[Federal Register Volume 72, Number 127 (Tuesday, July 3, 2007)]
[Proposed Rules]
[Pages 36406-36413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-12874]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 52 and Part 97
[Docket No. EPA-R02-OAR-2007-0233; FRL-8334-9]
Approval and Promulgation of Implementation Plans; New Jersey:
Clean Air Interstate Rule
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: EPA is proposing action on a revision to New Jersey's State
Implementation Plan (SIP) submitted on February 6, 2007. EPA is
proposing to fully approve its incorporation into the SIP provided New
Jersey's final rule is consistent with the modifications discussed
herein.
This revision incorporates provisions related to the implementation
of EPA's Clean Air Interstate Rule (CAIR) and the CAIR Federal
Implementation Plans (CAIR FIPs) concerning sulfur dioxide
(SO2), and annual and ozone season oxides of nitrogen
(NOX) emissions. EPA is not proposing to make any changes to
the CAIR FIPs, but is proposing to the extent EPA approves New Jersey's
SIP revision, to amend the appropriate appendices in the CAIR FIP
trading rules simply to note that approval.
On April 28, 2006, EPA promulgated CAIR FIPs for States covered by
CAIR as a backstop to implement the requirements of CAIR until States
have obtained fully approved SIPs to replace the FIPs. The FIPs require
certain electric generating units (EGUs) to participate in the Federal
CAIR cap-and-trade programs addressing SO2, NOX
annual, and NOX ozone season emissions. The CAIR FIPs also
provide that States may submit ``abbreviated'' SIP revisions to replace
or supplement specific elements of the FIPs, leaving the remainder of
the overall FIPs in place, rather than submitting full SIP revisions
that replace the FIPs.
The New Jersey SIP revision that EPA is proposing to approve is an
abbreviated SIP revision that will replace two provisions of the CAIR
FIP that allow the State to: (1) Use a methodology chosen by the State
for allocation of annual and ozone season NOX allowances
and; (2) use a methodology chosen by the State for allocation of
NOX annual allowances from the NOX annual
Compliance Supplemental Pool (CSP). The revision retires, rather than
allocates allowances from the NOX annual CSP.
The SIP revision that EPA is proposing to approve will also satisfy
New Jersey's 110(a)(2)(D)(i) obligations to submit a SIP revision that
contains adequate provisions to prohibit air emissions from adversely
affecting another State's air quality through interstate transport.
The intent of this proposed revision is to approve a State specific
CAIR program which will result in emission reductions necessary to
prevent the interstate transport of air pollutants. The revision also
shows that the interstate transport of pollutants from the State has
been adequately addressed in the applicable implementation plan.
DATES: Comments must be received on or before August 2, 2007.
ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R02-
OAR-2007-0233, by one of the following methods:
1. http://www.regulations.gov: Follow the on-line instructions for
submitting comments.
2. E-mail: [email protected].
3. Fax: (212) 637-3901.
4. Mail: Docket ID No. EPA-R02-OAR-2007-0233, Raymond Werner,
Chief, Air Programs Branch, Environmental Protection Agency, Region 2
Office, 290 Broadway, 25th Floor, New York, New York 10007-1866.
5. Hand Delivery or Courier: Raymond Werner, Chief, Air Programs
Branch, Environmental Protection Agency, Region 2 Office, 290 Broadway,
25th Floor, New York, New York 10007-1866. Such deliveries are only
accepted during the Regional Office's normal hours of operation. The
Regional Office's official hours of business is Monday through Friday,
8:30 to 4:30, excluding Federal holidays.
Instructions: Direct your comments to Docket ID No. EPA-R02-OAR-
2007-0233. EPA's policy is that all comments received will be included
in the public docket without change and may be made available online at
www.regulations.gov, including any personal information provided,
unless the comment includes information claimed to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Do not submit through www.regulations.gov or e-
mail, information that you consider to be CBI or otherwise protected.
The www.regulations.gov Web site is an ``anonymous access'' system,
which means EPA will not know your identity or contact information
unless you provide it in the body of your comment. If you send an e-
mail comment directly
[[Page 36407]]
to EPA without going through www.regulations.gov, your e-mail address
will be automatically captured and included as part of the comment that
is placed in the public docket and made available on the Internet. If
you submit an electronic comment, EPA recommends that you include your
name and other contact information in the body of your comment and with
any disk or CD-ROM you submit. If EPA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EPA
may not be able to consider your comment. Electronic files should avoid
the use of special characters and any form of encryption and should be
free of any defects or viruses. For additional information about EPA's
public docket visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm.
Docket: All documents in the electronic docket are listed in the
www.regulations.gov index. Although listed in the index, some
information is not publicly available, i.e., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, is not placed on the Internet and will be
publicly available only in hard copy form. Publicly available docket
materials are available either electronically in www.regulations.gov or
in hard copy at the Air Programs Branch, Environmental Protection
Agency, Region 2 Office, 290 Broadway, 25th Floor, New York, New York
10007-1866.
FOR FURTHER INFORMATION CONTACT: If you have questions concerning
today's proposal, please contact Kenneth Fradkin, Air Programs Branch,
Environmental Protection Agency, Region 2 Office, 290 Broadway, 25th
Floor, New York, New York 10007-1866. The telephone number is (212)
637-3702. Mr. Fradkin can also be reached via electronic mail at
[email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. What Action Is EPA Proposing To Take?
II. What Is the Regulatory History of CAIR and the CAIR FIPs?
III. What Are the General Requirements of CAIR and the CAIR FIPs?
IV. What Are the Types of CAIR SIP Submittals?
V. What Is the Result of EPA's Evaluation of New Jersey's CAIR SIP
Submittal?
