[Federal Register Volume 76, Number 152 (Monday, August 8, 2011)]
[Rules and Regulations]
[Pages 48208-48483]
[FR Doc No: 2011-17600]

Vol. 76

Monday,

No. 152

August 8, 2011

Part II

Environmental Protection Agency

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40 CFR Parts 51, 52, 72 et al.

Federal Implementation Plans: Interstate Transport of Fine Particulate
Matter and Ozone and Correction of SIP Approvals; Final Rule

Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Rules
and Regulations

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, 72, 78, and 97

[EPA-HQ-OAR-2009-0491; FRL-9436-8]
RIN 2060-AP50

Federal Implementation Plans: Interstate Transport of Fine
Particulate Matter and Ozone and Correction of SIP Approvals

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: In this action, EPA is limiting the interstate transport of
emissions of nitrogen oxides (NOX) and sulfur dioxide
(SO2) that contribute to harmful levels of fine particle
matter (PM2.5) and ozone in downwind states. EPA is
identifying emissions within 27 states in the eastern United States
that significantly affect the ability of downwind states to attain and
maintain compliance with the 1997 and 2006 fine particulate matter
national ambient air quality standards (NAAQS) and the 1997 ozone
NAAQS. Also, EPA is limiting these emissions through Federal
Implementation Plans (FIPs) that regulate electric generating units
(EGUs) in the 27 states. This action will substantially reduce adverse
air quality impacts in downwind states from emissions transported
across state lines. In conjunction with other federal and state
actions, it will help assure that all but a handful of areas in the
eastern part of the country achieve compliance with the current ozone
and PM2.5 NAAQS by the deadlines established in the Clean
Air Act (CAA or Act). The FIPs may not fully eliminate the prohibited
emissions from certain states with respect to the 1997 ozone NAAQS for
two remaining downwind areas and EPA is committed to identifying any
additional required upwind emission reductions and taking any necessary
action in a future rulemaking. In this action, EPA is also modifying
its prior approvals of certain State Implementation Plan (SIP)
submissions to rescind any statements that the submissions in question
satisfy the interstate transport requirements of the CAA or that EPA's
approval of the SIPs affects our authority to issue interstate
transport FIPs with respect to the 1997 fine particulate and 1997 ozone
standards for 22 states. EPA is also issuing a supplemental proposal to
request comment on its conclusion that six additional states
significantly affect downwind states' ability to attain and maintain
compliance with the 1997 ozone NAAQS.

DATES: This final rule is effective on October 7, 2011.

ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-OAR-2009-0491. All documents in the docket are listed on the
http://www.regulations.gov Web site. Although listed in the index, some
information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically through http://www.regulations.gov or in hard copy at the EPA Docket Center, EPA West,
Room B102, 1301 Constitution Avenue, NW., Washington, DC. The Public
Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through
Friday, excluding legal holidays. The telephone number for the Public
Reading Room is<PHONE_NUMBER>, and the telephone number for the Air
Docket is<PHONE_NUMBER>.

FOR FURTHER INFORMATION CONTACT: For general questions concerning this
action, please contact Ms. Meg Victor, Clean Air Markets Division,
Office of Atmospheric Programs, Mail Code 6204J, Environmental
Protection Agency, 1200 Pennsylvania Avenue, NW., Washington, DC 20460;
telephone number:<PHONE_NUMBER>; fax number:<PHONE_NUMBER>; e-mail
address<EMAIL_ADDRESS>For legal questions, please contact Ms.
Sonja Rodman, U.S. EPA, Office of General Counsel, Mail Code 2344A,
1200 Pennsylvania Avenue, NW., Washington, DC 20460, telephone (202)
564-4079; e-mail address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Preamble Glossary of Terms and Abbreviations

    The following are abbreviations of terms used in the preamble.

AQAT Air Quality Assessment Tool
ARP Acid Rain Program
BART Best Available Retrofit Technology
BACT Best Available Control Technology
CAA or Act Clean Air Act
CAIR Clean Air Interstate Rule
CAMx Comprehensive Air Quality Model with Extensions
CBI Confidential Business Information
CCR Coal Combustion Residuals
CEM Continuous Emissions Monitoring
CENRAP Central Regional Air Planning Association
CFR Code of Federal Regulations
DEQ Department of Environmental Quality
DSI Dry Sorbent Injection
EGU Electric Generating Unit
FERC Federal Energy Regulatory Commission
FGD Flue Gas Desulfurization
FIP Federal Implementation Plan
FR Federal Register
EPA U.S. Environmental Protection Agency
GHG Greenhouse Gas
GW Gigawatts
Hg Mercury
ICR Information Collection Request
IPM Integrated Planning Model
km Kilometers
lb/mmBtu Pounds Per Million British Thermal Unit
LNB Low-NOX Burners
MACT Maximum Achievable Control Technology
MATS Modeled Attainment Test Software
[mu]g/m \3\ Micrograms Per Cubic Meter
MSAT Mobile Source Air Toxics
MOVES Motor Vehicle Emission Simulator
NAAQS National Ambient Air Quality Standards
NBP NOX Budget Trading Program
NEI National Emission Inventory
NESHAP National Emissions Standards for Hazardous Air Pollutants
NOX Nitrogen Oxides
NODA Notices of Data Availability
NSPS New Source Performance Standard
NSR New Source Review
OFA Overfire Air
OSAT Ozone Source Apportionment Technique
OTAG Ozone Transport Assessment Group
ppb Parts Per Billion
PM2.5 Fine Particulate Matter, Less Than 2.5 Micrometers
PM10 Fine and Coarse Particulate Matter, Less Than 10
Micrometers
PM Particulate Matter
ppm Parts Per Million
PUC Public Utility Commission
RIA Regulatory Impact Analysis
SCR Selective Catalytic Reduction
SIP State Implementation Plan
SMOKE Sparse Matrix Operator Kernel Emissions
SNCR Selective Non-catalytic Reduction
SO2 Sulfur Dioxide
SOX Sulfur Oxides, Including Sulfur Dioxide
(SO2) and Sulfur Trioxide (SO3)
TAF Terminal Area Forecast
TCEQ Texas Commission on Environmental Quality
TIP Tribal Implementation Plan
TLN3 Tangential Low NOX
TPY Tons Per Year
TSD Technical Support Document
WRAP Western Regional Air Partnership

II. General Information

A. Does this action apply to me?

    This rule affects EGUs, and regulates the following groups:

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                    Industry group                          NAICS a
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Utilities (electric, natural gas, other systems.)....   2211, 2212, 2213
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a North American Industry Classification System.

    This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be regulated by this
action. This table lists

the types of entities that EPA is aware of that could potentially be
regulated. Other types of entities not listed in the table could also
be regulated. To determine whether your facility would be regulated by
the proposed rule, you should carefully examine the applicability
criteria in proposed Sec. Sec.  97.404, 97.504, and 97,604.

B. How is the preamble organized?

I. Preamble Glossary of Terms and Abbreviations
II. General Information
    A. Does this action apply to me?
    B. How is the preamble organized?
III. Executive Summary
IV. Legal Authority, Environmental Basis, and Correction of CAIR SIP
Approvals
    A. EPA's Authority for Transport Rule
    B. Rulemaking History
    C. Air Quality Problems and NAAQS Addressed
    1. Air Quality Problems and NAAQS Addressed
    2. FIP Authority for Each State and NAAQS Covered
    3. Additional Information Regarding CAA Section
110(a)(2)(D)(i)(I) SIPs for States in the Transport Rule Modeling
Domain
    D. Correction of CAIR SIP Approvals
V. Analysis of Downwind Air Quality and Upwind State Emissions
    A. Pollutants Regulated
    1. Background
    2. Which pollutants did EPA propose to control for purposes of
PM2.5 and Ozone Transport?
    3. Comments and Responses
    B. Baseline for Pollution Transport Analysis
    C. Air Quality Modeling to Identify Downwind Nonattainment and
Maintenance Receptors
    1. Emission Inventories
    2. Air Quality Basis for Identifying Receptors
    3. How did EPA project future nonattainment and maintenance for
annual PM2.5, 24-hour PM2.5, and 8-hour ozone?
    D. Pollution Transport From Upwind States
    1. Choice of Air Quality Thresholds
    2. Approach for Identifying Contributing Upwind States
VI. Quantification of State Emission Reductions Required
    A. Cost and Air Quality Structure for Defining Reductions
    1. Summary
    2. Background
    B. Cost of Available Emission Reductions (Step 1)
    1. Development of Annual NOX and Ozone-Season
NOX Cost Curves
    2. Development of SO2 Cost Curves
    3. Amount of Reductions That Could Be Achieved by 2012 and 2014
    C. Estimates of Air Quality Impacts (Step 2)
    1. Development of the Air Quality Assessment Tool and Air
Quality Modeling Strategy
    2. Utilization of AQAT to Evaluate Control Scenarios
    3. Air Quality Assessment Results
    D. Multi-Factor Analysis and Determination of State Emission
Budgets
    1. Multi-Factor Analysis (Step 3)
    2. State Emission Budgets (Step 4)
    E. Approach to Power Sector Emission Variability
    1. Introduction to Power Sector Variability
    2. Transport Rule Variability Limits
    F. Variability Limits and State Emission Budgets: State
Assurance Levels
    G. How the State Emission Reduction Requirements Are Consistent
With Judicial Opinions Interpreting the Clean Air Act
VII. FIP Program Structure to Achieve Reductions
    A. Overview of Air Quality-Assured Trading Programs
    B. Applicability
    C. Compliance Deadlines
    1. Alignment With NAAQS Attainment Deadlines
    2. Compliance and Deployment of Pollution Control Technologies
    D. Allocation of Emission Allowances
    1. Allocations to Existing Units
    2. Allocations to New Units
    E. Assurance Provisions
    F. Penalties
    G. Allowance Management System
    H. Emissions Monitoring and Reporting
    I. Permitting
    1. Title V Permitting
    2. New Source Review
    J. How the Program Structure Is Consistent With Judicial
Opinions Interpreting the Clean Air Act
VIII. Economic Impacts of the Transport Rule
    A. Emission Reductions
    B. The Impacts on PM2.5 and Ozone of the Final
SO2 and NOX Strategy
    C. Benefits
    1. Human Health Benefit Analysis
    2. Quantified and Monetized Visibility Benefits
    3. Benefits of Reducing GHG Emissions
    4. Total Monetized Benefits
    5. How do the benefits in 2012 compare to 2014?
    6. How do the benefits compare to the costs of this final rule?
    7. What are the unquantified and non-monetized benefits of the
Transport Rule emission reductions?
    D. Costs and Employment Impacts
    1. Transport Rule Costs and Employment Impacts
    2. End-Use Energy Efficiency
IX. Related Programs and the Transport Rule
    A. Transition From the Clean Air Interstate Rule
    1. Key Differences Between the Transport Rule and CAIR
    2. Transition From the Clean Air Interstate Rule to the
Transport Rule
    B. Interactions With NOX SIP Call
    C. Interactions With Title IV Acid Rain Program
    D. Other State Implementation Plan Requirements
X. Transport Rule State Implementation Plans
XI. Structure and Key Elements of Transport Rule Air Quality-Assured
Trading Program Rules
XII. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions That Significantly Affect
Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
    1. Consideration of Environmental Justice in the Transport Rule
Development Process and Response to Comments
    2. Potential Environmental and Public Health Impacts Among
Populations Susceptible or Vulnerable to Air Pollution
    3. Meaningful Public Participation
    4. Summary
    K. Congressional Review Act
    L. Judicial Review

III. Executive Summary

    The CAA section 110(a)(2)(D)(i)(I) requires states to prohibit
emissions that contribute significantly to nonattainment in, or
interfere with maintenance by, any other state with respect to any
primary or secondary NAAQS. In this final rule, EPA finds that
emissions of SO2 and NOX in 27 eastern,
midwestern, and southern states contribute significantly to
nonattainment or interfere with maintenance in one or more downwind
states with respect to one or more of three air quality standards--the
annual PM2.5 NAAQS promulgated in 1997, the 24-hour
PM2.5 NAAQS promulgated in 2006, and the ozone NAAQS
promulgated in 1997 (EPA uses the term ``states'' to include the
District of Columbia in this preamble).
    These emissions are transported downwind either as SO2
and NOX or, after transformation in the atmosphere, as fine
particles or ozone. This final rule identifies emission reduction
responsibilities of upwind states, and also promulgates enforceable
FIPs to achieve the required emission reductions in each state through
cost-effective and flexible requirements for power plants. Each state
has the option of replacing these federal rules with state rules to
achieve the required amount of emission reductions from sources
selected by the state.

