In this section of the preamble, the following topics are addressed: FIP requirements and key elements of the CSAPR trading programs; participation in the CSAPR NOX ozone-season trading program with a new budget; source monitoring and reporting; replacing the FIP with a SIP; title V permitting; and the relationship of this proposed rule to existing programs (NOX SIP Call, CSAPR trading programs, Clean Power Plan (CPP), and other ozone transport programs).
 FIP Requirements and Key Elements of the CSAPR Trading Programs
      The original CSAPR establishes an NOX ozone-season allowance trading program that allows covered sources within each state to trade allowances with other sources within the same trading group. Pursuant to the CSAPR NOX ozone-season trading program, sources are required to hold one allowance for each ton of NOX emitted during the ozone season. We propose to use that same regional trading program, with adjusted budgets and certain additional revisions described below, as the compliance remedy for the proposed FIPs to address the 2008 ozone NAAQS. The first control period for this updated CSAPR NOX ozone-season trading program is proposed to begin with the 2017 ozone season, on May 1, 2017.
	In this section, the EPA is proposing to use the existing NOX ozone-season allowance trading system that was established under CSAPR in 40 CFR Part 97, Subpart BBBBB, to implement the emission reductions identified and quantified in the FIPs for this action.
 Applicability
      In this proposed rule, the EPA would maintain the applicability provisions in the final CSAPR rule for the NOX ozone-season trading program (see 40 CFR 97.504).
      Under the general applicability provisions of the CSAPR final rule, a covered unit is any stationary fossil-fuel-fired boiler or combustion turbine serving at any time on or after January 1, 2005, a generator with nameplate capacity exceeding 25 MW producing electricity for sale, with the exception of certain cogeneration units and solid waste incineration units (see 76 FR 48273, August 8, 2011, for a discussion on applicability in the final CSAPR rule). The EPA is not proposing any changes to this provision.
 State Budgets
This proposal includes revisions to 40 CFR Part 97.510 to reflect new budgets for states covered under this proposal as delineated in section VI above. This includes the NOX ozone-season trading budgets, new unit set-asides, and Indian country new unit set-asides for 2017 and beyond, described in further detail below.
For states already covered by the original CSAPR ozone-season program, the EPA proposes to update CSAPR EGU NOX ozone-season budgets to reflect obligations to reduce interstate transport to address the 2008 ozone standard. For states that are newly brought into the CSAPR ozone-season program because emissions from the states significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS in a downwind state (i.e., Kansas based on information used to develop this proposal), the proposal includes an EGU NOX ozone-season emission budget. For states currently in the CSAPR ozone-season trading program, but not identified as contributing to interstate ozone transport for the 2008 NAAQS (i.e., Georgia based on information used to develop this proposal), participation in CSAPR would continue unchanged pursuant to their previously-defined obligation (budget) with respect to the 1997 ozone NAAQS.
The EPA proposes to establish reduced or new ozone-season emissions budgets for the 23 eastern states affected by the transport rule for the 2008 ozone NAAQS. The EPA proposes to implement these emissions budgets by allocating allowances to sources in those states equal to the proposed budgets for compliance starting in 2017. The EPA will establish allowance allocations for the existing units in each state through this rulemaking. Portions of the state budgets will be set aside for new units, and the EPA will use the existing processes set forth in the CSAPR regulations to annually allocate allowances to the new units in each state from the new unit set-asides. For states that are currently in the CSAPR ozone-season program, but are not affected under this proposed transport rule for the 2008 ozone NAAQS (i.e., Georgia based on information used to develop this proposal), the EPA will maintain the state's budget as finalized in the original CSAPR rulemakings.
 Allocations of Emission Allowances for Existing Units, New Units, and Tribes
Pursuant to the CSAPR trading program regulations, a covered source is required to hold sufficient allowances to cover the emissions from all covered units at the source during the control period for the NOX ozone season. The EPA assesses compliance with these allowance-holding requirements at the source (i.e., facility) level.
This section explains that the EPA proposes to allocate a state's budget to existing units and new units in that stateby applying the same allocation approach as finalized in CSAPR, based on a unit's historical heat input and its maximum historical emissions (see 76 FR 48284, August 8, 2011). This section also describes the new unit set-asides and Indian country new unit set-asides in each state, allocations to units that are not operating, and the recordation of allowance allocations in source compliance accounts.
         a. Allocations for existing units
The EPA proposes to implement each state's EGU NOX ozone-season emission budget in the trading program by allocating the number of emission allowances to sources within that state, equivalent to the tonnage of that specific state budget, as shown in section VI. For these 23 states, the EPA would allocate allowances under each state's budget to covered units in that state. The portion of a state budget allocated to existing units in that state is the state budget minus the new unit set-aside and minus the Indian country new unit set-aside. The new unit set-asides are portions of each budget reserved for new units that might locate in each state or in Indian country in the future. For the existing source level allocations, see the TSD called, "Existing Source Level Allocations for the 2008 NOX Ozone-season Rule FIPs," in the docket for this rulemaking. The methodology used to allocate allowances to individual units in a particular state has no impact on that state's budget.
      For the purpose of allocations, an "existing unit" in CSAPR is one that commenced commercial operation prior to January 1, 2010. For the 23 states included in this proposed rulemaking for the 2008 ozone NAAQS, the EPA proposes to identify an "existing unit" as one that commenced commercial operation prior to January 1, 2015. EPA has updated information on affected units that have commenced commercial operation prior to January 1, 2015 (currently defined either as existing units or as new units pursuant to the current CSAPR regulations) that would allow these units to be considered existing units for purposes of allocations and would allow new unit set-asides to be fully reserved for any future new units in affected states or Indian country. The EPA is not proposing to change the January 1, 2010 date for states that remain in the original CSAPR and are not affected by the changes proposed here (i.e., Georgia with respect to the CSAPR NOX ozone-season allowances and all states with respect to CSAPR SO2 or NOX annual allowances); thus, the only allowance allocations that are proposed to be changed in this rule for any units under any of the CSAPR trading programs are allocations of NOX ozone-season allowances from budgets that are proposed to be revised in this rule.
      The EPA proposes to follow the original CSAPR methodology for distributing, or allocating, emission allowances to existing units based on the unit's share of the state's heat input, limited by the unit's maximum historical emissions. This approach uses the highest three of the last five years to establish the heat input baseline for each unit, and constrains the unit-level allocations so as not to exceed the maximum historical baseline emissions during 2007-2014. As discussed in the original CSAPR final rule (see 76 FR 48288-9, August 8, 2011), the EPA finds no advantage or disadvantage in this approach that would penalize those units that have already invested in cleaner fuels or other pollution reduction measures. The EPA considers this allocation approach to be fuel-neutral, control-neutral, transparent, based on reliable data, and similar to allocation methodologies previously used in the NOX SIP Call and Acid Rain Program. The EPA requests comments on following the CSAPR approach for existing unit allocations in states covered by this proposed rule as to the 2008 ozone NAAQS.
For states that have EPA-approved abbreviated SIP revisions adopting a different allocation methodology for sources located within the state for CSAPR for the 2017 ozone season and beyond, those provisions would address the allocation of revised NOX ozone-season emissions budgets established under this rule, provided that the SIP revision includes not only specific allocations given the total state budget expected at the time of the SIP revision, but also a methodology for determining allocations from any given total state budget. For states that have EPA-approved full SIP revisions, the EPA proposes to use the EPA-approved allocation provisions of the state's SIP revision to allocate allowances to sources in that particular state using the revised emission budget proposed to address interstate ozone transport for the 2008 NAAQS, again provided that the SIP includes not only specific allocations but a methodology for determining allocations from any given total state budget.
Further, where the state regulation approved as a full or abbreviated SIP revision does not contain an allocation methodology but the materials submitted by the state to support EPA's approval of that regulation as a SIP revision contain the state's allocation method, described in an unambiguous manner, the EPA seeks comment on using that state-approved methodology to determine the allocations of allowances to sources in the state under the FIPs established in this rule. These possible approaches could prevent a state from needing to submit another SIP revision to implement the same allocation provisions under this rule that the state has already implemented under CSAPR before adoption of this rule.
For all other states, the EPA proposes to use the allocation method previously finalized in the final CSAPR rulemaking as discussed above in this section. These provisions would not prevent any state (one with an EPA-approved SIP revision or without) from submitting an alternative allocation methodology under the rule for later compliance years. EPA requests comment on this modified allocation approach for states with EPA-approved SIP revisions under the current rule.
               b.          Allocations for new units
      For the purpose of allocations, CSAPR identifies a "new unit" as one that commenced commercial operation on or after January 1, 2010, and provides a methodology for allocating emission allowances to new units from new unit set-asides in each state and to new units that locate in Indian country. See 76 FR 48290-48294 (Aug. 8, 2011), for more information. The FIPs that EPA is proposing will incorporate a trading program in which EPA is proposing to define a covered unit as a "new unit" if it commences commercial operation on or after January 1, 2015; if it becomes covered by meeting applicability criteria subsequent to January 1, 2015; if it relocates into a different state covered by this FIP; or if it was an "existing" covered unit that stopped operating for 2 consecutive years but resumes commercial operation at some point thereafter. To the extent that states seek approval of SIPs with different allocation provisions than EPA, these SIPs may seek to define new units differently.
      The EPA further proposes that its trading program will make allocations to each state for new units (the new unit set-aside) equal to a basic minimum 2 percent of the total state budget, plus the projected amount of emissions from planned units in that state (for instance, if planned units in state A are projected to emit 3 percent of the state's NOX ozone-season emission budget, then the new unit set-aside for the state would be set at 5 percent, consisting of the basic minimum 2 percent plus an additional 3 percent for planned units). See 76 FR 48292. New units may receive allocations starting with the first year they are subject to the allowance-holding requirements of the rule. If unallocated to new units, set-asides are redistributed to unretired existing units before the compliance deadline. The EPA requests comments on following the CSAPR approach for new unit allocations under this proposal. (For more detail on the CSAPR new unit set-aside provisions, see 40 CFR 97.511(b) and 97.512.)
      The EPA notes that applying the CSAPR approach using the data for this proposal results in a new-unit set-aside for New Jersey that is greater than 50% of the total proposed EGU NOX ozone-season emissions budget for the state. This result is influenced by the EPA's projected emissions rates for new units that are anticipated to come online within states. The EPA seeks comment on these data, which are available in the IPM documentation in the docket for this proposal. Further, the EPA seeks comment on whether additional data should be considered -- for example, reported NOX emission rates of recently constructed new NGCC units in each state.
Table VII.1. Proposed EGU NOX Ozone-Season New-unit Set-aside Amounts, Reflecting Proposed EGU Emissions Budgets (tons)
State
Proposed EGU NOX Emissions Budgets (tons)
New-unit set-aside amount (percent)
New-unit set-aside amount (tons)
Indian country set-aside amount (tons)
Alabama
                                                                          9,979
                                                                             2%
                                                                            205

Arkansas
                                                                          6,949
                                                                             2%
                                                                            141

Illinois
                                                                         12,078
                                                                             5%
                                                                            591

Indiana
                                                                         28,284
                                                                             2%
                                                                            565

Iowa
                                                                          8,351
                                                                             5%
                                                                            419
                                                                              8
Kansas
                                                                          9,272
                                                                             3%
                                                                            281
                                                                              9
Kentucky
                                                                         21,519
                                                                             3%
                                                                            647

