As stated above, EPA is requiring States to use the lower of historical baseline emissions or projected 2010 or 2015 emissions, as applicable, for a source category. This is because changes in production method, materials, fuels, or efficiency often play a key role in changes in emissions.

Because of factors such as these, emissions can often stay the same or even decrease as productivity within a sector increases.

These factors that contribute to emission decreases can be very difficult to quantify. Underestimating the impact of these types of factors can very easily result in a projection for increased emissions within a sector, when a correct estimate will result in a projection for decreased emissions within the sector. A few commenters opposed this methodology as arbitrary but failed to explain why EPA's concerns, as described above,

are not valid. Commenters also failed to propose other methodologies for addressing these concerns. Thus, EPA is finalizing the use of this second methodology.

v. Controlled Emissions Estimates for 2010 and 2015 The third step is to develop the 2010 and 2015 controlled emissions estimates by assuming the same changes in economic output and other factors listed above but adding the effects of the new controls adopted for the purpose of meeting the CAIR. 482 The controls may take the form of regulatory requirements, e. g.,

emissions caps, emission rate limits, technology requirements,

or work practice requirements. The State's estimate of the effect of the control regulations must be realistic in light of the specific provisions for monitoring, reporting, and enforcement and experience with similar regulatory approaches.

In addition, the State's analysis must examine the possibility that the controls may cause production and emissions to shift to unregulated or less stringently regulated sources in the same State or another State. If all sources of a source category ( defined to include all sources where any aspect of production is reasonably interchangeable) within the State are regulated with the same stringency and compliance assurance provisions, the analysis of production and emissions shifts need only consider the possibility of shifts to other States. If only a portion of a source category within a State is regulated,

the analysis must also include any in State shifting. In estimating controlled emissions in 2010 and 2015, assumptions regarding control measures that are not eligible for CAIR reduction credit must be the same as in the 2010 and 2015 baseline estimates. For example, a State may not take credit for reductions in the sulfur content of nonroad diesel fuel that are required under the recent Federal nonroad fuel rule ( 69 FR 38958; June 29, 2004). By including the effect of this Federal rule in both the baseline and controlled emissions estimates for 483 2010 and 2015, the State will appropriately exclude this ineligible reduction when it subtracts the controlled emissions estimates from the baseline emissions estimates.

The method that we are adopting today specifies the 2010 and 2015 emissions reductions which can be counted toward satisfying the CAIR. The method requires the use of the historical baseline or the baseline emission estimates,

whichever is lower. That is, the reduction is calculated as follows: ( i) for 2010, the difference between the lower of historical baseline or 2010 baseline emissions estimates and the 2010 controlled emissions estimates, minus any emissions that may shift to other sources rather than be eliminated; and ( ii)

for 2015, the difference between the lower of historical baseline or 2015 baseline emissions estimates and the 2015 controlled emissions estimates, minus any emissions that may shift to other sources rather than be eliminated.

4. Controls on Non EGUs Only Although we stated that we believe it is unlikely States may choose to control only non EGUs, we proposed in the CAIR SNPR provisions for determining the specified emissions reductions that must be obtained if States pursue this alternative, and we adopt those provisions today. The reason we think it is unlikely is based on States' emissions profiles.

Most SO2 emissions are from EGUs and therefore it is unlikely 484 112See " Technical Support Document for the Clean Air Interstate Rule Notice of Final Rulemaking: Regional and State SO2 and NOx Emissions Budgets" for tables containing information to calculate these amounts for both SO2 and NOx. that a State can achieve the required emissions reductions without regulating EGUs to some degree. In addition, SO2 emissions reductions from EGUs are highly cost effective.

States that choose this path must ensure that the amount of non

EGU reductions is equivalent to all of the emissions reductions that would have been required from EGUs had the State chosen to assign all the emissions reductions to EGUs. For SO2 emissions,

this amount in 2010 would be 50 percent of a State's title IV SO2 allocations for all units in the State and, for 2015, 65 percent of such allocations. For NOx emissions, this amount would be the difference between a State's EGU budget for NOx under the CAIR and its NOx baseline EGU emissions inventory as projected in the Integrated Planning Model ( IPM) for 2010 and 2015, respectively. 112 In addition, the same requirements described elsewhere in this part of today's preamble regarding the eligibility of non

EGU reductions, emissions control and monitoring, emissions inventories and demonstration of reductions, will apply to the situation where a State chooses to control only non EGUs.

E. Use of Banked Allowances and the Compliance Supplement Pool In the CAIR NPR, EPA stated that States may allow EGUs to demonstrate compliance with the State EGU SO2 budget by using 485 title IV allowances ( i) that were banked, or ( ii) that were obtained in the current year from sources in other States ( 69 FR 4627). The EPA adopts this provision in today's action. The EPA adopts a similar provision for the use of banked NOx SIP Call allowances ( pre 2009) to demonstrate compliance with the State EGU ozone season NOx budget. See also the CAIR NPR ( 69 FR 4633). Therefore, State rules may allow the use of pre 2010 title IV and pre 2009 NOx SIP Call allowances banked in the title IV and NOx SIP Call trading programs for compliance in the CAIR. States participating in the EPA administered CAIR trading programs must allow the use of these pre 2010 title IV allowances or pre 2009 NOx SIP Call allowances in accordance with EPA's model trading rules.

Additionally, States with annual NOx reduction requirements may use compliance supplement pool ( CSP) allowances as described in sections V and VIII. Distribution of the CSP is essentially the same as the process used in the NOx SIP Call,

through one or both of two mechanisms. States may distribute CSP allowances on a pro rata basis to sources that implement NOx control measures resulting in reductions in 2007 or 2008 that are beyond what is required by any applicable State or Federal emissions limitation ( early reductions). The second CSP distribution mechanism that a State can use is to issue CSP allowances based on the demonstration of a need for an extension of the 2009 deadline for implementing emission controls. The 486 demonstration must show unacceptable risk either to a source's own operation or its associated industry for EGUs, power supply reliability, for non EGUs risk comparable to that described for the electricity industry. See also 63 FR 57356 for further discussion of these points.

Pre 2010 title IV SO2 allowances, pre 2009 NOx SIP Call allowances and CAIR annual NOx CSP allowances can all be counted toward a States efforts to achieve its CAIR reduction obligations regardless of whether the CAIR trading programs are used or not.

B. State Implementation Plan Schedules 1. State Implementation Plan Submission Schedule In the NPR, we proposed to require States to submit SIPs to address interstate transport in accordance with the provisions of this rule approximately 18 months from the date of this final rule ( 69 FR 4624). After careful consideration of the comments we received concerning this issue, we have concluded that States should submit SIPs to satisfy this final rule as expeditiously as possible, but no later than 18 months from the date of today's action. Under this schedule, upwind States' transport SIPs to meet CAA section 110( a)( 2)( D) will be due before the downwind States' PM2.5 and 8 hour ozone nonattainment area SIPs under CAA section 172( b). We expect that the downwind States'

8 hour ozone nonattainment area SIPs will be due by June 15, 487 113By statute, the date for submission of nonattainment area SIPs is to be no later than 3 years from the date of nonattainment designation. Section 172( b). 2007, and their PM2.5 nonattainment SIPs will be due by April 5,

2008.113 We believe that this sequence for SIP submissions to address upwind interstate transport and downwind nonattainment areas is consistent both with the applicable provisions of the CAA and with sound policy objectives. The CAA provides for this sequence of submissions in section 110( a)( 1) and ( a)( 2), which provide that the submittal period for SIPs required by section 110( a)( 2)( D) runs from the earlier date of the NAAQS revision,

and in section 172( b), which provides that the submittal period for the nonattainment area SIPs runs from the later date of designation. Clean Air Act section 110( a)( 1) requires each State to submit a SIP to EPA " within 3 years ... after the promulgation of a [ NAAQS] ( or any revision thereof)." Section 110( a)( 2) makes clear that this SIP must include, among other things, provisions to address the requirements of section 110( a)( 2)( D). We read these provisions together to require that each upwind State must submit, within 3 years of a new or revised NAAQS, SIPs that address the section 110( a)( 2)( D)

requirement. By contrast, the schedule provided in section 172( b) is only applicable to the nonattainment area SIP requirements. 488 Section 110( a) imposes the obligation upon States to make a submission, but the contents of that submission may vary depending on the facts and circumstances. In particular, the data and analytical tools available at the time the section 110( a)( 2)( D) SIP is developed and submitted to EPA necessarily affect the content of the submission. Where, as here, the data and analytical tools to identify a significant contribution from upwind States to nonattainment areas in downwind States are available, the State's SIP submission must address the existence of the contribution and the emission reductions necessary to eliminate the significant contribution. In other circumstances,

however, the tools and information may not be available. In such circumstances, the section 110( a)( 2)( D) SIP submission should indicate that the necessary information is not available at the time the submission is made or that, based on the information available, the State believes that no significant contribution to downwind nonattainment exists. EPA can always act at a later time after the initial section 110( a)( 2)( D)

submissions to issue a SIP call under section 110( k)( 5) to States to revise their SIPs to provide for additional emission controls to satisfy the section 110( a)( 2)( D) obligations if such action were warranted based upon subsequently available data and analyses. This is precisely the circumstance that was presented at the time of the NOx SIP Call in 1998 when EPA issued a section 110( k)( 5) SIP call to states regarding their section 489 110( a)( 2)( D) obligations on the basis of new information that was developed years after the States' SIPs had been previously approved as satisfying section 110( a)( 2)( D) without providing for additional controls since the information available at the earlier point in time did not indicate the need for such additional controls.

Not only is this sequencing consistent with the CAA, it is consistent with sound policy considerations. The upwind reductions required by today's action will facilitate attainment planning by the States affected by transport downwind. Rather than being " premature" as some commenters suggested, EPA's understanding of the data and models leads the Agency to believe that requiring the States to address the upwind transport contribution to downwind nonattainment earlier in the process as a first step is a reasonable approach and is fully consistent with the statutory structure. This approach will allow downwind States to develop SIPs that address their share of emissions with knowledge of what measures upwind States will have adopted.

In addition, most of the downwind States that will benefit by today's rulemaking are themselves significant contributors to violations of the standards further downwind and, thus, are subject to the same requirements as the States further upwind.

The reductions these downwind States must implement due to their additional role as upwind States will help reduce their own PM2.5 and 8 hour ozone problems on the same schedule as 490 emissions reductions for the upwind States. We believe that providing 18 months from the date of today's action for States to submit the transport SIPs required by this rule is appropriate and reasonable, for the reasons discussed more fully below.

a. EPA's Authority to Require Section 110( a)( 2)( D) Submissions in Accordance with the Schedule of Section 110( a)( 1).

A number of commenters objected to EPA's proposal to require States to submit the transport SIPs on the schedule set forth in section 110( a)( 1). The commenters argued that section 110( a)( 1) does not apply to the requirements of section 110( a)( 2)( D), because the former refers to plans that States must adopt " to implement, maintain, and enforce" the NAAQS " within" the State, whereas the latter refers to plans that prevent emissions that affect nonattainment or maintenance of the NAAQS in places outside the State. According to the commenters, because section 110( a)( 1) SIPs purportedly need not address the interstate transport issues governed by section 110( a)( 2)( D), the States have no current obligation to prevent such interstate transport and, by extension, there is no basis for the CAIR at this time.

The EPA disagrees with the commenters. A State's SIP must of course provide for " implementation, maintenance, and 491 enforcement" of the NAAQS " within" the State because States lack authority to impose requirements on sources in other States;

i. e., any plan submitted by a State will necessarily be applicable to sources " within" that State. The CAA, however,

also requires that such SIPs must be submitted to EPA no later than three years after promulgation of a new or revised NAAQS and must contain adequate provisions regarding interstate transport from emission sources within the State in compliance with section 110( a)( 2)( D). The explicit terms of the statute provide for the State submission of initial SIPs after promulgation of a new NAAQS, and provide that such SIPs should address interstate transport. Section 110( a)( 1) provides that:

[ e] ach State shall... adopt and submit to the Administrator, within 3 years ( or such shorter period as the Administrator may prescribe) after the promulgation of a national primary ambient air quality standard ( or any revision thereof) ... a plan which provides for implementation,

maintenance, and enforcement of such primary standard in each [ area] within such State.

Section 110( a)( 2) provides, in relevant part, that:

[ e] ach implementation plan submitted by a State under this Act shall be adopted by the State after reasonable notice 492 and public hearing. Each such plan shall ...( D) contain adequate provisions  ( i) prohibiting ... any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will  ( I)

contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to [ the NAAQS].

