Great River Energy supports the surrender requirement for exceedence of the state assurance level on a designated representative level.  [EPA-HQ-OAR-2009-0491-3898[1].1, p.5]
In its January 7, 2011 NODA, EPA seeks comment on allocation surrender requirements. GRE generally supports keeping the surrender requirements at a designated representative level, which is consistent with the Acid Rain program. [EPA-HQ-OAR-2009-0491-3898[1].1, p.5]
Kansas City Power and Light Company (KCP&L)
An alternative approach to calculation of assurance provision allowance surrender requirements at the designated representative (DR) level:
KCP&L supports applying the allowance surrender requirement for the Proposed Transport Rule's assurance provisions on a DR basis rather than on an owner-by-owner basis. A DR-based requirement is more in line with the approach taken not only in other aspects of the Proposed Transport Rule but also in other interstate emissions allowance trading programs. Applying the surrender requirements on a DR basis would avoid the need for EPA to obtain detailed ownership information for individual units. It would also avoid the complications arising from dividing up units' emissions and allocations among partial owners of the regulated units. Calculation at the DR level would be more straightforward and more consistent with information already provided to the EPA. [EPA-HQ-OAR-2009-0491-3893[1].1, p.3]
Maryland Department of Environment (MDE)
3. Whether, the assurance provision allowance surrender requirement should be calculated on a designated representative basis
ARMA supports EPA's proposed approach of calculating the allowance surrender requirement on a designated representative basis, and we agree with EPA's assessment that it is more straightforward and should provide greater flexibility to owners and operators of Transport Rule units compared with EPA conducting this calculation on an owner-by-owner basis. [EPA-HQ-OAR-2009-0491-3972[1].1, p.3]
National Grid
National Grid supports the NODA proposal to impose the requirements of the assurance provision at the designated representative (DR) level rather that the owner level. Though initial compliance is determined at the facility level, the EPA designed the assurance provision to provide owners and operators more flexibility than the unit-by-unit or source-by-source compliance requirements. For National Grid, this flexibility is best achieved at the Designated Representative level rather that the owner level since several units may be under different corporate ownership but all units have the same Designated Representative. [EPA-HQ-OAR-2009-0491-3921[1].1, pp.1-2]
NRG Energy
 EPA Question  -  Should the Assurance Provision be calculated on a Designated Representative Basis or an Owner Basis?
While NRG is indifferent to this option, the Designated Representative approach is more efficient and consistent with practices for other programs.  [EPA-HQ-OAR-2009-0491-3933[1].1, p.8]
Santee Cooper
Santee Cooper also supports EPA's proposal to require compliance with assurance provisions on a DR basis, as explained further below. [EPA-HQ-OAR-2009-0491-3913[1].1, p.2]
Santee Cooper supports EPA's proposal to determine compliance with the Transport Rule's assurance provisions at the DR level, rather than on an owner-by-owner basis.7 We agree with EPA that DR-level compliance will afford owners of EGUs an additional measure of flexibility to comply with the assurance provisions, by allowing owners. to group high and low-emitting units together under common DRs. This flexibility will ensure that total state emissions remain within the variability limit, while avoiding the imposition of unreasonable penalties on utilities that experience increases in emissions at one EGU and compensating decreases in emissions at other EGUs. [EPA-HQ-OAR-2009-0491-3913[1].1, p.4]
As EPA indicates in the NODA, DR-level compliance with the assurance provisions will also promote administrative efficiency. With DR-level compliance, regulated entities (and EPA) will be spared the complex task of determining the ownership of individual EGUs and properly attributing the emissions of those EGUs to their owners. In addition, the DR is the principal entity responsible for compliance with other EPA regulatory programs. Vesting responsibility for compliance with the assurance provisions with the DR is consistent with tins long-standing practice. [EPA-HQ-OAR-2009-0491-3913[1].1, pp.4-5]
In light of these benefits, Santee Cooper sees no compelling reason to preserve the owner-level compliance mechanism of the proposed Transport Rule, and recommends that EPA adopt the NODA's DR-level compliance proposal. [EPA-HQ-OAR-2009-0491-3913[1].1, p.5]

7 Santee Cooper's comments on this aspect of the NODA do not reflect a change from our earlier comments on the proposed Transport Rule. In particular, Santee Cooper continues to believe that the 3- year variability limit is unnecessary and unworkable and should be omitted from the final rule.
Southern Company
In the NODA3, EPA requests comment on two issues relating to the assurance provisions of the proposed Transport Rule. Specifically, EPA requests comment on implementing the proposed assurance provisions on a designated representative-by-designated representative basis, rather than owner-by-owner basis. [EPA-HQ-OAR-2009-0491-3946[1].1, p.10]
First, Southern Company agrees with EPA's decision to consider applying the allowance surrender requirement of the proposed assurance provisions on a DR-by-DR basis, rather than an owner-by-owner basis. This approach appears to be more straight-forward and more in line with the approach taken in other aspects of the proposed Transport Rule and other interstate trading programs. However, EPA should be cautious not to include language that would undermine any agreements between joint owners or otherwise set expectations that the actual penalty allowance obligations should not be tied to ownership. [EPA-HQ-OAR-2009-0491-3946[1].1, p.10]
Tennessee Valley Authority (TVA)
In response to EPA's request for comments concerning the Calculation of Assurance Provision Allowance Surrender Requirements, TVA agrees with EPA's decision to consider applying the allowance surrender requirement on a designated-representative-by-designated-representative basis rather than on an owner-by-owner basis. This will more correctly place the responsibility of making emission reduction decisions on those responsible for operating the plants, and avoid the complication caused by having multiple owners of individual units divide up the units' emissions and allocations. Further, a designated representative-based approach is consistent with the approach taken by EPA in other interstate trading programs. [EPA-HQ-OAR-2009-0491-3983[1].1,p.2]
Tri-State Generation and Transmission Association, Inc.
Tri-State supports the proposed alternative provisions in the NODA to impose the assurance provision allowance surrender requirements on a designated-representative-by-designated- representative basis. Many of the generating units that Tri-State operates have multiple owners, and Tri-State retains ownership in units that are operated by other organizations. Tri-State agrees with EPA that imposing the assurance provision allowance surrender requirements at the designated-representative level rather than the owner level is more straightforward and consistent with information already provided to EPA, and potentially provides owners and operators with more flexibility than under the approach in the proposed Transport Rule. Tri-State appreciates EPAs willingness to consider and promote this alternative. [EPA-HQ-OAR-2009-0491-3902[1].1, p.3]
Utility Air Regulatory Group (UARG)
Finally, UARG agrees with EPA's decision to consider applying the allowance surrender requirement for the Proposed Transport Rule's "assurance provisions" on a designated-representative- by-designated-representative basis rather than on an owner-by-owner basis. See 76 Fed. Reg. at 1117. As EPA suggests, a DR-based requirement is more in line with the approach taken not only in other aspects of the Proposed Transport Rule but also in other interstate emission allowance trading programs. Applying any assurance provision allowance surrender requirements on a DR-by-DR basis should avoid any need by EPA to "obtain detailed ownership information (such as [information on] percentage ownership in individual units)." Id. In addition, adopting a DR-by-DR basis for these requirements would "avoid the complications arising from having to divide up units' emissions and allocations among partial owners of the units." Id. Thus, it seems likely that a DR-by-DR approach to applying these requirements would prove to be both "more straightforward" than an owner-by-owner approach and more "consistent with information already provided to EPA." Id. [EPA-HQ-OAR-2009-0491-3979[1].1, pp.3-4]
West Virginia Department of Environmental Protection
Alternative of implementing the proposed assurance provisions on a DR-by-DR basis, rather than owner-by-owner basis
The WVDAQ supports the implementation of the assurance provisions on a DR-by-DR (Designated Representative) basis, with the inclusion of the proposed alternative calculation method for variability. As we commented in our September 30, 2010 letter, we generally support the variability and assurance provisions, with the inclusion of the proposed alternative calculation method for variability. Since each unit can have only one DR, but may have multiple owners, the WVDAQ believes that implementation on a DR-by-DR basis simplifies the application of the assurance provisions, and is straight forward and transparent. [EPA-HQ-OAR-2009-0491-4000[1].1, p.2]
Xcel Energy Inc.
We support maintaining the assurance provision irrespective of the allocation methodology, with an allowance surrender requirement calculated on a Designated Representative basis. [EPA-HQ-OAR-2009-0491-3948[1].1, p.2]
EPA asked for comment on whether the assurance provision surrender requirement should be calculated on a Designated Representative basis. Xcel Energy supports this provision for the simple reason that it makes the program more similar to EPA's highly successful Acid Rain Program in terms of allowance surrender provisions. We further support requiring the generator(s) that trigger the assurance provision to surrender allowances proportional to their respective contribution to any exceedence of the variability limit over the state budget. [EPA-HQ-OAR-2009-0491-3948[1].1, pp.3-4]
Response:
See sections VII.E and XI of the preamble.
Organization: Westar Energy, Inc.
Comment:
Westar Energy, Inc.
The NODA seeks to replace the owner-by-owner approach to allowance surrenders with a designated representative ("DR") approach under which the "calculation of shares of covered-unit emissions and of the state budget plus variability would be performed for each group of covered units having a common DR." 76 FR 1117/-2. Each group having a common DR ('DR Group') would agree as to how to split the DR Group's allowance surrender among themselves, though they would be all jointly and individually liable for the DR Group's allowance surrender requirement. Id. The NODA proffers that the DR approach offers potentially more flexibility, is 'more straightforward' and consistent with information already reported to EPA, would 'eliminate the need to collect detailed ownership information and would also avoid the complications arising from having to divide up units' emissions and allocations among partial owners of the units.' Id. at 1117/3/ Westar doubts that any of those so-called benefits will be realized under a DR Group's approach. [EPA-HQ-OAR-2009-0491-3952[1].1, pp.5-6]
Initially, the benefits appear to ease EPA's administrative burden of the allowance surrender program, rather than reduce the burden for owners. Under a DR Group approach, owners will still be required to negotiate the allowance surrenders within the group and to enforce their agreement. EPA says the change will "eliminate the need to collect detailed ownership information and would also avoid the complications arising from having to divide up units' emissions and allocations among partial owners of the units." Id. While that may be true for EPA, it is not true for owners: detailed information will still have to be collected and complications of partial ownership will still have to be solved in the DR Group negotiations. Using the DR Group's approach simply shifts those problems to the owners within a DR Group, and may actually prove even more problematic in that context because owners must spend time, effort, and expense negotiating these matters within the DR Groups. The negotiations process seems likely to produce, at best, marginal differences from EPA-established unit allowances as the basis for sharing allowance surrenders, and thus offer little flexibility beyond what the Transport Rule and NODA establish. [EPA-HQ-OAR-2009-0491-3952[1].1, p.6]
Further, as the DR Group process is voluntary, there will likely be a patchwork of responses, with some units subject to a DR Group agreement and others that are not in a DR Group subject presumably to EPA's owner-by-owner rules. Also of concern is whether the DR Group approach limits allowance trading to only those owners within the same DR Group due to explicit or implicit pressure to assure the group has adequately protected its position against a possible allowance surrender. The NODA fails to explore whether these potential effects of a NODA approach are consistent with the stated objectives of the Transport Rule to offer interstate trading within group 1 or group 2 States. Aside from that, the DR Group agreements might foster policies in a particular region that are inconsistent with the Rule's objectives. [EPA-HQ-OAR-2009-0491-3952[1].1, pp.6-7]
Nothing in the NODA demonstrates that a DR Group approach provides an appropriate means to carry out the Rule's plan. Nor has EPA provided a means by which it would oversee DR Groups to assure that they do so. That stands in sharp contrast to how EPA has limited States to full or abbreviated SIPs if they want to benefit from the trading programs. Not only does this raise issues of whether a DR Group approach constitutes an improper delegation of authority, but also it fails to offer transparency and assurances of uniform treatment under the allowance surrender program. While the owner-by-owner approach has defects, it does offer transparency and uniform treatment to all units in similar circumstances. Those factors outweigh any supposed benefits claimed for a DR Group program. [EPA-HQ-OAR-2009-0491-3952[1].1, p.7]
Response:
See sections VII.E and XI of the preamble to the final Transport Rule.  The commenter claimed that the common-designated-representative approach in the assurance provisions simply "shifts" the "problems" of collecting ownership information and addressing partial ownership from EPA to the owners and operators.   EPA recognizes that units at sources (plants) may have multiple owners and, in fact, the identity and percentage shares of the multiple owners may vary from unit to unit at the same source and can change during the year.  For this reason, the final rule requires that each source have one designated representative for all of the owners and operators and implements the requirement to hold allowances covering emissions on a source (i.e., designated representative) basis. For purposes of dividing up ownership of allowance allocations and meeting the requirement to hold allowances covering the source's emissions, owners and operators already have to determine the identity and shares of multiple owners and operators of units at the same source.  Owners and operators have handled these situations under the Acid Rain Program and the CAIR trading programs through private agreements and can continue to do so under the Transport Rule trading programs.  Similarly, because owners and operators (and not EPA) have access to information on an ongoing basis on the identity and percentage shares of multiple owners and already make decisions about the shares of emissions and allowances to be attributed to the various owners, EPA maintains that it is reasonable to implement the assurance provisions on a common-designated-representative basis, rather than on an owner-by-owner basis.  This approach also provides more flexibility for owners and operators of only one or a few units in a state -- as compared to implementation on a unit-by-unit basis -- because such owners and operators can use their grouping with any other units at their source (which necessarily have the same, i.e., common, designated representative) and can also decide to group their units with units at other sources in the state by selecting, in coordination with owners and operators of such other units, a common designated representative.