Louisiana
                                                                         15,807
                                                                             4%
                                                                            628
                                                                             16
Maryland
                                                                          4,026
                                                                            12%
                                                                            485

Michigan
                                                                         19,115
                                                                             2%
                                                                            382
                                                                             19
Mississippi
                                                                          5,910
                                                                            10%
                                                                            590
                                                                              6
Missouri
                                                                         15,323
                                                                             2%
                                                                            314

New Jersey
                                                                          2,015
                                                                            57%
                                                                          1,151

New York
                                                                          4,450
                                                                             2%
                                                                             93
                                                                              4
North Carolina
                                                                         12,275
                                                                             2%
                                                                            248
                                                                             12
Ohio
                                                                         16,660
                                                                             2%
                                                                            337

Oklahoma
                                                                         16,215
                                                                             2%
                                                                            325
                                                                             16
Pennsylvania
                                                                         14,387
                                                                             7%
                                                                          1,017

Tennessee
                                                                          5,481
                                                                             2%
                                                                            109

Texas
                                                                         58,002
                                                                             5%
                                                                          2,910
                                                                             58
Virginia
                                                                          6,818
                                                                            27%
                                                                          1,844

West Virginia
                                                                         13,390
                                                                             2%
                                                                            268

Wisconsin
                                                                          5,561
                                                                             2%
                                                                            121
                                                                              6
23 State Region
                                                                        311,867

                                                                         13,671
                                                                            154

    c. Allocations for Tribes and New Units in Indian Country
      Tribes are not required to submit tribal implementation plans. However, as explained in the EPA's regulations outlining Tribal Clean Air Act authority, the EPA is authorized to promulgate FIPs for Indian country as necessary or appropriate to protect air quality if a tribe does not submit and get EPA approval of a tribal implementation plan. See 40 CFR 49.11(a); see also 42 U.S.C. 7601(d)(4). For this proposed ozone rule, there are no existing affected units in Indian country in the states affected by this rule.
      Under the current rule, allowances to possible future new units locating in Indian country are allocated by the EPA from an Indian country new unit set-aside established for each state with Indian country. (See 40 CFR 97.511(b)(2) and 97.512(b).) Because states generally have no SIP authority in reservation areas of Indian country and other areas of Indian country over which a tribe or EPA has demonstrated that a tribe has jurisdiction, the EPA continues to allocate such allowances to sources locating in such areas of Indian country within a state even if the state submits a SIP to replace the FIP. (40 CFR 52.38(b)(5)(v) and (vi) and 52.38(b)(6).) The EPA reserves 0.1 percent of the total state budget for new units in Indian country within that state (5 percent of the basic 2 percent new unit set-aside prior to any increase in a state's new unit set-aside amount for planned units). Unallocated allowances from a state's Indian country new unit set-aside are returned to the state's new unit set-aside and allocated according to the methodology described above. The EPA requests comment on following the CSAPR approach for new unit allocations in such areas of Indian country under the transport rule for the 2008 ozone NAAQS.
    d. Units that do not operate and the new unit set-aside
The EPA proposes to continue to apply for purposes of this rule the existing CSAPR provision under which a covered unit that does not operate for a period of two consecutive years will receive allowance allocations for a total of up to five years of non-operation. 40 CFR 97.511(a)(2). Starting in the fifth year after the first year of non-operation, allowances allocated to such units will instead be allocated to the new unit set-aside for the state in which the non-operating unit is located. This approach allows the new unit set-asides to grow over time. The EPA requests comment on retaining this timeline for allowance allocation for non-operating units or changing the allowance allocation for non-operating units to, for instance, two years or three years, in which case allowances would revert to the new unit set-aside in the second or third year after the first of two consecutive years of non-operation of a unit.
 Variability Limits, Assurance Levels, and Penalties
      In the original CSAPR, the EPA developed assurance provisions, including variability limits and assurance levels (with associated compliance penalties), to assure that each state will meet its pollution control obligations and to accommodate inherent year-to-year variability in state-level EGU operations.
      The original CSAPR budgets, and the updated CSAPR emission budgets proposed in this notice, reflect EGU operations in an "average year." However, year-to-year variability in EGU operations occurs due to the interconnected nature of the power sector and from changing weather patterns, demand growth, or disruptions in electricity supply from other units or from the transmission grid. Recognizing this, the FIP includes variability limits, which define the amount by which state emissions may exceed the level of the budgets in a given year to account for this variability in EGU operations. A state's budget plus its variability limit equals a state's assurance level, which acts as a cap on each state's NOX emissions during a control period (that is, during the May-September ozone season in the case of this rule).
      To establish the variability limits in the original CSAPR, the EPA analyzed historical state-level heat input variability as a proxy for emissions variability, assuming constant emission rates. (See 76 FR 48265, August 8, 2011.) The variability limits for ozone-season NOX in the original CSAPR were calculated as 21 percent of each state's budget, and these variability limits were then codified in 40 CFR 97.510 along with the state budgets. Applying the CSAPR approach, the EPA proposes to set new variability limits applying the same 21 percent figure as determined in the original CSAPR to this rule's budgets. The EPA proposes that the same 21% figure is appropriate to use because variability in state-level heat input across a multi-year period is expected to be relatively consistent around long-term trends. The EPA seeks comment on this approach. Table VII.1 shows the proposed EGU NOX ozone-season emissions budgets, variability limits, and assurance levels for each state.
Table VII.1. Proposed EGU NOX Ozone-Season Emission Budgets Reflecting EGU NOX mitigation Available for 2017 at $1,300 per ton, Variability Limits, and Assurance Levels (Tons)
State
EGU NOx Ozone-Season Emission Budgets
Variability Limits
EGU NOx Ozone-Season Assurance Levels
Alabama
                                                                          9,979
                                                                          2,096
                                                                         12,075
Arkansas
                                                                          6,949
                                                                          1,459
                                                                          8,408
Illinois
                                                                         12,078
                                                                          2,536
                                                                         14,614
Indiana
                                                                         28,284
                                                                          5,940
                                                                         34,224
Iowa
                                                                          8,351
                                                                          1,754
                                                                         10,105
Kansas
                                                                          9,272
                                                                          1,947
                                                                         11,219
Kentucky
                                                                         21,519
                                                                          4,519
                                                                         26,037
Louisiana
                                                                         15,807
                                                                          3,320
                                                                         19,127
Maryland
                                                                          4,026
                                                                            854
                                                                          4,871
Michigan
                                                                         19,115
                                                                          4,014
                                                                         23,129
Mississippi
                                                                          5,910
                                                                          1,241
                                                                          7,151
Missouri
                                                                         15,323
                                                                          3,218
                                                                         18,541
New Jersey
                                                                          2,015
                                                                            423
                                                                          2,438
New York
                                                                          4,450
                                                                            935
                                                                          5,385
North Carolina
                                                                         12,275
                                                                          2,578
                                                                         14,853
Ohio
                                                                         16,660
                                                                          3,499
                                                                         20,159
Oklahoma
                                                                         16,215
                                                                          3,405
                                                                         19,620
Pennsylvania
                                                                         14,387
                                                                          3,021
                                                                         17,408
Tennessee
                                                                          5,481
                                                                          1,151
                                                                          6,632
Texas
                                                                         58,002
                                                                         12,180
                                                                         70,183
Virginia
                                                                          6,818
                                                                          1,432
                                                                          8,250
West Virginia
                                                                         13,390
                                                                          2,812
                                                                         16,202
Wisconsin
                                                                          5,561
                                                                          1,168
                                                                          6,729
Region cap
                                                                        311,867
                                                                         65,493