A. State Budgets for Allowance Allocations
B. CAIR Cap-and-Trade Programs
C. Applicability Provisions for Non-EGUs NOX SIP Call
Sources
D. NOX Allowance Allocations
E. Allocation of NOX Allowances From the Compliance
Supplement Pool
F. Individual Opt-In Units
G. Satisfying Section 110(a)(2)(D)(i) of the Clean Air Act
VI. Conclusion
VII. Statutory and Executive Order Reviews
I. What Action Is EPA Proposing To Take?
CAIR SIP and 110(a)(2)(D)(i) Approval
EPA is proposing to approve a revision to New Jersey's SIP,
submitted on February 6, 2007, which was published in the New Jersey
Register on February 5, 2007. The revision modifies the application of
certain provisions of the CAIR FIP which requires emission reductions
of SO2, NOX annual, and NOX ozone
season emissions. (As discussed later, this less comprehensive CAIR SIP
is termed an abbreviated SIP.) This revision includes a new proposed
regulation, N.J.A.C. 7:27-30, Clean Air Interstate Rule (CAIR)
NOX Trading Program. As part of the revision, New Jersey has
also proposed at N.J.A.C. 7:27-31.23 the date when New Jersey's CAIR
NOX Trading Program will replace New Jersey's NOX
Budget Trading Program (Subchapter 31).
This action is being proposed under a procedure called parallel
processing. Under parallel processing, EPA proposes action on a State
submission before it has been formally adopted and submitted to EPA,
and will take final action on its proposal if the final submission is
substantially unchanged from the submission on which the proposal is
based, or if significant changes in the final submission are
anticipated and adequately described in EPA's proposal as a basis for
EPA's proposed action.
This proposed approval is contingent upon New Jersey making the
necessary changes to New Jersey's proposed CAIR rule in order to
address EPA's concerns discussed in section V, Part D (NOX
Allowance Allocations). If EPA determines New Jersey's final submission
is consistent with the necessary changes outlined in this proposed
action, EPA may proceed to publish its full approval of New Jersey's
CAIR SIP in the Federal Register. The final rule that New Jersey
submits to EPA must be consistent with the changes discussed in this
action for EPA to fully approve its incorporation into the SIP.
If New Jersey is unable to make the required changes upon adoption,
and must repropose their rule, EPA will finalize a partial approval in
lieu of a full approval. Under the partial approval alternative, EPA
would approve those portions of the rule consistent with EPA
requirements into the SIP and disapprove those not consistent. EPA
believes the approvable portions of the rule strengthen New Jersey's
SIP by allowing the State to be the implementing authority, and make
allocations consistent with New Jersey's air quality goals. EPA
recognizes that the Clean Air Act assigns first responsibility to the
States, and it is EPA's preference to defer, wherever possible, to
States the decisions about control mechanisms to prevent significant
contribution, including States' decisions about allocation of
NOX allowances. If EPA finalizes a partial approval, EPA
would concurrently disapprove those portions of the rule for not
meeting those applicable requirements.
New Jersey is subject to the CAIR FIPs that implement the CAIR
requirements by requiring certain Electric Generating Units (EGUs) to
participate in the EPA-administered Federal CAIR SO2,
NOX annual, and NOX ozone season cap-and-trade
programs. The SIP revision provides a methodology for allocating
NOX allowances for the NOX annual, and
NOX ozone season trading programs. The CAIR FIPs provide
that this methodology, if approved as EPA is proposing, will be used to
allocate NOX allowances to sources in New Jersey, instead of
the Federal allocation methodology otherwise provided in the FIPs. The
SIP revision also retires rather than allocates allowances from the
NOX annual Compliance Supplement Pool (CSP). Consistent with
the flexibility provided in the FIPs, these provisions, if approved,
will also be used to replace or supplement, as appropriate, the
corresponding provisions in the CAIR FIPs for New Jersey. EPA is not
proposing to make any changes to the CAIR FIP, but is proposing, to the
extent EPA approves New Jersey's SIP revision, to amend the appropriate
appendices in the CAIR FIP trading rules simply to note that approval.
New Jersey's proposed rule does not modify the CAIR FIP regarding
SO2.
Because New Jersey's CAIR Program will replace the State's
NOX Budget Program (subchapter 31) beginning with the 2009
control period, it is necessary for New Jersey to establish at N.J.A.C.
7:27-31.23 a transition date for the NOX Budget Trading
Program to prevent an overlap of ozone season cap and trade programs
for NOX. The NOX Budget Trading Program's non-
electric generating units and small electric generating units (EGUs)
that are not covered under New Jersey's CAIR NOX Trading
Program will be subject to New Jersey's Reasonable Available Control
Technology (RACT) or state of the art
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rules. EPA will propose a separate rulemaking on New Jersey's RACT at a
later date.
In addition, EPA is also proposing to approve a revision to New
Jersey's SIP to address the requirements of section 110(a)(2)(D)(i) of
the Clean Air Act. This section of the Act requires each State to
submit a SIP that prohibits emissions that could adversely affect
another State. The SIP must prevent sources in the State from emitting
pollutants in amounts which will: (1) Contribute significantly to
downwind nonattainment of the NAAQS, (2) interfere with maintenance of
the NAAQS, (3) interfere with provisions to prevent significant
deterioration of air quality, and (4) interfere with efforts to protect
visibility.
II. What Is the Regulatory History of the CAIR and the CAIR FIPs?
The Clean Air Interstate Rule (CAIR) was published by EPA on May
12, 2005 (70 FR 25162). In this rule, EPA determined that 28 States and
the District of Columbia contribute significantly to nonattainment and
interfere with maintenance of the national ambient air quality
standards (NAAQS) for fine particles (PM2.5) and/or 8-hour
ozone in downwind States in the eastern part of the country. As a
result, EPA required those upwind States to revise their SIPs to
include control measures that reduce emissions of SO2, which
is a precursor to PM2.5 formation, and/or NOX,
which is a precursor to both ozone and PM2.5 formation. For
jurisdictions that contribute significantly to downwind
PM2.5 nonattainment, CAIR sets annual State-wide emission
reduction requirements (i.e., budgets) for SO2 and annual
State-wide emission reduction requirements for NOX.
