provisions involved in CEED applied, on an optional basis, only to nine western States152 ( none of which are in the CAIR region) and the Tribes therein. The provisions, contained in 40 CFR 51.309 (" § 309") required among other things that States choosing to participate in a " backstop" 153 cap and trade program must demonstrate that the emissions reductions under the program resulted in greater progress towards the national visibility goals than would BART. At issue was the particular methodology required for this demonstration. Specifically, EPA's rule required that visibility improvements under source specific BART   the 680 154 The methodology is prescribed in 40 CFR 51.308( e)( 2) and incorporated into § 309 by reference at 40 CFR 51.309( f). benchmark for comparison to the cap and trade program   must be calculated based on the application of BART controls to all sources subject to BART. 154 Although American Corn Growers had vacated this cumulative visibility approach in the context of determining BART for individual sources, EPA believed that it was still permissible to require this methodology in the context of a BART alternative program.

The D. C. Circuit in CEED held otherwise, stating: " EPA cannot under § 309 require states to exceed invalid emission reductions ( or, to put it more exactly, limit them to a § 309 alternative defined by an unlawful methodology)." ( Id.

at 14).

Thus, CEED firmly established two principles: ( 1) the CAA allows States to substitute other programs for BART where the alternative achieves greater progress, and ( 2) EPA may not require States to evaluate visibility improvement on a cumulative basis as a condition for approval of a BARTalternative The first principle validates EPA's proposal to allow the CAIR to substitute for BART. The second principle is not at issue in the CAIR context, because EPA is not proposing to impose the cumulative visibility methodology upon States, nor to require States to treat the CAIR as having satisfied their BART obligations. 681 Nonetheless, EPA has determined that it is premature to make a final determination regarding the sufficiency of the CAIR as a BART alternative, primarily because ( 1) the guidelines for source specific BART determinations, in response to American Corn Growers have not been finalized,

and ( 2) there is now a need to revise the Regional Haze Rule and the guidelines for BART alternative programs in response to CEED. The source specific BART guidelines will be finalized on or before April 15, 2005, under a consent decree. The rule changes and revisions to the BARTalternative guidelines will be proposed soon thereafter.

Therefore, we are making no final determination in today's action with respect to BART. The EPA continues to believe, however, that the CAIR will result in greater progress in visibility improvement than BART, as explained below.

1. How Does this Rule Relate to Requirements for BART under the Visibility Provisions of the CAA?

a. Supplemental Notice of Proposed Rulemaking In the SNPR, we proposed that States which adopt the CAIR cap and trade program for SO2 and NOx would be allowed to treat the participation of EGUs in this program as a substitute for the application of BART controls for these 682 155 The SNPR preamble used the term " exemption" in describing this policy. As clarified below, and as consistent with the proposed regulatory language, the better than BART policy is not actually an exemption but rather an alternative means of compliance. pollutants to affected EGUs. 155 To give this option effect,

we proposed an amendment to the Regional Haze Rule which would add a section at 40 CFR 51.308( e)( 3), as follows:

( 3) A State that opts to participate in the Clean Air Interstate Rule cap and trade program under part 96 AAA EEE need not require affected BARTeligible EGUs to install, operate, and maintain BART. A State that chooses this option may also include provisions for a geographic enhancement to the program to address the requirement under § 51.302( c) related to BART for reasonably attributable impairment from the pollutants covered by the CAIR cap and trade program.

This proposal is consistent with currently existing provisions which allow States to develop cap and trade programs or other alternative measures in lieu of the application of BART on a source specific basis. ( See 40 CFR 51.308( e)( 2) and 64 FR 35714, 35741   35743, July 1, 1999).

The proposal was based on the application of the proposed two pronged test for whether an alternative to BART is " better than BART" which was proposed in the 2001 BART guidelines and reproposed without changes in our May, 2004 683 proposed guidelines for BART determinations ( 69 FR 25184,

May 5, 2004).

Specifically, the re proposed BART Guidelines provide that if the geographic distribution of emissions reductions is anticipated to be similar under both programs, the trading program ( or other alternative measure) must be shown to achieve greater overall emissions reductions than the application of source specific BART. If the trading program is anticipated to result in a different geographic distribution of emissions reductions than would sourcespecific BART, the trading program must be shown to result in no decline in visibility at any Class I area, and in an overall improvement in visibility on an average basis over all affected Class I areas ( 69 FR 25184, 25231). Because we had not yet determined whether there is a difference in the geographic distribution of emissions reductions between the CAIR and the application of source specific BART in the CAIR region, we assessed the difference between the two programs by evaluating the visibility impacts of each program, using this proposed two pronged test.

The emissions projections and air quality modeling used to demonstrate that the CAIR satisfies this proposed twopronged test were presented in a document entitled Supplemental Air Quality Modeling Technical Support Document ( TSD) for the Clean Air Interstate Rule ( May 4, 2004). In 684 brief, we found that the CAIR would not result in a degradation of visibility from current conditions at any Class I Area nationwide. Within the CAIR affected States and New England, EPA found that the CAIR would produce greater visibility benefits   specifically, an average improvement of 2.0 deciviews, as compared to 1.0 for BART.

The EPA also found that average visibility improvement for Class I areas nationwide would be 0.7 deciviews under the CAIR, compared to 0.4 deciviews under BART. The EPA noted in the SNPR and the TSD that because the emissions scenarios used in these analyses were developed for different purposes, the scenarios varied slightly from the scenarios which would be ideal for this test. The EPA committed to conduct additional analyses, and those analyses have now been done. The new modeling and results are discussed in more detail in section IX. C. 2 below.

b. Comments and EPA's Responses Several commenters argued that a categorical exclusion of sources from BART would violate the CAA, as interpreted by the U. S. Court of Appeals for the D. C. Circuit in American Corn Growers v. EPA, 291 F. 3d 1, 2002, by illegally constraining the discretion Congress conferred to States in making BART determinations and by depriving States of an adequate opportunity to evaluate the emissions reductions in light of the BART requirement. Some States also expressed a 685 desire to retain their discretion to require BART.

Additionally, some commenters asserted that EPA could not offer an exemption to BART unless the conditions for exemptions provided by CAA 169A( c) are met, including a showing that the source in question will not, alone or in combination with other sources, emit any pollutant which may reasonably be anticipated to cause or contribute to impairment at any Class I area, and the concurrence of the appropriate Federal Land Manager with the exemption determination.

The EPA agrees that under the CAA and the American Corn Growers case, EPA may not preclude a State from conducting its own BART analysis, nor from requiring BART controls at individual sources as determined appropriate through such analysis. Accordingly, as noted above, the proposed regulatory change to the Regional Haze Rule would provide that a CAIR affected State " need not require affected BARTeligible EGUs to install, operate, and maintain BART" if such State opts to participate in the CAIR cap and trade program. The optional nature of this language (" need not"

rather than " may not") is consistent with the American Corn Growers decision, because it does not attempt to mandate that States must consider the CAIR as having met the requirements of BART. 686 The SNPR preamble summarized the proposal by stating that " EPA proposes that BART eligible EGUs in any State affected by CAIR may be exempted from BART controls for SO2 and NOx if that State complies with the CAIR requirements through adoption of the CAIR cap and trade programs for SO2 and NOx emissions." ( 69 FR 3270). That statement accurately reflected the optional nature of the better than

BART substitution policy, by providing that sources " may" be granted such regulatory flexibility. However, the use of the term " exempted" in this context was somewhat imprecise.

EPA agrees that sources may not be " exempt" from BART requirements unless the requirements of 169A( c) are fulfilled. The better than BART policy is not an " exemption" from BART; it is an alternative regulatory program that would allow Congressionally required emissions reductions from BART eligible sources to be made in a more cost effective manner. Moreover, as explained elsewhere in the SNPR and again below, BART eligible EGUs would not be " exempt" from BART because, until the emissions reductions required by the CAIR are fully realized, such sources would remain subject to the possibility of being required to install BART controls if deemed necessary to meet requirements regarding reasonably attributable visibility impairment, as provided by 40 CFR 51.302. 687 Several commenters asserted that because Congress singled out 26 source categories for the application of BART, there is no basis in law for EPA to " exempt" some of these categories. These comments amount to facial challenges of EPA's authority to approve SIPs which contain alternative strategies, rather than source specific BART requirements, for BART eligible sources.

The EPA's authority to approve alternative measures to BART, where those measures achieve greater reasonable progress than would BART, was recently upheld by the D. C.

Circuit. ( CEED, slip. op. at 13). See also Central Arizona Water Conservation District v. EPA, 990 F. 2d 1531,1543,

( 1993)( Upholding EPA's interpretation of CAA 169A( b)( 2) as providing discretion to adopt implementation plan provisions other than those provided by BART analyses in situations where the agency reasonably concludes that more reasonable progress will thereby be attained).

Similarly, some commenters stated that the CAIR could not substitute for BART because the CAIR and BART are authorized by separate parts of the CAA. They argue that allowing reductions required by a provision of the CAA not linked to visibility improvement to substitute for BART would alter Congress' " mandate" that certain source categories make reductions for visibility in excess of what 688 156 CAIR is linked to visibility improvements insofar as it attempts to make progress towards attainment of the PM2.5 NAAQS, which would, among other things, improve visibility. other CAA provisions require of those sources. 156 Commenters also point to Regional Haze Rule section 308( e)( 2), as evidence that reductions from other programs such as title IV and the NOx SIP Call must be achieved in addition to, and not as a substitute for, BART. Commenters also argue that EPA ( and States) will need all available tools, including BART, to meet visibility and NAAQS requirements.

Again, under our interpretation of CAA section 169A( b)( 2) as upheld in CEED and Central Arizona Water,

Congress did not " mandate" that emission reductions from certain source categories be obtained by the installation of BART controls. Instead, the CAA allows for alternative measures to BART   whether for EGUs or non EGUs   where those measures result in greater reasonable progress, and as explained below, we have determined that greater reasonable progress can be obtained from the EGU sector through the use of the CAIR cap and trade program. However, if a State believes more progress can be made at affected Class I areas by utilizing BART, the State need not make the determination that the CAIR substitutes for BART in that State.

