Air quality implementation plans; approval and promulgation; various States: New York,

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Federal Register: October 14, 1999 (Volume 64, Number 198)Proposed RulesPage 55667-55671From the Federal Register Online via GPO Access [wais.access.gpo.gov]

DOCID:fr14oc99-17

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

Region II Docket No. NY33-1-197, FRL-6457-3Approval and Promulgation of Implementation Plans; New York; Nitrogen Oxides Budget and Allowance Trading Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

SUMMARY: The Environmental Protection Agency proposes approval of New York's State Implementation Plan (SIP) revision for ozone. This SIP revision relates to New York's portion of the Ozone Transport Commission's September 27, 1994 Memorandum of Understanding, which includes a regional nitrogen oxides budget and allowance (NO<INF>X</INF> Budget) trading program that will significantly reduce NO<INF>X</INF> emissions generated within the Ozone Transport Region. Today's action proposes approval of New York's regulations which implement Phase II of the NO<INF>X</INF> Budget Trading Program to reduce NO<INF>X</INF>, and intends to help meet the national ambient air quality standard for ozone.

DATES: EPA must receive written comments on or before November 15, 1999.

ADDRESSES: Address all comments to: Raymond Werner, Acting Chief, Air Programs Branch, Environmental Protection Agency, Region II Office, 290 Broadway, 25th Floor, New York, New York 10007-1866.

Copies of the state submittal and supporting documents are available for inspection during normal business hours, at the following addresses:

Environmental Protection Agency, Region II Office, Air Programs Branch, 290 Broadway, 25th Floor, New York, New York 10007-1866. New York State Department of Environmental Conservation, Division of Air Resources, 50 Wolf Road, Albany, New York 12233.

FOR FURTHER INFORMATION CONTACT: Richard Ruvo, Air Programs Branch, Environmental Protection Agency Region II, 290 Broadway, 25th Floor, New York, New York 10007-1866, (212) 637-4014.

SUPPLEMENTARY INFORMATION:

Overview

The Environmental Protection Agency (EPA) proposes approval of the New York State Department of Environmental Conservation's (New York's) Nitrogen Oxides Budget and Allowance (NO<INF>X</INF> Budget) Trading Program.

The following table of contents describes the format for this SUPPLEMENTARY INFORMATION section: EPA's Action

What Action Is EPA Proposing Today?

Why is EPA Proposing this Action?

What is a Budget and Allowance Trading Program?

What Guidance did EPA Use to Evaluate New York's Program?

What is EPA's Evaluation of New York's Program? New York's NO<INF>X</INF> Budget Trading Program

What is the Ozone Transport Commission's Memorandum of Understanding (OTC MOU)?

Which States Signed the OTC MOU?

What Does the OTC MOU Require?

How Did States Meet the OTC MOU?

How Did New York Meet the OTC MOU?

How Does New York's Program Protect the Environment?

How Will New York and EPA Enforce the Program?

When Did New York Propose and Adopt the Program?

When Did New York Submit the Program to EPA and What Did it Include?

What Other Significant Items Relate to New York's Program? Conclusion Administrative Requirements

EPA's Action

What Action Is EPA Proposing Today?

EPA proposes approval of a revision to New York's ozone State Implementation Plan (SIP) which New York submitted on April 29, 1999. This SIP revision relates to New York's new Subpart 227-3, ``Pre-2003 Nitrogen Oxides Emissions Budget and Allowance Program'' regulation for New York's NO<INF>X</INF> Budget Trading Program.

Why Is EPA Proposing This Action?

EPA is proposing this action to:

<bullet> Give you the opportunity to submit written comments on EPA's proposed action, as discussed in the DATES and ADDRESSES sections

<bullet> Fulfill New York's and EPA's requirements under the Clean Air Act (the Act)

<bullet> Make New York's NO<INF>X</INF> Budget Trading Program federally-enforceable and available for credit toward the attainment SIP.

What Is a Budget and Allowance Trading Program?

Air emissions trading uses market forces to reduce the overall cost of compliance for sources, such as a power plant, while maintaining emission reductions and environmental benefits. One type of market- based program is an

[Page 55668]emissions budget and allowance trading program, also commonly referred to as a cap and trade program.

In a budget and allowance trading program, the state or EPA set a regulatory limit, or budget, on mass emissions from a specific group of sources. The state or EPA assigns or allocates allowances to the sources, authorizing emissions up to the level of the budget. Sources may sell or trade allowances with other sources, cost-effectively complying with the budget. The budget limits the total number of allocated allowances. The total effect is to reduce emissions. An example of a budget and allowance trading program is EPA's Acid Rain Program for reducing sulfur dioxide emissions.