    Section 110(a)(2)(D)(i)(I) of the CAA requires the elimination of
upwind state emissions that significantly contribute to nonattainment
or interfere with maintenance of a NAAQS in another state. Elimination
of these upwind state emissions may not necessarily, in itself, fully
resolve nonattainment or maintenance problems at downwind state
receptors. Downwind states also have control responsibilities because,
among other things, the Act requires each state to adopt enforceable
plans to attain and maintain air quality standards. Indeed, states have
put in place measures to reduce local emissions that contribute to
nonattainment within their borders. Section 110(a)(2)(D)(i)(I) only
requires the elimination of emissions that significantly contribute to
nonattainment or interfere with maintenance of the NAAQS in other
states; it does not shift to upwind states the responsibility for
ensuring that all areas in other states attain the NAAQS.
    The reductions obtained through the Transport Rule will help all
but a few downwind areas come into attainment with and maintain the
1997 annual PM2.5 NAAQS, the 2006 24-hour PM2.5
NAAQS, and the 1997 ozone NAAQS. With respect to the annual
PM2.5 NAAQS, this rule finds that 18 states have
SO2 and annual NOX emission reduction
responsibilities, and this rule quantifies each state's full emission
reduction responsibility under section 110(a)(2)(D)(i)(I). See Table
III-1 for the list of these states. With these reductions, EPA projects
that no areas will have nonattainment or maintenance concerns with
respect to the annual PM2.5 NAAQS.
    With respect to the 24-hour PM2.5 NAAQS, this rule finds
that 21 states have SO2 and annual NOX emission
reduction responsibilities, and this rule quantifies each state's full
emission reduction responsibility under 110(a)(2)(D)(i)(I). See Table
III-1 for the list of these states. In all, this rule requires emission
reductions related to interstate transport of fine particles in 23
states. With these reductions, as discussed in section VI.D of this
preamble, only one area (Liberty-Clairton) is projected to remain in
nonattainment, and three other areas (Chicago,\1\ Detroit, and
Lancaster) are projected to have remaining maintenance concerns for the
24-hour PM2.5 NAAQS.
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    \1\ This area is not currently designated as nonattainment for
the 24-hour PM2.5 standard. EPA is portraying the
receptors and counties in this area as a single 24-hour maintenance
area based on the annual PM2.5 nonattainment designation
of Chicago-Gary-Lake County, IL-IN.
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    With respect to the 1997 ozone NAAQS, this rule finds that 20
states have ozone-season NOX emission reduction
responsibilities. For 10 of these states this rule quantifies the
state's full emission reduction responsibility under section
110(a)(2)(D)(i)(I).\2\ For 10 additional states, EPA quantifies in this
rule the ozone-season NOX emission reductions that are
necessary but may not be sufficient to eliminate all significant
contribution to nonattainment and interference with maintenance in
other states.\3\ See Table III-1 for the complete list of 20 states
required to reduce ozone-season NOX emissions in this rule.
With the Transport Rule reductions, only one area (Houston) is
projected to remain in nonattainment, and one area (Baton Rouge) to
have a remaining maintenance concern with respect to the 1997 ozone
NAAQS. The 10 states upwind of either of these two areas are the states
for which additional reductions may be necessary to fully eliminate
each state's significant contribution to nonattainment and interference
with maintenance, as discussed in section VI of this preamble.\4\
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    \2\ The 10 states for which this rule quantifies the state's
full responsibility under section 110(a)(2)(D)(i)(I) with respect to
the 1997 ozone NAAQS are Florida, Maryland, New Jersey, New York,
North Carolina, Ohio, Pennsylvania, South Carolina, Virginia, and
West Virginia.
    \3\ The 10 states for which this rule quantifies reductions that
are necessary but may not be sufficient to satisfy the requirements
of 110(a)(2)(D)(i)(I) with respect to the 1997 ozone NAAQS are
Alabama, Arkansas, Georgia, Illinois, Indiana, Kentucky, Louisiana,
Mississippi, Tennessee, and Texas.
    \4\ This preamble uses the term ``significant contribution''
only in the context of the CAA section 110(a)(2)(D)(i)(I)
requirement that states prohibit emissions that ``contribute
significantly to nonattainment'' in any other state with respect to
any primary or secondary NAAQS. Thus, a significant contribution, as
used in this preamble, is one that is significant for purposes of
CAA section 110(a)(2)(D)(i)(I) as coming from a particular state.
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    As discussed further below, EPA's analysis also demonstrates that
six additional states should be required to reduce ozone-season
NOX emissions. EPA is issuing a supplemental proposal to
request comment on requiring ozone-season NOX reductions in
these six states. For five of these six states, EPA's analysis
identifies the state's full emission reduction responsibility under
section 110(a)(2)(D)(i)(I), and for the remaining one state EPA's
analysis identifies reductions that are necessary but may not be
sufficient to satisfy the requirements of 110(a)(2)(D)(i)(I).\5\
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    \5\ The five states addressed in the supplemental proposal for
which EPA's analysis identifies the state's full reduction
responsibility under section 110(a)(2)(D)(i)(I) with respect to the
1997 ozone NAAQS are Iowa, Kansas, Michigan, Oklahoma, and
Wisconsin. The one state addressed in the supplemental proposal for
which EPA's analysis identifies reductions that are necessary but
may not be sufficient to satisfy section 110(a)(2)(D)(i)(I) with
respect to the 1997 ozone NAAQS is Missouri.
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    On January 19, 2010, EPA proposed revisions to the 8-hour ozone
NAAQS that the Agency had issued March 12, 2008 (75 FR 2938); the
Agency intends to finalize its reconsideration in the summer of 2011.
EPA intends to propose a rule to address transport with respect to the
reconsidered 2008 ozone NAAQS as expeditiously as possible after
reconsideration is completed. EPA intends to include in that proposed
rule requirements to address any remaining significant contribution to
nonattainment and interference with maintenance with respect to the
1997 ozone NAAQS for the states identified in this final rule, or the
associated supplemental notice of proposed rulemaking, for which EPA
was unable to fully quantify the emissions that must be prohibited to
satisfy the requirements of 110(a)(2)(D)(i)(I) with respect to the 1997
ozone NAAQS.
    The Act requires EPA to conduct periodic reviews of each of the
NAAQS. When NAAQS are set or revised, the CAA requires revision of SIPs
to ensure the standards are met expeditiously and within relevant
timetables in the Act. If more protective NAAQS are promulgated, in the
case of pollutants for which interstate transport is important,
additional emission reductions to address transported pollution may be
required from the power sector, from other sectors, and from sources in
additional states. EPA will act promptly to promulgate any future rules
addressing transport with respect to revised NAAQS.
    The Transport Rule requires substantial near-term emission
reductions in every covered state to address each state's significant
contribution to nonattainment and interference with maintenance
downwind. This rule achieves these reductions through FIPs that
regulate the power sector using air quality-assured trading programs
whose assurance provisions ensure that necessary reductions will occur
within every covered state. This remedy structure is substantially
similar to the preferred trading remedy structure presented in the
proposal. The Transport Rule's air quality-assured trading approach
will assure

environmental results in each state while providing market-based
flexibility to covered sources through interstate trading. The final
rule includes four air quality-assured trading programs: An annual
NOX trading program, an ozone-season NOX trading
program, and two separate SO2 trading programs
(``SO2 Group 1'' and ``SO2 Group 2''), as
discussed further in sections VI and VII, below.
    The first phase of Transport Rule compliance commences January 1,
2012, for SO2 and annual NOX reductions and May
1, 2012, for ozone-season NOX reductions. The second phase
of Transport Rule reductions, which commences January 1, 2014,
increases the stringency of SO2 reductions in a number of
states as discussed further below.
    EPA projects that with the Transport Rule, covered EGU will
substantially reduce SO2, annual NOX and ozone-
season NOX emissions, as shown in Tables III-2 and III-3,
below. This rule generally covers electric generating units that are
fossil fuel-fired boilers and turbines producing electricity for sale,
as detailed in section VII.B.
    EPA is promulgating the Transport Rule in response to the remand of
the Clean Air Interstate Rule (CAIR) by the U.S. Court of Appeals for
the District of Columbia Circuit (``Court'') in 2008. CAIR, promulgated
May 12, 2005 (70 FR 25162), required 29 states to adopt and submit
revisions to their State Implementation Plans (SIPs) to eliminate
SO2 and NOX emissions that contribute
significantly to downwind nonattainment of the PM2.5 and
ozone NAAQS promulgated in July 1997. CAIR covered a similar but not
identical set of states as the Transport Rule. CAIR FIPs were
promulgated April 26, 2006 (71 FR 25328) to regulate electric
generating units in the covered states and achieve the emission
reduction requirements established by CAIR until states could submit
and obtain approval of SIPs to achieve the reductions.
    In July 2008, the Court found CAIR and the CAIR FIPs unlawful.
North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008), modified on
rehearing, North Carolina v. EPA, 550 F.3d 1176, 1178 (D.C. Cir. 2008).
The Court's original decision vacated CAIR. North Carolina, 531 F.3d at
929-30. However, the Court subsequently remanded CAIR to EPA without
vacatur because it found that ``allowing CAIR to remain in effect until
it is replaced by a rule consistent with our opinion would at least
temporarily preserve the environmental values covered by CAIR.'' North
Carolina, 550 F.3d at 1178. The CAIR requirements have remained in
place while EPA has developed the Transport Rule to replace them.
    EPA's approach in the Transport Rule to measure and address each
state's significant contribution to downwind nonattainment and
interference with maintenance is guided by and consistent with the
Court's opinion in North Carolina and addresses the flaws in CAIR
identified by the Court therein. This final rule also responds to
extensive public comments and stakeholder input received during the
public comment periods in response to the proposal and subsequent
Notices of Data Availability (NODAs).
    In this action, EPA both identifies and addresses emissions within
states that significantly contribute to nonattainment or interfere with
maintenance in other downwind states. In developing this rule, EPA used
a state-specific methodology to identify emission reductions that must
be made in covered states to address the CAA section 110(a)(2)(D)(i)(I)
prohibition on emissions that significantly contribute to nonattainment
or interfere with maintenance in a downwind state. EPA believes this
methodology addresses the Court's concern that the approach used in
CAIR was insufficiently state-specific. EPA used detailed air quality
analysis to determine whether a state's contribution to downwind air
quality problems is at or above specific thresholds. A state is covered
by the Transport Rule if its contribution meets or exceeds one of those
air quality thresholds and the Agency identifies, using a multi-factor
analysis that takes into account both air quality and cost
considerations, emissions within the state that constitute the state's
significant contribution to nonattainment and interference with
maintenance with respect to the 1997 ozone or the 1997 annual or 2006
24-hour PM2.5 NAAQS. Section 110(a)(2)(D)(i)(I) requires
states to eliminate the emissions that constitute this ``significant
contribution'' and ``interference with maintenance.'' \6\
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    \6\ In this preamble, EPA uses the terms ``significant
contribution'' and ``interference with maintenance'' to refer to the
emissions that must be prohibited pursuant to section
110(a)(2)(D)(i)(I) because they significantly contribute to
nonattainment or interfere with maintenance of the NAAQS in another
state.
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    In this final rule, EPA determined the emission reductions required
from all upwind states to eliminate significant contribution to
nonattainment and interference with maintenance with respect to the
1997 ozone, 1997 annual PM2.5, and 2006 24-hour
PM2.5 NAAQS, using, in part, an assessment of modeled air
quality in 2012 and 2014. EPA first identified the following two sets
of downwind receptors: (1) Receptors that EPA projects will have
nonattainment problems; and, (2) receptors that EPA projects may have
difficulty maintaining the NAAQS based on historic variation in air
quality. To identify areas that may have problems attaining or
maintaining these air quality standards, EPA projected a suite of
future air quality design values, based on measured data during the
period 2003 through 2007. EPA used the average of these future design
values to assess whether an area will be in nonattainment. EPA used the
maximum projected future design value to assess whether an area may
have difficulty maintaining the relevant NAAQS (i.e., whether an area
has a reasonable possibility of being in nonattainment under adverse
emission and weather conditions). Section V.C of this preamble details
the Transport Rule's approach to identify downwind nonattainment and
maintenance areas.
    After identifying downwind nonattainment and/or maintenance areas,
EPA next used air quality modeling to determine which upwind states are
projected to contribute at or above threshold levels to the air quality
problems in those areas. Section V.D details the choice of air quality
thresholds and the approach to determine how much each upwind state
contributes. States whose contributions meet or exceed the threshold
levels were analyzed further, as detailed in section VI, to determine
whether they significantly contribute to nonattainment or interfere
with maintenance of a relevant NAAQS, and if so, the quantity of
emissions that constitute their significant contribution and
interference with maintenance.
    When EPA proposed this air-quality and cost-based multi-factor
approach to identify emissions that constitute significant contribution
to nonattainment and interference with maintenance from upwind states
with respect to the 1997 ozone, annual PM2.5, and 2006 24-
hour PM2.5 NAAQS, the Agency indicated that the approach was
designed to be applicable to both current and potential future ozone
and PM2.5 NAAQS (75 FR 45214). EPA believes that the
Transport Rule's approach of using air-quality thresholds to determine
upwind-to-downwind-state linkages and using the air-quality and cost-
based multi-factor approach to determine the quantity of emissions that
each upwind state must eliminate, i.e., the state's significant
contribution to nonattainment and interference with maintenance, could
serve as a precedent for quantifying upwind state emission reduction
responsibilities with respect