The commenter expressed concern that the common-designated-representative approach will result in a "patchwork" with some units subject to a "DR Group agreement" and some units not in a "DR Group" and subject to an "owner-by-owner" approach.  Under the Transport Rule trading programs, like under the Acid Rain Program and the CAIR trading programs, every source must have a designated representative representing all the owners and operators of units at the source.  Thus, all units at each source have the same designated representative (i.e., a common designated representative), but the owners and operators of multiple sources have the option to choose a common designated representative for the group of sources.  In short, every unit has a common designated representative, either at the source level or, if the option is taken by the owners and operators of multiple sources, at the group-of-sources level.  A source, or group of sources, having multiple owners and operators can use private agreements to address the distribution of responsibilities for actually providing allowances for the assurance penalty in the event that the state triggers the assurance provisions and the owners and operators of the source or the group are subject to the assurance penalty.  The assurance provisions in the final rule adopt a common-designated-representative approach and not an owner-by-owner approach.
The commenter made vague claims that there would be "explicit or implicit pressure" on units in a "DR Group" to limit allowance trading to members of the group in order to protect against a possible assurance surrender and that "DR Group agreements might foster policies inconsistent with" the Transport Rule's objectives.  However, the commenter failed to identify the source of such "pressure" and failed to explain why retaining allowances within the group of sources and units with a common designated representative would "protect" against a possible assurance surrender requirement.  In the final rule, for each group of units and sources with a common designated representative, total emissions are compared to total allocations plus share of variability, and whether the allocations continue to be held or are sold does not affect the determination of whether the owners and operators of the group are subject to the assurance surrender requirement if the state triggers the assurance provisions. Further, the commenter failed to explain, even with hypothetical examples, how private agreements among owners and operators to select a common designated representative and to address who will actually provide allowances necessary to meet any assurance surrender requirement would have results inconsistent with the elimination of states' significant contribution and interference with maintenance or any other aspect of the Transport Rule.  EPA rejects the commenter's claims as vague, speculative, and unsupported.
Organization: Wolverine Power Supply Cooperative
Comment:
Wolverine Power Supply Cooperative
ASSURANCE PROVISIONS ON A DR BY DR BASIS
Regarding the USEPA's request for comment on implementing the compliance assurance provisions on a Designated Representative (DR) by DR basis rather than an Owner by Owner basis, Wolverine supports  this concept as being more consistent with past practice and simpler to implement because of multiple owner arrangements on many affected units. This change does not, however, resolve our concern expressed in our October 1, 2010, comments that large generating systems are at a great advantage over stranded units and small systems, and that the proposed assurance provisions will structurally provide market concentration as well as incentive for large generating systems to hoard allowances and potentially manipulate allowance markets. The DR by DR change would in no way remedy this defect in the proposed Transport Rule. [EPA-HQ-OAR-2009-0491-4014[1].1, pp. 4-5]
Response:
See section VII.E of the preamble.  The commenter expressed concern over "stranded units and small systems" being disadvantages under the assurance provisions.  The approach in the final rule of implementing the assurance provisions on a common-designated-representative basis provides flexibility for such units and systems in a state to group together under a common designated representative and thereby potentially reduce or eliminate the group's excess of total emissions over total allocations plus share of variability and thus the group's  share of any assurance provision penalty in the event the state triggers the assurance provisions.  The commenter also stated, without explanation or support, that the assurance provisions will "structurally provide market concentration" and incentives for allowance hoarding  and market manipulation.  In particular, the commenter failed to explain what "structure" of the assurance provisions will cause "market concentration" or what the commenter means by "market concentration".  Further, the commenter failed to explain what the commenter means by "manipulation" and how the assurance provisions encourage hoarding and manipulation.  EPA therefore rejects the commenter's claim as vague, speculative, and unsupported.

XX.C. Whether Assurance Provision Approach Should Be Maintained if Allocation Approach is Changed

Organization: Ameren Services Company
Comment:
Ameren Services Company
EPA asks 'Whether the Overall Assurance Provision Approach Should Be Maintained if One of the Alternative Allocation Methodologies Is Used in the Final Transport Rule' (Page 1118). Ameren believes that the Assurance Provisions as described in the proposed Transport Rule have merit and should be maintained. [EPA-HQ-OAR-2009-0491-3894[1].1, p.3]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  See section VII.E of the preamble.
Organization: America's Natural Gas Alliance
Comment:
America's Natural Gas Alliance
ANGA also suggests that the Agency ensure that whatever method the Agency ultimately adopts for calculating the allowance surrender requirements does not impact the overall goal of the assurance provision - ensuring that statewide emissions meet the assurance level cap (essentially the state budget plus the variability allowance). [EPA-HQ-OAR-2009-0491-3939[1].1, p.5]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  See section VII.E of the preamble.
Organization: Clean Energy Group
Comment:
Clean Energy Group
The Clean Energy Group agrees with EPA's conclusion that changing the allocation methodology does not require a change in the proposed assurance provisions. The assurance provisions would create a powerful incentive to operate pollution control equipment rather than buy allowances. With a sufficient allowance price, the requirement that an owner surrender an additional allowance for every ton it contributes to a state exceeding its variability limit will likely result in companies limiting their reliance upon purchased allowances. Instead, companies will look to achieve further emissions reductions. This would ensure reductions occur in the necessary states so as to meet the requirements of section 110, clarified in the D.C. Circuit decision. Some Clean Energy Group companies' individual comments will suggest additional opportunities to further strengthen the assurance provisions. [EPA-HQ-OAR-2009-0491-4002[1].1, pp.2-3]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  See section VII.E of the preamble.
Organization: Cleco Corporation
Comment:
Cleco Corporation
A. Assurance provisions (i.e., penalty provisions) exacerbate the windfall problem; to the extent the windfall is not removed.
EPA proposes to determine an owner or operator's obligation to surrender a penalty allowance based on a comparison of emissions to allocations. If the allocations are unrealistically high for some units (e.g., because EPA does not correct windfall) then those units would almost certainly never trigger penalty provisions. The units that are correspondingly under-allocated allowances, on the other hand, would bear the full brunt of the penalty provisions if a state exceeded its variability limit. [EPA-HQ-OAR-2009-0491-4007[1].1, pp.6-7]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  This approach will allow owners and operators of individual units greater flexibility in meeting the assurance provisions.  For example, owners and operators will have the ability to select a common designated representative for a group of units reflecting different unit types, technologies, fuel types, and types of emissions controls and, in this way, address any potential disadvantages that individual units might otherwise have under the assurance provisions.   See section VII.E of the preamble.  Further, EPA is finalizing an allowance allocation approach that is based on historic heat input and limits each unit's allocation to its maximum historic emissions.  See section VII.D of the preamble.
Organization: Constellation Energy
Comment:
Constellation Energy
Constellation Energy suggests changing the proposed assurance provisions if Option 1 or Option 2 allocations are Implemented.
Combined with Option 1 or Option 2 allocations, the current assurance provisions are too onerous for some generators and may be technically unachievable. We are concerned that, as proposed, even very well controlled units could invoke the assurance penalties. Constellation Energy suggests that EPA incorporate an engineering analysis into the assurance provisions to ensure that they are technically achievable by existing facilities. [EPA-HQ-OAR-2009-0491-4031, p.3]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  This approach will allow owners and operators of individual units greater flexibility in meeting the assurance provisions.  For example, owners and operators will have the ability to select a common designated representative for a group of units reflecting different unit types, technologies, fuel types, and types of emissions controls and, in this way, address any potential disadvantages that individual units might otherwise have under the assurance provisions.   See section VII.E of the preamble.  Consequently, it is difficult to understand the basis for the commenter's vague and unsupported concern about whether the assurance provisions are "technically achievable".  Further, EPA is finalizing an allowance allocation approach based on historic heat input and which limits each unit's allocation to its maximum historic emissions.  See section VII.D of the preamble.
Organization: Dynegy, Inc.
Comment:
Dynegy, Inc.
To avoid the inequity inherent in punishing EGU systems that have installed and operated air pollution controls, EPA should in the first instance apply the assurance provision penalties to those owners (or, as proposed in the NODA. units with the same designated representative) that have not installed and/or do not operate emissions control technology. Because owners of well-controlled units have already made substantial investments in and installed air pollution control technologies, they should not be the primary target of the assurance pro vision penalties for contributing to downwind nonattainment. Simply put, it would be more appropriate and reasonable for the uncontrolled (or under-controlled) units to bear the brunt of the assurance provision penalties. Thus, EPA should delink the assurance provisions and allocations and instead focus the assurance provision penalties on uncontrolled units. [EPA-HQ-OAR-2009-0491-3944[1].1, p.4]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  EPA believes that this approach does not disadvantage "well-controlled" units because the allowance allocation methodology for existing units is fuel and emission control neutral, with the result that "well-controlled" units, as a group, are not disadvantaged by allowance allocations and by the assurance provisions requiring allowance surrender when emissions exceed allocations plus a share of the state variability limit.  See section VII.D of the preamble.  In addition, the final assurance provisions provide owners and operators of individual units flexibility in complying with assurance requirements.  For example, owners and operators will have the ability to select a common designated representative for a group of units reflecting different unit types, technologies, fuel types, and types of emissions controls and, in this way, address any potential disadvantages that individual units might otherwise have under the assurance provisions.   See section VII.E of the preamble.
Organization: GenOn Energy, Inc.
Comment:
GenOn Energy, Inc.
IV. The compliance assurance provisions in the Proposed Transport Rule will no longer be workable if EPA chooses either of the options in NODA 3.
In the current NODA, EPA specifically asks for comments on 'whether the overall assurance provision approach should be maintained if one of the alternative allocations methodologies is used in the final Transport Rule.' 76 Fed. Reg. at 1118. For the reasons discussed below, the proposed compliance assurance provisions simply will not work if the Agency adopts either of the allocation schemes in NODA 3. [EPA-HQ-OAR-2009-0491-3996[1].1, p. 9]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  This approach will allow owners and operators of individual units greater flexibility in meeting the assurance provisions.  For example, owners and operators will have the ability to select a common designated representative for a group of units reflecting different unit types, technologies, fuel types, and types of emissions controls and, in this way, address any potential disadvantages that individual units might otherwise have under the assurance provisions.   See section VII.E of the preamble.  Consequently, it is difficult to understand the basis for the commenter's vague and unsupported claim that the assurance provisions will not be "workable".  Further, EPA is finalizing an allowance allocation approach based on historic heat input and which limits each unit's allocation to its maximum historic emissions.  See section VII.D of the preamble.
Organization: Maryland Department of Environment (MDE)
Comment:
Maryland Department of Environment (MDE)
4. Whether the overall assurance provision approach should be maintained if one of the alternative allocation methodologies is used in the final Transport Rule
In the NODA, EPA states that it does not believe that the assurance provision approach needs to be changed in response to a change in the allocation methodology, but that EPA may reevaluate some of the details of the assurance provisions (76 FR 1118). ARMA strongly supports EPA reevaluating some details of the assurance provisions, such as the proposed variability limits for each state and the allowance surrender levels. [EPA-HQ-OAR-2009-0491-3972[1].1, p.3]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  See section VII.E of the preamble.
