[Federal Register Volume 72, Number 176 (Wednesday, September 12, 2007)]
[Proposed Rules]
[Pages 52038-52044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-18026]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 52 and 97
[EPA-R05-OAR-2007-0519; FRL-8466-2]
Approval of Implementation Plans of Michigan: Clean Air
Interstate Rule
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: EPA is proposing to conditionally approve a revision to the
Michigan State Implementation Plan (SIP) submitted on July 16, 2007.
This revision incorporates provisions related to the implementation of
EPA's Clean Air Interstate Rule (CAIR), promulgated on May 12, 2005,
and subsequently revised on April 28, 2006, and December 13, 2006, and
the CAIR Federal Implementation Plan (CAIR FIP) concerning
SO2, NOX annual, and NOX ozone season
emissions for the state of Michigan, promulgated on April 28, 2006, and
subsequently revised December 13, 2006. EPA is not proposing to make
any changes to the CAIR FIP, but is proposing, to the extent EPA
approves Michigan's SIP revision, to amend the appropriate appendices
in the CAIR FIP trading rules simply to note that approval.
The SIP revision that EPA is proposing to conditionally approve is
an abbreviated SIP revision that addresses: The applicability
provisions for the NOX ozone season trading program under
the CAIR FIP and supporting definitions of terms; the methodology to be
used to allocate NOX annual and ozone season NOX
allowances under the CAIR FIP and supporting definitions of terms; and
provisions for opt-in units under the CAIR FIP. Michigan will be
submitting additional SO2 rules in the future.
DATES: Comments must be received on or before October 12, 2007.
ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R05-
OAR-2007-0519, by one of the following methods:
1. www.regulations.gov: Follow the on-line instructions for
submitting comments.
2. E-mail: [email protected].
3. Fax: (312) 886-5824.
4. Mail: John M. Mooney, Chief, Criteria Pollutant Section, Air
Programs Branch (AR-18J), U.S. Environmental Protection Agency, 77 West
Jackson Boulevard, Chicago, Illinois 60604.
5. Hand Delivery: John M. Mooney, Chief, Criteria Pollutant
Section, Air Programs Branch (AR-18J), U.S. Environmental Protection
Agency, 77 West Jackson Boulevard, Chicago, Illinois 60604. Such
deliveries are only accepted during the Regional Office normal hours of
operation, and special arrangements should be made for deliveries of
boxed information. The Regional Office official hours of business are
Monday through Friday, 8:30 a.m. to 4:30 p.m. excluding Federal
holidays.
Instructions: Direct your comments to Docket ID No. EPA-R05-OAR-
2007-0519. 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 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 Environmental Protection Agency, Region 5, Air and
Radiation Division, 77 West Jackson Boulevard, Chicago, Illinois 60604.
This Facility is open from 8:30 a.m. to 4:30 p.m., Monday through
Friday, excluding legal holidays. We recommend that you telephone
Douglas Aburano, Environmental Engineer, at (312) 353-6960, before
visiting the Region 5 office.
FOR FURTHER INFORMATION CONTACT: Douglas Aburano, Environmental
Engineer, Criteria Pollutant Section, Air Programs Branch (AR-18J),
Environmental Protection Agency, Region 5, 77 West Jackson Boulevard,
Chicago, Illinois 60604, (312) 353-6960, [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 FIP?
III. What Are the General Requirements of CAIR and the CAIR FIP?
IV. What Are the Types of CAIR SIP Submittals?
V. Analysis of Michigan's CAIR SIP Submittal
[[Page 52039]]