Therefore, EPA is not eliminating any tools available to the States. 689 157 See " 2002 Base Year Emission Inventory SIP Planning: 8 hr Ozone, PM2.5 and Regional Haze Programs, " November 8, 2002, Guidance Memorandum, http:// www. epa. gov/ ttn/ oarpg/ t1/ memoranda/ 2002bye_ gm. pdf 158 The purpose of providing a cut off year for SIP measures to which the alternative must be surplus is to prevent an untenable situation where programs being developed simultaneously must be surplus to each other. Establishing a baseline year allows States to continue to make reductions between that baseline date and the submittal of regional haze SIPs without being " penalized" for those reductions by not being allowed to count them as contributing to reasonable progress towards the national visibility goal. With respect to Regional Haze Rule section 308( e)( 2),

EPA does not believe that this section provides any support for the notion that emissions reductions from other programs must necessarily be in addition to, not substitute, for BART. We first note that the decision in CEED necessitates revisions to 308( e)( 2), at least in the provisions requiring visibility to be evaluated on a cumulative basis in defining the BART benchmark for comparison to BART alternative programs. It remains to be seen whether 308( e)( 2)( iv),

which requires that emissions reductions from the BART alternative be " surplus to reductions resulting from measures adopted to meet requirements as of the baseline date of the SIP," will be changed. Even if that section remains unchanged, the CAIR complies with it. The baseline date of Regional Haze SIPs is 2002.157 Since any emissions reduction requirements to meet the CAIR would necessarily be adopted after 2002, CAIR required reductions would clearly be surplus to measures adopted as of the baseline year. 158 690 Several commenters argued that the question of whether BART is better than the CAIR is properly addressed in the BART rulemaking, not in today's action, and that the betterthan BART determination is otherwise premature. While EPA believes that our current analysis demonstrates that the CAIR is better than BART ( based on the criteria in our May 2004 BART proposal), and that the range of uncertainty regarding the presumptive BART controls for EGUs to be finalized in the BART guidelines is not likely to alter that demonstration, we agree that we cannot make a final determination that CAIR is better than BART until the changes to the regional haze regulations required by both American Corn Growers and CEED are finalized.

Several commenters felt the CAIR should be considered better than BART for a State whether or not that State participates in the CAIR cap and trade program, as long as the State achieves its emission reduction requirement under the CAIR. Conversely, one commenter felt that CAIR reductions should be considered better than BART only when a State does not participate in the cap and trade program,

thereby ensuring that the reductions will occur in State.

Our preliminary demonstration that the CAIR results in more reasonable progress than BART for EGUs is based on a comparison of emissions reductions from EGUs, and attendant air quality effects, under the CAIR as compared to under 691 BART as proposed in May, 2004. If emissions reductions are achieved from other source sectors, a similar analysis would have to be conducted for those sector( s) before it could be determined that the reductions were better than BART for affected source categories. For example, if a State either wants to use EGU emissions reductions under the CAIR to substitute for BART for non EGUs, or use non EGU emissions reductions to substitute for BART for EGUs, that could be allowed as an alternative measure to BART provided a similar " better than BART" determination is made for the sectors involved.

A few commenters believed EPA should not limit the substitution of the CAIR for BART to States that are required to meet CAIR for both SO2 and NOx on an annual basis, but rather should also allow it for States which are only required to reduce NOx during the ozone season.

Because the modeling scenarios were based on the pollutants covered by the CAIR in each affected State, our better than

BART demonstration is limited to those scenarios. A State subject to the CAIR for NOx purposes only would have to make a supplementary demonstration that BART has been satisfied for SO2, as well as for NOx on an annual basis.

A few commenters believed that the CAIR should satisfy BART for purposes of reasonably attributable visibility impairment as well as BART for purposes of regional haze. 692 Several others commented that it was appropriate or legally necessary to preserve the authority of Federal Land Managers ( FLMs) and States to certify impairment and make reasonable attribution determinations, which could subject a source to BART requirements even if the source is a participant in the CAIR cap and trade program. These commenters supported the use of a strategy similar to that employed by the Western Regional Air Partnership, which relies upon a Memorandum Of Understanding ( MOU) between the FLMs and the States regarding the criteria by which certifications of impairment may be made, along with the possibility of " geographic enhancements" to the cap and trade program to accommodate the imposition of source specific BART control requirements on a source within the cap and trade program.

As proposed in the SNPR, EPA continues to believe that reasonably attributable visibility impairment determinations under 40 CFR 51.302 must continue to be a viable option in order to insure against any possibility of hot spots. We believe that a certification of reasonably attributable visibility impairment is fairly unlikely, given that there have been few such certifications since 1980, and given that the reductions from the CAIR and other recent initiatives will make such certifications decreasingly likely. We believe sources can be given sufficient regulatory certainty to enable effective participation in a cap and trade program 693 159 The question of whether section 169A( b)( 2) requires BART based on contribution to impairment at any Class I area is separate from the question of whether this section requires source specific BART under all circumstances. As noted earlier, we interpret section 169A ( b)( 2) as requiring BART only as needed to make reasonable progress, thus allowing for alternative measures which make greater reasonable progress. through the use of MOUs and geographic enhancement provisions.

Some commenters believe that because section 169A( b)( 2)( A) requires BART for an eligible source which may reasonably be anticipated to cause or contribute to any impairment of visibility in any Class I area, EPA is without basis in law or regulation to base a better than BART determination on an analysis that does not evaluate visibility improvement at each and every Class I area, or one that uses averaging of visibility improvement across different Class I areas.

The criteria we applied in our present analysis   that greater reasonable progress is defined as no degradation at any Class I area, and greater overall average improvement   have not been finalized. However, we disagree with comments that 169A( b)( 2)' s requirement of BART for sources reasonably anticipated to contribute to impairment at any Class I area159 means that an alternative to the BART program must be shown to create improvement at each and every Class I area.

Even if a BART alternative is deemed to satisfy BART for 694 regional haze purposes, based on average overall improvement as opposed to improvement at each and every Class I Area,

169A( b)( 2)' s trigger for BART based on impairment at any Class I area remains in effect, because a source may become subject to BART based on " reasonably attributable visibility impairment" at any area. ( The EPA believes it is unlikely that a State or FLM will have need to certify reasonably attributable visibility impairment ( RAVI) with respect to any EGU in the CAIR region, but nevertheless believes it is necessary to preserve this safeguard).

We also received a number of comments regarding the broader relationship between the CAIR and regional haze,

including whether the CAIR meets reasonable progress requirements, as well as BART, for affected States; whether EPA should allow non CAIR States to opt in to the CAIR cap and trade program to meet their BART requirements; and whether regional haze provisions should be used as a basis for expanding the CAIR rule to the rest of the States which were not included on the basis of contribution to PM2.5 and ozone nonattainment. The EPA's responses to comments on these broader issues, which are not germane to the issue of whether the CAIR may substitute for BART for affected EGUs,

are contained in the Response to Comment Document.

c. Today's Action 695 As discussed above, EPA has the authority to approve SIPs which rely upon a cap and trade program as an alternative to BART. However, at this time, we are deferring a final determination that, in EPA's view, the CAIR makes greater progress than BART for CAIR affected States until such time as the BART guidelines for EGUs and the criteria for BART alternative programs are finalized.

At that time, contingent upon supporting analysis and our final rules governing the regional haze program, EPA will make a final determination as to whether the CAIR makes greater progress than BART, and can be relied on as an alternative measure in lieu of BART.

2. What Improvements Did EPA Make to the Bart Versus the CAIR Modeling, and What Are the New Results?

a. Supplemental Notice of Proposed Rulemaking For the better than BART analysis in the SNPR, we used the Integrated Planning Model ( IPM) to estimate emissions expected after implementation of a source specific BART approach and after implementation of the CAIR cap and trade program for EGUs. We then used the Regional Modeling System for Aerosols and Deposition ( REMSAD) air quality model to project the visibility impact of these IPM emissions predictions for both the CAIR and the nationwide sourcespecific BART scenarios. Specifically, EPA evaluated the model results for the 20 percent best days ( that is, least 696 visibility impaired) and the 20 percent worst days at 44 Class I areas throughout the country. Thirteen of these Class I areas are within States affected by the CAIR proposal, and 31 Class I areas are outside the CAIR region   29 in States to the west of the CAIR region, and 2 in New England States northeast of the CAIR region.

As explained in the SNPR, the " CAIR" scenario modeled was imperfect for purposes of this analysis in that it assumed SO2 reductions on a nationwide basis ( rather than in the CAIR region only) and assumed NOx reductions requirements in a slightly different geographic region than covered by the proposed CAIR. The ideal scenario would have correctly represented the geographic scope of the CAIR SO2 and NOx reduction requirements, and included source specific BART controls in areas outside the CAIR region. ( This corrected scenario has been modeled for the NFR, as explained below).

The SNPR REMSAD modeling showed that under the proposed two pronged test, CAIR controls achieved equal or greater visibility improvement than the application of sourcespecific BART to EGUs nationwide. The modeling predicted that the CAIR cap and trade program will not result in degradation of visibility, compared to existing ( 1998 2002)

visibility conditions, at any of the 44 Class I areas considered. It also indicated that CAIR emissions 697 reductions as modeled produce significantly greater visibility improvements than source specific BART.

Specifically, for the 15 Eastern Class I areas analyzed, the average visibility improvement ( on the 20 percent worst days) expected solely as a result of the CAIR was 2.0 deciviews, and the average degree of improvement predicted for source specific BART was 1.0 deciviews. Similarly, on a national basis, the visibility modeling showed that for all 44 Class I areas evaluated, the average visibility improvement, on the 20 percent worst days, in 2015 was 0.7 deciviews under the CAIR cap and trade program, but only 0.4 deciviews under the source specific BART approach.

b. Comments and EPA Responses Several commenters noted that EPA did not model the " correct" emissions scenarios to compare the CAIR and BART controls. They suggested that a model run with the CAIR controls in the East and BART controls in the West should be compared to a model run with nationwide BART controls.