      The assurance provisions include penalties that are triggered when the state emissions as a whole exceed its assurance level. The original CSAPR provided that a state that exceeds its assurance level in a given year is assessed a total of 3-to-1 allowance surrender on the excess tons. Each excess ton above the assurance level must be met with one allowance for normal compliance plus two additional allowances to satisfy the penalty. The penalty is designed to deter state-level emissions from exceeding assurance levels. This was referred to in the original CSAPR as air quality-assured trading that accounts for variability in the electricity sector but also ensures that the necessary emission reductions occur within each covered state. If a state does not exceed its assurance level, no penalties are incurred by any source. Establishing assurance levels with compliance penalties therefore responds to the court's holding in North Carolina requiring the EPA to assure that sources in each state were required to eliminate emissions that significantly contribute to nonattainment and interfere with maintenance of the NAAQS in another state.
       To assess the penalty under the assurance provisions, the EPA evaluates whether any state's total EGU emissions in a control period exceeded the state's assurance level, and if so, the EPA then determines which owners and operators of units in the state will be subject to an allowance surrender requirement based on each source's emissions as compared to its unit-level assurance level. Since a single designated representative (DR) often represents multiple sources, the EPA evaluates which groups of units at the common DR level had emissions exceeding the respective common DR's share of the state assurance level, regardless of whether the individual source had enough allowances to cover its emissions during the control period. This provision is triggered only if two criteria are met: (1) the group of sources and units with a common DR are located in a state where the total state EGU emissions for a control period exceed the state assurance level; and (2) that group with the common DR had emissions exceeding the respective DR's share of the state assurance level.
      For more information on the CSAPR assurance provisions see 76 FR 48294 (August 8, 2011).
 Implementation Approaches for Transitioning the Existing CSAPR NOX Ozone-season Program to Address Transport for a Newer NAAQS
      Consistent with the original CSAPR approach, EPA proposes that in this updated rulemaking, EGUs would be able to trade NOX ozone-season emission allowances among units within the state and across state boundaries, with emissions and use of allowances limited by the assurance provisions. The following sections describe approaches to transition the existing CSAPR program designed for the 1997 ozone NAAQS to address interstate ozone transport for the 2008 ozone NAAQS.
      A primary focus of this section is the extent to which allowances created to address interstate transport with respect to the 1997 ozone NAAQS, reflecting emissions budgets at $500 per ton, are fungible with allowances created under this proposal to address interstate transport for the 2008 ozone NAAQS, reflecting emissions budgets at $1,300 per ton. The EPA proposes that these implementation tools are not presumptively equivalent, given that they were developed to address ozone transport under different NAAQS and using different cost thresholds. However, as further discussed below, the EPA is proposing approaches under which allowances allocated under budgets established to address the 1997 NAAQS could be used for compliance for addressing interstate transport for the 2008 NAAQS, subject to specific limitations. . The EPA is also taking comment on several other approaches for addressing the transition from a program in which all budgets were established based on an integrated analysis using a single control cost threshold to address the 1997 NAAQS to a program with a mix of budgets established in independent analyses using different control cost thresholds, in some cases to address the 1997 NAAQS and in other cases to address the 2008 NAAQS.
      a. Use of CSAPR Ozone-season Trading Program Bank in the transport rule for the 2008 ozone NAAQS Trading Program
Since CSAPR was promulgated in 2011, the U.S. electric sector has undergone considerable transformation primarily due to economic and market forces precipitated by the natural gas boom. In addition, demand growth has slowed; a majority of U.S. states have implemented renewable portfolio standards and other energy efficiency programs; and high-efficiency building designs, residential energy conservation, roof-top solar, and other forms of distributed generation have grown. In combination, these factors have significantly reduced EGU NOX emissions.
As a result of protracted litigation, CSAPR implementation was delayed by three years, from 2012 to 2015. Due to this delay, expectations are that total banked allowances for the CSAPR ozone-season trading program could be in excess of 210,000 tons by the start of the 2017 ozone-season compliance period, which is more than twice the emission reduction potential estimated at the $1,300 per ton control level described in section VI above.  This number was estimated by comparing recent measured emission levels to the original CSAPR NOX ozone-season phase 1 emissions budgets, assuming EGU emissions in CSAPR NOX ozone-season states for 2015 and 2016 would continue at 2014 levels.
The use of allowance banks generally provide a glide path for sources required to meet more stringent emission limits in later years and accommodate year-to-year variability in operation. However, allowing unrestricted use of the large number of banked allowances for compliance with this new rule could result in regional 2017 ozone season NOX emissions that exceed the collective state budgets quantified in this rule to address transported air pollution with respect to the 2008 ozone standard. While the assurance provisions included in CSAPR do limit the ultimate amount of pollution that may occur in these states in 2017 (i.e., no matter how large an allowance bank may exist, only a portion of that bank may be used in a state in any given year without exceeding the assurance levels and incurring penalties), unrestricted use of the bank in this situation could allow emissions to exceed the state budgets, up to the assurance level, year after year. As described in CSAPR, the flexibility provided by the assurance provisions is not designed to be used repeatedly, year after year. Rather, the use of banked allowances is intended to be limited by binding emissions budgets such that drawing down the bank in one year is only possible because of actions taken to build up the bank in a previous year. Moreover, a relatively large allowance bank that enables emission budgets to be exceeded year after year may encourage sources to postpone emission reductions that would be more timely in the 2017 timeframe in order to align reductions with the downwind area attainment dates for the 2008 ozone NAAQS.
The EPA is proposing and taking comment on a range of options for how to treat the use of banked 2015 and 2016 CSAPR NOX ozone-season allowances by units in the 23 states with new or updated budgets in this proposal. The use of banked allowances by states that are not included in the proposed FIPs to address ozone transport under the 2008 NAAQS (i.e., Georgia for CSAPR NOX ozone-season program and all states for CSAPR SO2 and NOX annual programs) would not be affected by these options.
      The EPA is proposing that allowances issued for compliance in 2015 and 2016 under CSAPR may be used for compliance under the updated CSAPR from 2017 forward in order to smooth implementation in the first few years under the new budgets. However, the EPA is proposing to impose certain limits on the use of these banked allowances starting in 2017.  Specifically, the EPA is proposing that sources in the 23 states with new or updated budgets in this proposal must use four pre-2017 allowances (vintage 2015 or 2016) to cover one ton of NOX emitted. This ratio of four banked allowances to one ton of emissions is derived from the ratio of the anticipated allowance bank in 2017 (approximately 210,000 allowances) to the ozone season variability limit (i.e., the difference between the sum of the emissions budgets for all 23 states and the sum of the assurance levels for all 23 states; approximately 60,000 tons), rounded to the nearest whole number. The EPA is proposing this approach to limit the emissions impact of using banked allowances to the magnitude of all states emitting up to their assurance levels for one year.
The EPA believes that this approach provides a means for the existing CSAPR EGU NOX ozone-season allowances to retain some value, while appropriately mitigating the potential adverse impact of the allowance bank on the emission-reducing actions needed from affected units in states with obligations to address interstate transport for the 2008 ozone NAAQS. The EPA seeks comment on this proposed approach and on the use of a ratio other than 4-to-1 under this approach.
      The EPA is also soliciting comment on another approach that we believe could achieve these same goals (i.e., valuing the anticipated CSAPR allowance bank while promoting near-term emission reductions). Under this alternative approach, the EPA would issue fewer allowances than the tons quantified in state budgets for the 23 states affected by this rulemaking in the first three years of program implementation (i.e. 2017, 2018, and 2019). This approach recognizes that 2015 and 2016 allowances are available to sources for compliance and would allow use of those banked CSAPR NOX ozone allowances at a one-to-one turn-in ratio (i.e., one allowance is surrendered for one ton of emissions).  By reducing overall allocations for a period of time, the impact of states using those banked allowances on emission levels would be mitigated.
      The EPA seeks comment on what percentage (below 100 percent) of allowances to issue, and over what number of years, under this alternative approach. As a specific example, the EPA seeks comment on implementing this approach in a manner such that the EPA would issue allowances to sources within each of the 23 states with updated budgets under this proposal at a level of 85 percent of the proposed emissions budgets for the first three years that the new budgets are effective. Using the proposed EGU NOX ozone-season emissions budget of 9,979 tons for Alabama as an example, this would mean issuing approximately 8,482 allowances for each of the 2017 through 2019 (inclusive) control periods (and the full budget for each subsequent control period). Applying this approach to all 23 states with updated budgets under this proposal (which sum to 312,824 allowances) would mean that EPA would issue approximately 266,900 allowances across those states in each of the 2017, 2018, and 2019 control periods. EGUs in those states would be able to use allowances from the anticipated 210,000 allowance bank in addition to allowances issued for these years in order to comply with the updated CSAPR emission requirements. Allocating approximately 266,900 allowances for the first three years of the updated requirements would, based on current estimates, result in approximately 47,000 banked allowances used for compliance each year. This would leave approximately 70,000 banked allowances, which is roughly equivalent to the regional variability limit (i.e., the difference between the states' collective emissions budgets and their collective assurance levels). As under the four-to-one proposed option, the remaining amount of banked allowances that would remain after using this initial reduced allocation is approximately the amount of banked allowances that would allow all states to emit up to their assurance levels for one year.
      The EPA also seeks comment on what other percentages of the budget and time-frames could be appropriately used to implement this alternative approach. As in the specific example above, the EPA would seek a combination of time and recordation percentage such that the ultimate influence of the anticipated allowance bank is limited to approximately the regional variability limit (i.e., the difference between the collective emissions budgets and the collective assurance levels).
      Under either approach, the EPA would conduct unit-level allowance allocations in the same manner as described above, such that each unit's share of its state's total allowances issued is determined by that allocation approach whether the EPA issues allowances in the full amount of the state budget with a trade-in ratio of 4 to 1 (as proposed) or in a lesser amount to address the potential effect of the allowance bank (as entertained in this alternative on which we are inviting comment). In other words, the effect of this alternative approach would be to reduce unit-level allowance allocations in those years in a proportional manner (e.g., all unit-level allowance allocations would decrease by the same percentage as the reduction in total allowances issued below that state's budget).
      Additionally, the EPA is soliciting comment on less and more restrictive approaches to address use of the CSAPR EGU NOX ozone allowance bank. Specifically, the EPA seeks comment on: (1) allowing banked 2015 and 2016 CSAPR NOX ozone allowances to be used for compliance with the proposed budgets for the 2008 ozone NAAQS starting in 2017 at a 1-to-1 ratio, or (2) completely disallowing the use of banked 2015 and 2016 CSAPR NOX ozone allowances for compliance with the proposed budgets for the 2008 ozone NAAQS starting in 2017. The EPA is also soliciting comment on whether and how the assurance provision penalty might be increased, in conjunction with any of the above approaches, to address the relationship of the allowance bank to emissions occurring under this revised program from 2017 onward.
         a. Use of CSAPR NOX Ozone-season Allowances from States Addressing the 1997 Ozone NAAQS for Compliance in States Addressing the 2008 Ozone NAAQS
      Consistent with the original CSAPR, EGUs covered by the seasonal NOX budget trading program that will be incorporated into these proposed FIPs are able to trade NOX ozone-season emission allowances among units within the state and across state boundaries, with emissions and the use of allowances limited by the assurance provisions.
      The EPA is considering how to transition allowance trading between the group of states that are in the CSAPR NOX ozone-season program with respect to the 1997 ozone NAAQS but will not have updated emissions budgets proposed in this action (e.g., Georgia based on this proposal) and the group of states for which the EPA is proposing to establish new or lower budgets to address the 2008 ozone NAAQS in this action.
      The EPA believes that, where appropriate and feasible, continuity of programs is important, particularly for market-based and other power sector regulations, as this sector makes long-term investment and operational decisions. However, CSAPR allowances issued under budgets established to address the 1997 ozone NAAQS using a $500 per ton cost threshold in one state may not be appropriately valued to reduce interstate ozone transport in another state for the 2008 NAAQS under this proposal where budgets are being established using a $1,300 per ton cost threshold. In the original CSAPR rulemaking, the EPA discussed the concern that allowing unrestricted trading between groups of states whose budgets were established using different cost thresholds would impact whether the necessary emission reductions would be achieved within each state. The assurance provisions used in CSAPR provide some assurance that emission reductions will occur within each state, but in the CSAPR rulemaking the EPA acknowledged concerns that the assurance provisions alone may not be sufficient. Consistent with those previously acknowledged concerns, the EPA is proposing in this rule not to allow these two groups of states to trade without some additional assurances that the emission reductions will be appropriately achieved within each state.
      However, because of the relatively small size of the group of states with budgets set using the $500 per ton cost threshold, the EPA is not proposing to prohibit altogether trading between the two groups in this instance. The EPA does not expect that a single state (i.e., Georgia) would drastically influence emission reductions in the other 23 states covered by this proposed rule. EPA is instead proposing to permit trading between the two groups of ozone states subject to certain restrictions on trading. In particular, the EPA is proposing to require that sources in states addressing the 2008 ozone NAAQS under this proposal may use allowances issued in states only addressing the 1997 ozone NAAQS via the CSAPR trading programs (e.g., Georgia) at a rate of 2.5 allowances for each ton of NOX emitted. The EPA proposes a ratio of 2.5-to-1 in order to align with the ratio of the cost of ozone season EGU NOX reduction promulgated in the original CSAPR (i.e., $500 per ton) to the cost proposed for this rule (i.e., $1,300 per ton). The EPA proposes this restriction as sufficient, in conjunction with the assurance provisions, to protect the needed reductions in the 23 states addressing interstate transport for the 2008 ozone NAAQS. The EPA requests comments on this approach. The EPA also seeks comment on using a different ratio than 2.5-to-1, and on using the same ratio as the ratio for the use of banked allowances, whether that ratio is 4-to-1 as proposed or a different ratio.
      The EPA is also seeking comment on allowing trading without distinction between the particular NAAQS (1997 ozone NAAQS or 2008 ozone NAAQS) for which an upwind state has obligations to reduce transported pollution, and subject only to the constraints of the CSAPR assurance provisions with no additional restrictions. The EPA is soliciting comment on whether and how the assurance provision penalty might be increased in conjunction with this approach.
      Alternatively, the EPA is seeking comment on separating compliance between groups of upwind states under each NAAQS, whereby the use of NOX ozone-season emission allowances from one group (e.g., sources in states only covered for the 1997 ozone NAAQS) would be disallowed for compliance use by units in the other group (e.g., sources in states covered for the 2008 ozone NAAQS), similar to the existing separation between the CSAPR SO2 Group 1 and CSAPR SO2 Group 2 programs.
         b. Use of CSAPR NOX Ozone-season Allowances between States with Different Control Stringencies Addressing the 2008 Ozone NAAQS
      As discussed in Section VI of this proposal, the EPA notes that the evaluation of EGU NOX requirements for the final rule could show one or more states fully addressing their good neighbor obligation based on ozone season NOX control requirements represented by one cost level while one or more other states have ozone season NOX control requirements based on a more stringent cost level. In this situation, the EPA proposes that it would quantify requirements for these different groups of states based on different uniform control stringencies. However, CSAPR allowances issued under budgets established using a one cost threshold (e.g., $1,300 per ton) in one state may not be appropriately valued to reduce interstate ozone transport in another state where budgets might be established using different cost threshold (e.g., $3,400 per ton). Consistent with the previous discussion (regarding allowances issued in states continuing to address the 1997 ozone NAAQS under budgets established using $500 per ton threshold), the EPA is proposing to permit trading between these groups of states subject to certain restrictions on trading. In particular, the EPA is proposing to require that sources in states with emissions budgets established using the more stringent cost thresholds (e.g., $3,400 per ton) may use allowances issued in states with emissions budgets established using the less stringent cost thresholds (e.g., $1,300 per ton) at a rate of allowances for each ton of NOX emitted based on the ratio of these cost thresholds. For example, states with emissions budgets established using $3,400 per ton could use allowances at a rate of approximately 2.5-to-1 in order to align with the ratio of the relevant cost thresholds. The EPA requests comments on allowing the states to trade with the proposed restrictions on the use of allowances by sources in states controlled using the more stringent cost threshold.
      The EPA is also seeking comment on allowing trading without distinction between the particular cost thresholds for which an upwind state has obligations to reduce transported pollution, and subject only to the constraints of the CSAPR assurance provisions with no additional restrictions. The EPA is also soliciting comment on whether and how the assurance provision penalty might be increased in conjunction with this approach.
      Alternatively, the EPA is seeking comment on separating compliance between groups of upwind states under each cost threshold, whereby the use of NOX ozone-season emission allowances from one group (e.g., sources in states with allowances issued using the more stringent cost threshold) would be disallowed for compliance use by units in the other group, similar to the existing separation between the CSAPR SO2 Group 1 and CSAPR SO2 Group 2 programs.
         c.  Summary of Proposed Allowance Surrender Ratios
      As discussed in sections a. and b. above, the EPA proposes that in this updated rulemaking, EGUs would be able to trade NOX ozone-season emission allowances among units within the state and across state boundaries, with emissions and use of allowances limited by the assurance provisions. However, the EPA is proposing to impose certain additional limits on the use of allowances starting in 2017 for EGUs in the 23 states with updated budgets in this proposal. Table VII-2 summarizes the limits on the proposed use for CSAPR NOX ozone-season allowances.
Table VII.2. Proposed Use of CSAPR NOX Ozone-Season Allowances for 2015, 2016, 2017, and Later Allowance Vintages (Tons)