By referencing each implementation plan in section 110( a)( 2), it is clear that the implementation plans required under section 110( a)( 1) must satisfy the requirements of section 110( a)( 2)( D).

Thus, the plain meaning of these provisions, read together, is that SIP submissions are required within 3 years of promulgation of a new or revised NAAQS, and that the SIP submissions must meet the requirements of section 110( a)( 2)( D).

By contrast, other requirements of section 110( a)( 2) are not triggered by EPA's promulgation of a new or revised NAAQS,

but rather by EPA's final designation of nonattainment areas.

For example, section 110( a)( 2)( I) by its terms indicates that State SIPs must meet that requirement not on the schedule of section 110( a)( 1), but instead on the schedule of section 172( b).

The explicit distinction in the statute between requirements that States must meet on the schedule of section 110( a)( 1)

versus the schedule of section 172( b) reinforces the conclusion 493 114 Under section 107( d), EPA is required to identify all areas of each State as falling into one of these three categories. that States are to meet the initial requirements of section 110( a)( 2)( D) within the schedule of section 110( a)( 1).

In this context, it is important to note that the requirements of section 110( a)( 1) plans are not limited to areas designated attainment, nonattainment, or unclassifiable. 114 Section 110( a)( 1) requires each State to develop and submit a plan that provides for the implementation, maintenance, and enforcement of the NAAQS in " each" area of the State.

Similarly, the requirement in section 110( a)( 2)( D) that SIPs must prohibit interstate transport of air pollutants that significantly contribute to downwind nonattainment is not limited to any particular category of formally designated areas in the State. The provisions apply to emissions activities that occur anywhere in a state, regardless of its designation. If, as the commenters suggested, the requirements of section 110( a)( 2)( D) plans are governed not by section 110( a)( 1), but rather by the schedule of section 172, that would lead to the absurd result that upwind States need only reduce emissions from designated nonattainment areas to prevent significant contribution to nonattainment or interference with maintenance in a downwind State. Given that large portions of many upwind States may be designated as attainment for the NAAQS for local 494 115 The EPA notes that under the provisions of section 107( d), certain portions of an upwind State that are monitoring attainment may be designated nonattainment because they contribute to violations of the NAAQS in a " nearby" area. Nevertheless, there will be portions of upwind States that include emissions sources that are not in designated nonattainment areas, whether because of local monitored nonattainment, or because of contribution to a nearby nonattainment area, yet these portions of the upwind State may contain sources that cause emissions that States must address to meet the requirements of section 110( a)( 2)( D). purposes, yet still contain large sources of emissions that affect downwind States through interstate transport, EPA believes that Congress could not have intended the prohibitions of section 110( a)( 2)( D) to apply only to nonattainment areas in upwind States. 115 Indeed, the language of section 110( a)( 2)

itself does not support such an interpretation. Therefore, the alternative schedule provided in section 172( b) applicable only to nonattainment areas cannot be the schedule that governs the State submission of transport SIPs. This leaves the schedule of section 110( a)( 1) as the only appropriate schedule in the case of SIPs following EPA promulgation of new or revised NAAQS.

The commenters also disputed that the schedule of section 110( a)( 1) applies to the section 110( a)( 2)( D) requirement because there are other elements of section 110( a)( 2) that States could not meet on that schedule. As an example, the commenters pointed to section 110( a)( 2)( I) which requires States to meet certain obligations imposed upon designated nonattainment areas. As formal designation under the generally 495 applicable provisions of section 107( d) could take up to 3 years following promulgation of a new or revised NAAQS, and section 172( b) allows up to 3 additional years for State submission of nonattainment area SIPs, the commenters concluded that States could not meet section 110( a)( 2)( I) on the schedule of section 110( a)( 1). From the fact that States could not meet all of the elements of the section 110( a)( 2) requirement within 3 years,

the commenters inferred that EPA cannot require States to meet any of the requirements in section 110( a)( 2), including section 110( a)( 2)( D).

EPA disagrees with the commenters' approach to the interpretation of the statute. The EPA agrees that there are certain provisions of section 110( a)( 2) that are governed not by the schedule of section 110( a)( 1), but instead by the timing requirement of section 172( b), e. g., section 110( a)( 2)( I). Other items in section 110( a)( 2), however, do not depend upon prior designations in order for States to develop a SIP to begin to comply with them, e. g., section 110( a)( 2)( B)( pertaining to monitoring); section 110( a)( 2)( E)( stipulating that States must provide for adequate resources); and section 110( a)( 2)( K) ( pertaining to modeling).

Most important, section 110( a)( 2)( D) itself does not apply only to impacts on downwind nonattainment areas, and thus does not presuppose prior designations in either upwind 496 or downwind States, or suggest that section 110( a)( 2)( D) is somehow inapplicable until the submission of nonattainment area plans. By its explicit terms, section 110( a)( 2)( D)

requires States to prohibit emissions from " any source or other types of emissions activity within the State" that " contribute to nonattainment in, or interfere with maintenance by" any other State. A plain reading of the statute indicates that the emissions at issue can emanate from any portion of an upwind State and that the impacts of concern can occur in any portion of the downwind State While EPA agrees that there is overlap between the submission requirements of sections 110( a)( 1) and ( a)( 2) and section 172( c), EPA believes that the plain language of these sections requires States to submit plans that comply with section 110( a)( 2)( D) prior to the deadline for nonattainment area SIPs established by section 172, and that there is nothing that compels a contrary conclusion in the language of section 172. Section 172( b) provides that State plans for nonattainment areas must meet " the applicable requirements of [ section 172( c)] and section 110( a)( 2)" ( emphasis added).

Thus, the statute itself explicitly indicates that the State submissions for nonattainment plans must meet those requirements of section 110( a)( 2) that are " applicable," not each requirement regardless of applicability. In the current 497 116 As noted earlier, what will be needed to meet section 110( a)( 2) may vary, depending upon the specific facts and circumstances surrounding a new or revised NAAQS. See, e. g., Proposed Requirements for Implementation Plans and Ambient Air Quality Surveillance for Sulfur Oxides ( Sulfur Dioxide) National Ambient Air Quality Standard, 60 FR 12492, 12505 ( March 7, 1995). In the context of a proposed 5 minute NAAQS for SO2, EPA tentatively concluded that existing SIP provisions for the 24 hour and annual SO2 NAAQS were probably sufficient to meet many elements of section 110( a)( 2). The EPA did not explicitly discuss State obligations under section 110( a)( 2)( D) for the 5 minute NAAQS in the proposal, but the nature of the pollutant, the sources, and the proposed NAAQS are such that interstate transport would not have been the critical regionwide concern that it is for the PM2.5 and 8 hour ozone NAAQS. The EPA does not expect States to make SIP submissions establishing emission controls for the purpose of addressing interstate transport without having adequate information available to them.

117 The EPA notes that the 8 hour ozone designations became effective on June 15, 2004, and that the PM2.5 designations will become effective on April 5, 2005. The EPA believes situation, EPA believes that it is appropriate to view the CAA as requiring States to make a submission to meet the requirement of section 110( a)( 2)( D) in accordance with the schedule of section 110( a)( 1), rather than under the schedule for nonattainment SIPs in section 172( b). 116 b. EPA's Authority to Require Section 110( a)( 2)( D)

Submissions Prior to Formal Designation of Nonattainment Areas under Section 107.

A number of commenters argued that EPA has no authority to require States to comply with section 110( a)( 2)( D) until after EPA formally designates nonattainment areas for the PM2.5 and 8 hour ozone NAAQS. 117 These commenters claimed 498 that the issue raised by the commenters is thus moot with respect to both the 8 hour ozone and PM2.5 nonattainment areas because those designations are now complete. that section 107( d) and provisions of the Transportation Equity Act for the 21st Century ( TEA 21) governing the designation of PM2.5 and 8 hour ozone nonattainment areas preclude EPA from interpreting the CAA to require States to submit SIPs that comply with section 110( a)( 2)( D) on the schedule contemplated by section 110( a)( 1). In the view of the commenters, EPA could not reasonably expect States to determine whether and to what extent their in State sources significantly contributed to nonattainment in other States within the initial 3 year timeframe, in advance of nonattainment area designations. According to the commenters, section 107( d) and TEA 21 negate the timing requirements of section 110( a)( 1), so that States have no current obligation to address interstate transport and thus there is no basis for today's action.

The EPA disagrees with the commenters' view of the interaction of section 110 and section 107( d). The statute does not require EPA to have completed the designations process before the Agency or a State could assess the existence of, or extent of, significant contribution from one State to another. In addition, the technical approach by which EPA determines significant contribution from upwind to 499 118 For reasons discussed in more detail above, EPA interprets the requirement of section 110( a)( 2)( D) to be among those that Congress intended States to meet within the 3 year timeframe of section 110( a)( 1). The EPA agrees that other requirements, such as those of section 110( a)( 2)( I), are subject to the different timing requirements of section 172( b). downwind States does not depend upon the prior completion of the designation process.

The EPA believes that the statute does not compel the conclusion that States may postpone compliance with section 110( a)( 2)( D) until some future point after completion of the designation process. As discussed above, a reading of the plain language of sections 110( a)( 1) and 110( a)( 2) indicates that States must adopt and submit a plan to EPA within 3 years after promulgation of a new or revised NAAQS ( the same time at which designations are generally due under section 107), and that each such plan must meet the applicable requirements of section 110( a)( 2)( D). 118 Significantly, neither section 110( a)( 1) nor section 110( a)( 2)( D) are limited to " nonattainment" areas. By their explicit terms, both provisions apply to all areas within the State, regardless of whether EPA has formally designated the areas as attainment, nonattainment, or unclassifiable,

pursuant to section 107( d). As to causes, section 110( a)( 2)( D) compels States to address any " emissions activity within the State," not solely emissions from 500 formally designated nonattainment areas, nor does it in any other terms suggest that designations of upwind areas must first have occurred. As to impacts, section 110( a)( 2)( D)

refers only to prevention of " nonattainment" in other States,

not to prevention of nonattainment in designated nonattainment areas or any similar formulation requiring that designations for downwind nonattainment areas must first have occurred. By comparison, other provisions of the CAA do clearly indicate when they are applicable to designated nonattainment areas, rather than simply to nonattainment more generally ( e. g., sections 107( d)( 1)( A)( i), 181( b)( 2)( A), and 211( k)( 10)( D)). Because section 110( a)( 2)( D) refers only to " nonattainment," not to " nonattainment areas," EPA concludes that the section does not presuppose the existence of formally designated nonattainment areas, but rather to ambient air quality that does not attain the NAAQS.

The EPA believes that this plain reading of the provisions is also the most logical approach. A reading that section 110( a)( 2)( D) means that States have no obligation to address interstate transport unless and until there are formally designated nonattainment areas pursuant to section 107 would be inconsistent with the larger goal of the CAA to encourage expeditious attainment of the NAAQS. In this immediate instance, currently available air quality monitoring data and modeling make it clear that many areas of 501 the eastern portion of the country are in violation of both the PM2.5 and 8 hour ozone NAAQS. Air quality modeling studies generally available to the States demonstrate that,

and quantify the extent to which, SO2 and NOx emissions from sources in upwind States are contributing to violations of the PM2.5 and 8 hour ozone NAAQS in downwind States.

Following the example of the NOx SIP Call, EPA has an effective analytical approach to determine whether that interstate contribution is significant, in accordance with section 110( a)( 2)( D). Thus, EPA currently has the information and tools that it needs to determine what the initial PM2.5 and 8 hour ozone SIPs from upwind States should include as appropriate NOx and SO2 emissions reductions in order to prevent emissions that significantly contribute to nonattainment in downwind States. The designation process under section 107 is the means by which States and EPA decide the precise boundaries of the nonattainment areas in the downwind States. Both PM2.5 and ozone are regional phenomena, however, and information as to the precise boundaries of nonattainment areas is not necessary to implement the requirements of section 110( a)( 2)( D) for these pollutants. Consequently, it was not necessary for EPA to wait until after completion of formal designation of nonattainment area boundaries before undertaking this rulemaking. Moreover, EPA believes that taking action now 502 will achieve public health protections more quickly as it will enable States to develop implementation plans more expeditiously and efficiently.

The EPA disagrees with the commenters' view of the relationship between section 110( a)( 2) and section 107 and their apparent view of the method by which EPA analyzes whether there is a contribution from an upwind State to a downwind State, and whether that contribution is significant.

EPA has, in this case, used the detailed data from the extensive network of air quality monitors to identify which States have monitors that are currently showing violations of the PM2.5 and 8 hour ozone NAAQS. In the NPR, EPA stated that based upon data for the 3 year period from 2000  2002,

" 120 counties with monitors exceed the annual PM2.5 NAAQS and 297 counties with monitor readings exceed the 8 hour ozone NAAQS" ( 69 FR 4566, 4581; January 30, 2004)( emphasis added).