The EPA agrees ( as we have already noted in the SNPR)

that the suggested comparison of model runs is a more appropriate comparison of the CAIR and BART. The SNPR better than BART analysis was limited by the availability of the model results at the time. For the NFR, we have modeled nationwide BART for EGUs as proposed in the May 2004 guidelines and a separate scenario consisting of CAIR 698 160 Because the presumptive controls in the BART guidelines are applicable to coal fired EGUs, the BART analysis does not assume controls on oil and gas fired units. However, NOx emissions from all ( not just BART eligible) oil and gas steam plants and simple cycle turbines in the CAIR region in the 2010 base case are projected to be about 40,000 tons, or less than 1.5% of the projected total 2010 EGU emissions. By comparison, the modeling of the scenario of the CAIR ( with BART in the non CAIR region) resulted in 640,000 tons of NOx per year less than the projected emissions under a nationwide BART scenario. Therefore, even if the 40,000 tons of NOx emissions from oil and gas EGUs were reduced to zero under the BART scenario, the CAIR will still produce significantly greater emission reductions than BART. Also, not all of the oil and gas units associated with those 40,000 tons would be eligible for BART. The IPM does not predict any difference in SO2 emissions from oil or gas fired units between the CAIR and BART. 161 See " Memo From Perrin Quarles Associates, Inc. Re Follow Up on Units Potentially Affected by BART, July 19, 2004," as Appendix A to the " Better than BART" TSD. reductions in the CAIR affected States plus BART reductions in the remaining States ( excluding Alaska and Hawaii).

Additionally, we have improved the BART control assumptions ( in both scenarios) by increasing the number of BARTeligible units included. Specifically, in the SNPR analysis, controls were " required" ( i. e., assumed by the model) for BART eligible EGUs greater than 250 MW capacity,

for both NOx and SO2. For today's action, BART controls are assumed for SO2 for all BART eligible EGU units greater than 100 MW, and NOx controls for all BART eligible EGU units greater than 25 MW. 160 This, along with a review of potentially BART eligible EGUs, has expanded the universe of units assumed subject to BART in the modeling from 302 to 491.161 699 162 Some Class I areas do not have IMPROVE monitors and are represented by nearby IMPROVE sites. 163 This is the number of IMPROVE sites that are located at or represent Class I areas. There are additional IMPROVE protocol monitoring sites that are not located at Class I areas. Several commenters noted that the better than BART visibility analysis only covered 44 Class I areas and did not adequately address visibility in all areas of the country.

For the NFR, we have significantly expanded the number of Class I areas covered by the analysis. The NPR and SNPR visibility analysis was limited by the availability of observed data from Inter agency Monitoring of Protected Visual Environments ( IMPROVE) monitors during the meteorological modeling year of 1996. There was complete IMPROVE data at 44 IMPROVE sites which represented 68 Class I areas. 162 All of the regions of the country ( as defined by IMPROVE) were represented by at least one site, except the Northern Great Lakes region. For the final rule, the modeling has been updated to use a meteorological year of 2001. Therefore, the IMPROVE data for 2001 was used for the NFR better than BART analysis. For 2001, there were 81 IMPROVE sites with complete data, 163 representing 116 Class I areas. The NFR analysis accounts for visibility changes at 80 percent of the active IMPROVE sites in the lower 48 States. More importantly for today's rulemaking, the number 700 164 There are 5 Class I areas in the East and 33 Class I areas in the West ( outside of the CAIR control region) that do not have complete IMPROVE data for 2001. 165 " Demonstration that CAIR Satisfies the ` Better than BART' Test As proposed in the Guidelines for Making BART Determinations," March, 2005. of Class I areas in the East has been increased from 15 to 29 and now covers all IMPROVE defined visibility regions within the CAIR affected States, including the Northern Great Lakes. 164 We, therefore, believe the expanded geographic scope of Class I areas covered is sufficient for purposes of this analysis.

c. Today's Action We have compared the two model runs ( BART nationwide and BART in the West with the CAIR in the East) using the proposed two pronged better than BART test. The results were analyzed at the 116 Class I areas that have complete IMPROVE data for 2001 or are represented by IMPROVE monitors with complete data. Twenty nine of the Class I areas are in the East and 87 are in the West. Detailed modeling results for all 116 Class I areas are contained in the Better than

BART TSD. 165 Results applicable to the better than BART proposed two pronged test are summarized below.

The updated visibility analysis reaffirms that under the proposed two pronged test, CAIR controls are better than BART for EGUs. The modeling predicts that the CAIR cap and trade program will not result in degradation of visibility 701 166 See Better than BART TSD for results at each Class I Area. on the 20 percent best or 20 percent worst days compared to the 2015 baseline conditions, at any of the 116 Class I areas considered. 166 With respect to the greater average improvement prong,

the modeling indicates that CAIR emissions reductions in the East produce significantly greater visibility improvements than source specific BART. Specifically, for the 29 Eastern Class I areas analyzed, the average visibility improvement,

on the 20 percent worst days, expected solely as a result of the CAIR applied in the East and BART applied in the West is 1.6 dv, as compared to the average degree of improvement predicted for nationwide source specific BART of 0.7 dv.

Similarly, on a national basis, the visibility modeling showed that for all 116 Class I areas evaluated, the average visibility improvement, on the 20 percent worst days, in 2015 was 0.5 dv under the CAIR cap and trade program in the East and BART in the West, but only 0.2 deciviews under the nationwide source specific BART approach.

The modeling showed similar results for the 20 percent best visibility days, although there is less visibility improvement on the best days compared to the worst days.

For the 29 Eastern Class I areas analyzed, the average visibility improvement, on the 20 percent best days, 702 167 Eastern Class I areas are those in the CAIR affected states, except areas in west Texas which are considered western and therefore included in the national average, plus those in New England. expected solely as result of the CAIR applied in the East and BART applied in the West is 0.4 dv, as compared to the average degree of improvement predicted for nationwide source specific BART of 0.2 dv. On a national basis, the visibility modeling showed that for all 116 class I areas evaluated, the average visibility improvement, on the 20 percent best days, in 2015 was 0.1 dv under both the CAIR cap and trade program in the East and BART in the West, and under the nationwide source specific BART approach. The results are summarized in table IX 1.

Table IX 1 Average Visibility Improvement in 2015 vs. 2015 Base Case ( deciviews)

CAIR + BART in West Nationwide BART Class I Areas East167 National East National 20% Worst Days 1.6 0.5 0.7 0.2 20% Best Days 0.4 0.1 0.2 0.1 The results clearly indicate that the CAIR will achieve greater reasonable progress than BART as proposed, measured by the proposed better than BART test. At this time, we can foresee no circumstances under which BART for EGUs could produce greater visibility improvement than the CAIR.

However, for the reasons noted in section IX. C. 1. above, we are deferring a final determination of whether the CAIR 703 makes greater reasonable progress than BART until the BART guidelines for EGUs and the criteria for BART alternative programs are finalized.

D. How Will EPA Handle State Petitions Under Section 126 of the CAA?

Section 126 of the CAA authorizes a downwind State to petition EPA for a finding that any new ( or modified) or existing major stationary source or group of stationary sources upwind of the State emits or would emit in violation of the prohibition of section 110( a)( 2)( D)( i) because their emissions contribute significantly to nonattainment, or interfere with maintenance, of a NAAQS in the State. If EPA makes such a finding, EPA is authorized to directly regulate the affected sources. Section 126 relies on the same statutory provision that underlies the CAIR.

In the January 30, 2004 CAIR proposal, EPA set forth its general view of the approach it expected to take in responding to any section 126 petition that might be submitted which relies on essentially the same record as the CAIR. That approach is the one EPA used in addressing section 126 petitions that were submitted to EPA in 1997 while EPA was developing the NOx SIP Call to control ozone transport. In the NOx SIP Call rule, we determined under section 110( a)( 2)( D) that the SIP for each affected State ( and the District of Columbia) must be revised to eliminate 704 the amount of emissions that contributes significantly to nonattainment in downwind States. The emissions reductions requirement was based on the quantity of emissions that could be eliminated by the application of highly costeffective controls on specified sources in that State. In May 1999, shortly after promulgation of the NOx SIP Call,

EPA took final action on the section 126 petitions ( 64 FR 28250; May 25, 1999). The Section 126 action relied on essentially the same record as the NOx SIP Call. In addition, we established a section 126 remedy based on the same set of highly cost effective controls. In the May 1999 Section 126 Rule, we determined which petitions had technical merit, but we stopped short of granting the findings for the petitions. Instead, we stated that because we had promulgated the NOx SIP Call  a transport rule under section 110( a)( 2)( D)  as long as an upwind State remained on track to comply with that rule, EPA would defer making the section 126 findings. The findings would be triggered at either of two future dates if specified progress had not been made by those times. The Section 126 Rule included a provision under which the rule would be automatically withdrawn for sources in a State once that State submitted and EPA fully approved a SIP that complied with the NOx SIP Call. ( See 64 FR 28271 28274; May 25, 1999.) The reason for this withdrawal would be the fact that the affected State's 705 SIP revision would fulfill the section 110( a)( 2)( D)

requirements, so that there would no longer be any basis for the section 126 finding with respect to that State. In this manner, the NOx SIP Call and the Section 126 Rules would be harmonized.

Under the CAIR proposal, EPA received comments regarding its intended approach for acting on any future section 126 petitions that might be filed. Many commenters expressed support for the approach that EPA had outlined.

Other commenters raised issues regarding the timing of emissions reductions under a new section 126 action. Some pointed out that the CAIR compliance date would be later than the 3 years allowed for compliance under section 126.

Some were concerned that the proposed CAIR compliance date is later than many attainment dates and States may need section 126 petitions in order to get earlier upwind reductions in order to meet their attainment dates. Some questioned the legal basis for linking the two rules.

Several commenters expressed concern that EPA would be restricting the use of or weakening the section 126 provision. A number of commenters urged EPA not to prejudge any petition, but to evaluate each on its own merit. Some thought that any petitions submitted prior to designations or before States had had the opportunity to prepare SIPs would be premature and should be denied. Others suggested 706 that CAIR might not solve all the transport problems and that States would need to retain the section 126 tool to seek further reductions.

After issuing the CAIR proposal, EPA received, on March 19, 2004, a section 126 petition from North Carolina seeking reductions in upwind NOx and SO2 for purposes of reducing PM2.5 and 8 hour ozone levels in North Carolina. The petition relies in large part on the technical record for the proposed CAIR.

When we propose action on the North Carolina petition,

we will set forth our view of the interaction between section 110( a)( 2)( D) and section 126. In that proposal, we will take into consideration and respond to the section 126

related comments we received on the CAIR. The EPA will provide a comment period and opportunity for a public hearing on the specifics of that section 126 proposal,

including an opportunity to comment on our view of the interaction of the 2 statutory provisions.