What Guidance Did EPA Use To Evaluate New York's Program?

In 1994, EPA issued Economic Incentive Program (EIP) rules and guidance (40 CFR part 51, subpart U), that outlines requirements for establishing EIPs in cases where the Act requires States adopt EIPs to meet the ozone and carbon monoxide standards in designated nonattainment areas. There is no requirement for New York to submit an EIP. However, since subpart U also contains guidance on the development of voluntary EIPs, New York followed the EIP guidance in the development and submittal of its NO<INF>X</INF> Budget Trading Program.

EPA evaluated New York's NO<INF>X</INF> Budget Trading Program to determine whether the Program meets the SIP requirements described in section 110 of the Act. EPA also evaluated the Program using the EIP of 1994 as guidance for voluntary EIPs, in coordination with other guidance documents.

What Is EPA's Evaluation of New York's Program?

EPA determined New York's new Subpart 227-3 regulation for New York's NO<INF>X</INF> Budget Trading Program is consistent with EPA's guidance. Specifically, New York's NO<INF>X</INF> Budget Trading Program is consistent with EPA's EIP guidance of 1994.

New York's Subpart 227-3 contains provisions for definitions, program applicability, opt-ins, annual allowance allocation, permitting, allowance transfer, allowance banking, early reduction credits, the NO<INF>X</INF> Allowance Tracking System, monitoring, recordkeeping, reporting, end-of-season reconciliation, compliance certification, excess emissions deduction, the program audit, and penalties.

Given the documentation in the SIP submittal and the provisions of New York's NO<INF>X</INF> Budget Trading Program, and New York's commitment for a periodic program audit, EPA determined New York will continue to meet the reasonable further progress and SIP attainment requirements.

Also, EPA has determined that the amendments and administrative changes made to Part 200, Subpart 227-1, and Subpart 227-2 are consistent with Subpart 227-3, and EPA's guidance.

A Technical Support Document (TSD), prepared in support of this proposed action, contains the full description of New York's submittal and EPA's evaluation. A copy of the TSD is available upon request from the EPA Regional Office listed in the ADDRESSES section.

New York's NO<INF>X</INF> Budget Trading Program

What Is the Ozone Transport Commission's Memorandum of Understanding?

The Ozone Transport Commission (OTC) adopted a Memorandum of Understanding (MOU) on September 27, 1994, which committed the signatory states to the development and proposal of a region-wide reduction in NO<INF>X</INF> emissions, with one phase of reductions by 1999 and another phase of reductions by 2003. Since the Act required reasonably available control technology (RACT) to reduce NO<INF>X</INF> emissions by May of 1995, the OTC MOU refers to the reduction in NO<INF>X</INF> emissions by 1999 as Phase II and the reduction in NO<INF>X</INF> emissions by 2003 as Phase III.

Which States Signed the OTC MOU?

The OTC states include Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island, New York, New Jersey, Pennsylvania, Maryland, Delaware, the northern counties of Virginia and the District of Columbia. All of the OTC jurisdictions, with the exception of the Commonwealth of Virginia, signed the September 27, 1994 MOU.

What Does the OTC MOU Require?

The OTC MOU requires a reduction in ozone season (May 1 to September 30) NO<INF>X</INF> emissions from utility and large industrial combustion facilities within the Ozone Transport Region. This reduction furthers the effort to achieve the health-based national ambient air quality standard for ozone. In the MOU, the OTC states agreed to propose regulations for the control of NO<INF>X</INF> emissions according to the following guidelines:

<bullet> The level of required NO<INF>X</INF> reductions is from a 1990 baseline emissions level

<bullet> The reduction would vary by location, or zone, and use a two-phase region-wide trading program

<bullet> The reduction required by May 1, 1999 is the less stringent of the following:

a. The affected facilities in the inner zone will reduce their NO<INF>X</INF> emission rate by 65% from the 1990 baseline, or emit NO<INF>X</INF> at a rate no greater than 0.20 pounds per million Btu

b. The affected facilities in the outer zone will reduce their NO<INF>X</INF> emission rate by 55% from the 1990 baseline, or emit NO<INF>X</INF> at a rate no greater than 0.20 pounds per million Btu

<bullet> The reduction required by May 1, 2003 is the less stringent of the following:

c. The affected facilities in the inner and outer zones will reduce their NO<INF>X</INF> emission rate by 75% from the 1990 baseline, or emit NO<INF>X</INF> at a rate no greater than 0.15 pounds per million Btu

d. The affected facilities in the northern zone will reduce their NO<INF>X</INF> emission rate by 55% from the 1990 baseline, or emit NO<INF>X</INF> at a rate no greater than 0.20 pounds per million Btu.