to potential future NAAQS, as discussed further in section VI.A of this
preamble. The Agency further believes that the final Transport Rule
demonstrates the strong value of this approach for addressing the role
of interstate transport of air pollution in communities' ability to
comply with current and future NAAQS.
    EPA thus identified specific emission reduction responsibilities
for each upwind state found to significantly contribute to
nonattainment or interfere with maintenance in other states. Using that
information, EPA developed individual state budgets for emissions from
covered units under the Transport Rule. The Transport Rule emission
budgets are based on EPA's state-by-state analysis of each upwind
state's significant contribution to nonattainment and interference with
maintenance. Because each state's budget is directly linked to this
state-specific analysis of the state's obligations pursuant to section
110(a)(2)(D)(i)(I), this approach addresses the Court's concerns about
the development of CAIR budgets.
    In this rule, EPA is finalizing SO2 and annual
NOX budgets for each state covered for the 24-hour and/or
annual PM2.5 NAAQS and an ozone-season NOX budget
for each state covered for the ozone NAAQS. A state's emission budget
is the quantity of emissions that will remain from covered units under
the Transport Rule after elimination of significant contribution to
nonattainment and interference with maintenance in an average year
(i.e., before accounting for the inherent variability in power system
operations).\7\
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    \7\ For the states discussed above for which EPA has quantified
the minimum amount of emission reductions needed to make measurable
progress toward satisfying the state's section 110(a)(2)(D)(i)(I)
responsibility, the emission budget is the quantity of emissions
that will remain from covered units after removal of those
emissions.
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    Baseline power sector emissions from a state can be affected by
changing weather patterns, demand growth, or disruptions in electricity
supply from other units or from the transmission grid. As a
consequence, emissions could vary from year to year even in a state
where covered sources have installed all controls and taken all
measures necessary to eliminate the state's significant contribution to
nonattainment and interference with maintenance. As described in detail
in sections VI and VII of this preamble, the Transport Rule accounts
for the inherent variability in power system operations through
``assurance provisions'' based on state-specific variability limits
which extend above the state budgets to form each state's ``assurance
level.'' The state assurance levels take into account the inherent
variability in baseline emissions from year to year. The final
Transport Rule FIPs will implement assurance provisions starting in
2012 as discussed in section VII, below.
    The emission reduction requirements (i.e., the ``remedy'') EPA is
promulgating in this rule respond to the Court's concerns that in CAIR,
EPA had not shown that the emission reduction requirements would get
all necessary reductions within the state as required by section
110(a)(2)(D)(i)(I). The Transport Rule FIPs include assurance
provisions specifically designed to ensure that no state's emissions
are allowed to exceed that specific state's budget plus the variability
limit (i.e., the state's assurance level).
    Each state's Transport Rule SO2, annual NOX,
or ozone-season NOX emission budget is composed of a number
of emission allowances (``allowances'') equivalent to the tonnage of
that specific state budget. Under the Transport Rule FIPs, EPA is
distributing (``allocating'') allowances under each state's budget to
covered units in that state. In this rule, EPA analyzed each individual
state's significant contribution to nonattainment and interference with
maintenance and calculated budgets that represent each state's
emissions after the elimination of those prohibited emissions in an
average year. The methodology used to allocate allowances to individual
units in a particular state has no impact on that state's budget or on
the requirement that the state's emissions not exceed that budget plus
the variability limit; the allocation methodology therefore has no
impact on the rule's ability to satisfy the statutory mandate of CAA
section 110(a)(2)(D)(i)(I).
    The Transport Rule's approach to allocate emission allowances to
existing units is based on historic heat-input data, as detailed in
section VII.D of this preamble. The Transport Rule SO2,
annual NOX, and ozone-season NOX emission
allowances each authorize the emission of one ton of SO2,
annual NOX, or ozone-season NOX emissions,
respectively, during a Transport Rule control period, and are the
currency in the Transport Rule's air quality-assured trading programs.
As discussed in section IX.A.2 below, EPA is creating these Transport
Rule allowances as distinct compliance instruments with no relation to
allowances from the CAIR trading programs. EPA agrees with the general
principle that it is desirable, where possible, to provide continuity
under successive regulatory trading programs, for example through the
carryover of allowances from one program into a subsequent one.
However, EPA is promulgating the Transport Rule as a court-ordered
replacement for (not a successor to) CAIR's trading programs. In light
of the specific circumstances of this case, including legal and
technical issues discussed in Section IX.A.2 below, the final rule will
not allow any carryover of banked SO2 or NOX
allowances from the Title IV or CAIR trading programs. EPA will
strongly consider administrative continuity of this rule's trading
programs under any future actions designed to address related problems
of interstate transport of air pollution. A state may submit a SIP
revision under which the state (rather than EPA) would determine
allocations for one or more of the Transport Rule trading programs
beginning with vintage year 2013 or later allowances.\8\ Section X of
this preamble discusses the final rule's provisions for SIP submissions
in detail.
---------------------------------------------------------------------------

    \8\ This final rule allows states to make 2013 allowance
allocations through the use of a SIP revision that is narrower in
scope than the other SIP revisions states can use to replace the
FIPs and/or to make allocation decisions for 2014 and beyond, as
discussed in section X.
---------------------------------------------------------------------------

    Table III-1 lists states covered by the Transport Rule for
PM2.5 and ozone. It also, with respect to PM2.5,
identifies whether EPA determined the state was significantly
contributing to nonattainment or interfering with maintenance of the
1997 annual PM2.5 NAAQS, the 2006 24-hour PM2.5
NAAQS, or both. As discussed below, the Transport Rule sorts the states
required to reduce SO2 emissions due to their contribution
to PM2.5 downwind into two groups of varying reduction
stringency, with ``Group 1'' states subject to greater SO2
reduction stringency than ``Group 2'' states starting in 2014. Table
III-1 also lists which SO2 Group each of the states is in.

   Table III-1--States That Significantly Contribute to Nonattainment or Interfere With Maintenance of a NAAQS
                                      Downwind in the Final Transport Rule
----------------------------------------------------------------------------------------------------------------
                                                         1997 Annual PM2.5     2006 24-Hour
                State                  1997 Ozone NAAQS        NAAQS           PM2.5 NAAQS         SO2 group
----------------------------------------------------------------------------------------------------------------
Alabama.............................                 X                  X                  X                  2
Arkansas............................                 X   .................  .................  .................
Florida.............................                 X   .................  .................  .................
Georgia.............................                 X                  X                  X                  2
Illinois............................                 X                  X                  X                  1
Indiana.............................                 X                  X                  X                  1
Iowa................................  .................                 X                  X                  1
Kansas..............................  .................  .................                 X                  2
Kentucky............................                 X                  X                  X                  1
Louisiana...........................                 X   .................  .................  .................
Maryland............................                 X                  X                  X                  1
Michigan............................  .................                 X                  X                  1
Minnesota...........................  .................  .................                 X                  2
Mississippi.........................                 X   .................  .................  .................
Missouri............................  .................                 X                  X                  1
Nebraska............................  .................  .................                 X                  2
New Jersey..........................                 X   .................                 X                  1
New York............................                 X                  X                  X                  1
North Carolina......................                 X                  X                  X                  1
Ohio................................                 X                  X                  X                  1
Pennsylvania........................                 X                  X                  X                  1
South Carolina......................                 X                  X   .................                 2
Tennessee...........................                 X                  X                  X                  1
Texas...............................                 X                  X   .................                 2
Virginia............................                 X   .................                 X                  1
West Virginia.......................                 X                  X                  X                  1
Wisconsin...........................  .................                 X                  X                  1
Number of States....................                20                 18                 21   .................
----------------------------------------------------------------------------------------------------------------

    As explained in this preamble, EPA has improved and updated both
steps of its significant contribution analysis. It updated and improved
the modeling platforms and modeling inputs used to identify states with
contributions to certain downwind receptors that meet or exceed
specified thresholds. It also updated and improved its analysis for
identifying any emissions within such states that constitute the
state's significant contribution to nonattainment or interference with
maintenance. Therefore, the results of the analysis conducted for the
final rule differ somewhat from the results of the analysis conducted
for the proposal.\9\
---------------------------------------------------------------------------

    \9\ EPA updated its modeling platforms and modeling inputs in
response to public comments received on the proposed Transport Rule
and subsequent NODAs and performed other standard updates.
---------------------------------------------------------------------------

    With respect to the 1997 ozone NAAQS, the analysis EPA conducted
for the proposal did not identify Wisconsin, Iowa and Missouri as
states that significantly contribute to nonattainment or interfere with
maintenance of the ozone NAAQS in another state. However, the analysis
conducted for the final rule shows that emissions from these states do
significantly contribute to nonattainment or interfere with maintenance
of the ozone NAAQS in another state. EPA is not issuing FIPs with
respect to the 1997 ozone NAAQS or finalizing ozone season
NOX budgets for these states in this rule. EPA is publishing
a supplemental notice of proposed rulemaking that will provide an
opportunity for public comment on our conclusion that these states
significantly contribute to nonattainment or interfere with maintenance
of the 1997 ozone NAAQS.
    In the other direction, the analysis conducted for the proposal
supported EPA's conclusion at the time that Connecticut, Delaware, and
the District of Columbia significantly contributed to nonattainment or
interfered with maintenance with respect to the 1997 ozone NAAQS,
whereas the modeling for the final rule no longer supports that
conclusion for those states.
    Additionally, the modeling conducted for the final rule identified
two ozone maintenance receptors that were not identified in the
modeling conducted for the proposal--Allegan County (MI) and Harford
County (MD). Five states that EPA identified as significantly
contributing to maintenance problems at the Allegan and/or Harford
County receptors in the modeling for the final rule uniquely contribute
to these receptors, i.e., absent these receptors the states would not
be covered by the Transport Rule ozone-season program. The five states
that uniquely contribute to these receptors are Iowa, Kansas, Michigan,
Oklahoma, and Wisconsin. EPA is not issuing FIPs with respect to the
1997 ozone NAAQS or finalizing ozone-season NOX budgets for
these states in this rule. EPA is publishing a supplemental notice of
proposed rulemaking that will provide an opportunity for public comment
on our conclusion that these states significantly contribute to
nonattainment or interfere with maintenance of the 1997 ozone NAAQS.
    EPA did not change its methodology between the proposed Transport
Rule and the final Transport Rule for identifying upwind states that
significantly contribute to nonattainment or interfere with maintenance
in other states; nor did EPA change its methodology for identifying
receptors of concern with respect to maintenance of the 1997 ozone
NAAQS. The final rule's air quality modeling identifies the new states
and new receptors described above based on updated input information
(including emission inventories), much of which was provided to EPA
through public comment on the proposal and subsequent NODAs. Section V
of this preamble details the approach EPA used

to identify contributing states and receptors of concern.
    With respect to the annual PM2.5 NAAQS, the analysis EPA
conducted for the proposal supported EPA's conclusion that the states
of Delaware, the District of Columbia, Florida, Louisiana, Minnesota,
New Jersey, and Virginia were significantly contributing to
nonattainment and interfering with maintenance of the annual
PM2.5 NAAQS while the final rule's analysis does not. Also,
with respect to the 24-hour PM2.5 NAAQS, the analysis
conducted for the proposal supported EPA's conclusion that the states
of Connecticut, Delaware, the District of Columbia, and Massachusetts
were significantly contributing to nonattainment or interfering with
maintenance in other states while the analysis conducted for the final
rule did not.
    In the proposal EPA also requested comment on whether Texas should
be included in the Transport Rule for annual PM2.5. EPA's
analysis for the proposal showed that emissions in Texas would
significantly contribute to nonattainment or interfere with maintenance
of the annual PM2.5 NAAQS if Texas were not included in the
rule for PM2.5. The proposal did not include an illustrative
budget for Texas or illustrative allowance allocations. However, the
budgets and allowance allocations provided for other states in the
proposal were included solely to illustrate the result of applying
EPA's proposed methodology for quantifying significant contribution to
the data EPA proposed to use. EPA provided an ample opportunity for
comment on this methodology and on the data, including data regarding
emissions from Texas sources, used in the significant contribution
analysis. EPA received numerous comments on and corrections to Texas-
specific data. The modeling conducted for the final rule demonstrates
that Texas significantly contributes to nonattainment or interferes
with maintenance of the annual PM2.5 NAAQS in another state.
EPA provided a full opportunity for comment on whether Texas should be
included in the rule for annual PM2.5, as well as on the
methodology and data used for the significant contribution analysis for
the final rule. EPA therefore believes its determination that Texas
must be included in the rule for annual PM2.5 is a logical
outgrowth of its proposal.
    With respect to the 24-hour PM2.5 NAAQS, the analysis
EPA conducted for the proposal did not identify Texas as a state that
significantly contributes to nonattainment or interferes with
maintenance of 24-hour PM2.5 in another state. However, the
analysis conducted for the final rule shows that emissions from Texas
do significantly contribute to nonattainment of the 24-hour
PM2.5 NAAQS in another state. EPA is not issuing a FIP for
Texas with respect to the 24-hour PM2.5 NAAQS in this rule.
However, EPA believes that the FIP for Texas with respect to the 1997
annual PM2.5 NAAQS also addresses the emissions in Texas
that significantly contribute to nonattainment and interference with
maintenance of the 2006 24-hour PM2.5 NAAQS in another
state.
    The final rule, however, does not cover the states of Connecticut,
Delaware, the District of Columbia, Florida, Louisiana, or
Massachusetts for annual or 24-hour PM2.5 as the analysis
for the final rule does not support their inclusion.
    The Transport Rule FIPs require the 23 states covered for purposes
of the 24-hour and/or annual PM2.5 NAAQS to reduce
SO2 and annual NOX emissions by specified
amounts. The FIPs require the 20 states covered for purposes of the
ozone NAAQS to reduce ozone-season NOX emissions by
specified amounts. As discussed in detail in section VI, below, the 23
states covered for the 24-hour and/or annual PM2.5 NAAQS are
grouped in two tiers reflecting the stringency of SO2
reductions required to eliminate that state's significant contribution
to nonattainment and interference with maintenance downwind. The more-
stringent SO2 tier (``Group 1'') is comprised of the 16
states indicated in Table III-1, above, and the less-stringent
SO2 tier (``Group 2'') is comprised of the 7 states
identified in the table. The two SO2 trading programs are
exclusive, i.e., a covered source in a Group 1 state may use only a
Group 1 allowance for compliance, and likewise a source in a Group 2
state may use only a Group 2 allowance for compliance. In Group 1
states, the SO2 reduction requirements become more stringent
in the second phase, which starts in 2014.
    In response to the Court's opinion in North Carolina, EPA has
coordinated the Transport Rule's compliance deadlines with the NAAQS
attainment deadlines that apply to the downwind nonattainment and
maintenance areas. The Transport Rule requires that all significant
contribution to nonattainment and interference with maintenance
identified in this action with respect to the 1997 annual
PM2.5 NAAQS and the 2006 24-hour PM2.5 NAAQS be
eliminated by no later than 2014, with an initial phase of reductions
starting in 2012 to ensure that reductions are made as expeditiously as
practicable and, consistent with the Court's remand, to ``preserve the
environmental values covered by CAIR.'' Sources must comply by January
1, 2012 and January 1, 2014 for the first and second phases,
respectively.
    With respect to the 1997 ozone NAAQS, the Transport Rule requires
NOX reductions starting in 2012 to ensure that reductions
are made as expeditiously as practicable to assist downwind state
attainment and maintenance of the standard. Sources must comply by May
1, 2012. The Transport Rule's compliance schedule and alignment with
downwind NAAQS attainment deadlines are discussed in detail in section
VII below.
    Table III-2 shows projected Transport Rule emissions compared to
projected base case emissions, and Table III-3 shows projected
Transport Rule emissions compared to historical emissions (i.e., 2005
emissions), for the power sector in all Transport Rule states. The
ozone-season NOX results shown in Tables III-2 and III-3 are
based on analysis of the group of 26 states that would be covered for
the ozone-season program if EPA finalizes the supplemental proposal
regarding ozone-season requirements for Iowa, Kansas, Michigan,
Missouri, Oklahoma, and Wisconsin.