E. Will Sources Subject to CAIR Also Be Subject To New Source Review?

The EPA did not propose any provisions in the CAIR related to new source review ( NSR). Nonetheless, we received some comments on the relationship between CAIR and the NSR provisions that may apply to emissions sources also impacted by the CAIR. Many commenters indicated that if an 707 168See 40 CFR 51.165( a)( 1)( xxv) and 51.165( e), 40 CFR 51.166 ( b)( 31) and 51.166( v), and 40 CFR 51.21( b)( 32) and 52.21( z). EGU is part of an EPA administered regional cap and trade program for NOx and SO2, then that EGU should be exempted from NSR for the covered pollutants. The commenters cited Clear Skies legislation as containing provisions affecting NSR for covered sources. In this final rule, EPA is not addressing or revising the provisions of NSR.

It should be noted that pollution control measures implemented by EGUs in compliance with the CAIR may be eligible for an exemption under the NSR pollution control project provision. 168 These provisions provide an exemption from major NSR for controls such as selective catalytic reduction ( SCR) for NOx control and wet scrubbers for SO2 control, provided that certain conditions identified in the provisions are met.

X. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review Under Executive Order 12866 ( 58 FR 51735, October 4,

1993), the Agency must determine whether a regulatory action is " significant" and therefore subject to Office of Management and Budget ( OMB) review and the requirements of the Executive Order. The Order defines " significant regulatory action" as one that is likely to result in a rule that may: 708 1. Have an annual effect on the economy of $ 100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or Tribal governments or communities;

2. Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

3. Materially alter the budgetary impact of entitlements,

grants, user fees, or loan programs or the rights and obligations of recipients thereof; or 4. Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

In view of its important policy implications and potential effect on the economy of over $ 100 million, this action has been judged to be an economically " significant regulatory action" within the meaning of the Executive Order. As a result, today's action was submitted to OMB for review, and EPA has prepared an economic analysis of the rule entitled " Regulatory Impact Analysis of the Final Clean Air Interstate Rule" ( March 2005).

1. What Economic Analyses Were Conducted for the Rulemaking? 709 The analyses conducted for this final rule provide several important analyses of impacts on public welfare.

These include an analysis of the social benefits, social costs, and net benefits of the regulatory scenario. The economic analyses also address issues involving small business impacts, unfunded mandates ( including impacts for Tribal governments), environmental justice, children's health, energy impacts, and requirements of the Paperwork Reduction Act ( PRA).

2. What Are the Benefits and Costs of this Rule?

The benefit cost analysis shows that substantial net economic benefits to society are likely to be achieved due to reductions in emissions resulting from this rule. The results detailed below show that this rule would be highly beneficial to society, with annual net benefits ( benefits less costs) of approximately $ 71.4 or $ 60.4 billion in 2010 and $ 98.5 or $ 83.2 billion in 2015. These alternative net benefits estimates occur due to differing assumptions concerning the social discount rate used to estimate the annual value of the benefits and costs of the rule with the lower estimates relating to a discount rate of 7 percent and the higher estimates a discount rate of 3 percent. All amounts are reflected in 1999 dollars.

The benefits and costs reported for the CAIR represent estimates for the final CAIR program that includes the CAIR 710 promulgated rule and the concurrent proposal to include annual SO2 and NOx controls for New Jersey and Delaware.

The modeling used to provide these estimates also assumes annual SO2 and NOx controls for Arkansas that are not a part of the final CAIR program resulting in a slight overstatement of the reported benefits and costs.

a. Control Scenario Today's rule sets forth requirements for States to eliminate their significant contribution to down wind nonattainment of the ozone and PM2.5 NAAQS. In order to reduce this significant contribution, EPA requires that certain States reduce their emissions of SO2 and NOx. The EPA derived the quantities by calculating the amount of SO2 and NOx emissions that EPA believes can be controlled from the electric power industry in a highly cost effective manner. The EPA considered all promulgated CAA requirements and known State actions in the baseline used to develop the estimates of benefits and costs for this rule. For a more complete description of the reduction requirements and how they were calculated, see section IV of today's rulemaking.

Although States may choose to obtain the emissions reductions from other source categories, for purposes of analyzing the impacts of the rule, EPA is assuming the application of the controls that it has identified to be highly cost effective on all EGUs in the transport region. 711 b. Cost Analysis and Economic Impacts For the affected region, the projected annual private incremental costs of the CAIR to the power industry are $ 2.4 billion in 2010 and $ 3.6 billion in 2015. These costs represent the private compliance cost to the electric generating industry of reducing NOx and SO2 emissions to meet the caps set forth in the rule. Estimates are in 1999 dollars.

In estimating the net benefits of regulation, the appropriate cost measure is " social costs." Social costs represent the welfare costs of the rule to society. These costs do not consider transfer payments ( such as taxes) that are simply redistributions of wealth. The social costs of this rule are estimated to be approximately $ 1.9 billion in 2010 and $ 2.6 billion in 2015 assuming a 3 percent discount rate. These costs become $ 2.1 billion in 2010 and $ 3.1 billion in 2015 assuming a 7 percent discount rate.

Overall, the impacts of the CAIR are modest,

particularly in light of the large benefits we expect.

Ultimately, we believe the industry will pass along most of the costs of the rule to consumers, so that the costs of the rule will largely fall upon the consumers of electricity.

Retail electricity prices are projected to increase roughly 2.0 2.7 percent with the CAIR in the 2010 and 2015 712 timeframe, and then drop below the 2.0 percent increase level thereafter. The effects of the CAIR on natural gas prices and the power sector generation mix are relatively small, with a 1.6 percent or less increase in natural gas prices projected from 2010 to 2020. There will be continued reliance on coal fired generation, that is projected to remain at roughly 50 percent of total electricity generated.

A relatively small amount of coal fired capacity, about 5.3 GW ( 1.7 percent of all coal fired capacity and 0.5 percent of all generating capacity), is projected to be uneconomic to maintain. For the most part, these units are small and infrequently used generating units that are dispersed throughout the CAIR region. Units projected to be uneconomic to maintain may be " mothballed," retired, or kept in service to ensure transmission reliability in certain parts of the grid. The EPA's analysis does not address these choices.

As demand grows in the future, additional coal fired generation is projected to be built under the CAIR. As a result, coal production for electricity generation is projected to increase from 2003 levels by about 15 percent in 2010 and 25 percent by 2020, and we expect a small shift towards greater coal production in Appalachia and the interior coal regions of the country with the CAIR. 713 For today's rule, EPA analyzed the costs using the Integrated Planning Model ( IPM). The IPM is a dynamic linear programming model that can be used to examine the economic impacts of air pollution control policies for SO2 and NOx throughout the contiguous U. S. for the entire power system. Documentation for IPM can be found in the docket for this rulemaking or at www. epa. gov/ airmarkets/ epa ipm.

c. Human Health Benefit Analysis Our analysis of the health and welfare benefits anticipated from this rule are presented in this section.

Briefly, the analysis projects major benefits from implementation of the rule in 2010 and 2015. As described below, thousands of deaths and other serious health effects would be prevented. We are able to monetize annual benefits of approximately $ 73.3 or $ 62.6 billion in 2010 ( based upon a 3 percent or 7 percent discount rate, respectively) and $ 101 billion or $ 86.3 billion in 2015 ( based upon a discount rate of 3 percent or 7 percent, respectively, 1999 dollars).

Table X 1 presents the primary estimates of reduced incidence of PM and ozone related health effects for the years 2010 and 2015 for the regulatory control strategy. In 2015, we estimate that PM related annual benefits include approximately 17,000 fewer premature fatalities, 8,700 fewer cases of chronic bronchitis, 22,000 fewer non fatal heart attacks, 10,500 fewer hospitalizations ( for respiratory and 714 169 Thurston, G. D. and K. Ito. 2001. " Epidemiological Studies of Acute Ozone Exposures and Mortality". J Expo Anal Environ Epidemiology 11 ( 4): 286 294. cardiovascular disease combined) and result in significant reductions in days of restricted activity due to respiratory illness ( with an estimate of 9.9 million fewer cases) and approximately 1,700,000 fewer work loss days. We also estimate substantial health improvements for children from reduced upper and lower respiratory illness, acute bronchitis, and asthma attacks.

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

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

While we did not include in our primary benefits analysis separate estimates of the number of premature deaths that would be avoided due to reductions in ozone levels, recent studies suggest a link between short term ozone exposures with premature mortality independent of PM exposures. Based upon a recent report by Thurston and Ito,

( 2001), 169 the EPA Science Advisory Board has recommended 715 170 Bell, M. L., A. McDermott, S. Zeger, J. Samet, F. Dominichi. 2005. " Ozone and Mortality in 95 U. S. Urban Communities from 1987 to 2000." Journal of the American Medical Association. Forthcoming. that EPA reevaluate the ozone mortality literature for possible inclusion of ozone mortality in the estimate of total benefits. More recently, a comprehensive analysis using data from the National Morbidity, Mortality and Air Pollution Study ( NMMAPS) found a significant association between daily ozone levels and daily mortality rates ( Bell et al. 2004). 170 The analysis estimated a 0.5 percent increase in daily mortality associated with a 10 ppb increase in ozone, based on data from 95 major urban areas.

Using a similar magnitude effect estimate, sensitivity analysis estimates suggest that in 2015, the CAIR would result in an additional 500 fewer premature deaths annually due to reductions in daily ambient ozone concentrations.

The EPA has sponsored three independent meta analyses of the ozone mortality epidemiology literature to inform a determination on inclusion of this important health impact in the primary benefits analysis for future regulations.

Table X 2 presents the estimated monetary value of reductions in the incidence of health and welfare effects.

Annual PM related and ozone related health benefits are estimated to be approximately $ 72.1 or $ 61.4 billion in 2010 ( 3 percent and 7 percent discount rate, respectively) and 716 $ 99.3 or $ 84.5 billion in 2015 ( 3 percent or 7 percent discount rate, respectively). Estimated annual visibility benefits in southeastern Class I areas are approximately $ 1.14 billion in 2010 and $ 1.78 billion in 2015. All monetized estimates are stated in 1999$. These estimates account for growth in real gross domestic product ( GDP) per capita between the present and the years 2010 and 2015. As the table indicates, total benefits are driven primarily by the reduction in premature fatalities each year, that accounts for over 90 percent of total benefits.

Table X 3 presents the total monetized net benefits for the years 2010 and 2015. This table also indicates with a " B" those additional health and environmental benefits of the rule that we were unable to quantify or monetize. These effects are additive to the estimate of total benefits. A listing of the benefit categories that could not be quantified or monetized in our benefit estimates are provided in Table X 4. We are not able to estimate the magnitude of these unquantified and unmonetized benefits.