Compliance Period and Unit Location of Allowance Use

Used for 2015 or 2016 Compliance  -  any state
Used for 2017 or later compliance - unit in states with updated budget for 2008 ozone NAAQS
Used for 2017 or later compliance  -  states with original CSAPR emissions budget
 Vintage Year and State of Allowance Issuance
2015 or 2016 vintage  -  any state
1 for 1
4 for 1
1 for 1

2017 or later vintage  -  states with updated budget for 2008 ozone NAAQS
Not Applicable
1 for 1
1 for 1

2017 or later vintage  -  states with original CSAPR emissions budget
Not Applicable
2.5 for 1
1 for 1

 Compliance Deadlines
      As discussed above at sections II.A., III.B., and IV.A., the proposed rule would require NOX reductions from sources starting May 1, 2017, to ensure that reductions are made as expeditiously as practicable to assist downwind states' attainment and maintenance of the 2008 ozone NAAQS. The compliance deadline is coordinated with the attainment deadline for the relevant NAAQS and, as discussed above, the rule includes provisions to assure that all necessary reductions occur at sources within each individual state.
      In section VI above, the EPA explains that this is an adequate and reasonable time for sources to plan for compliance and operate necessary controls.
For states for which EPA has already established a FIP requiring their units to participate in the CSAPR NOX ozone-season trading program because of transport obligations under the 1997 ozone NAAQS, no CFR changes are necessary to accommodate this compliance deadline. The EPA proposes to amend the regulatory text in 40 CFR section 97.506(c)(3) to reflect the 2017 start of compliance obligations for units in states that were not previously subject to the CSAPR NOX ozone-season trading program (e.g., Kansas). The EPA also proposes to amend various FIP provisions in 40 CFR Part 52 to indicate the start and end of compliance obligations under the FIPs for sources in states added to the trading program under this rule (e.g., Kansas) or removed from the trading program in response to the D.C. Circuit's remand of certain NOX ozone-season emission budgets (e.g., Florida and South Carolina). These revisions are shown in the proposed regulatory text at the end of this preamble.
 Monitoring and Reporting and the Allowance Management System
      Monitoring and reporting in accordance with the provisions of 40 CFR Part 75 are required for all units subject to the CSAPR NOX ozone-season trading programs and would also be required for all units covered under the proposed transport rule for the 2008 ozone NAAQS requirements. The EPA proposes that the monitoring certification deadline by which monitors are installed and certified for compliance use generally would be May 1, 2017, the beginning of the first compliance period proposed in this rule, with potentially later deadlines for units that commence commercial operation after July 1, 2016. Similarly, the EPA proposes that the first calendar quarter in which quarterly emission reporting is required would generally be the quarter including May 1, 2017. These deadlines are analogous to the current deadlines under CSAPR but are delayed by two years to reflect the fact that this rule's initial implementation year would be two years later than the existing CSAPR programs' initial implementation year.
      Under Part 75, a unit has several options for monitoring and reporting, namely the use of a CEMS; an excepted monitoring methodology based in part on fuel flow metering for certain gas- or oil-fired peaking units; low-mass emissions monitoring for certain non-coal-fired, low emitting units; or an alternative monitoring system approved by the Administrator through a petition process. In addition, sources can submit petitions to the Administrator for alternatives to specific CSAPR and Part 75 monitoring, recordkeeping, and reporting requirements. Each CEMS must undergo rigorous initial certification testing and periodic quality assurance testing thereafter, including the use of relative accuracy test audits (RATAs) and 24-hour calibrations. In addition, when a monitoring system is not operating properly, standard substitute data procedures are applied and result in a conservative estimate of emissions for the period involved.
      Further, Part 75 requires electronic submission of a quarterly emissions report to the Administrator, and in a format prescribed by the Administrator. The report would contain all of the data required concerning ozone season NOX emissions.
      Units currently subject to CSAPR NOX ozone-season or CSAPR NOX annual trading program requirements monitor and report NOX emissions in accordance with Part 75, so most sources would not have to make any changes to monitoring and reporting practices. In fact, only units in Kansas currently subject to the CSAPR NOX annual trading program but not the CSAPR NOX ozone-season trading program would need to start newly reporting ozone season NOX mass emissions. These emissions are already measured under the annual program, so the change would be a minor reporting modification. Units in the following states monitor and report NOX emissions under the CSAPR NOX ozone-season trading program and would continue to do so without change under the CSAPR ozone update for the 2008 NAAQS: Alabama, Arkansas, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, West Virginia, and Wisconsin.
 Recordation of Allowances
The EPA proposes to update the deadlines by which EPA would record allowances for the CSAPR NOX ozone-season trading program for the compliance periods in the years from 2017 through 2022. The proposed new dates would amend the recordation deadlines in 40 CFR 97.521 as shown in the proposed regulatory text amendments at the end of this proposal. The existing recordation provisions require EPA to record either FIP-based (i.e., governed by part 97) or SIP-based allocations for 2017 and 2018 by July 1, 2016. The EPA proposes to delay this deadline to December 1, 2016. The extension would allow EPA to finalize any changes to the state budgets for the 2017 compliance period before recording 2017 allowances.  This would prevent the need to take back allowances that were recorded under existing budgets in cases where state budgets are reduced. The extended deadline would still allow allocations to be recorded five months prior to the start of the 2017 compliance period, giving affected units time to make compliance plans. Compliance true-up for the 2017 ozone season occurs after December 1, 2017, so affected sources would have more than a year from the extended recordation deadline to ensure they hold enough allowances for 2017 ozone season compliance. The EPA is taking comment on this new deadline for 2017 and 2018 allowance allocation recordation. The EPA is also taking comment on whether the provision to delay 2017 and 2018 allocation recordation should be finalized ahead of final action on this full proposal if this proposal is not finalized before July 1, 2016.
The EPA is also proposing to extend the existing deadlines for recording CSAPR NOX ozone-season allowances for the 2019 and 2020 compliance periods and for the 2021 and 2022 compliance periods each by one year, to July 1, 2018, and July 1, 2019, respectively. The purpose of these proposed deadline extensions is to provide time for states to submit SIP revisions to modify or replace the FIPs proposed in this rule on schedules comparable to the schedules for the SIP revision options that the states have under the current CSAPR regulations. The EPA seeks comment on extending these recordation deadlines as discussed.
 Submitting a SIP
      As noted earlier in this section VIII, states may replace the FIP with a SIP at any time if approved by the EPA. "Abbreviated" and "full" SIP options continue to be available. An "abbreviated SIP" allows a state to submit a SIP that would modify allocation provisions in the NOx budget trading program that is incorporated into FIP to allow the state to substitute its own allocation provisions. A second approach, referred to as a full SIP, allows a state to adopt a trading program meeting certain requirements that would allow sources in the state to continue to use the EPA-administered trading program through an approved SIP, rather than a FIP. In addition, as under CSAPR, EPA proposes to provide states with an opportunity to adopt state-determined allowance allocations for existing units for the second compliance period under this rule  -  in this case, the 2018 compliance period  -  through streamlined SIP revisions. See 76 FR 48326-48332 for additional discussion on full and abbreviated SIP options and 40 CFR 52.38(b).
 2018 SIP option
       As under CSAPR, the EPA proposes to allow a state to submit a SIP revision establishing allowance allocations for existing units for the second year of the new requirements, 2018, to replace the FIP-based allocations. The process would be the same as under the current rule with deadlines shifted roughly 2 years  --  i.e., a state would submit a letter to EPA by November 15, 2016 indicating its intent to submit a complete SIP revision by April 1, 2017. The SIP would provide in an EPA-prescribed format a list of existing units and their allocations for the 2018 control period. If a state does not submit a letter of intent to submit a SIP revision, FIP allocations would be recorded by December 1, 2016. If a state submits a timely letter of intent but fails to submit a SIP revision, FIP allocations would be recorded by April 1, 2017. If a state submits a timely letter of intent followed by a timely SIP revision that is approved, the approved SIP allocations would be recorded by October 1, 2017.
 2019 and beyond SIP option
      For the 2019 control period and later, EPA proposes that the SIP submittal deadline be delayed one year, until December 1, 2017, from the current deadline. The deadline to then submit state allocations for 2019 and 2020 would be June 1, 2018 and the deadline to record those allocations would be July 1, 2018. Under the proposed new deadlines, a state could submit a SIP revision for 2021 and beyond control periods by December 1, 2018, with state allocations due June 1, 2019, and allocation recordation by July 1, 2019. For 2019 control period and later, SIPs can be full or abbreviated SIPs. An allocation methodology approved in an abbreviated SIP submitted for 2017 under the existing CSAPR regulations could also apply under the proposed new rule in 2017 and 2018. See above and 76 FR 48326-48332 for additional discussion on full and abbreviated SIP options and 40 CFR 52.38(b).
 SIP revisions that do not use the CSAPR trading program
For a transport SIP revision that does not use the CSAPR NOX ozone-season trading program, EPA would evaluate the transport SIP based on the particular control strategies selected and whether the strategies as a whole provide adequate and enforceable provisions ensuring that the emission reductions will be achieved. The SIP revision at a minimum should include the following general elements: (1) a comprehensive baseline 2017 statewide NOX emission inventory (which includes growth and existing control requirements), which should be consistent with the 2017 emission inventory the EPA would use when finalizing this rulemaking to calculate the required state budget; (2) a list and description of control measures to satisfy the state emission reduction obligation and a demonstration showing when each measure would be in place to meet the 2017 compliance date; (3) fully-adopted state rules providing for such NOX controls during the ozone season; (4) for EGUs greater than 25 MWe and large boilers and combustion turbines with a rated heat input capacity of 250 mmBtu per hour or greater, Part 75 monitoring, and for other units, monitoring and reporting procedures sufficient to demonstrate that sources are complying with the SIP; and (5) a projected inventory demonstrating that state measures along with federal measures will achieve the necessary emission reductions in time to meet the 2017 compliance deadline. The SIPs must meet the requirements for public hearing, be adopted by the appropriate board or authority, and establish by a practically enforceable regulation or permit a schedule and date for each affected source or source category to achieve compliance. Once the state has made a SIP submission, the EPA will evaluate the submission(s) for completeness. The EPA's criteria for determining completeness of a SIP submission are codified at 40 CFR part 51 appendix V.
For further information on replacing a FIP with a SIP, see the discussion in the final CSAPR rulemaking (76 FR 48326, August 8, 2011). The EPA requests comment on what types of additional information and guidance would be helpful and stands ready to assist states in SIP development.
 Submitting a SIP to participate in CSAPR for states not included in this proposal
The EPA believes that there could be circumstances where a state that is not obligated to reduce NOX emissions in order to eliminate significant contribution to nonattainment or interference with maintenance of ozone standards in another state (such as Florida or South Carolina for purposes of this proposal) may wish to participate in the NOX ozone-season trading program in order to serve a different regulatory purpose. For example, the state may have a pending request for redesignation of an area to attainment that relies on participation in the trading program as part of the state's demonstration that emissions will not exceed certain levels, or the state may wish to rely on participation in the trading program for purposes of a SIP revision to satisfy certain obligations under the Regional Haze Rule. The EPA seeks comment on whether the EPA should revise the CSAPR regulations to allow the EPA to approve a SIP revision in which a state seeks to participate in the NOX ozone-season trading program for a purpose other than addressing ozone transport obligations.
Further, the EPA seeks comment on the conditions that should apply to any such approval in order to ensure that the state's participation is consistent with the trading program's ability to achieve the program's objectives with respect to interstate transport of ozone pollution. The EPA believes that the primary conditions for consideration in this circumstance would be the level of the state emissions budget and what, if any, limitations would be placed on the use of allowances issued to the sources in that state by sources in other states.
The EPA specifically seeks comment on whether a presumption of approvability of such a SIP revision should arise, without limitations on the use of corresponding allowances for compliance by sources within that state or in other states, if the state would adopt as part of the SIP revision a NOX ozone-season emissions budget no higher than the emissions budgets that the EPA finalizes under this rule. For example, based on this proposal, an emissions budget that reflects EGU NOX mitigation strategies represented by a uniform cost of $1,300 per ton. The EPA notes that such emissions budgets could be developed using the data and analysis used to establish the emissions budgets for this rule.
EPA also specifically seeks comment on whether a presumption of approvability of such a SIP revision should arise, with limitations on the use of allowances issued to the state's sources analogous to the limitations proposed for allowances issued to Georgia's units in this rule, if the state would adopt as part of the SIP revision a NOX ozone-season emissions budget no higher than the base case ozone season NOX emissions that EPA projected for the state in the analysis used to establish the emissions budgets for this rule.
The EPA also specifically seeks comment on whether, in the case of a state previously subject to the CSAPR NOX ozone-season trading program (e.g., Florida or South Carolina), a presumption of approvability of such a SIP revision should arise at an emissions level higher than the state's base case emissions in the analysis used to establish the emissions budgets for this rule  -  for example, an emissions level equal to the state's previously promulgated CSAPR budget  -  subject to the imposition of trading limitations on allowances issued to the state's units analogous to the limitations proposed for allowances issued to Georgia's units in this proposal.
Finally, the EPA also seeks comment on whether a state whose allowances would otherwise be subject to limitations on use analogous to the limitations proposed for allowances issued to Georgia's units in this rule could avoid those limitations by adopting in a SIP revision a more stringent budget reflecting emission levels at higher dollar per ton emission reduction costs comparable to the dollar per ton emission reduction costs used to establish the budgets for other states in this rule.
 Title V Permitting
      The proposed rule, like CSAPR, does 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. All major stationary sources of air pollution and certain other sources are required to apply for title V operating permits that include emission limitations and other conditions as necessary to assure compliance with the applicable requirements of the CAA, including the requirements of the applicable State Implementation Plan. CAA sections 502(a) and 504(a), 42 U.S.C. 7661a(a) and 7661c(a). The ``applicable requirements'' that must be addressed in title V permits are defined in the title V regulations (40 CFR 70.2 and 71.2 (definition of ``applicable requirement'')).
      The EPA anticipates that, given the nature of the units subject to this transport rule and given that many of the units covered here are already subject to CSAPR, most of the sources at which the units are located are already subject to title V permitting requirements. For sources subject to title V, the interstate transport requirements for the 2008 ozone NAAQS that would be applicable to them under the final FIPs will be ``applicable requirements'' under title V and therefore will need to be addressed in the title V permits. For example, requirements concerning designated representatives, monitoring, reporting, and recordkeeping, the requirement to hold allowances covering emissions, the assurance provisions, and liability will be ``applicable requirements'' to be addressed in the permits.