The inner zone consists of all contiguous moderate and above nonattainment areas in the OTC, except those located in Maine. The outer zone consists of the remainder of the OTC, except the northern zone. The northern zone consists of Maine, Vermont and New Hampshire (except for its moderate and above nonattainment areas) and the northeastern attainment portion of New York.

New York must meet the requirements for the inner, outer and northern zones.

How Did States Meet the OTC MOU?

First, after consideration of the reductions required in the OTC MOU, the OTC States developed a 1990 baseline emission level and the emission budgets for 1999 and 2003. The NO<INF>X</INF> Budget Trading Program caps NO<INF>X</INF> emissions in the Ozone Transport Region at 219,000 tons in 1999 and 143,000 tons in 2003, less than half of the 1990 baseline emission level of 490,000 tons.

Then, the OTC charged a Task Force of representatives from the OTC States, organized through the Northeast States for Coordinated Air Use Management (NESCAUM) and the Mid-Atlantic Regional Air Management Association (MARAMA), with the task of developing a model rule to implement the program defined by the OTC MOU. During 1995 and 1996, the NESCAUM/MARAMA NO<INF>X</INF> Budget Task Force worked with

[Page 55669]EPA, as well as representatives from industry, utilities, and environmental groups, and developed a model rule as a template for OTC states to adopt their own rules to implement the OTC MOU. EPA's EIP rules formed the general regulatory framework for the model rule. The OTC issued the model rule on May 1, 1996. The model rule was intended to be used by the OTC states to implement the Phase II reductions called for in the MOU. The model rule does not specifically include the implementation of Phase III.

How Did New York Meet the OTC MOU?

In accordance and consistent with the NESCAUM/MARAMA NO<INF>X</INF> Budget model rule issued in May 1996, New York developed their regulation, new Subpart 227-3 ``Pre-2003 Nitrogen Oxides Emissions Budget and Allowance Program.''

Subpart 227-3 includes reduction requirements to implement Phase II of the OTC's MOU. The regulation includes provisions for a regional NO<INF>X</INF> Budget Trading Program, and establishes NO<INF>X</INF> emission allowances for each NO<INF>X</INF> control period beginning May 1, 1999 through the NO<INF>X</INF> control period ending September 30, 2002 (Phase II). New York's SIP submittal identifies the budget sources and their initial NO<INF>X</INF> allowance allocations.

How Does New York's Program Protect the Environment?

Specific to New York, the NO<INF>X</INF> Budget Program will result in NO<INF>X</INF> emissions reductions during the ozone season of 46% between 1990 and 2002 from applicable sources. In 1990, NO<INF>X</INF> emissions from NO<INF>X</INF> Budget sources totaled more than 82,000 tons during the ozone season. In 1995, following New York's NO<INF>X</INF> RACT rules, emissions of NO<INF>X</INF> were reduced to about 52,300 tons during the ozone season. The adopted NO<INF>X</INF> Budget Program rules will further reduce NO<INF>X</INF> emissions to 46,959 tons during the ozone seasons from 1999 through 2002. The NO<INF>X</INF> Budget Program accounts for an additional 64 tons per day of NO<INF>X</INF> reductions beyond NO<INF>X</INF> RACT in 1999 and 76 tons per day in 2002.

In addition to contributing to attainment of the ozone standard, decreases of NO<INF>X</INF> emissions will also likely help improve the environment in several important ways. On a national scale, decreases in NO<INF>X</INF> emissions will also decrease acid deposition, nitrates in drinking water, excessive nitrogen loadings to aquatic and terrestrial ecosystems, and ambient concentrations of nitrogen dioxide, particulate matter and toxics. On a global scale, decreases in NO<INF>X</INF> emissions will, to some degree, reduce greenhouse gases and stratospheric ozone depletion.

How Will New York and EPA Enforce the Program?

Under New York's NO<INF>X</INF> Budget Trading Program, New York allocates allowances to budget sources. Each allowance permits a source to emit one ton of NO<INF>X</INF> during the seasonal control period. For each ton of NO<INF>X</INF> discharged in a given control period, EPA will remove one allowance from the source's allowance account. The source, or any other source will never use this allowance again for compliance. This is known as a retirement of the allowance.