While EPA believes there is considerable value to the public for the PM related benefit categories that could not be monetized, we believe these benefits may be small relative to those categories we were able to quantify and monetize.

In contrast, EPA believes the monetary value of the ozonerelated premature mortality benefits could be substantial. 717 As previously discussed, we estimate that ozone mortality benefits may yield as many as 500 reduced premature mortalities per year and may increase the benefits of CAIR by approximately $ 3 billion annually.

d) Quantified and Monetized Welfare Benefits Only a subset of the expected visibility benefits

those for Class I areas in the southeastern U. S. are included in the monetary benefits estimates we project for this rule. We believe the benefits associated with these non health benefit categories are likely significant. For example, we are able to quantify significant visibility improvements in Class I areas in the Northeast and Midwest,

but are unable at present to place a monetary value on these improvements. Similarly, we anticipate improvement in visibility in residential areas where people live, work and recreate within the CAIR region for which we are currently unable to monetize benefits. For the Class I areas in the southeastern U. S., we estimate annual benefits of $ 1.78 billion beginning in 2015 for visibility improvements. The value of visibility benefits in areas where we were unable to monetize benefits could also be substantial.

We also quantify nitrogen and sulfur deposition reductions expected to occur as a result of the CAIR and discuss potential benefits from these reductions in section X. A. 4 of this preamble. While we are unable to estimate a 718 dollar value associated with these benefits, we are able to quantify acidification improvements in lakes in the Northeast including the Adirondacks and potential benefits of reductions in nitrogen deposition to estuaries such as the Chesapeake Bay.

TABLE X 1. Estimated Annual Reductions in Incidence of Health Effectsa Health Effect 2010 Annual Incidence Reduction 2015 Annual Incidence Reduction PM Related Endpoints:

Premature Mortalityb, c Adult, age 30 and over Infant, age < 1 year 13,000 29 17,000 36 Chronic bronchitis ( adult, age 26 and over) 6,900 8,700 Non fatal myocardial infarction ( adult, age 18 and over) 17,000 22,000 Hospital admissions  respiratory ( all ages) d 4,300 5,500 Hospital admissions  cardiovascular ( adults, age > 18) e 3,800 5,000 Emergency room visits for asthma ( age 18 years and younger) 10,000 13,000 Acute bronchitis, ( children, age 8 12) 16,000 19,000 Lower respiratory symptoms ( children, age 7 14) 190,000 230,000 Upper respiratory symptoms ( asthmatic children, age 9 18) 150,000 180,000 Asthma exacerbation ( asthmatic children, age 6 18) 240,000 290,000 Work Loss Days 1,400,000 1,700,000 Minor restricted activity days ( adults age 18 65) 8,100,000 9,900,000 Ozone Related Endpoints:

Hospital admissions respiratory causes ( adult, 65 and older) f 610 1,700 Hospital admissions  respiratory 380 1,100 719 171Pope, C. A., III, R. T. Burnett, M. J. Thun, E. E. Calle, D. Krewski, K. Ito, and G. D. Thurston. 2002. " Lung Cancer, Cardiopulmonary Mortality, and Long term Exposure to Fine Particulate Air Pollution." Journal of American Medical Association 287: 1132 1141. 172Woodruff, T. J., J. Grillo, and K. C. Schoendorf. 1997. " The Relationship Between Selected Causes of Postneonatal Infant Mortality and Particulate Infant Mortality and Particulate Air Pollution in the United States." Environmental Health Perspectives 105( 6): 608 612. causes ( children, under 2)

Emergency room visit for asthma ( all ages) 100 280 Minor restricted activity days ( adults, age 18 65) 280,000 690,000 School absence days 180,000 510,000 aIncidences are rounded to two significant digits. These estimates represent benefits from the CAIR nationwide. The modeling used to derive these incidence estimates are reflective of those expected for the final CAIR program including the CAIR promulgated rule and the proposal to include annual SO2 and NOx controls for New Jersey and Delaware. Modeling used to develop these estimates assumes annual SO2 and NOx controls for Arkansas resulting in a slight overstatement of the reported benefits and costs for the complete CAIR program.

bPremature mortality benefits associated with ozone are not analyzed in the primary analysis. cAdult mortality based upon studies by Pope, et al 2002.171 Infant mortality based upon studies by Woodruff, Grillo, and Schoendorf, 1997.172 d Respiratory hospital admissions for PM include admissions for chronic obstructive pulmonary disease ( COPD), pneumonia and asthma. e Cardiovascular hospital admissions for PM include total cardiovascular and subcategories for ischemic heart disease, dysrhythmias, and heart failure. f Respiratory hospital admissions for ozone include admissions for all respiratory causes and subcategories for COPD and pneumonia.

TABLE X 2. Estimated Annual Monetary Value of Reductions in Incidence of Health and Welfare Effects ( Millions of 1999$) a, b Health Effect Pollutant 2010 Estimated Value of Reductions 2015 Estimated Value of Reductions Premature mortalityc, d Adult > 30 years 3 percent discount rate 7 percent discount rate Child < 1 year PM2.5 $ 67,300 $ 56,600 $ 168 $ 92,800 $ 78,100 $ 222 Chronic bronchitis ( adults, 26 and over) PM2.5 $ 2,520 $ 3,340 Non fatal acute myocardial infarctions 3 percent discount rate 7 percent discount rate PM2.5 $ 1,420 $ 1,370 $ 1,850 $ 1,790 720 173U. S. Environmental Protection Agency, 2000. Guidelines for Preparing Economic Analyses. www. yosemite1. epa. gov/ ee/ epa/ eed/ hsf/ pages/ Guideline. html.

Office of Management and Budget, The Executive Office of the President, 2003. Circular A 4. http:// www. whitehouse. gov/ omb/ circulars. Hospital admissions for respiratory causes PM2.5, O3 $ 45.2 $ 78.9 Hospital admissions for cardiovascular causes PM2.5 $ 80.7 $ 105 Emergency room visits for asthma PM2.5, O3 $ 2.84 $ 3.56 Acute bronchitis ( children, age 8 12) PM2.5 $ 5.63 $ 7.06 Lower respiratory symptoms ( children, age 7 14) PM2.5 $ 2.98 $ 3.74 Upper respiratory symptoms ( asthma, age 9 11) PM2.5 $ 3.80 $ 4.77 Asthma exacerbations PM2.5 $ 10.3 $ 12.7 Work loss days PM2.5, $ 180 $ 219 Minor restricted activity days ( MRADs) PM2.5, O3 $ 422 $ 543 School absence days O3 $ 12.9 $ 36.4 Worker productivity ( outdoor workers, age 18 65) O3 $ 7.66 $ 19.9 Recreational visibility, 81 Class I areas PM2.5 $ 1,140 $ 1,780 Monetized Total e Base estimate: 3 percent discount rate 7 percent discount rate PM2.5, O3 $ 73,300 + B $ 62,600 + B $ 101,000 + B $ 86,300 + B a Monetary benefits are rounded to three significant digits. These estimates represent benefits from the CAIR nationwide for NOx and SO2 emissions reductions from electricity generating units sources ( with the exception of ozone and visibility benefits). Ozone benefits relate to the eastern United States. Visibility benefits relate to Class I areas in the southeastern United States. The benefit estimates reflected relate to the final CAIR program that includes the CAIR promulgated rule and the proposal to include annual SO2 and NOx controls for New Jersey and Delaware. Modeling used to develop these estimates assumes annual SO2 and NOx controls for Arkansas resulting in a slight overstatement of the reported benefits and costs for the complete CAIR program. b Monetary benefits adjusted to account for growth in real GDP per capita between 1990 and the analysis year ( 2010 or 2015). c Valuation assumes discounting over the SAB recommended 20 year segmented lag structure described in the Regulatory Impact Analysis for the Final Clean Air Interstate Rule ( March 2005). Results show 3 percent and 7 percent discount rates consistent with EPA and OMB guidelines for preparing economic analyses ( US EPA, 2000 and OMB, 2003). 173 d Adult mortality based upon studies by Pope et al 2002. Infant mortality based upon studies by Woodruff, Grillo, and Schoendorf, 1997. e B represents the monetary value of health and welfare benefits not monetized. A detailed listing is provided in Table X 4. 721 3. How Do the Benefits Compare to the Costs of This Final Rule?

The estimated annual private costs to implement the emission reduction requirements of the final rule for the CAIR region are $ 2.36 in 2010 and $ 3.57 billion in 2015 ( 1999$). These costs are the annual incremental electric generation production costs that are expected to occur with the CAIR. The EPA uses these costs as compliance cost estimates in developing cost effectiveness estimates.

In estimating the net benefits of regulation, the appropriate cost measure is ` social costs.' Social costs represent the welfare costs of the rule to society. These costs do not consider transfer payments ( such as taxes) that are simply redistributions of wealth. The social costs of this rule are estimated to be approximately $ 1.9 billion in 2010 and $ 2.6 billion in 2015 assuming a 3 percent discount rate. These costs become $ 2.1 billion in 2010 and $ 3.1 billion in 2015, if one assumes a 7 percent discount rate.

Thus, the net benefit ( social benefits minus social costs)

of the program is approximately $ 71.4 + B billion or $ 60.4 +

B billion ( 3 percent and 7 percent discount rate,

respectively) annually in 2010 and $ 98.5 + B billion or $ 83.2 + B billion annually ( 3 percent and 7 percent discount rate, respectively) in 2015. Implementation of the rule is 722 expected to provide society with a substantial net gain in social welfare based on economic efficiency criteria.

The annualized regional cost of the CAIR, as quantified here, is EPA's best assessment of the cost of implementing the CAIR, assuming that States adopt the model cap and trade program. These costs are generated from rigorous economic modeling of changes in the power sector due to the CAIR.