A. Nature of Michigan's Submittal
B. Summary of Michigan's Rules
C. State Budgets for Allowance Allocations
D. CAIR Cap-and-Trade Programs
E. Applicability Provisions for Non-EGU NOX SIP Call
Sources
F. NOX Allowance Allocations
G. Allocation of NOX Allowances From the Compliance
Supplement Pool
H. Individual Opt-in Units
I. Conditions for Approval
VI. Proposed Action
VII. Statutory and Executive Order Reviews
I. What Action Is EPA Proposing To Take?
CAIR SIP Approval
EPA is proposing to conditionally approve a revision to Michigan's
SIP, submitted on July 16, 2007, that would modify the application of
certain provisions of the CAIR FIP concerning NOX annual and
NOX ozone season emissions. (As discussed below, this less
comprehensive CAIR SIP is termed an abbreviated SIP.) The CAIR
SO2 FIP will remain in place unaffected. Michigan is subject
to the CAIR FIP that implements 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 FIP provides that this methodology, if approved as EPA is
proposing, will be used to allocate NOX allowances to
sources in Michigan, instead of the federal allocation methodology
otherwise provided in the FIP. The SIP revision also provides a
methodology for allocating the compliance supplement pool (CSP) in the
CAIR NOX annual trading program, expands the applicability
provisions of the CAIR NOX ozone season trading program, and
allows for individual units not otherwise subject to the CAIR trading
programs to opt into such trading programs. Consistent with the
flexibility provided in the FIP, these provisions, if approved, will
also be used to replace or supplement, as appropriate, the
corresponding provisions in the CAIR FIP for Michigan. EPA is not
proposing to make any changes to the CAIR FIP, but is proposing, to the
extent EPA approves Michigan's SIP revision, to amend the appropriate
appendices in the CAIR FIP trading rules simply to note that approval.
This SIP revision is being proposed for conditional approval as
opposed to a full or complete approval because of several minor
deficiencies that must be addressed. If the conditions for full
approval are not met within one year of the effective date of EPA
approval, this conditional approval will revert to a disapproval, as of
the deadline for meeting the conditions, without further action
required by EPA. In the event the conditional approval reverts to a
disapproval, EPA will publish a notice in the Federal Register to
inform the public. If Michigan does meet the conditions necessary for a
full approval, EPA will publish a Federal Register notice finalizing
the full approval.
II. What Is the Regulatory History of the CAIR and the CAIR FIP?
The 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 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 April 28, 2006, EPA promulgated a FIP 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 FIP until the
state fully adopts, and EPA approves, a SIP revision meeting the
requirements of CAIR. The CAIR FIP requires 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 CAIR FIP or SIP trading programs for that pollutant. The
CAIR FIP also allows 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 states 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.
III. What Are the General Requirements of CAIR and the CAIR FIP?
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.
[[Page 52040]]
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 FIP. Alternatively, states may submit abbreviated SIP
revisions. These SIP revisions will not replace the CAIR FIP; however,
the CAIR FIP provides that, when approved, the provisions in these
abbreviated SIP revisions will be used instead of or in conjunction
with, as appropriate, the corresponding provisions of the CAIR FIP
(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 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 using a
methodology chosen by the state;
3. Provide for allocation of NOX annual allowances from
the compliance supplement pool (CSP) by the state, rather than by the
Administrator, and using 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 July 16, 2007, submittal from Michigan has been submitted as an
abbreviated SIP revision.
V. Analysis of Michigan's CAIR SIP Submittal
A. Nature of Michigan's Submittal
On July 16, 2007, Michigan submitted draft rules and supporting
material for addressing CAIR requirements. The Michigan Department of
Environmental Quality (MDEQ) held a public hearing on these proposed
rules on April 2, 2007. MDEQ also provided a 30-day comment period that
ended on April 2, 2007.
B. Summary of Michigan's Rules
Part 8 of Michigan Air Pollution Control Rules, entitled,
``Emission Limitations and Prohibitions--Oxides of Nitrogen,'' includes
provisions limiting the emissions of NOX from stationary
sources in Michigan. While Part 8 contains many sections, Michigan
submitted only a portion of them to address the CAIR requirements.
Specifically, Michigan submitted rules 802a, 803, 821 through 826, and
830 through 834 for federal approval.
Rule 802a, entitled ``Adoption by reference,'' contains
adoption by reference language. Michigan has adopted necessary portions
of federal regulations including parts of: EPA's Acid Rain Program
(specifically 40 CFR 72.2 and 72.8), Continuous Emission Monitoring
Program (the entire 40 CFR part 75), NOX Model Rule
Compliance 40 CFR 96.54, and the CAIR SO2 and NOX
FIP rules (specifically 40 CFR 97.2, 97.102, 97.103, 97.104, 97.302,
97.303, 97.304, 97.180 to 97.188, 97.380 to 97.388).
Rule 803, entitled ``Definitions,'' modifies the existing
Michigan definitions section to address the CAIR requirements. In order
to incorporate sources affected by the NOX SIP Call into the
CAIR NOX trading program, and also to accommodate Michigan's
NOX allocation methodology, the state has adopted
definitions that did not already exist in the CAIR FIP.
Rule 821, entitled ``CAIR NOX ozone season and
annual trading programs; applicability determinations,'' contains
applicability criteria. Michigan has incorporated the CAIR
applicability from the CAIR FIP, has included the non-EGU sources from
the NOX SIP Call, and also allows sources of renewable
energy and renewable energy projects to receive NOX
allowances under the state's allocation methodology. Michigan has also
included in this section allocation adjustments based on EGU fuel type.
Rule 822, entitled ``CAIR NOX ozone season
trading program; allowance allocation,'' establishes the NOX
budgets for the ozone season control period and establishes the
allocation methodology procedures for the ozone season. These
provisions describe how Michigan sources under the CAIR FIP, non-EGUs
formerly affected by the NOX SIP Call, and renewable energy
sources will be allocated NOX ozone season allowances.
Rule 823, entitled ``New EGUs, new non-EGUs, and newly
affected EGUs under CAIR NOX ozone season trading program;
allowance allocations,'' establishes the provisions for a set-aside
ozone season control period allocation pool for new EGUs, new non-EGUS,
and newly affected EGUS (which were not included in the original
NOX SIP Call program due to geographic location).
Rule 824, entitled ``CAIR NOX ozone season
trading program; hardship set-aside,'' establishes the provisions for a
hardship set-aside ozone season control period allocation pool to
address issues for small (i.e., employing fewer than 250 people)
businesses that can demonstrate that the controls required for this
source result in excessive or prohibitive costs for compliance.
Rule 825, entitled ``CAIR NOX ozone season
trading program; renewable set-aside,'' establishes the provisions for
an ozone season control
[[Page 52041]]
period allocation pool to be allocated to renewable energy sources or
renewable energy projects.
Rule 826, entitled ``CAIR NOX ozone season
trading program; opt-in provisions,'' adopts by reference the ozone
season control period opt-in provisions under the federal CAIR FIP
rules, specifically 40 CFR 97.380 to 97.388.
Rule 830, entitled ``CAIR NOX annual trading
program; allowance allocations,'' establishes the NOX
budgets for the annual control period, and establishes the allocation
methodology procedures for the annual control period.
Rule 831, entitled ``New EGUs under CAIR NOX
annual trading program; allowance allocations,'' establishes the
provisions for a set-aside annual control period allocation pool for
new EGUs and the pool allocation methodology.
Rule 832, entitled ``CAIR NOX annual trading
program; hardship set-aside,'' establishes the provisions for a set-
aside annual control period allocation pool to address issues for small
(i.e., employing fewer than 250 people) businesses that can demonstrate
that the required controls will result in excessive or prohibitive
compliance costs.
Rule 833, entitled ``CAIR NOX annual trading
program; compliance supplement pool,'' establishes the provisions for
an annual control period compliance supplement pool that provides for
allocation for early reduction credit generation for existing sources,
and for the newly affected EGUs that were not in the original
NOX Budget Program that can demonstrate that compliance
during the 2009 control period would create an undue risk to the
reliability of the electrical supply.
Rule 834, entitled ``Opt-in provisions under the CAIR
NOX annual trading program,'' adopts by reference the opt-in
provisions for the annual control period under the federal CAIR rules.
While Michigan has developed an abbreviated SIP, it differs from most
other states because of artifacts from the NOX SIP Call.
While many states are affected by the NOX SIP Call, Michigan
is one of only a few states that is not entirely covered under the
NOX SIP Call, due to a modeling boundary that EPA used in
atmospheric modeling of pollution sources and downwind effects. Only
those Michigan counties that fall, in their entirety, south of 44
[ordm] latitude are affected by the NOX SIP Call. This is
the result of a decision in Michigan v. EPA, 213 F.3d 663 (DC Cir.
March 3, 2000) that established 44 [ordm] (a modeling boundary) as the
appropriate northern boundary for the NOX SIP Call. EPA
describes both the court decision and how it applies to Michigan in a
Federal Register notice dated April 21, 2004 (69 FR 21604, 21622-
21627). Although only a portion of Michigan is affected by the
NOX SIP Call, the entire state is affected by CAIR. In order
to transition from the NOX SIP Call trading program to the
CAIR ozone season trading program, the Michigan rules include
additional definitions and provisions to account for this geographic
discrepancy.