Organization: Michigan Municipal Electric Association (MMEA)
Comment:
Michigan Municipal Electric Association (MMEA)
EPA suggests in the 3rd NODA that "those groups of units with total emissions exceeding their total allowance allocations plus their share of state variability . . . would reasonably be viewed as accounting for the state's exceedance and thus should be subject to proportionate shares of the allowance surrender penalty." 76 Fed. Reg. at 1118. However, small municipal units will be part of the group that "exceed[s] their total allowance allocations plus their share of state variability", but they will not be the ones to cause state assurance exceedances. EPA does not consider that this assumption will particularly harm small municipal utility units in Michigan that have relied on EPA-approved hardship allowances, and that have no time or ability to start from scratch now to apply cost-prohibitive controls. [EPA-HQ-OAR-2009-0491-4020[1].1, p.7]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  This approach will allow owners and operators of individual units greater flexibility in meeting the assurance provisions.  For example, owners and operators will have the ability to select a common designated representative for a group of units (such as a group that combines small municipal utility units with other units)  reflecting different unit types, technologies, fuel types, and types of emissions controls and, in this way, address any potential disadvantages that individual units might otherwise have under the assurance provisions.  See section VII.E of the preamble.  Further, if a state triggers the assurance provisions by having total emissions exceeding the state budget plus variability, it is difficult to see how the commenter can dispute the fact that any unit that purchases and uses allowances issued in a different states to cover its emissions will be contributing to the state's triggering of the assurance provisions.  Moreover, EPA is finalizing an allowance allocation approach under the FIPs based on historic heat input and which limits each unit's allocation to its maximum historic emissions and finalizing provisions under which states can replace FIP existing unit allocations starting with 2013 and existing and new unit allocations starting with 2014.  See sections VII.D and X of the preamble.
Organization: National Mining Association (NMA)
Comment:
National Mining Association (NMA)
The adverse financial impact to coal of the heat-input methodologies is not limited to just the allocations. That impact is magnified by EPA's method for determining which units owe penalty allowances under the assurance provisions. [EPA-HQ-OAR-2009-0491-4013[1].1, p.6]
Under the assurance provisions, EPA proposes to require one additional penalty allowance for each ton of emissions in excess of the state budget plus the variability limit. EPA has proposed attributing the penalty based on a comparison of emissions to allocations at the owner level or at the designated representative level. In either case, whether a penalty is owed is based on the extent to which emissions exceed allocations. Thus, under-allocated units, owners or designated representatives have much greater exposure to the penalties than properly allocated units, owners or designated representatives. [EPA-HQ-OAR-2009-0491-4013[1].1, p.6]
The penalty is likely to be triggered in a particularly hot summer where there is unusually high energy demand. In such an event, a unit like the Fairless Energy Center in Pennsylvania, a natural gas-fired unit, which under the heat-input methodology is allocated allowances equal to over 600 times its historical maximum annual SO2 emissions, would never trigger a penalty no matter how much it ran. An under-allocated coal unit on the other hand may far exceed its allocation in a hot summer and incur the full brunt of the rule's penalty provision. Where allocations are based on emissions, this penalty burden  -  again, likely triggered in a particularly hot summer  -  is born more evenly. Coal-fired generation is still likely to incur more penalties than natural gas, but would not likely share the burden alone. [EPA-HQ-OAR-2009-0491-4013[1].1, pp.6-7]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  This approach will allow owners and operators of individual units greater flexibility in meeting the assurance provisions.  For example, owners and operators will have the ability to select a common designated representative for a group of units reflecting different unit types, technologies, fuel types, and types of emissions controls and, in this way, address any potential disadvantages that individual units might otherwise have under the assurance provisions.   See section VII.E of the preamble.
Further, EPA is finalizing an allowance allocation approach based on historic heat input and which limits each unit's allocation to its maximum historic emissions.  This will prevent natural gas units from receiving SO2 allowances equal to multiple times their potential emissions.  See section VII.D of the preamble.
Organization: NextEra Energy, Inc.
Comment:
NextEra Energy, Inc.
First of all, NextEra Energy agrees with EPA's conclusion that changing the allowance allocation methodology does not require a change in the proposed compliance assurance provisions. As explained in the proposed Transport Rule, in the event that a state's total emissions exceeds the state budget plus variability, those groups of units (whether grouped by owner as in the proposal or by common DR as discussed in the NODA) with an analogous exceedance (i.e., those groups of units with total emissions exceeding their total allowance allocations plus their shares of state variability) would reasonably be viewed as accounting for the state's exceedance and, thus, should be subject to proportionate shares of the allowance surrender penalty. Even under a different allowance allocation methodology than the allocation methodology proposed in the Transport Rule, it would continue to be the case that groups of units with greater emissions than their allocations plus share of state variability would reasonably be held responsible for the state's excess of emissions over the state assurance level. EPA believes that any state that would exceed its state assurance level would likely do so because not all units would have made the reductions necessary to eliminate the state's contribution to nonattainment or interference with maintenance. Moreover, the groups of units with emissions exceeding their allocations plus share of variability would be the units that were most likely to have contributed to the state's exceedance of its state assurance level and, thus, to the state's triggering of the assurance provisions. Consequently, it would be reasonable to penalize those groups of units (whether grouped by owner or by common DR)-through application of the assurance provision allowance surrender requirement-for the state's exceedance. [EPA-HQ-OAR-2009-0491-3962[1].1, p.4]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  See section VII.E of the preamble.
Organization: NRG Energy
Comment:
NRG Energy
Assurance Provision and Variability  -  We endorse EPA's assurance provision and inclusion of a variability penalty. This provision provides incentive for participating units and states to achieve the modeled reductions. We are concerned that under the current proposals for Option 1 and 2, the plant and state allocations are out of sync and could challenge severely under allocated facilities. [EPA-HQ-OAR-2009-0491-3933[1].1, p.6]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  This approach will allow owners and operators of individual units greater flexibility in meeting the assurance provisions.  For example, owners and operators will have the ability to select a common designated representative for a group of units reflecting different unit types, technologies, fuel types, and types of emissions controls and, in this way, address any potential disadvantages that individual units might otherwise have under the assurance provisions.   See section VII.E of the preamble.  Further, EPA is finalizing an allowance allocation approach that is based on historic heat input and limits each unit's allocation to its maximum historic emissions.  See section VII.D of the preamble.
Organization: Prairie State Generating Company, LLC
Comment:
Prairie State Generating Company, LLC
Variability limits in Illinois which need reconsideration to accommodate newly constructed units [EPA-HQ-OAR-2009-0491-3897[1].1, p.1]
As long as the variability limits are necessary and have been calculated correctly, PSGC agrees with EPA's assessment that a change in allocation methodology would not necessitate any changes in the assurance provisions. [EPA-HQ-OAR-2009-0491-3897[1].1, p.6]
Response:
With regard to the variability limits, see sections E and F of the preamble.
With regard to the assurance provisions, see section VII.E of the preamble.  EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.
Organization: PSEG Services Corporation
Comment:
PSEG Services Corporation
PSEG Fossil agrees with EPA's conclusion that changing the allocation methodology does not require a change in the proposed assurance provisions. The assurance provisions would create a powerful incentive to operate pollution control equipment rather than buy allowances. With a sufficient allowance price, the requirement that an owner surrender two allowances for every ton it contributes to a state exceeding its variability limit will likely result in companies limiting their reliance upon purchased allowances. Instead, companies will look to achieve further emissions reductions. This would ensure reductions occur in the necessary states so as to meet the requirements of Section 110, clarified in the D.C. Circuit decision. [EPA-HQ-OAR-2009-0491-3936[1].1, p.3]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  See section VII.E of the preamble.
Organization: Southern Company
Comment:
Southern Company
EPA also asks for comment on the implications that the alternative allocation methodologies might have on the proposed assurance provisions and the reasonableness of using the proposed assurance provisions with the alternative allocation methodologies. [EPA-HQ-OAR-2009-0491-3946[1].1, p.10]
Lastly, it appears that the assurance provisions under either of the heat-input allocation schemes would be disproportionately shared by the higher emission-rate units. As discussed in Section III of these comments, the heat-input methods yield a windfall of allowances to lower emission rate units (e.g., natural gas). In many cases, these units are allocated well over 500 times what they could possibly emit (e.g., SO2). Higher emission-rate units (e.g., coal) are significantly under allocated. The assurance provisions come into play when a state exceeds its budget plus variability. Therefore, if a state experiences an unusually high demand year and exceeds its budget plus variability, a significant portion of the penalty allowances will be owed by the under-allocated units. As noted earlier, the heat-input allocation method--without more consideration of actual emissions--leads to absurd results and disproportionately applies the assurance provision penalties on the higher-emitting units. [EPA-HQ-OAR-2009-0491-3946[1].1, p.10]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  This approach will allow owners and operators of individual units greater flexibility in meeting the assurance provisions.  For example, owners and operators will have the ability to select a common designated representative for a group of units reflecting different unit types, technologies, fuel types, and types of emissions controls and, in this way, address any potential disadvantages that individual units might otherwise have under the assurance provisions.   See section VII.E of the preamble.  Further, EPA is finalizing an allowance allocation approach that is based on historic heat input and limits each unit's allocation to its maximum historic emissions.  See section VII.D of the preamble.
Organization: Wolverine Power Supply Cooperative
Comment:
Wolverine Power Supply Cooperative
IMPLICATIONS THAT OPTIONS 1 AND/OR 2 MIGHT HAVE ON IMPLEMENTATION AND REASONABLENESS OF THE ASSURANCE PROVISIONS OF THE PROPOSED TRANSPORT RULE
Regarding the USEPA's request for comment on this subject, Wolverine does not see that the heat-input based Options 1 and/or 2 materially impact the structure or implementation of the assurance provisions. Although they give a small amount of relief to the concerns of stranded units and small systems that they will be essentially shut out of the program, it does not relieve the great uncertainty that will exist with the future-year true-up system that the assurance proposal creates. The assurance provisions remain unreasonable in that they create a high level of risk to stranded and small systems, such as Wolverine's Sumpter plant, that they will incur [EPA-HQ-OAR-2009-0491-4014[1].1, p. 5]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  This approach will allow owners and operators of individual units greater flexibility in meeting the assurance provisions.  For example, owners and operators will have the ability to select a common designated representative for a group of units (such as a group that combines includes a "stranded and small" system with other) units) reflecting different unit types, technologies, fuel types, and types of emissions controls and, in this way, address any potential disadvantages that individual units might otherwise have under the assurance provisions.   See section VII.E of the preamble.
Organization: Xcel Energy Inc.
Comment:
Xcel Energy Inc.
EPA also requested comment on whether the overall assurance provision approach should be maintained if one of the alternative allocation methodologies is used in the final Transport Rule. Xcel Energy supports the continued use of the overall assurance provision approach, regardless of whether the original allocation method, the alternative allocation method, or our recommended allocation is used. [EPA-HQ-OAR-2009-0491-3948[1].1, p.4]
Response:
EPA is maintaining the overall assurance provision approach in the final Transport Rule, except that, if the assurance provisions are triggered in a state, the determination of which owners and operators of units in the state must surrender allowances for the assurance penalty is determined at the common designated representative level, rather than the owner level.  See section VII.E of the preamble.

XX.D. Allocations to New Units in Indian Country

Organization: Connecticut Department of Environmental Protection
Comment:
Connecticut Department of Environmental Protection
Allocations to New Covered Units in Indian Country in the Future
At 76 FR 1118, EPA states that presently there are no covered sources located in Indian country in the region covered by the proposed Transport Rule. At 76 FR 1119, EPA suggests that the owner or operator of units in Indian country in the proposed Transport Rule region could request allocations from the EPA administered new unit set-aside by a specified deadline each year. EPA requests comment on all aspects of how allowances for covered units locating on tribal lands should be allocated. [EPA-HQ-OAR-2009-0491-3884[1].1, p.2]
Any provisions to accommodate units locating in Indian country in the proposed Transport Rule region in the future should not be detrimental to state programs, especially where there are limited state budgets. Removing allowances from new unit set-asides removes allowances available for newer, cleaner units in individual states. [EPA-HQ-OAR-2009-0491-3884[1].1, p.2]
Response:
EPA is designating a new unit set-aside for each state with federally recognized tribes and Indian country for any future EGUs constructed in Indian country in the Transport Rule region as part of the final rule.  EPA will maintain control of the new unit set-aside accounts, even when states submit their own SIPs.  Unallocated allowances from these new unit set-asides will be made available to new units in the rest of the state and then, if still unallocated, to existing units in the rest of the state.  See the preamble for more details.