The geographic distribution of monitors with data registering current violations indicated that there is nonattainment of both the PM2.5 and 8 hour ozone NAAQS throughout the eastern United States and in other portions of the country including California. For analyses of future ambient conditions, EPA used various modeling tools to predict that, in the absence of the CAIR, there would be counties with monitors that would continue to show violations of the PM2.5 and 8 hour ozone NAAQS in 2010 and 2015. In subsequent steps, EPA analyzed 503 whether the emissions from upwind States contributed to the ambient conditions at the monitors registering NAAQS violations in downwind States, and thereafter determined whether that contribution would be significant pursuant to section 110( a)( 2)( D).

In none of these steps, however, did EPA need to know the precise boundaries of the nonattainment areas that may ultimately result from the section 107 designation process.

The determination of attainment status in a given county is based primarily upon the monitored ambient measurements of the applicable pollutant in the county. Thus, it is the readings at the monitors that are the appropriate information for EPA to evaluate in assessing current and future interstate transport at that monitor in that county, not the exact dimensions of the area that may ultimately comprise the formally designated nonattainment area. The ultimate size of nonattainment areas will have a bearing on other components of the State's nonattainment area SIP. The size of such nonattainment areas, however, is not meaningful in assessing whether interstate transport from another State or States has an impact at a violating monitor, and whether the transport significantly contributes to nonattainment, that the other State or States should address to comply with section 110( a)( 2)( D). Thus, EPA believes that basing the significant contribution analysis upon the counties with monitors that 504 register nonattainment, without regard to the precise boundaries of the nonattainment areas that may ultimately result from the formal designation process under section 107,

is the proper approach.

For similar reasons, EPA also disagrees with the commenters' assertion that the provisions of TEA 21 preclude EPA's interpretation of the timing requirements of sections 110( a)( 1) and 110( a)( 2). However, TEA 21 did address the need to create a new network of monitors to assess the geographic scope and location of PM2.5 nonattainment. Also,

TEA 21 did provide that such a network should be up and running by December 31, 1999. TEA 21 did lay out a schedule for the collection of data over a period of 3 years in order to make subsequent regulatory decisions. From these facts,

the commenters concluded that TEA 21 necessarily contradicts EPA's position that States must now take action to address significant contribution to downwind nonattainment in their initial section 110( a)( 1) SIPs, merely because the initial three year period following the promulgation of a new or revised NAAQS specified in section 110( a)( 1) has expired.

The EPA believes that nothing in TEA 21 explicitly or implicitly altered the timing requirements of section 110( a)( 1) for compliance with section 110( a)( 2)( D), although EPA recognizes that the data from monitoring funded by that Act contributed to the Agency's development of the SIP 505 requirements in today's rulemaking. The provisions of TEA 21 pertained to the installation of a network of monitors for PM2.5, and to the timing of designation decisions for PM2.5 and 8 hour ozone. To be specific, TEA 21 had two primary purposes for the new NAAQS: ( 1) to gather information " for use in the determination of area attainment or nonattainment designations" for the PM2.5 NAAQS; and ( 2) to ensure that States had adequate time to consider guidance from EPA concerning " drawing area boundaries prior to submitting area designations" for the 8 hour ozone NAAQS. TEA 21 sections 6101( b)( 1) and ( 2). The EPA interprets the third stated purpose of TEA 21 to refer to ensuring consistency of timing between the Regional Haze program requirements and the PM2.5 NAAQS requirements. With respect to timing, TEA 21 similarly only referred to the dates by which States and EPA should take their respective actions concerning designations. For PM2.5, TEA 21 provided that States were required " to submit designations referred to in section 107( d)( 1) ... within 1 year after receipt of 3 years of air quality monitoring data." TEA 21 section 6102( c)( 1). For 8 hour ozone, TEA 21 required States to submit designation recommendations within 2 years after the promulgation of the new NAAQS, and required EPA to make final designations within 1 year after that ( TEA

21 sections 6103( a) and ( b)). In all of these provisions,

TEA 21 only addresses SIP timing in the context of the 506 designation process of section 107( d). As explained in more detail above, EPA does not believe that the timing of section 110( a)( 1) and section 110( a)( 2)( D) obligations depend upon the prior designation of areas in accordance with section 107( d).

The EPA also notes that legislation subsequent to TEA 21 further supports this conclusion. In the 2004 Consolidated Appropriations Act, Congress further amended section 107 to provide specific dates by which States and EPA must make PM2.5 designations. 42 USC section 7407 note. The Act now requires States to have made their initial recommendations for PM2.5 designations by February 15, 2004, and requires EPA to take action on those recommendations and make its final designation decisions no later than December 31, 2004. Again,

these requirements pertain only to formal designations, and do not directly affect the obligations of States to meet other SIP requirements. Neither TEA 21 nor the 2004 Appropriations Act language altered the section 110( a)( 1)

schedule for compliance with section 110( a)( 2)( D).

The commenters suggested that because Congress provided more time for making formal designations pursuant to section 107, it necessarily follows that States should not have to meet the requirements of section 110( a)( 2)( D) on the schedule of section 110( a)( 1). The EPA believes that Congress did not, through TEA 21 or other actions, alter the existing 507 submission schedule for SIPs to address interstate transport.

By contrast, Congress did explicitly alter the schedule for submission of plan revisions to address Regional Haze. From this, EPA infers that Congress did not intend EPA to delay action to address the issue of interstate transport for the 8 hour or PM 2.5 NAAQS. Thus, EPA must still ensure that States submit SIPs in accordance with the substantive requirements of section 110( a)( 2)( D). However, because EPA and the States now have the data and analyses to establish the presence and magnitude of interstate transport, in part through the monitoring data gathered pursuant to TEA 21, the Agency believes that that it is now appropriate to require States to address interstate transport at this time in the manner set forth in today's rule.

c. EPA's Authority to Require Section 110( a)( 2)( D)

Submissions Prior to State Submission of Nonattainment Area Plans Under Section 172.

Some commenters suggested that EPA cannot determine the existence of a significant contribution from upwind States to downwind States until EPA actually receives the nonattainment area SIPs from each State and evaluates how much " residual"

nonattainment remains. If the reasoning of these commenters were adopted, downwind States would have to construct SIPs to attain the NAAQS without first knowing what upwind States 508 might ultimately do to reduce interstate transport.

Presumably, the theory is that the downwind States may choose to control their own local emissions sources more aggressively so that sources in upwind States could avoid installation of highly cost effective emission controls,

notwithstanding the continued significant impacts of emissions from upwind sources on downwind States.

Alternatively, the rationale may be that EPA should wait until submission of upwind State nonattainment area SIPs to discover whether and to what degree the SIPs address interstate transport to downwind States.

For reasons already discussed more fully above, EPA does not believe that the statute requires a " wait and see"

approach to discover what, if anything, States may ultimately do to address the problem of regional interstate transport.

Section 110( a)( 1) requires " each" State to submit a SIP within 3 years after a new or revised NAAQS addressing the requirements of section 110( a)( 2)( D). When the data and the analyses needed to establish the existence of interstate transport of pollutants and to determine whether there is a significant contribution to nonattainment or interference with maintenance by one State in another State are available,

as here after the monitoring funded by TEA 21, EPA believes that it may act upon that information prior to State SIP submissions to ensure that States address such contribution 509 expeditiously, as it is doing in this rulemaking. The EPA believes it is a better policy to assist the States to address the regional component of the nonattainment problem in a way that is equitable, timely, cost effective, and certain.

The EPA acknowledges that historically, especially in the case of 1 hour ozone, the Agency has not had the data and the analytical tools to help upwind States to address interstate transport as early in the SIP process as it is doing today for PM2.5 and 8 hour ozone. The CAA has required States to regulate ozone or its regulatory predecessors since 1970. For many years, States and EPA focused on the adoption and implementation of local controls to bring local nonattainment areas into attainment. Thus, historically,

local areas bore the burden of achieving attainment through imposition of control measures on local sources. By comparison, upwind States did not have to adopt local controls in attainment areas and typically did not adopt such controls solely to lessen the impact of their emissions on downwind States. Since 1977, the CAA has also imposed a series of local control obligations on 1 hour ozone nonattainment areas, such as RACT for stationary sources,

inspection and maintenance for mobile sources, and other requirements that became increasingly more stringent, based upon the level of local nonattainment. In spite of these 510 local control efforts, there continued to be a widespread problem with nonattainment that resulted, in part, from unaddressed interstate transport. A lack of information and analytical tools hindered the ability of EPA and the States to address the regional interstate transport component of 1

hour ozone nonattainment, until the NOx SIP Call in 1998.

While it is thus true that the NOx SIP Call postdated the submission of nonattainment area SIPs, this should not be construed as evidence that the statute precludes the States and EPA from addressing interstate transport earlier in the process for the 8 hour ozone and PM 2.5 NAAQS.

Given that EPA and the States indisputably have the requisite information to identify interstate transport at this stage of SIP development, EPA believes, based upon its experience in implementing the 1 hour ozone NAAQS, that it is preferable to take action under section 110( a)( 2)( D) to address the regional transport component of the PM2.5 and 8

hour ozone nonattainment problem. States, both upwind and downwind, will still have an obligation to control emissions from sources within their boundaries for the purposes of local area attainment and maintenance of the NAAQS. The EPA does not believe, however, that it is either required by the statute, or in accordance with sound policy, for the Agency to wait until submission of the nonattainment area SIPs of downwind States to discover whether or not those SIPs will 511 control local sources sufficiently to provide for eventual attainment regardless of continued significant contribution through interstate transport from upwind States. To the contrary, past experience with the 1 hour ozone NAAQS has demonstrated that delayed action to address the interstate component of nonattainment will potentially lead to delays in attainment as downwind areas struggle to overcome the impacts of transport. Indeed, a number of scientific and technical assessments of ozone and PM2.5 by the NRC and the Ozone Transport Assessment Group have identified addressing interstate transport as a critical issue in developing SIPs.

d. EPA's Authority to Require Section 110( a)( 2)( D)

Submissions Prior to Completion of the Next Review of the PM2.5 and 8 hour Ozone NAAQS.

Commenters also asserted that EPA should not take any action to implement the 8 hour ozone and PM2.5 NAAQS, until completion of the next NAAQS review cycle. According to the commenters, a series of statements by EPA and others indicated an intention to take no action to implement the NAAQS until after the next review cycle, and that statutes passed by Congress confirm that EPA is to take no such action.

The EPA disagrees with the assertion that it should take no action to implement the 1997 PM2.5 and 8 hour ozone NAAQS 512 until completion of the next NAAQS review. Section 110( a)

explicitly requires States to begin to submit SIPS within 3 years after promulgation of a new or revised NAAQS. The CAA also requires EPA to take action upon State SIP submissions within specific timeframes. States are likewise explicitly obligated to attain existing NAAQS within certain specified timeframes. None of these basic statutory submission,

review, or attainment obligations are stayed or delayed due to the fact that there may be an ongoing NAAQS review cycle.

Indeed, under section 109, EPA is to review all NAAQS on an ongoing basis, every 5 years. If the mere existence of a NAAQS review cycle were grounds to suspend implementation of a NAAQS, it would undermine the very goals of the statute.

The commenters argued that certain statements made by EPA and others in guidance memoranda and elsewhere preclude EPA from taking any action to implement the PM2.5 and 8 hour ozone NAAQS. The EPA believes that the commenters are misconstruing those statements, and that the statements merely reflect the Agency's assumption that the NAAQS review cycle would occur on the normal schedule. It would be nonsensical to suggest that, if for any reason, the NAAQS review cycle were delayed, that the CAA would permit no implementation of the existing NAAQS. Such an approach would invite and encourage inappropriate interference in the NAAQS review cycle as a means of subverting the CAA. 513 The commenters further argued that Congress has taken action to prevent implementation of the 8 hour ozone and PM2.5 NAAQS pending the next NAAQS review cycle. The EPA does not see any such intention on the part of Congress. In TEA 21 and the 2004 Consolidated Appropriations Act, Congress has amended section 107 to provide specific dates by which States and EPA must make designations. Significantly,

Congress did not alter the existing statute with respect to any other deadlines for SIP submissions, or with respect to implementation of the PM2.5 and 8 hour ozone NAAQS generally.