      Title V of the CAA establishes the basic requirements for state title V permitting programs, including, among other things, provisions governing permit applications, permit content, and permit revisions that address applicable requirements under final FIPs in a manner that provides the flexibility necessary to implement market-based programs such as the trading programs established by CSAPR and updated by this proposed ozone interstate transport rule. 42 U.S.C. 7661a(b).
      In CSAPR, EPA established standard requirements governing how sources covered by the rule would comply with title V and its regulations. 40 CFR 97.506(d). Under this proposed rule, EPA proposes that those same requirements would continue to apply to sources already in the CSAPR NOX Ozone-season Trading Program and to any newly covered sources that have been added to address interstate transport of the 2008 ozone NAAQS. For example, the title V regulations provide that a permit issued under title V must include "[a] provision stating that no permit revision shall be required under any approved . . . emissions trading and other similar programs or processes for changes that are provided for in the permit." 40 CFR 70.6(a)(8) and 71.6(a)(8). Consistent with these provisions in the title V regulations, in CSAPR, EPA included a provision stating that no permit revision is necessary for the allocation, holding, deduction, or transfer of allowances. 40 CFR 97.506(d)(1).  This provision is also included in each title V permit for a covered source. The EPA proposes to maintain its approach under CSAPR that allowances can be traded (or allocated, held, or deducted) without a revision to the title V permit of any of the sources involved.
      Similarly, the EPA is also proposing to maintain that sources in the CSAPR NOx Ozone-season Trading Program can continue to use the title V minor modification procedure to change their approach for monitoring and reporting emissions, in certain circumstances. Specifically, sources may use the minor modification procedure so long as the new monitoring and reporting approach is one of the prior-approved approaches under CSAPR (i.e., approaches using a continuous emission monitoring system, an excepted monitoring system under appendices D and E to Part 75, a low mass emissions excepted monitoring methodology under 40 CFR 75.19, or an alternative monitoring system under subpart E of Part 75), and the permit already includes a description of the new monitoring and reporting approach to be used. See 40 CFR 97.506(d)(2); 40 CFR 70.7(e)(2)(i)(B) and 40 CFR 71.7(e)(1)(i)(B). As described in our 2015 guidance, we suggest in our template that sources may comply with this requirement by including a table of all of the approved monitoring and reporting approaches under the rule, and the applicable requirements governing each of those approaches. Inclusion of the table in a source's title V permit therefore allows a covered unit that seeks to change or add to their chosen monitoring and recordkeeping approach to easily comply with the regulations governing the use of the title V minor modification procedure.
      Parts XXX and XXX [CITE GUIDANCE DOCUMENT] set forth in detail the approaches previously discussed that are available for covered units to use for monitoring and reporting emissions, and provide reference to the relevant provisions in Part 75. Under CSAPR, in order to change a monitoring or reporting approach, unit owners and operators must submit monitoring system certification applications to the EPA establishing the monitoring and reporting approach actually to be used by the unit, or, if the owners and operators choose to employ an alternative monitoring system, to submit petitions for that alternative to the EPA. These applications and petitions are subject to EPA review and approval to ensure consistency in monitoring and reporting among all trading program participants. The EPA's responses to any petitions for alternative monitoring systems or for alternatives to specific monitoring or reporting requirements are to be posted on the EPA's website. EPA proposes to maintain the same approach in this proposed rule.
      Consistent with the EPA's approach under CSAPR, the applicable requirements resulting from this proposed FIP 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 standard permit renewal provisions (40 CFR 70.7(c) and 71.7(c)). For sources newly subject to title V that will also be covered sources under the final FIPs, the initial title V permit issued pursuant to 40 CFR 70.7(a) should address the final FIP requirements.
      As in CSAPR, the approach to title V permitting under the proposed FIPs imposes no independent permitting requirements and should reduce the burden on sources already required to be permitted under title V and on permitting authorities.
E. Relationship to Other Emission Trading and Ozone Transport Programs
1. Interactions with Existing CSAPR Annual Programs, Title IV Acid Rain Program, NOX SIP Call, Section 176A Petition, and Other State Implementation Plans
      a. CSAPR Annual Programs
      Nothing in this proposal affects any CSAPR NOX annual or CSAPR SO2 Group 1 or CSAPR SO2 Group 2 requirements. The CSAPR annual requirements were premised on the 1997 and 2006 PM2.5 NAAQS that are not being addressed in this rulemaking. The CSAPR NOX annual trading program and the CSAPR SO2 Group 1 and Group 2 trading programs remain in place and will continue to be administered by the EPA.
      The EPA acknowledges that, in addition to the ozone budgets discussed above, the D.C. Circuit has remanded for reconsideration the CSAPR SO2 budgets for Alabama, Georgia, South Carolina, and Texas. EME Homer City II, slip op. at 36. Regarding the remand of CSAPR phase 2 SO2 emissions budgets as to four states. This proposal does not address the remand of these CSAPR phase 2 SO2 emissions budgets.
	b. Title IV Interactions
      This proposed rule if adopted would not affect any Acid Rain Program requirements. Any Title IV sources that are subject to provisions of this proposed rule would still need to continue to comply with all Acid Rain provisions. Acid Rain Program SO2 and NOX requirements are established independently in Title IV of the Clean Air Act, and will continue to apply independently of this proposed rule's provisions. Acid Rain sources will still be required to comply with Title IV requirements, including the requirement to hold Title IV allowances to cover SO2 emissions at the end of a compliance year.
	c. NOX SIP Call Interactions
	States affected by both the NOX SIP Call and any final CSAPR ozone update for the 2008 NAAQS will be required to comply with the requirements of both rules. This proposed rule requires NOX ozone season emission reductions from EGUs greater than 25 MW in nearly all NOX SIP Call states and at levels greater than required by the NOX SIP Call. Therefore, this proposed rule would satisfy the requirements of the NOX SIP Call for these large EGU units.
	The NOX SIP Call states used the NOX Budget Trading Program to comply with the NOX SIP Call requirements for EGUs serving a generator with a nameplate capacity greater than 25 MW and large non-EGUs with a maximum rated heat input capacity greater than 250 MMBTU/hr. (In some states, EGUs smaller than 25 MW were also part of the NBP as a carryover from the Ozone Transport Commission NOX Budget Trading Program.) When the EPA promulgated CAIR, it allowed states to modify that program and include all NOX Budget Trading Program units in the CAIR NOX Ozone-season Trading Program as a way to continue to meet the requirements of the NOX SIP Call for these sources.
      In CSAPR, however, the EPA allowed states to expand applicability of the trading program to EGUs smaller than 25 MW but did not allow the expansion of applicability to include large non-EGU sources. The reason for excluding large non-EGU sources was largely that emissions from these sources were generally much lower than the budget amount and there was concern that surplus allowances created as a result of an overestimation of baseline emissions and subsequent shutdowns (since 1999 when the NOX SIP Call was promulgated) would prevent needed reductions by the EGUs to address significant contribution to downwind air quality impacts.
	Since then, states have had to find appropriate ways to continue to show compliance with the NOX SIP Call, particularly for large non-EGUs. Most states that included such sources in CAIR are still working to find suitable solutions.
	Therefore, the EPA is taking comment on whether to allow any NOX SIP Call state affected by this proposed rule to voluntarily submit a SIP revision at a budget level that is environmentally neutral to address the state's NOX SIP Call requirement for ozone season NOX reductions. The SIP revision could include a rule to expand the applicability of the CSAPR NOX ozone-season trading program to include all NOX Budget Trading Program units. Analysis shows that these units (mainly large non-EGU boilers, combustion turbines, and combined cycle units with a maximum rated heat input capacity greater than 250 mmBtu/hr) continue to emit well below their portion of the NOX SIP Call budget. In order to ensure that the necessary amount of EGU emission reductions occur for this proposed rule, the corresponding state ozone-season emission budget amount could be increased by the lesser of the highest ozone season NOX emissions (in the last 3 - 5 years) from those units or the relevant non-EGU budget under the NOX SIP Call, and this small group of non-EGUs could participate in the CSAPR ozone-season trading program. The environmental impact would be neutral using this approach, and hourly reporting of emissions under part 75 would continue. This approach would address requests by states for help in determining an appropriate way to address the continuing NOX SIP Call requirement as to non-EGU sources. EPA proposes that if this option is finalized that the variability limits established for EGUs be unchanged as a result of including these non-EGUs. The assurance provisions would apply to EGUs, and emissions from non-EGUs would not affect the assurance levels.
      The NOX SIP Call generally requires that states choosing to rely on large EGUs and large non-EGUs for meeting NOX SIP Call emission reduction requirements must establish a NOX mass emissions cap on each source and require Part 75, subpart H monitoring. As an alternative to source-by-source NOX mass emission caps, a state may impose NOX emission rate limits on each source and use maximum operating capacity for estimating NOX mass emissions or may rely on other requirements that the state demonstrates to be equivalent to either the NOX mass emission caps or the NOX emission rate limits that assume maximum operating capacity. Collectively, the caps or their alternatives cannot exceed the portion of the state budget for those sources. See 40 CFR 51.121(f)(2) and (i)(4). If the EPA were to allow a state to expand the applicability of this proposed rule to include all the NOX Budget Trading Program units in the CSAPR NOX ozone-season trading program, the cap requirement would be met through the new budget and the monitoring requirement would be met through the trading program provisions, which require part 75 monitoring. Whether this option is finalized or not, the EPA will work with states to ensure that NOX SIP Call obligations continue to be met. The EPA requests comment on the voluntary inclusion of NOX SIP Call non-EGUs in this 2008 ozone-season proposed rule.
      d. CAA Section 176A Petition to Expand the OTR
      On December 9, 2013, the EPA received a CAA section 176A petition from the states of Connecticut, Delaware, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. The petition was amended on December 12, 2013 to add the state of Pennsylvania as a petitioning state. The petition requests that the EPA add 8 states and the remainder of the Commonwealth of Virginia to the current Ozone Transport Region that was established under CAA section 184. The proposed rule if adopted would [insert detailed information].
      e. Other State Implementation Plans
      In this proposal, the EPA has not conducted any technical analysis to determine whether compliance with the proposed rule would satisfy other requirements for EGUs in any attainment or nonattainment areas (e.g., RACT or BART). For that reason, the EPA is not now making determinations nor establishing any presumptions that compliance with the proposed rule satisfies any other requirements for EGUs. Based on analyses that states conduct on a case-by-case basis, states may be able to conclude that compliance with the proposed rule for certain EGUs fulfills other SIP requirements.
      2. Other Federal Rulemakings
      a. Clean Power Plan
      On August 3, 2015, President Obama and EPA announced the Clean Power Plan  -  a historic and important action on emissions that contribute to climate change. The CPP reduces carbon pollution from the power sector. With strong but achievable standards for power plants, and customized goals for states to cut the carbon pollution (CO2) that is driving climate change, the Clean Power Plan (CPP) provides national consistency, accountability and a level playing field while reflecting each state's energy mix.
      The Clean Air Act  -  under section 111(d)  -  creates a partnership between EPA, states, tribes and U.S. territories  -  with EPA setting a goal and states and tribes choosing how they will meet it. The CPP follows that approach. The CPP establishes interim and final CO2 emission performance rates and statewide goals. States then develop and implement plans that ensure that the power plants in their state  -  either individually, together or in combination with other measures  -  achieve these rates or goals. States will be required to submit a state plan, or an initial submittal with an extension request, by September 6, 2016. Complete state plans must be submitted no later than September 6, 2018. The interim rates and goals are assessed over the years 2022 to 2029 and the final CO2 emission performance rates, rate-based goals, or mass-based goals are assessed for 2030 and after.
      Because the final deadline for states to submit complete plans under the CPP is September 2018 and because mandatory CPP reductions do not begin until the interim period (i.e., starting in 2022), the EPA does not anticipate significant interactions with the CPP and the near-term (i.e., starting in 2017) ozone season EGU NOX emission reduction requirements under this proposal.
      However the EPA notes that actions taken to reduce CO2 emissions (e.g., deployment of zero-emitting generation) may also reduce ozone season NOX emissions. To the extent that states or electric utilities consider emission reduction strategies to meet these two separate requirements  -  CPP and interstate ozone transport  -  in a coordinated manner, they may find efficiency gains in that actions to meet the CPP goals may also help meet interstate ozone transport requirements.
      The EPA believes that timing flexibility provided in the CPP offers significant benefits that allow states to develop plans that will help achieve a number of goals, including, but not limited to: reducing cost, addressing reliability concerns, addressing concerns about stranded assets, and facilitating the integration of meeting the emission guidelines and compliance by affected EGUs with other air quality and pollution control obligations on the part of both states and affected EGUs.
      The EPA is also cognizant of the potential influence of addressing interstate ozone transport on the CPP. As states and utilities undertake the near- and longer-term planning that will be needed for the CPP, they will have the opportunity to consider how compliance with this rule can anticipate, or be consistent with, expected compliance strategies for the CPP. While some EGU NOX mitigation strategies, most notably shifting generation from higher-NOX emitting coal-fired units to lower NOX emitting NGCC units, can potentially also reduce CO2 emissions, the EGU emissions analysis performed for this interstate transport action does not results in a notable difference in CO2 emissions. However, EPA's results do not preclude states and utilities from considering these programs together. And, as the EPA has structured the interstate transport obligations that would be established by this proposal as requirements to limit aggregate affected EGU emissions and the EPA is not proposing to enforce source-specific emission reduction requirements, EGU owners have the flexibility to plan for compliance with the interstate ozone transport requirements in ways that are consistent with state and EGU strategies to reduce CO2 emissions for the Clean Power Plan.
      With respect to concerns about potentially stranded investments in NOX control equipment, the EPA's budget-setting approach quantifies NOX reductions from upgrading combustion controls at coal-fired units. However, CSAPR's flexible compliance does not require that specific NOX controls be installed at any specific facilities, and we would not expect such controls to be installed on units that may not be economic to operate in the future.
      b. 2015 Ozone Standard
      On Nov. 25, 2014, the EPA proposed to strengthen the ground-level ozone NAAQS, based on extensive scientific evidence about ozone's effects on public health and welfare. Following a court order, the agency will issue a final decision regarding that proposal by Oct. 1, 2015. This proposed rule to update CSAPR to address interstate emissions transport with respect to the 2008 ozone NAAQS is a separate and distinct regulatory action and is not meant to address the CAA's good neighbor provision with respect to the 2014 proposal or potential October 2015 final rule.
[Update if/when final rule is available.]