Organization: Empire District Electric Company (Empire District)
Comment:
Empire District Electric Company (Empire District)
New units that chose to locate within Indian country should be allocated allowances from the State budget of the State in which the unit is located. This assures the prevention of significant impact on downwind States and Indian Territories. [EPA-HQ-OAR-2009-0491-3883[1].1, p.2]
Response:
EPA is designating a new unit set-aside for each state with federally recognized tribes and Indian country for any future EGUs constructed in Indian country in the Transport Rule region as part of the final rule.  EPA will maintain control of the new unit set-aside accounts, even when states submit their own SIPs.  See the preamble for more details.
Organization: Fond du Lac Reservation
Comment:
Fond du Lac Reservation
Moving on to new source allocations of credits, in the NODA it was suggested that tribes 'could go to the states' and ask for allocations from the 3% that states would be given for new source points of pollution. Under no circumstances is it believed that this is an acceptable solution. It is our stance that, like with existing source allocations, tribal allocations should be set aside for tribes. If a tribe has a need for the allocations, then they are available, if there is not a need, then the state could purchase these allocations from the tribe if needed or, again they aren't used and the environment wins. Furthermore, it is our belief that tribal allocations should not come from a percentage of the total allocations for new sources, but should be a percentage of that year's total allocation. One scenario that the Band would support, being a member of the Lake Superior Chippewa, (whose ceded territories, includes much of Michigan, the northern half of Wisconsin, much of Minnesota) has strong objection to asking the 'states' for new allocations. We believe that rights reserved. by us, in treaties entitle us to utilize these allocations as we see fit. It is our understanding, from the NODA dated 1-7-2011 that each state will be given 3% of total allocations for new source development. We believe that the signatory tribes should be given I% of each of the states of Minnesota, Michigan and Wisconsin allocations for new sources. This would offer us our rightful seat at the table in protecting our planet and its environment, in which our reservations and ceded territories lie. Secondly, it would give us a platform in which to 'retire' or trade these allocations with industry and the 'states' that surround our reservation land and reserved hunting, fishing and gathering territories. [EPA-HQ-OAR-2009-0491-4021, pp.2-3]
Another example that the band could likely support and an example of how the Agency got it right is the Western Regional Air Partnership ('WRAP'), a partnership between Indian tribes, states and federal agencies (including the EPA) and with participation from such entities as environmental organizations and industry, advocated for a tribal set-aside during the late 1990s that was eventually adopted as part of the Annex to the Regional Haze Rule ('RHR'). The Annex established declining SO2 emission milestones for major sources. If the milestones were exceeded, then a cap-and-trade program would be initiated to ensure continued SO2 reductions. As part of the Annex, an annual SO2 tribal set-aside of 20,000 tons was made available to tribes within a nine-state region, regardless if such tribes had major industrial sources emitting SO2. This set-aside was to be distributed as determined by the region's tribes (e.g., for future industrial sources, other economic development purposes, tribal scholarships, etc} This annual tribal set-aside also grew out of multiple discussions among the WRAP's partners and participants where issues of equity and economic development kept coming up during conversations with respect to the tribes that had hardly contributed to visibility impairment in the West but whose environment and health had been adversely affected by neighboring jurisdictions with sources emitting significant amounts of SO2. At that time, neither the WRAP partners or participants had sufficient information about future EGUs in Indian country but they felt it imperative to address equity issues properly before and not after the Annex was implemented. [EPA-HQ-OAR-2009-0491-4021, p.3]
In regards to new allocations, it is our stance that tribes should not be 'requesting,' the states that surround their lands, for allocations for new sources. We should receive a percentage of the proposed allocations; we look forward to working out the details that would be acceptable to all parties. [EPA-HQ-OAR-2009-0491-4021, p.3]
Response:
EPA is designating a new unit set-aside for each state with federally recognized tribes and Indian country for any future EGUs constructed in Indian country in the Transport Rule region as part of the final rule.  EPA will maintain control of the new unit set-aside accounts, even when states submit their own SIPs.  Allowances are allocated from the Indian country new unit set-aside if and when a covered EGU is constructed in Indian country and otherwise are returned to the state budget for allocation to existing or new units (or other uses in accordance with a state's SIP).  Unallocated allowances are not provided to the tribes. See the preamble section VII.D for more details.
Organization: Forest County Potawatomi Community
Comment:
Forest County Potawatomi Community
III. In order for EPA to meet its trust responsibility, EPA must consider and address the effects of upwind sources on tribal areas and create a set-aside of emissions allowances dedicated to tribes.
A. EPA's trust responsibility requires it to consider and address the effects of upwind sources on Tribal areas.
EPA has requested comment on 'all aspects of how allowances for covered units locating on tribal lands should be allocated.' 76 Fed. Reg. 1119. FCPC appreciates EPA's current invitation to comment on this important issue, but the Tribe is troubled by EPA's failure to consider the issue in its initial Transport Rule proposal. This failure highlights broader shortcomings in EPA's overall approach in this rulemaking: the lack of analysis on the overall effects of upwind sources on Indian Country, and the effect of the proposed rule on Indian tribes. [EPA-HQ-OAR-2009-0491-3882[1].1, p.4]
By failing to consider the impacts of upwind sources and of the proposed Transport Rule on Tribal lands, EPA has not lived up to its legal trust responsibility to Tribes. Under the federal trust responsibility, established by the Supreme Court in the 1830s in the historic Cherokee cases, the federal government is obligated to protect Indian tribes' lands, waters, natural resources and rights of self-government as a trustee would protect the interests of a beneficiary. This obligation is heightened by the Environmental Justice Doctrine. Pursuant to Executive Order 12,898, the federal government has bound itself to ensuring the fair treatment and environmental protection of all minority communities, including Indian tribes. [EPA-HQ-OAR-2009-0491-3882[1].1, p.4]
In 2009 the EPA reaffirmed its Indian Policy. First adopted in 1984, the Policy mandates that EPA 'recognize that a trust responsibility derives from the historical relationship between the Federal Government and Indian Tribes as expressed in certain treaties and Federal Indian law.' The Policy continues: 'In keeping with that trust responsibility, the Agency will endeavor to protect the environmental interests of Indian Tribes when carrying out its responsibilities that may affect the reservations.' [EPA-HQ-OAR-2009-0491-3882[1].1, p.4]
The Policy also confirms that the EPA will stand ready to 'work directly with Indian tribal governments on a one-to-one basis (the 'government-to-government' relationship), rather than as subdivisions of other governments.' Finally, in circumstances where EPA has not transferred regulatory and program management responsibilities to tribes (though the Policy expresses a preference for such transfers), the Policy requires that EPA 'encourage [tribes] to participate in policy-making' and other appropriate roles in the management of reservation programs. [EPA-HQ-OAR-2009-0491-3882[1].1, pp.4-5]
In reaffirming this Policy, the EPA Administrator concluded:
The United States has a unique legal relationship with Tribal Governments based on the Constitution, treaties, statutes, Executive Orders, and court decisions. This relationship includes a recognition of the right of tribes as sovereign governments to self-determination, and an acknowledgment of the Federal government's trust responsibility to the Tribes.  [EPA-HQ-OAR-2009-0491-3882[1].1, p.5]
Accordingly, it is critical that EPA work closely with FCPC and other impacted tribes to ensure that EPA's trust responsibility is met in addressing the impacts of upwind sources on Tribal lands and resources. This trust responsibility and EPA's own Indian Policy require EPA to work with tribal governments on a government-to-government basis to analyze the impacts of upwind sources on tribal lands and resources. [EPA-HQ-OAR-2009-0491-3882[1].1, p.5]
For purposes of this analysis, upwind sources include those in the state or states that directly border tribal lands. For example, in the case of FCPC, upwind sources include those sources located in the state of Wisconsin, since Wisconsin borders FCPC's trust land. EPA must consider the impact of Wisconsin emissions sources on the air quality on FCPC's reservation lands in Forest County, as well as its trust lands in Milwaukee County. The same holds true for every tribe's lands in every state covered by the Transport Rule. [EPA-HQ-OAR-2009-0491-3882[1].1, p.5]
In essence, EPA should treat tribal lands in the same manner as it treats states for purposes of the proposed Transport Rule. Such treatment is consistent with EPA's appropriate recognition of tribes as sovereign entities and with EPA's stated approach to dealing with tribes on a 'government-to-government' basis and not as subdivisions of other governments. Moreover, while FCPC does have Treatment as State ('TAS'), it notes that for purposes of the Transport Rule, tribes should not be required to seek TAS in order to receive the same consideration as states under Clean Air Act section 110. The TAS process is designed to ensure that tribes have the capability to administer certain provisions of the Clean Air Act. But administrative capability is of no consequence with respect to the downwind recipients of pollution under section 110(a)(2)(D)(i)(I). Downwind areas are simply the passive recipients of pollution from upwind sources, and it is EPA's duty to determine whether the upwind pollution significantly contributes to nonattainment in those downwind areas, whether the downwind areas are governed by states or by tribes. [EPA-HQ-OAR-2009-0491-3882[1].1, p.5]
At the very least, EPA should undertake the required analysis concerning effects on tribal lands during the rulemaking process for the 'Transport Rule II,' which FCPC understands will apply basic Transport Rule principles to the pending revision of the ozone NAAQS. A stricter ozone NAAQS will likely result in many more tribal areas being in nonattainment, heightening the need for EPA to explicitly consider the effects of upwind sources on tribal areas. [EPA-HQ-OAR-2009-0491-3882[1].1, pp.5-6]
B. EPA's trust responsibility requires it to create a set-aside of emissions allowances dedicated to tribes.
To fulfill its trust responsibility to tribes, EPA must create a set-aside of emissions allowances dedicated to tribes. This tribal set-aside must be calculated as a percentage of allowances for both new and existing units, because otherwise tribes are at risk of being shut out from receiving a distribution of any allowances. There are at least two compelling reasons for creating such a tribal set-aside. [EPA-HQ-OAR-2009-0491-3882[1].1, p.6]
First, failing to allocate allowances for new and existing units to tribes would cause EPA to fail to meet its obligation to work with tribes on a government-to-government basis and not as subdivisions of states or other governments. Under EPA's presently proposed allocation methodology, tribes would be treated as subdivisions of states and shut out from directly receiving any initial distribution of allowances. Moreover, if any state receives SIP authority to implement the Transport Rule, that state would directly control the distribution of allowances. This would require tribes to ask states for emissions allowances. Such a requirement would not only offend basic tribal sovereignty principles but would also raise difficult political situations for tribes, as states might be unwilling to allocate valuable emissions credits to sources locating on tribal lands (outside the jurisdiction of the states with respect to the Clean Air Act and taxing authority of the state). While some states may decline to seek to implement a SIP for purposes of section 110(a)(2)(D)(i)(I), tribes which anticipate obtaining and using emissions credits cannot simply hope that this is the case. To prevent such a situation from arising, EPA should at the outset create a tribal set-aside of emissions allowances. [EPA-HQ-OAR-2009-0491-3882[1].1, p.6]
Second, while tribes have been significantly impacted by emissions from upwind sources such as EGUs, they have not been the source of these emissions. The impacts to tribes are enhanced because of their significant reliance on the environment for their subsistence lifestyles and their traditional cultures. Moreover, energy development in Indian country has typically lagged behind the rest of the country - a reflection of the economic depression which plagues many tribes. And those tribes which do have resources for energy development often choose to implement green energy projects producing little pollution. For example, FCPC is currently pursuing biofuel projects on its reservation and trust land. This combination of historic economic depression and an environmental ethic that avoids high-polluting energy sources means that tribes - which of course bear the effects of pollution from EGUs - are effectively shut out from receiving any of the benefits of emissions allowances. Ironically, EPA's proposed allowance distribution methodology, rather than trying to rectify this disparity, enhances it by providing allowances to the sources that impact Indian Country, rather than to tribes themselves. EPA should rectify this inequitable situation by creating an explicit set-aside for tribes. [EPA-HQ-OAR-2009-0491-3882[1].1, p.6]
At a minimum, the tribal set-aside should be based on the ratio of tribal lands, including reservation lands and other trust lands, to the total area of a particular state covered by the Transport Rule. For example, if tribal areas make up 5% of the land area within a particular state's boundaries. EPA should set aside for tribes 5% of the total emissions allowances for that state. This approach would retain the state-specific character of the 'significant contribution' analysis required by the courts, while ensuring an equitable portion of allowances is reserved for tribes. [EPA-HQ-OAR-2009-0491-3882[1].1, p.7]
In addition, EPA should set aside an additional amount of allowances for tribes based on culturally important and historically significant lands used by tribes. These lands could include ceded territories, or in the case of FCPC, areas recognized as eligible for the National Historic Registry, as well as other critical cultural and historic lands. These lands are of critical importance to tribes and have been significantly impacted by emissions from EGUs. Accordingly, in addition to allocations to tribes based on their reservation lands, EPA should also allocate allowances to tribes based upon their interests and rights in these additional culturally critical lands. EPA should consult with tribes, including FCPC, regarding the extent of these additional lands and the appropriate amounts of credits to allocate to tribes based on these lands. [EPA-HQ-OAR-2009-0491-3882[1].1, p.7]
Response:
EPA is designating a new unit set-aside for each state with federally recognized tribes and Indian country for any future EGUs constructed in Indian country in the Transport Rule region as part of the final rule.  EPA will maintain control of the new unit set-aside accounts, even when states submit their own SIPs.  The allowances would only be allocated to new sources covered under the Transport Rule once they are constructed.  See the preamble for more details.