By contrast, in the 2004 Consolidated Appropriations Act,

Congress did explicitly alter the date by which States must submit plan revisions to address Regional Haze. See, Section 7( A), 42 USC section 7407 note. From this explicit action,

one must infer that Congress could have taken action to alter the submission date for plans to address PM2.5 or 8 hour ozone, had it intended to alter the existing statutory scheme. Most importantly, however, Congress did not make any of the changes effected in TEA 21 or the 2004 Consolidated Appropriations Act dependent upon completion of the next NAAQS review. To the contrary, Congress directed EPA to take certain actions notwithstanding the fact that there were and are ongoing reviews of the NAAQS. From this, EPA infers that Congress did not intend EPA to defer all action to implement 514 the existing NAAQS, including today's action to assist States to address the requirements of section 110( a)( 2)( D).

e. EPA's Authority to Require States to Make Section 110( a)( 2)( D) Submissions within 18 Months of this Final Rule.

Some commenters questioned EPA's proposal to require States to make SIP submissions in response to this action as expeditiously as practicable but no later than within 18 months. A number of commenters suggested that this schedule is too short because of the magnitude or complexity of the task or because of the typical duration of State rulemaking processes. Other commenters suggested that EPA should follow the example of the NOx SIP Call more closely and provide a shorter period than the Agency proposed.

The EPA has concluded that the proposed 18 month schedule is reasonable given the circumstances and given the scope of the actions that we are requiring States to take.

We issued the PM2.5 and 8 hour ozone NAAQS revisions in July 1997. More than 3 years have already elapsed since promulgation of the NAAQS, and States have not submitted SIPs to address their section 110( a)( 2)( D) obligations under the new NAAQS. We recognize that litigation over the new PM2.5 and 8 hour ozone NAAQS created substantial uncertainty as to whether the courts would uphold the new NAAQS, and that this uncertainty, as a practical matter, rendered it more 515 difficult for States to develop SIPs. Moreover, in the case of PM2.5, additional time was needed for creation of an adequate monitoring network, collection of at least 3 years of data from that network, and analysis of those data.

In addition, in the NPR, the SNPR, and today's action,

we have provided States with a great deal of data and analysis concerning air quality and control costs, as well as policy judgments from EPA concerning the appropriate criteria for determining whether upwind sources contribute significantly to downwind nonattainment under section 110( a)( 2)( D). We recognize that States would face great difficulties in developing transport SIPs to meet the requirements of today's action without these data and policies. In light of these factors and the fact that States can no longer meet the original three year submittal date of section 110( a)( 1), we believe that States need a reasonable period of time in which to comply with the requirements of today's action.

In the comparable NOx SIP Call rulemaking, EPA provided 12 months for the affected States to submit their SIP revisions. One of the factors that we considered in setting that 12 month period was that upwind States had already, as part of the Ozone Transport Assessment Group process begun 3 years before the NOx SIP Call rulemaking, been given the opportunity to consider available control options. Because 516 119 See, e. g., section 182( a)( 2)( A)( providing a 6 month schedule for submission of a revision to provide for RACT today's action requires affected States to control both SO2 and NOx emissions, and to do so for the purpose of addressing both the PM2.5 and 8 hour ozone NAAQS, we believe it is reasonable to allow affected States more time than was allotted in the NOx SIP Call to develop and submit transport SIPs.

Another factor that we have considered is that under section 110( k)( 5), the CAA stipulates that EPA may provide up to 18 months for SIP submissions to correct substantially inadequate plans. While today's action is not pursuant to section 110( k)( 5), we believe that the provision provides an analogy for the appropriate schedule on which EPA should expect States to make the submission required by today's action. We believe it would not be appropriate to set a longer schedule for submission of the plan than would have been possible under section 110( k)( 5) had the States submitted a plan on the original 3 year schedule contemplated in section 110( a)( 1) that did not provide for the emissions reductions today's action requires. While the CAA does require States to make some SIP submissions on shorter schedules, we conclude that the complexities of the action required by today's rulemaking militate in favor of a longer schedule. 119 517 corrections); section 189( d) ( providing 12 months for submission of plan revisions to ensure attainment and required emissions reductions). The former revision could be relatively limited in scope, but the latter might entail submission of a completely revised SIP. Finally, we note that by making findings that States have thus far failed to submit SIPs to meet the requirements of section 110( a)( 2)( D) for the 8 hour ozone and PM2.5 NAAQS,

EPA has an obligation to implement a Federal implementation plan ( FIP) to address interstate transport no later than 24 months after that finding, if the States fail to take appropriate action. Given this schedule for the FIP obligation, EPA believes that it is reasonable to require States to take action to meet the section 110( a)( 2)( D)

obligation with respect to the significant contribution identified in today's rule within no more than 18 months.

Such a schedule will allow States adequate time to develop submissions to meet this requirement and will afford EPA adequate time to review such submissions before the imposition of a FIP in lieu of a SIP, if necessary.

Thus, EPA has concluded that States should submit SIPs to reduce interstate transport, as required by this final action, as expeditiously as practicable but no later than 18 months from today's date. Such a schedule will provide both upwind and downwind States, and those States that are in both positions relative to other States, to develop SIPs that will 518 facilitate expeditious attainment of the PM2.5 and the 8 hour ozone standards. C. What Happens If a State Fails to Submit a Transport SIP or EPA Disapproves the Submitted SIP?

1. Under What Circumstances Is EPA Required to Promulgate a FIP?

Under section 110( c)( 1), EPA is required to promulgate a FIP within 2 years of: ( 1) finding that a State has failed to make a required submittal; or ( 2) finding that a submittal received does not satisfy the minimum completeness criteria established under section 110( k)( 1)( A) ( 40 CFR part 51,

appendix V); or ( 3) disapproving a SIP submittal in whole or in part. Section 110( c)( 1) mandates that EPA promulgate a FIP unless the States corrects the deficiency and EPA approves the SIP before the time EPA would promulgate the FIP.

2. What Are the Completeness Criteria?

Any SIP submittal that is made with respect to the final CAIR requirements first would be determined to be either incomplete or complete. A finding of completeness is not a determination that the submittal is approvable. Rather, it means the submittal is administratively and technically sufficient for EPA to proceed with its review to determine whether the submittal meets the statutory and regulatory requirements for approval. Under 40 CFR 51.123 and 40 CFR 519 51.124 ( the proposed new regulations for NOx and SO2 SIP requirements, respectively), a submittal, to be complete,

must meet the criteria described in 40 CFR, part 51, appendix V, " Criteria for Determining the Completeness of Plan Submissions." These criteria apply generally to SIP submissions.

Under CAA section 110( k)( 1) and section 1.2 of appendix V, EPA must notify States whether a submittal meets the requirements of appendix V within 60 days of, but no later than 6 months after, EPA's receipt of the submittal. If a completeness determination is not made within 6 months after submission, the submittal is deemed complete by operation of law. For rules submitted in response to the CAIR, EPA intends to make completeness determinations expeditiously.

3. When Would EPA Promulgate the CAIR Transport FIP?

The EPA views seriously its responsibility to address the issue of regional transport of PM2.5, ozone, and precursor emissions. Decreases in NOx and SO2 emissions are needed in the States named in the CAIR to enable the downwind States to develop and implement plans to achieve the PM2.5 and 8 hour ozone NAAQS and provide clean air for their residents. Thus, EPA intends to promulgate the FIP shortly after the CAIR SIP submission deadline for States that fail to submit approvable SIPs in order to help assure that the 520 downwind States realize the air quality benefits of regional NOx and SO2 reductions as soon as practicable. This is consistent with Congress' intent that attainment occur in these downwind nonattainment areas " as expeditiously as practicable" ( sections 181( a), 172( a)). To this end, EPA intends to propose the FIP prior to the SIP submission deadline.

The FIP proposal would achieve the NOx and SO2 emissions reductions required under the CAIR by requiring EGUs in affected States to reduce emissions through participation in Federal NOx and SO2 cap and trade programs. The EPA intends to integrate these Federal trading programs with the model trading programs that States may choose to adopt to meet the CAIR. Although EPA would be proposing FIPs for all States affected by the CAIR, EPA will only issue a final FIP for those jurisdictions that fail to respond adequately to the CAIR.

The EPA's goal is to have approvable SIPs that meet the requirements of the CAIR. We remain ready to work with the States to develop fully approvable SIPs, which would eliminate the need for EPA to promulgate a FIP.

D. What Are the Emissions Reporting Requirements for States?

The EPA believes that it is essential that achievement of the emissions reductions required by the CAIR be verified 521 on a regular basis. Emission reporting is the principal mechanism to verify these reductions and to assure the downwind affected States and EPA that the ozone and PM2.5 transport problems are being mitigated as required by the rule. Therefore, the final rule establishes a small set of new emission reporting requirements applicable to States affected by the CAIR, covering certain emissions data not already required under existing emission reporting regulations. The rule language also removes a current emission reporting requirement related to the NOX SIP call,

which we believe is not necessary, for reasons explained below. A number of other proposed changes in emission reporting requirements which would have affected States not subject to the final CAIR are not included in the final rule,

for reasons explained below. We will repropose these other changes, with modifications, in a separate proposal to allow additional opportunity for public comment.

1. Purpose and Authority Because we are consolidating and harmonizing the new emission reporting requirements promulgated today with two pre existing sets of emission reporting requirements, we review here the purpose and authority for emission reporting requirements in general. 522 Emissions inventories are critical for the efforts of State, local, and Federal agencies to attain and maintain the NAAQS that EPA has established for criteria pollutants such as ozone, PM, and CO. Pursuant to its authority under sections 110 and 172 of the CAA, EPA has long required SIPs to provide for the submission by States to EPA of emissions inventories containing information regarding the emissions of criteria pollutants and their precursors ( e. g., VOCs). The EPA codified these requirements in subpart Q of 40 CFR part 51, in 1979 and amended them in 1987.

The 1990 Amendments to the CAA revised many of the provisions of the CAA related to the attainment of the NAAQS and the protection of visibility in Class I areas. These revisions established new periodic emissions inventory requirements applicable to certain areas that were designated nonattainment for certain pollutants. For example, section 182( a)( 3)( A) required States to submit an emissions inventory every three years for ozone nonattainment areas beginning in 1993. Similarly, section 187( a)( 5) required States to submit an inventory every three years for CO nonattainment areas.

The EPA, however, did not immediately codify these statutory requirements in the CFR, but simply relied on the statutory language to implement them.

In 1998, EPA promulgated the NOX SIP call which requires the affected States and the District of Columbia to submit 523 120 Other CAA provisions relevant to this final rule include section 172( c)( 3) ( provides that SIPs for nonattainment areas must include comprehensive, current inventory of actual emissions, including periodic revisions); section 182( a)( 3)( A) ( emissions inventories from ozone nonattainment areas); and section 187( a)( 5) ( emissions inventories from CO SIP revisions providing for NOX reductions to reduce their adverse impact on downwind ozone nonattainment areas. ( 63 FR 57356, October 27, 1998). As part of that rule, codified in 40 CFR 51.122, EPA established emissions reporting requirements to be included in the SIP revisions required under that action.

Another set of emissions reporting requirements, termed the Consolidated Emissions Reporting Rule ( CERR), was promulgated by EPA in 2002, and is codified at 40 CFR part 51 subpart A. ( 67 FR 39602, June 10, 2002). These requirements replaced the requirements previously contained in subpart Q,

expanding their geographic and pollutant coverages while simplifying them in other ways.

The principal statutory authority for the emissions inventory reporting requirements outlined in this final rule is found in CAA section 110( a)( 2)( F), which provides that SIPs must require " as may be prescribed by the Administrator... ( ii) periodic reports on the nature and amounts of emissions and emissions related data from such sources." Section 301( a) of the CAA provides authority for EPA to promulgate regulations under this provision. 120 524 nonattainment areas). 2. Pre existing Emission Reporting Requirements As noted above, prior to this final rule, two sections of title 40 of the CFR contained emissions reporting requirements that are applicable to States: subpart A of part 51 ( the CERR) and section 51.122 in subpart G of part 51 ( the NOX SIP Call reporting requirements).

Under the NOX SIP Call requirements in section 51.122,

emissions of NOX for a defined 5 month ozone season ( May 1 through September 30) and for work weekday emissions for point, area and mobile sources that the State has subjected to emissions control to comply with the requirements of the NOX SIP Call, are required to be reported by the affected States to EPA every year. However, emissions of sources reporting directly to EPA as part of the NOX trading program are not required to be reported by the State to EPA every year. The affected States are also required to report ozone season emissions and typical summer daily emissions of NOX from all sources every third year ( 2002, 2005, etc.) and in 2007. This triennial reporting process does not have an exemption for sources participating in the emissions trading programs. Section 51.122 also requires that a number of data elements be reported for each source in addition to ozone 525 season NOX emissions. These data elements describe certain of the source's physical and operational parameters.