This type of analysis using IPM has undergone peer review and been upheld in Federal courts. The direct cost includes, but is not limited to, capital investments in pollution controls, operating expenses of the pollution controls, investments in new generating sources, and additional fuel expenditures. The EPA believes that these costs reflect, as closely as possible, the additional costs of the CAIR to industry. The relatively small cost associated with monitoring emissions, reporting, and recordkeeping for affected sources is not included in these annualized cost estimates, but EPA has done a separate analysis and estimated the cost to less than $ 42 million ( see section X. B., Paperwork Reduction Act). However,

there may exist certain costs that EPA has not quantified in these estimates. These costs may include costs of transitioning to the CAIR, such as the costs associated with the retirement of smaller or less efficient EGUs, employment shifts as workers are retrained at the same company or re 723 employed elsewhere in the economy, and certain relatively small permitting costs associated with title IV that new program entrants face. Costs may be understated since an optimization model was employed that assumes cost minimization, and the regulated community may not react in the same manner to comply with the rules. Although EPA has not quantified these costs, the Agency believes that they are small compared to the quantified costs of the program on the power sector. The annualized cost estimates presented are the best and most accurate based upon available information. In a separate analysis, EPA estimates the indirect costs and impacts of higher electricity prices on the entire economy [ see Regulatory Impact Analysis for the Final Clean Air Interstate Rule, Appendix E ( March 2005)].

The costs presented here are EPA's best estimate of the direct private costs of the CAIR. For purposes of benefitcost analysis of this rule, EPA has also estimated the additional costs of the CAIR using alternate discount rates for calculating the social costs, parallel to the range of discount rates used in the estimates of the benefits of the CAIR ( 3 percent and 7 percent). Using these alternate discount rates, the social costs of the CAIR are $ 1.9 billion in 2010 and $ 2.6 billion in 2015 using a discount rate of 3 percent, and $ 2.1 billion in 2010 and $ 3.1 billion in 2015 using a discount rate of 7 percent. The costs of 724 the CAIR using the adjusted discount rates are lower than the private costs of the CAIR generated using IPM because the social costs do not include certain transfer payments,

primarily taxes, that are considered a redistribution of wealth rather than a social cost.

Table X 3. Summary of Annual Benefits, Costs, and Net Benefits of the Clean Air Interstate Rulea ( Billions of 1999 dollars)

Description 2010 ( Billions of 1999 dollars) 2015 ( Billions of 1999 dollars)

Social Costsb 3 percent discount rate 7 percent discount rate $ 1.91 $ 2.14 $ 2.56 $ 3.07 Social Benefits c, d, e 3 percent discount rate 7 percent discount rate $ 73.3 + B $ 62.6 + B $ 101 + B $ 86.3 + B Health related benefits 3 percent discount rate 7 percent discount rate $ 72.1 + B $ 61.4 + B $ 99.3 + B $ 84.5 + B Visibility benefits $ 1.14 + B $ 1.78 + B Annual Net Benefits ( Benefits Costs) e, f 3 percent discount rate 7 percent discount rate $ 71.4 + B $ 60.4 + B $ 98.5 + B $ 83.2 + B a All estimates are rounded to three significant digits and represent annualized benefits and costs anticipated for the years 2010 and 2015. Estimates relate to the complete CAIR program including the CAIR promulgated rule and the proposal to include annual SO2 and NOx controls for New Jersey and Delaware. Modeling used to develop these estimates assumes annual SO2 and NOx controls for Arkansas resulting in a slight overstatement of the reported benefits and costs for the complete CAIR program. b Note that costs are the annual total costs of reducing pollutants including NOx and SO2 in the CAIR region. c As this table indicates, total benefits are driven primarily by PMrelated health benefits. The reduction in premature fatalities each year accounts for over 90 percent of total monetized benefits in 2015. Benefits in this table are nationwide ( with the exception of ozone and visibility) and are associated with NOx and SO2 reductions for the EGU source category. Ozone benefits represent benefits in the eastern United States. Visibility benefits represent benefits in Class I areas in the southeastern United States. d Not all possible benefits or disbenefits are quantified and monetized in this analysis. B is the sum of all unquantified benefits and 725 174United States Environmental Protection Agency, 2000. Guidelines for Preparing Economic Analyses. www. yosemite1. epa. gov/ ee/ epa/ eed/ hsf/ pages/ Guideline. html.

Office of Management and Budget, The Executive Office of the President, 2003. Circular A 4. www. http:// www. whitehouse. gov/ omb/ circulars. disbenefits. Potential benefit categories that have not been quantified and monetized are listed in Table X 4. e Valuation assumes discounting over the SAB recommended 20 year segmented lag structure described in chapter 4 of the Regulatory Impact Analysis for the Clean Air Interstate Rule ( March 2005). Results reflect 3 percent and 7 percent discount rates consistent with EPA and OMB guidelines for preparing economic analyses ( U. S. EPA, 2000 and OMB, 2003). 174 f Net benefits are rounded to the nearest $ 100 million. Columnar totals may not sum due to rounding.

Every benefit cost analysis examining the potential effects of a change in environmental protection requirements is limited to some extent by data gaps, limitations in model capabilities ( such as geographic coverage), and uncertainties in the underlying scientific and economic studies used to configure the benefit and cost models. Gaps in the scientific literature often result in the inability to estimate quantitative changes in health and environmental effects. Gaps in the economics literature often result in the inability to assign economic values even to those health and environmental outcomes that can be quantified. While uncertainties in the underlying scientific and economics literatures ( that may result in overestimation or underestimation of benefits) are discussed in detail in the economic analyses and its supporting documents and references, the key uncertainties which have a bearing on 726 the results of the benefit cost analysis of this rule include the following:

° EPA's inability to quantify potentially significant benefit categories;

° Uncertainties in population growth and baseline incidence rates;

° Uncertainties in projection of emissions inventories and air quality into the future;

° Uncertainty in the estimated relationships of health and welfare effects to changes in pollutant concentrations including the shape of the C R function, the size of the effect estimates, and the relative toxicity of the many components of the PM mixture;

° Uncertainties in exposure estimation; and ° Uncertainties associated with the effect of potential future actions to limit emissions.

Despite these uncertainties, we believe the benefit cost analysis provides a reasonable indication of the expected economic benefits of the rulemaking in future years under a set of reasonable assumptions.

In valuing reductions in premature fatalities associated with PM, we used a value of $ 5.5 million per statistical life. This represents a central value consistent with a range of values from $ 1 to $ 10 million 727 175 Mrozek, J. R. and L. O. Taylor, What determines the value of a life? A Meta Analysis, Journal of Policy Analysis and Management 21 ( 2), pp. 253 270. suggested by recent meta analyses of the wage risk value of statistical life ( VSL) literature. 175 The benefits estimates generated for this rule are subject to a number of assumptions and uncertainties, that are discussed throughout the Regulatory Impact Analysis document [ Regulatory Impact Analysis for the Final Clean Air Interstate Rule ( March 2005)]. As Table X 2 indicates,

total benefits are driven primarily by the reduction in premature fatalities each year. Elaborating on the previous uncertainty discussion, some key assumptions underlying the primary estimate for the premature mortality category include the following:

( 1) EPA assumes inhalation of fine particles is causally associated with premature death at concentrations near those experienced by most Americans on a daily basis. Plausible biological mechanisms for this effect have been hypothesized for the endpoints included in the primary analysis and the weight of the available epidemiological evidence supports an assumption of causality.

( 2) EPA assumes all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality. This is an important 728 176U. S. EPA. ( 2004). Air Quality Criteria for Particulate Matter. Research Triangle Park, NC: National Center for Environmental Assessment RTP Office; Report No. EPA/ 600/ P 99/ 002aD. assumption, because the proportion of certain components in the PM mixture produced via precursors emitted from EGUs may differ significantly from direct PM released from automotive engines and other industrial sources,

but no clear scientific grounds exist for supporting differential effects estimates by particle type.

( 3) EPA assumes the C R function for fine particles is approximately linear within the range of ambient concentrations under consideration. In the PM Criteria Document, EPA recognizes that for individuals and specific health responses there are likely threshold levels, but there remains little evidence of thresholds for PM related effects in populations. 176 Where potential threshold levels have been suggested, they are at fairly low levels with increasing uncertainty about effects at lower ends of the PM2.5 concentration ranges. Thus, EPA estimates include health benefits from reducing the fine particles in areas with varied concentrations of PM, 729 including both regions that are in attainment with fine particle standard and those that do not meet the standard.

The EPA recognizes the difficulties, assumptions, and inherent uncertainties in the overall enterprise. The analyses upon which the CAIR is based were selected from the peer reviewed scientific literature. We used up to date assessment tools, and we believe the results are highly useful in assessing this rule.

There are a number of health and environmental effects that we were unable to quantify or monetize. A complete benefit cost analysis of the CAIR requires consideration of all benefits and costs expected to result from the rule, not just those benefits and costs which could be expressed here in dollar terms. A listing of the benefit categories that were not quantified or monetized in our estimate are provided in Table X 4. These effects are denoted by " B" in Table X 3 above, and are additive to the estimates of benefits.

4. What are the Unquantified and Unmonetized Benefits of the CAIR Emissions Reductions?

Important benefits beyond the human health and welfare benefits resulting from reductions in ambient levels of PM2.5 and ozone are expected to occur from this rule. These other benefits occur both directly from NOx and SO2 730 emissions reductions, and indirectly through reductions in co pollutants such as mercury. These benefits are listed in Table X 4. Some of the more important examples include:

Reductions in NOx and SO2 emissions required by the CAIR will reduce acidification and, in the case of NOx,

eutrophication of water bodies. Reduced nitrate contamination of drinking water is another possible benefit of the rule. This final rule will also reduce acid and particulate deposition that cause damages to cultural monuments, as well as, soiling and other materials damage.

To illustrate the important nature of benefit categories we are currently unable to monetize, we discuss two categories of public welfare and environmental impacts related to reductions in emissions required by the CAIR:

reduced acid deposition and reduced eutrophication of water bodies.

a. What Are the Benefits of Reduced Deposition of Sulfur and Nitrogen to Aquatic, Forest, and Coastal Ecosystems?

Atmospheric deposition of sulfur and nitrogen, more commonly known as acid rain, occurs when emissions of SO2 and NOx react in the atmosphere ( with water, oxygen, and oxidants) to form various acidic compounds. These acidic compounds fall to earth in either a wet form ( rain, snow,

and fog) or a dry form ( gases and particles). Prevailing winds can transport acidic compounds hundreds of miles, 731 across State borders. Acidic compounds ( including small particles such as sulfates and nitrates) cause many negative environmental effects, including acidification of lakes and streams, harm to sensitive forests, and harm to sensitive coastal ecosystems.

v. Acid Deposition and Acidification of Lakes and Streams The extent of adverse effects of acid deposition on freshwater and forest ecosystems depends largely upon the ecosystem's ability to neutralize the acid. The neutralizing ability [ key indicator is termed Acid Neutralizing Capacity ( ANC)] depends largely on the watershed's physical characteristics: geology, soils, and size. Waters that are sensitive to acidification tend to be located in small watersheds that have few alkaline minerals and shallow soils. Conversely, watersheds that contain alkaline minerals, such as limestone, tend to have waters with a high ANC. Areas especially sensitive to acidification include portions of the Northeast ( particularly, the Adirondack and Catskill Mountains,

portions of New England, and streams in the mid Appalachian highlands) and southeastern streams.