With respect to the impact of upwind sources in Indian country within Wisconsin, our analysis shows that after implementation of the Transport Rule, when the emission reductions required of the state of Wisconsin have been made, all areas encompassed within the borders of the state of Wisconsin, including Indian country, will be free of nonattainment and maintenance problems.  Moreover, there will be few nonattainment or maintenance areas in any states covered by the Transport Rule after its implementation, and none of those areas are projected to include Indian country.  For the annual PM2.5 standard, the Transport Rule fully addresses all upwind states' transport obligations to downwind areas.  For the 24-hour PM2.5 standard, only the Liberty-Clairton area in Pennsylvania is expected to be nonattainment and only Chicago, Illinois, Detroit, Michigan, and Lancaster, Pennsylvania, are expected to have maintenance problems.  Only one area (Houston, Texas) is projected to remain in nonattainment, and one area (Baton Rouge, Louisiana) to have a remaining maintenance concern for the 1997 ozone standard.  Where there are no nonattainment or maintenance problems, there can be no significant contribution to nonattainment or interference with maintenance.  Thus, as there are no nonattainment or maintenance problems projected in Indian country after implementation of this rule, it is clear that any and all emissions which significantly contribute to nonattainment and interference with maintenance have been prohibited.
 EPA also notes that, since the state of Wisconsin is already included in the Transport Rule region for significantly contributing to downwind receptors in other states, even though there are no receptors in Indian country in Wisconsin, sources in the state of Wisconsin are already required to reduce emissions and comply with the Transport Rule requirements.  Further, Wisconsin is a Group 1 SO2 state in the final rule and is already required to make all reductions available at the maximum cost thresholds used to set state budgets.  Therefore, the identification of additional "linkages" for Wisconsin would not have changed the emission reduction requirements applicable to the state.
The commenter also notes that EPA should treat Indian country the same as states for purposes of the Transport Rule and that tribes should not be required to obtain Treatment as a State (TAS) status for purposes of being considered relevant downwind recipients of pollution under CAA section 110(a)(2)(D)(i)(I).  Because implementation of the Transport Rule will avoid nonattainment and maintenance problems in Indian country  -  and thus will necessarily prohibit any emissions which significantly contribute to nonattainment and interference with maintenance in such areas  -  EPA does not need to address in this action the question whether CAA section 110(a)(2)(D)(i)(I) requires that a SIP address impacts on Indian country geographically located within the submitting State or how the TAS status of a potentially-affected downwind tribe may be relevant to that issue.
Organization: Mille Lacs Band of Ojibwe
Comment:
Mille Lacs Band of Ojibwe
The Band recommends allowance allocation be set not strictly based on existing units, but rather be set by combination of existing units together with anticipated future units and sovereign entity's total acreage bases. By setting allowance allocation strictly based on existing units, USEPA will force majority of the Tribes to miss out on the commodification of allowances afforded to States. Due to past policies of the United States which excluded Tribes from actively participating in self-determination, which lead to social, economic and political oppression geared towards extinction of Tribes and assimilate into the general public, today, energy development in Indian Country either far lags development in surrounding areas or is used to actively exploit for the benefit of surrounding areas. In addition, having allowance allocation be set strictly based on existing units would significantly hinder Tribes from developing new sources, and curtailing any possible competition with EGUs in buying allowances. [EPA-HQ-OAR-2009-0491-4019[1].1, p.3]

There are several reasons on our part to suggest factoring in allocation of allowances based on total acre basis of the sovereign entity, whether a Tribe or a State. It is inappropriate for Tribes, as sovereign nations, to be given allowances from another sovereign entity, such as the States. However, since all Tribes hold some level of interest on State lands, we propose that each of the States affected by the Air Transport Rule meet with all the appropriate Tribes holding interest on State lands-whether as simple as preservation interest per Native American Graves Protection and Repatriation Act (NAGPRA) (Pub.L. 101-601, 104 Stat. 3048), National Historic Preservation Act (NHPA) (Pub.L. 89-665; 16 U.S.C. 470 et seq.), Archaeological Resources Protection Act of 1979 (ARPA) (Pub.L. 96-95 as amended, 93 Stat. 721) or National Environmental Policy Act (NEPA) (pub.L. 91-190, 83 Stat. 852), or as extensive as usufruct rights-and have the State and Tribes together determine an equitable methodology for managing distribution and implementations of State allocation of allowances that would aid in safeguarding the interests of the Tribes on State lands. We recommend USEPA to serve as facilitator and moderator between the States and the Tribes. Once the States and Tribes have made the determination, the determination will be incorporated into the State Implementation Plans (SIPs). This allows for Tribes with little or no land base, or have no future plans on energy development upon their lands, to still have a small allocation to any unanticipated energy development, while still influencing any developments on State lands that may greatly affect the interests of the Tribes. In addition, setting allowance allocation strictly on existing units will exclude majority of Tribes who do not have existing units or have existing units that are not under the Tribes jurisdiction; these allowances are form of social credit that can be monetized, and excluding Tribes will continue to foster energy development lags or keep existing units in Indian Country not under the Tribe's authority stay out of the reach of Tribe's authority. [EPA-HQ-OAR-2009-0491-4019[1].1, p.3]
Response:
EPA has decided to base allocations for existing units made under the FIPs on historic heat input, subject to a maximum allocation limit to any individual unit based on that unit's maximum historic emissions. This limit should help prevent over-allocation of allowances to units. Further detail on the implementation of this approach, rationale, and response to comments on the allocation method is provided in Preamble Section VII.D as well as in the Allowance Allocation Final Rule TSD in the docket for this rulemaking.
 EPA is designating a new unit set-aside for each state with federally recognized tribes and Indian country for any future EGUs constructed in Indian country in the Transport Rule region as part of the final rule.  EPA will maintain control of the new unit set-aside accounts, even when states submit their own SIPs.  Allowances are allocated from the Indian country new unit set-aside if and when a covered EGU is constructed in Indian country and otherwise are returned to the state budget for allocation to existing or new units (or other uses in accordance with a state's SIP).  Unallocated allowances are not provided to the tribes.  See the preamble section VII.D for more details.
Organization: National Tribal Air Association (NTAA)
Comment:
National Tribal Air Association (NTAA)
Although the organization always seeks to represent consensus perspectives on any given issue, it is important to note that the views expressed by the NTAA may not be agreed upon by all Tribes. Furthermore, it is also important the EPA understands that interactions with the organization do not substitute for government-to-government consultation which can only be achieved through direct communication between the federal government and Indian Tribes. [EPA-HQ-OAR-2009-0491-3993[1].1, p. 2]
Construction of New Sources on Tribal Lands
Forcing Indian Tribes to secure allowances for new sources constructed on their lands from state allocations, through the EPA or from states themselves, is problematic in at least two ways. [EPA-HQ-OAR-2009-0491-3993[1].1, p. 2]
First, states have a vested interest in making a sufficient number of allowances available for new sources locating in their jurisdictions so as to enhance economic development and to provide greater access to energy by their residents. Hence, these states would likely be less than enthusiastic in passing on some of these allowances to Tribes, particularly if they foresaw a shortage of allowances to distribute to their own sources. This, in turn, could lead to some states litigating the issue with EPA for which a decision by the court might not be forthcoming for many years. This, in turn, could hold implementation of the Transport Rule hostage, a rule that promises to greatly improve air quality in the eastern part of the nation in which so many Tribes live. [EPA-HQ-OAR-2009-0491-3993[1].1, p. 2]
Second, a Tribe's sovereignty could be perceived as being compromised if new units locating on its land would be required to rely on the allowances already set aside for units locating in the surrounding state. Federally-recognized Indian Tribes, however, are sovereign nations with certain rights ensured by the U.S. Constitution, treaties and legal precedence, and should be treated as such by the EPA and other federal agencies. One such right is the federal government's obligation to consult with Tribes on a government-to-government basis, and in the case at hand, the Agency should be dealing directly with such Tribes regarding the allocation of allowances. Unfortunately, the EPA is proposing to pass on this obligation to states which do not share a similar obligation of consulting with Tribes, nor do they have any regulatory authority over Tribal lands. [EPA-HQ-OAR-2009-0491-3993[1].1, pp. 2-3]
Hence, the EPA should be dealing directly with Indian Tribes in the case of allocating allowances for sources being constructed on Tribal lands. Among other things, more than 100 of the nation's 565 federally-recognized Tribes reside in the region covered by the Transport Rule, with these Tribes occupying a large amount of the four percent or 95 million acres of the U.S. land base that consists of Tribal lands. In addition, Tribes have never been apportioned allowances under any of existing cap-and-trade programs for which states have received innumerable allowances. Finally, the Agency has failed to satisfactorily answer the following questions in recent consultations with Tribes: [EPA-HQ-OAR-2009-0491-3993[1].1, p. 2]
-How to identify a basis for treating new units locating in Indian Country without having initial sulfur dioxide (SO2) or nitrogen oxide (NOx) allowance allocations provided to Indian Tribes (e.g., states in which new units would locate that have already received allowance allocations as part of the Transport Rule's allowance budget); and [EPA-HQ-OAR-2009-0491-3993[1].1, p. 3]
-How allowance allocations for Indian Country should be addressed in a state that has submitted a state implementation plan providing for the state's allocation of allowances (e.g., new unit set-aside would be maintained by the state and not EPA). [EPA-HQ-OAR-2009-0491-3993[1].1, p. 3]
As such, the NTAA recommends that five percent of the total number of allowances allocated to states or an appropriate portion thereof should be made available as a Tribal set-aside for the sole purpose of providing such allowances for new sources established on Tribal lands within the region covered by the Transport Rule. Distribution of any allowances would also necessitate government-to-government consultation between the EPA and any Tribe seeking such allowances, thereby eliminating any involvement of states that do not have a similar obligation to consult with Tribes. [EPA-HQ-OAR-2009-0491-3993[1].1, p. 3]
It is imperative that the EPA address these comments and recommendations as Indian Tribes should be provided with allocations immediately based on such existing sources unlike those larger sources (e.g., coal-fired power plants) that could be constructed in the future. [EPA-HQ-OAR-2009-0491-3993[1].1, p. 4]
Response:
EPA is designating a new unit set-aside for each state with federally recognized tribes and Indian country for any future EGUs constructed in Indian country in the Transport Rule region as part of the final rule.  EPA will maintain control of the new unit set-aside accounts, even when states submit their own SIPs.  Allowances are allocated from the Indian country new unit set-aside if and when a covered EGU is constructed in Indian country and otherwise are returned to the state budget for allocation to existing or new units (or other uses in accordance with a state's SIP).  Unallocated allowances are not provided to the tribes.  See the preamble section VII.D for more details.
XX.E. Provisions for States to Submit Full or Abbreviated SIPs Providing for State Allowance Allocations

Organization: Alabama Department of Environmental Management
Comment:
Alabama Department of Environmental Management
ADEM strongly encourages EPA to allow States to choose which type of SIP submittal, a full or abbreviated SIP, is most appropriate for their needs, as was allowed in CAIR. Submission of either a full or abbreviated SIP should meet the transport requirement under section 110(a)(2)(D)(i)(I) of the Clean Air Act. [EPA-HQ-OAR-2009-0491-3887-cp, p.1]
Further, ADEM requests that EPA reconsider the SIP submission timeline in order for States to develop their own SIPs for distribution of allowances. With the uncertainty of the timing of the final release of the Transport Rule, States may have 5 months or less to accomplish this by November, 2011. This timeframe is inadequate for our agency to complete the rulemaking process and thus makes it impossible to have input into the 2014 allocation process. [EPA-HQ-OAR-2009-0491-3887-cp, p.1]
Response:
In the final Transport Rule, EPA revises the deadlines for submission of SIP revisions to replace EPA-determined allocations by state-determined allocations.  The first deadline for submission of SIP revisions with replacement, state-determined allocations is April 1, 2012 for allocations for 2013.  See section X of the preamble.