Emissions reporting under the NOX SIP Call as first promulgated was required starting for the emissions reporting year 2002, the year prior to the start of the required emissions reductions. The reports are due to EPA on December 31 of the calendar year following the inventory year. For example, emissions from all sources and types in the 2002 ozone season were required to be reported on December 31,

2003. However, because the Court which heard challenges to the NOX SIP Call delayed the implementation by one year to 2004, no State was required to start reporting until the 2003 inventory year. EPA promulgated a rule to subject Georgia and Missouri to the NOX SIP Call with an implementation date of 2007. ( See 69 FR 21604, April 21, 2004.) We have recently proposed to stay the NOX SIP Call for Georgia ( see 70 FR 9897, March 1, 2005). Missouri's emissions reporting begins with 2006. These emissions reporting requirements under the NOX SIP Call affect the District of Columbia and 18 of the 28 States affected by the proposed CAIR.

As noted above, the other set of pre existing emissions reporting requirements is codified at subpart A of part 51.

Although entitled the Consolidated Emissions Reporting Rule ( CERR), this rule left in place the separate § 51.122 for the 526 NOX SIP Call reporting. The CERR requirements were aimed at obtaining emissions information to support a broader set of purposes under the CAA than were the reporting requirements under the NOX SIP Call. The CERR requirements apply to all States.

Like the requirements under the NOX SIP Call, the CERR requires reporting of all sources at 3 year intervals ( 2005,

2008, etc.). It requires reporting of certain large sources every year. However, the required reporting date under the CERR is 5 months later than under the NOX SIP Call reporting requirements. Also, emissions must be reported for the whole year, for a typical day in winter, and a typical day in summer, but not for the 5 month ozone season as is required by the NOX SIP Call. Finally, the CERR and the NOX SIP Call differ in what non emissions data elements must be reported.

3. Summary of the Proposed Emissions Reporting Requirements On June 10, 2004, EPA published a SNPR ( 69 FR 32684) to EPA's January 30, 2004 proposal ( 69 FR 4566). The EPA's main objective with respect to emissions reporting was to add limited new requirements for emissions reports to serve the additional purposes of verifying the CAIR required emissions reductions. The SNPR also sought to harmonize the CERR and NOX SIP Call reporting requirements with respect to specific data elements and consolidate them entirely in subpart A, and 527 to reduce and simplify the reporting requirements in several ways. These latter changes were proposed to be applicable to all States, not just those affected by the CAIR emissions reduction requirements. The major changes included in the SNPR are described below.

Amendments were proposed to subpart A, which contains § 51.1 through 51.45 and an appendix, and to § 51.122. We also proposed to add a new § 51.125.

° In § 51.122, the NOX SIP Call provisions, we proposed to abolish certain requirements entirely, and to replace certain requirements with a cross reference to subpart A so that detailed lists of required data elements appeared only in subpart A. As proposed, § 51.122 would then have specified what pollutants, sources, and time periods the States subject to the NOX SIP Call must report and when, but would no longer have listed the detailed data elements required for those reports.

° The proposed new § 51.125 would have been functionally parallel to § 51.122, specifying all the pollutants,

sources, and time periods the States subject to the proposed CAIR must report and when, referencing subpart A for the detailed data elements required.

° The proposed amended subpart A would have listed the detailed data elements for all three reporting programs ( CERR, NOX SIP Call, and CAIR) as well as provided 528 information on submittal procedures, definitions, and other generally applicable provisions.

Taken together, the pre existing emissions reporting requirements under the NOX SIP Call and CERR were already rather comprehensive in terms of the States covered and the information required. Therefore, the practical impact of the proposed changes would have imposed only three new requirements.

First, in Arkansas, Florida, Iowa, Louisiana,

Mississippi and Wisconsin for which we proposed and are finalizing a finding of significant contribution to ozone nonattainment in another State but which were not among the 22 States already subject to the NOX SIP Call, the required emissions reporting would be expanded to match those of the 22 States. The proposed change would require that they report NOX emissions during the 5 month ozone season and for a typical summer day, in addition to the existing requirement for reporting emissions for the full year. We proposed that this new requirement begin with the triennial inventory year prior to the CAIR implementation date. This would be the 2008 inventory year, the report for which would be due to EPA by June 1, 2010.

Second, under the existing CERR, yearly reporting is required only for sources whose emissions exceed specified amounts. The SNPR proposed that the 28 States and the 529 121We used the term " non point source" in the SNPR to refer to a stationary source that is treated for inventory purposes as part of an aggregated source category rather than as an individual facility. In the existing subpart A of part 51, such emissions sources are referred to as " area sources." However, the term " area source" is used in section 112 of the CAA to indicate a non major source of hazardous air pollutants, which could be a point source. As emissions inventory activities increasingly encompass both NAAQS related pollutants and hazardous air pollutants, the differing uses of " area source" can cause confusion. Accordingly, EPA proposed to substitute the term " non point source" for the term " area source" in subpart A, § 51.122, and the new § 51.125 to avoid confusion. We are not finalizing this change in terminology in today's rule. District of Columbia subject to the CAIR for reasons of PM2.5 must report to EPA each year a set of specified data elements for all sources subject to new controls adopted specifically to meet the CAIR requirements related to PM2.5, unless the sources participate in an EPA administered emissions trading program. We proposed that this new requirement begin with the 2009 inventory year, the report for which will be due to EPA by June 1, 2011. This new requirement would have no effect on States that fully comply with the CAIR by requiring their EGUs to participate in the CAIR model cap and trade programs.

Third, in all States, we proposed to expand the definition of what sources must report in point source format, so that fewer sources would be included in non point source emissions. 121 We proposed to base the requirement for point source format reporting on whether the source is a 530 major source under 40 CFR part 70 for the pollutants for which reporting is required, i. e., for CO, VOC, NOX, SO2,

PM2.5, PM10 and ammonia but without regard to emissions of hazardous air pollutants.

A number of other proposed changes would have reduced reporting requirements on States or provided them with additional options. Two of the proposed changes in this category are of special note in understanding the final requirements of today's rule. ( The remainder of these changes were explained in the SNPR at 69 FR 32697.)

° The NOX SIP Call rule requires the affected States to submit emissions inventory reports for a given ozone season to EPA by December 31 of the following year. The CERR requires similar but not identical reports from all States by the following June 1, five months later. We proposed to move the December 31 reporting requirement to the following June 1, the more generally applicable submission date affecting all 50 States. We asked for comment on whether allowing this 5 month delay is consistent with the air quality goals served by the emissions reporting requirements. However, we also asked for comment on the alternative of moving forward to December 31 all or part of the June 1 reporting for all 50 States. In particular, we solicited comment on 531 requiring that point sources be reported on December 31 and other sources on June 1.

° We also proposed to eliminate a requirement of the NOX SIP Call for a special all sources report by affected States for the year 2007, due December 31, 2008.

4. Summary of Comments Received and EPA's Responses A number of commenters objected to the 45 day comment period as being too short to allow for full understanding of and comment on the emissions reporting changes that EPA had proposed. With respect to this issue, EPA believes that the comment period was sufficient for those proposed changes that would affect the States subject to the emissions reductions requirements of the CAIR and that are specifically directed at ensuring the effectiveness of the CAIR, namely: ( 1) the requirement for six more States to report ozone season emissions, and ( 2) the requirement for all subject States to report annual emissions from controlled sources every year if those sources are not participating in the emission trading programs. These proposed changes are easy to understand on their face, and also have close precedents in the NOX SIP Call. Moreover, the States affected by these proposed reporting requirements were identified as being subject to the proposed emissions reduction requirements of the CAIR in the original NPR, and thus they knew to be alert to the contents of the SNPR. We also consider the comment period 532 sufficient with respect to two other specific elements of the proposal, namely ( 3) the proposal to eliminate the 2007 inventory reporting requirement under the NOX SIP Call and ( 4) the proposal to change the reporting date for the NOX SIP Call from December 31 ( 12 months after the end of the reported year) to June 1 ( 17 months after the end of the reported year). These were also readily understood proposals, and the States affected by them were among those initially identified as subject to the CAIR itself. A number of substantive comments were received on these four proposed changes. Therefore, we have concluded that it is appropriate to consider the substantive comments that were received on these four elements of the SNPR, and to take final action on them. The disposition of the remaining elements of the SNPR is discussed further below.

The EPA received one comment from the Mississippi Department of Environmental Quality on the proposed requirement that Mississippi and five other States report ozone season emissions. Mississippi disagreed that they should be included with the other States subject to the CAIR provisions, including the emissions reporting provisions.

The EPA has concluded that the analysis performed to support CAIR and discussed earlier in this preamble amply demonstrates that Mississippi should be included in the CAIR and subject to the CAIR emissions reporting requirements. 533 We did not receive comments specifically on the proposal to require States to report annual emissions every year from sources controlled to comply with the CAIR, if those sources are not participating in the emission trading programs operated by EPA. While we expect the number of such sources to be small if not zero, we continue to believe that tracking their emissions from year to year is appropriate, and we are finalizing this requirement. Since the CERR already contains a requirement for every year reporting of emissions from point sources above certain emission thresholds, this requirement will have an incremental impact only if States choose to control fairly small point sources or nonpoint or mobile sources as part of their plan for meeting the CAIR requirements.

The EPA received several comments regarding the elimination of the NOX SIP Call special all sources 2007 emissions inventory. These comments all favored the elimination of the 2007 emissions inventory, which EPA is promulgating in today's rule. We would like to clarify that the NOX SIP Call contained no requirement that any State make a retrospective demonstration that actual statewide emissions of NOX were within any limit. The requirement for the 2007 inventory was for the purpose of program evaluation by EPA.

As explained in the SNPR, we believe that in light of the data on 2007 emissions that will be available from the NOX 534 trading program and the further reductions in NOX required by the CAIR, the 2007 inventory submissions from the States are not needed for this purpose.

The EPA also proposed to harmonize the report due dates for the NOX SIP Call, currently 12 months after the end of the reported year, and for the CERR, currently 17 months after the end of the reported year. The EPA proposed to harmonize the dates for both at 17 months, but asked for comments on a 12 month due date. Several comments were received, all favoring harmonizing the report due date at 17 months. While we continue to believe in the efficiency advantage of harmonized submission date requirements, we are not finalizing this change. The EPA has reconsidered this part of the proposed emissions reporting requirements and believes that it may be in the interest of the public to move in the direction of shortening the emissions reporting cycle for all three reporting requirements ( CERR, NOX SIP Call, and CAIR), rather than accepting the longer CERR cycle for all three reporting requirements. In today's final rule, we are retaining the 12 month submission date requirement of the original NOX SIP Call for the States already subject to it.

For the six States that are newly subject to reporting ozone season NOX emissions and for the new requirement for everyyear reporting by sources controlled to meet the CAIR requirements for SO2 and NOX annual emissions reductions but 535 not included in the trading programs, the required reporting date for States will be June 1, 17 months after the end of the reported year, as was proposed. We will address reporting deadlines comprehensively in a separate NPR which will propose a unified, but shorter period of time to report to EPA. This separate notice will allow for more public comment on the reporting cycle. The dual approach to reporting due dates retained in today's rule will be combined into unified due dates and will be influenced by comments received in response to our proposal when the separate rulemaking is completed.

Regarding elements of the proposed requirements beyond these four, i. e., the requirements that would have affected States not subjected to the CAIR emissions reduction requirements as well as CAIR States, many commenters said that EPA should not have included changes to national emissions reporting requirements in a proposed rule placing emissions reduction requirements on only certain States.

Commenters also questioned whether EPA had given adequate time for comment on the more detailed revisions in required data elements, definitions, etc. Substantively, many commenters supported some or all of the proposed changes, but some commenters objected to some of them.

The EPA has considered these comments. Without conceding EPA's legal authority to include these provisions 536 in the final rule in light of the history of proposal, public hearing, and comment period, EPA has  in an abundance of caution  decided to omit these provisions from today's rule ( see section VIII. D. 5 Summary of the Emissions Reporting Requirements below for the changes which are being finalized today). We will repropose them, with modifications, in a separate NPR to allow additional opportunity for public comment by all affected States and other parties.

5. Summary of the Emissions Reporting Requirements As a result of the comments received, EPA has revised the emissions reporting requirements of today's rule by limiting new requirements to the ones where sufficient notice and opportunity for comment was clearly given in the June 10,

2004, SNPR and that either: ( 1) are necessary for the monitoring of the implementation of the emissions reduction requirements of the CAIR, or ( 2) are changes in reporting under the NOX SIP Call linked to the CAIR. Three specific emissions reporting provisions that change the pre existing requirements are included in today's rule.

1. Alabama, Arkansas, Connecticut, Delaware, Florida,

Illinois, Indiana, Iowa, Kentucky, Louisiana,

Maryland, Massachusetts, Michigan, Mississippi,

Missouri, New Jersey, New York, North Carolina,

Ohio, Pennsylvania, South Carolina, Tennessee,

Virginia, West Virginia, Wisconsin and the District 537 of Columbia, which are subject to the CAIR for reasons of ozone, are made subject to emission reporting requirements for NOX that are very similar to the existing requirements of the NOX SIP Call, which already affects all but six of these States. For these six States ( Arkansas, Florida,

Iowa, Louisiana, Mississippi and Wisconsin) a new requirement is that they report NOX emissions during the 5 month ozone season from all sources every three years, in addition to reporting emissions for the full year and for a summer day as was already required. This new requirement begins with the triennial inventory year 2008. For all the listed States, a new requirement is to report to EPA for 2009 and each year thereafter the ozoneseason and summer day NOX emissions, plus a set of specified other data elements, for all sources subject to new controls adopted specifically to meet the CAIR requirements related to ozone, unless the sources participate in an EPA administered emissions trading program. These reports will be due June 1 of the second year following the end of the reported year, i. e., 17 months after the end of the reported year. The existing CERR includes several other reporting requirements which in 538 conjunction with this new requirement will meet the needs for monitoring the implementation of required NOX emissions reductions.

2. Alabama, Florida, Georgia, Illinois, Indiana, Iowa,

Kentucky, Louisiana, Maryland, Michigan, Minnesota,

Mississippi, Missouri, New York, North Carolina,

Ohio, Pennsylvania, South Carolina, Tennessee,

Texas, Virginia, West Virginia, Wisconsin and the District of Columbia, which are subject to the CAIR for reasons of PM2.5, must report to EPA each year annual NOX and SO2 emissions, plus a set of specified other data elements, for all sources subject to new controls adopted specifically to meet the CAIR requirements related to PM2.5, unless the sources participate in an EPA administered emissions trading program. Previously, these states may have been required to report these sources only every third year, depending on their size. The existing CERR includes several other reporting requirements which in conjunction with this new requirement will meet the needs for monitoring the implementation of required NOX and SO2 emissions reductions.

3. The EPA has determined that the requirement in the NOX SIP Call for a special all sources report by 539 12240 CFR 51.122 is also amended: ( 1) to remove a reference to now obsolete electronic data reporting processes ( a " housekeeping" deletion that was specifically included in the proposed rule text with the SNPR), and ( 2) to make a minor technical correction to properly indicate which of the latitude versus longitude data elements corresponds to the x coordinate and which to the y coordinate ( a correction that was implicitly proposed in the SNPR in that 51.122 was proposed to refer to 51 subpart A for all its data element descriptions). affected States for the year 2007, due December 31,

2008, is no longer needed to administer provisions in the NOX SIP Call. Accordingly, EPA is eliminating this requirement in today's rule.

The final rule accomplishes these changes by making minimal changes to the existing provisions of 40 CFR part 51.

Subpart A, which contains the CERR requirements, is not amended at all. 40 CFR 51.122, the section containing emission inventory reporting requirements for the NOX SIP Call, is substantively amended only to delete the requirement for the 2007 inventory report. 122 A new section 40 CFR 51.125 is added to contain the two new emission inventory reporting requirements specifically related to the new CAIR requirements for emissions reductions, regarding ozone season emissions of NOX and every year reporting of NOX and SO2 emissions from all sources controlled but not participating in the EPA trading programs. The new 40 CFR 51.125 refers to 40 CFR subpart A for the other specific data elements that must be reported. 540 VIII. Model NOx and SO2 Cap and Trade Programs A. What Is the Overall Structure of the Model NOx and SO2 Cap and Trade Programs?

The EPA is finalizing model rules for the CAIR annual NOx, CAIR ozone season NOx, and SO2 trading programs that States can use to meet the emission reduction requirements in the CAIR. These rules are designed to be referenced by States in State rulemaking. State use of the model cap and trade rules helps to ensure consistency between the State programs, which is necessary for the market aspects of the regional trading program to function properly. It also allows the CAIR Program to build on the successful Acid Rain Program. Consistency in the CAIR requirements from State to

State benefits the affected sources, as well as EPA, which administers the program on behalf of States.

This section focuses on the structure which maintains the existing NOx SIP Call rules ( in part 96, subparts A through J) while adding parallel rules for the CAIR annual NOx ( in subparts AA through II), CAIR SO2 ( in subparts AAA through III), and the CAIR ozone season NOx ( in subparts AAAA through IIII) of the model rules. Commenters generally supported the proposed structure of the model rules, as well as the use of the cap and trade approach, which are maintained in the final rules. Later sections of today's 541 rule discuss specific aspects of the model rules that have been modified or maintained in response to comment.

The EPA designed the model rules to parallel the NOx SIP Call model trading rules ( part 96) and to coordinate with the Acid Rain Program. Mirroring the structure of existing part 96 in the final CAIR NOx and SO2 model rules will ease the transition to the CAIR rules as many States and sources are already familiar with the layout of the NOx SIP Call rule.

In addition, because the EPA proposed new CAIR model trading rules   separate from the existing NOx SIP Call model rule in part 96   States can continue to reference part 96 ( subparts A through J) through 2008. The CAIR ozone season NOx cap and trade program that the EPA has included in today's final rule is intended for use by CAIR ozone affected sources as well as those subject to the NOx SIP Call in 2009 and beyond. Those States that wish to use an EPA administered, ozone season cap and trade program to achieve the reductions mandated by the CAIR or the NOx SIP Call, must use the CAIR ozone season NOx model rule ( subparts AAAA through IIII) in 2009 and beyond.

The model rules rely on the detailed unit level emissions monitoring and reporting procedures of part 75 and consistent allowance management practices. ( Note that full CAIR related SIP requirements, i. e., part 51, are discussed in section VII of today's preamble.) Additionally, section IX. B of today's preamble discusses the final revisions to 542 parts 72 through 77 in order to, among other things,

facilitate the interaction of the title IV Acid Rain Program's SO2 cap and trade provisions and those of the CAIR SO2 trading program.

Road Map of Model Cap and Trade Rules The following is a brief " road map" to the final CAIR NOx and SO2 cap and trade programs. Please refer to the detailed discussions of the CAIR programmatic elements throughout today's rule for further information on each aspect.

State Participation

D. States have flexibility to achieve emissions reductions however they chose, including developing and implementing their own trading program.

E. States may elect to participate in an EPA managed cap and trade program. To participate, a State must adopt the model cap and trade rules finalized in this section of today's rule with flexibility to modify sections regarding NOx allocations and whether to include individual unit opt in provisions.

F. States may participate in EPA managed cap and trade programs for either the annual NOx, the ozone season NOx, the SO2, or any combination. The State can only choose to participate in the EPA administered, CAIR cap 543 123 Rhode Island ( RI) is the only State currently participating in the NOx SIP Call cap and trade program that is not affected by today's ozone finding. As is explained in section IX, RI may join the CAIR ozone season trading program as a means of satisfying its NOx SIP Call requirements. and trade program( s) that is( are) relevant to thier finding( s).

G. The annual NOx model rule is to be used by only those States that are affected by the CAIR PM2.5 finding.

H. The ozone season NOx model rule is designed to be used by those States that are affected by the CAIR ozone finding as well as take the place of the NOx SIP Call requirements123. The CAIR ozone season NOx program will be the only ozone season NOx program that EPA will administer. Because the EPA will no longer run a NOx SIP Call trading program, States may include their NOx SIP Call sources if they adopt the EPA administered CAIR ozone season NOx program.

I. The SO2 model rule is designed to satisfy the ongoing statutory requirements of the title IV Acid Rain SO2 cap and trade program   with simultaneous compliance with title IV and the CAIR   for sources in the CAIR region that are affected by both the Acid Rain Program and the CAIR.

Trading Sources  544 J. States must achieve all of the mandated emission reductions from EGUs to participate in EPA managed cap and trade programs. States may include other NOx SIP Call trading sources in the ozone season CAIR NOx cap and trade program and still participate in EPA managed cap and trade programs.

K. States may participate in EPA managed cap and trade programs whether or not they adopt the optional individual opt in provisions of the model rule.

However, if the State chooses to allow individual sources to opt in, the opt in requirements must reflect the requirements of the model rule.

Emission Allowances

A. The CAIR annual NOx cap and trade program will rely upon CAIR annual NOx allowances allocated by the States. The NOx SIP Call allowances and CAIR ozone season NOx allowances cannot be used for compliance with the annual CAIR reduction requirement. ( Note that allowances from the Compliance Supplement Pool ( CSP) will be CAIR annual NOx allowances.)

B. The CAIR ozone season NOx cap and trade program will rely upon CAIR ozone season NOx allowances allocated by the States. In addition, pre 2009 NOx SIP Call allowances can be banked into the program and used by CAIR affected sources for compliance with the CAIR 545 ozone season NOx program. The NOx SIP Call allowances of vintages 2009 and later can not be used for compliance with any EPA administered cap and trade programs.

C. The CAIR SO2 cap and trade program will rely upon title IV SO2 allowances but may also include additional CAIR SO2 allowances, should a State not require all of their SO2 emissions reductions from EGUs in their budget demonstration. Pre 2010 title IV SO2 allowances can be used for compliance with the CAIR.

D. Sulfur dioxide reductions are achieved by requiring sources to retire more than one allowance for each ton of SO2 emissions. The emission value of an SO2 allowance is independent of the year in which it is used, but is based upon it's vintage ( i. e., the year in which the allowance is issued). Sulfur dioxide allowances of vintage 2009 and earlier offset one ton of SO2 emissions. Vintages 2010 through 2014 offset 0.5 tons of emissions. And, vintages 2015 and beyond offset 0.35 tons of emissions.

Allocation of Allowances to Sources

E. For SO2 allowances, sources have already received allowances through title IV.

F. NOx allowances ( for both the annual and ozone season programs) will be allocated based upon the State's 546 2 The 200,000 total includes the share of the CSP that DE and NJ would receive if the EPA finalizes a parallel rule finding that they are significant contributors for PM2.5. chosen allocation methodology. The EPA's model NOx rules have provided an example allocation, complete with regulatory text, that may be used by State's or replaced by text that implements a States alternative allocation methodology.

Compliance Supplement Pool ( CSP)

G. Each State will have a share of the CSP that is comprised of 200,000124 CAIR annual NOx allowances of vintage year 2009. The State may distribute the CSP allowances based upon the criteria, found in the SIP Approvability section of today's rule, for early reductions and need.

Emission Monitoring and Reporting by Sources

A. Sources monitor and report their emissions using part 75. This includes individual sources that opt in to the program.

B. Source information management, emissions data reporting,

and allowance trading is done through on line systems similar to those currently used for the Acid Rain SO2 and NOx SIP Call Programs. 547 125Compliance with the title IV Acid Rain Program will be determined separately from CAIR compliance. C. Emission monitoring and reporting for both the CAIR annual and ozone season NOx cap and trade programs will use part 75.

Compliance and Penalties

A. Compliance for the annual and ozone season NOx cap and trade programs, as well as the SO2 program, will be determined separately. 125 B. For the NOx and SO2 cap and trade programs, any source found to have excess emissions must: ( 1) surrender allowances sufficient to offset the excess emissions;

and, ( 2) surrender allowances from the next control period equal to three times the excess emissions.

Comments Regarding the Use of a Cap and Trade Approach and the Proposed Structure Commenters overwhelmingly supported the use of a cap and trade approach and the overall framework of the model rules to achieve the mandated emissions reductions. Some supported the use of cap and trade for achieving regional emissions reductions but noted the need to have additional measures that ensure that emission reductions take place in nonattainment areas. This is in line with the EPA's strategy of reducing transported SO2 and NOx through a regionwide cap 548 and trade approach and encouraging States to take complementary measures to address their particular,

persistent nonattainment issues. ( Note that comments on specific mechanisms within the cap and trade program are discussed in the topic specific sections that follow.)

B. What Is the Process for States to Adopt the Model Cap and Trade Programs and How Will It Interact with Existing Programs?