An additional complication that Michigan has addressed in its rules
is that the CAIR requirements for sources of NOX begin in
2009. Under the NOX SIP Call, Michigan has already issued
NOX allowances through 2009. Because the 2009 NOX
SIP Call allowances have already been allocated to the Michigan
sources, Michigan included provisions acknowledging the 2009
NOX SIP Call allowances and provided that they will be
treated as CAIR NOX ozone season allowances issued for that
year. 2010 will be the first year in which Michigan sources (other than
CAIR opt-in units) will be allocated CAIR NOX ozone season
allowances that were not previously issued as NOX SIP Call
allowances.
C. 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 FIP established the NOX budgets for Michigan as
65,304 tons for NOX annual emissions for 2009-2014; 54,420
tons for NOX annual emissions for 2015 and thereafter;
28,971 tons for NOX ozone season emissions for 2009-2014;
and 24,142 tons for NOX ozone season emissions for 2015 and
thereafter. Michigan's SIP revision, proposed for conditional approval
in today's action, does not affect these budgets, which are total
amounts of allowances available for allocation for each year under the
EPA-administered cap-and-trade programs under the CAIR FIP. In short,
the abbreviated SIP revision only affects allocations of allowances
under the established budgets.
D. CAIR Cap-and-Trade Programs
The CAIR NOX annual and ozone-season FIP largely mirrors
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 FIP 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 after the 2008 ozone season and is coordinated
with the NOX SIP Call program. 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.
In addition, states have the option of continuing to meet their
NOX SIP Call requirement by participating in the CAIR
NOX ozone season trading program and including all their
NOX SIP Call trading sources in that program.
EPA used the CAIR model trading rules as the basis for the trading
programs in the CAIR FIP. 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.
Michigan is subject to the CAIR FIP for ozone and PM2.5,
and the CAIR FIP trading programs for SO2, NOX
annual, and NOX ozone season apply to sources in Michigan.
Consistent with the flexibility it gives to states, the CAIR FIP
provides that states may submit abbreviated SIP revisions that will
replace or supplement, as appropriate, certain provisions of the CAIR
FIP trading programs. Michigan's July 16, 2007, submission is an
abbreviated SIP revision.
E. 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-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
[[Page 52042]]
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,
Michigan has 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.
F. 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 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,
Michigan has chosen to replace the provisions of the CAIR
NOX annual FIP concerning the allocation of NOX
annual allowances with its own methodology. Michigan has chosen to
distribute NOX annual allowances based upon a heat input
based methodology for existing units, with set-asides for new sources
and for existing sources that submit acceptable demonstrations of
hardship to MDEQ.
Michigan's Rule 830 allocates three years of NOX annual
allowances at a time to existing sources on a heat input basis. This
begins in 2007 for the annual control periods of 2009, 2010 and 2011.
By October 31, 2008, Michigan will submit to EPA allocations for the
annual control periods of 2012, 2013 and 2014. By October 31, 2011,
and, thereafter, each October 31 of every third year Michigan will
submit to EPA allocation for the subsequent three year period.
Under Michigan Rule 831, the new source set-aside for new EGUs is
1,000 tons per year for years 2009-2011, and 1,400 tons per year for
years 2012 and thereafter. Allowances for the first annual control
period under the new source set-aside are allocated based on 70 percent
of a unit's projected emissions. After the first annual control period,
new EGUs can request allowances equal to (the number of megawatt hours
operated during the previous control period divided by 2,000 lb/ton),
multiplied by (1.0 lb NOX/megawatt hours). Once a unit has
five years of operating data, it is no longer considered a ``new'' unit
and will be allocated allowances as an existing source under Rule 830.
Michigan Rule 832 establishes a hardship set-aside of 1,200
allowances per year for existing sources. Existing sources with fewer
than 250 employees that are able to submit a demonstration to Michigan
that the control level required by CAIR will result in excessive or
prohibitive compliance costs can request allowances from this set-aside
pool.
Michigan Rule 833 establishes a compliance supplement pool of 6,491
allowances for existing EGUs and a pool for newly-affected EGUs of
1,856 allowances. For existing EGUs, allowances can be requested if
units have made early reductions during calendar year 2007 and 2008. A
newly affected EGU can request hardship allowances if it can
demonstrate that compliance with CAIR will result in hardship.