Organization: Ameren Services Company
Comment:
Ameren Services Company
In Tables III and IV (page 1121) EPA lists the deadlines for states to submit SIPs (either abbreviated or full) replacing EPA's FIP. The timelines for 2012, 2013 and 2014 are either nonexistent or extremely short. This affectively eliminates most if not all states included in the Transport Rule from developing their own SIPs at least for 2014. This scheduling is flawed. [EPA-HQ-OAR-2009-0491-3894[1].1, p.2]
a) Based on EPA's current schedule no state can develop a SIP for the 2012·13 portion of the Transport Rule. This is unacceptable and severely limits the states inalienable rights as described above in comment #5.
b) As described in this Transport Rule NODA states are only allowed to develop SIPs for 2014 and beyond. According to EPAs schedule a SIP would be due November 1, 2011 for the year 2014. [EPA-HQ-OAR-2009-0491-3894[1].1, p.2]
Considering that EPA plans on finalizing the Transport Rule in June 2011 that would allow only 4 months for the states to develop a SIP. This timeframe is impossible to meet considering some states need up to 2 years to complete a rule making. [EPA-HQ-OAR-2009-0491-3894[1].1, p.3]
Response:
In the final Transport Rule, EPA revises the deadlines for submission of SIP revisions to replace EPA-determined allocations by state-determined allocations.  The first deadline for submission of SIP revisions with replacement, state-determined allocations is April 1, 2012 for allocations for 2013.  See section X of the preamble.
Organization: American Electric Power
Comment:
American Electric Power
The Proposed Schedule Fails to Recognize the Primacy of States
NODA-3 admits a fatal flaw in the Proposed Transport Rule - the primacy of states in developing and implementing the substantive requirements of their state implementation plans (SIPs). But rather than provide the minimum time required to allow states to perform these Congressionally-mandated tasks, NODA-3 ignores that authority and simply assumes that states will follow the federal plan in 2012. While such a proposal appears to provide a practical alternative, it is not what the Clean Air Act demands. [EPA-HQ-OAR-2009-0491-3934[1].1, p.3]
Response:
EPA has the authority to promulgate the FIPs in the final Transport Rule.  See section IV.C of the preamble.
Organization: ARIPPA
Wisconsin Public Service Corporation (WPSC)
Comment:
ARIPPA
ARIPPA also supports EPA's proposal to allow states to develop partial State Implementation Plans ("SIPs") to replace the Federal Implementation Plan ("FIP"), initially with respect only to proposed allocations, rather than simultaneously addressing all regulatory aspects of the FIP.  [EPA-HQ-OAR-2009-0491-3903[1].1, p.3]
ARIPPA supports EPA's proposal through the Second NODA to authorize individual states to pursue partial SIPs in order to accelerate state-specific allocation approaches.  [EPA-HQ-OAR-2009-0491-3903[1].1, p.13]
For these reasons, ARIPPA strongly endorses EPA's proposal through the Second NODA  to allow states to develop partial SIPs that would address state-specific allowance allocation methodologies, while postponing or foregoing state-specific revisions to other elements of the FIP.  This approach would reduce the time necessary for states to develop state-specific allocation schemes and satisfy the procedural requirements for SIP approval.  [EPA-HQ-OAR-2009-0491-3903[1].1, p.15]
In order to ensure individual states maximum flexibility in implementation of the program, ARIPPA also endorses EPA's efforts to increase the tools available to individual states to pursue timely, efficient and effective revisions to state implementation plans to replace the FIP.  In this context, states should be afforded the option of proposing partial SIPs to allow substitution of state-specific allowance allocation methodologies without simultaneous promulgation of a comprehensive SIP-based substitution for the FIP.  However, even with such additional flexibility and opportunity for more accelerated partial SIP revision, the timeframes proposed by EPA through the Proposed Transport Rule are insufficient to allow both states and affected sources to adequately prepare for implementation.   [EPA-HQ-OAR-2009-0491-3903[1].1, p.15]
Wisconsin Public Service Corporation (WPSC)
2. Require that State Transport Rule SIPs Adopt the Transport Rule FIP Allowance Allocations
EPA is taking comment on all aspects of how a state could replace the Transport Rule Federal Implementation Plant (FIP) with a State Implementation Plan (SIP) and on what the SIP approval criteria should be. [EPA-HQ-OAR-2009-0491-3994[1].1, p. 3]
Two difficult complications for utility compliance planning and implementation are uncertainty and short timelines. Deferring Transport Rule allowance allocations to yet to be developed and state approved SIPs introduces both these complications into utility compliance planning and implementation. [EPA-HQ-OAR-2009-0491-3994[1].1, p. 3]
First, deferral of unit allowance allocation methods to the State blurs a utility's compliance plan target and implementation approaches. Planning becomes uncertain as to what unit allocations will be and how SIPs in trading group states will combine to affect the pool and availability of tradable allowances. Include the possibility of auctions for some or all allowances, in yet to be established state auction rules, and utility compliance planning become unnecessarily complicated with no additional benefit to the goals of the Transport Rule. [EPA-HQ-OAR-2009-0491-3994[1].1, p. 3]
Second, with compliance scheduled to begin in 2012 and changing in 2014, the timeliness of the SIP development process compresses the planning and implementation timeline. The SIP development, passage, and approval process has historically been slow. Time consumed by the SIP process is time taken from compliance planning and implementation. The earlier allowance allocations are determined, the more time utilities have to prepare for compliance with the Transport Rule. [EPA-HQ-OAR-2009-0491-3994[1].1, p. 3]
Response:
In the final Transport Rule, EPA revises the deadlines for submission of SIP revisions to replace EPA-determined allocations by state-determined allocations.  The first deadline for submission of SIP revisions with replacement, state-determined allocations is April 1, 2012 for allocations for 2013.  See section X of the preamble.
See section VII.C, concerning compliance deadlines under the final Transport Rule.
Organization: Associated Electric Cooperative, Inc. (AECI)
Comment:
Associated Electric Cooperative, Inc. (AECI)
AECI supports the inclusion of the both the abbreviated and full SIP options proposed in the NODA III.  The compressed timeline of 2012 for the CATR first compliance period, however, presents insufficient time to allow states the opportunity to distribute allowances under a SIP to reflect individual state needs and concerns. [EPA-HQ-OAR-2009-0491-3989[1].1, p.2]
AECI's comments to the CATR NODA III are directed exclusively at the proposed state implementation plan options and allowance allocation methods.  First, AECI supports the proposal to include the two State Implementation Plan (SIP) options. AECI is disappointed however that the timelines EPA has proposed for CATR implementation, beginning in 2012, does not allow adequate time for states to submit and obtain SIP approvals incorporating allowance allocation methodologies better suited to meeting state or local concerns as compared the chosen methodology in the generic FIP.  EPA's hurry up compliance timeline of 2012 again presents another problem with the CATR, that of the ability of a state to craft its own allowance policies to best suit its needs during the first two years of CATR implementation. [EPA-HQ-OAR-2009-0491-3989[1].1, p.3]
I. State Implementation Plan (SIP) Options:
AECI supports the CATR NODA III proposal incorporating the full and abbreviated SIP options into the final CATR regulation.  AECI is disappointed, however, that the agency has not addressed the problematic timing of the CATR 2012 and 2014 compliance periods as AECI and others have identified in earlier comments to the August 2, 2010 CATR.  EPA's failure to extend the CAIR beyond 2011 and its proposed imposition of the 2012 and the 2014 timelines continue to plague this rulemaking.  Regarding the proposed SIP options, as EPA notes in the NODA III proposal, considering the time to submit and approved a SIP and record allowances, a SIP could not be applicable before the 2014 compliance period.   As AECI has noted in our earlier comments, there is no legal prohibition in the North Carolina decision against keeping CAIR in effect beyond 2011, and EPA's failure to do so would create yet another problem in so far as effectively prohibiting states from implementing SIPs addressing Clean Air Act Section 110(a)(2)(D)(i) deficiencies during the early stages of CATR implementation. [EPA-HQ-OAR-2009-0491-3989[1].1, pp.3-4]
Response:
In the final Transport Rule, EPA revises the deadlines for submission of SIP revisions to replace EPA-determined allocations by state-determined allocations.  The first deadline for submission of SIP revisions with replacement, state-determined allocations is April 1, 2012 for allocations for 2013.  See section X of the preamble.
See section IV.C of the preamble, concerning EPA's authority to issue the final Transport Rule FIPs, and section VII.C of the preamble, concerning the compliance deadlines under the final Transport Rule.
Organization: Buckeye Power, Inc.
Comment:
Buckeye Power, Inc.
EPA's suggestion of an abbreviated SIP, which limits participation in interstate trading and allows states to submit abbreviated SIPs regarding certain aspects of the CATR, but only in years after 2012, does not go far enough. First, allowing only limited interstate trading does not further the goal of utilizing the market to the greatest extent possible to ensure reduction of emissions at the least cost. Second, EPA is proposing a Federal Implementation Plan for compliance year 2012. That FIP most likely would not maximize emission reductions. Congress recognized that the states are in the best position to adopt programs that will yield necessary reductions. [EPA-HQ-OAR-2009-0491-3900[1].1, p.6]
Similarly, EPA's suggestion of a full SIP for years after 2012 is likewise deficient insofar as it proposes to implement a FIP at least for year 2012, without giving states adequate time to impose a SIP. Allowing states the initial opportunity to address allocation and other issues, and thereby reducing impacts to downwind states, is in accordance with the judgment of Congress and the history of the Clean Air Act. States, as the entities in the best position to make judgments about allocations and emissions reductions, should be granted the role of primary decision-maker until and unless the states choose not to act. [EPA-HQ-OAR-2009-0491-3900[1].1, p.7]
Response:
In the final Transport Rule, EPA revises the deadlines for submission of SIP revisions to replace EPA-determined allocations by state-determined allocations.  The first deadline for submission of SIP revisions with replacement, state-determined allocations is April 1, 2012 for allocations for 2013.  See section X of the preamble.
See section IV.C of the preamble, concerning EPA's authority to issue the final Transport Rule FIPs, and section VII.C of the preamble, concerning the compliance deadlines under the final Transport Rule.
Organization: Cleco Corporation
Comment:
Cleco Corporation
In NODA-3, EPA proposes to allow states an opportunity to submit abbreviated SIPs to address the limited issue of how allowances are allocated to the unit-level. While we encourage EPA to afford the states flexibility, the abbreviated SIP process simply does not meet the Clean Air Act requirement that states have primary responsibility for controlling sources within their borders. As an initial matter, EPA proposes to require states seeking alternative allocation approaches to submit proposed allocation SIPs this fall  -  just a few months after the rule is scheduled to be finalized. This would essentially mean that states would have to begin the state rulemaking process before a final Transport Rule is finalized. States, such as Louisiana, are likely to be reluctant to do so, since at this point it is unclear whether Louisiana will be in the Transport Rule and if so, whether trading will be a part of the final rule. Additionally, even if Louisiana were to meet this accelerated timeline, its allocation method would not take effect until the third year of the program  -  2014. Put simply, the abbreviated SIP process does not cure EPA's unlawful attempt to deny states an initial opportunity to develop a SIP before EPA imposes a FIP. The abbreviated SIP process is too little, too late. [EPA-HQ-OAR-2009-0491-4007[1].1, pp.2-3]
VI. EPA Should Afford States Flexibility in Determining the Best Allocation Method Given Local Conditions.
As noted above, EPA is legally required to give states the opportunity to develop SIPs and should delay implementation of the FIP to allow that process to move forward. If, however, EPA insists on by passing the states, it should consider giving states additional flexibility in determining allocations. There is simply no reason why EPA must promulgate a single approved allocation method. In addition to allowing for abbreviated allocation SIPs, EPA could promulgate two or three EPA-approved allocation methods and let states opt into the allocation method that works best for their local conditions. By way of example, EPA could promulgate the improved proposed Transport Rule allocation method (discussed above) and, at the same time, promulgate an improved Option 2 method (e.g., with a more precise emission constraint) as an alternative allocation method that states could opt-in and adopt. Like the abbreviated SIP process, this would not cure EPA's unlawful bypassing of the state SIP process, but it could help mitigate the adverse impacts of potential state-specific injustices resulting from a single allocation method. [EPA-HQ-OAR-2009-0491-4007[1].1, p.7]
Response:
In the final Transport Rule, EPA revises the deadlines for submission of SIP revisions to replace EPA-determined allocations by state-determined allocations.  The first deadline for submission of SIP revisions with replacement, state-determined allocations is April 1, 2012 for allocations for 2013.  See section X of the preamble.