 Costs, Benefits, and Other Impacts of the Proposed Rule
      The EPA evaluated the costs, benefits, and impacts of compliance with the proposed EGU NOX ozone-season emissions budgets that reflect uniform NOX costs of $1,300 per ton (see proposed emissions budgets in table VI.1). In addition, the EPA also assessed compliance with other more and less stringent alternative EGU NOX ozone-season emissions budgets, reflecting uniform NOX costs of $3,400 per ton and $500 per ton, respectively (see alternative emissions budgets in tables VI.2 and VI.3). The EPA evaluated the impact of implementing these emissions budgets to reduce interstate transport for the 2008 ozone NAAQS in 2017. More details for this assessment can be found in the Regulatory Impact Analysis in the docket for this proposed rule.
      The EPA notes that its analysis of the regulatory control scenarios (i.e., the proposal and more and less stringent alternatives) is illustrative in nature, in part because the EPA proposes to implement the proposed EGU NOX emissions budgets via a regional NOX ozone-season allowance trading program. This implementation approach provides utilities with the flexibility to determine their own compliance path. The EPA's assessment develops and analyzes one possible scenario for implementing the NOX budgets proposed by this action and one possible scenario for implementing the more and less stringent alternatives.
      Table VIII.1 provides the projected 2017 EGU emissions reductions for the evaluated regulatory control scenarios.

Table VIII.1 - Projected 2017 Emissions Reductions of NOx, SO2, and CO2 with the Proposed NOx Emissions Budgets and More or Less Stringent Alternatives (Tons)[1]

                                   Proposal
                          More Stringent Alternative
                          Less Stringent Alternative
NOX (annual)
                                                                         89,969
                                                                         92,582
                                                                         23,686
NOX (ozone season)
                                                                         84,856
                                                                         83,680
                                                                         25,051
SO2 (annual)
                                                                            383
                                                                            425
                                                                            301

CO2 (annual)
                                                                        610,092
                                                                        614,385
                                                                        719,760
[1] NOx and SO2 emissions are reported in English (short) tons; CO2 is reported in metric tons.