Allowances may be bought, sold, or banked. Unused allowances may be banked for future use, with limitation. Each budget source must comply with the program by demonstrating at the end of each control period that actual emissions do not exceed the amount of allowances held for that period. However, regardless of the number of allowances a source holds, it cannot emit at levels that would violate other federal or state limits, for example, RACT, new source performance standards, or Title IV.

The State and EPA will determine compliance by ensuring that allowances held by a source at the end of each control period meet or exceed the emissions for that source for the given control period. Source owners will monitor emissions by certified monitoring systems and must report resulting data to EPA. Violations are also possible for not adhering to monitoring, reporting and record keeping requirements. Lastly, the federally-enforceable operating permits for budget sources contain the applicable requirements of the NO<INF>X</INF> Budget Program.

When Did New York Propose and Adopt the Program?

New York proposed their NO<INF>X</INF> Budget Trading Program on September 16, 1998 and held public hearings on November 2 and 4, 1998. New York requested public comments by November 9, 1998. New York adopted the NO<INF>X</INF> Budget Trading Program on January 12, 1999 with an effective date of March 5, 1999.

When Did New York Submit the Program to EPA and What Did It Include?

New York submitted its NO<INF>X</INF> Budget Trading Program SIP revision to EPA on April 29, 1999. EPA determined the submittal administratively and technically complete on June 18, 1999.

New York's NO<INF>X</INF> Budget Trading Program SIP revision included the following elements:

<bullet> New Subpart 227-3

<bullet> Amended Part 200, Subpart 227-1 and 227-2

<bullet> Source List and Allowance Allocation File, as supporting information

<bullet> Opt-in application and early reduction credit applications, as supporting information.

What Other Significant Items Relate to New York's Program?

<bullet> New York's NO<INF>X</INF> Budget Trading Program SIP revision also fulfills the State's commitments to adopt the NO<INF>X</INF> Budget Program with respect to the Alternative Ozone Attainment Demonstration submittals sent to EPA on September 4, 1997 and November 27, 1998.

<bullet> New York's Subpart 227-3 currently contains the NO<INF>X</INF> emissions budget and allocation only for 1999 through the ozone season of 2002, referred to as ``Phase II'' of the NO<INF>X</INF> Budget Trading Program.

However, the OTC MOU obligates New York to require its allowance program sources to make specific additional NO<INF>X</INF> reductions by May 1, 2003 and continue to make reductions thereafter, i.e., ``Phase III.'' Additionally, New York's attainment demonstrations will rely on the NO<INF>X</INF> reductions associated with the OTC program in 2003 and beyond to achieve attainment with the one hour ozone standard.

In the response to comments, January 27, 1999 adoption documents, New York said it remains committed to the OTC MOU Phase III emissions reductions beginning in 2003. New York committed to implementing Phase III in its ``April 1998 SIP submittal'' to EPA. New York commits to implementing NO<INF>X</INF> control measures at least as stringent as those called for in Phase III.

In its current form, Subpart 227-3 is approvable for 1999, 2000, 2001, and 2002. However, in order to meet the interstate MOU and for New York to meet its attainment demonstration commitments, New York will need to amend their regulations to establish the NO<INF>X</INF> caps in the State during 2003 and beyond.

In September 1998, EPA issued the final Regional Transport of Ozone Rule (``NO<INF>X</INF> SIP Call'') requiring 22 eastern States and the District of Columbia to submit SIP's to address the regional transport of ground-level ozone through reductions in NO<INF>X</INF>. New York did not submit the April 29, 1999 SIP revision for Subpart 227-3 to satisfy the requirements of the NO<INF>X</INF> SIP Call.

[Page 55670]Therefore, in order to meet EPA's NO<INF>X</INF> SIP Call, New York will need to submit an additional SIP revision that establishes the NO<INF>X</INF> caps for the State during 2003 and beyond.

Conclusion

EPA proposes approval of the New York SIP revision for Subpart 227- 3, which implements Phase II of the OTC's MOU to reduce NO<INF>X</INF>. This SIP revision implements New York's NO<INF>X</INF> Budget Trading Program.

EPA requests public comment on the issues discussed in today's action. EPA will consider all public comments before taking final action. Interested parties may participate in the Federal rulemaking procedure by submitting written comments to the EPA Regional office listed in the ADDRESSES section.