Similarly, for jurisdictions that contribute significantly to 8-hour
ozone nonattainment, CAIR sets State-wide emission reduction
requirements for NOX for the ozone season (May 1st to
September 30th). Under CAIR, States may implement these emission
budgets by participating in the EPA-administered cap-and-trade programs
or by adopting any other control measures.
CAIR explains to subject States what must be included in SIPs to
address the requirements of section 110(a)(2)(D) of the Clean Air Act
(CAA) with regard to interstate transport with respect to the 8-hour
ozone and PM2.5 NAAQS. EPA made national findings, effective
May 25, 2005, that the States had failed to submit SIPs meeting the
requirements of section 110(a)(2)(D). The SIPs were due in July 2000, 3
years after the promulgation of the 8-hour ozone and PM2.5
NAAQS. These May 25, 2005 findings started a 2-year clock for EPA to
promulgate a Federal Implementation Plan (FIP) to address the
requirements of section 110(a)(2)(D). Under CAA section 110(c)(1), EPA
may issue a FIP anytime after such findings are made and must do so
within two years unless a SIP revision correcting the deficiency is
approved by EPA before the FIP is promulgated. On August 17, 2006 EPA
issued guidance for SIP submissions states should make to address the
requirements of section 110(a)(2)(D)(i) for the 8-hour ozone and
PM2.5 NAAQS.
On April 28, 2006 EPA promulgated FIPs for all States covered by
CAIR in order to ensure the emissions reductions required by CAIR are
achieved on schedule. Each CAIR State is subject to the FIPs until the
State fully adopts, and EPA approves, a SIP revision meeting the
requirements of CAIR. The CAIR FIPs require certain EGUs to participate
in the EPA-administered CAIR SO2, NOX annual, and
NOX ozone-season model trading programs, as appropriate. The
CAIR FIP SO2, NOX annual, and NOX
ozone season trading programs impose essentially the same requirements
as, and are integrated with, the respective CAIR SIP trading programs.
The integration of the CAIR FIP and SIP trading programs means that
these trading programs will work together to create effectively a
single trading program for each regulated pollutant (SO2,
NOX annual, and NOX ozone season) in all States
covered by a CAIR FIP or SIP trading program for that pollutant. The
CAIR FIPs also allow States to submit abbreviated SIP revisions that,
if approved by EPA, will automatically replace or supplement the
corresponding CAIR FIP provisions (e.g., the methodology for allocating
NOX allowances to sources in the State), while the CAIR FIP
remains in place for all other provisions.
On April 28, 2006, EPA published two more CAIR-related final rules
that added the State of Delaware and New Jersey to the list of States
subject to CAIR for PM2.5 and announced EPA's final
decisions on reconsideration of five issues without making any
substantive changes to the CAIR requirements. The five issues addressed
SO2 allocation methodology; fuel adjustment factors used in
establishing State NOX budgets; inputs to the fine particle
(PM2.5) modeling used to determine whether Minnesota should
be included in the CAIR region for PM2.5; EPA's
determination that Florida should be included in the CAIR region for
ozone; and the potential impact of a judicial opinion, New York v. EPA,
413 F.3d 3 (DC Cir. 2005), on EPA's previous determination that CAIR is
highly cost-effective and timing of compliance dates.
III. What Are the General Requirements of CAIR and the CAIR FIPs?
CAIR establishes State-wide emission budgets for SO2 and
NOX and is to be implemented in two phases. The first phase
of NOX reductions starts in 2009 and continues through 2014,
while the first phase of SO2 reductions starts in 2010 and
continues through 2014. The second phase of reductions for both
NOX and SO2 starts in 2015 and continues
thereafter. CAIR requires States to implement the budgets by either:
(1) Requiring EGUs to participate in the EPA-administered cap-and-trade
programs: or, (2) adopting other control measures of the State's
choosing and demonstrating that such control measures will result in
compliance with the applicable State SO2 and NOX
budgets.
The May 12, 2005 and April 28, 2006 CAIR rules provide model rules
that States must adopt (with certain limited changes, if desired) if
they want to participate in the EPA-administered trading programs.
With two exceptions, only States that choose to meet the
requirements of CAIR through methods that exclusively regulate EGUs are
allowed to participate in the EPA-administered trading programs. One
exception is for States that adopt the opt-in provisions of the model
rules to allow non-EGUs individually to opt into the EPA-administered
trading programs. The other exception is for States that include all
non-EGUs from their NOX SIP Call trading programs in their
CAIR NOX ozone season trading programs.
IV. What Are the Types of CAIR SIP Submittals?
States have the flexibility to choose the type of control measures
they will use to meet the requirements of CAIR. EPA anticipates that
most States will choose to meet the CAIR requirements by selecting an
option that requires EGUs to participate in the EPA-administered CAIR
cap-and-trade programs. For such States, EPA has provided two
approaches for submitting and obtaining approval for CAIR SIP
revisions. States may submit full SIP revisions that adopt the model
CAIR cap-and-trade rules. If approved, these SIP revisions will fully
replace the CAIR FIPs. Alternatively, States may submit abbreviated SIP
revisions. These SIP revisions will not replace the CAIR FIPs; however,
the CAIR FIPs provide that, when approved, the provisions in these
abbreviated SIP revisions will be used
[[Page 36409]]
instead of or in conjunction with, as appropriate, the corresponding
provisions of the CAIR FIPs (e.g., the NOX allowance
allocation methodology).