Consistent with the flexibility given to states in the CAIR FIP,
Michigan has chosen to replace the provisions of the CAIR
NOX ozone season FIP concerning allowance allocations with
its own methodology. Michigan has chosen to distribute NOX
ozone season allowances using a heat input-based methodology for
existing units, with set-asides for new sources, renewable energy
sources, and existing sources that submit acceptable demonstrations of
hardship to MDEQ.
Michigan's Rule 822 establishes trading budgets for existing EGUs,
new EGUs, newly affected EGUs, existing non-EGUs, renewable sources and
hardship set-asides. Rule 822 also provides for allocation of three
years of NOX ozone season control period allowances at a
time to existing EGUs and existing non-EGUs on a heat input basis. This
begins in 2007 for the ozone season control periods of 2010 and 2011.
By October 31, 2008, Michigan will submit to EPA allocations for the
ozone control periods of 2012, 2013 and 2014. By October 31, 2011, and
thereafter by each October 31 of the year that is three years after the
last year of allocation submittal, Michigan will submit the next three
years of ozone control period allocations to EPA. Allowances for the
2009 ozone control period are the same as were allocated under the
NOX SIP Call Budget Trading Program.
Rule 823 establishes a set-aside pool for new EGUs, new non-EGUs
and newly affected EGUs. Rule 823 also includes the directions for how
sources can apply for the allowances in this set-aside. Most EGUs were
allocated NOX allowances for the 2009 ozone control period
under the NOX SIP Call. These allowances are now being
designated as CAIR NOX ozone season allowances issued for
the 2009 ozone control period. Newly affected EGUs that were not
subject to the NOX SIP Call never were allocated 2009 ozone
control period allowances under the NOX SIP Call, but will
need allowances to comply with CAIR in 2009. Therefore, they are being
allowed to request allowances from this set-aside. Newly affected
sources can request allowances based on their historic heat input. For
the first ozone season control period of operation, new EGUs and new
non-EGUs can request allowances from this set-aside based on predicted
hours of operation. For the four ozone control periods after the first
ozone control period of operation, new EGUs may request allowances
based on the actual number of megawatt hours of electricity
[[Page 52043]]
generated during the ozone control period immediately preceding the
request. After a new EGU has five ozone control periods of operating
data, it is no longer considered a ``new'' EGU and is allocated ozone
control period allowances per the requirements found in Rule 822.
Rule 824 creates an annual hardship set-aside pool of 650
allowances beginning in 2010. Both existing EGUs and non-EGUs can
request allowances from this pool if the company making the request
employs fewer than 250 people and can make a demonstration of financial
hardship. The number of allowances a source can request will be based
on historical heat input.
Rule 825 establishes a set-aside of 200 allowances per year for
renewable units. Initially, renewable units can request allowances from
this set-aside based on the nameplate capacity of the unit and the
predicted hours of operation during the ozone control period. After a
renewable unit has been in operation for one ozone control period, the
unit can request allowances based on the previous ozone season control
period's actual megawatt hours. Renewable units may only request
allowances for three consecutive ozone seasons.
G. 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.
Consistent with the flexibility given to states in the FIP,
Michigan has chosen to modify the provisions of the CAIR NOX
annual FIP concerning the allocation of allowances from the CSP.
Michigan Rule 833 establishes an annual compliance supplement pool of
6,491 allowances for existing EGUs and an annual pool for newly-
affected EGUs of 1,856 allowances. Existing EGUs can request allowances
if the units have made early reductions during calendar years 2007 and
2008. Newly affected EGUs can request hardship allowances if a
demonstration of hardship can be made.
H. 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 FIP,
Michigan has chosen to allow non-EGUs meeting certain requirements to
participate in the CAIR NOX annual trading program. Michigan
has adopted by reference the FIP language regarding opt-ins. Rule 802a
incorporates 40 CFR 97.180 to 97.188 by reference, and Rule 834 makes
them applicable to units in the State.
Consistent with the flexibility given to states in the FIP,
Michigan has chosen to permit non-EGUs meeting certain requirements to
participate in the CAIR NOX ozone season trading program.
Michigan has adopted by reference the FIP language regarding opt-ins.
Rule 802a incorporates 40 CFR 97.380 to 97.388 by reference, and Rule
826 makes them applicable to units in the State.