Further, EPA rejects the commenter's suggestion that EPA provide several pre-approved model allocation methods that states choose to adopt.  As indicated by any commenters and as confirmed by EPA's experience in reviewing the variety of allowance allocation methods adopted by states in CAIR SIPs, states have a broad range of views on how allowances should be allocated within their borders, with states having different views concerning, for example, the establishment of allowance set-asides for specific purposes such as for encouraging efficiency or renewable energy, for cases of hardship, or for new units.  Consequently, EPA believes that, rather than trying to develop alternative model allocation methods that would attempt to capture the wide variety of state-preferred allocation methods, it is reasonable to provide general requirements for allowance allocations (such as the requirement not to exceed the available amount of the state budget and certain timing requirements for submission of allocations for recordation by EPA) and allow individual states to develop and submit their preferred allocation methods in SIP revisions for approval by EPA.

See section IV.C of the preamble, concerning EPA's authority to issue the final Transport Rule FIPs, and section VII.C of the preamble, concerning the compliance deadlines under the final Transport Rule.
Organization: Connecticut Department of Environmental Protection
Southern IL Power Cooperative
Exelon
Business Council for Sustainable Energy (BCSE)
Michigan Department of Natural Resources and Environment
New Jersey Department of Environmental Protection (NJDEP)
Alliance to Save Energy
Prairie State Generating Company, LLC
South Carolina Department of Health and Environmental Control
Wolverine Power Supply Cooperative
Constellation Energy
Western Farmers Electric Cooperative (WFEC)
America's Natural Gas Alliance
West Virginia Department of Environmental Protection
PowerSouth Energy Cooperative
National Rural Electric Cooperative Association (NRECA)
State of Louisiana, Department of Environmental Quality
Comment:
Alliance to Save Energy
The current NODA acknowledges that '... of course, each state would still have the ability to submit other types of SIPs using emissions reduction approaches other than the proposed Transport Rule trading programs...'  The Alliance supports allowing states flexibility to allocate allowances and establish emissions reduction approaches that recognize and provide incentives for enhancing energy efficiency. [EPA-HQ-OAR-2009-0491-3926[1].1, p.2]
Some states may wish to include set-asides for energy efficiency and renewable energy (EERE) measures, as a number of states did under the Clean Air Interstate Rule (CAIR). The Alliance believes that states following their own procedures, including inclusion of EERE set-asides, should not affect the approvability of SIPs because the distribution of allowances within a state does not affect overall emissions in the state. [EPA-HQ-OAR-2009-0491-3926[1].1, p.2]
However, the NOPR and the NODA do not provide guidance to states on what EPA would accept as allowance distribution approaches or mechanisms. The Alliance urges EPA to:
:: indicate to states that it will duly consider state SIPs that incorporate FIP components but only differ in terms of allowance allocation mechanisms;
:: provide guidance on what allowance distribution approaches or mechanisms it will accept; and
:: provide guidance on criteria that state SIPs would have to meet to allow applicable emission sources in a state to participate in an emissions trading program. [EPA-HQ-OAR-2009-0491-3926[1].1, p.2]
Thus, the Alliance urges the EPA to provide more specific guidance and technical assistance to states on incorporating EERE set-asides or other energy efficiency provisions into a SIP, including:
:: model rules; and
:: advice on measure eligibility, M&V, and other parameters that must be met for EPA acceptance of a SIP. [EPA-HQ-OAR-2009-0491-3926[1].1, p.3]
We note that the Commonwealth of Massachusetts implemented a successful EERE NOx allowance set-aside program under CAIR in which EERE set-asides have been oversubscribed and such allowances have been sold in the market. Thus, Massachusetts may serve as a good case for guidance and assistance to other states. We also recognize that some states may opt for an alternative EERE set-aside program in which emissions allowances attributed to EERE are retired as creditable NOx reductions under the SIP rather than sold into the market. [EPA-HQ-OAR-2009-0491-3926[1].1, p.3]
The EPA may find useful resources on energy efficiency options, programs, deployment, M&V, and other pertinent issues in the work conducted through the National Action Plan for Energy Efficiency (NAPEE) and the ongoing State Energy Efficiency (SEE) Action Network.  Further, a number of states affected by CA TR have existing electric utility energy efficiency programs and requirements that have addressed questions of defining and determining energy savings, M&V, additionality, and other issues that may be useful in the development of SIPs acceptable to the EPA. The SEE Action Network also could serve as a vehicle for providing guidance and technical assistance to the states on EERE set-asides. [EPA-HQ-OAR-2009-0491-3926[1].1, p.3]
America's Natural Gas Alliance
If the Agency decides to modify the proposed Transport Rule to allow states to replace the allocation methodology adopted by EPA in the FIP with an allocation program adopted by the state and approved by EPA, either as a full SIP or as a partial SIP revision, ANGA believes that EPA must do so in a way that preserves and maintains certainty for the regulated community to the greatest extent possible. [EPA-HQ-OAR-2009-0491-3939[1].1, p.5]
As the Agency is aware, owners and operators of units covered by the CATR are continually engaged in short- and long-term planning for these units, planning that necessarily includes CAA compliance strategies and timelines that will be affected directly by the final CATR, including the critical issue of allocation methodologies. Owners and operators need maximum certainty in terms of how allowances will be allocated in order to evaluate short and long term compliance strategies, including such basic but critical strategic decisions as installing controls \IS. fuel switching vs. purchasing allowances to meet CATR obligations. [EPA-HQ-OAR-2009-0491-3939[1].1, p.5]
ANGA acknowledges that Section 1l0(a)(2)(D)(i)(l) gives states flexibility in designing their SIP programs to abate significant contribution to nonattainment or interference with maintenance in another state. However, regardless of whether the program that applies to covered units is the FIP or a SIP, in either case the program must ensure that allocations are issued/auctioned/otherwise distributed in a timely fashion such that existing units are fully able to develop and implement their CATR compliance strategies. [EPA-HQ-OAR-2009-0491-3939[1].1, p.5]
In addition, any timeline that is prescribed for submittal of full or partial SIPs to EPA for approval must be sufficient to allow EPA time for review, public comment, and approval, and it cannot result in a situation where existing covered units are subject to both a state allocation methodology pursuant to validly promulgated state regulations and the EPA's FIP allocation methodology because EPA has not been able to approve the SIP in a timely fashion. Such a scenario would inject unacceptable uncertainty into owner/operators long term planning processes. [EPA-HQ-OAR-2009-0491-3939[1].1, p.5]
In addition, if EPA allows state-created alternative allocation methodologies, those methodologies must contain adequate safeguards to ensure that the program results in the abatement of emissions necessary to meet the Section 110(a)(2)(D)(i)(I) obligations, and states cannot be authorized to modify other program elements of the Transport Rule, including but not limited to state budgets or variability allowances. [EPA-HQ-OAR-2009-0491-3939[1].1, p.5]
Business Council for Sustainable Energy (BCSE)
The BCSE has also long supported state set-aside programs that advance energy efficiency and renewable energy deployment and development. States should be free and encouraged to submit State Implementation Plans (SIPs) that include emission reduction approaches that recognize and provide incentives for energy efficiency (including CHP and WHP) and renewable energy development. Such set-aside programs would not increase a state's emissions because the total number of allowances would remain unchanged and, therefore, should not affect the approvability of any SIPs. [EPA-HQ-OAR-2009-0491-3985[1].1, p.1]
As the NODA acknowledges, EPA will need to provide guidance to the states on what EPA would accept as allowance distribution approaches or mechanisms. The BCSE encourages EPA to make it as clear as possible that it will look favorably upon SIPs that incorporate Federal Implementation Plan (FIP) elements but that adopt allowance allocation mechanisms that include set-aside programs for energy efficiency and renewable energy. [EPA-HQ-OAR-2009-0491-3985[1].1, pp.1-2]
Connecticut Department of Environmental Protection
Provisions for states to submit SIPs or abbreviated SIPs providing for state allocation of allowances CTDEP supports EPA's provisions for states to submit SIPs or abbreviated SIPs providing for State allocation of allowances in the proposed Transport Rule trading programs. CTDEP agrees with the concept of providing the opportunity for states to allocate allowances in order to address state-specific needs or policies. [EPA-HQ-OAR-2009-0491-3884[1].1, p.2]
Constellation Energy
Constellation Energy supports an abbreviated SIP addressing only allocations.
Regarding provisions for a state in the proposed Transport Rule region to participate in the Transport Rule trading programs through submission of a full SIP or to determine the unit-level allocations under a FIP through submission of an abbreviated SIP addressing only allocations, Constellation Energy reiterates our position that implementation of a Transport Rule on a timely basis is important for human health, environmental and economic concerns. Hobbling implementation through a lengthy and unnecessary SIP process would be counterproductive. Constellation Energy supports a FIP through submission of an abbreviated SIP addressing only allocations. [EPA-HQ-OAR-2009-0491-4031, p.3]
Exelon
Exelon also supports EPA's proposal to establish an expedited SIP approval process for states that wish to adopt a different allocation methodology, provided that allocation methodology does not undermine compliance or create perverse incentives. [EPA-HQ-OAR-2009-0491-3919[1].1, p.3]
Michigan Department of Natural Resources and Environment
The current TR is expected to be finalized in 2011 with immediate EPA implementation of 2012. This latest NODA allows for states to submit full or abbreviated SIPs and implement them at the earliest in 2014, meanwhile keeping the EPA implementation in effect. The DNRE agrees with the EPA's proposal to allow for state submittals of full or abbreviated SIPs to implement the program. [EPA-HQ-OAR-2009-0491-3890[1].1, p.1] [[This comment can also be found in Section XX.]]
As indicated by Tables III and IV within the NODA, the earliest that Michigan could take over allocations through an approved full or abbreviated SIP is November 1, 2011 for 2014 allocations and November 1, 2012 for 2015 allowances. The DNRE needs at least 18 months to generate a full or abbreviated SIP. This process cannot start until the TR is final, which is predicted to be spring of 2011. Thus the SIP would not be done until fall of 2012. Even if Michigan started now, without a final rule, the earliest we could have a complete rule package submitted to the EPA is June 2012 and the first time the states can allocate under a SIP would be for the annual and ozone season of 2014. [EPA-HQ-OAR-2009-0491-3890[1].1, pp.1-2]
National Rural Electric Cooperative Association (NRECA)
First, NRECA supports the proposal to include the two State Implementation Plan (SIP) options. [EPA-HQ-OAR-2009-0491-3943[1].2, p.3]
NRECA supports the CATR NODA III proposal incorporating the full and abbreviated SIP options into the final CATR regulation.   [EPA-HQ-OAR-2009-0491-3943[1].2, p.4]
Regarding the proposed SIP options, as EPA notes in the NODA III proposal, considering the time to submit and approve a SIP and record allowances, a SIP could not be applicable before the 2014 compliance period. [EPA-HQ-OAR-2009-0491-3943[1].2, pp.4-5]
New Jersey Department of Environmental Protection (NJDEP)
The Department is very supportive of US EPA's proposal to retain states' right to allocate the allowances from the state budget to the affected sources for the Transport Rule trading programs. It is very important that states retain this right because states work closely with the sources and would better understand how to fairly allocate the allowances. Also, if the USEPA does not use a dynamic allocation method like the three-year rolling average recommendation, states like New Jersey should have the right to use such a method for allocating allowances. New Jersey's NOx Budget Program and CAIR NOx Trading Programs are examples of states' success with allocations that are fair and better address new units. [EPA-HQ-OAR-2009-0491-3891[1].1, pp.2-3]
PowerSouth Energy Cooperative
PowerSouth also offers comments on the importance of facilitating State Implementation Plans (SIP) revisions which would allow the State of Alabama to set and administer unit allocations based on the state's budgets. [EPA-HQ-OAR-2009-0491-3956[1].1, p.1]
Prairie State Generating Company, LLC
An implementation schedule which should allow state authorities to develop SIPs [EPA-HQ-OAR-2009-0491-3897[1].1, p.1]
As noted above, PSGC supports provisions which allow states to develop their own Transport Rule SIPs. The states are in the best position to understand critical factors surrounding existing, new, and potential electric generating units locating within their boundaries. [EPA-HQ-OAR-2009-0491-3897[1].1, p.6]
South Carolina Department of Health and Environmental Control
The EPA also proposed additional SIP provisions in the NODA. Under the Clean Air Act, states have the primary responsibility for air quality, and DHEC takes its responsibility as co-regulator with the EPA seriously. The EPA proposed two SIP options in the NODA, a 'full SIP' option and an 'abbreviated SIP' option, in which states would superintend various parts of the Transport Rule program. DHEC prefers both options over the abstract discussion in the August 2,2010 Proposal, and in general would support flexibility on SIP implementation in the final Transport Rule. [EPA-HQ-OAR-2009-0491-3961[1].1, p.2]
Again, DHEC generally supports the EPA's options on allocations and SIPS as proposed in the NODA. [EPA-HQ-OAR-2009-0491-3961[1].1, p.2] [[This comment can also be found in Section XX.A.1.]]