Some of the impacts of today's rulemaking on acidification of water bodies have been quantified. In particular, this rule will result in improvements in the acid buffering capacity for lakes in the Northeast and 732 177Banzhaf, Spencer, Dallas Burtraw, David Evans, and Alan Krupnick. " Valuation of Natural Resource Improvements in the Adirondacks," Resources for the Future ( RFF), September 2004. Adirondack Mountains. Specifically, 12 percent of Adirondack lakes are projected to be chronically acidic in the base case. However, we project that the CAIR rule will eliminate chronic acidification in lakes in the Adirondack Mountains by 2030. In addition, today's rule is expected to decrease the percentage of chronically acidic lakes throughout Northeast from 6 to 1 percent. However, some lakes in the Adirondacks and New England will continue to experience episodic acidification even after implementation of this rule.

In a recent study, 177 Resources for the Future ( RFF)

estimates total benefits ( i. e., the sum of use and nonuse values) of natural resource improvements for the Adirondacks resulting from a program that would reduce acidification in 40 percent of the lakes in the Adirondacks that were of concern for acidification. While this study requires further evaluation, the RFF study suggests that the benefits of acid deposition reductions for the CAIR are likely to be substantial in terms of the total monetized value for ecological endpoints ( although likely small in comparison to the estimated premature mortality benefits estimates).

vi. Acid Deposition and Forest Ecosystem Impacts 733 Current understanding of the effects of acid deposition on forest ecosystems focuses on the effects of ecological processes affecting plant uptake, retention, and cycling of nutrients within forest ecosystems. Recent studies indicate that acid deposition is at least partially responsible for decreases in base cations ( calcium, magnesium, potassium,

and others) from soils in the northeastern and southeastern United States. Losses of calcium from forest soils and forested watersheds have now been documented as a sensitive early indicator of soil response to acid deposition for a wide range of forest soils in the United States.

In red spruce stands, a clear link exists between acid deposition, calcium supply, and sensitivity to abiotic stress. Red spruce uptake and retention of calcium is impacted by acid deposition in two main ways: leaching of important stores of calcium from needles and decreased root uptake of calcium due to calcium depletion from the soil and aluminum mobilization. These changes increase the sensitivity of red spruce to winter injuries under normal winter conditions in the Northeast, result in the loss of needles, slow tree growth, and impair the overall health and productivity of forest ecosystems in many areas of the eastern United States. In addition, recent studies of sugar maple decline in the Northeast demonstrate a link between low base cation availability, high levels of aluminum and 734 manganese in the soil, and increased levels of tree mortality due to native defoliating insects.

Although sulfate is the primary cause of base cation leaching, nitrate is a significant contributor in watersheds that are nearly nitrogen saturated. Base cation depletion is a cause for concern because of the role these ions play in surface water acid neutralization and their importance as essential nutrients for tree growth ( calcium, magnesium and potassium).

This regulatory action will decrease acid deposition in the transport region and is likely to have positive effects on the health and productivity of forest systems in the region.

vii. Coastal Ecosystems Since 1990, a large amount of research has been conducted on the impact of nitrogen deposition to coastal waters. Nitrogen is often the limiting nutrient in coastal ecosystems. Increasing the levels of nitrogen in coastal waters can cause significant changes to those ecosystems.

In recent decades, human activities have accelerated nitrogen nutrient inputs, causing excessive growth of algae and leading to degraded water quality and associated impairments of estuarine and coastal resources.

Atmospheric deposition of nitrogen is a significant source of nitrogen to many estuaries. The amount of 735 nitrogen entering estuaries due to atmospheric deposition varies widely, depending on the size and location of the estuarine watershed and other sources of nitrogen in the watershed. There are a few estuaries where atmospheric deposition of nitrogen contributes well over 40 percent of the total nitrogen load; however, in most estuaries for which estimates exist, the contribution from atmospheric deposition ranges from 15 30 percent. The area of the country with the highest air deposition rates ( 30 percent deposition rates) includes many estuaries along the northeast seaboard from Massachusetts to the Chesapeake Bay and along the central Gulf of Mexico coast.

In 1999, National Oceanic and Atmospheric Administration ( NOAA) published the results of a 5 year national assessment of the severity and extent of estuarine eutrophication. An estuary is defined as the inland arm of the sea that meets the mouth of a river. The 138 estuaries characterized in the study represent more than 90 percent of total estuarine water surface area and the total number of U. S. estuaries. The study found that estuaries with moderate to high eutrophication represented 65 percent of the estuarine surface area.

Eutrophication is of particular concern in coastal areas with poor or stratified circulation patterns, such as the Chesapeake Bay, Long Island Sound, and the Gulf of 736 Mexico. In such areas, the " overproduced" algae tends to sink to the bottom and decay, using all or most of the available oxygen and thereby reducing or eliminating populations of bottom feeder fish and shellfish, distorting the normal population balance between different aquatic organisms, and in extreme cases, causing dramatic fish kills. Severe and persistent eutrophication often directly impacts human activities. For example, fishery resource losses can be caused directly by fish kills associated with low dissolved oxygen and toxic blooms.

Declines in tourism occur when low dissolved oxygen causes noxious smells and floating mats of algal blooms create unfavorable aesthetic conditions. Risks to human health increase when the toxins from algal blooms accumulate in edible fish and shellfish, and when toxins become airborne,

causing respiratory problems due to inhalation. According to the NOAA report, more than half of the nation's estuaries have moderate to high expressions of at least one of these symptoms   an indication that eutrophication is well developed in more than half of U. S. estuaries.

This rule is anticipated to reduce nitrogen deposition in the CAIR region. Thus, reductions in the levels of nitrogen deposition will have a positive impact upon current eutrophic conditions in estuaries and coastal areas in the region. While we are unable to monetize the benefits of 737 178 Sweeney, Jeff. " EPA's Chesapeake Bay Program Air Strategy." October 26, 2004. such reductions, the Chesapeake Bay Program estimated the reduced mass of delivered nitrogen loads likely to result from the CAIR, based upon the CAIR proposal deposition estimates published in January 2004. Atmospheric deposition of nitrogen accounts for a significant portion of the nitrogen loads to the Chesapeake with 28 percent of the nitrogen loads from the watershed coming from air deposition. Based upon the CAIR proposal, nitrogen deposition rates published in the January 2004 proposal, the Chesapeake Bay Program finds that the CAIR will likely reduce the nitrogen loads to the Bay by 10 million pounds per year by 2010.178 These substantial nitrogen load reductions more than fulfill the EPA's commitment to reduce atmospheric deposition delivered to the Chesapeake Bay by 8 million pounds.

B. Are There Health or Welfare Disbenefits of the CAIR that Have Not Been Quantified?

In contrast to the additional benefits of the rule discussed above, it is also possible that this rule will result in disbenefits in some areas of the region. Current levels of nitrogen deposition in these areas may provide passive fertilization for forest and terrestrial ecosystems 738 where nutrients are a limiting factor and for some croplands.

The effects of ozone and PM on radiative transfer in the atmosphere can also lead to effects of uncertain magnitude and direction on the penetration of ultraviolet light and climate. Ground level ozone makes up a small percentage of total atmospheric ozone ( including the stratospheric layer) that attenuates penetration of ultraviolet  b ( UVb) radiation to the ground. The EPA's past evaluation of the information indicates that potential disbenefits would be small, variable, and with too many uncertainties to attempt quantification of relatively small changes in average ozone levels over the course of a year ( EPA, 2005a). The EPA's most recent provisional assessment of the currently available information indicates that potential but unquantifiable benefits may also arise from ozone related attenuation of UVb radiation ( EPA, 2005b).

Sulfate and nitrate particles also scatter UVb, which can decrease exposure of horizontal surfaces to UVb, but increase exposure of vertical surfaces. In this case as well, both the magnitude and direction of the effect of reductions in sulfate and nitrate particles are too uncertain to quantify ( EPA, 2004). Ozone is a greenhouse gas, and sulfates and nitrates can reduce the amount of solar radiation reaching the earth, but EPA believes that we 739 are unable to quantify any net climate related disbenefit or benefit associated with the combined ozone and PM reductions in this rule.

Table X 4. Unquantified and Non Monetized Effects of the Clean Air Interstate Rule Pollutant/ Effects Effects Not Included in Primary Estimates  Changes in:

Ozone Healtha Premature mortalityb Chronic respiratory damage Premature aging of the lungs Non asthma respiratory emergency room visits Increased exposure to UVb Ozone Welfare Yields for  commercial forests  fruits and vegetables  commercial and non commercial crops Damage to urban ornamental plants Impacts on recreational demand from damaged forest aesthetics Ecosystem functions Increased exposure to UVb PM Healthc Premature mortality  short term exposuresd Low birth weight Pulmonary function Chronic respiratory diseases other than chronic bronchitis Non asthma respiratory emergency room visits Exposure to UVb (+/) e PM Welfare Visibility in many Class I areas Residential and recreational visibility in non Class I areas Soiling and materials damage Damage to ecosystem functions Exposure to UVb (+/) e Nitrogen and Sulfate Deposition Welfare Commercial forests due to acidic sulfate and nitrate deposition Commercial freshwater fishing due to acidic deposition Recreation in terrestrial ecosystems due to acidic deposition Existence values for currently healthy ecosystems Commercial fishing, agriculture, and forests due to nitrogen deposition Recreation in estuarine ecosystems due to nitrogen deposition Ecosystem functions Passive fertilization 740 Pollutant/ Effects Effects Not Included in Primary Estimates  Changes in:

Mercury Health Incidences of neurological disorders Incidences of learning disabilities Incidences of developmental delays Potential reproductive effectsf Potential cardiovascular effectsf, including: Altered blood pressure regulationf Increased heart rate variability f Myocardial infarctionf Mercury Deposition Welfare Impact on birds and mammals ( e. g., reproductive effects) Impacts to commercial, subsistence, and recreational fishing Notes:

a In addition to primary economic endpoints, there are a number of biological responses that have been associated with ozone health effects including increased airway responsiveness to stimuli, inflamation in the lung, acute inflammation and respiratory cell damage, and increased susceptibility to respiratory infection. The public health impact of these biological responses may be partly represented by our quantified endpoints.

b Premature mortality associated with ozone is not currently included in the primary analysis. Recent evidence suggests that short term exposures to ozone may have a significant effect on daily mortality rates, independent of exposure to PM. EPA is currently conducting a series of meta analyses of the ozone mortality epidemiology literature. EPA will consider including ozone mortality in primary benefits analyses once a peer reviewed methodology is available.

c In addition to primary economic endpoints, there are a number of biological responses that have been associated with PM health effects including morphological changes and altered host defense mechanisms. The public health impact of these biological responses may be partly represented by our quantified endpoints.

d While some of the effects of short term exposures are likely to be captured in the estimates, there may be premature mortality due to short term exposure to PM not captured in the cohort study upon which the primary analysis is based.

e May result in benefits or disbenefits. 741 f These are potential effects as the literature is insufficient.