I. Conditions for Approval
EPA notes that it has identified several minor deficiencies that
are necessary to correct in Michigan's rules. These minor deficiencies
are as follows:
1. In rule 803(3), Michigan needs to add a definition for
``commence operation.'' This definition, and the revised definition of
``commence commercial operation,'' are necessary to take account of
NOX SIP Call units brought into the CAIR NOX
ozone season trading program that do not generate electricity for sale
and to ensure that they have appropriate deadlines for certification of
monitoring systems under 40 CFR Part 97.
2. In rule 803(3)(c), Michigan needs to revise the definition for
``commence commercial operation,'' as described in Condition 1, above.
3. In rule 803(3)(d)(ii), Michigan needs to revise the definition
of ``electric generating unit'' or ``EGU.'' EPA interprets Michigan's
current rule 803 as properly including in the CAIR NOX ozone
season trading program all EGUs in Michigan that were subject to the
NOX SIP Call trading program. Michigan must revise the rule
to clarify that all EGUs in Michigan that were subject to the
NOX SIP Call trading program are included in the CAIR
NOX ozone season trading program.
4. In rule 823(5)(c), Michigan needs to reference ``subrule (1)(a),
(b), (c), and (d)'' of the rule. While EPA interprets Michigan's
current rule as limiting the new unit set-aside allocations to the
amount of allowances in the set-aside, Michigan must revise this
provision to clarify the mechanism for implementing this limitation on
such allocations.
These minor deficiencies are described in detail in a technical
support document in the docket for this rulemaking. By a letter dated
August 15, 2007, Michigan committed to making final and effective
revisions to its rules by correcting these deficiencies as discussed
above by July 20, 2008.
Under section 110(k)(4) of the CAA, EPA may conditionally approve a
SIP revision based on a commitment from the State to adopt specific
enforceable
[[Page 52044]]
measures by a date certain that is no more than one year from the date
of conditional approval. In this action, we are proposing to approve
the SIP revision that Michigan has submitted on the condition that the
minor deficiencies in the SIP revision are corrected as discussed above
by the date referenced in Michigan's letter, i.e., by July 20, 2008. If
this condition is not met within one year of the effective date of
final rulemaking, the conditional approval will automatically revert to
a disapproval--as of the deadline for meeting the conditions--without
further action from the EPA. A notice will be published in the Federal
Register informing the public of a disapproval. In the event the
conditional approval automatically reverts to a disapproval, the
validity of allocations made under the SIP revision (including the
treatment, of previously allocated 2009 NOX SIP Call
allowances as 2009 CAIR ozone season allowances) before the date of
such reversion to disapproval will not be affected. If Michigan submits
final and effective rule revisions correcting the deficiencies as
discussed above within one year from this conditional approval being
final and effective, EPA will publish in the Federal Register a notice
to acknowledge this and to convert the conditional approval to a full
approval.
VI. Proposed Action
EPA is proposing to conditionally approve Michigan's abbreviated
CAIR SIP revision submitted on July 16, 2007. Michigan is covered by
the CAIR FIP, which requires 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
FIP, Michigan adopts provisions for allocating allowances under the
CAIR FIP NOX annual and ozone season trading programs. In
addition, Michigan adopts in the abbreviated SIP revision provisions
that establish a methodology for allocating allowances in the CSP,
expand the applicability provisions for the CAIR FIP NOX
ozone season trading program, and allow for individual non-EGUs to opt
into the CAIR FIP NOX annual and NOX ozone season
cap-and-trade programs. As provided for in the CAIR FIP, these
provisions in the abbreviated SIP revision will replace or supplement
the corresponding provisions of the CAIR FIP in Michigan. The
abbreviated SIP revision meets the applicable requirements in 40 CFR
51.123(p) and (ee), with regard to NOX annual and
NOX ozone season emissions. EPA is not proposing to make any
changes to the CAIR FIP, but is proposing, to the extent EPA approves
Michigan's SIP revision, to amend the appropriate appendices in the
CAIR FIP trading rules simply to note that approval.
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 dioxide, Ozone,
Particulate matter, Reporting and recordkeeping requirements, Sulfur
oxides.
40 CFR Part 97
Environmental protection, Air pollution control, Electric
utilities, Intergovernmental relations, Nitrogen oxides, Ozone,
Particulate matter, Reporting and recordkeeping requirements, Sulfur
dioxide.
Dated: September 4, 2007.
Bharat Mathur,
Acting Regional Administrator, Region 5.
[FR Doc. E7-18026 Filed 9-11-07; 8:45 am]
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