 Table III-2--Projected SO2 and NOX Electric Generating Unit Emission Reductions in Covered States With the Transport Rule Compared to Base Case Without
                                                                Transport Rule or CAIR **
                                                                     [Million tons]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          2012 Base case  2012 Transport   2012 Emission  2014 Base case  2014 Transport   2014 Emission
                                                             emissions    rule emissions    reductions       emissions    rule emissions    reductions
--------------------------------------------------------------------------------------------------------------------------------------------------------
SO2.....................................................             7.0             3.0             4.0             6.2             2.4             3.9
Annual NOX..............................................             1.4             1.3             0.1             1.4             1.2             0.2

Ozone-Season NOX........................................             0.7             0.6             0.1             0.7             0.6             0.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Note that numbers may not sum exactly due to rounding.
** As explained in section V.B, EPA's base case projections for the Transport Rule assume that CAIR is not in place.

    Notes: The SO2 and annual NOX emissions in
this table reflect EGUs in the 23 states covered by this rule for
purposes of the 24-hour and/or annual PM2.5 NAAQS
(Alabama, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky,
Maryland, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee,
Texas, Virginia, West Virginia, and Wisconsin). The ozone-season
NOX emissions reflect EGUs in the 20 states covered by
this rule for purposes of the ozone NAAQS (Alabama, Arkansas,
Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland,
Mississippi, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and West
Virginia) and the six states that would be covered for the ozone
NAAQS if EPA finalizes its supplemental proposal (Iowa, Kansas,
Michigan, Missouri, Oklahoma, and Wisconsin).

   Table III-3--Projected SO2 and NOX Electric Generating Unit Emission Reductions in Covered States With the
                                Transport Rule Compared to 2005 Actual Emissions
                                                 [Million tons]
----------------------------------------------------------------------------------------------------------------
                                                                   2012 Emission                   2014 Emission
                                    2005 Actual   2012 Transport    reductions    2014 Transport    reductions
                                     emissions    rule emissions     from 2005    rule emissions     from 2005
----------------------------------------------------------------------------------------------------------------
SO2.............................             8.8             3.0             5.8             2.4             6.4
Annual NOX......................             2.6             1.3             1.3             1.2             1.4
Ozone-Season NOX................             0.9             0.6             0.3             0.6             0.3
----------------------------------------------------------------------------------------------------------------

    Notes: The SO2 and annual NOX emissions in
this table reflect EGUs in the 23 states covered by this rule for
purposes of the 24-hour and/or annual PM2.5 NAAQS
(Alabama, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky,
Maryland, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee,
Texas, Virginia, West Virginia, and Wisconsin). The ozone-season
NOX emissions reflect EGUs in the 20 states covered by
this rule for purposes of the ozone NAAQS (Alabama, Arkansas,
Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland,
Mississippi, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and West
Virginia) and the six states that would be covered for the ozone
NAAQS if EPA finalizes its supplemental proposal (Iowa, Kansas,
Michigan, Missouri, Oklahoma, and Wisconsin).

    In addition to the emission reductions shown above, EPA projects
other substantial benefits of the Transport Rule, as described in
section VIII in this preamble. EPA used air quality modeling to
quantify the improvements in PM2.5 and ozone concentrations
that are expected to result from the Transport Rule emission reductions
in 2014. The Agency used the results of this modeling to calculate the
average and peak reduction in annual PM2.5, 24-hour
PM2.5, and 8-hour ozone concentrations for monitoring sites
in the Transport Rule covered states (including the six states for
which EPA issued a supplemental proposal for ozone-season
NOX requirements) in 2014.
    For annual PM2.5, the average reduction across all
monitoring sites in covered states in 2014 is 1.41 microgram per meter
cubed ([micro]g/m\3\) and the greatest reduction at a single site is
3.60 [micro]g/m\3\. For 24-hour PM2.5, the average reduction
across all monitoring sites in covered states in 2014 is 4.3 [micro]g/
m\3\ and the greatest reduction at a single site is 11.6 [micro]g/m\3\.
And finally, for 8-hour ozone, the average reduction across all
monitoring sites in covered states in 2014 is 0.3 parts per billion
(ppb) and the greatest is 3.9 ppb. See section VIII for further
information on air quality improvements.
    EPA estimated the Transport Rule's costs and benefits, including
effects on sensitive and vulnerable and environmental justice
communities. Table III-4, below, summarizes some of these results.
Further discussion of the results is provided in preamble section VIII,
below, and in the Regulatory Impact Analysis (RIA). Estimates here are
subject to uncertainties discussed further in the RIA.

      Table III-4.--Summary of Annual Benefits, Costs, and Net Benefits of the Final Transport Rule in 2014
                                             [Billions of 2007$] \a\
----------------------------------------------------------------------------------------------------------------
                                                       Transport rule remedy (billions of 2007 $)
              Description              -------------------------------------------------------------------------
                                                  3% discount rate                     7% discount rate
----------------------------------------------------------------------------------------------------------------
Social costs..........................  $0.81..............................  $0.81.
Total monetized benefits \b\..........  $120 to $280.......................  $110 to $250.
Net benefits (benefits-costs).........  $120 to $280.......................  $110 to $250.
----------------------------------------------------------------------------------------------------------------
\a\ All estimates are for 2014, and are rounded to two significant figures.

\b\ The total monetized benefits reflect the human health benefits associated with reducing exposure to PM2.5
  and ozone and the welfare benefits associated with improved visibility in Class I areas. The reduction in
  premature mortalities account for over 90 percent of total monetized PM2.5 and ozone benefits.

    As a result of updated analyses and in response to public comments,
the final Transport Rule differs from the proposal in a number of ways.
The differences between proposal and final rule are discussed
throughout this preamble. Some key changes between proposal and final
rule are that EPA:
     Updated emission inventories (resulting in generally lower
base case emissions). See section V.C.
     Updated modeling and analysis tools (including improved
alignment between air quality estimates and air quality modeling
results). See sections V and VI.
     Updated conclusions regarding which states significantly
contribute to nonattainment or interfere with maintenance of the NAAQS
in other states. See Table III-1 and sections V.D and VI.
     Recalculated state budgets and variability limits, i.e.,
state assurance levels, based on updated modeling. See section VI.
     Simplified variability limits for one-year application
only. See section VI.E.
     Revised allocation methodology for existing and new units
and revised new unit set-asides for new units in Transport Rule states
and new units potentially locating in Indian country. See section
VII.D.
     Changed start of assurance provisions to 2012 and
increased assurance provision penalties. See section VII.E.
     Removed opt-in provisions. See section VII.B
     Added provisions for full and abbreviated Transport Rule
SIP revisions. See section X.
    EPA conducted substantial stakeholder outreach in developing the
Transport Rule, starting with a series of ``listening sessions'' in the
spring of 2009 with states, nongovernmental organizations, and
industry. EPA docketed stakeholder-related materials in the Transport
Rule docket (Docket ID No. EPA-HQ-OAR-2009-0491). The Agency conducted
general teleconferences on the rule with tribal environmental
professionals, conducted consultation with tribal governments, and
hosted a webinar for communities and tribal governments. EPA continued
to provide updates to regulatory partners and stakeholders through
several conference calls with states as well as at conferences where
EPA officials often made presentations. The Agency conducted additional
stakeholder outreach during the public comment period. EPA responded to
extensive public comments received during the public comment periods on
the proposed rule and associated NODAs.
    This Transport Rule is one of a series of regulatory actions to
reduce the adverse health and environmental impacts of the power
sector. EPA is developing these rules to address judicial review of
previous rulemakings and to issue rules required by environmental laws.
Finalizing these rules will effectuate health and environmental
protection mandated by Congress while substantially reducing
uncertainty over the future regulatory obligations of power plants,
which will assist the power sector in planning for compliance more cost
effectively. The Agency is providing full opportunity for notice and
comment for each rule.
    As discussed above, rules to address transport under revised NAAQS,
including the reconsidered 2008 ozone NAAQS, may result in additional
emission reduction requirements for the power sector. In addition,
existing Clean Air Act rules establishing best available retrofit
technology (BART) requirements and other requirements for addressing
visibility and regional haze may also result in future state
requirements for certain power plant emission reductions where needed.
    On May 3, 2011 (76 FR 24976), EPA proposed national emission
standards for hazardous air pollutants from coal- and oil-fired
electric utility steam generating units under CAA section 112(d), also
called Mercury and Air Toxics Standards (MATS), and proposed revised
new source performance standards for fossil fuel-fired EGUs under
section 111(b). As discussed in the EPA-led public listening sessions
during February and March 2011, EPA is preparing to propose innovative,
cost-effective and flexible greenhouse gas (GHG) emissions performance
standards under section 111 for steam electric generating units, the
largest U.S. source of greenhouse gas emissions. On April 20, 2011 (76
FR 22174), EPA proposed requirements under section 316(b) of the Clean
Water Act for existing power generating facilities, manufacturing and
industrial facilities that withdraw more than two million gallons per
day of water from waters of the U.S. and use at least twenty-five
percent of that water exclusively for cooling purposes. On June 21,
2010 (75 FR 35128), the Agency proposed to regulate coal combustion
residuals (CCRs) under the Resource Conservation and Recovery Act to
address the risks from the disposal of CCRs generated from the
combustion of coal at electric utilities and independent power
producers.
    EPA will coordinate utility-related air pollution rules with each
other and with other actions affecting the power sector including these
rules from EPA's Office of Water and its Office of Resource
Conservation and Recovery to the extent consistent with legal authority
in order to provide timely information needed to support regulated
sources in making informed decisions. Use of a small number of air
pollution control technologies, widely deployed, can assist with
compliance for multiple rules. EPA also notes that the flexibility
inherent in the allowance-trading mechanism included in the Transport
Rule affords utilities themselves a degree of latitude to determine how
best to integrate compliance with the emission reduction requirements
of this rule and those of the other rules. EPA will pursue energy
efficiency improvements in the use of electricity throughout the
economy, along with other federal agencies, states and other groups,
which will contribute to additional environmental and public health
improvements while lowering the costs of realizing those improvements.