1. Adopting the Model Cap and Trade Programs States may choose to participate in the EPA administered cap and trade programs, which are a fully approvable control strategy for achieving all of the emissions reductions required under today's rulemaking in a highly cost effective manner. States may simply reference the model rules in their State rules and, thereby, comply with the requirements for statewide budget demonstrations detailed in section VII. B of today's preamble. Affected States for both PM2.5 and ozone can adopt the annual NOx and SO2 cap and trade programs in part 96, subparts AA through II, part 96 subparts AAA through III, and AAAA through IIII. States with ozone season only CAIR requirements ( i. e., Arkansas, Connecticut, Delaware,

Massachusetts, and New Jersey) can adopt the ozone season CAIR NOx program ( subparts AAAA through IIII). Part 96 subparts AA through II and AAA through III can be used by 549 States that are affected for only PM2.5 ( i. e., Georgia,

Minnesota, and Texas). States that elect to achieve the required reductions by regulating other sources or using other approaches will follow alternate State requirements,

also described in section VII. B of today's preamble.

As proposed, the EPA is requiring States that wish to participate in the EPA managed cap and trade program to use the model rule to ensure that all participating sources,

regardless of which State in the CAIR region they are located, are subject to the same trading and allowance holding requirements. Further, requiring States to use the complete model rule provides for accurate, certain, and consistent quantification of emissions. Because emissions quantification is the basis for applying the emissions authorization provided by each allowance and emissions authorizations ( in the form of allowances) are the valuable commodity traded in the market, the emissions quantification requirements of the model rule are necessary to maintain the integrity of the cap and trade approach of the program and therefore, to ensure that the environmental goals of the program are met.

For States Electing to Participate in the EPA Administered Ozone Season CAIR NOx Cap and Trade Program States that wish to achieve their CAIR ozone season requirements through an EPA administered ozone season NOx cap 550 and trade program will adopt the CAIR model rule in subparts AAAA through IIII. ( Note that the EPA administered annual NOx CAIR cap and trade program is independent of ozone season CAIR NOx model rule.) Because the EPA will no longer administer the trading program for the NOx SIP Call, States that wish to continue to meet their NOx SIP Call obligations through an EPA administered cap and trade program will also adopt the CAIR ozone season model rule. NOx SIP Call States will " sun set" their NOx SIP Call rules for sources that will move into the CAIR NOx ozone season program. Part 96,

sections A  J ( i. e., the NOx SIP Call trading rule) will continue to be available for the NOx SIP Call and will not be removed for the CAIR. The CAIR model rules specifically address how NOx SIP Call allowances carry forward into the CAIR NOx ozone season program. ( Section IX. A provides additional discussion of interactions between the CAIR and the NOx SIP Call).

For States Electing to Participate in the EPA Administered Annual NOx Cap and Trade Program States that are PM2.5 affected and wish to participate in an EPA administered annual NOx cap and trade program will adopt the CAIR model rule in subparts AA through II. States may participate by either adopting the model rule provisions by reference or codifying the model rule in their State regulations. 551 For States Electing to Participate in the EPA Administered SO2 Cap and Trade Program States may simply adopt new provisions, whether by incorporating by reference the CAIR SO2 cap and Trade rule ( part 96, subparts AAA through III) or codifying the provisions of the CAIR SO2 cap and trade rules, in order to participate in the EPA administered SO2 cap and trade program. The CAIR SO2 model rule works in conjunction with the Acid Rain Program provisions, which are implemented at the Federal level and will stay in place. Today's action also finalizes some revisions to the Acid Rain Program ( i. e.,

parts 72, 73, 74, 75, and 78). ( Section IX. B of today's preamble provides additional discussion of interactions between the CAIR and the Acid Rain Program and changes to the Acid Rain Program).

Comments Regarding the Process for Adopting the Model Rules Commenters supported the EPA's proposed process and emphasized the importance of workable model rules, because States with limited resources are likely to incorporate them by reference or heavily rely on them as the basis for State rules.

2. Flexibility in Adopting Model Cap and Trade Rules It is important to have consistency on a State to State basis with the basic requirements of the cap and trade approach when implementing a multi State cap and trade 552 program. Such consistency ensures the: preservation of the integrity of the cap and trade approach so that the required emissions reductions are achieved; smooth and efficient operation of the trading market and infrastructure across the multi State CAIR region so that compliance and administrative costs are minimized; and equitable treatment of owners and operators of regulated sources. However, the EPA believes that some limited differences are possible without jeopardizing the environmental and other goals of the program. Therefore, the final rule allows States to modify the model rule language to best suit their unique circumstances in a few, specific areas.

First, States have the flexibility to include, as full trading partners, all trading sources affected by the NOx SIP Call in the ozone season CAIR NOx cap and trade program.

This is an outgrowth of the development of the CAIR ozoneseason NOx program, which will be the only ozone season NOx cap and trade program administered by the EPA.

In addition, States may develop their own NOx allocations methodologies, provided allocation information is submitted to the EPA in the required timeframe. ( Section VIII. D of today's preamble discusses unit level allocations and the related comments in greater detail. This includes a discussion of the provisions establishing the advance notice States must provide for unit by unit allocations). 553 Lastly, States using the model cap and trade rules may elect to include provisions that allow individual units to " opt in" to the cap and trade programs. States that wish to include this mechanism must adopt provisions discussed in section VIII. G of today's rulemaking. Adopting the individual unit opt in provisions, which would allow non EGUs that meet the opt in requirements to enter into the EPAmanaged cap and trade programs, does not preclude a State from participating in the EPA administered cap and trade programs.

C. What Sources Are Affected under the Model Cap and Trade Rules?

In the January 2004 NPR, the EPA proposed a method for developing budgets that assumed reductions only from EGUs.

Electric Generating Units were defined as: fossil fuel fired,

non cogeneration EGUs serving a generator with a nameplate capacity of greater than 25 MWe; and fossil fuel fired cogeneration EGUs meeting certain criteria ( referred to as the " 1/ 3 potential electric output capacity criteria"). In the SNPR, we proposed model cap and trade rules that applied to the same categories of sources. We are finalizing the nameplate capacity cut off that we proposed in the NPR for developing budgets and that we proposed in the SNPR for the applicability of the model trading rules. We are also finalizing the " fossil fuel fired" definition and the 1/ 3 554 electric output capacity criteria that were proposed. The actual rule language in the SNPR describing the sources to which the model rules apply is being slightly revised to be clearer in response to some comments that the proposed language was not clear.

1. 25 MW Cut Off The EPA is retaining the 25 MW cut off for EGUs for budget and model rule purposes. The EPA believes it is reasonable to assume no further control of air emissions from smaller EGUs. Available air emissions data indicate that the collective emissions from small EGUs are relatively small and that further regulating their emissions would be burdensome,

to both the regulated community and regulators, given the relatively large number of such units. For example, NOx and SO2 emissions from EGUs of 25 MW or less in the CAIR region represent approximately one percent and two percent of total NOx and SO2 emissions from EGUs, respectively. There are over 4000 EGUs of 25 MW or less in the CAIR region.

Consequently, EPA believes that administrative actions to control this large group with small emissions would be inordinate and thus does not believe these small units should be included. This approach of using a 25 MW cut off for EGUs is consistent with existing SO2 and NOx cap and trade programs such as the NOx SIP Call ( where existing and new EGUs at or under this cut off are, for similar reasons, not required to 555 be included) and the Acid Rain Program ( where this cut off is applied to existing units and to new units combusting clean fuel). Also, EPA's New Source Performance Standards use an applicability threshold of approximately 25 MW under subpart Da.

One commenter suggested a plant wide cut off of 250 MW.

This commenter suggested that including units between 25 and 250 MW would cause these units to shutdown but failed to provide any analysis to support its claim. Such a cut off would be inconsistent with other existing SO2 and NOx cap and trade programs as noted above. The EPA estimates that approximately 1/ 3 of the SO2 reductions, and 30 percent of the NOx reductions, required under today's rule come from plants between 25 MW and 250 MW. Our modeling shows that some units below 250 MW will put on controls as part of our highly cost effective set of control actions. The units also have the option to coal switch, alter dispatch, and/ or purchase allowances.

Another commenter suggested that, in lieu of the language proposed in the SNPR, the EPA adopt a definition for EGU that, according to the commenter, is the Acid Rain Program's definition of affected utility. The commenter stated that the Acid Rain definition of EGU is " all fossil fuel fired units with a nameplate capacity greater than 25 MW supplying more than 1/ 3 of potential electrical output to the 556 126 For example, certain cogeneration units and new units 25 MW or less that burn only clean fuel are exempt from the Acid Rain Program. grid." However, the commenter misstated the Acid Rain definition and confused the Acid Rain applicability provisions concerning utility units in general with those provisions concerning cogeneration units in particular. The Acid Rain Program covers, with certain exceptions, 126 all existing fossil fuel fired units greater than 25 MW that produce any electricity for sale; and new fossil fuel fired units that produce any electricity for sale. The language referenced by the commenter concerning potential electrical output applies, in the Acid Rain Program, only to cogeneration units, not all fossil fuel fired units. For non cogeneration units, there is no exemption from Acid Rain Program requirements based on the unit selling a " small"

amount of electricity for sale. The provisions in the NPR and the SNPR concerning cogeneration units are discussed below.

2. Definition of Fossil Fuel Fired The EPA is finalizing the proposed definition of fossil fuel fired, i. e., where any amount of fossil fuel is used at any time. This is the same definition that is used in the Acid Rain Program. One commenter suggested that the proposed definition is too broad and that the EPA should use in the 557 CAIR Program the same definition that is used in the NOx SIP Call, i. e., where a unit uses fossil fuel for at least 50 percent of its annual heat input during a specified period.

The same commenter also proposed excluding large wood fired boilers and black liquor recovery furnaces. The commenter's definition would result in units already subject to the Acid Rain Program in a given State being excluded from the CAIR Program and the model cap and trade rules applicable in that State. Such exclusion would make it more difficult to coordinate the Acid Rain Program and the CAIR Program.

Consequently, the EPA rejects the commenter's more restricted definition of fossil fuel fired.

The EPA recognizes that new ( i. e., post 1990) units that are 25 MW or less and burn other than clean fuels are subject to the Acid Rain Program but not to the CAIR Program.

However, there are very few such units, and EPA has decided to exclude any units that are 25 MW or less on other grounds discussed above.

3. Exemption for Cogeneration Units As proposed, EPA is finalizing an exemption from the model cap and trade programs for cogeneration units, i. e.,

units having equipment used to produce electricity and useful thermal energy for industrial, commercial, heating, or cooling purposes through sequential use of energy and meeting certain operating and efficiency standards ( discussed below). 558 The EPA is adopting the proposed definition of cogeneration unit and the proposed criteria for determining which cogeneration units qualify for the exemption from the model cap and trade programs.

The CAIR trading program has different applicability provisions for non cogeneration units and cogeneration units.

If a unit initially qualifies as a cogeneration unit, and for the exemption from the trading program for certain cogeneration units, but subsequently loses its cogenerationunit status ( e. g., due to changes in operation), such unit loses the cogeneration unit exemption and becomes subject to the applicability criteria for non cogeneration units,

regardless of any future changes in the unit or its operations. If, under the non cogeneration unit applicability criteria, the unit becomes subject to the trading program, the unit will remain subject to the program in the future. Conversely if a unit initially does not qualify as a cogeneration unit, such unit becomes subject to the applicability criteria for non cogeneration units,

regardless of any future changes in the unit. If, under such criteria, the unit is subject to the trading program, the unit will remain subject to the program in the future. This approach to applicability means that units ( other than, in some cases, opt in units) cannot go in and out of the trading program, which, if allowed, would make it difficult for the 559 EPA, States, and owners or operators to determine which units should be complying with trading program requirements, and during what years, and would likely result in more noncompliance problems.

a. Efficiency Standard for Cogeneration Units The EPA proposed operating and efficiency standards ( i. e., the useful thermal energy output of the unit must be no less than a certain percent of the total energy output and, in some cases, useful power must be no less than a certain percent of total energy input) in the SNPR that a unit must meet in order to qualify as a cogeneration unit.

If the unit qualifies as a cogeneration unit, then it may be eligible for exemption from the CAIR, depending upon whether it meets additional operating criteria, discussed below. As discussed in the NPR, the EPA proposed the same operating and efficiency standards for all fossil fuel fired units ( regardless of whether they burn coal, oil, or gas). In addition, not applying the operating and efficiency standards to coal fired units would be counter productive to the EPA's efforts to reduce SO2 and NOx emissions under this proposed rule because of the relatively high SO2 and NOx emissions from coal fired units. In particular, without application of the efficiency standards to coal fired units, highly inefficient coal fired units, which have particularly high emissions per MWhr generated, could be exempt from the CAIR 560 Program. In addition, if coal fired units were not subject to the operating standard, the potential would exist for a coal fired unit to provide only a token amount of useful thermal energy and still qualify for a cogeneration unit exemption from the CAIR Program, despite having relatively high emissions.