      The EPA estimates the costs associated with compliance with the illustrative proposed regulatory control alternative to be approximately $93 million annually. These costs represent the private compliance cost of reducing NOX emissions to comply with the proposal and include monitoring, recordkeeping, and reporting costs. Table VIII.2 provides the estimated costs for the evaluated regulatory control scenarios, including the proposal and more and less stringent alternatives. Estimates are in 2011 dollars.
Table VIII.2  -  Cost Estimates for Compliance with the Proposed NOX Emissions Budgets and More and Less Stringent Alternatives (2011$)[1]

                                   Proposal
                          More Stringent Alternative
                          Less Stringent Alternative
Costs
                                                                            $93
                                                                            $96
                                                                           $4.7
[1] Levelized annualized costs over the period 2016 through 2040, discounted using the 4.77 discount rate used in IPM's objective function of minimizing the net present value of the stream of total costs of electricity generation.
      In this analysis, the EPA monetized the estimated benefits associated with the reduced exposure to ozone and PM2.5 and co-benefits of decreased emissions of CO2, but was unable to monetize the co-benefits associated with reducing exposure to mercury, carbon monoxide, and NO2, as well as ecosystem effects and visibility impairment. In addition, there are expected to be unquantified health and welfare impacts associated with changes in hydrogen chloride. Specifically, the EPA estimated combinations of health benefits at discount rates of 3 percent and 7 percent (as recommended by the EPA's Guidelines for Preparing Economic Analyses [U.S. EPA, 2014] and OMB's Circular A-4 [OMB, 2003]) and climate co-benefits at discount rates of 5 percent, 3 percent, 2.5 percent, and 3 percent (95[th] percentile) (as recommended by the interagency working group). The EPA estimates the monetized ozone-related benefits of the proposal to be $490 million to $790 million (2011$) in 2017 and the PM2.5-related co-benefits of the proposal to be $190 million to $430 million (2011$) using a 3% discount rate and $170 million to $380 million (2011$) using a 7% discount rate. Further, the EPA estimates CO2-related co-benefits of $6.5 to $66 million (2011$). Additional details on this analysis are provided in the RIA for this proposal. Tables VIII.3 and VIII.5, summarize the quantified monetized human health and climate benefits of the proposal and the more and less stringent control alternatives. Table VIII.4 summarizes the estimated avoided ozone- and PM2.5-related health incidences for the proposal and the more and less stringent control alternatives.
Table VIII.3 Estimated Health Benefits of Projected 2017 Emissions Reductions for the Proposal and More or Less Stringent Alternatives (millions of 2011$)[1]

                                   Proposal
                                More Stringent
                                  Alternative
                          Less Stringent Alternative
NOX (as ozone)
                                                                   $490 to $790
                                                                   $500 to $820
                                                                   $140 to $230
NOX (as PM2.5)
  3% Discount Rate
  7% Discount Rate
                                                                   $190 to $430
                                                                   $170 to $380
                                                                   $190 to $440
                                                                   $170 to $390
                                                                    $49 to $110
                                                                    $45 to $100
Total
  3% Discount Rate
  7% Discount Rate
                                                                 $670 to $1,200
                                                                 $660 to $1,200
                                                                 $690 to $1,300
                                                                 $670 to $1,200
                                                                   $190 to $350
                                                                   $190 to $340
[1] The health benefits range is based on adult mortality functions (e.g., from Krewski et al. (2009) with Smith et al. (2009) to Lepeule et al. (2012) with Zanobetti and Schwartz (2008)).

Table VIII.4 Summary of Estimated Avoided Ozone-Related and PM2.5-Related Health Incidences from Projected 2017 Emissions Reductions for the Proposal and More or Less Stringent Alternatives[1]
                         Ozone-related Health Effects
                                   Proposal
                          More Stringent Alternative
                          Less Stringent Alternative
Avoided Premature Mortality

 Smith et al. (2009) (all ages)
                                      48
                                      50
                                      14
 Zanobetti and Schwartz (2008) (all ages)
                                      81
                                      83
                                      24
Avoided Morbidity

 Hospital admissions -- respiratory causes (ages > 65)
                                      79
                                      81
                                      23
 Emergency room visits for asthma (all ages)
                                      320
                                      330
                                      94
 Asthma exacerbation (ages 6-18)
                                    93,000
                                    95,000
                                    27,000
 Minor restricted-activity days (ages 18-65)
                                    240,000
                                    240,000
                                    70,000
 School loss days  (ages 5-17)
                                    77,000
                                    79,000
                                    23,000
                         PM2.5-related Health Effects

Avoided Premature Mortality

 Krewski et al. (2009) (adult)
                                      21
                                      22
                                      5.6
 Lepeule et al. (2012) (adult)
                                      48
                                      50
                                      13
 Woodruff et al. (1997) (infant)
                                       0
                                       0
                                       0
Avoided Morbidity

 Emergency department visits for asthma (all ages)
                                      12
                                      12
                                      3.1
 Acute bronchitis (age 8 - 12)
                                      31
                                      32
                                      8.1
 Lower respiratory symptoms (age 7 - 14)
                                      390
                                      400
                                      100
 Upper respiratory symptoms (asthmatics age 9 - 11)
                                      560
                                      570
                                      150
 Minor restricted-activity days (age 18 - 65)
                                    16,000
                                    16,000
                                     4,200
 Lost work days (age 18 - 65)
                                     2,700
                                     2,700
                                      700
 Asthma exacerbation (age 6 - 18)
                                      580
                                      600
                                      150
 Hospital admissions -- respiratory (all ages)
                                      6.4
                                      6.5
                                      1.7
 Hospital admissions -- cardiovascular (age > 18)
                                      7.8
                                      8.0
                                      2.1
 Non-Fatal Heart Attacks (age >18)

  Peters et al. (2001)
                                      25
                                      26
                                      6.6
  Pooled estimate of 4 studies
                                      2.7
                                      2.8
                                      0.7
[1] All estimates are rounded to whole numbers with two significant figures.

Table VIII.5 Estimated Global Climate Co-benefits of CO2 Reductions for the Proposal and More or Less Stringent Alternatives (millions of 2011$)[1]
Discount rate and statistic
                                   Proposal
                                More Stringent
                                  Alternative
                          Less Stringent Alternative
5% (average)
                                     $6.5
                                     $6.5
                                     $7.6
3% (average)
                                      $23
                                      $23
                                      $27
2.5% (average)
                                      $35
                                      $35
                                      $41
3% (95[th] percentile)
                                      $66
                                      $66
                                      $78
[1] The social cost of carbon (SC-CO2) values are dollar-year and emissions-year specific. SC-CO2 values represent only a partial accounting of climate impacts.

      The EPA combined this information to perform a benefit-cost analysis for this proposal (shown in table VIII.6 and for the more and less stringent alternatives -- shown in the RIA in the docket for this proposed rule).
Table VIII.6 Total Costs, Total Monetized Benefits, and Net Benefits of the Proposal in 2017 for U.S. (millions of 2011$)
Climate Co-Benefits
                                      $23
Air Quality Health Benefits
                                 $700 to $1200
Total Benefits
                                 $720 to $1200
Annualized Compliance Costs
                                      $93
                                      10
Net Benefits
                                 $630 to $1100
Non-Monetized Benefits
                        Non-monetized climate benefits

                 Reductions in exposure to ambient NO2 and SO2

                       Reductions in mercury deposition

  Ecosystem benefits assoc. with reductions in emissions of NOx, SO2, and PM

                             Visibility impairment

      There are additional important benefits that the EPA could not monetize. Due to current data and modeling limitations, our estimates of the co-benefits from reducing CO2 emissions do not include important impacts like ocean acidification or potential tipping points in natural or managed ecosystems. Unquantified benefits also include climate co-benefits from reducing emissions of non-CO2 GHGs (e.g., nitrous oxide and methane) and co-benefits from reducing direct exposure to SO2, NOX, and hazardous air pollution (e.g., mercury), as well as from reducing ecosystem effects and visibility impairment. Based upon the foregoing discussion, it remains clear that the benefits of this proposed action are substantial, and far exceed the costs. Additional details on benefits, costs, and net benefits estimates are provided in the RIA for this proposal.