B. Paperwork Reduction Act In compliance with the Paperwork Reduction Act ( 44 U. S. C. 3501 et seq.), EPA submitted a proposed Information Collection Request ( ICR) ( EPA ICR number 2512.01) to the OMB for review and approval on July 19, 2004 ( FR 42720 42722).

The ICR describes the nature of the information collection and its estimated burden and cost associated with the final rule. In cases where information is already collected by a related program, the ICR takes into account only the additional burden. This situation arises in States that are also subject to requirements of the Consolidated Emissions Reporting Rule ( EPA ICR number 0916.10; OMB control number 2060 0088) or for sources that are subject to the Acid Rain Program ( EPA ICR number 1633.13; OMB control number 2060

0258) or NOx SIP Call ( EPA ICR number 1857.03; OMB number 2060 0445) requirements.

The EPA solicited comments on specific aspects of the information collection. The purpose of the ICR is to estimate the anticipated monitoring, reporting, and recordkeeping burden estimates and associated costs for States, local governments, and sources that are expected to result from the CAIR.

The recordkeeping and reporting burden to sources resulting from States choosing to participate in a regional 742 cap and trade program are expected to be less than $ 42 million annually at the time the monitors are implemented.

This estimate includes the annualized cost of installing and operating appropriate SO2 and NOx emissions monitoring equipment to measure and report the total emissions of these pollutants from affected EGUs serving generators greater than 25 megawatt electrical. The burden to State and local air agencies includes any necessary SIP revisions,

performing monitoring certification, and fulfilling audit responsibilities.

In accordance with the Paperwork Reduction Act, on July 19, 2004, an ICR was made available to the public for comment. The 60 day comment period expired September 19,

2004 with no public comments received specific to the ICR.

C. Regulatory Flexibility Act The Regulatory Flexibility Act ( 5 U. S. C. § 601 et seq.)( RFA), as amended by the Small Business Regulatory Enforcement Fairness Act ( Public Law No. 104 121)( SBREFA),

provides that whenever an agency is required to publish a general notice of rulemaking, it must prepare and make available an initial regulatory flexibility analysis, unless it certifies that the rule, if promulgated, will not have " a significant economic impact on a substantial number of small entities." 5 U. S. C. § 605( b). Small entities include small 743 businesses, small organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of today's rule on small entities, small entity is defined as: ( 1) a small business that is identified by the North American Industry Classification System ( NAICS) Code, as defined by the Small Business Administration ( SBA); ( 2) a small governmental jurisdiction that is a government of a city, county, town,

school district or special district with a population of less that 50,000; and ( 3) a small organization that is any not for profit enterprise which is independently owned and operated and is not dominant in its field. Table X 5 lists entities potentially impacted by this rule with applicable NAICS code.

X 5. Potentially Regulated Categories and Entities Category NAICS code1 Examples of potentially regulated entities Industry 221112 Fossil fuel fired electric utility steam generating units.

Federal government 2211122 Fossil fuel fired electric utility steam generating units owned by the Federal government.

State/ local/ Tribal government 2211122 921150 Fossil fuel fired electric utility steam generating units owned by municipalities. Fossil fuel fired electric utility steam generating units in Indian Country.

1 North American Industry Classification System. 744 2 Federal, State, or local government owned and operated establishments are classified according to the activity in which they are engaged.

According to the SBA size standards for NAICS code 221112 Utilities Fossil Fuel Electric Power Generation, a firm is small if, including its affiliates, it is primarily engaged in the generation, transmission, and or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours.

Courts have interpreted the RFA to require a regulatory flexibility analysis only when small entities will be subject to the requirements of the rule. See Michigan v.

EPA, 213 F. 3d 663, 668 69 ( D. C. Cir., 2000), cert. den. 121 S. Ct. 225, 149 L. Ed. 2d 135 ( 2001).

This rule would not establish requirements applicable to small entities. Instead, it would require States to develop, adopt, and submit SIP revisions that would achieve the necessary SO2 and NOx emissions reductions, and would leave to the States the task of determining how to obtain those reductions, including which entities to regulate.

Moreover, because affected States would have discretion to choose the sources to regulate and how much emissions reductions each selected source would have to achieve, EPA could not predict the effect of the rule on small entities. 745 Although not required by the RFA, the Agency has conducted a small business analysis.

Overall, about 445 MW of total small entity capacity,

or 1.0 percent of total small entity capacity in the CAIR region, is projected to be uneconomic to maintain under the CAIR relative to the Base Case. In practice, units projected to be uneconomic to maintain may be " mothballed,"

retired, or kept in service to ensure transmission reliability in certain parts of the grid. Our IPM modeling is unable to distinguish between these potential outcomes.

The EPA modeling identified 264 small entities within the CAIR region based upon the definition of small entity outlined above. From this analysis, EPA excluded 189 small entities that were not projected to have at least one unit with a generating capacity of 25 MW or great operating in the base case. Thus, we found that 75 small entities may potentially be affected by the CAIR. Of these 75 small entities, 28 may experience compliance costs in excess of one percent of revenues in 2010, and 46 may in 2015, based on the Agency's assumptions of how the affected States implement control measures to meet their emissions budgets as set forth in this rulemaking. Potentially affected small entities experiencing compliance costs in excess of 1 percent of revenues have some potential for significant impact resulting from implementation of the CAIR. However, 746 it is the Agency's position that because none of the affected entities currently operate in a competitive market environment, they should be able to pass the costs of complying with the CAIR on to rate payers. Moreover, the decision to include only units greater than 25 MW in size exempts 185 small entities that would otherwise be potentially affected by the CAIR.

Two other points should be considered when evaluating the impact of the CAIR, specifically, and cap and trade programs more generally, on small entities. First, under the CAIR, the cap and trade program is designed such that States determine how NOx allowances are to be allocated across units. A State that wishes to mitigate the impact of the rule on small entities might choose to allocate NOx allowances in a manner that is favorable to small entities.

Finally, the use of cap and trade in general will limit impacts on small entities relative to a less flexible command and control program.

D. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 ( Public Law 104 4)( UMRA), establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and Tribal governments and the private sector. Under section 202 of the UMRA, 2 U. S. C.

1532, EPA generally must prepare a written statement, 747 including a cost benefit analysis, for any proposed or final rule that " includes any Federal mandate that may result in the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector, of $ 100,000,000 or more ... in any one year." A " Federal mandate" is defined under section 421( 6), 2 U. S. C. 658( 6), to include a " Federal intergovernmental mandate" and a " Federal private sector mandate." A " Federal intergovernmental mandate," in turn,

is defined to include a regulation that " would impose an enforceable duty upon State, Local, or Tribal governments,"

section 421( 5)( A)( i), 2 U. S. C. 658( 5)( A)( i), except for,

among other things, a duty that is " a condition of Federal assistance," section 421( 5)( A)( i)( I). A " Federal private sector mandate" includes a regulation that " would impose an enforceable duty upon the private sector," with certain exceptions, section 421( 7)( A), 2 U. S. C. 658( 7)( A).

Before promulgating an EPA rule for which a written statement is needed under section 202 of the UMRA, section 205, 2 U. S. C. 1535, of the UMRA generally requires EPA to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most costeffective or least burdensome alternative that achieves the objectives of the rule.

The EPA prepared a written statement for the final rule consistent with the requirements of section 202 of the UMRA. 748 Furthermore, as EPA stated in the rule, EPA is not directly establishing any regulatory requirements that may significantly or uniquely affect small governments,

including Tribal governments. Thus, EPA is not obligated to develop under section 203 of the UMRA a small government agency plan. Furthermore, in a manner consistent with the intergovernmental consultation provisions of section 204 of the UMRA, EPA carried out consultations with the governmental entities affected by this rule.

For several reasons, however, EPA is not reaching a final conclusion as to the applicability of the requirements of UMRA to this rulemaking action. First, it is questionable whether a requirement to submit a SIP revision would constitute a Federal mandate in any case. The obligation for a State to revise its SIP that arises out of section 110( a) of the CAA is not legally enforceable by a court of law, and at most is a condition for continued receipt of highway funds. Therefore, it is possible to view an action requiring such a submittal as not creating any enforceable duty within the meaning of section 421( 5)( 9a)( I)

of UMRA ( 2 U. S. C. 658 ( a)( I)). Even if it did, the duty could be viewed as falling within the exception for a condition of Federal assistance under section 421( 5)( a)( i)( I) of UMRA ( 2 U. S. C. 658( 5)( a)( i)( I)). 749 As noted earlier, however, notwithstanding these issues, EPA prepared for the final rule the statement that would be required by UMRA if its statutory provisions applied, and EPA has consulted with governmental entities as would be required by UMRA. Consequently, it is not necessary for EPA to reach a conclusion as to the applicability of the UMRA requirements.

The EPA conducted an analysis of the economic impacts anticipated from the CAIR for government owned entities.

The modeling conducted using the IPM projects that about 340 MW of municipality owned capacity ( about 0.4 percent of all subdivision, State and municipality capacity in the CAIR region) would be uneconomic to maintain under the CAIR,

beyond what is projected in the Base Case. In practice,

however, the units projected to be uneconomic to maintain may be ' mothballed,' retired, or kept in service to ensure transmission reliability in certain parts of the grid. For the most part, these units are small and infrequently used generating units that are dispersed throughout the CAIR region.