One commenter suggested that the EPA should not use the efficiency standards for solid fuel fired cogeneration units,

because it may require some coal fired cogeneration units that were exempt from the Acid Rain Program to purchase CAIR allowances. However, the EPA analysis indicates that most existing solid fuel fired cogeneration units affected by this rule will meet the proposed standard. See TSD entitled " Cogeneration Unit Efficiency Calculations" in the docket.

To the extent any solid fuel fired cogeneration units cannot meet the efficiency standard and become affected units under the CAIR, the EPA believes that, considering their relatively high emissions of SO2 and NOx compared to oil and gas fired units, it is important to require these sources to meet the efficiency standards or be subject to the emission limits under the CAIR Program.

Another commenter suggested that the efficiency standards should not apply to solid fuel fired cogeneration units because solid fuel fired unit efficiency is based on HHV ( higher heating value) while gas, or oil fired unit 561 127 The range included solid fuel fired cogeneration units from 25 MW to 250 MW. efficiency is based on LHV ( lower heating value). The EPA analyzed a range127 of solid fuel fired cogeneration units and calculated their efficiencies to see if they would meet the minimum efficiency standard. All of the units selected satisfied the proposed efficiency standard. See TSD entitled " Cogeneration Unit Efficiency Calculations" in the docket.

As a result, the EPA believes that most solid fuel fired cogeneration units will meet the proposed efficiency standard. The efficiency standard the EPA is adopting is the Public Utility Regulatory Act ( PURPA) of thermal efficiency of 42.5 percent. See TSD entitled, " Cogeneration Unit Efficiency Calculations" for further discussion, is based on LHV. If the efficiency of a solid fuel fired unit is expressed in terms of HHV, it can easily be converted to LHV for purposes of determining whether it meets the efficiency standard. Therefore, the reason given by the commenter ( that solid fuel fired unit efficiency is expressed in terms of HHV) is not grounds for not applying an efficiency standard to these units. One commenter supported applying the same efficiency standard to solid fuel fired units as the EPA proposed. The EPA is finalizing its proposed cogeneration unit definition, which applies the same operating and 562 efficiency standards to all units regardless of the type of fossil fuel burned.

b. One third Potential Electric Output Capacity The EPA is finalizing the 1/ 3 potential electric output capacity criteria in the NPR and SNPR. Under the proposals,

the following cogeneration units are EGUs: any cogeneration unit serving a generator with a nameplate capacity of greater than 25 MW and supplying more than 1/ 3 potential electric output capacity and more than 219,000 MW hrs annually to any utility power distribution system for sale. These criteria are similar to those used in the Acid Rain Program to determine whether a cogeneration unit is a utility unit and the NOx SIP Call to determine whether a cogeneration unit is an EGU or a non EGU. The primary difference between the proposed criteria and the 1/ 3 potential electric criteria for the Acid Rain and NOx SIP Call Programs is that these programs applied the criteria to the initial operation of the unit and then to 3 year rolling average periods while the proposed CAIR criteria are applied to each individual year starting with the commencement of operation. The EPA believes that using an individual year approach would streamline the application and administration of this exemption. No adverse comments were received on using an individual year approach as opposed to a 3 year rolling average. In addition, the criteria under the Acid Rain 563 Program and the NOx SIP Call are applied somewhat differently to units commencing construction on or before November 15,

1990 and units commencing construction after November 15,

1990. Several commenters suggested exempting all cogeneration units under the PURPA instead of using the proposed criteria and cite the high efficiency of cogeneration as a reason for a complete exemption. The EPA believes it is important to include in the CAIR Program all units, including cogeneration units, that are substantially in the business of selling electricity. The proposed 1/ 3 potential electric output criteria described above are intended to do that.

Inclusion of all units substantially in the electricity sales business minimizes the potential for shifting utilization, and emissions, from regulated to unregulated units in that business and thereby freeing up allowances,

with the result that total emissions from generation of electricity for sale exceed the CAIR emissions caps. The fact that units in the electricity sales business are generally interconnected through their access to the grid significantly increases the potential for utilization shifting.

One commenter suggested that the 1/ 3 of potential electric output capacity criteria be applied on an annual basis. The EPA agrees that the criteria should be applied 564 annually. The proposed and final model cap and trade rules adopt that approach.

c. Clarifying " For Sale"

Several commenters requested the EPA confirm that, for purposes of applying the 1/ 3 potential electric output criteria, simultaneous purchases and sales of electricity are to be measured on a " net" basis, as is done in the Acid Rain Program. At least one commenter suggested that the net approach also be applied to purchase and sales that are not simultaneous. For purposes of applying the 1/ 3 potential electric output criteria in the CAIR Program and the model cap and trade rules, EPA confirms that the only electricity that counts as a sale is electricity produced by a unit that actually flows to a utility power distribution system from the unit. Electricity that is produced by the unit and used on site by the electricity consuming component of the facility will not count, including cogenerated electricity that is simultaneously purchased by the utility and sold back to such facility under purchase and sale agreements under the PURPA. However, electric purchases and sales that are not simultaneous will not be netted; the 1/ 3 potential electric output criteria will be applied on a gross basis, except for simultaneous purchase and sales. This is consistent with the approach taken in the Acid Rain Program.

d. Multiple Cogeneration Units 565 Some commenters suggested aggregating multiple cogeneration units that are connected to a utility distribution system through a single point when applying the 1/ 3 potential electric output capacity criteria. These commenters suggested that it is not feasible to determine which unit is producing the electricity exported to the outside grid. The EPA proposed to determine whether a unit is affected by the CAIR on an individual unit basis. This unit based approach is consistent with both the Acid Rain Program and the NOx SIP Call. The EPA considers this approach to be feasible based on experience from these existing programs, including for sources with multiple cogeneration units. The EPA is unaware of any instances of cogeneration unit owners being unable to determine how to apply the 1/ 3 potential electric output capacity criteria where there are multiple cogeneration units at a source.

In a case where there are multiple cogeneration units with only one connection to a utility power distribution system, the electricity supplied to the utility distribution system can be apportioned among the units in order to apply the 1/ 3 potential electric output capacity criteria. A reasonable basis for such apportionment must be developed based on the particular circumstances. The most accurate way of apportioning the electricity supplied to the utility power distribution system seems to be apportionment based on the 566 amount of electricity produced by each unit during the relevant period of time.

Exemption for Independent Power Production ( IPP) Facilities:

Some commenters stated that certain IPP facilities are exempt from the Acid Rain Program and that they should also be exempt from the CAIR Program and model cap and trade rules. Under the Acid Rain Program, an IPP facility that has, as of November 15, 1990, a qualifying power purchase commitment ( including a sales price) to sell at least 15 percent of planned net output capacity and has installed net output capacity not exceeding 130 percent of planned net output capacity is exempt. However, if the power purchase commitment changes after November 15, 1990 in a way that allows the cost of compliance with the Acid Rain Program to be shifted to the purchaser, then the IPP facility loses the exemption. For example, expiration or termination of the power purchase commitment or modification so that the price is increased ( e. g., changed to a market price) results in loss of the exemption. The purpose of the exemption is to protect IPP facilities subject to contract prices that were set before passage of the CAA Amendments of 1990 ( including the Acid Rain Program in title IV) and that did not allow passthrough of the costs of Acid Rain Program compliance.

However, the EPA maintains that this exemption was aimed at easing the transition of such facilities into the Acid Rain 567 Program and that there is no basis for maintaining this exemption for every subsequent cap and trade program. In addition, this exemption was not used in the NOx SIP Call.

D. How Are Emission Allowances Allocated to Sources?

It is important to have consistency on a State by State basis with the basic requirements of the cap and trade approach when implementing a multi State cap and trade program. This will ensure that: the integrity of the cap and trade approach is preserved so that the required emissions reductions are achieved; the compliance and administrative costs are minimized; and source owners and operators are equitably treated. However, the EPA believes that some limited differences, such as allowance allocation methodologies for NOx allowances, are possible without jeopardizing the environmental and other goals of the program.

1. Allocation of NOx and SO2 Allowances.

Each State participating in EPA administered cap and trade programs must develop a method for allocating ( i. e.,

distributing) an amount of allowances authorizing the emissions tonnage of the State's CAIR EGU budget. For NOx allowances, each State has the flexibility to allocate its allowances however they choose, so long as certain timing requirements are met. 568 For SO2, as noted in the January 2004 proposal, States will have no discretion in their allocation approach since the CAIR SO2 cap and trade program uses title IV SO2 allowances, which have been already allocated in perpetuity to individual units by title IV of the CAA.

a. Required Aspects of a State NOx Allocation Approach.

While it is the EPA's intent to provide States with as much flexibility as possible in developing allocation approaches, there are some aspects of State allocations that must be consistent for all States. All State allocation systems are required to include specific provisions that establish when States notify the EPA and sources of the unit by unit allocations. These provisions establish a deadline for each State to submit to the EPA its unit by unit allocations for processing into the electronic allowance tracking system. Since the Administrator will then expeditiously record the submitted allowance allocations,

sources will thereby be notified of, and have access to,

allocations with a minimum lead time ( about 3 years) before the allowances can be used to meet the NOx emission limit.

Today's action finalizes the proposal to require States to submit unit by unit allocations of allowances for a given year no less than 3 years prior to January 1 of the allowance 569 128 If the deadline for States to submit SIPs is September of 2006, then this would result in notification period of less than 3 years for the first year of CAIR. vintage year, which approach was supported by commenters. 128 Requiring States to submit allocations and thereby provide a minimum lead time before the allowances can be used to meet the NOx emission limit ensures that an affected source   regardless of the State in the CAIR region in which the unit is located   will have sufficient time to plan for compliance and implement their compliance planning. Allocating allowances less than 3 years in advance of the compliance year may reduce a CAIR unit's ability to plan for and implement compliance and, consequently, increase compliance costs. For example, a shorter lead time would reduce the period for buying or selling allowances and could prevent sources from participating in allowance futures markets, a mechanism for hedging risk and lowering costs.

Further, requiring a uniform, minimum lead time for submission of allocations allows the EPA to perform its allocation recordation activities in a coordinated and efficient manner in order to complete expeditiously the recordation for the entire CAIR region and thereby promote a fair and competitive allowance market across the region. 570 These minimum requirements apply to the NOx allocation approach and are not relevant for the SO2 cap and trade program, which relies on title IV allowances.

b. Flexibility and Options for a State NOx Allowance Allocations Approach.

Allowance allocation decisions in a cap and trade program raise essentially distributional issues, as economic forces are expected to result in economically efficient and environmentally similar outcomes regardless of the manner in which allowances are initially distributed. Consequently,

for CAIR NOx allowances, States are given latitude in developing their allocation approach. NOx allocation methodology elements for which States will have flexibility include:

B. The cost of the allowance distribution ( e. g., free distribution or auction);

C. The frequency of allocations ( e. g., permanent or periodically updated);

D. The basis for distributing the allowances ( e. g.,

heat input or power output); and,

E. The use of allowance set asides and their size, if used ( e. g., new unit set asides or set asides for energy efficiency, for development of Integrated Gasification Combined Cycle ( IGCC) generation, for renewables, or for small units). 571 Some commenters have argued against giving States flexibility in determining NOx allocations, citing concerns about complexity of operating in different markets and about the robustness of the trading system. The EPA maintains that offering such flexibility, as it did in the NOx SIP Call,

does not compromise the effectiveness of the trading program.

A number of commenters have argued against allowing ( or requiring) the use of allowance auctions, while others did not believe that the EPA should recommend auctions. For today's final action, while there are some clear potential benefits to using auctions for allocating allowances ( as noted in the SNPR), the EPA believes that the decision regarding utilizing auctions should ultimately be made by the States. Therefore, EPA is not requiring, restricting, or barring State use of auctions for allocating allowances.

A number of commenters supported allowing the use of allowance set asides for various purposes. In today's final action, the EPA is leaving the decision on using set asides up to the States, so that States may craft their allocation approach to meet their State specific policy goals.

i. Example Allowance Allocation Methodology In the SNPR, EPA included an example ( offered for informational guidance) of an allocation methodology that includes allowances for new generation and is administratively straightforward. In today's preamble, EPA 572 is including in today's preamble, this " modified output"

example allocations approach, as was outlined in the SNPR.

The EPA maintains that the choice of allocation methodology does not impact the achievement of the specific environmental goals of the CAIR Program. This methodology is offered simply as an example, and individual States retain full latitude to make their own choices regarding what type of allocation method to adopt for NOx allowances and are not bound in any way to adopt the EPA's example.