A State submitting an abbreviated SIP revision, may submit limited
SIP revisions to tailor the CAIR FIP cap-and-trade programs to the
State submitting the revision. Specifically, an abbreviated SIP
revision may establish certain applicability and allowance allocation
provisions that will be used instead of or in conjunction with the
corresponding provisions in the CAIR FIP rules in that State.
Specifically, the abbreviated SIP revisions may:
1. Include all NOX SIP Call trading sources that are not
EGUs under CAIR in the CAIR FIP NOX ozone season trading
program;
2. Provide for allocation of NOX annual or ozone season
allowances by the State, rather than the Administrator, and use a
methodology chosen by the State;
3. Provide for allocation of NOX annual allowances from
the CSP by the State, rather than by the Administrator, and use the
State's choice of allowed, alternative methodologies; or
4. Allow units that are not otherwise CAIR units to opt
individually into the CAIR FIP cap-and-trade programs under the opt-in
provisions in the CAIR FIP rules.
With approval of an abbreviated SIP revision, the CAIR FIP remains in
place, as tailored to sources in the State by that approved SIP
revision.
Abbreviated SIP revisions can be submitted in lieu of, or as part
of, CAIR full SIP revisions. States may want to designate part of their
full SIP as an abbreviated SIP for EPA to act on first when the timing
of the State's submission might not provide EPA with sufficient time to
approve the full SIP prior to the deadline for recording NOX
allocations. This will help ensure that the elements of the trading
programs, where flexibility is allowed, are implemented according to
the State's decisions. Submission of an abbreviated SIP revision does
not preclude future submission of a CAIR full SIP revision. In this
case, the February 6, 2007 submittal from New Jersey has been submitted
as an abbreviated SIP revision.
V. What Is the Result of EPA's Evaluation of New Jersey's CAIR SIP
Submittal?
A. State Budgets for Allowance Allocations
The CAIR NOX annual and ozone season budgets were
developed from historical heat input data for EGUs. Using these data,
EPA calculated annual and ozone season regional heat input values,
which were multiplied by 0.15 lb/mmBtu, for phase 1, and 0.125 lb/
mmBtu, for phase 2, to obtain regional NOX budgets for 2009-
2014 and for 2015 and thereafter, respectively. EPA derived the State
NOX annual and ozone season budgets from the regional
budgets using State heat input data adjusted by fuel factors.
The CAIR State SO2 budgets were derived by discounting
the tonnage of emissions authorized by annual allowance allocations
under the Acid Rain Program under title IV of the CAA. Under CAIR, each
allowance allocated under the Acid Rain Program for the years in phase
1 of CAIR (2010 through 2014) authorizes 0.5 ton of SO2
emissions in the CAIR trading program, and each Acid Rain Program
allowance allocated for the years in phase 2 of CAIR (2015 and
thereafter) authorizes 0.35 ton of SO2 emissions in the CAIR
trading program.
The CAIR FIP established the EGU budgets for New Jersey as 12,670
tons for the years 2009-2014 (Phase I) and 10,558 tons for the years
2015 and beyond (Phase II) for NOX annual emissions; 6,654
tons for the years 2009-2014 (Phase I) and 5,545 tons for the years
2015 and beyond (Phase II) for NOX ozone season emissions;
and 32,392 tons for the years 2010-2014 (Phase I) and 22,674 tons for
the years 2015 and beyond (Phase II) for SO2 emissions. New
Jersey's SIP revision, proposed for approval in today's action, does
not affect these budgets, which are the total amount of allowances
available for allocation for each year under the EPA-administered cap-
and-trade program under the CAIR FIP. In short, the abbreviated SIP
revision only affects allocations of allowances under the established
budgets.
B. CAIR Cap-and-Trade Programs
The CAIR NOX annual and ozone-season FIPs both largely
mirror the structure of the NOX SIP Call model trading rule
in 40 CFR part 96, subparts A through I. While the provisions of the
NOX annual and ozone-season FIPs are similar, there are some
differences. For example, the NOX annual FIP (but not the
NOX ozone season FIP) provides for a CSP, which is discussed
below and under which allowances may be awarded for early reductions of
NOX annual emissions. As a further example, the
NOX ozone season FIP reflects the fact that the CAIR
NOX ozone season trading program replaces the NOX
SIP Call trading program for EGUs after the 2008 ozone season and is
coordinated with the NOX SIP Call program. States also have
the option of continuing to meet their NOX SIP Call non-EGU
reduction obligations by participating in the CAIR NOX ozone
season trading program and including all their NOX SIP Call
trading sources in that program. In addition the NOX ozone
season FIP provides incentives for early emissions reductions by
allowing banked, pre-2009 NOX SIP Call allowances to be used
for compliance in the CAIR NOX ozone-season trading program.
The provisions of the CAIR SO2 FIP are also similar to
the provisions of the NOX annual and ozone season FIPs.
However, the SO2 FIP is coordinated with the ongoing Acid
Rain SO2 cap-and-trade program under CAA title IV. The
SO2 FIP uses the title IV allowances for compliance, with
each allowance allocated for 2010-2014 authorizing only 0.50 ton of
emissions and each allowance allocated for 2015 and thereafter
authorizing only 0.35 ton of emissions. Banked title IV allowances
allocated for years before 2010 can be used at any time in the CAIR
SO2 cap-and-trade program, with each such allowance
authorizing 1 ton of emissions. Title IV allowances are to be freely
transferable among sources covered by the Acid Rain Program and sources
covered by the CAIR SO2 cap-and-trade program.
EPA used the CAIR model trading rules as the basis for the trading
programs in the CAIR FIPs. The CAIR FIP trading rules are virtually
identical to the CAIR model trading rules, with changes made to account
for Federal rather than State implementation. The CAIR model
SO2, NOX annual, and NOX ozone season
trading rules and the respective CAIR FIP trading rules are designed to
work together as integrated SO2, NOX annual, and
NOX ozone season trading programs.