Southern IL Power Cooperative
Southern Illinois Power Cooperative supports the proposal to include the two State Implementation Plan (SIP) options. [EPA-HQ-OAR-2009-0491-3901[1].1, p.2]
State of Louisiana, Department of Environmental Quality
Louisiana requests that EPA extend the same FIP/SIP alternatives that were available in the CAIR to those states affected by the proposed Transport Rule. [EPA-HQ-OAR-2009-0491-3977[1].1, p.2]
West Virginia Department of Environmental Protection
Information regarding provisions for state participation in the Trading Rule trading program through submission of a full or abbreviated SIP
EPA has requested comment on two approaches, which are analogous to the approaches adopted under the CAIR trading programs. WVDAQ supports the first approach, wherein EPA would adopt new provisions, as part of the proposed Transport Rule FIP that would allow a state to submit an abbreviated SIP modifying specified provisions of the proposed trading programs. Specifically, the abbreviated SIP would substitute state allocation provisions (for entities other than opt-in units) for controls periods in years after 2012. The abbreviated SIP could provide for the substitution of state allocations in one or more of the proposed Transport Rule trading programs. [EPA-HQ-OAR-2009-0491-4000[1].1, p.3]
Western Farmers Electric Cooperative (WFEC)
Regarding the proposed SIP options, as EPA notes in the NODA III proposal, considering the time to submit and approved a SIP and record allowances, a SIP could not be applicable before the 2014 compliance period.  [EPA-HQ-OAR-2009-0491-3945[1].1, p.2]
WFEC supports the CATR NODA III proposal incorporating the full and abbreviated SIP options into the final CATR regulation.   [EPA-HQ-OAR-2009-0491-3945[1].1, p.4]
Wolverine Power Supply Cooperative
Regarding the USEPA's request for comment on adding an abbreviated State Implementation Plan (SIP) process to the proposed Transport Rule that would allow states the authorization to develop their own allocation schemes for the state's budget, while otherwise accepting the FIP, Wolverine supports this concept as adding additional flexibility to the process. [EPA-HQ-OAR-2009-0491-4014[1].1, p. 5]
Response:
In the final Transport Rule, EPA revises the deadlines for submission of SIP revisions to replace EPA-determined allocations by state-determined allocations.  The first deadline for submission of SIP revisions with replacement, state-determined allocations is April 1, 2012 for allocations for 2013.  See section X of the preamble.
Organization: Dayton Power and Light Company (DP&L)
Comment:
Dayton Power and Light Company (DP&L)
F. Provisions for States to Submit Transport Rule SIPs or Abbreviated SIPS Providing for State Allocation of Allowances in Proposed Transport Rule Trading Programs.
DP&L supports the opportunity of the State of Ohio to create a SIP and allocate allowances at the earliest possible time. DP&L does not support 'the auction of some or all of the allowances' by Ohio or the EPA. DP&L believes that it is an inappropriate additional cost to the utilities and auctioning allowances will interfere with the market incentive to reduce emissions inherent in an allocated allowance system. [EPA-HQ-OAR-2009-0491-3973[1].1, p.4]
:: State SIPS are warranted at the earliest possible time. [EPA-HQ-OAR-2009-0491-3973[1].1, p.4]
:: States should be discouraged from auctioning SO2 or NOx allowances. [EPA-HQ-OAR-2009-0491-3973[1].1, p.4]
Response:
In the final Transport Rule, EPA revises the deadlines for submission of SIP revisions to replace EPA-determined allocations by state-determined allocations.  The first deadline for submission of SIP revisions with replacement, state-determined allocations is April 1, 2012 for allocations for 2013.  See section X of the preamble.
In the final Transport Rule, EPA does not establish auctioning of allowances in the Transport Rule FIP trading programs.  Further, EPA does not see -- and the commenter's unsupported, general assertions failed to provide -- any basis for barring states from considering whether to provide for allowance auctions in SIP revisions modifying or replacing the FIP trading program allocation provisions.  In order to provide states the flexibility to consider, and decide whether to adopt, allowance auctions in SIP revisions, the final rule neither encourages nor discourages state adoption of such auctions.  Instead, the final rule allows states to determine whether auctioning of any allowances is appropriate, and interested parties (such as the commenter) will have an opportunity to comment -- consistent with states' SIP development and adoption procedures -- on the appropriateness of allowance auctions.
Organization: Edison Mission Energy (EME)
Comment:
Edison Mission Energy (EME)
While EME agrees that a re-evaluation of the methodology used to determine unit level allocations is needed and believes that states should implement the emission limitation goals of the Transport Rule through State Implementation Plans ("SIPs"), EME does not believe that the allocation methodology or the SIP provisions proposed in the Transport Rule NODA adequately address the flaws it has identified with EPA's approach to the Transport Rule. [EPA-HQ-OAR-2009-0491-3953[1].1, p.2] [[This comment can also be found in Section XX.A.1.]]
EPA should allow states to implement the Transport Rule through SIPs because states are best positioned to collect the information needed to make informed decisions on unit level allocations. [EPA-HQ-OAR-2009-0491-3953[1].1, p.3]
The Transport Rule NODA provisions regarding SIPs still violate the cooperative federalism dictates of Title I of the CAA.
While EPA proposes that states may submit SIPs for Phase II of the Transport Rule, EPA's proposal still requires the implementation of the Transport Rule directly through FIPs in Phase I and likely during part of Phase II. [EPA-HQ-OAR-2009-0491-3953[1].1, p.3]
EME submits that EPA should allow states to implement the Transport Rule through SIPs because EPA does not have the authority to directly implement FIPs (see section V below) and because states are best positioned to collect the emissions data, information on the status of controls and generation mix, and other information needed to make informed decisions on unit level allocations (in many states, such as those with delegated air programs, EGUs report data directly to the states). Furthermore, allowing states to implement the Transport Rule through SIPs will allow states to take into account important state-specific consideration. As an example, states that currently have output-based allocation systems in place, may choose to proceed with an output-based allocation approach for the Transport Rule. This would be the most logical and efficient mechanism in these states because EGUs will have already made control technology investments based upon output-based allocations. [EPA-HQ-OAR-2009-0491-3953[1].1, pp.14-15]
Despite EPA's Proposal, The Agency Will Still be Improperly Imposing Emission Reductions on States by Directly Implementing FIPs.
EPA's Proposal seeks comment on two approaches (which it describes as analogous to approaches adopted under CAIR trading programs) that would purportedly allow states to allocate allowances and participate in the Transport Rule trading programs. The first approach would allow states to submit an abbreviated SIP substituting state developed unit level allocation provisions for EPA's unit level allocations. The abbreviated SIP could not change any other aspect of the Transport Rule trading program and the allocation allowances could not exceed the applicable state budget. The second approach would allow states to submit a full SIP if it adopts Transport Rule trading program regulations. If approved, EPA proposes in the Transport Rule NODA that the full SIP would correct the deficiency under CAA § 110(a)(2)(D)(i)(I) that EPA claims is the basis for issuance of the Transport Rule FIP. EPA's proposed second approach would significantly limit the differences that the state could adopt in its SIP. A state would only be allowed to adopt its own unit level allocation provisions, and they would have to meet the same requirements as EPA's first approach. [EPA-HQ-OAR-2009-0491-3953[1].1, pp.15-16]
Importantly, under both approaches, EPA would require that the final allocations for existing units be issued by May 1 (or January 1 for ozone season NOx) two years before the control period in which the allowances would be distributed. Furthermore, EPA would require a certain amount of time for its review and approval of the SIPS. Consequently, EPA's Proposal does not even allow for implementation of SIPs at any point during Phase I of the Transport Rule -- in either 2012 or 2013. EPA concedes that it "assume[s] that the first year for which state allocations might be used, in lieu of EPA allocation, would be 2014." [EPA-HQ-OAR-2009-0491-3953[1].1, p.16]
However, EME submits that even though EPA's proposal theoretically allows for implementation of SIPs in 2014 during Phase II of the Transport Rule, states will not likely be able to submit alternative allocations until the deadline for the 2015 control year at the earliest. It would be nearly impossible for states to meet the 2014 deadline because the SIP would be due to EPA by November 1, 2011. This is less than nine months away and EPA has not even finalized the Transport Rule yet. States must either promulgate a SIP through notice and comment rulemaking or through the enactment of legislation. It is highly unlikely that either of these actions could occur in that timeframe. [EPA-HQ-OAR-2009-0491-3953[1].1, p.16]
Therefore, even under EPA's Transport Rule NODA, the Transport Rule would be implemented by FIPs for at least the first three years of its operation, including the entirety of Phase I of the Transport Rule. As explained below, since the approaches proposed in the Transport Rule NODA still require implementation of the Transport Rule through FIPs, they are contrary to law. [EPA-HQ-OAR-2009-0491-3953[1].1,p.17]
The Transport Rule NODA provisions regarding SIPs still violate the cooperative federalism dictates of Title I of the CAA. [EPA-HQ-OAR-2009-0491-3953[1].1, p.24]
Response:
In the final Transport Rule, EPA revises the deadlines for submission of SIP revisions to replace EPA-determined allocations by state-determined allocations.  The first deadline for submission of SIP revisions with replacement, state-determined allocations is April 1, 2012 for allocations for 2013.  See section X of the preamble.
See section IV.C of the preamble, concerning EPA's authority to issue the final Transport Rule FIPs, and section VII.C of the preamble, concerning the compliance deadlines under the final Transport Rule.
Organization: EquiPower Resources Corp.
Comment:
EquiPower Resources Corp.
EPA should allow states to implement the Transport Rule through SIPs.
o The Transport Rule NODA's proposal regarding SIPs will not allow states to adopt SIPs to implement the Rule until 2014 at the very earliest and, for many states, likely later. Therefore, the Transport Rule NODA, like the Transport Rule, directly implements the regulations through FIPs.[EPA-HQ-OAR-2009-0491-3928[1].1, pp.2-3]
EPA Should Allow States to Implement the Transport Rule Through SIPs
State regulators are in the best position to craft SIPs and decide unit-level allocations as they have a detailed understanding about the generation mix in their state, the status of controls on those EGUs, and the performance of individual EGUs or groups of EGUs. They are also best-situated to compile data and perform the necessary analyses because the universe of affected sources in an individual state is much smaller than the total number of sources covered by the Transport Rule. Additionally, in states with delegated air programs, individual EGUs are obligated to report data directly to them. If states were allowed to establish the allocations, they would likely select allocation approaches tailored to the specific circumstances in a given state, as opposed to the one-size-fits-all approach employed by EPA under the Transport Rule's FIP. More importantly, in contrast to EPA's proposals, states typically do regular re-allocations to adjust for changes in the source mix, capacity, etc. Therefore, a state approach would be less likely to lead to supply disruptions and inefficient use of capital. [EPA-HQ-OAR-2009-0491-3928[1].1, pp.12-13]
However, EPA's Proposal is flawed for two reasons: (1) it does not allow states to implement SIPs until years after the Transport Rule goes into effect; and (2) even when states would be allowed, under EPA's Proposal, to promulgate SIPs to allocate allowances and participate in the Transport Rule trading programs, EPA's Proposal limits states' flexibility to determine how best to achieve the Transport Rule NAAQS. [EPA-HQ-OAR-2009-0491-3928[1].1, p.15]
EPA's proposal regarding SIPs in the Transport Rule NODA does nothing to correct the Transport Rule's failure to comply with the cooperative federalism structure that is established under Title I of the CAA. [EPA-HQ-OAR-2009-0491-3928[1].1, p.20]
Response: