All states have an obligation to submit SIPs that address the
requirements of CAA section 110(a)(2) within 3 years of promulgation or
revision of a NAAQS. With respect to the 1997 ozone and
PM2.5 NAAQS, EPA found in 2005 that states had failed to
make submissions that address the requirements of section
110(a)(2)(D)(i) related to interstate transport of pollution. See 70 FR
21147 (April 25, 2005). Also in 2005, EPA promulgated the CAIR, which
was intended to provide states covered by the rule with a mechanism to
satisfy their section 110(a)(2)(D)(i)(I) obligations. In the CAIR, EPA
concluded that the states in the CAIR region would meet their section
110(a)(2)(D)(i) obligations to address ``significant contribution'' and
`` interference with maintenance'' requirements by complying with the
CAIR requirements. Consequently, states within the CAIR region did not
need to submit a separate SIP revision to satisfy the section
110(a)(2)(D)(i) requirements provided they submitted a SIP revision to
satisfy CAIR. Most of the CAIR states participated in the CAIR trading
programs and submitted SIP revisions that EPA subsequently approved. In
2008, the Court granted several petitions for the review of the CAIR
and found, among other things, that EPA had not demonstrated that the
CAIR effectuates the statutory mandate of section 110(a)(2)(D)(i)(I).
The EPA approvals of the CAIR SIPS preceded the remand of the CAIR by
the Court. Therefore, because the D.C. Circuit Court found CAIR and the
CAIR FIPs unlawful, EPA's approval of the provisions of a state's SIP
submittal as addressing the requirements of the CAIR could not satisfy
that state's section 110(a)(2)(D)(i)(I) obligation. In other words, a
CAIR SIP submission can no longer be considered an adequate section
110(a)(2)(D)(i)(I) SIP submission. For this reason, EPA's 2005 findings
that states had failed to submit SIPs that satisfy section
110(a)(2)(D)(i)(I) \106\ remain in force regardless of whether a state
covered by the CAIR submitted

and/or had an approved SIP stating that compliance with the CAIR
satisfied their 110(a)(2)(D)(i) obligations.
---------------------------------------------------------------------------

    \106\ The 2005 findings of failure to submit related to states'
obligations pursuant to section 110(a)(2)(D)(i). The CAIR, however,
addressed only the requirements of 110(a)(2)(D)(i)(I). The remand of
CAIR, therefore, had no impact on state SIP submissions or EPA
approval of state SIP submissions pursuant to section
110(a)(2)(D)(i)(II).
---------------------------------------------------------------------------

    The 2005 findings of failure to submit also remain in force for
many states not covered by the original CAIR. Some of these states have
not yet submitted 110(a)(2)(D)(i)(I) SIPs and thus the findings remain
in force. However, several states that were not covered by the CAIR
have since 2005 submitted SIP revisions to satisfy the requirements of
section 110(a)(2)(D)(i) for the 1997 8-hour ozone and PM2.5
NAAQS. Some of these SIPs have been approved and some are pending
approval.
    For the states that have now been identified to be contributing
significantly to nonattainment or interfering with maintenance under
this proposed rule and whose 110(a)(2)(D)(i)(I) SIPs with respect to
the 1997 ozone and PM2.5 NAAQS are pending approval, EPA
will finalize the FIP included in this proposed rule only if EPA either
determines that the SIP submission is incomplete or disapproves the SIP
submission. (Alternatively, if a state withdraws its SIP submission,
EPA will finalize the FIP.)
    For states which are not included in a final FIP under this
proposed transport rule and that have not submitted a
110(a)(2)(D)(i)(I) SIP to address the 1997 ozone and PM2.5
NAAQS, a SIP submittal is required.
    EPA has approved the 110(a)(2)(D)(i) submission from the state of
Kansas for the 1997 ozone and PM2.5 NAAQS. The updated
modeling done for this proposed rule demonstrates that emissions from
Kansas significantly contribute to nonattainment or interfere with
maintenance of the 1997 8-hour ozone NAAQS in downwind areas. Because
Kansas' current SIP does not prohibit these emissions, it is not
adequate to satisfy the requirements of 110(a)(2)(D)(i)(I) at this
time. For Kansas, under a separate action, EPA plans to propose a
finding under CAA 110(k)(5) (known as a SIP Call) that the state's
existing SIP is substantially inadequate to meet the requirements of
110(a)(2)(D)(i)(I) with respect to the 1997 ozone NAAQS. That SIP call,
if finalized, would also establish a deadline for submission of a new
110(a)(2)(D)(i)(I) SIP which EPA would review for completeness.
Therefore, in today's notice EPA is proposing to finalize the FIP for
Kansas for ozone only if the state fails to submit a complete and
approvable SIP by the deadline established in any final SIP Call.

B. Section 110 (a)(2)(D)(i) SIPs for the 2006 24-Hour PM2.5 NAAQS

    With respect to the 2006 24-hour PM2.5 NAAQS, EPA has
issued a separate Federal Register notice finding that a number of
states failed to make the required 110(a)(2)(D)(i)(I) SIP submissions.
None of the SIP submittals in the states that have submitted section
110(a)(2)(D)(i)(I) transport SIPs for the 2006 24-hour PM2.5
NAAQS have been acted on yet by EPA. For the states with SIPs that are
pending approval, EPA is proposing to finalize the FIP with respect to
the 2006 PM2.5 NAAQS only if EPA finds the previously
submitted SIP incomplete or disapproves the SIP submission.
Alternatively, if any of these states withdraws its 2006 24-hour
PM2.5 SIP submittal, EPA plans to issue a separate notice of
finding for such states.

C. Transport Rule SIPs

    EPA also notes that, by promulgating these Transport Rule FIPs, EPA
would in no way affect the right of states to submit, for review and
approval, a SIP that replaces the federal requirements of the FIP with
state requirements. In order to replace the FIP in a state, the state's
SIP must provide adequate provisions to prohibit NOX and
SO2 emissions that contribute significantly to nonattainment
or interfere with maintenance in another state or states. The Transport
Rule FIPs would be in place in each covered state until a state's SIP
was submitted and approved by EPA to replace a FIP.
    For each upwind state covered by the proposed Transport Rule, EPA
proposes state-specific emissions reductions requirements with respect
to one or more of three air quality standards--the 1997 annual
PM2.5 NAAQS, the 2006 24-hour PM2.5 NAAQS, and
the 1997 ozone NAAQS. In CAIR, EPA allowed the states to replace the
CAIR FIP with SIPs and provided substantial flexibility. Again EPA
wants to offer states substantial flexibility for addressing the
Section 110(a)(2)(D)(i)(I) transport issues through a SIP should they
choose to do so. The EPA's intent is to provide states with substantial
flexibility in implementing these emissions reductions requirements.
EPA will allow a state to submit a SIP for the ozone requirements only,
for the PM2.5 requirements only, or for both the ozone and
the PM2.5 requirements. The specific quantity of emissions
reductions necessary for a state's SIP would be determined based on the
state emissions budgets provided in the final transport rule. (See
Tables IV.E-1 for proposed SO2 and annual NOX
budgets, and IV.E-2 for proposed ozone season NOX budgets,
in section IV.E).
    In the states for which EPA is proposing to require reductions with
respect to both the 24-hour PM2.5 NAAQS and the annual
PM2.5 NAAQS, there is no case where the annual standard
drives the reduction requirements deeper than would the 24-hour
standard alone. Thus, emissions reduction requirements for a SIP to
address significant contribution and interference with maintenance with
respect to the 24-hour PM2.5 NAAQS would be based on the
SO2 and NOX emissions budgets in Table IV.E-1.
For such a state, a SIP that addresses the requirements with respect to
the 24-hour PM2.5 NAAQS would also by definition address the
requirements with respect to the annual PM2.5 NAAQS.
    EPA is taking comment on all aspects of how a state could replace
the Transport Rule FIP with a SIP and on what the SIP approval criteria
should be.

VIII. Permitting

A. Title V Permitting

    EPA's proposed FIPs would not establish any permitting requirements
independent of those under Title V of the CAA and the regulations
implementing title V, 40 CFR parts 70 and 71.\107\ Title V requires
that sources meeting certain criteria have permits meeting the
requirements specified in Title V and the Title V regulations. For
example, for sources required to have Title V permits, such permits
must include, among other things, all ``applicable requirements,'' as
defined in the Title V regulations (40 CFR 70.2 and 71.2 (definition of
``applicable requirement'')).
---------------------------------------------------------------------------

    \107\ Part 70 governs approved state Title V programs, and part
71 governs the federal Title V program.
---------------------------------------------------------------------------

    EPA anticipates that, given the nature of the units covered by the
proposed FIPs, most of the sources at which they are located would be
subject to Title V permitting requirements. For sources subject to
Title V, the requirements applicable to them under the proposed FIPs
would be ``applicable requirements'' under Title V and therefore would
need to be included in the Title V permits. For example, requirements
under the proposed FIPs concerning designated representatives,
monitoring, reporting, and recordkeeping, the requirement to hold
allowances covering emissions, the assurance provisions, and liability
would be ``applicable requirements'' and necessary to include in the
permits.

    The Title V permits program includes, among other things,
provisions for permit applications, permit content, and permit
revisions that would address the applicable requirements under the
proposed FIPs in a manner that would provide the flexibility necessary
to implement a market-based program such as the one that EPA is
proposing. For example, the Title V regulations provide that a permit
issued under Title V must include, for any ``approved * * * emissions
trading and other similar programs or processes'' applicable to the
source, a provision stating that no permit revision is required ``for
changes that are provided for in the permit.'' 40 CFR 70.6(a)(8) and
71.6(a)(8). The trading program regulations for the proposed FIPs would
include a provision stating that no permit revision is necessary for
the allocation, holding, deduction, or transfer of allowances.
Consistent with the Title V regulations, this provision would also be
included in each Title V permit for a covered source. As a result,
allowances could be traded (or allocated, held, or deducted) under the
FIPs without a revision of the Title V permit of any of the sources
involved.
    As a further example of flexibility under Title V, the Title V
regulations allow the use of the minor permit modification procedures
for permit modifications ``involving the use of economic incentives,
marketable permits, emissions trading, and other similar approaches, to
the extent that such minor permit modification procedures are
explicitly provided for in an applicable implementation plan or in
applicable requirements promulgated by EPA.'' 40 CFR 70.7(e)(2)(i)(B)
and 40 CFR 71.7(e)(1)(i)(B). The trading program regulations for the
proposed FIPs would include provisions requiring unit owners and
operators to submit monitoring system certification applications (or,
for alternative monitoring systems, petitions) to EPA establishing the
monitoring and reporting approach to be used by the unit. These
applications and petitions are subject to EPA review and approval to
ensure consistency in monitoring and reporting among all trading
program participants. As provided in the proposed regulations, EPA
would only allow use of approaches that would result in emissions data
with an appropriate level of precision, reliability, accessibility, and
timeliness. The proposed regulations would also include a provision
stating that a description of the general approach that each covered
unit is required to use for monitoring and reporting emissions (i.e.,
an approach using a continuous emissions monitoring system, an excepted
monitoring system under appendices D and E to part 75, a low mass
emissions excepted monitoring methodology under Sec.  75.19, or an
alternative monitoring system under subpart E of part 75) could be
added to or changed in a Title V permit using minor permit modification
procedures, provided that the requirements applicable to the monitoring
and reporting addition or change were already incorporated elsewhere in
the permit. As a result, minor permit modification procedures could be
used to revise a unit's Title V permit to be consistent with any
changes in the monitoring and reporting approach allowed for the unit
by EPA through the monitoring system certification or petition process
in the proposed trading program regulations. However, if the permit did
not already incorporate the monitoring and reporting requirements
applicable to the change, the permit would also have to be revised to
incorporate these requirements, and this change would not qualify as a
minor permit modification pursuant to 40 CFR 70.7(e)(2)(i)(B) and 40
CFR 71.7(e)(1)(i)(B).
    As new applicable requirements under Title V, the requirements for
covered units under the final FIPs would be incorporated into covered
sources' existing Title V permits either pursuant to the provisions for
reopening for cause (40 CFR 70.7(f) and 40 CFR 71.7(f)) or the permit
renewal provisions (40 CFR 70.7(c) and 71.7(c)).\108\ For sources newly
subject to title V that would also be covered sources under the
proposed FIPs, the initial Title V permit issued pursuant to 40 CFR
70.7(a) would include the final FIP requirements. In order to ensure
that covered sources' Title V permit provisions concerning the FIPs
would reflect, properly and in a manner consistent from permit to
permit, the trading program requirements and flexibilities, EPA intends
to issue guidance, after promulgation of the final FIPs, to assist
permitting authorities. This guidance would include information on
permit issuance and permit modification requirements, as well as a
permit content template that would identify the applicable requirements
under the trading program and thereby ensure that they would be
correctly and comprehensively reflected in each permit in a manner that
would reduce the need for frequent permit revisions. Use of a permit
content template would also reduce the burden on sources in obtaining,
on permitting authorities in issuing, and on EPA in reviewing, permits
or permit revisions.
---------------------------------------------------------------------------

    \108\ A permit is reopened for cause if any new applicable
requirements (such as those under a FIP) become applicable to a
covered source with a remaining permit term of 3 or more years. If
the remaining permit term is less than 3 years, such new applicable
requirements will be added to the permit during permit renewal. See
40 CFR 70.7(f)(1)(i) and 71.7(f)(1)(i).
---------------------------------------------------------------------------

B. New Source Review

    EPA recognizes that pollution control projects, including pollution
control projects constructed to comply with the proposed rule, have the
potential to trigger new source review (NSR) permitting.
    On December 20, 2005, the EPA agreed to reconsider one specific
aspect of the CAIR. In that notice, EPA granted reconsideration and
sought comment on the potential impact of a judicial opinion, New York
v. EPA, 413 F.3d 3 (D.C. Cir. 2005). This decision vacated the
pollution control project exclusion in EPA's NSR regulations. (The
exclusion allowed for certain environmentally beneficial pollution
control projects to be excluded from certain NSR requirements.) For
this reconsideration, EPA conducted an analysis which showed that the
court decision did not impact the CAIR analyses. The EPA believes this
analysis, which remains current and relevant for all pollutants except
for greenhouse gas (GHG), shows that New Source Review (NSR)
requirements would not significantly impact the construction of
controls that are installed to comply with the proposed transport rule.
Details of this analysis can be found in a Technical Support document
which is available on EPA's Web site at: http://epa.gov/cair/pdfs/0053-
2263.pdf.
    Because GHG was not considered by EPA to be a ``pollutant'', let
alone a ``regulated pollutant,'' at the time of CAIR, GHG was not
addressed in the previous analysis. GHG requirements related to the
component of new source review concerning the Prevention of Significant
Deterioration (``PSD'') program have recently been addressed in EPA's
``Interpretation of Regulations that Determine Pollutants Covered by
Clean Air Act Permitting Programs,'' 75 FR 17004 (April 2, 2010), and
``Prevention of Significant Deterioration and Title V Greenhouse Gas
Tailoring Rule,'' 75 FR (June 3, 2010) (``Tailoring Rule''). Generally,
as discussed in those actions, once the PSD requirements for GHG take
effect on January 2, 2011, major stationary sources will be required to
address GHG emissions as part of the PSD program if these sources emit
GHG in amounts that equal or

exceed the thresholds in the Tailoring Rule. Once the PSD requirements
take effect, major sources that undergo a modification, including the
addition of pollution control equipment, will trigger PSD requirements
for their emissions of GHG if such emissions increase by at least
75,000 tons per year of CO2 equivalent. EPA believes it is very
unlikely that pollution control projects would cause GHG increases that
would exceed the 75,000 tons per year threshold.
    Consistent with EPA's previous analysis and EPA's conclusions for
GHG, EPA does not believe that there are significant impacts from NSR
for any pollution control projects resulting from the proposed rule
such as low-NOX burners, SO2 scrubbers, or SCR.
EPA requests comment on this issue.

IX. What benefits are projected for the proposed rule?

    In this section, we present the results of EPA's analysis of the
benefits of the emissions reductions in this proposal on
PM2.5 and ozone air quality, public health, welfare, and the
environment. These improvements were determined based upon air quality
modeling of the 2014 base case and the ``State Budgets/Limited
Trading'' remedy proposed in this rule, as described in section V,
above.
    Implementation of this rule will very substantially lower the
extent of nonattainment and maintenance problems for the annual and 24-
hour PM2.5 NAAQS and 8-hour ozone NAAQS in the eastern U.S.
(see section IX.A, below). The improvements in air quality will
annually prevent thousands of premature deaths and other serious health
effects (see section IX.B, below). We estimate the total monetized
annual benefits to be approximately $120 billion to $290 billion or
$110 billion to $270 billion in 2014 (at a 3 percent and a 7 percent
discount rate, respectively) for the proposed ``State Budgets/Limited
Trading'' remedy. There will be significant benefits that are not
quantified. Notably, in 2012 the benefits are actually larger since
greater emissions reductions are occurring from the baseline in that
timeframe, as indicated in Table V.E-2, above. Because the magnitude of
the PM2.5 co-benefits is largely driven by the
concentration-response function for premature mortality, we examined
alternate relationships between PM2.5 and premature
mortality supplied by experts. Higher and lower co-benefits estimates
are plausible, but most of the expert-based estimates fall between
these two estimates above.\109\ All monetized estimates are stated in
2006 dollars. Also note that the analytic baseline presents a unique
situation. EPA has been directed to replace the CAIR; yet the CAIR
remains in place and has led to significant emissions reductions in
many states.
---------------------------------------------------------------------------

    \109\ Roman et al., 2008. Expert Judgment Assessment of the
Mortality Impact of Changes in Ambient Fine Particulate Matter in
the U.S. Environ. Sci. Technol., 42, 7, 2268-2274.
---------------------------------------------------------------------------

    A key step in the process of developing a 110(a)(2)(D)(i)(I) rule
involves analyzing existing (base case) emissions to determine which
states significantly contribute to downwind nonattainment and
maintenance areas. EPA cannot prejudge at this stage which states will
be affected by the rule. For example, a state affected by CAIR may not
be affected by the new rule and after the new rule goes into effect,
the CAIR requirements will no longer apply. For a state covered by CAIR
but not covered by the new rule, the CAIR requirements would not be
replaced with new requirements, and therefore an increase in emissions
relative to present levels could occur in that state. More
fundamentally, the court has made clear that, due to legal flaws, the
CAIR rule cannot remain in place and must be replaced. If EPA's base
case analysis were to ignore this fact and assume that reductions from
CAIR would continue indefinitely, areas that are in attainment solely
due to controls required by CAIR would again face nonattainment
problems because the existing protection from upwind pollution would
not be replaced. For these reasons, EPA cannot assume in its base case
analysis, that the reductions required by CAIR will continue to be
achieved.
    Following this logic, the 2012 base case shows emissions higher
than current levels in some states. Because EPA has been directed to
replace CAIR, EPA believes that for many states, the absence of the
CAIR NOX program will lead to the status quo of the
NOX Budget Program, which limits ozone-season NOX
emissions and ensures the operation of NOX controls in those
states. Also, without the CAIR SO2 program, emission
requirements in many areas would revert to the comparatively less
stringent requirements of the Title IV Acid Rain program. As a result,
SO2 emissions in many states would increase markedly in the
2012 base case relative to the present. Efforts to comply with ARP
rules at the least-cost would occur in many cases without the operation
of existing scrubbers through use of readily available, inexpensive
Title IV allowances. Notably, all known controls that are required
under state laws, NSPS, consent decrees, and other enforceable binding
commitments through 2014 are accounted for in the base case. It is
against this backdrop that the Transport Rule is analyzed and that
significant contribution to nonattainment and interference with
maintenance must be addressed.

A. The Impacts on PM2.5 and Ozone of the Proposed SO2 and NOX Strategy

    The air quality modeling platform described in section IV.C. was
used by EPA to model the impacts of the proposed SO2 and
NOX emissions reductions on annual average PM2.5,
24-hour PM2.5, and 8-hour ozone concentrations. In brief, we
ran the CAMx model for the meteorological conditions in the year of
2005 for the eastern U.S. modeling domain.\110\ Modeling was performed
for the 2014 base case and the 2014 ``State Budgets/Limited Trading''
scenario to assess the expected effects of the proposed regional
strategy on projected PM2.5 and ozone design value
concentrations and nonattainment and maintenance. The procedures used
to project future design values and nonattainment and maintenance are
described in section IV.C. The aggregate emissions in 2012 and 2014 for
SO2 and NOX are provided in Table V.E-2 in
section V.E. The emissions by state are provided in Tables V.E-5
through V.E-7 in section V.E, and also in the Air Quality Modeling TSD.
---------------------------------------------------------------------------

    \110\ As described in the AQMTSD, the eastern U.S. was modeled
at a horizontal resolution of 12 x 12 km. The remainder of the U.S.
was modeled at a resolution of 36 x 36 km.
---------------------------------------------------------------------------

    The projected 2014 concentrations of annual PM2.5, daily
PM2.5, and ozone at each monitoring site in the East for
which projections were made are provided in the AQMTSD. The number of
nonattainment and/or maintenance sites in the East for the 2012 base
case, 2014 base case, and 2014 remedy for annual PM2.5,
daily PM2.5, and ozone are provided in Table IX-1.\111\ The
average and peak reductions in annual PM2.5, daily
PM2.5, and ozone predicted at 2012 nonattainment and/or
maintenance sites due to the emissions reductions

between 2012 and the 2014 remedy are provided in Table IX-2.
---------------------------------------------------------------------------

    \111\ To provide a point of reference, Table IX-1 also includes
the number of nonattainment and/maintenance sites based on ambient
design values for the period 2003 through 2007.

                  Table IX-1--Projected Reduction in Nonattainment and/or Maintenance Problems for PM2.5 and Ozone in the Eastern U.S.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Percent         Percent
                                                                                reduction:      reduction:
                                                          Ambient (2003-                                   2014 proposed  2012 base case  2014 base case
                                                               2007)      2012 base case  2014 base case      remedy         vs. 2014        vs. 2014
                                                                                remedy          remedy
                                                                                (percent)       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual PM2.5 Nonattainment Sites \112\..................             102              32              15               1              97              93
Annual PM2.5 Maintenance-Only Sites.....................              21              16               7               1              94              86
Daily PM2.5 Nonattainment Sites.........................             151              92              54              17              82              69
Daily PM2.5 Maintenance-Only Sites......................              48              38              28              11              71              61
Ozone Nonattainment Sites...............................             103              11               7               7              36               0
Ozone Maintenance-Only Sites............................              67              16               6               5              69              17
--------------------------------------------------------------------------------------------------------------------------------------------------------

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

    \112\ ``Nonattainment'' is used to denote sites that are
projected to have both nonattainment and maintenance problems.

Table IX-2--Average and Peak Reduction in Annual PM2.5, Daily PM2.5, and
     Ozone for Sites That Are Projected To Have Nonattainment and/or
               Maintenance Problems in the 2012 Base Case
------------------------------------------------------------------------
                                  Average reduction:    Peak reduction:
                                   2012 base case to   2012 base case to
                                      2014 remedy         2014 remedy
------------------------------------------------------------------------
Annual PM2.5 Nonattainment Sites  2.8 [mu]g/m\3\....  3.9 [mu]g/m\3\
Annual PM2.5 Maintenance-Only     2.6 [mu]g/m\3\....  4.2 [mu]g/m\3\
 Sites.
Daily PM2.5 Nonattainment Sites.  5.8 [mu]g/m\3\....  15.3 [mu]g/m\3\
Daily PM2.5 Maintenance-Only      5.1 [mu]g/m\3\....  13.5 [mu]g/m\3\
 Sites.
Ozone Nonattainment Sites.......  1.9 ppb...........  3.9 ppb
Ozone Maintenance-Only Sites....  2.3 ppb...........  4.2 ppb
------------------------------------------------------------------------

    The information in Table IX-1 shows that there will be significant
reductions in the extent of nonattainment and maintenance problems for
annual PM2.5, daily PM2.5, and ozone between 2012
and 2014 as a result of the emissions budgets in this proposal coupled
with emissions reductions during this time period from other existing
control programs. Specifically, the results of the air quality modeling
indicate that all but 1 site is projected to be in attainment and only
1 site is projected to have a maintenance problem for annual
PM2.5 in 2014 with the emissions reductions expected from
this proposal. As indicated in Table IX-2, the average reduction in
annual PM2.5 across the 32 2012 nonattainment sites is 1.9
[mu]g/m\3\ and the peak reduction at an individual nonattainment site
is 3.2 [mu]g/m\3\. Comparable reductions are projected at annual
PM2.5 maintenance-only sites.
    For 24-hour PM2.5, we project that the number of
nonattainment sites will be reduced by 82 percent and the number of
maintenance-only sites by 71 percent in 2014 compared to the 2012 base
case. The average reduction in 24-hour PM2.5 across the 92
2012 nonattainment sites is 5.8 [mu]g/m\3\ and the peak reduction at an
individual nonattainment site is 15.3 [mu]g/m\3\. Comparable reductions
are projected at 24-hour PM2.5 maintenance-only sites.
    The emissions reductions in this proposal will result in
considerable progress toward attainment and maintenance at the 28 sites
that remain as nonattainment and/or maintenance for the 24-hour
PM2.5 standard. On average for these 28 sites, the predicted
amount of PM2.5 reduction in 2014 is more than half of what
is needed for these sites to attain and/or maintain the 24-hour
standard.
    Thus, the SO2 and NOX emissions reductions
which will result from today's proposal will greatly reduce the extent
of PM2.5 nonattainment and maintenance problems by 2014 and
beyond. As described previously, these emissions reductions are
expected to substantially reduce the number of PM2.5
nonattainment and/or maintenance sites in the East and make attainment
easier for those counties that remain nonattainment by substantially
lowering PM2.5 concentrations in residual nonattainment
sites. The emissions reductions will also help those locations that may
have maintenance problems.
    Based on the 2012 base air quality modeling for ozone, 27 sites in
the East are projected to be nonattainment or have problems maintaining
the 1997 ozone standard. The initial phase of summer NOX
reductions in today's proposal are projected to lower 8-hour ozone
concentration by 2.8 ppb, on average by 2014, at monitoring sites
projected to be nonattainment and/or have maintenance problems in the
2012 base case. We expect that the number of nonattainment sites will
be reduced by 36 percent and the number of maintenance-only sites by 69
percent in 2014 compared to the 2012 base case. For the 12 sites
expected to have residual nonattainment/maintenance problems in 2014,
the predicted ozone reductions provide nearly 10 percent of the amount
needed for these sites to attain and/or maintain the ozone standard.
Thus, our modeling indicates that by 2014 the initial phase of summer
NOX emissions reductions in this proposal will lower ozone
concentrations in the East and help bring areas closer to attainment
for the 8-hour ozone NAAQS.

B. Human Health Benefit Analysis

    To estimate the human health benefits of the proposed Transport
Rule, we used the BenMAP model to quantify the changes in
PM2.5 and ozone-related health impacts and monetized
benefits based on changes in air quality. We provide such estimates for
the proposed remedy option. Notably, EPA expects that in 2014 the other
two alternatives that the Agency considered have the same general level
of benefits that will result from their implementation. The results of
the analysis for the alternate SO2 reduction scenarios are
found in the RIA. For context, it is important to note that the
magnitude of the PM2.5 benefits is largely driven by the
concentration response function for premature mortality. Experts have
advised EPA to consider a variety of assumptions, including estimates
based both on empirical (epidemiological) studies and judgments
elicited from scientific experts, to characterize the uncertainty in
the relationship between PM2.5 concentrations and premature
mortality. For this proposed rule we cite two key empirical studies,
one based on the American Cancer Society cohort study \113\ and the
other based on the extended Six Cities cohort study.\114\
---------------------------------------------------------------------------

    \113\ Pope et al., 2002. ``Lung Cancer, Cardiopulmonary
Mortality, and Long-term Exposure to Fine Particulate Air
Pollution.'' Journal of the American Medical Association. 287:1132-
1141.
    \114\ Laden et al., 2006. ``Reduction in Fine Particulate Air
Pollution and Mortality.'' American Journal of Respiratory and
Critical Care Medicine. 173:667-672.
---------------------------------------------------------------------------

    Table IX-3 presents the primary estimates of reduced incidence of
PM2.5 and ozone-related health effects in 2014 for the
proposed and alternative remedies. In 2014, we estimate that PM-related
annual benefits of the proposed remedy include approximately 14,000 to
36,000 fewer premature mortalities, 9,200 fewer cases of chronic
bronchitis, 22,000 fewer non-fatal heart attacks, 11,000 fewer
hospitalizations (for respiratory and cardiovascular disease combined),
10 million fewer days of restricted activity due to respiratory illness
and approximately 1.8 million fewer work-loss days. We also estimate
substantial health improvements for children from fewer cases of upper
and lower respiratory illness, acute bronchitis, and asthma attacks. As
mentioned earlier, the reduced incidences of various effects would be
greater in 2012 due to the larger emissions reductions that occur from
the baseline. The lower reductions in emissions in 2014 result from
further SO2 controls in the proposed remedy because the
baseline has much greater controls resulting from state actions and
consent decrees.
    Ozone health-related benefits are expected to occur during the
summer ozone season (usually ranging from May to September in the
eastern U.S.). Based upon modeling for 2014, annual ozone related
health benefits are expected to include between 50 and 230 fewer
premature mortalities, 690 fewer hospital admissions for respiratory
illnesses, 230 fewer emergency room admissions for asthma, 300,000
fewer days with restricted activity levels, and 110,000 fewer days
where children are absent from school due to illnesses. When adding the
PM and ozone-related mortalities together, we find that the proposed
Transport Rule will yield between 14,000 and 36,000 fewer premature
mortalities. The following references are used in providing our
estimates of ozone health-related benefits:

    Bell, M.L., et al. 2004. Ozone and short-term mortality in 95
U.S. urban communities, 1987-2000. Journal of the American Medical
Association. 292 (19): p. 2372-8.
    Laden, F., J. Schwartz, F.E. Speizer, and D.W. Dockery. 2006.
Reduction in Fine Particulate Air Pollution and Mortality. American
Journal of Respiratory and Critical Care Medicine 173:667-672.
Estimating the Public Health Benefits of Proposed Air Pollution
Regulations. Washington, DC: The National Academies Press.
    Levy JI, Baxter LK, Schwartz J. 2009. Uncertainty and
variability in health-related damages from coal-fired power plants
in the United States. Risk Anal. doi: 10.1111/j.1539-
6924.2009.01227.x [Online 9 Apr 2009]
    Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D.
Krewski, K. Ito, and G.D. Thurston. 2002. Lung Cancer,
Cardiopulmonary Mortality, and Long-term Exposure to Fine
Particulate Air Pollution. Journal of the American Medical
Association 287:1132-1141.

 Table IX-3--Estimated Annual Reductions in Incidence of Health Effects
                                   \A\
------------------------------------------------------------------------
               Health effect                       Proposed remedy
------------------------------------------------------------------------
PM-Related endpoints
Premature Mortality
    Pope et al. (2002) (age >30)..........         14,000 (4,000-25,000)
    Laden et al. (2006) (age >25).........        36,000 (17,000-56,000)
    Infant (< 1 year).....................                  59 (-66-180)
    Chronic Bronchitis....................            9,200 (320-18,000)
    Non-fatal heart attacks (age > 18)....         22,000 (5,800-39,000)
    Hospital admissions--respiratory (all            3,500 (1,400-5,500)
     ages)................................
    Hospital admissions--cardiovascular              7,500 (5,200-8,900)
     (age > 18)...........................
    Emergency room visits for asthma (age          14,000 (7,200-21,000)
     < 18)................................
    Acute bronchitis (age 8-12)...........        21,000 (-4,800-46,000)
    Lower respiratory symptoms (age 7-14).      250,000 (98,000-400,000)
    Upper respiratory symptoms (asthmatics      190,000 (36,000-350,000)
     age 9-18)............................
    Asthma exacerbation (asthmatics 6-18).       240,000 (8,300-800,000)
    Lost work days (ages 18-65)...........         1,800,000 (1,500,000-
                                                              2,000,000)
    Minor restricted-activity days (ages          10,000,000 (8,600,000-
     18-65)...............................                   12,000,000)
Ozone-related endpoints
Premature mortality
    Bell et al. (2004) (all ages).........                    50 (17-84)
    Levy et al. (2005) (all ages).........                 230 (160-300)
    Hospital admissions--respiratory                       390 (-18-740)
     causes (ages > 65)...................
    Hospital admissions--respiratory                       300 (130-460)
     causes (ages < 2)....................
    Emergency room visits for asthma (all                  230 (-30-730)
     ages)................................
    Minor restricted-activity days (ages       300,000 (130,000-480,000)
     18-65)...............................

    School absence days...................      110,000 (38,000-160,000)
------------------------------------------------------------------------
\A\ Values rounded to two significant figures. Benefits from reducing
  other criteria pollutants and hazardous air pollutants and ecosystem
  effects are not included here.

C. Quantified and Monetized Visibility Benefits

    Only a subset of the expected visibility benefits--those for Class
I areas--are included in the monetary benefits estimates we project for
this rule. We anticipate improvement in visibility in residential areas
where people live, work and recreate within the Transport Rule region
for which we are currently unable to monetize benefits. For the Class I
areas we estimate annual benefits of $3.4 billion beginning in 2014 for
visibility improvements. Methodological limitations prevented us from
quantifying the visibility benefits of the alternate remedies. The
value of visibility benefits in areas where we were unable to monetize
benefits could also be substantial.

D. Benefits of Reducing GHG Emissions

    When fully implemented in 2014, the proposed Transport Rule would
reduce emissions of CO2 from electrical generating units by
about 15 million metric tons annually. Using a ``social cost of
carbon'' (SCC) estimate that accounts for the marginal dollar value
(i.e., cost) of climate-related damages resulting from CO2
emissions, previous analyses including the RIA for the Final Rulemaking
to Establish Light-Duty Vehicle Greenhouse Gas Emissions Standards and
Corporate Average Fuel Efficiency Standards have found the total
benefit of CO2 reductions is substantial. The monetary value
of these avoided damages also grows over time. Readers interested in
learning more about the calculation of the SCC metric should refer to
the SCC TSD, Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866 [Docket No. EPA-HQ-OAR-2009-0472].

E. Total Monetized Benefits

    Table IX-4 presents the estimated monetary value of reductions in
the incidence of health and welfare effects. These estimates account
for increases in the value of risk reduction over time. As the table
indicates, total benefits are driven primarily by the reduction in
premature fatalities each year, which account for over 90 percent of
total benefits.
    Table IX-5 presents the total monetized net benefits for 2014. A
listing of the benefit categories that could not be quantified or
monetized in our benefit estimates are provided in Table IX-6.

      Table IX-4--Estimated Annual Monetary Value of Reductions in Incidence of Health and Welfare Effects
                                             (Billions Of 2006$) \A\
----------------------------------------------------------------------------------------------------------------
                 Health effect                               Pollutant                     Proposed remedy
----------------------------------------------------------------------------------------------------------------
Premature mortality (Pope et al. 2002 PM mortality and Bell et al. 2004 ozone mortality estimates)
----------------------------------------------------------------------------------------------------------------
3% discount rate...............................  PM2.5 & O3.......................              $110 ($8.8-$340)
7% discount rate...............................  PM2.5 & O3.......................              $100 ($7.9-$300)
----------------------------------------------------------------------------------------------------------------
Premature mortality (Laden et al. 2006 PM mortality and Levy et al. 2005 ozone mortality estimates)
----------------------------------------------------------------------------------------------------------------
3% discount rate...............................  PM2.5 & O3.......................               $280 ($25-$820)
7% discount rate...............................  PM2.5 & O3.......................               $260 ($22-$310)
Chronic bronchitis.............................  PM2.5............................                $4.3 $0.2-$20)
Non-fatal heart attacks........................
3% discount rate...............................  PM2.5............................                $2.5 ($0.4-$6)
7% discount rate...............................  PM2.5............................              $2.4 ($0.4-$5.9)
Hospital admissions--respiratory...............  PM2.5 & O3.......................            $0.06 ($0.03-$0.1)
Hospital admissions--cardiovascular............  PM2.5............................              $0.2 ($0.1-$0.3)
Emergency room visits for asthma...............  PM2.5 & O3.......................        $0.005 ($0.002-$0.008)
Acute bronchitis...............................  PM2.5............................       $0.009 (-$0.0004-$0.03)
Lower respiratory symptoms.....................  PM2.5............................        $0.005 ($0.002-$0.009)
Upper respiratory symptoms.....................  PM2.5............................        $0.006 ($0.001-$0.014)
Asthma exacerbation............................  PM2.5............................        $0.012 ($0.001-$0.046)
Lost work days.................................  PM2.5............................            $0.2 ($0.19-$0.24)
School loss days...............................  .................................         $0.01 ($0.004-$0.013)
Minor restricted-activity days.................  PM2.5 & O3.......................           $0.64 ($0.34-$0.97)
Recreational visibility, Class I areas.........  PM2.5............................                          $3.6
----------------------------------------------------------------------------------------------------------------
Total benefits based on Pope et al. 2002 PM mortality and Bell et al. 2004 ozone mortality estimates
----------------------------------------------------------------------------------------------------------------
3% discount rate...............................  PM2.5 & O3.......................               $120 ($10-$360)
7% discount rate...............................  PM2.5 & O3.......................                $110 ($9-$330)
----------------------------------------------------------------------------------------------------------------
Total benefits based on Laden et al. 2006 PM mortality and Levy et al. 2005 ozone mortality estimates
----------------------------------------------------------------------------------------------------------------
3% discount rate...............................  PM2.5 & O3.......................               $290 ($26-$840)
7% discount rate...............................  PM2.5 & O3.......................               $270 ($24-$760)
----------------------------------------------------------------------------------------------------------------
\A\ Estimates rounded to two significant figures.

E. How do the benefits compare to the costs of this proposed rule?

    The estimated annual private costs to implement the emission
reduction requirements of the proposed rule for the Transport Rule
region are $3.7 billion in 2012 and $2.8 billion in 2014 (2006$) for
the proposed remedy option, $4.2 billion in 2012 and $2.7 billion in
2014 for the State Budgets/Intrastate Trading remedy option, and $4.3
billion in 2012 and $3.4 billion in 2014 for the direct control remedy
option. These costs are the annual incremental electric generation
production costs that are expected to occur with the Transport Rule.
The EPA uses these costs as compliance cost estimates in developing
cost-effectiveness estimates.
    In estimating the net benefits of regulation, the appropriate cost
measure is ``social costs.'' Social costs represent the welfare costs
of the rule to society. These costs do not consider transfer payments
(such as taxes) that are simply redistributions of wealth. The social
costs of this rule (thus reflecting the proposed remedy option) are
estimated to be approximately $2.0 billion in 2014 assuming a 3 percent
discount rate. These costs become $2.2 billion in 2014, if one assumes
a 7 percent discount rate. Thus, the net benefit (social benefits minus
social costs) as will be shown in Table IX-5 for the proposed remedy
option is approximately $120 to 292 billion or $109 to 264 billion (3
percent and 7 percent discount rates) in 2014. Implementation of the
rule is expected to provide society with a substantial net gain in
social welfare based on economic efficiency criteria.
    The annualized regional cost of the proposed rule, as quantified
here, is EPA's best assessment of the cost of implementing the proposed
option. These costs are generated from rigorous economic modeling of
changes in the power sector expected from the proposed rule. This type
of analysis using IPM has undergone peer review and been upheld in
federal courts. The direct cost includes, but is not limited to,
capital investments in pollution controls, operating expenses of the
pollution controls, investments in new generating sources, and
additional fuel expenditures. The EPA believes that these costs
reflect, as closely as possible, the additional costs of the proposed
option to industry. The relatively small cost associated with
monitoring emissions, reporting, and recordkeeping for affected sources
is not included in these annualized cost estimates, but EPA has done a
separate analysis and estimated the cost to less than $28 million (see
section XII.B., Paperwork Reduction Act). However, there may exist
certain costs that EPA has not quantified in these estimates. These
costs may include costs of transitioning to this rule, such as the
costs associated with the retirement of smaller or less efficient EGUs,
employment shifts as workers are retrained at the same company or re-
employed elsewhere in the economy, and certain relatively small
permitting costs associated with Title V that new program entrants
face.
    An optimization model was employed that assumes cost minimization.
Costs may be understated if the regulated community chooses not to
minimize its compliance costs in the same manner to comply with the
rules. Although EPA has not quantified these costs, the Agency believes
that they are small compared to the quantified costs of the program on
the power sector. However, EPA's experience and results of independent
evaluation suggests that costs are likely to be lower by some degree
(see RIA for details). The annualized cost estimates presented are the
best and most accurate based upon available information. In a separate
analysis, EPA estimates the indirect costs and impacts of higher
electricity prices on the entire economy. These impacts are summarized
in section X of this preamble and in the RIA for this proposed rule.

 Table IX-5--Summary of Annual Benefits, Costs, and Net Benefits of the
                         Transport Rule in 2014
                       [Billions of 2006 dollars]
------------------------------------------------------------------------
           Description                        Proposed remedy
------------------------------------------------------------------------
Social costs:
    3 percent discount rate......  $2.0.
    7 percent discount rate......  $2.2.
Social benefits:
    3 percent discount rate......  $122 to 294 + B.
    7 percent discount rate......  $111 to 266 + B.
Health-related benefits:
    3 percent discount rate......  $118 to 290.
    7 percent discount rate......  $107 to 262.
Visibility benefits:
    3 percent discount rate......  $3.6.
    7 percent discount rate......  $3.6.
Annual net benefits (benefits-
 costs)
    3 percent discount rate......  $120 to 292.
    7 percent discount rate......  $109 to 264.
------------------------------------------------------------------------
\a\ All estimates are rounded to three significant digits and represent
  annualized benefits and costs anticipated for 2014. Estimates relate
  to the complete Transport Rule program.
\b\ Note that costs are the annual total costs of reducing pollutants
  including NOX and SO2 in the Transport Rule region.
\c\ As this table indicates, total benefits are driven primarily by
  PM2.5-related health benefits. The reduction in premature fatalities
  each year accounts for over 90 percent of total monetized benefits
  2014. Benefits in this table are nationwide (with the exception of
  visibility) and are associated with NOX and SO2 reductions for the EGU
  source category. Ozone benefits represent benefits in the eastern
  United States. Visibility benefits represent benefits in Class I areas
  in the southeastern United States.
\d\ Not all possible benefits or disbenefits are quantified and
  monetized in this analysis. Potential benefit categories that have not
  been quantified and monetized are listed in Table IX-6. We represent
  the value of unquantified benefits and disbenefits with a ``B.''
\e\ Valuation assumes discounting over the SAB-recommended 20 year
  segmented lag structure described in chapter 4 of the Regulatory
  Impact Analysis for the Clean Air Interstate Rule (March 2005).
  Results reflect 3 percent and 7 percent discount rates consistent with
  EPA and OMB guidelines for preparing economic analyses (U.S. EPA, 2000
  and OMB, 2003).174
\f\ Net benefits are rounded to the nearest $1 billion. Columnar totals
  may not sum due to rounding.

    Every benefit-cost analysis examining the potential effects of a
change in environmental protection requirements is limited to some
extent by data gaps, limitations in model capabilities (such as
geographic coverage), and uncertainties in the underlying scientific
and economic studies used to configure the benefit and cost models.
Gaps in the scientific literature often result in the inability to
estimate quantitative changes in health and environmental effects. Gaps
in the economics literature often result in the inability to assign
economic values even to those health and environmental outcomes that
can be quantified. While uncertainties in the underlying scientific and
economics literatures (that may result in overestimation or
underestimation of benefits) are discussed in detail in the economic
analyses and its supporting documents and references, the key
uncertainties which have a bearing on the results of the benefit-cost
analysis of this rule include the following:
     EPA's inability to quantify potentially significant
benefit categories;
     Uncertainties in population growth and baseline incidence
rates;
     Uncertainties in projection of emissions inventories and
air quality into the future;
     Uncertainty in the estimated relationships of health and
welfare effects to changes in pollutant concentrations including the
shape of the C-R function, the size of the effect estimates, and the
relative toxicity of the many components of the PM mixture;
     Uncertainties in exposure estimation; and
     Uncertainties associated with the effect of potential
future actions to limit emissions.
    Despite these uncertainties, we believe the benefit-cost analysis
provides a reasonable indication of the expected economic benefits of
the rulemaking in future years under a set of reasonable assumptions.
This approach calculates a mean value across VSL estimates derived from
26 labor market and contingent valuation studies published between 1974
and 1991. The mean VSL across these studies is $6.3 million
(2000$).\115\ The benefits estimates generated for this rule are
subject to a number of assumptions and uncertainties, which are
discussed throughout the RIA document.
---------------------------------------------------------------------------

    \115\ In this analysis, we adjust the VSL to account for a
different currency year (2006$) and to account for income growth to
2014. After applying these adjustments to the $6.3 million value,
the VSL is $8.5 million.
---------------------------------------------------------------------------

    As Table IX-4 indicates, total benefits are driven primarily by the
reduction in premature mortalities each year. Some key assumptions
underlying the primary estimate for the premature mortality category
include the following:
    (1) EPA assumes inhalation of fine particles is causally associated
with premature death at concentrations near those experienced by most
Americans on a daily basis. Plausible biological mechanisms for this
effect have been hypothesized for the endpoints included in the primary
analysis and the weight of the available epidemiological evidence
supports an assumption of causality.
    (2) EPA assumes all fine particles, regardless of their chemical
composition, are equally potent in causing premature mortality. This is
an important assumption, because the proportion of certain components
in the PM mixture produced via precursors emitted from EGUs may differ
significantly from direct PM released from automotive engines and other
industrial sources, but no clear scientific grounds exist for
supporting differential effects estimates by particle type.
    (3) We assume that the health impact function for fine particles is
linear down to the lowest air quality levels modeled in this analysis.
Thus, the estimates include health benefits from reducing fine
particles in areas with varied concentrations of PM2.5,
including both regions that are in attainment with fine particle
standard and those that do not meet the standard down to the lowest
modeled concentrations.
    The EPA recognizes the difficulties, assumptions, and inherent
uncertainties in the overall enterprise. The analyses upon which the
Transport Rule is based were selected from the peer-reviewed scientific
literature. We used up-to-date assessment tools, and we believe the
results are highly useful in assessing this rule.
    There are a number of health and environmental effects that we were
unable to quantify or monetize. A complete benefit-cost analysis of the
Transport Rule requires consideration of all benefits and costs
expected to result from the rule, not just those benefits and costs
which could be expressed here in dollar terms. A listing of the benefit
categories that were not quantified or monetized in our estimate are
provided in Table IX-6.

F. What are the unquantified and unmonetized benefits of the Transport
Rule emissions reductions?

    Important benefits beyond the human health and welfare benefits
resulting from reductions in ambient levels of PM2.5 and
ozone in the eastern United States are expected to occur from this
rule. These other benefits occur both directly from NOX and
SO2 emissions reductions. These benefits are listed in Table
IX-6. Some of the more important examples include: Reductions in
NOX and SO2 emissions required by the Transport
Rule will reduce acidification and, in the case of NOX,
eutrophication of water bodies. Reduced nitrate contamination of
drinking water is another possible benefit of the rule. This proposed
rule will also reduce acid and particulate deposition that causes
damages to cultural monuments, as well as, soiling and other materials
damage. To illustrate the important nature of benefit categories we are
currently unable to monetize, we discuss four categories of public
welfare and environmental impacts related to reductions in emissions
required by the Transport Rule: Reduced acid deposition, reduced
eutrophication of estuaries, and reduced vegetation impairment from
ozone.
1. What are the benefits of reduced deposition of sulfur and nitrogen
to aquatic, forest, and coastal ecosystems?
    Atmospheric deposition of sulfur and nitrogen, often referred to as
acid rain, occurs when emissions of SO2 and NOX
react in the atmosphere (with water, oxygen, and oxidants) to form
various acidic compounds. These acidic compounds fall to earth in
either a wet form (rain, snow, and fog) or a dry form (gases and
particles). Prevailing winds can transport acidic compounds hundreds of
miles, across state borders. Together these emissions are deposited
onto terrestrial and aquatic ecosystems across the U.S., contributing
to the problems of acidification, nutrient enrichment, and
methylmercury production. In addition, NOX is a precursor to
ozone, which can impair vegetation.
a. Acid Deposition and Acidification of Lakes and Streams
    The extent of adverse effects of acid deposition on freshwater and
forest ecosystems depends largely upon the ecosystem's ability to
neutralize the acid. The neutralizing ability [key indicator is termed
Acid Neutralizing Capacity (ANC)] depends largely on the watershed's
physical characteristics, such as geology, soils, and size. Acidic
conditions occur more frequently during rainfall and snowmelt that
cause high flows of water and less commonly during low-flow conditions,
except where chronic acidity conditions are severe. Biological effects
are primarily attributable to a combination of low pH and high
inorganic aluminum

concentrations. Biological effects of episodes include reduced fish
condition factor, changes in species composition and declines in
aquatic species richness across multiple taxa, ecosystems and regions,
as well as fish mortality. Waters that are sensitive to acidification
tend to be located in small watersheds that have few alkaline minerals
and shallow soils. Conversely, watersheds that contain alkaline
minerals, such as limestone, tend to have waters with a high ANC. Areas
especially sensitive to acidification include portions of the Northeast
(particularly, the Adirondack and Catskill Mountains, portions of New
England, and streams in the mid-Appalachian highlands) and southeastern
streams. This regulatory action will decrease acid deposition in the
transport region and is likely to have positive effects on the health
and productivity of aquatic ecosystems in the region.
b. Acid Deposition and Forest Ecosystem Impacts
    Acidifying deposition has altered major biogeochemical processes in
the U.S. by increasing the nitrogen and sulfur content of soils,
accelerating nitrate and sulfate leaching from soil to drainage waters,
depleting base cations (especially calcium and magnesium) from soils,
and increasing the mobility of aluminum. Inorganic aluminum is toxic to
some tree roots. Plants affected by high levels of aluminum from the
soil often have reduced root growth, which restricts the ability of the
plant to take up water and nutrients, especially calcium (U.S. EPA,
2008f). These direct effects can, in turn, influence the response of
these plants to climatic stresses such as droughts and cold
temperatures. They can also influence the sensitivity of plants to
other stresses, including insect pests and disease (Joslin et al.,
1992), leading to increased mortality of canopy trees.
    Both coniferous and deciduous forests throughout the eastern U.S.
are experiencing gradual losses of base cation nutrients from the soil
due to accelerated leaching for acidifying deposition. This change in
nutrient availability may reduce the quality of forest nutrition over
the long term. Evidence suggests that red spruce and sugar maple in
some areas in the eastern U.S. have experienced declining health
because of this deposition. For red spruce (Picea rubens), dieback or
decline has been observed across high elevation landscapes of the
northeastern U.S., and to a lesser extent, the southeastern U.S., and
acidifying deposition has been implicated as a causal factor (DeHayes
et al., 1999).
    This regulatory action will decrease acid deposition in the
transport region and is likely to have positive effects on the health
and productivity of forest systems in the region.
c. Coastal Ecosystems
    Since 1990, a large amount of research has been conducted on the
impact of nitrogen deposition to coastal waters. Nitrogen is often the
limiting nutrient in coastal ecosystems. Increasing the levels of
nitrogen in coastal waters can cause significant changes to those
ecosystems. In recent decades, human activities have accelerated
nitrogen nutrient inputs, causing excessive growth of algae and leading
to degraded water quality and associated impairments of estuarine and
coastal resources.
    Atmospheric deposition of nitrogen is a significant source of
nitrogen to many estuaries. The amount of nitrogen entering estuaries
due to atmospheric deposition varies widely, depending on the size and
location of the estuarine watershed and other sources of nitrogen in
the watershed. A recent assessment of 141 estuaries nationwide by the
National Oceanic and Atmospheric Administration (NOAA) concluded that
19 estuaries (13 percent) suffered from moderately high or high levels
of eutrophication due to excessive inputs of both N and phosphorus, and
a majority of these estuaries are located in the coastal area from
North Carolina to Massachusetts (NOAA, 2007). For estuaries in the Mid-
Atlantic region, the contribution of atmospheric distribution to total
N loads is estimated to range between 10 percent and 58 percent
(Valigura et al., 2001).
    Eutrophication in estuaries is associated with a range of adverse
ecological effects. The conceptual framework developed by NOAA
emphasizes four main types of eutrophication effects--low dissolved
oxygen (DO), harmful algal blooms (HABs), loss of submerged aquatic
vegetation (SAV), and low water clarity. Low DO disrupts aquatic
habitats, causing stress to fish and shellfish, which, in the short-
term, can lead to episodic fish kills and, in the long-term, can damage
overall growth in fish and shellfish populations. Low DO also degrades
the aesthetic qualities of surface water. In addition to often being
toxic to fish and shellfish, and leading to fish kills and aesthetic
impairments of estuaries, HABs can, in some instances, also be harmful
to human health. SAV provides critical habitat for many aquatic species
in estuaries and, in some instances, can also protect shorelines by
reducing wave strength; therefore, declines in SAV due to nutrient
enrichment are an important source of concern. Low water clarity is the
result of accumulations of both algae and sediments in estuarine
waters. In addition to contributing to declines in SAV, high levels of
turbidity also degrade the aesthetic qualities of the estuarine
environment.
    Estuaries in the eastern United States are an important source of
food production, in particular fish and shellfish production. The
estuaries are capable of supporting large stocks of resident commercial
species, and they serve as the breeding grounds and interim habitat for
several migratory species.
    This rule is anticipated to reduce nitrogen deposition in the
Transport Rule region. Thus, reductions in the levels of nitrogen
deposition will have a positive impact upon current eutrophic
conditions in estuaries and coastal areas in the region.
d. Mercury Methylation and Deposition
    Mercury is a highly neurotoxic contaminant that enters the food web
as a methylated compound, methylmercury (U.S. EPA, 2008d). The
contaminant is concentrated in higher trophic levels, including fish
eaten by humans. Experimental evidence has established that only
inconsequential amounts of methylmercury can be produced in the absence
of sulfate. Current evidence indicates that in watersheds where mercury
is present, increased SOX deposition very likely results in
methylmercury accumulation in fish (Drevnick et al., 2007; Munthe et
al., 2007). The SO2 ISA (U.S. EPA, 2008) concluded that
evidence is sufficient to infer a casual relationship between sulfur
deposition and increased mercury methylation in wetlands and aquatic
environments.
2. Ozone Vegetation Effects
    Ozone causes discernible injury to a wide array of vegetation (U.S.
EPA, 2006; Fox and Mickler, 1996). In terms of forest productivity and
ecosystem diversity, ozone may be the pollutant with the greatest
potential for regional-scale forest impacts (U.S. EPA, 2006). Studies
have demonstrated repeatedly that ozone concentrations commonly
observed in polluted areas can have substantial impacts on plant
function (De Steiguer et al., 1990; Pye, 1988).
    Assessing the impact of ground-level ozone on forests in the
eastern United States involves understanding the risks to sensitive
tree species from ambient ozone concentrations and accounting for the
prevalence of those species within the forest. As a way to quantify the
risks to particular plants from ground-level

ozone, scientists have developed ozone-exposure/tree-response functions
by exposing tree seedlings to different ozone levels and measuring
reductions in growth as ``biomass loss.'' Typically, seedlings are used
because they are easy to manipulate and measure their growth loss from
ozone pollution. The mechanisms of susceptibility to ozone within the
leaves of seedlings and mature trees are identical, and the decreases
predicted using the seedlings should be related to the decrease in
overall plant fitness for mature trees, but the magnitude of the effect
may be higher or lower depending on the tree species (Chappelka and
Samuelson, 1998). In areas where certain ozone-sensitive species
dominate the forest community, the biomass loss from ozone can be
significant. Significant biomass loss can be defined as a more than 2
percent annual biomass loss, which would cause long-term ecological
harm as the short-term negative effects on seedlings compound to affect
long-term forest health (Heck, 1997).
    Urban ornamentals are an additional vegetation category likely to
experience some degree of negative effects associated with exposure to
ambient ozone levels. Because ozone causes visible foliar injury, the
aesthetic value of ornamentals (such as petunia, geranium, and
poinsettia) in urban landscapes would be reduced (U.S. EPA, 2007).
Sensitive ornamental species would require more frequent replacement
and/or increased maintenance (fertilizer or pesticide application) to
maintain the desired appearance because of exposure to ambient ozone
(U.S. EPA, 2007). In addition, many businesses rely on healthy-looking
vegetation for their livelihoods (e.g., horticulturalists, landscapers,
Christmas tree growers, farmers of leafy crops, etc.) and a variety of
ornamental species have been listed as sensitive to ozone (Abt
Associates, 1995).
3. Other Health or Welfare Disbenefits of the Transport Rule That Have
Not Been Quantified
    In contrast to the additional benefits of the proposed rule
discussed above, it is also possible that this rule will result in
disbenefits in some areas of the region. Current levels of nitrogen
deposition in these areas may provide passive fertilization for forest
and terrestrial ecosystems where nutrients are a limiting factor and
for some croplands. The effects of ozone and PM on radiative transfer
in the atmosphere can also lead to effects of uncertain magnitude and
direction on the penetration of ultraviolet light and climate. Ground
level ozone makes up a small percentage of total atmospheric ozone
(including the stratospheric layer) that attenuates penetration of
ultraviolet-b (UVb) radiation to the ground. The EPA's past evaluation
of the information indicates that potential disbenefits would be small,
variable, and with too many uncertainties to attempt quantification of
relatively small changes in average ozone levels over the course of a
year (EPA, 2005a). The EPA's most recent provisional assessment of the
currently available information indicates that potential but
unquantifiable benefits may also arise from ozone-related attenuation
of UVb radiation (EPA, 2005b). Sulfate and nitrate particles also
scatter UVb, which can decrease exposure of horizontal surfaces to UVb,
but increase exposure of vertical surfaces. In this case as well, both
the magnitude and direction of the effect of reductions in sulfate and
nitrate particles are too uncertain to quantify (EPA, 2004). Ozone is a
greenhouse gas, and sulfates and nitrates can reduce the amount of
solar radiation reaching the earth, but EPA believes that we are unable
to quantify any net climate-related disbenefit or benefit associated
with the combined ozone and PM reductions in this rule.
    Additionally, from analyses of the benefits of the Acid Rain
Program, EPA has seen that substantial health and environmental
benefits that are likely to occur for Canadians because 80 percent of
the Canadian population lives within 40 miles of the US-Canada border.

Table IX-6--Unquantified and Non-Monetized Effects of the Transport Rule
------------------------------------------------------------------------
           Pollutant/effect                         Endpoint
------------------------------------------------------------------------
PM: health \a\.......................  Low birth weight.
                                       Pulmonary function.
                                       Chronic respiratory diseases
                                        other than chronic bronchitis.
                                       Non-asthma respiratory emergency
                                        room visits.
                                       UVb exposure (+/-) \c\.
PM: welfare..........................  Household soiling.
                                       Visibility in residential and non-
                                        class I areas.
                                       UVb exposure (+/-) \c\.
                                       Global climate impacts \c\.
Ozone: health........................  Chronic respiratory damage.
                                       Premature aging of the lungs.
                                       Non-asthma respiratory emergency
                                        room visits.
                                       Increased exposure to UVb (+/-)
                                        \c\.
Ozone: welfare.......................  Yields for:
                                       --Commercial forests.
                                       --Fruits and vegetables, and
                                       --Other commercial and
                                        noncommercial crops.
                                       Damage to urban ornamental
                                        plants.
                                       Recreational demand from damaged
                                        forest aesthetics.
                                       Ecosystem functions.
                                       Increased exposure to UVb (+/-)
                                        \c\.
NO2: health..........................  Respiratory hospital admissions.
                                       Respiratory emergency department
                                        visits.
                                       Asthma exacerbation.
                                       Acute respiratory symptoms.
                                       Premature mortality.
                                       Pulmonary function.
NO2: welfare.........................  Commercial fishing and forestry
                                        from acidic deposition.
                                       Commercial fishing, agriculture
                                        and forestry from nutrient
                                        deposition.
                                       Recreation in terrestrial and
                                        estuarine ecosystems from
                                        nutrient deposition.

                                       Other ecosystem services and
                                        existence values for currently
                                        healthy ecosystems.
SO2: health..........................  Respiratory hospital admissions.
                                       Asthma emergency room visits.
                                       Asthma exacerbation.
                                       Acute respiratory symptoms.
                                       Premature mortality.
                                       Pulmonary function.
SO2: welfare.........................  Commercial fishing and forestry
                                        from acidic deposition.
                                       Recreation in terrestrial and
                                        aquatic ecosystems from acid
                                        deposition.
                                       Increased mercury methylation.
------------------------------------------------------------------------
\a\ In addition to primary economic endpoints, there are a number of
  biological responses that have been associated with PM health effects
  including morphological changes and altered host defense mechanisms.
  The public health impact of these biological responses may be partly
  represented by our quantified endpoints.
\b\ Cohort estimates are designed to examine the effects of long term
  exposures to ambient pollution, but relative risk estimates may also
  incorporate some effects due to shorter term exposures (see Kunzli et
  al. (2001) for a discussion of this issue). While some of the effects
  of short term exposure are likely to be captured by the cohort
  estimates, there may be additional premature mortality from short term
  PM exposure not captured in the cohort estimates included in the
  primary analysis.
\c\ May result in benefits or disbenefits.

X. Economic Impacts

    For the affected region, the projected annual private incremental
costs of the proposed remedy option to the power industry are $3.7
billion in 2012 and $2.8 billion in 2014. For the State Budgets/
Intrastate Trading remedy, projected annual private incremental costs
are $4.2 billion in 2012 and $2.7 billion in 2014. Finally, for the
direct control remedy, the projected annual private incremental costs
are $4.3 billion in 2012 and $3.4 billion in 2014. These costs
represent the private compliance cost to the electric generating
industry of reducing NOX and SO2 emissions to
meet the requirements set forth in the rule. Estimates are in 2006
dollars.
    In estimating the net benefits of regulation, the appropriate cost
measure is ``social costs.'' Social costs represent the welfare costs
of the rule to society. These costs do not consider transfer payments
(such as taxes) that are simply redistributions of wealth. The social
costs of this rule for the proposed remedy option are estimated to be
approximately $2.0 billion in 2014 assuming a 3 percent discount rate.
These costs become $2.2 billion in 2014 assuming a 7 percent discount
rate. For the State Budgets/Intrastate Trading remedy, social costs are
estimated to be approximately $2.5 billion in 2014 assuming a 3 percent
discount rate and $2.7 billion in 2014 assuming a 7 percent discount
rate. Finally, for the direct control remedy, social costs are
estimated to be approximately $2.7 billion in 2014 assuming a 3 percent
discount rate and $2.9 billion in 2014 assuming a 7 percent discount
rate.
    Overall, the economic impacts of the Transport Rule proposal are
modest in 2014, particularly in light of the large benefits ($122 to
$294 billion annually at a 3 percent discount rate and $111 to $266
billion annually at a 7 percent discount rate) we expect as shown
earlier in this preamble (see section IX for more details). Ultimately,
we believe the electric power industry will pass along most of the
costs of the rule to consumers, so that the costs of the rule will
largely fall upon the consumers of electricity. For more information on
electricity price changes that result from this proposal, please refer
to section XII.H (Statement of Energy Effects) later in this preamble.
    For this proposed rule, EPA analyzed the costs using the Integrated
Planning Model (IPM). The IPM is a dynamic linear programming model
that can be used to examine the economic impacts of air pollution
control policies for SO2 and NOX throughout the
contiguous United States for the entire power system.
    Documentation for IPM can be found in the docket for this
rulemaking or at http://www.epa.gov/airmarkets/progsregs/epa-ipm/
index.html. Analysis of impacts on affected industries outside of the
electric power generating sector are estimated by the Economic Model
for Policy Analysis (EMPAX), a dynamic model that can generate price
and output changes for output affected by electricity price changes due
to air pollution control policies and also estimates of social costs
associated with such policies. Documentation for EMPAX can be found in
the docket for this rulemaking or at http://www.epa.gov/ttn/ecas/
EMPAX.htm.
    Also note that as explained in section IV.A.3, the baseline used in
this analysis assumes no CAIR. If EPA's base case analysis were to
assume that reductions from CAIR would continue indefinitely, areas
that are in attainment solely due to controls required by CAIR would
again face nonattainment problems because the existing protection from
upwind pollution would not be replaced. As explained in that section,
EPA believes that this is the most appropriate baseline to use for
purposes of determining whether an upwind state has an impact on a
downwind monitoring site in violation of section 110(a)(2)(D).

XI. Incorporating End-Use Energy Efficiency Into the Proposed Transport
Rule

A. Background

    EPA believes that achievement of energy efficiency improvements in
homes, buildings, and industry is an important component of achieving
emissions reductions from the power sector while minimizing associated
compliance costs. By reducing electricity demand, energy efficiency
avoids emissions of all pollutants associated with electricity
generation, including emissions of NOX and SO2
targeted by this rule. While all remedy options considered--including
the proposed remedy (State Budgets/Limited Trading)--will lead to a
modest increase in the relative cost-effectiveness of energy efficiency
investments by internalizing environmental costs associated with these
pollutants, EPA is interested in considering additional means by which
energy efficiency can be encouraged through this proposed rule.
1. What is end-use energy efficiency?
    End-use energy efficiency (hereafter, ``energy efficiency'') in the
context of this proposed rule refers to activities that reduce the
demand for electricity from EGUs in affected states. Energy

efficiency improvements are pursued through the efforts of state
agencies, independent program administrators (e.g. Vermont Energy
Investment Corporation), electric utilities, energy service companies,
and other commercial entities. Examples of common energy efficiency
projects include re-commissioning of commercial buildings, rebates for
energy efficient appliances, and home energy audits.
2. How does energy efficiency contribute to cost-effective reductions
of air emissions from EGUs?
    EPA recognizes that significant opportunity remains for energy
efficiency improvements in businesses, homes, and industry. However,
there are several informational and market barriers that limit
investment in cost-effective energy efficient practices. Several
federal programs authorized under the Act, including ENERGY STAR, are
designed to address these barriers.
    By reducing the demand for electricity energy efficiency reduces
the need for investments in EGU emissions control technologies in order
to meet the limits of an established state emissions budget and can
often be implemented at a lower cost than traditional control
technologies. Section III.E in this preamble further discusses the
importance of electricity demand reductions as a component of EPA's
broader air quality improvement strategy for the power sector.
    EPA is available to assist states in quantifying the reduction in
compliance costs of air regulatory programs, including the proposed
rule, that can be realized through effective energy efficiency policies
and programs.
3. How does the proposed rule support greater investment in energy
efficiency?
    By requiring reductions in the emissions of NOX and
SO2 from power plants in affected states, a transport rule
will lead to the internalization of costs associated with reducing the
environmental effects of these pollutants. Since the economics of
energy efficiency investments are directly related to power generation
costs, this will improve the relative cost-effectiveness of these
investments. Over time, this effect is expected to lead to increases in
energy efficiency investments and associated benefits.
4. How have EPA and states previously integrated energy efficiency into
air regulatory programs?
    Congress, EPA, and states have all recognized the value of
incorporating energy efficiency into air regulatory programs. Several
allowance-based programs--including the Acid Rain Program, EPA's
NOX Budget Trading program, and the Regional Greenhouse Gas
Initiative (an effort of 10 states from the Northeast and Mid-Atlantic
regions)--have provided mechanisms for rewarding energy efficiency
projects through either the award of emissions allowances, typically
through the use of a fixed set-aside pool, or the use of revenues
obtained through the auction of emissions allowances. The emissions
caps established by these programs are unaffected by this approach,
however, compliance costs are reduced (to the extent electricity demand
reductions are realized) as are the emissions of non-capped pollutants
from affected EGUs. In addition to these allowance-based programs, EPA
has also established, through Guidance,\116\ a means for recognizing
the emissions benefits of energy efficiency in SIPs and has approved
their use in individual state plans.
---------------------------------------------------------------------------

    \116\ U.S. EPA. 2004. Guidance on State Implementation Plan
(SIP) Credits for Emission Reductions From Electric-Sector Energy
Efficiency and Renewable Energy Measures. August. http://
www.epa.gov/ttn/oarpg/t1/memoranda/ereseerem_gd.pdf.
---------------------------------------------------------------------------

B. Incorporating End-Use Energy Efficiency Into the Transport Rule

    As discussed previously, EPA believes that increasing end-use
energy efficiency can be an effective approach for reducing compliance
costs of the proposed rule, as well as for reducing EGU emissions that
are not the target of this rule including mercury, other toxics, and
carbon dioxide. While EPA believes the proposed rule will make energy
efficiency investments more competitive, the Agency is seeking comments
on additional ways in which this rule could further encourage these
investments.
1. Options that Could Be Used To Incorporate Energy Efficiency Into
Allowance Based Programs
    As discussed previously, allowance-based programs (such as the
proposed State Budgets/Limited Trading remedy and the alternative State
Budgets/Intrastate Trading remedy) of EPA and states have supported
energy efficiency projects through the use of auction revenues or the
award of allowances. EPA considered these options in developing this
proposal but, for the reasons described later, decided not to include
either option in this proposal.
2. Why did EPA not propose these options?
    The emissions reductions requirements of the proposed rule are
implemented through proposed FIPs. This means, among other things, that
EPA allocates the emission allowances directly to individual sources.
In contrast, when allowance based programs are implemented through
SIPs, states may have significant flexibility to determine the
methodology used to allocate or auction allowances in their budgets.
Under the proposed FIPs, EPA would allocate allowances to sources in a
manner consistent with the methodology used to determine each state's
budget. EPA believes this approach is appropriate because of the link
between the allowance allocation methodology and the significant
contribution determinations. EPA requests comment on whether EPA has
authority to and whether it would be appropriate for EPA to consider
energy efficiency considerations in developing the allowance allocation
methodology.
    In addition, because the emission reduction requirements are
implemented through FIPs, any auction of allowances would be conducted
by EPA. As discussed previously in section V.D.5.b, pursuant to the
Miscellaneous Receipts Act, any revenues from a federal auction of
allowances must go to the U.S. Treasury. This precludes the use of
proceeds from such an auction to reward energy efficiency projects.
    In addition, and as also discussed previously in sections III.A and
III.B.3, EPA anticipates further revisions to the PM2.5 and
ozone NAAQS and intends to issue subsequent proposals to address the
interstate transport requirements of section 110(a)(2)(D)(i)(I) with
respect to those new NAAQS. The emissions reductions requirements
identified in any such rules could be implemented through SIPs. The SIP
process could give states significant flexibility in regards to
allocation and auctioning of allowances. This flexibility could be used
by states to support energy efficiency projects through the use of
auction revenues or the award of allowances.
    EPA is seeking comment on the discussion within this section and
the use of these and other approaches for encouraging energy efficiency
within the proposed rule.

XII. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

    Under section 3(f)(1) of Executive Order 12866 (58 FR 51735,
October 4,

1993), this action is an ``economically significant regulatory action''
because it is likely to have an annual effect on the economy of $100
million. Accordingly, EPA submitted this action to the Office of
Management and Budget (OMB) for review under EO 12866 and any changes
made in response to OMB recommendations have been documented in the
docket for this action. In addition, EPA prepared a Regulatory Impact
Analysis (RIA) of the potential costs and benefits associated with this
action.
    When estimating the PM2.5- and ozone-related human
health benefits and compliance costs in Table 1 below, EPA applied
methods and assumptions consistent with the state-of-the-science for
human health impact assessment, economics and air quality analysis. EPA
applied its best professional judgment in performing this analysis and
believes that these estimates provide a reasonable indication of the
expected benefits and costs to the nation of the preferred and
alternate Transport Rule remedies considered by the Agency. The
Regulatory Impacts Analysis (RIA) available in the docket describes in
detail the empirical basis for EPA's assumptions and characterizes the
various sources of uncertainties affecting the estimates below.
    When characterizing uncertainty in the PM-mortality relationship,
EPA has historically presented a sensitivity analysis applying
alternate assumed thresholds in the PM concentration-response
relationship. In its synthesis of the current state of the PM science,
EPA's 2009 Integrated Science Assessment (ISA) for Particulate Matter
concluded that a no-threshold log-linear model most adequately portrays
the PM-mortality concentration-response relationship. In the RIA
accompanying this rule, rather than segmenting out impacts predicted to
be associated levels above and below a `bright line' threshold, EPA
includes a ``lowest-measured-level (LML)'' that illustrates the
increasing uncertainty that characterizes impacts attributed to levels
of PM2.5 below the LML for each study. Figure 5-19 shows the
distribution of avoided PM mortality impacts predicted relative to the
baseline (i.e. pre-Transport Rule) PM2.5 levels experienced
by the population receiving the PM2.5 mortality benefit in
2014 (Figure 5-19). This figure also shows the lowest air quality
levels measured in each of the two primary epidemiological studies EPA
uses to quantify PM-related mortality. This information allows readers
to determine the portion of PM-related mortality benefits occurring
above or below the LML of each study; in general, our confidence in the
size of the estimated reduction PM2.5-related premature
mortality decreases in areas where annual mean PM2.5 levels
are further below the LML in the two epidemiological studies. In this
analysis, we see that about 80% of the estimated benefits accrue among
populations exposed to annual mean PM2.5 levels above 10ug/
m3 (the LML in the Six Cities study) and 97% of the estimated benefits
are associated with PM levels above 7.5 mg/m3 (the LML in the American
Cancer Society study used for this analysis). While the LML analysis
provides some insight into the level of uncertainty in the estimated PM
mortality benefits, EPA does not view the LML as a threshold and
continues to quantify PM-related mortality impacts using a full range
of modeled air quality concentrations.
    Table XII.A-1 shows the results of the cost and benefits analysis
for the proposed and alternate remedies.

 Table XII.A-1--Summary of Annual Benefits, Costs, and Net Benefits of Versions of the Proposed Remedy Option in
                                                    2014 \a\
                                               [Billions of 2006$]
----------------------------------------------------------------------------------------------------------------
                                        Preferred remedy-State
             Description               budgets/limited trading       Direct control         Intrastate trading
----------------------------------------------------------------------------------------------------------------
Social costs \b\
    3% discount rate.................  $2.03..................  $2.68..................  $2.49.
    7% discount rate.................  $2.23..................  $2.91..................  $2.70.
Health-related benefits \c,d\
    3% discount rate.................  $118 to $288 + B.......  $117 to $286 + B.......  $113 to $276 + B.
    7% discount rate.................  $108 to $260 + B.......  $108 to $262 + B.......  $104 to $252 + B.
Net benefits (benefits-costs)
    3% discount rate.................  $116 to $286...........  $115 to $283...........  $110 to $273.
    7% discount rate.................  $105 to $258...........  $105 to $259...........  $101 to $249.
----------------------------------------------------------------------------------------------------------------
Notes: (a) All estimates are rounded to three significant digits and represent annualized benefits and costs
  anticipated for the year 2014. For notational purposes, unquantified benefits are indicated with a ``B'' to
  represent the sum of additional monetary benefits and disbenefits. Data limitations prevented us from
  quantifying these endpoints, and as such, these benefits are inherently more uncertain than those benefits
  that we were able to quantify. A listing of health and welfare effects is provided in RIA Table 1-6. Estimates
  here are subject to uncertainties discussed further in the body of the document. (b) The social costs are the
  loss of household utility as measured in Hicksian equivalent variation. (c) The reduction in premature
  mortalities account for over 90% of total monetized benefits. Benefit estimates are national. Valuation
  assumes discounting over the SAB-recommended 20-year segmented lag structure described in Chapter 5. Results
  reflect 3 percent and 7 percent discount rates consistent with EPA and OMB guidelines for preparing economic
  analyses (U.S. EPA, 2000; OMB, 2003). The estimate of social benefits also includes CO2-related benefits
  calculated using the social cost of carbon, discussed further in chapter 5. Benefits are shown as a range from
  Pope et al. (2002) to Laden et al. (2006). Monetized benefits do not include unquantified benefits, such as
  other health effects, reduced sulfur deposition or visibility. These models assume that all fine particles,
  regardless of their chemical composition, are equally potent in causing premature mortality because there is
  no clear scientific evidence that would support the development of differential effects estimates by particle
  type. (d) Not all possible benefits or disbenefits are quantified and monetized in this analysis. B is the sum
  of all unquantified benefits and disbenefits. Potential benefit categories that have not been quantified and
  monetized are listed in RIA Table 1-4.

B. Paperwork Reduction Act

    The information collection requirements in the proposed rule have
been submitted for approval to OMB under the Paperwork Reduction Act,
44 U.S.C. 3501 et seq. The information collection requirements are not
enforceable until OMB approves them.
    The information collection activities in this proposed rule include
monitoring and the maintenance of records. The information generated by
these activities will be used by EPA to ensure that affected facilities
comply with the emission limits and other requirements. Records and
reports are necessary to enable EPA or states to identify affected
facilities that may not be in compliance with the requirements. Based
on reported information, EPA

will decide which units and what records or processes should be
inspected. The amendments do not require any notifications or reports
beyond those required by the General Provisions. The recordkeeping
requirements require only the specific information needed to determine
compliance. These recordkeeping and reporting requirements are
specifically authorized by CAA section 114 (42 U.S.C. 7414). All
information submitted to EPA for which a claim of confidentiality is
made will be safeguarded according to EPA policies in 40 CFR part 2,
subpart B, Confidentiality of Business Information.
    The record-keeping and reporting burden to sources resulting from
states choosing to participate in a regional cap-and-trade program is
approximately $28 million annually. This estimate includes the
annualized cost of installing and operating appropriate SO2
and NOX emissions monitoring equipment to measure and report
the total emissions of these pollutants from affected EGUs (serving
generators greater than 25 megawatt electrical). The burden to state
and local air agencies includes any necessary SIP revisions,
performance of monitoring certification, and fulfilling of audit
responsibilities. More information on the ICR analysis is included in
the proposed Transport Rule docket. Burden is defined at 5 CFR
1320.3(b).
    An Agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9. When this ICR is
approved by OMB, the Agency will publish a technical amendment to 40
CFR part 9 in the Federal Register to display the OMB control number
for the approved information collection requirements contained in this
final rule.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
    For purposes of assessing the impacts of this proposed rule on
small entities, small entity is defined as: (1) A small business as
defined by the Small Business Administration's (SBA) regulations at 13
CFR 121.201. For the electric power generation industry, the small
business size standard is an ultimate parent entity defined as having a
total electric output of 4 million megawatt-hours (MW-hr) or less in
the previous fiscal year.
    (2) A small governmental jurisdiction that is a government of a
city, county, town, school district or special district with a
population of less than 50,000; and
    (3) A small organization that is any not-for-profit enterprise
which is independently owned and operated and is not dominant in its
field.

     Table XII.C-1--Potentially Regulated Categories and Entities a
------------------------------------------------------------------------
                                   NAICS       Examples of potentially
            Category               Code b        regulated entities
------------------------------------------------------------------------
Industry.......................     221112  Fossil fuel-fired electric
                                             utility steam generating
                                             units.
Federal Government.............   c 221112  Fossil fuel-fired electric
                                             utility steam generating
                                             units owned by the federal
                                             government.
State/Local....................   c 221112  Fossil fuel-fired electric
                                             utility steam generating
                                             units owned by
                                             municipalities.
Tribal Government..............     921150  Fossil fuel-fired electric
                                             utility steam generating
                                             units in Indian Country.
------------------------------------------------------------------------
a Include NAICS categories for source categories that own and operate
  electric generating units only.
b North American Industry Classification System.
c Federal, state, or local government-owned and operated establishments
  are classified according to the activity in which they are engaged.

    After considering the economic impacts of this proposed rule on
small entities, EPA is certifying that this action will not have a
significant economic impact on a substantial number of small entities.
This certification is based on the economic impact of this proposed
action to all affected small entities across all industries affected.
EPA has assessed the potential impact of this action on small entities
and found that approximately 550 of the estimated 4,700 EGUs
potentially affected by today's proposal are owned by the 81
potentially affected small entities identified by EPA's analysis. EPA
estimates that 30 of the 81 identified small entities will have
annualized costs greater than 1 percent of their revenues, and the
other 51 are projected to incur costs less than 1 percent of revenues.
While there are costs greater than 1 percent of revenues for a number
of small entities, EPA is certifying No SISNOSE for several reasons.
First, of the 30 entities projected to have costs greater than 1
percent of revenues, around 75 percent of them operate in cost of
service regions and would generally be able to pass any increased costs
along to rate-payers. This is one of the primary reasons given in the
Regulatory Impact Assessment for the Final Clean Air Interstate Rule
(EPA-452/R-05-002 March 2005) that supported EPA's ``No SISNOSE''
certification in the final CAIR FIP rule on April 28, 2006 (71 FR
25366). Furthermore, of the approximately 550 units identified by EPA
as being potentially owned by small entities, approximately two-thirds
of the units that have higher costs are not expected to make
operational changes as a result of this rule (e.g., install control
equipment or switch fuels). Their increased costs are largely due to
increased cost of the fuel they would be expected to use whether or not
they had to comply with the proposed rule. Further, increased fuel
costs are often passed through to rate-payers as common practice in
many areas of the United States due to fuel adder arrangements
instituted by state public utility commissions. In addition, EPA's
decision to exclude units smaller than 25 MWe has already significantly
reduced the burden on small entities. Hence, EPA has concluded that
there is no SISNOSE for this rule.
    For more information on the small entity impacts associated with
the proposed rule, please refer to the Economic Impact and Small
Business Analyses in the public docket. These analyses can be found in
the Regulatory Impact Analysis for this proposed rule. Finally,
although EPA believes that the proposed rule would not have a
significant economic impact on a

substantial number of small entities, EPA plans to take steps to
conduct meetings with industry trade associations to discuss regulatory
options and ensure that the burdens imposed on small entities are
minimal.
    We continue to be interested in the potential impacts of the
proposed rule on small entities and welcome comments on issues related
to such impacts.

D. Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2
U.S.C. 1531-1538, requires federal agencies, unless otherwise
prohibited by law, to assess the effects of their regulatory actions on
state, local, and tribal governments and the private sector. This rule
contains a Federal mandate that may result in expenditures of $100
million or more for state, local, and tribal governments, in the
aggregate, or the private sector in any one year. Accordingly, EPA has
prepared under section 202 of the UMRA a written statement which is
summarized later.
    Consistent with section 205, EPA has identified and considered a
reasonable number of regulatory alternatives. In today's action, EPA
has included three remedy options that it considered when developing
this proposed rule: (1) The proposed remedy of State Budgets/Limited
Trading, (2) State Budgets/Intrastate Trading, and (3) Direct Controls.
Moreover, section 205 allows EPA to adopt an alternative other than the
least costly, most cost-effective or least burdensome alternative if
the Administrator publishes with the final rule an explanation why that
alternative was not adopted.
    EPA examined the potential economic impacts on state and
municipality-owned entities associated with this rulemaking based on
assumptions of how the affected states will implement control measures
to meet their emissions. Although EPA does not conclude that the
requirements of the UMRA apply to the Transport Rule, these impacts
have been calculated to provide additional understanding of the nature
of potential impacts and additional information.
    According to EPA's analysis, of the 84 government entities
considered in this analysis and the 482 government entities in the
Transport Rule region that are included in EPA's modeling, 27 may
experience compliance costs in excess of 1 percent of revenues in 2014,
based on our assumptions of how the affected states implement control
measures to meet their emissions budgets as set forth in this
rulemaking.
    Government entities projected to experience compliance costs in
excess of 1 percent of revenues have some potential for significant
impact resulting from implementation of the Transport Rule. However, as
noted previously, it is EPA's position that because these government
entities can pass on their costs of compliance to rate-payers, they
will not be significantly affected. Furthermore, the decision to
include only units greater than 25 MW in size exempts 380 government
entities that would otherwise be potentially affected by the Transport
Rule. For more information on the impacts estimated for this analysis,
please refer to the RIA for this proposed rule.
    In addition, before EPA establishes any regulatory requirements
that may significantly or uniquely affect small governments, including
tribal governments, it must have developed under section 203 of the
UMRA, a small government agency plan. The plan must provide for
notifying potentially affected small governments, enabling officials of
affected small governments to have meaningful and timely input in the
development of EPA regulatory proposals with significant Federal
intergovernmental mandates, and informing, educating, and advising
small governments on compliance with the regulatory requirements.
Consistent with the intergovernmental consultation provisions of
section 204 of the UMRA, EPA has initiated consultations with
governmental entities affected by this rule.
    The EPA has determined that this rule contains a Federal mandate
that may result in expenditures of $100 million or more in 1 year. EPA
has determined that this rule contains no regulatory requirements that
might significantly or uniquely affect small governments and that
development of a small government plan under section 203 of the Act is
not required. The costs of compliance will be borne predominately by
sources in the private sector although a small number of sources owned
by state and local governments may also be impacted. The requirements
in this action do not distinguish EGUs based on ownership, either for
those units that are included within the scope of the rule or for those
units that are exempted by the generating capacity cut-off. Therefore,
this rule is not subject to the requirements of section 203 of UMRA
because it contains no regulatory requirements that might significantly
or uniquely affect small governments.

E. Executive Order 13132: Federalism

    This proposed rule does not have federalism implications. It will
not have substantial direct effects on the states, on the relationship
between the national government and the states, or on the distribution
of power and responsibilities among the various levels of government,
as specified in Executive Order 13132. The proposed rule primarily
affects private industry, and does not impose significant economic
costs on state or local governments. Thus, Executive Order 13132 does
not apply to the proposed rule.
    In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and state and local
governments, EPA will specifically solicit comment on the proposed rule
from state and local officials.