New Jersey is subject to the CAIR FIPs for ozone and
PM2.5 and the CAIR FIP trading programs for SO2,
NOX annual, and NOX ozone season applies to
sources in New Jersey. Consistent with the flexibility it gives to
States, the CAIR FIPs provide that States may submit abbreviated SIP
revisions that will replace or supplement, as appropriate, certain
provisions of the CAIR FIP trading programs. New Jersey has elected to
propose these rules for its EGU sources as part of the abbreviated SIP
which was submitted on February 6, 2007.
C. Applicability Provisions for Non-EGU NOX SIP Call Sources
In general, the CAIR FIP trading programs apply to any stationary,
fossil-fuel-fired boiler or stationary, fossil-
[[Page 36410]]
fuel-fired combustion turbine serving at any time, since the later of
November 15, 1990 or the start-up of the unit's combustion chamber, a
generator with nameplate capacity of more than 25 MWe producing
electricity for sale.
States have the option of bringing in, for the CAIR NOX
ozone season program only, those units in the State's NOX
SIP Call trading program that are not EGUs as defined under CAIR. EPA
advises States exercising this option to use provisions for
applicability that are substantively identical to the provisions in 40
CFR 96.304 and add the applicability provisions in the State's
NOX SIP Call trading rule for non-EGUs to the applicability
provisions in 40 CFR 96.304 in order to include in the CAIR
NOX ozone season trading program all units required to be in
the State's NOX SIP Call trading program that are not
already included under 40 CFR 96.304. Under this option, the CAIR
NOX ozone season program must cover all large industrial
boilers and combustion turbines, as well as any small EGUs (i.e. units
serving a generator with a nameplate capacity of 25 MWe or less), that
the State currently requires to be in the NOX SIP Call
trading program. Consistent with the flexibility given to States in the
CAIR FIP, New Jersey has not chosen to expand the applicability
provisions of the CAIR NOX ozone season trading program to
include all non-EGUs in the State's NOX SIP Call trading
program. New Jersey's non-EGUs and small electric generating units
(EGUs) will be subject to Reasonable Available Control Technology
(RACT) or state of the art rules.
D. NOX Allowance Allocations
Under the NOX allowance allocation methodology in the
CAIR model trading rules and in the CAIR FIP, NOX annual and
ozone season allowances are allocated to units that have operated at
least for five years, based on heat input data from a three-year period
that are adjusted for fuel type by using fuel factors of 1.0 for coal,
0.6 for oil, and 0.4 for other fuels. The CAIR model trading rules and
the CAIR FIP also provide a new unit set-aside from which units without
five years of operation are allocated allowances based on the units'
prior year emissions.
The CAIR FIP provides States the flexibility to establish a
different NOX allowance allocation methodology that will be
used to allocate allowances to sources in the States if certain
requirements are met concerning the timing of submission of units'
allocations to the Administrator for recordation and the total amount
of allowances allocated for each control period. In adopting
alternative NOX allowance allocation methodologies, States
have flexibility with regard to:
1. The cost to recipients of the allowances, which may be
distributed for free or auctioned;
2. The frequency of allocations;
3. The basis for allocating allowances, which may be distributed,
for example, based on historical heat input or electric and thermal
output; and
4. The use of allowance set-asides and, if used, their size.
Consistent with the flexibility given to States in the CAIR FIP,
New Jersey has chosen to replace the provisions of the CAIR
NOX annual and ozone season FIP concerning allowance
allocations with its own methodology.
New Jersey will distribute NOX annual and ozone season
allowances to CAIR units based upon historical electrical and thermal
output. Allowances, which will be distributed (not auctioned), will be
based on three years of data. For control periods 2009-2011,
NOX annual and ozone season allowances will be calculated
based on data from years 2003, 2004, and 2005. New Jersey will submit
2009-2011 NOX allocations to EPA by April 30, 2007. For
control periods in years 2012 and thereafter, the calculation of the
allocation shall be based on data from the three most recent years
prior to the year the allocation is due to the EPA (i.e. 2012
calculations which is due October 31, 2008 will be calculated based on
data from years 2005 through 2007). The allocations for the control
periods beginning in 2012 are due to EPA by October 31, 2008 and
October 31 of each year thereafter for the fourth year after the year
of the notification deadline.
New Jersey has established set-asides for new source/growth (``New
Source/ Growth Reserve''), and energy efficiency and renewable energy
programs or techniques (``Incentive Reserve''). New Jersey is
allocating ten percent of the State's CAIR NOX annual and
CAIR NOX ozone season budgets to the New Source/Growth
Reserve, and five percent of the State's CAIR NOX annual and
CAIR NOX ozone season budgets to the Incentive Reserve each
year.
The priority of the New Source/Growth Reserve is to hold aside
allowances for distribution to new CAIR units. Any remaining allowances
would be available for distribution to low NOX emission rate
units that emit more tons of NOX than the number of
allowances allocated for the control period.
The purpose of the incentive reserve is to hold aside allowances so
that they are available for distribution after the control period to
persons who claim incentive allowances, based on their energy savings
or the generation of electricity through the implementation of
environmentally beneficial techniques.
If the New Source/Growth Reserve or Incentive Reserve is under-
allocated, allowances will be distributed to units in equal proportion
to the number of allowances available in the reserve. New Jersey will
allow allowances from both reserves to be used interchangeably if one
reserve is over-allocated while the other is under-allocated. Any
allowances remaining in the reserves will remain in the Incentive
Reserve or the New Source/Growth Reserve to be available for allocation
in the following year.
Unallocated allowances from the existing New Source/Growth and
Incentive Reserves from New Jersey's NOX Budget Trading
Program (Subchapter 31) for the 2008 control period will be carried
over for use in the 2009 CAIR NOX ozone season.