IV. Legal Authority, Environmental Basis, and Correction of CAIR SIP
Approvals

A. EPA's Authority for Transport Rule

    The statutory authority for this action is provided by the CAA, as
amended, 42 U.S.C. 7401 et seq. Section 110(a)(2)(D) of the CAA, often
referred to as the ``good neighbor'' provision of the Act, and requires
states to prohibit certain emissions because of their impact on air
quality in downwind states. Specifically, it requires all states,
within 3 years of promulgation of a new or revised NAAQS, to submit
SIPs that prohibit certain emissions of air pollutants because of the
impact they would have on air quality in other states. 42 U.S.C.
7410(a)(2)(D). This action addresses the requirement in section
110(a)(2)(D)(i)(I) regarding the prohibition of emissions within a
state that will significantly contribute to nonattainment or interfere
with maintenance of the NAAQS in any other

state. EPA has previously issued two rules interpreting and clarifying
the requirements of section 110(a)(2)(D)(i)(I). The NOX SIP
Call, promulgated in 1998, was largely upheld by the U.S. Court of
Appeals for the DC Circuit in Michigan, 213 F.3d 663. CAIR, promulgated
in 2005, was remanded by the DC Circuit in North Carolina, 531 F.3d
896, modified on reh'g, 550 F.3d. 1176. These decisions provide
additional guidance regarding the requirements of section
110(a)(2)(D)(i)(I) and are discussed later in this notice.
    Section 301(a)(1) of the CAA also gives the Administrator of EPA
general authority to prescribe such regulations as are necessary to
carry out her functions under the Act. 42 U.S.C. 7601(a)(1). Pursuant
to this section, EPA has authority to clarify the applicability of CAA
requirements. In this action, among other things, EPA is clarifying the
applicability of section 110(a)(2)(D)(i)(I) by identifying
SO2 and NOX emissions that must be prohibited
pursuant to this section with respect to the PM2.5 NAAQS
promulgated in 1997 and 2006 and the 8-hour ozone NAAQS promulgated in
1997.
    Section 110(c)(1) requires the Administrator to promulgate a FIP at
any time within 2 years after the Administrator finds that a state has
failed to make a required SIP submission, finds a SIP submission to be
incomplete or disapproves a SIP submission unless the state corrects
the deficiency, and the Administrator approves the SIP revision, before
the Administrator promulgates a FIP. 42 U.S.C. 7410(c)(1).
    Tribes are not required to submit state implementation plans.
However, as explained in EPA's regulations outlining Tribal Clean Air
Act authority, EPA is authorized to promulgate FIPs for Indian country
as necessary or appropriate to protect air quality if a tribe does not
submit and get EPA approval of an implementation plan. See 40 CFR
49.11(a); see also 42 U.S.C. section 7601(d)(4).
    Section 110(k)(6) of the CAA gives the Administrator authority,
without any further submission from a state, to revise certain prior
actions, including actions to approve SIPs, upon determining that those
actions were in error.

B. Rulemaking History

    The Transport Rule FIPs will limit the interstate transport of
emissions of NOX and SO2 within 27 states in the
eastern, midwestern, and southern United States that affect the ability
of downwind states to attain and maintain compliance with the 1997 and
2006 PM2.5 NAAQS and the 1997 ozone NAAQS.\10\ Prior to this
Transport Rule, CAIR was EPA's most recent regulatory action in a
longstanding series of regulatory initiatives to address interstate
transport of air pollution. The proposed Transport Rule preamble
provides more information on EPA actions prior to CAIR (75 FR 45221-
45225).
---------------------------------------------------------------------------

    \10\ As discussed in section III of this preamble, EPA is
proposing to apply ozone-season NOX requirements to
additional states. If EPA finalizes that action as proposed, the
total number of states covered by the Transport Rule FIPs would be
28.
---------------------------------------------------------------------------

    CAIR, promulgated May 12, 2005 (70 FR 25162), required 29 states to
adopt and submit revisions to their SIPs to eliminate SO2
and NOX emissions that contribute significantly to downwind
nonattainment of the PM2.5 and ozone NAAQS promulgated in
1997. The states covered by CAIR were similar but not identical to the
states covered by the Transport Rule. The CAIR FIPs, promulgated April
26, 2006 (71 FR 25328), regulated electric generating units in the
covered states and achieved CAIR's emission reduction requirements
unless or until states had approved SIPs to achieve the required
reductions.
    In July 2008, the DC Circuit Court found CAIR and the CAIR FIPs
unlawful and vacated CAIR. North Carolina, 531 F.3d at 929-30. However,
the Court subsequently remanded CAIR to EPA without vacatur in order to
``at least temporarily preserve the environmental values covered by
CAIR.'' North Carolina, 550 F.3d at 1178. CAIR requirements have
remained in place and CAIR's emission trading programs have operated
while EPA developed replacement rules in response to the remand.
    By promulgating the Transport Rule FIPs, EPA is responding to the
Court's remand of CAIR and the CAIR FIPs and replacing those rules. The
approaches EPA used in the Transport Rule to measure and address each
state's significant contribution to downwind nonattainment and
interference with maintenance are guided by and consistent with the
Court's opinion in North Carolina and address the flaws in CAIR
identified by the Court therein.
    By notice of proposed rulemaking (Federal Implementation Plans To
Reduce Interstate Transport of Fine Particulate Matter and Ozone, 75 FR
45210; August 2, 2010), EPA proposed the Transport Rule to identify and
limit NOX and SO2 emissions within 32 states in
the eastern, midwestern, and southern United States that affect the
ability of downwind states to attain and maintain compliance with the
1997 and 2006 PM2.5 NAAQS and the 1997 ozone NAAQS. EPA
proposed to achieve the emission reductions under FIPs, which states
may choose to replace by submitting SIPs for EPA approval. EPA proposed
to limit emissions by regulating electric generating units in the 32
states with interstate emission trading programs and assurance
provisions to ensure the required reductions occur in each covered
state. EPA also requested comment on two alternative FIP remedies.
    EPA supplemented the Transport Rule record with additional
information relevant to the rulemaking in three NODAs for which EPA
requested comments:
     Notice of Data Availability Supporting Federal
Implementation Plans to Reduce Interstate Transport of Fine Particulate
Matter and Ozone (75 FR 53613; September 1, 2010). This NODA provided
an updated database of unit-level characteristics of EGUs included in
EPA modeling, an updated version of the power sector modeling platform
EPA used to support the final rule, and other input assumptions and
data EPA provided for public review and comment.
     Notice of Data Availability Supporting Federal
Implementation Plans To Reduce Interstate Transport of Fine Particulate
Matter and Ozone: Revisions to Emission Inventories (75 FR 66055;
October 27, 2010). This NODA provided additional information relevant
to the rulemaking, including updated emission inventory data for 2005,
2012 and 2014 for several stationary and mobile source inventory
components.
     Notice of Data Availability for Federal Implementation
Plans To Reduce Interstate Transport of Fine Particulate Matter and
Ozone: Request for Comment on Alternative Allocations, Calculation of
Assurance Provision Allowance Surrender Requirements, New-Unit
Allocations in Indian Country, and Allocations by States (76 FR 1109;
January 7, 2011). This NODA provided additional information relevant to
the rulemaking, including emissions allowance allocations for existing
units calculated using two alternative methodologies, data supporting
those calculations, information about an alternative approach to
calculation of assurance provision allowance surrender requirements,
allocations for new units locating in Indian country in Transport Rule
states in the future, and provisions for states to submit SIPs
providing for state allocation of allowances in the Transport Rule
trading programs.

C. Air Quality Problems and NAAQS Addressed

1. Air Quality Problems and NAAQS Addressed
a. Fine Particles
    Fine particles are associated with a number of serious health
effects including premature mortality, aggravation of respiratory and
cardiovascular disease (as indicated by increased hospital admissions,
emergency room visits, health-related absences from school or work, and
restricted activity days), lung disease, decreased lung function,
asthma attacks, and certain cardiovascular problems. In addition to
effects on public health, fine particles are linked to a number of
public welfare effects, including (1) Reduced visibility (haze) in
scenic areas, (2) effects caused by particles settling on ground or
water, such as: making lakes and streams acidic, changing the nutrient
balance in coastal waters and large river basins, depleting the
nutrients in soil, damaging sensitive forests and farm crops, and
affecting the diversity of ecosystems, and (3) staining and damaging of
stone and other materials, including culturally important objects such
as statues and monuments.
    In 1997, EPA revised the NAAQS for PM to add new annual and 24-hour
standards for fine particles, using PM2.5 as the indicator
(62 FR 38652). These revisions established an annual standard of 15
[mu]g/m\3\ and a 24-hour standard of 65 [mu]g/m\3\. During 2006, EPA
revised the air quality standards for PM2.5. The 2006
standards decreased the level of the 24-hour fine particle standard
from 65 [mu]g/m\3\ to 35 [mu]g/m\3\, and retained the annual fine
particle standard at 15 [mu]g/m\3\.
b. Ozone
    Short-term (1- to 3-hour) and prolonged (6- to 8-hour) exposures to
ambient ozone have been linked to a number of adverse health effects.
At sufficient concentrations, short-term exposure to ozone can irritate
the respiratory system, causing coughing, throat irritation, and chest
pain. Ozone can reduce lung function and make it more difficult to
breathe deeply. Breathing may become more rapid and shallow than
normal, thereby limiting a person's normal activity. Ozone also can
aggravate asthma, leading to more asthma attacks that may require a
doctor's attention and the use of additional medication. Increased
hospital admissions and emergency room visits for respiratory problems
have been associated with ambient ozone exposures. Longer-term ozone
exposure can inflame and damage the lining of the lungs, which may lead
to permanent changes in lung tissue and irreversible reductions in lung
function. A lower quality of life may result if the inflammation occurs
repeatedly over a long time period (such as months, years, or a
lifetime). There is also epidemiological evidence indicating a
correlation between short-term ozone exposure and premature mortality.
    In addition to causing adverse health effects, ozone affects
vegetation and ecosystems, leading to reductions in agricultural crop
and commercial forest yields; reduced growth and survivability of tree
seedlings; and increased plant susceptibility to disease, pests, and
other environmental stresses (e.g., harsh weather). In long-lived
species, these effects may become evident only after several years or
even decades and have the potential for long-term adverse impacts on
forest ecosystems. Ozone damage to the foliage of trees and other
plants can also decrease the aesthetic value of ornamental species used
in residential landscaping, as well as the natural beauty of our
national parks and recreation areas. In 1997, at the same time we
revised the PM2.5 standards, EPA issued its final action to
revise the NAAQS for ozone (62 FR 38856) to establish new 8-hour
standards. In this action published on July 18, 1997, we promulgated
identical revised primary and secondary ozone standards that specified
an 8-hour ozone standard of 0.08 parts per million (ppm). Specifically,
the standards require that the 3-year average of the fourth highest 24-
hour maximum 8-hour average ozone concentration may not exceed 0.08
ppm. In general, the 8-hour standards are more protective of public
health and the environment and more stringent than the pre-existing 1-
hour ozone standards.
    On March 12, 2008, EPA published a revision to the 8-hour ozone
standard, lowering the level from 0.08 ppm to 0.075 ppm. On September
16, 2009, EPA announced it would reconsider these 2008 ozone standards.
The purpose of the reconsideration is to ensure that the ozone
standards are clearly grounded in science, protect public health with
an adequate margin of safety, and are sufficient to protect the
environment. EPA proposed revisions to the standards on January 19,
2010 (75 FR 2938) and anticipates issuing final standards soon.
c. Which NAAQS does this rule address?
    This action addresses the requirements of CAA section
110(a)(2)(D)(i)(I) as they relate to:
    (1) The 1997 annual PM2.5 standard,
    (2) The 2006 24-hour PM2.5 standard, and
    (3) The 1997 ozone standard.
    The original CAIR and CAIR FIP rules, which pre-dated the 2006
PM2.5 standards, addressed the 1997 ozone and 1997
PM2.5 standards only.
    In this action, EPA fully addresses, for the states covered by this
rule, the requirements of CAA section 110(a)(2)(D)(i)(I) for the annual
PM2.5 standard of 15 [mu]g/m\3\ and the 24-hour standard of
35 [mu]g/m\3\. For the 1997 8-hour ozone standard of 0.08 ppm, EPA
fully addresses the CAA section 110(a)(2)(D)(i)(I) requirements for
some states covered by this rule, but for the remaining states EPA is
conducting further analysis to determine whether further requirements
are needed, as discussed in section III of this preamble.
    This action does not address the CAA section 110(a)(2)(D)(i)(I)
requirements for the revised ozone standards promulgated in 2008. These
standards are currently under reconsideration. We are, however,
actively conducting the technical analyses and other work needed to
address interstate transport for the reconsidered ozone standard as
soon as possible. We intend to issue as soon as possible a proposal to
address the transport requirements with respect to the reconsidered
standard.
    This action addresses these CAA transport requirements through
reductions in annual emissions of SO2 and NOX,
and through reductions in ozone-season NOX. The rationale
for these reductions is discussed in detail later in the preamble.
d. Public Comments
    EPA received comments on two issues related to the NAAQS regulated
under the proposed FIPs.
    A number of commenters believed that EPA's approach to ozone was
inadequate, and that EPA should not have based the proposed
requirements on the 1997 ozone NAAQS. These commenters cited EPA's 2008
revision to the standard which lowered the standard to 75 ppb, and
noted that EPA's January 2010 proposal for reconsidered ozone NAAQS
would, if finalized, further lower the primary NAAQS from 75 ppb to a
value between 60 and 70 ppb. Accordingly, many of the commenters
believed that EPA should have considered the 75 ppb level to be the
maximum possible value moving forward, and that EPA should have used a
value no greater than 75 ppb in its analysis.
    EPA agrees with commenters that EPA and states should address
interstate transport with respect to the tighter