F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments

    This action does not have tribal implications, as specified in
Executive Order 13175 (65 FR 67249, November 9, 2000). It will not have
substantial direct effects on tribal governments, on the relationship
between the Federal government and Indian tribes, or on the
distribution of power and responsibilities between the federal
government and Indian tribes, as specified in Executive Order 13175.
Thus, Executive Order 13175 does not apply to the final rule.

G. Executive Order 13045: Protection of Children From Environmental
Health and Safety Risks

    EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997)
as applying to those regulatory actions that concern health or safety
risks, such that the analysis required under section 5-501 of the Order
has the potential to influence the regulation. This action is not
subject to Executive Order 13045 because it does not involve decisions
on environmental health or safety risks that may disproportionately
affect children. The EPA believes that the emissions reductions from
the strategies in this rule will further improve air quality and will
further improve children's health.

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

    Executive Order 13211 (66 FR 28355, May 22, 2001) provides that
agencies shall prepare and submit to the Administrator of the Office of
Regulatory Affairs, OMB, a Statement of Energy Effects for certain
actions identified as ``significant energy actions.'' Section 4(b) of
Executive Order 13211 defines ``significant energy

action'' as ``any action by an agency (normally published in the
Federal Register) that promulgates or is expected to lead to the
promulgation of a final rule or regulation, including notices of
inquiry, advance notices of proposed rulemaking, and notices of
proposed rulemaking: (1)(i) That is a significant regulatory action
under Executive Order 12866 or any successor order, and (ii) is likely
to have a significant adverse effect on the supply, distribution, or
use of energy; or (2) that is designated by the Administrator of the
Office of Information and Regulatory Affairs as a significant energy
action.'' This proposed rule is a significant regulatory action under
Executive Order 12866, and this proposed rule may have a significant
adverse effect on the supply, distribution, or use of energy.
    Under the provisions of this proposed rule, EPA projects that
approximately 1.2 GW of coal-fired generation may be removed from
operation by 2014. In practice, however, the units projected to be
uneconomic to maintain may be ``mothballed,'' retired, or kept in
service to ensure transmission reliability in certain parts of the
grid. These units are predominantly small and infrequently used
generating units dispersed throughout the area affected by the rule.
Assumptions of higher natural gas prices or electricity demand would
create a greater incentive to keep these units operational. The EPA
projects that the average retail electricity price could increase
nationally by less than 2.5 percent in 2012 and 1.5 percent in 2014.
This is generally less of an increase than often occurs with
fluctuating fuel prices and other market factors. Related to this,
delivered coal prices increase by about 7 percent in 2012 and 4 percent
in 2014 as a result of higher demand for lower-sulfur coals. The EPA
also projects that natural gas prices will increase by less than 1.7
percent in 2012 and 0.5 percent in 2014 and that natural gas use for
electricity generation will increase by less than 73 million mcf by
2014. The price increase is also within the range we regularly see in
delivered natural gas prices. Finally, the EPA projects coal production
for use by the power sector, a large component of total coal
production, will decrease by 3 million tons in 2012 and 9 million tons
in 2014. The EPA does not believe that this rule will have any other
impacts that exceed the significance criteria.
    The EPA believes that a number of features of the proposed
rulemaking serve to reduce its impact on energy supply. First, the
trading programs in State Budgets/Limited Trading provide considerable
flexibility to the power sector and enable industry to comply with the
emission reduction requirements in the most cost-effective manner, thus
minimizing overall costs and the ultimate impact on energy supply.
Second, the more stringent budgets for SO2 are set in two
phases, providing adequate time for EGUs to install pollution controls.
In addition, both the operational flexibility of trading and the
ability to bank allowances for future years helps industry plan for and
ensure reliability in the electrical system. For more details
concerning energy impacts, see the RIA for the proposed Transport Rule.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standards bodies. NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards.
    This proposed rule would require all sources to meet the applicable
monitoring requirements of 40 CFR part 75. Part 75 already incorporates
a number of voluntary consensus standards.
    Consistent with the Agency's Performance Based Measurement System
(PBMS), Part 75 sets forth performance criteria that allow the use of
alternative methods to the ones set forth in Part 75. The PBMS approach
is intended to be more flexible and cost-effective for the regulated
community; it is also intended to encourage innovation in analytical
technology and improved data quality. At this time, EPA is not
recommending any revisions to Part 75; however, EPA periodically
revises the test procedures set forth in Part 75.
    When EPA revises the test procedures set forth in Part 75 in the
future, EPA will address the use of any new voluntary consensus
standards that are equivalent. Currently, even if a test procedure is
not set forth in Part 75, EPA is not precluding the use of any method,
whether it constitutes a voluntary consensus standard or not, as long
as it meets the performance criteria specified; however, any
alternative methods must be approved through the petition process under
40 CFR 75.66 before they are used.

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

    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
federal executive policy on environmental justice. Its main provision
directs federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority, low-income, and Tribal
populations in the United States.
1. Consideration of Environmental Justice Issues in the Rule
Development Process
    In the rulemaking process, EPA considers whether there are positive
or negative impacts of the action that appear to affect low-income,
minority, or Tribal communities disproportionately, and, regardless of
whether a disproportionate effect exists, whether there is a chance for
these communities to meaningfully participate in the rulemaking
process. EPA expects that this rule, ``Federal Implementation Plans to
Reduce Interstate Transport of Fine Particulate Matter and Ozone,''
will provide significant health and environmental benefits to, among
others, people with asthma, people with heart disease, and people
living in ozone or fine particle (PM2.5) nonattainment
areas. This rule also has the potential to affect the cost structure of
the utility industry and could lead to regional shifts in electricity
generation and/or emissions of various pollutants. Therefore we expect
this rule to be of interest to many environmental justice communities.
EPA's analysis of the effects of this proposed rule, including
information on air quality changes and the resulting health benefits,
is presented both in section IX of this preamble and in more detail in
the air quality modeling Technical Support Document and the Regulatory
Impact Analysis (RIA) for this rule. These documents can be accessed
through the rule docket No. EPA-HQ-OAR-2009-0491 and from the main EPA
Web page for the rule http:// www.epagov/airtransport. This section
summarizes the legal basis for this rule, and provides background
information on how this rule fits into the larger regulatory strategy
for controlling

pollution from the power sector. A summary of the emissions, air
quality, and health benefit estimates for this rule then follows.
    This rule is replacing an earlier rule (the 2005 Clean Air
Interstate Rule (CAIR)) that was first vacated and then remanded to EPA
by the U.S. Court of Appeals for the District of Columbia Circuit. CAIR
was vacated by the U.S. Court of Appeals for the District of Columbia
Circuit in July 2008 in a case known as North Carolina v. EPA. In
December 2008, the vacatur was altered to a remand based on the likely
environmental harms of vacating the rule and EPA's stated intent to
replace the rule promptly. At the time of the 2008 court ruling, many
sources had already begun to install and run emissions control devices
or otherwise alter their operations and had successfully begun reducing
their emissions. The court decision has led to significant uncertainty
among affected sources as to what emissions reductions will be required
and among states and communities as to what air quality benefits will
be achieved. By proposing this aggressive replacement rule that meets
the legal requirements of the CAA as interpreted by the Court in the
North Carolina decision promptly, EPA is both maximizing the likelihood
that the goals of the CAA will be met, and helping communities receive
the air quality benefits they need as quickly as possible by minimizing
the chance that any emissions reductions achieved under CAIR would be
lost.
    It is important to note that CAA section 110(a)(2)(d), which
addresses transport of criteria pollutants between states and is the
authority for this rule, is only one of many provisions of the CAA that
provide EPA, states, and local governments with authorities to reduce
exposure to ozone and PM2.5 in communities. These legal
authorities work together to reduce exposure to these pollutants in
communities, including environmental justice communities, and provide
substantial health benefits to both the general public and sensitive
sub-populations.
    This proposed rule is one of a group of regulatory actions that EPA
will take over the next several years to respond to statutory and
judicial mandates that will reduce exposure to ozone and
PM2.5, as well as to other pollutants, from power plants and
other sources. To the extent that EPA has the legal authority to do so
while fulfilling its obligations under the CAA and other relevant
statutes, we will also coordinate these utility-related air pollution
rules with upcoming regulations for the power sector from EPA's Office
of Water (OW) and its Office of Resource Conservation and Recovery
(ORCR). The primary actions are outlined below and presented in more
detail in section III.E of this preamble.
    Beyond this action and any additional efforts undertaken in
response to comment, other rules that will drive the creation of a
clean, efficient and completely modern power sector include: CAA
section 112(d) standards (one of which is often referred to as a
Maximum Achievable Control Technology (MACT) standard) to reduce
emissions of air toxics, including mercury, and particles from coal-
and oil-fired power plants; new National Ambient Air Quality Standards
(NAAQS) for ozone, PM2.5, sulfur dioxide, and nitrogen
oxides; potentially one or more additional rules eliminating interstate
transport of emissions that contribute significantly to nonattainment
and maintenance areas for the new ozone and PM2.5 NAAQS as
necessary; revisions to the New Source Performance Standards (NSPS) for
steam electric generating units; and best available retrofit technology
(BART) requirements and other requirements that address visibility and
regional haze. Within the planning and investment horizon for
compliance with these rules, EPA very likely will be compelled to
respond to a pending petition to set standards for the emissions of
greenhouse gases (GHGs) from steam electric generating units under the
New Source Performance Standard program. Furthermore, as set forth in
the recently promulgated reinterpretation of the Johnson Memo,
beginning in 2011 new and modified sources of GHG emissions, including
EGUs, will be subject to permits under the Prevention of Significant
Deterioration program requiring them to adopt Best Available Control
Technology for their GHGs. Finally, 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
that the Agency wants to provide while lowering the costs of realizing
those improvements.
    Together, these rules and actions will have substantial and long-
term effects on both the U.S. power industry and on communities
currently breathing dirty air. Therefore, we anticipate significant
interest in many, if not most, of these actions from environmental
justice communities, among many others. EPA intends to provide multiple
opportunities for comment on these actions, including during the
comment process for this rule, and encourages environmental justice
communities to review and comment on them.
2. Potential Environmental and Public Health Impacts to Vulnerable
Populations
    There are several considerations to take into account when
assessing the effects of this proposed rule on minority, low-income,
and tribal populations. These include: Amount of emissions reductions
and where they take place (including any potential for areas of
increased emissions); the changes in ambient concentrations across the
affected area; and the health benefits expected from the rules.
    Emissions reductions. This proposed rule will reduce exposure to
PM2.5 and ozone pollution in most eastern states by reducing
interstate transport of these pollutants and their chemical precursors
(sulfur dioxide (SO2) and nitrogen oxides (NOX)).
This rule has the effect of reducing emissions of these pollutants that
affect the most-contaminated areas (i.e. areas that are not meeting the
1997 and 2006 ozone and PM2.5 National Ambient Air Quality
Standards (NAAQS)). This rule separately identifies both nonattainment
areas and maintenance areas (maintenance areas are those that currently
meet the NAAQS but that, based on past data, are in danger of exceeding
the standards in the future). This approach of requiring emissions
reductions to protect maintenance areas as well as nonattainment areas
reduces the likelihood that any areas close to the level of the
standard will exceed the current health-based standards in the future.
    Ozone and PM2.5 concentrations in both nonattainment and
maintenance areas identified in this rule are the result of both local
emissions and long-range transport of pollution. This rule requires
upwind states to reduce or eliminate their significant contribution to
nonattainment or maintenance problems in downwind states. Even when the
significant contributions of upwind states are fully eliminated,
additional emissions reductions within the nonattainment area and/or
the downwind state will be needed for some areas to attain and maintain
the NAAQS.
    The proposed remedy option for this rule would use a limited
emissions trading mechanism among power plants to achieve significant
emissions reductions in states covered by the rule. EPA recognizes that
many environmental justice communities have voiced concerns about
emissions trading and any resulting potential for any emissions
increases in any location.

    This proposed rule uses EPA's authority in CAA Sec.  110(a)(2)(d)
to require states to eliminate emissions from power plants in their
state that contribute significantly to downwind PM2.5 or
ozone nonattainment or maintenance areas. EPA's proposed mechanism for
achieving these emissions reductions is to use a tightly constrained
trading program that requires a strict emission ceiling in each state