New Jersey is allocating to the New Source/Growth Reserve 1,267
CAIR NOX annual allowances and 665 CAIR NOX ozone
season allowances of the State budget each year for vintage years 2009
through 2014. For years 2015 and thereafter, New Jersey will allocate
1,056 CAIR NOX annual allowances and 555 CAIR NOX
ozone season allowances of the State budget each year into the reserve.
New Jersey is allocating to the Incentive Reserve 634 CAIR
NOX annual allowances and 333 CAIR NOX ozone
season allowances of the State budget each year into this reserve for
vintage years 2009 through 2014. For years 2015 and thereafter, New
Jersey will allocate 528 CAIR NOX annual allowances and 277
CAIR NOX ozone season allowances of the State budget each
year into the reserve.
Several provisions of New Jersey's NOX allocation
proposal are inconsistent with the NOX allocation timing
requirements of the abbreviated SIP revision requirements and the CAIR
FIP trading programs. Full approval of New Jersey's proposed regulation
by EPA is contingent upon New Jersey modifying the proposed rule in
order to clarify that EPA's NOX allocation timing
requirements will be met under New Jersey's program as discussed in
this section. Sections 51.123(p)(1)(ii)(B) and (ee)(2)(ii)(C) of CAIR
require that the State determines and notifies the Administrator of
each existing unit's allowance allocation at least 3 years in advance
of the CAIR FIP NOX annual and ozone season programs.
Sections 51.123(p)(1)(ii)(C) and (ee)(2)(ii)(D) require that the State
determines, and notifies the Administrator of each new
[[Page 36411]]
unit's allowances by October 31 (for the CAIR NOX annual
trading program) or July 31 (for the CAIR NOX ozone season
trading program) of the year for which the allowances are being
allocated.
New Jersey's proposed regulation does not meet NOX
allocation timing requirements for existing or new units that must
surrender and transfer allowances to EPA for retirement for the year in
which the unit shuts down and any year thereafter. As currently written
in the proposed rule, the owner or operator of an existing unit that is
required to surrender allowances will no longer be able to buy or sell
allowances, or undertake other allowance market activities, that were
provided three years in advance and already recorded into their
compliance account. Additionally, the owner or operator of a new unit
could not buy or sell allowances, or undertake other allowance market
activities, in reliance on its allocations provided in advance in
October or July.
It is not clear from New Jersey's proposal what the timing would be
for surrendering the allowances, and whether the State intended for
recorded allowances to be surrendered. New Jersey should clarify the
provisions of the appropriate section regarding permanently shut down
units to be retired, section 7:27-30.3(g), by either removing this
section from the rule, or by clarifying that the State can discontinue
making future allocations to units that permanently shut down.
New Jersey's proposed regulation does not meet NOX
allocation timing requirements with regard to the provision in New
Jersey's proposed rule which provides that the Department may determine
that allocations for existing (or new) units for current or past years
had erroneously allocated too many or too few allowances based on
inaccurate data or projections. As currently written in the proposed
rule, it is unclear how long after determination and recordation of an
allocation the Department may determine that the allocation was
incorrect. The inclusion of the word ``projection'' also suggests New
Jersey will be correcting allocations that were based on projections.
New Jersey should correct this problem by either removing the
allocation correction provision, 7:27-30.3(h), from the rule, or modify
this section in order to address NOX allocation timing
requirements. If NJ chooses to retain the provision, New Jersey may
limit this provision to errors of calculation, errors in the allowable
emission rates used, and/or errors in data on actual operations and
that does not correct allocations once the allocations are recorded by
the Administrator.
New Jersey's proposed rule also provides that if the sum of new
unit allocations (determined by October 31 or July 31 of the year for
which allocations are made) and the existing unit growth allocations
(determined by the end of the year for which allocations are made)
exceeds the total amount of the New Source/Growth Reserve for the year,
all the allocations from the reserve will be reduced on a pro-rata
basis so that the total amount allocated to these new and existing
units does not exceed the reserve. New Jersey should clarify that the
allocation-proration provisions will be applied to new unit allocations
before the October 31 deadline or July 31 deadline for submission of
new unit allocations to EPA and applied to the existing unit growth
allocations before the March 1 deadline for submission of those
allocations to EPA.
E. Allocation of NOX Allowances From the Compliance
Supplement Pool
The CSP provides an incentive for early reductions in
NOX annual emissions. The CSP consists of 200,000 CAIR
NOX annual allowances of vintage 2009 for the entire CAIR
region, and a State's share of the CSP is based upon the State's share
of the projected emission reductions under CAIR. States may distribute
CSP allowances, one allowance for each ton of early reduction, to
sources that make NOX reductions during 2007 or 2008 beyond
what is required by any applicable State or Federal emission
limitation. States also may distribute CSP allowances based upon a
demonstration of need for an extension of the 2009 deadline for
implementing emission controls.
The CAIR NOX annual FIP establishes specific
methodologies for allocations of CSP allowances. States may choose an
allowed, alternative CSP allocation methodology to be used to allocate
CSP allowances to sources in those States.
EPA has allocated to New Jersey allowances equal to 660 tons of
NOX annual emissions for possible distribution.
Consistent with the flexibility given to States in the FIP, New
Jersey has chosen to modify the provisions of the CAIR NOX
annual FIP concerning the allocation of allowances from the CSP. New
Jersey has chosen to retire the CSP allowances budgeted for New Jersey
by not allocating them to CAIR units. New Jersey has maintained in
their rule that the CSP allowances, if allocated, would delay
attainment in New Jersey of the NAAQS for ozone and PM2.5.
New Jersey anticipates that New Jersey CAIR units will be able to meet
their emission limits without risk to the reliability of the energy
supply without resorting to the CSP.