Administrative Requirements

Executive Order 12866

The Office of Management and Budget (OMB) has exempted this regulatory action from review under Executive Order (E.O.) 12866, entitled ``Regulatory Planning and Review.''

Executive Order on Federalism

Under E.O. 12875, EPA may not issue a regulation that is not required by statute and that creates a mandate upon a state, local, or tribal government, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by those governments. If the mandate is unfunded, EPA must provide to the Office of Management and Budget a description of the extent of EPA's prior consultation with representatives of affected state, local, and tribal governments, the nature of their concerns, copies of written communications from the governments, and a statement supporting the need to issue the regulation. In addition, E.O. 12875 requires EPA to develop an effective process permitting elected officials and other representatives of state, local, and tribal governments ``to provide meaningful and timely input in the development of regulatory proposals containing significant unfunded mandates.''

Today's rule does not create a mandate on state, local or tribal governments. The rule does not impose any enforceable duties on these entities. Accordingly, the requirements of section 1(a) of E.O. 12875 do not apply to this rule.

On August 4, 1999, President Clinton issued a new executive order on federalism, Executive Order 13132, [64 FR 43255 (August 10, 1999),] which will take effect on November 2, 1999. In the interim, the current Executive Order 12612, [52 FR 41685 (October 30, 1987),] on federalism still applies. This rule will not have a substantial direct effect on 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 12612. The rule affects only one State, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act.

Executive Order 13045

Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997), applies to any rule that: (1) Is determined to be ``economically significant'' as defined under E.O. 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency.

This rule is not subject to E.O. 13045 because it is not an economically significant regulatory action as defined by E.O. 12866, and it does not address environmental health or safety risk that would have a disproportionate effect on children.

Executive Order 13084

Under E.O. 13084, EPA may not issue a regulation that is not required by statute, that significantly or uniquely affects the communities of Indian tribal governments, and that imposes substantial direct compliance costs on those communities, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by the tribal governments. If the mandate is unfunded, EPA must provide to the Office of Management and Budget, in a separately identified section of the preamble to the rule, a description of the extent of EPA's prior consultation with representatives of affected tribal governments, a summary of the nature of their concerns, and a statement supporting the need to issue the regulation. In addition, E.O. 13084 requires EPA to develop an effective process permitting elected officials and other representatives of Indian tribal governments ``to provide meaningful and timely input in the development of regulatory policies on matters that significantly or uniquely affect their communities.''

Today's rule does not significantly or uniquely affect the communities of Indian tribal governments. Accordingly, the requirements of section 3(b) of E.O. 13084 do not apply to this rule.

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small not-for-profit enterprises, and small governmental jurisdictions. This proposed rule will not have a significant impact on a substantial number of small entities because SIP approvals under section 110 and subchapter I, part D of the Clean Air Act do not create any new requirements but simply approve requirements that the State is already imposing. Therefore, because the Federal SIP approval does not create any new requirements, I certify that this action will not have a significant economic impact on a substantial number of small entities. Moreover, due to the nature of the Federal-State relationship under the Clean Air Act, preparation of flexibility analysis would constitute Federal inquiry into the economic reasonableness of state action. The Clean Air Act forbids EPA to base its actions concerning SIPs on such grounds. Union Electric Co. v. U.S. EPA, 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a)(2).

Unfunded Mandates

Under section 202 of the Unfunded Mandates Reform Act of 1995 (``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule that includes a federal mandate that may result in estimated annual costs to State, local, or tribal governments in the aggregate; or to private sector, of $100 million or more. Under section 205, EPA must select the most cost-effective and least burdensome alternative that achieves the objectives of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly or uniquely impacted by the rule.

EPA has determined that the proposed approval action does not

[Page 55671]include a federal mandate that may result in estimated annual costs of $100 million or more to either State, local, or tribal governments in the aggregate, or to the private sector. This federal action approves pre-existing requirements under State or local law, and imposes no new requirements. Accordingly, no additional costs to State, local, or tribal governments, or to the private sector, result from this action.

List of Subjects in 40 CFR Part 52

Environmental protection, Air pollution control, Hydrocarbons, Intergovernmental relations, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.

Authority: 42 U.S.C. 7401 et seq.

Dated: September 30, 1999. William J. Muszynski, Acting Regional Administrator, Region 2.

FR Doc. 99-26856Filed10-13-99; 8:45 amBILLING CODE 6560-50-U

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