ozone NAAQS as quickly as possible. EPA, as commenters noted, intends
to propose a second rule to address interstate transport of ozone that
will be appropriately configured for the revised level of the ozone
NAAQS after reconsideration of the 2008 standard is finalized. EPA is
mindful of the need for SIPs to provide for continuing ozone progress
to meet the 75 ppb level of the 2008 NAAQS, or possibly lower levels
based on the reconsideration. EPA believes that the ozone-season
NOX requirements of this rule will provide important initial
assistance to states in this regard.
    Some commenters questioned whether EPA had given states the
opportunity to provide SIPs addressing transport under the 2006
PM2.5 NAAQS, and thus questioned the appropriateness of the
issuance of FIPs addressing those NAAQS. Those comments, and EPA's
response, are discussed in detail in section IV.C.2.
2. FIP Authority for Each State and NAAQS Covered
    The CAA requires and authorizes EPA to promulgate each of the
Federal Implementation Plans in this final rule. Section 110(c)(1) of
the CAA requires the Administrator to promulgate a FIP at any time
within 2 years after the Administrator takes one of three distinct
actions: (1) She finds that a state has failed to make a required SIP
submission; (2) she finds a SIP submission to be incomplete; or (3) she
disapproves a SIP submission. Once the Administrator has taken one of
these actions with respect to a specific state's 110(a)(2)(D)(i)(I)
obligation for a specific NAAQS, she has a legal obligation to
promulgate a FIP to correct the SIP deficiency within 2 years. EPA is
relieved of the obligation to promulgate a FIP only if two events occur
before the FIP is promulgated: (1) The state submits a SIP correcting
the deficiency; and (2) the Administrator approves the SIP revision. 42
U.S.C. 7410(c)(1).\11\
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    \11\ The CAA provides that EPA is not relieved of its obligation
to promulgate FIPs unless the state submits a SIP that corrects the
deficiency and EPA approves the SIP. Nonetheless, in the preamble to
the proposed rule, EPA indicated that for states not covered by CAIR
which had 110(a)(2)(D)(i)(I) SIPs pending at the time of proposal,
EPA would finalize the FIP only if EPA determined the submission was
incomplete or disapproved the SIP submission. The only two states
covered by this rule but not covered by CAIR are Kansas and
Nebraska. Both Kansas and Nebraska are covered by this rule based
only on their significant contribution to nonattainment or
interference with maintenance of the 2006 PM2.5 NAAQS.
EPA has not received a 110(a)(2)(D)(i)(I) submission from Nebraska
with respect to the requirements of the 2006 PM2.5 NAAQS.
EPA disapproved a SIP submission from Kansas with respect to the
requirements of 110(a)(2)(D)(i)(I) for the 2006 PM2.5
NAAQS.
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    For each FIP in this rule,\12\ EPA either has found that the state
has failed to make a required 110(a)(2)(D)(i)(I) SIP submission, or has
disapproved a SIP submission.\13\ In addition, EPA has determined, in
each case, that there has been no approval by the Administrator of a
SIP submission correcting the deficiency prior to promulgation of the
FIP. EPA's obligation to promulgate a FIP arose when the finding of
failure to submit or disapproval was made, and in no case has it been
relieved of that obligation.
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    \12\ In this action, EPA is issuing 59 FIPs. EPA is issuing 20
FIPs to remedy SIP deficiencies relating to the 110(a)(2)(D)(i)(I)
requirements for the 1997 ozone NAAQS. EPA is also issuing 18 FIPs
to remedy SIP deficiencies relating to the 1997 PM2.5
NAAQS. Finally, EPA is issuing 21 FIPs to remedy SIP deficiencies
relating to the 2006 PM2.5 NAAQS.
    \13\ The specific findings made and actions taken by EPA are
described in greater detail in the TSD entitled ``Status of CAA
110(a)(2)(D)(i)(I) SIPs.''
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    Some commenters argued that EPA was relieved of its obligation to
promulgate FIPs when it approved the CAIR SIPs for certain states. As
an initial matter, EPA notes that this argument applies only to EPA's
authority to promulgate FIPs with respect to the 1997 PM2.5
and/or 1997 ozone NAAQS for a subset of states covered by the CAIR. It
does not apply to EPA's authority to promulgate FIPs for the 2006
PM2.5 NAAQS which was not addressed in CAIR. It also does
not apply to EPA's authority to promulgate FIPs for the 1997 ozone and
1997 PM2.5 NAAQS for states that remain subject to the CAIR
FIPs, including the states that received EPA approval of abbreviated
CAIR SIPs which allowed the states to allocate allowances while
remaining subject to the CAIR FIPs.\14\
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    \14\ States may also have received approval to expand the
applicability of the CAIR NOX ozone season program to
include all units subject to the NOX Budget Program,
allow opt-ins, or provide for distribution of a Compliance
Supplement Pool under the CAIR NOX (annual) program.
---------------------------------------------------------------------------

    Further, the CAIR SIP approvals do not eliminate EPA's obligation
and authority to promulgate a FIP to address the requirements of
110(a)(2)(D)(i)(I) because the Court in North Carolina v. EPA, 531 F.3d
896 (D.C. Cir. 2008) found that compliance with CAIR does not satisfy
the requirement that each state prohibit all emissions within the state
that significantly contribute to nonattainment or interfere with
maintenance in another state. The Court's finding that CAIR was
unlawful because it did not make measureable progress towards the
statutory mandate of section 110(a)(2)(D)(i)(I) meant that the CAIR
SIPs were not adequate to satisfy that mandate. The CAIR SIPs thus do
not correct the SIP deficiencies identified in the 2005 findings of
failure to submit. The SIPs remained in force for the limited purpose
allowed by the Court--that is, to achieve interim reductions until EPA
promulgated a rule to replace CAIR. Given the flaws the court
identified with CAIR, EPA's approval of a CAIR SIP does not relieve it
of the obligation to promulgate FIPs created under section 110(c)(1) of
the CAA.
    Further, to avoid any confusion, EPA has decided to correct, in
this notice, the full CAIR SIP approvals for states covered by this
rule and the CAA 110(a)(2)(D)(i) SIP approvals for states covered by
CAIR to rescind any statements suggesting that the SIP submissions
satisfied or relieved states of the obligation to submit SIPs to
satisfy the requirements of section 110(a)(2)(D)(i)(I) or that EPA was
relieved of its obligation and authority to promulgate FIPs under
110(a)(2)(D)(I)(i).
    Some commenters further argued that states should be given
additional time, following promulgation of the Transport Rule, to
submit a SIP to meet the requirements of section 110(a)(2)(D)(i)(I) and
that CAIR should remain in place in the meantime. Some commenters
specifically suggested that EPA restart the ``FIP clock'' \15\ to give
states this additional time. EPA does not interpret the CAA as giving
it authority to extend the deadline for SIP submissions or restart the
FIP clock. And nothing in the Act requires EPA to give the states
another opportunity, following promulgation of the Transport Rule, to
promulgate a SIP before EPA promulgates a FIP. The plain language of
section 110(a)(1) of the Act requires the submission of SIPs that meet
the requirements of 110(a)(2)(D)(i)(I) within 3 years after the
promulgation of or revision of a primary NAAQS. See 42 U.S.C.
7410(a)(1). Section 110(a)(2)(D)(i)(I) SIPs for the 1997 ozone and
PM2.5 NAAQS were due in 2000 and 110(a)(2)(D)(i)(I) SIPs for
the 2006 PM2.5 NAAQS were due in 2009. While the statute
gives EPA authority to prescribe a shorter period of time for states to
make these SIP submissions, it does not give EPA authority to extend
the 3-year deadline established by the Act. See 42 U.S.C. 7410(a)(1).
The plain language of section 110(c)(1) of the Act, in turn, provides
that EPA shall promulgate a FIP at any time within 2 years after the
Administrator makes a finding of failure to make a required SIP

submission of disapproves, in whole or in part, a SIP submission. See
42 U.S.C. 7410(c)(1). EPA does not have authority to set aside the
specific deadlines established in the statute, and neither provision
allows for the deadlines to be extended or to run from promulgation by
EPA of a rule to quantify the state's specific obligations pursuant to
section 110(a)(2)(D)(i)(I). The Act does not require EPA to promulgate
a rule or issue guidance regarding the specific requirements of section
110(a)(2)(D)(i)(I) in advance of the SIP submittal deadline, much less
require EPA to promulgate such a rule a specific amount of time before
the SIP submittal deadline. For these reasons, EPA has neither
authority to alter the SIP submittal deadline nor authority to alter
the statute provision regarding when EPA's obligation to promulgate a
FIP is triggered.
---------------------------------------------------------------------------

    \15\ ``FIP clock'' is a term used to describe EPA's
responsibility found in CAA Section 110(c)(1) to promulgate a FIP
within 2 years after either: Finding that a state has not submitted
a required SIP revision or that a submitted SIP revision is
incomplete; or disapproving a SIP revision.
---------------------------------------------------------------------------

    Finally, EPA does not believe it would be appropriate, in light of
the Court's decision in North Carolina, to establish a lengthy
transition period to the rule that will replace CAIR. The Court
decision remanding CAIR without vacatur stressed the court's conclusion
that CAIR was deeply flawed and emphasized EPA's obligation to remedy
those flaws expeditiously. North Carolina, 550 F.3d 1176. Although the
Court did not set a specific deadline for corrective action, the Court
took care to note that the effect of its opinion would not be delayed
``indefinitely'' and that petitioners could bring a mandamus petition
if EPA were to fail to modify CAIR in a manner consistent with its
prior opinion. Id. Given the Court's emphasis on remedying CAIR's flaws
expeditiously, EPA does not believe it would be appropriate to
establish a lengthy transition period to the rule which is to replace
CAIR.
3. Additional Information Regarding CAA Section 110(a)(2)(D)(i)(I) SIPs
for States in the Transport Rule Modeling Domain
    This final rule quantifies out-of-state contributions for the 38
states that are fully contained within the 12 kilometers (km) eastern
U.S. modeling domain. EPA is making no specific finding for states that
are not fully contained within the eastern 12 km modeling domain. EPA
did not conduct a contribution analysis or make any specific finding
for New Mexico, Colorado, Wyoming, and Montana since they are only
partially contained within the 12 km modeling domain. With regard to
the 1997 PM2.5 NAAQS and 2006 PM2.5 NAAQS, EPA
believes that states that are included in this 38 state modeling domain
will meet their section 110(a)(2)(D)(i)(I) obligations to address the
``significant contribution'' and ``interference with maintenance''
requirements by complying with the requirements in this rule. With
regard to the 1997 ozone NAAQS, EPA believes that states that are
included in this 38 state modeling domain will meet their section
110(a)(2)(D)(i)(I) obligations to address the ``significant
contribution'' and ``interference with maintenance'' requirements by
complying with the requirements in this rule, except for the 10 states
found to significantly contribute to nonattainment or interference of
maintenance in either Houston or Baton Rouge (i.e., Alabama, Arkansas,
Georgia, Illinois, Indiana, Kentucky, Louisiana, Mississippi,
Tennessee, and Texas). States that are in the 38 state modeling domain,
and that are not found to be contributing significantly to
nonattainment or interfering with maintenance for any NAAQS evaluated
in the modeling for the final rule, could rely on this analysis as
technical support that their existing or future interstate transport
SIP submittals are adequate to address the transport requirements of
110(a)(2)(D)(i)(I). For example, this rule finds that South Carolina
significantly contributes to nonattainment and interferes with
maintenance of the 1997 ozone NAAQS and the 1997 PM2.5 NAAQS
in downwind states. The technical support for the rule does not show
that South Carolina significantly contributes to nonattainment or
interferes with maintenance of the 2006 PM2.5 NAAQS in
downwind states. EPA believes that South Carolina can make a negative
declaration concluding that the state does not significantly contribute
to nonattainment or interfere with maintenance in other states with
regard to the 2006 PM2.5 NAAQS.