F. Individual Opt-In Units
The opt-in provisions allow for certain non-EGUs (i.e., boilers,
combustion turbines, and other stationary fossil-fuel-fired devices)
that do not meet the applicability criteria for a CAIR trading program
to participate voluntarily in (i.e., opt into) the CAIR trading
program. A non-EGU may opt into one or more of the CAIR trading
programs. In order to qualify to opt into a CAIR trading program, a
unit must vent all emissions through a stack and be able to meet
monitoring, recordkeeping, and recording requirements of 40 CFR part
75. The owners and operators seeking to opt a unit into a CAIR trading
program must apply for a CAIR opt-in permit. If the unit is issued a
CAIR opt-in permit, the unit becomes a CAIR unit, is allocated
allowances, and must meet the same allowance-holding and emissions
monitoring and reporting requirements as other units subject to the
CAIR trading program. The opt-in provisions provide for two
methodologies for allocating allowances for opt-in units, one
methodology that applies to opt-in units in general and a second
methodology that allocates allowances only to opt-in units that the
owners and operators intend to repower before January 1, 2015.
States have several options concerning the opt-in provisions. The
rules for each of the CAIR FIP trading programs include opt-in
provisions that are essentially the same as those in the respective
CAIR SIP model rules, except that the CAIR FIP opt-in provisions become
effective in a State only if the State's abbreviated SIP revision
adopts the opt-in provisions. The State may adopt the opt-in provisions
entirely or may adopt them but exclude one of the allowance allocation
methodologies. The State also has the option of not adopting any opt-in
provisions in the abbreviated SIP revision and thereby providing for
the CAIR FIP trading program to be implemented in the State without the
ability for units to opt into the program.
Consistent with the flexibility given to States in the FIPs, New
Jersey has chosen not to allow non-EGUs meeting the FIP-specified
requirements to participate in the CAIR NOX annual trading
program, the CAIR NOX ozone season trading program, and the
SO2 trading program. Therefore, non-EGUs in New Jersey
cannot opt into either the CAIR trading program under EPA's
[[Page 36412]]
CAIR FIP or New Jersey's abbreviated SIP.
G. Satisfying Section 110(a)(2)(D)(i) of the Clean Air Act
Section 110(a)(2)(D)(i) of the CAA requires each State to submit a
SIP that prohibits emissions that could adversely affect another State.
The SIP must prevent sources in the State from emitting pollutants in
amounts which will: (1) Contribute significantly to downwind
nonattainment of the NAAQS, (2) interfere with maintenance of the
NAAQS, (3) interfere with provisions to prevent significant
deterioration of air quality, and (4) interfere with efforts to protect
visibility.
EPA issued guidance on August 15, 2006, relating to SIP submissions
to meet the requirements of section 110(a)(2)(D)(i). As discussed
below, New Jersey's SIP revision with respect to the statutory
requirements is consistent with the guidance.
New Jersey addresses the first two of these four elements by
complying with the requirements of CAIR. New Jersey satisfies these
requirements either by relying on the existing CAIR FIPs, or through
approval of this SIP revision.
The third element New Jersey addresses was prevention of
significant deterioration (PSD). In accordance with the guidance issued
on August 15, 2006, States may continue to rely on their existing
Nonattainment New Source Review (NNSR) and PSD permitting programs to
prevent significant deterioration of air quality within their own
boundaries and in adjacent States. For 8-hour ozone, the State has met
the obligation by confirming that the existing ozone Nonattainment New
Source Review (NNSR) permitting program remains in effect and applies
to the 8-hour ozone NAAQS standard for the State's major stationary
sources. New Jersey has noted that the State's current NNSR program
retains the lower applicability levels and higher off-set ratios
previously required under the States 1-hour ozone classification and
therefore is more stringent than required under the 8-hour ozone
classification. The State has indicated that it's on track to meet its
June 15, 2007 obligations to submit a final attainment demonstration
for the 8-hour ozone NAAQS by that date. For PM2.5, the
State has confirmed that the State's NNSR and PSD programs are being
implemented in accordance with EPA's interim guidance calling for the
use of PM10 as a surrogate for PM2.5. New Jersey commits to
revising its NNSR program and adopting a PSD program after EPA
finalizes its PM2.5 implementation rule.
It should be noted that the entire State of New Jersey is
nonattainment for 8-hour ozone necessitating only a NNSR program (not
PSD) for ozone. For PM2.5 the State has both attainment and
non-attainment areas necessitating both NNSR and PSD programs.
Consistent with EPA's August 15, 2006 guidance, at this time, it is
impossible for New Jersey to accurately determine whether there is
interference with measures in another State's SIP designed to protect
visibility, which is the fourth element that was addressed. New Jersey
has indicated that it will address the visibility protection
requirements once the regional haze SIP is completed and submitted to
EPA in December of 2007.
VI. Conclusion
New Jersey is covered by the CAIR FIPs, which require participation
in the EPA-administered CAIR FIP cap-and-trade programs for
SO2, NOX annual, and NOX ozone season
emissions. Under this abbreviated SIP revision and consistent with the
flexibility given to States in the FIPs, New Jersey has proposed to
adopt under N.J.A.C. 7:27-30, Clean Air Interstate Rule (CAIR)
NOX Trading Program, provisions for allocating allowances
under the CAIR FIP NOX annual and ozone season trading
programs. In addition, New Jersey has also proposed at N.J.A.C. 7:27-
31.23 the date when New Jersey's CAIR NOX Trading Program
will replace New Jersey's NOX Budget Trading Program
(Subchapter 31). In addition, New Jersey has proposed to adopt in the
abbreviated SIP revision provisions that retire CSP allowances.