      For this proposed rule, the EPA analyzed the costs to the electric power sector using 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 www.epa.gov/powersectormodeling.
      The EPA provides a qualitative assessment of economic impacts associated with electricity price changes to consumers that may result from this proposed rule. This assessment can be found in the RIA for this proposed rule.
      Executive Order 13563 directs federal agencies to consider the effect of regulations on job creation and employment. According to the Executive Order, "our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation. It must be based on the best available science" (Executive Order 13563, 2011). Although standard benefit-cost analyses have not typically included a separate analysis of regulation-induced employment impacts, employment impacts are of particular concern and questions may arise about their existence and magnitude.
      States have the responsibility and flexibility to implement policies and practices as part of developing SIPs for compliance with the emissions budgets found in this proposed rule. Given the wide range of approaches that may be used and industries that could be affected, quantifying the associated employment impacts is difficult.
 Summary of Proposed Changes to the Regulatory Text for the CSAPR FIPs and CSAPR Trading Programs
      This section describes proposed amendments to the regulatory text in the Code of Federal Regulations (CFR) for the CSAPR FIPs and the CSAPR NOX Ozone-Season Trading Program related to the findings and remedy discussed throughout this preamble. This section also describes other minor proposed corrections to the existing CFR text for the CSAPR FIPs and the CSAPR trading programs more generally.
      The proposed regulatory text amendments related to the CSAPR FIPs and the CSAPR NOX Ozone-Season Trading Program would be made in parts 52, 78, and 97 of title 40 of the CFR. Proposed changes to update the list of states that would be subject to FIPs to address obligations related to transported ozone pollution are in section 52.38(b)(2) (summarizing all states subject to FIPs), 52.540 (ending FIP for Florida), 52.882 (establishing FIP for Kansas), and 52.2140 (ending FIP for South Carolina). Section 97.510 contains the proposed changes establishing or revising the amounts of NOX Ozone-Season trading budgets, new unit set-asides (NUSAs), Indian country NUSAs, and variability limits for states whose sources participate in the CSAPR NOX Ozone-Season Trading Program. Additional proposed changes to accommodate trading program participation by sources whose coverage starts in different years are in sections 97.506(c)(3) (compliance deadlines), 97.512 (NUSA allowance allocation procedures), 97.530(b) (monitor certification deadlines), and 97.534(d) (reporting deadlines).
	Proposed changes to section 52.38(b)(3) through (5) would update states' options to submit SIP revisions which, upon approval by the EPA, would modify certain CSAPR trading program provisions as applied to those states or replace the states' FIPs with SIPs  -  options that correspond closely to states' SIP revision options under CSAPR as initially promulgated.  Proposed changes in section 97.521 (allowance recordation) delay the deadlines for recording CSAPR NOX Ozone-Season allowances for the control periods in 2018 through 2022 in order to coordinate with the proposed updated submission deadlines for the optional SIP revisions.  A similar proposed delay in the deadline for recording allowances for the control period in 2017 would provide time to finalize this rule and would thereby allow the EPA to record allocations of 2017 allowances based on the final revised budgets instead of recording allocations based on existing budgets that are proposed to be superseded.
      The proposed limitations on the use of emission allowances issued for a compliance period before 2017 or from the state NOX Ozone-Season trading budget for Georgia are implemented by redefining sources' obligations under the trading program in terms of "tonnage equivalents" of allowances rather than in terms of nominal quantities of allowances. Section 97.502 contains a proposed new definition of "tonnage equivalent" and related proposed modifications to the definitions of "CSAPR NOX Ozone-Season allowance" and "CSAPR NOX Ozone-Season emissions limitation." A new section 97.524(f) sets out the proposed procedures for determining the tonnage equivalent of an allowance. Additional proposed changes to reflect the use of tonnage equivalents rather than nominal numbers of allowances to meet various obligations are contained in sections 97.506(c) (standard requirements relating to NOX emissions), 97.511(c) (corrections of incorrect allowance allocations), 97.524 (compliance with emissions limitations and excess emissions provisions), and 97.525 (compliance with assurance provisions). A proposed change to section 78.1 would make EPA's determinations of the tonnage equivalents of particular allowance holdings subject to the administrative appeal procedures set forth in part 78.
      In addition to the proposed CFR changes described above, this proposal also includes other minor amendments throughout the sections of parts 52, 78, and 97 implementing CSAPR, including sections implementing CSAPR's other three emissions trading programs. The most common category of these minor changes consists of proposed corrections to cross-references. Some cross-references would change as a result of this proposal and corrections of those cross-references are therefore related to the changes described above, while other cross-references as originally published indicated incorrect locations because of typographical errors or indicated correct locations but did not use the correct CFR format. In virtually all cases, the intended correct cross-reference can be determined from context, but the corrections clarify the regulations.
      Besides the proposed corrections to cross-references, most of the remaining proposed corrections address other typographical errors. However, a small number of the proposed CFR changes correct errors that are not cross-references or obviously typographical errors. While the EPA views all of these proposed corrections as noncontroversial, a few merit a short explanation.
      First, the phrase "with regard to the State" or "the State and" would be added in a number of locations in sections 52.38 and 52.39 where it was inadvertently omitted. The added phrase clarifies that when the EPA approves a state's SIP revision as modifying or replacing provisions in a CSAPR trading program, the modification or replacement is effective only with regard to that particular state. Correcting the omissions of these phrases would make the language concerning SIP revisions consistent for all the types of SIP revisions under all the CSAPR trading programs.
      Second, the phrase "in part" would be removed from the existing FIP language in various sections of part 52 for certain states with Indian country to clarify that in order to replace a CSAPR FIP affecting the sources in these states, a SIP revision must fully, not "in part," correct the SIP deficiency identified by the EPA as the basis for the FIP. The intended purpose of the words "in part"  -  specifically, to indicate that approval of a state's SIP revision would not relieve any sources in Indian country within the borders of the state from obligations under the FIP  -  is already served by other language in those FIPs.  The proposed corrections would make the language in these CSAPR FIPs consistent with the FIP language for the remaining CSAPR FIPs that address states with Indian country. Analogous proposed changes to the general CSAPR FIP language in sections 52.38(a)(5) and (6) and (b)(5) and (6) and 52.39(f), (i), and (j) would remove the phrase "in whole or in part" (referencing states without Indian country and states with Indian country, respectively) while adding language distinguishing the effect that the EPA's approval of a SIP revision would have on sources in the state from the lack of effect on any sources in Indian country within the borders of the state.
      Third, language would be added to section 78.1 clarifying that determinations by the EPA Administrator under the CSAPR trading programs that are subject to the part 78 administrative appeal procedures are subject to those procedures whether the source in question participates in a CSAPR trading program under a FIP or under an approved SIP revision. This approach is consistent with the approach taken under CAIR FIPs and SIPs and with the EPA's intent in CSAPR, as evidenced by the lack of any proposal or discussion in the CSAPR rulemaking regarding deviation from the historical approach. This approach is also consistent with provisions in sections 52.38 and 52.39 prohibiting approvable SIP revisions from altering certain provisions of the CSAPR trading programs, including the provisions specifying that administrative appeal procedures for determinations of the EPA Administrator under the trading programs are set forth in part 78.
      Fourth, the phrase "steam turbine generator" would be changed to "generator" in the list of required equipment in the definition of a "cogeneration system" in sections 97.402, 97.502, 97.602, and 97.702. Absent this correction, a combustion turbine in a facility that uses the combustion turbine in combination with an electricity generator and heat recovery steam generator, but no steam turbine, to produce electricity and useful thermal energy would not meet the definition of a "cogeneration unit." The proposed correction would clarify that a combustion turbine in such a facility should be able to qualify as a "cogeneration unit" (assuming it meets other relevant criteria) under CSAPR, as it could under CAIR. The consistency of this approach with the EPA's intent in this rulemaking is evidenced by the lack of any proposal or discussion in the CSAPR rulemaking regarding the concept of narrowing the set of facilities qualifying for an applicability exemption as cogeneration units. To the contrary, as discussed in the preamble to the CSAPR proposal (75 FR 45307), the definition of "cogeneration system" was created in CSAPR specifically to facilitate qualification as "cogeneration units" by certain units that might not meet the required levels of efficiency on an individual basis but that operate as components of multi-unit "cogeneration systems" that do meet the required levels of efficiency.
      Fifth, the deadline for recording certain allowance allocations under sections 97.421(j), 97.521(j), 97.621(j), and 97.721(j) would be changed from the "date on which" the EPA receives the necessary allocation information to the date "15 days after the date on which" the EPA receives the information. The EPA's lack of intention in the CSAPR rulemaking to establish the deadline as defined prior to the correction is evidenced by the impracticability of complying with such a deadline.
      Sixth, a proposed change to a description of a required notice under the assurance provisions in sections 97.425(b)(2)(iii)(B), 97.525(b)(2)(iii)(B), 97.625(b)(2)(iii)(B), and 97.725(b)(2)(iii)(B) would modify the phrase "any adjustments" to the phrase "calculations incorporating any adjustments" in order to clarify that the required notice will identify not only any adjustments made to previously noticed calculations, but also the complete calculations with (or without) such adjustments. The intended meaning is clear from the subsequent provisions that use this notice as the point of reference for the complete calculations used in the succeeding administrative procedures.
      Finally, the EPA notes that the proposed amendments include updating the name of the rule in the CFR from its name as initially proposed  -  "Transport Rule" or "TR"  -  to its name as finalized  -  "Cross-State Air Pollution Rule" or "CSAPR." This update is intended to reduce confusion and simplify communications regarding the rule by allowing a single name to be used in all contexts.
      The EPA invites comment on the proposed regulatory text amendments described above and shown at the end of this notice.

 Statutory and Executive Order Reviews
      Additional information about these statutes and Executive Orders can be found at http://www2.epa.gov/laws-regulations/laws-and-executive-orders.
A.	Executive Order 12866: Regulatory Planning and Review
and Executive Order 13563: Improving Regulation and Regulatory Review
      This action is an economically significant regulatory action that was submitted to the Office of Management and Budget (OMB) for review. Any changes made in response to OMB recommendations have been documented in the docket. The EPA prepared an analysis of the potential costs and benefits associated with this action. This analysis, which is contained in the "Regulatory Impact Analysis for the Proposed Cross-State Air Pollution Rule for the 2008 Ozone NAAQS" [insert RIA reference], is available in the docket and is briefly summarized in section VIII of this preamble.
      Consistent with Executive Order (EO) 12866 and EO 13563, the EPA estimated the costs and benefits for three regulatory control alternatives: the proposed EGU NOX ozone-season emissions budgets and more and less stringent alternatives. This proposed action would reduce ozone season NOX emissions from EGUs in 23 eastern states. Actions taken to comply with the proposed EGU NOX ozone-season emissions budgets would also reduce emissions of other criteria air pollution and hazardous air pollution emissions, including annual NOX, and CO2. The benefits associated with these co-pollutant reductions are referred to as co-benefits, as these reductions are not the primary objective of this rule.
      The RIA for this proposal analyzed illustrative compliance approaches for implementing the proposed FIPs. This proposal would establish EGU NOX ozone-season emissions budgets for 23 states and implement these budgets via the existing CSAPR NOX ozone-season allowance trading program.
      The EPA evaluated the costs, benefits, and impacts of implementing the proposed EGU NOX ozone-season emissions budgets that reflect uniform NOX costs of $1,300 per ton (see proposed emissions budgets in table VI.1). In addition, the EPA also assessed implementation of other more and less stringent alternative EGU NOX ozone-season emissions budgets, reflecting uniform NOX costs of $3,400 per ton and $500 per ton, respectively (see alternative emissions budgets in tables VI.2 and VI.3). The EPA evaluated the impact of implementing these emissions budgets to reduce interstate transport for the 2008 ozone NAAQS in 2017. More details for this assessment can be found in the Regulatory Impact Analysis in the docket for this proposed rule.
      The EPA notes that its analysis of the regulatory control scenarios (i.e., the proposal and more and less stringent alternatives) is illustrative in nature, in part because the EPA proposes to implement the proposed EGU NOX emissions budgets via a regional NOX ozone-season allowance trading program. This implementation approach provides utilities with the flexibility to determine their own compliance path. The EPA's assessment develops and analyzes one possible scenario for implementing the NOX budgets proposed by this action and one possible scenario for implementing the more and less stringent alternatives.
      The EPA estimates the costs associated with compliance with the illustrative proposed regulatory control alternative to be approximately $93 million (2011$) annually. These costs represent the private compliance cost of reducing NOX emissions to comply with the proposal.
      In this analysis, the EPA monetized the estimated benefits associated with the reduced exposure to ozone and PM2.5 and co-benefits of decreased emissions of CO2, but was unable to monetize the co-benefits associated with reducing exposure to mercury, carbon monoxide, and NO2, as well as ecosystem effects and visibility impairment. In addition, there are expected to be unquantified health and welfare impacts associated with changes in hydrogen chloride. Specifically, the EPA estimated combinations of health benefits at discount rates of 3 percent and 7 percent (as recommended by the EPA's Guidelines for Preparing Economic Analyses [U.S. EPA, 2014] and OMB's Circular A-4 [OMB, 2003]) and climate co-benefits at discount rates of 5 percent, 3 percent, 2.5 percent, and 3 percent (95[th] percentile) (as recommended by the interagency working group). The EPA estimates the monetized ozone-related benefits of the proposal to be $490 million to $790 million (2011$) in 2017 and the PM2.5-related co-benefits of the proposal to be $190 million to $430 million (2011$) using a 3% discount rate and $170 million to $380 million (2011$) using a 7% discount rate. Further, the EPA estimates CO2-related co-benefits of $6.5 to $66 million (2011$). Additional details on this analysis are provided in the RIA for this proposal. Tables X.1, X.2, and X.3 summarize the quantified human health and climate benefits and the costs of the proposal and the more and less stringent control alternatives.
Table X.1 Estimated Health Benefits of Projected 2017 Emissions Reductions for the Proposal and More or Less Stringent Alternatives (millions of 2011$)[1]

                                   Proposal
                                More Stringent
                                Less Stringent
NOX (as ozone)
                                                                   $490 to $790
                                                                   $500 to $820
                                                                   $140 to $230
NOX (as PM2.5)
  3% Discount Rate
  7% Discount Rate
                                                                   $190 to $430
                                                                   $170 to $380
                                                                   $190 to $440
                                                                   $170 to $390
                                                                    $49 to $110
                                                                    $45 to $100
Total
  3% Discount Rate
  7% Discount Rate
                                                                 $670 to $1,200
                                                                 $660 to $1,200
                                                                 $690 to $1,300
                                                                 $670 to $1,200
                                                                   $190 to $350
                                                                   $190 to $340