D. Correction of CAIR SIP Approvals

    In this action, EPA is also correcting its prior approvals of CAIR
related SIP submissions and CAA 110(a)(2)(D)(i) SIP submissions from
Alabama, Arkansas, Connecticut, Florida, Georgia, Illinois, Indiana,
Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota,
Mississippi, Missouri, New York, North Carolina, Ohio, Pennsylvania,
South Carolina, Virginia and West Virginia to rescind any statements
that the SIP submissions either satisfy or relieve the state of the
obligation to submit a SIP to satisfy the requirements of section
110(a)(2)(D)(i)(I) with respect to the 1997 ozone and/or 1997
PM2.5 NAAQS or any statements that EPA's approval of the SIP
submissions either relieve EPA of the obligation to promulgate a FIP or
remove EPA's authority to promulgate a FIP. This action is based on
EPA's determination that those SIP approvals were in error to the
extent they provided explicitly or implicitly that compliance with CAIR
satisfies the requirements of 110(a)(2)(D)(i)(I) with respect to the
1997 ozone and 1997 PM2.5 NAAQS. The July 2008 decision of
the DC Circuit held, among other things, that the CAIR rule did not
``achieve[] something measureable toward the goal of prohibiting
sources `within the State' from contributing to nonattainment or
interfering with maintenance in `any other State.''' North Carolina,
531 F.3d 908; see also, e.g., id. at 916 (EPA not exercising its
authority to make measureable progress towards the goals of section
110(a)(2)(D)(i)(I) because the emission budgets were insufficiently
related to the statutory mandate). EPA's actions to approve CAIR SIP
submittals as satisfying the requirements of section
110(a)(2)(D)(i)(I), based on the flawed determination in CAIR that
compliance with CAIR satisfied those statutory requirements, were thus
in error as were the separate actions taken to approve section
110(a)(2)(D)(i)(I) submissions that relied wholly or in part on CAIR.
    The approval for Alabama titled ``Approval and Promulgation of
Implementation Plans; Alabama; Clean Air Interstate Rule'' which is
hereby corrected was originally published in the Federal Register on
October 1, 2007 (72 FR 55659).
    The approval for Arkansas titled ``Approval and Promulgation of
Implementation Plans; Arkansas; Clean Air Interstate Rule Nitrogen
Oxides Ozone Season Trading Program'' which is hereby corrected was
originally published in the Federal Register on September 26, 2007 (72
FR 54556).
    The approval for Connecticut titled ``Approval and Promulgation of
Air Quality Implementation Plans; Connecticut; State Implementation
Plan Revision to Implement the Clean Air Interstate Rule'' which is
hereby corrected was originally published in the Federal Register on
January 24, 2008 (73 FR 4105) and the approval for Connecticut titled
``Approval and Promulgation of Air Quality Implementation Plans;
Connecticut; Interstate Transport of Pollution'' which is hereby
corrected was originally published in the Federal Register on May 7,
2008 (73 FR 25516).
    The approval for Florida titled ``Approval and Promulgation of
Implementation Plans; Florida; Clean Air Interstate Rule'' which is
hereby corrected was originally published in the Federal Register on
October 12, 2007 (72 FR 58016).

    The approval for Georgia titled ``Approval and Promulgation of
Implementation Plans; Georgia; Clean Air Interstate Rule'' which is
hereby corrected was originally published in the Federal Register on
October 9, 2007 (72 FR 57202).
    The approval for Illinois titled ``Approval of Implementation Plans
of Illinois: Clean Air Interstate Rule'' which is hereby corrected was
originally published in the Federal Register on October 16, 2007 (72 FR
58528).
    The approval for Indiana titled ``Limited Approval of
Implementation Plans of Indiana: Clean Air Interstate Rule'' which is
hereby corrected was originally published in the Federal Register on
October 22, 2007 (72 FR 59480) and the approval for Indiana titled
``Approval and Promulgation of Air Quality Implementation Plans;
Indiana; Clean Air Interstate Rule'' which is hereby corrected was
originally published in the Federal Register on November 29, 2010 (75
FR 72956).
    The approval for Iowa titled ``Approval and Promulgation of
Implementation Plans; Iowa; Clean Air Interstate Rule'' which is hereby
corrected was originally published in the Federal Register on August 6,
2007 (72 FR 43539) and the approval for Iowa titled ``Approval and
Promulgation of Implementation Plans; Iowa; Interstate Transport of
Pollution'' which is hereby corrected was originally published in the
Federal Register on March 8, 2007 (72 FR 10380).
    The approval for Kentucky titled ``Approval of Implementation Plans
of Kentucky: Clean Air Interstate Rule'' which is hereby corrected was
originally published in the Federal Register on October 4, 2007 (72 FR
56623).
    The approval for Louisiana titled ``Approval and Promulgation of
Implementation Plans; Louisiana; Clean Air Interstate Rule Sulfur
Dioxide Trading Program'' which is hereby corrected was originally
published in the Federal Register on July 20, 2007 (72 FR 39741) and
the approval for Louisiana titled ``Approval and Promulgation of
Implementation Plans; Louisiana; Clean Air Interstate Rule Nitrogen
Oxides Trading Program'' which is hereby corrected was originally
published in the Federal Register on September 28, 2007 (72 FR 55064).
    The approval for Maryland titled ``Approval and Promulgation of Air
Quality Implementation Plans; Maryland; Clean Air Interstate Rule''
which is hereby corrected was originally published in the Federal
Register on October 30, 2009 (74 FR 56117).
    The approval for Massachusetts titled ``Approval and Promulgation
of Air Quality Implementation Plans; Massachusetts; State
Implementation Plan Revision to Implement the Clean Air Interstate
Rule'' which is hereby corrected was originally published in the
Federal Register on December 3, 2007 (72 FR 67854).
    The approval for Minnesota titled ``Approval and Promulgation of
Air Quality Implementation Plans; Minnesota; Interstate Transport of
Pollution'' which is hereby corrected was originally published in the
Federal Register on June 2, 2008 (73 FR 31366).
    The approval for Mississippi titled ``Approval and Promulgation of
Implementation Plans; Mississippi: Clean Air Interstate Rule'' which is
hereby corrected was originally published in the Federal Register on
October 3, 2007 (72 FR 56268).
    The approval for Missouri titled ``Approval and Promulgation of
Implementation Plans; Missouri; Clean Air Interstate Rule'' which is
hereby corrected was originally published in the Federal Register on
December 14, 2007 (72 FR 71073) and the approval of Missouri titled
``Approval and Promulgation of Implementation Plans; Missouri;
Interstate Transport of Pollution'' which is hereby corrected was
originally published in the Federal Register on May 8, 2007 (75 FR
25975).
    The approval for New York titled ``Approval and Promulgation of
Implementation Plans; New York: Clean Air Interstate Rule'' which is
hereby corrected was originally published in the Federal Register on
January 24, 2008 (73 FR 4109).
    The approval for North Carolina titled ``Approval of Implementation
Plans; North Carolina: Clean Air Interstate Rule'' which is hereby
corrected was originally published in the Federal Register on October
5, 2007 (72 FR 56914) and the approval for North Carolina titled
``Approval and Promulgation of Air Quality Implementation Plans; North
Carolina; Clean Air Interstate Rule'' which is hereby corrected was
originally published in the Federal Register on November 30, 2009 (74
FR 62496).
    The approval for Ohio titled ``Approval and Promulgation of Air
Quality Implementation Plans; Ohio; Clean Air Interstate Rule'' which
is hereby corrected was originally published in the Federal Register on
February 1, 2008 (73 FR 6034) and the approval for Ohio titled
``Approval and Promulgation of Air Quality Implementation Plans; Ohio;
Clean Air Interstate Rule'' which is hereby corrected was originally
published in the Federal Register on September 25, 2009 (74 FR 48857).
    The approval for Pennsylvania titled ``Approval and Promulgation of
Air Quality Implementation Plans; Pennsylvania; Clean Air Interstate
Rule; NOX SIP Call Rule; Amendments to NOX
Control Rules'' which is hereby corrected was originally published in
the Federal Register on December 10, 2009 (74 FR 65446).
    The approval for South Carolina titled ``Approval of Implementation
Plans of South Carolina: Clean Air Interstate Rule'' which is hereby
corrected was originally published in the Federal Register on October
9, 2007 (72 FR 57209) and the approval for South Carolina titled
``Approval and Promulgation of Air Quality Implementation Plans; South
Carolina; Clean Air Interstate Rule'' which is hereby corrected was
originally published in the Federal Register on October 16, 2009 (74 FR
53167).
    The approval for Virginia titled ``Approval and Promulgation of Air
Quality Implementation Plans; Virginia; Clean Air Interstate Rule
Budget Trading Programs'' which is hereby corrected was originally
published in the Federal Register on December 28, 2007 (72 FR 73602).
    The approval for West Virginia titled ``Approval and Promulgation
of Air Quality Implementation Plans; West Virginia; Clean Air
Interstate Rule'' which is hereby corrected was originally published in
the Federal Register on December 18, 2007 (72 FR 71576) and the
approval for West Virginia titled ``Approval and Promulgation of Air
Quality Implementation Plans; West Virginia; Clean Air Interstate
Rule'' which is hereby corrected was originally published in the
Federal Register on August 4, 2009 (74 FR 38536).
    EPA is taking this final action without prior opportunity for
notice and comment because EPA finds, for good cause, that notice and
public procedure thereon are unnecessary and not in the public
interest. Section 553(b)(B) of the Administrative Procedure Act
provides that the notice and comment requirements in section 553 do not
apply when the agency for good cause finds that notice and public
procedure there on are impracticable, unnecessary, or contrary to the
public interest. 5 U.S.C. 553(b)(B). Section 307(d)(1) of the CAA in
turn provides that the requirements of section 307(d) do not apply in
the case of a rule or circumstance referred to in section 553(b)(A) or
section 553(b)(B) of the Administrative Procedure Act in Title 5. 42
U.S.C. 7607(1).
    EPA finds that notice and public procedure are unnecessary because
EPA has no discretion given the specific

circumstances presented in this case. EPA is bound by the decisions of
the courts and must act in accordance with those decisions. EPA must
accept the Court's conclusion that compliance with CAIR does not
satisfy the requirements of CAA section 110(a)(2)(D)(i)(I) and lacks
discretion to reach a different conclusion. This correction is a
ministerial matter consistent with the decisions of the courts. For
these reasons, it is unnecessary to provide an opportunity for notice
and comment.

V. Analysis of Downwind Air Quality and Upwind State Emissions

A. Pollutants Regulated

    To address interstate transport of air pollution, EPA must choose
which pollutants to regulate relevant to significant contribution to
nonattainment or interference with maintenance of the NAAQS of concern
downwind. This section of the preamble discusses the pollutants
regulated under the final Transport Rule.
1. Background
    Based on scientific and technical information, as well as EPA's air
quality modeling, EPA concluded for CAIR that the most effective
approach to reducing the contribution of interstate transport to
PM2.5 was to control SO2 and NOX
emissions. For CAIR, EPA did not limit emissions of other components of
PM2.5, noting that ``current information relating to sources
and controls for other components identified in transported
PM2.5 (carbonaceous particles, ammonium, and crustal
materials) does not, at this time, provide an adequate basis for
regulating the regional transport of emissions responsible for these
PM2.5 components'' (69 FR 4582).
    With respect to ozone transport, EPA has previously concluded that
it is proper to control ozone-season NOX emissions. For CAIR
and the NOX SIP Call programs, EPA based this conclusion on
the assessment of ozone transport conducted by the Ozone Transport
Assessment Group (OTAG) in the mid-1990s. The OTAG Regional and Urban
Scale Modeling and Air Quality Analysis Work Groups concluded that
regional NOX emission reductions are effective in producing
ozone benefits that grow with increasing regional NOX
abatement.
    The relative importance of NOX and VOC in ozone
formation and control varies with local and time-specific factors,
including the relative amounts of VOC and NOX present. In
rural areas and many urban areas with high concentrations of VOC from
biogenic sources, ozone formation and control is governed by
NOX. In some urban core situations, NOX
concentrations can be high enough relative to VOC to suppress ozone
formation locally, but still contribute to increased ozone downwind
from the city. In such situations, VOC reductions are most effective at
reducing ozone within the urban environment and immediately downwind.
The formation of ozone increases with temperature and sunlight, which
is one reason ozone levels are higher during the summer. Increased
temperature also increases emissions of volatile man-made and biogenic
organics and can indirectly increase NOX as well (e.g.,
increased electricity generation for air conditioning). Summertime
conditions also bring increased episodes of large scale stagnation of
air masses, which promote the build-up of direct emissions and
pollutants formed through atmospheric reactions over large regions.
Authoritative assessments of ozone control approaches have concluded
that, for reducing regional scale ozone transport, a NOX
control strategy is most effective, whereas VOC reductions are
generally most effective locally, in more dense urbanized areas.
    Studies conducted since the 1970s established that ozone occurs on
a regional scale (i.e., thousands of kilometers) over much of the
eastern U.S., with elevated concentrations occurring in rural as well
as metropolitan areas. While substantial progress has been made in
reducing ozone in many urban areas, regional-scale ozone transport is
still an important component of high ozone concentrations during the
extended summer ozone season. A series of more recent progress reports
discussing the effect of the NOX SIP Call reductions can be
found on EPA's Web site at: http://www.epa.gov/airmarkets/progress/progress-reports.html.
    More recent assessments of ozone (including those conducted for the
Regulatory Impact Analysis for the ozone standards in 2008) continue to
show the importance of NOX transport as a factor in ozone
formation. For addressing interstate ozone transport in CAIR, EPA
required NOX emission reductions but did not include
requirements for VOCs. EPA believes that VOCs from some upwind states
do indeed have an impact in some nearby downwind states, particularly
over short transport distances. EPA expects that states, typically in
local nonattainment planning, would benefit from examining the extent
to which VOC emissions affect ozone pollution levels within and near
urban nonattainment areas, and states may identify areas where multi-
state VOC strategies might assist in attainment planning for meeting
the 8-hour standard. However, EPA continues to believe that the most
effective regional pollution control strategy for mitigation of
interstate transport of ozone remains NOX emission
reductions.
2. Which pollutants did EPA propose to control for purposes of
PM2.5 and ozone transport?
    For the proposed rule, EPA concluded that its findings in CAIR
regarding the nature of pollutant contributions are still appropriate.
EPA proposed to require SO2 and annual NOX
emission reductions to control PM2.5 transport and to
require ozone-season NOX emission reductions to control
ozone transport. In the proposal, EPA discussed and requested comment
on the inclusion of southern states in the annual NOX
program for PM2.5 control.
3. Comments and Responses
    EPA received no adverse comments on its proposal to regulate
SO2 for addressing PM2.5 transport, the proposal
not to regulate direct PM2.5 or organic PM2.5
precursors, and the proposal to focus ozone-season efforts on
NOX and not to regulate VOCs.
    One commenter questioned EPA's regulation of NOX for
purposes of addressing PM2.5 transport in all states
(including northern states with cooler climates and higher nitrate
deposition). Several commenters, representing southern state air
quality agencies and regulated sources in southern states, disagreed
with EPA's proposed regulation of annual NOX emissions for
all regulated states. These commenters, while not disagreeing with the
need for regulation of SO2, observed that in EPA's modeling
analysis, contributions from certain southern states' NOX
emissions to PM2.5 in downwind states were relatively small.
    Accordingly, these commenters argued that either (1) EPA should
remove NOX as a precursor analyzed for PM2.5
contribution from those states, or (2) the required remedy for emission
reductions in those states should not require reductions in annual
NOX.
    For the final rule, EPA retains the approach for regulated
pollutants in the proposal, which regulates annual NOX and
SO2 for states affecting downwind state PM2.5
nonattainment and maintenance sites, and ozone-season NOX
for states impacting downwind state ozone nonattainment and
maintenance. EPA considered commenters' requests to remove some states
from the annual NOX program. However, EPA believes that it
is