EPA is proposing to approve New Jersey's abbreviated CAIR SIP
revision. This proposed approval is contingent upon New Jersey making
the necessary changes to New Jersey's proposed CAIR rule in order to
address EPA's concerns discussed in section V, Part D (NOX
Allowance Allocations) concerning shutdown units, correction of
allocations to new and existing units, and prorating for the New
Source/ Growth Reserve. If EPA determines New Jersey's final submission
is consistent with the necessary changes outlined in this proposed
action, EPA may proceed to publish its full approval of New Jersey's
CAIR SIP in the Federal Register, and approve its incorporation into
the SIP. To the extent EPA approves New Jersey's SIP revision, EPA
would not make any changes to the CAIR FIP, but would amend the
appropriate appendices of 40 CFR part 97 in the CAIR FIP trading rules
simply to note approval.
Although EPA expects New Jersey to make the necessary changes to
their proposed rule upon final adoption, EPA will finalize a partial
approval/ disapproval should New Jersey be unable to do so. Although
the rule does not currently meet all of the applicable requirements in
40 CFR 51.123(p) and (ee) with regard to NOX annual and
NOX ozone season emissions, EPA believes that the approvable
portions of the rule strengthen New Jersey's SIP by allowing the State
to be the implementing authority, and making allocations consistent
with New Jersey's air quality goals. Partial approval/disapproval will
result in EPA approval of New Jersey's initial NOX
allocations for existing units for the 2009-2011 control periods. EPA
would not make any changes to the CAIR FIP, but would amend the
appropriate appendices of 40 CFR part 97 in the CAIR FIP trading rules
to note partial approval. If New Jersey is unable to make the necessary
changes, EPA proposes partial approval/disapproval of New Jersey's
proposed rule as follows: Subchapter 30 approval of all sections except
``7:27-30.3 Allocation of CAIR NOX annual allowances and
CAIR NOX ozone season allowances''. EPA is approving
portions of 7:27-30.3 which address the allocation of NOX
allowances to existing units and to the incentive reserve, rounding
allowances to the nearest whole number, and consideration of other data
by the department if the data is unusable. (7:27-30.3(a), (b), (c)2,
(c)3, (c)4ii(1), (c)4ii(3), (e), and (f)). EPA is disapproving
provisions for the allocation to the new source/growth reserve, post
control period allocations, provisions that require any unit (existing
or new) that permanently shuts down to surrender and transfer
allowances to EPA for retirement, and correction of allowances
allocated erroneously or were allocated based on data or projections
that are determined to be inaccurate. (7:27-30.3(c)1, (c)4i, (c)4ii(2),
(c)4iii, (d), (g), and (h).
EPA is proposing approval of ``7:27-31.23 Replacement of the
NOX Budget Program'', and ``7:27A-3.10 Civil administrative
penalties for violation of the rules adopted pursuant to the Act''.
EPA is also proposing that this revision adequately addresses the
required elements of 110(a)(2)(D)(i) with the exception of the protect
visibility requirement. This requirement will be re-evaluated after the
regional haze SIP is completed and submitted to EPA in December 2007.
[[Page 36413]]
VII. Statutory and Executive Order Reviews
Under Executive Order 12866 (58 FR 51735, October 4, 1993), this
action is not a ``significant regulatory action'' and therefore is not
subject to review by the Office of Management and Budget. For this
reason, this action is also not subject to Executive Order 13211,
``Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use'' (66 FR 28355, May 22, 2001). This action
merely proposes to approve State law as meeting Federal requirements
and would impose no additional requirements beyond those imposed by
State law. Accordingly, the Administrator certifies that this proposed
rule would not have a significant economic impact on a substantial
number of small entities under the Regulatory Flexibility Act (5 U.S.C.
601 et seq.). Because this action proposes to approve pre-existing
requirements under State law and would not impose any additional
enforceable duty beyond that required by State law, it does not contain
any unfunded mandate or significantly or uniquely affect small
governments, as described in the Unfunded Mandates Reform Act of 1995
(Pub. L. 104 4).
This proposal also does not have tribal implications because it
would not have a substantial direct effect on one or more Indian
tribes, on the relationship between the Federal Government and Indian
tribes, or on the distribution of power and responsibilities between
the Federal Government and Indian tribes, as specified by Executive
Order 13175 (65 FR 67249, November 9, 2000). This proposed action also
does not have Federalism implications because it would not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This
action merely proposes to approve a State rule implementing a Federal
standard and to amend the appropriate appendices in the CAIR FIP
trading rules to note that approval. It does not alter the relationship
or the distribution of power and responsibilities established in the
Clean Air Act. This proposed rule also is not subject to Executive
Order 13045 ``Protection of Children from Environmental Health Risks
and Safety Risks'' (62 FR 19885, April 23, 1997), because it would
approve a State rule implementing a Federal Standard.
In reviewing SIP submissions, EPA's role is to approve State
choices, provided that they meet the criteria of the Clean Air Act. In
this context, in the absence of a prior existing requirement for the
State to use voluntary consensus standards (VCS), EPA has no authority
to disapprove a SIP submission for failure to use VCS. It would thus be
inconsistent with applicable law for EPA, when it reviews a SIP
submission; to use VCS in place of a SIP submission that otherwise
satisfies the provisions of the Clean Air Act. Thus, the requirements
of section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (15 U.S.C. 272 note) do not apply. This proposed rule would
not impose an information collection burden under the provisions of the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).
List of Subjects
40 CFR Part 52
Environmental protection, Air pollution control, Electric
utilities, Intergovernmental relations, Nitrogen oxides, Ozone,
Particulate matter, Reporting and recordkeeping requirements, Sulfur
dioxide.
40 CFR Part 97
Environmental protection, Air pollution control, Electric
utilities, Intergovernmental relations, Nitrogen oxides, Ozone,
Particulate matter, Reporting and recordkeeping requirements, Sulfur
dioxide.
Authority: 42 U.S.C. 7401 et seq.
Dated: June 25, 2007.
Alan J. Steinberg,
Regional Administrator, Region 2.
[FR Doc. E7-12874 Filed 7-2-07; 8:45 am]
BILLING CODE 6560-50-P