appropriate to establish a cap on these states' annual NOX
emissions, in part to ensure the continued annual operation of existing
control equipment that would prevent substantial increases in
NOX emissions. EPA believes that without these reductions,
increased ``nitrate replacement'' could occur, a known atmospheric
phenomenon whereby some of the sulfate reductions due to SO2
emission reductions are eroded by increases in nitrate concentrations
due solely to those SO2 reductions.\16\ This is an
especially pertinent concern for southern states which have significant
impacts on northern receptors in colder climates where nitrate
concentrations are generally higher. For example, Alabama and Tennessee
are both linked to Washtenaw County, MI for 24-hour PM2.5;
North Carolina is linked to Lancaster County, PA for 24-hour
PM2.5; and Texas is linked to Madison County, IL for both
annual and 24-hour PM2.5. All of these downwind areas have
appreciable nitrate deposition contributing to nonattainment and
maintenance concerns for the PM2.5 NAAQS. If the states
linked to those receptors were to make SO2 reductions only,
their beneficial impact on downwind air quality would be partially
eroded by nitrate replacement. EPA therefore believes that it is
reasonable to seek both SO2 and NOX reductions
from states included in the Transport Rule program that are found to
significantly contribute to nonattainment or interfere with maintenance
of the PM2.5 NAAQS in downwind states.
---------------------------------------------------------------------------

    \16\ SO2 reductions successfully decrease atmospheric
formation of ammonium sulfate, but in doing so they ``free up'' the
ammonia component that would otherwise have reacted with
SO2 and is now free to react with NOX instead,
causing a ``rebound effect'' partially eroding the improvement in
PM2.5 concentrations. This effect can be mitigated with
tandem NOX reductions.
---------------------------------------------------------------------------

    In addition, EPA notes that there would be important disbenefits to
effectively removing CAIR's existing annual NOX requirements
in those states. If EPA were to allow annual NOX emissions
to increase for those states, there would be potentially harmful
effects on visibility, nitrogen deposition, and other aspects of human
and environmental health.

B. Baseline for Pollution Transport Analysis

    Implementing the mandate of CAA section 110(a)(2)(D)(i)(I) requires
EPA to determine which states significantly contribute to nonattainment
and interfere with maintenance of the NAAQS in other states, as well as
to quantify the emissions in each state that must be eliminated. This
process begins with an analysis of baseline emissions. Baseline
emissions are the emissions that would occur in each state if EPA did
not promulgate the Transport Rule. To conduct such analysis, EPA
generally takes into account emission limitations that are currently,
and will continue to be, in place. From that baseline, EPA analyzes
whether additional reductions are necessary beyond those already
mandated by existing emission limitation requirements. For example, the
base case used in CAIR reflected the reductions already required by the
NOX SIP Call, which remained in effect even after the CAIR
emission reduction requirements took effect.
    The unique legal situation addressed by the Transport Rule
necessarily affects the quantification of baseline emissions.
Specifically, because the Transport Rule will replace CAIR, EPA cannot
consider reductions associated with CAIR in the ``base case'' (i.e.,
analytical baseline emissions scenario). If EPA were to consider all
reductions associated with CAIR in the ``base case,'' the baseline
emissions would not adequately reflect the true 2012 baseline in each
state (i.e., the emissions that would occur in each state in 2012 if
the Transport Rule did not require any reductions in that state).
Similarly, if EPA were to treat the capital investments that have
already been made to meet the requirements of CAIR as new costs rather
than treating them as ``sunk'' capital costs, EPA's analysis would not
accurately reflect the cost of emission reductions required by the
Transport Rule. As explained below, EPA's analysis both properly
considered all capital investments made in response to CAIR and
properly recognized that, after CAIR is terminated, the emission
limitations imposed by CAIR will cease to exist.
    In 2005 EPA promulgated CAIR, which required large electric
generating units in 29 states to make phase I emission reductions in
NOX emissions starting in 2009, phase I emission reductions
in SO2 starting in 2010 and phase II reductions in emissions
of both pollutants starting in 2015. On July 11, 2008, the DC Court of
Appeals held that CAIR had ``more than several fatal flaws,'' North
Carolina, 531 F.3d at 901, and remanded and vacated the rule, id. at
930. The Court subsequently granted EPA's petition for rehearing in
part and remanded CAIR without vacatur ``for EPA to conduct further
proceedings consistent with'' the Court's July 11, 2008 opinion. North
Carolina, 550 F.3d 1176. The Court explained that it was ``allowing
CAIR to remain in effect until it is replaced by a rule consistent with
[the July 11, 2008] opinion'' because this ``would at least temporarily
preserve the environmental values covered by CAIR.'' Id. at 1178.
Moreover, the Court stated that it did not ``intend to grant an
indefinite stay of the effectiveness of'' the July 11, 2008 order
vacating CAIR. Id. In summary, the Court determined that CAIR was
fatally flawed and could remain in effect only as a stopgap measure
until EPA could act to replace it.
    Thus, unlike most other regulatory requirements (such as the Acid
Rain Program under CAA Title IV, the NOX Budget Trading
Program under the NOX SIP Call, New Source Performance
Standards, and state laws and consent orders requiring emission
reductions), the emission limitations contained in CAIR are only
temporary. Moreover, the duration of these limitations is directly tied
to the Transport Rule. The Transport Rule replaces CAIR. Thus, CAIR
itself will be terminated for the SO2, annual
NOX, and ozone-season NOX control periods
starting in 2012 when the emission limitations established in the final
Transport Rule for those control periods take effect (January 1, 2012
for the annual control periods and May 1, 2012 for the ozone-season
control period). For this reason, emission reductions made to comply
with CAIR cannot be treated as if they were emission reductions
achieved to comply with statutory provisions, rules, consent decrees,
and other enforceable requirements that establish permanent emission
limitations. EPA takes reductions made to comply with permanent
limitations into consideration when quantifying each state's baseline
emissions for the purpose of analyzing whether its emissions
significantly contribute to nonattainment or interfere with maintenance
in another state. However, the unique legal status of CAIR and its
replacement with the Transport Rule distinguish the emission reductions
required by CAIR from those of other regulatory requirements. Since the
limitations and emission reduction requirements in CAIR are temporary
and will be terminated by the Transport Rule, they must be excluded
from the Transport Rule's base case analysis.
    Some comments on the Transport Rule proposal claim that EPA's
treatment of CAIR is inconsistent with the treatment, in prior
rulemakings, of the Acid Rain Program and the NOX SIP Call.
Such comments ignore the unique legal status of CAIR, and EPA therefore
rejects these claims.
    A simple example illustrates this point. Assume state Z's emissions
before

CAIR were 2,000 tons and that state Z was required by CAIR to reduce
its emissions to 1,000 tons. If EPA were to determine that state Z's
baseline emissions were 1,000 tons and then conclude, based on that
assumption, that no additional reductions in state Z are necessary
because state Z does not significantly contribute to downwind
nonattainment unless its emissions exceed 1,500 tons, then state Z
would not be covered by the Transport Rule. However, the Transport Rule
will terminate all CAIR requirements in all CAIR states regardless of
whether they are covered by the Transport Rule. Thus, after
promulgation of the Transport Rule, state Z would again be allowed, and
would be projected in this example, to emit 2,000 tons. In other words,
state Z would be allowed to significantly contribute to nonattainment
and/or interfere with maintenance in other states--a result that would
be inconsistent with the statutory mandate of CAA section
110(a)(2)(D)(i)(I). On the other hand, if EPA assumes state Z's
baseline emissions are 2,000 tons as projected without CAIR in place,
EPA can properly determine whether, if state Z were allowed to emit
that amount (i.e., the amount state Z would be projected to emit if
excluded from the Transport Rule), the state would significantly
contribute to nonattainment or interfere with maintenance in any other
state. In other words, EPA can determine the stringency of emission
limitations needed (if any) to replace those that were established by
CAIR in order to ensure that state Z prohibits all emissions that
significantly contribute to nonattainment or interfere with maintenance
in other states.
    In fact, commenters' suggestion that the Transport Rule base case
should include CAIR would cause the anomalous result of excluding
sources in a state from the Transport Rule because of their CAIR-
required emission reductions while simultaneously eliminating those
CAIR emission reduction requirements. If EPA's base case analysis were
to assume erroneously that reductions from CAIR would continue
indefinitely, a state currently covered by CAIR, but not covered by the
Transport Rule, would have no CAIR requirements once the Transport Rule
programs began and so could increase emissions beyond the CAIR
limitations. Downwind areas that are in attainment (and are not
experiencing interference with maintenance of such attainment) solely
because of emission reductions required by CAIR could again face
nonattainment or interference with maintenance problems because the
current protection from upwind pollution from such an upwind state
would not be replaced. In short, the analysis of whether a state should
be included in a rule eliminating and replacing CAIR cannot logically
assume that CAIR remains in place. For these reasons, EPA believes it
is reasonable to use a base case that does not assume that the CAIR
reduction requirements will continue to be achieved and so does not
include CAIR-specific emission reductions.
    As a result, EPA's 2012 base case shows emissions higher than
current levels in some states. In the absence of the CAIR
SO2 and NOX programs that EPA has been directed
to eliminate and replace, utility emissions in CAIR states will be
limited only by non-CAIR constraints including the Acid Rain Program,
the NOX SIP Call, New Source Performance Standards, any
state laws and consent order requiring emission reductions, and any
other permanent and enforceable binding reduction commitments. This
will lead to increased emissions in some states in the 2012 base case
relative to current emissions. For example, efforts to comply with the
Acid Rain Program at the least cost may occur, in some cases, without
the operation of existing scrubbers through use of readily available,
inexpensive Title IV allowances.
    It is important to note that, to the extent that emission
reductions currently required by CAIR are also reflected in emission
reduction requirements under the Acid Rain Program, the NOX
SIP Call, New Source Performance Standards, any state laws and consent
orders requiring emission reductions, and any other enforceable binding
reduction commitments, such reductions are accounted for in EPA's 2012
base case. Some commenter claimed that in excluding CAIR-specific
emission reductions from the base case, EPA ignores non-CAIR legal
requirements (e.g., in Title V permits) that may prevent sources from
increasing emissions above CAIR levels. Such allegations are incorrect.
As discussed elsewhere in this preamble, EPA accounted for any Title V
permits, consent decrees, state rules, and other enforceable
limitations on sources' emissions; if these non-CAIR limitations
effectively restrain a state's emissions to not exceed the state's CAIR
limitations, EPA's base case modeling would reflect this outcome.
Commenters also assert that utilities are unlikely to dismantle or
discontinue running the installed controls to the point of returning to
pre-CAIR emission levels. EPA agrees that installed controls are not
likely to be physically dismantled, and as discussed elsewhere in this
preamble, EPA's analysis properly treats the capital investments made
in emission controls attributed to CAIR as ``sunk'' capital costs
(i.e., capital costs already obligated in the past) that are not
included as costs of meeting Transport Rule requirements.
    Our cost analysis for significant contribution reflects on-the-
ground realities. Investments in pollution control equipment were made
in response to CAIR requirements. Those expenditures are ``sunk''
capital costs, meaning that those investments were committed in the
past, prior to the Transport Rule. Adding the capital costs of that
equipment into the costs of Transport Rule emission reduction options
would be incorrect; those capital investments are represented in place
in the base case.
    However, given ongoing costs associated with operating these
controls, EPA believes sources would have an economic incentive to