Approval and Promulgation of Implementation Plans; Missouri; Clean Air Interstate Rule

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Final rule.

SUMMARY:

EPA is taking final action to approve a revision to the Missouri State Implementation Plan (SIP) submitted on May 18, 2007. This revision addresses the requirements of EPA's Clean Air Interstate Rule (CAIR) promulgated on May 12, 2005, and subsequently revised on April 28, 2006, and December 13, 2006. EPA has determined that the SIP revision fully implements the CAIR requirements for Missouri. As a result of this action, EPA will also withdraw, through a separate rulemaking, the CAIR Federal Implementation Plans (FIPs) concerning SO₂, NO_X annual, and NO_X ozone season emissions for Missouri. The CAIR FIPs for all States in the CAIR region were promulgated on April 28, 2006, and subsequently revised on December 13, 2006.

CAIR requires States to reduce emissions of sulfur dioxide (SO₂) and nitrogen oxides (NO_X) that significantly contribute to, and interfere with maintenance of, the national ambient air quality standards for fine particulates and/or ozone in any downwind state. CAIR establishes State budgets for SO₂ and NO_X and requires States to submit SIP revisions that implement these budgets in States that EPA concluded did contribute to nonattainment in downwind states. States have the flexibility to choose which control measures to adopt to achieve the budgets, including participating in the EPA-administered cap-and-trade programs. In the SIP revision that EPA is approving today, Missouri has met the CAIR requirements by electing to participate in the EPA-administered cap-and-trade programs addressing SO₂, NO_X annual, and NO_X ozone season emissions.

DATES:

This rule is effective on December 14, 2007.

ADDRESSES:

EPA has established a docket for this action under Docket ID No. EPA-R07-OAR-2007-0782. All documents in the docket are listed on the http://www.regulations.gov Web site. 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 through http://www.regulations.gov or in hard copy at the Environmental Protection Agency, Air Planning and Development Branch, 901 North 5th Street, Kansas City, Kansas 66101. The Regional Office's official hours of business are Monday through Friday, 8 to 4:30 excluding Federal holidays. The interested persons wanting to examine these documents should make an appointment with the office at least 24 hours in advance.

FOR FURTHER INFORMATION CONTACT:

Michael Jay at (913) 551-7460 or by e-mail at jay.michael@epa.gov.

SUPPLEMENTARY INFORMATION:

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA.

Table of Contents

I. What Action Is EPA Taking?

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. Analysis of Missouri's CAIR SIP Submittal

A. State Budgets for Allowance Allocations

B. CAIR Cap-and-Trade Programs

C. Applicability Provisions for Non-EGU NO _X SIP Call Sources

D. NO _X Allowance Allocations

E. Allocation of NO _X Allowances From Compliance Supplement Pool

F. Individual Opt-in Units

V. Final Action

VI. When Is This Action Effective?

VII. Statutory and Executive Order Reviews

I. What Action Is EPA Taking?

EPA is taking final action to approve a revision to Missouri's SIP submitted on May 18, 2007. In its SIP revision, Missouri has met the CAIR requirements by requiring certain electric generating units (EGUs) to participate in the EPA-administered State CAIR cap-and-trade programs addressing SO2, NOX annual, and NOX ozone season emissions, as finalized in the Missouri Register on April 16, 2007, pages 646-661. Missouri's regulations adopt by reference most of the provisions of EPA's SO2, NOX annual, and NOX ozone season model trading rules, with certain changes discussed below. EPA has determined that the SIP as revised will meet the applicable requirements of CAIR. As a result of this action, the Administrator of EPA will also issue a final rule to withdraw the FIPs concerning SO2, NOX annual, and NOX ozone season emissions for Missouri. The Administrator's action will delete and reserve 40 CFR 52.1341 and 40 CFR 52.1342, relating to the CAIR FIP obligations for Missouri. The withdrawal of the CAIR FIPs for Missouri is a conforming amendment that must be made once the SIP is approved because EPA's authority to issue the FIPs was premised on a deficiency in the SIP for Missouri. Once a SIP is fully approved, EPA no longer has authority for the FIPs. Thus, EPA does not have the option of maintaining the FIPs following full SIP approval. Accordingly, EPA does not intend to offer an opportunity for a public hearing or an additional opportunity for written public comment on the withdrawal of the FIPs.

EPA proposed to approve Missouri's request to amend the SIP on September 17, 2007 (72 FR 52828). In that proposal, EPA also stated its intent to withdraw the FIP, as described above. The comment period closed on October 17, 2007. No comments were received. EPA is finalizing the approval as proposed based on the rationale stated in the proposal and in this final action.

II. What Is the Regulatory History of CAIR and the CAIR FIPs?

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 1 to September 30). Under CAIR, States may implement these reduction requirements 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 on 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.

Missouri submitted its SIP in response to EPA's section 110(a)(2)(D) finding, which EPA approved in a rule published May 8, 2007 (72 FR 25975). In that rule, EPA stated that Missouri had met its obligation with regard to interstate transport by adoption of the CAIR model rule. EPA also stated that it would review and act on Missouri's CAIR rule in a separate rulemaking. This document takes final action on Missouri's CAIR rule as explained below.

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. Analysis of Missouri's CAIR SIP Submittal

A. State Budgets for Allowance Allocations

In this action, EPA is taking final action to approve Missouri's SIP revision that adopts the budgets established for the State in CAIR, i.e., 59,871 (2009-2014) and 49,892 (2015-thereafter) tons for NOX annual emissions, 26,678 (2009-2014) and 22,231 (2015-thereafter) tons for NOX ozone season emissions, and 137,214 (2010-2014) and 96,050 (2015-thereafter) tons for SO2 emissions. Missouri's SIP revision sets these budgets as the total amounts of allowances available for allocation for each year under the EPA-administered cap-and-trade programs.

B. CAIR Cap-and-Trade Programs

The CAIR NOX annual and ozone season model trading rules 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 model rules are similar, there are some differences. For example, the NOX annual model rule (but not the NOX ozone season model rule) provides for a compliance supplement pool (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 model rule 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 model rule 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.

The provisions of the CAIR SO2 model rule are also similar to the provisions of the NOX annual and ozone season model rules. However, the SO2 model rule is coordinated with the ongoing Acid Rain SO2 cap-and-trade program under CAA title IV. The SO2 model rule 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 one 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 also 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.

In the SIP revision, Missouri has chosen to implement its CAIR budgets by requiring EGUs to participate in EPA-administered cap-and-trade programs for SO2, NOX annual, and NOX ozone season emissions. Missouri has adopted a full SIP revision that adopts, with certain allowed changes discussed below, the CAIR model cap-and-trade rules for SO2, NOX annual, and NOX ozone season emissions.

C. Applicability Provisions for Non-EGU NO _X SIP Call Sources

In general, the CAIR model trading rules 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 nameplate capacity of more than 25 megawatts electric (MWe) producing electricity for sale.

States have the option of bringing in, for the CAIR NO_X ozone season program only, those units in the State's NO_X SIP Call trading program that are not EGUs as defined under CAIR. Under this option, the CAIR NO_X 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 NO_X SIP Call trading program.

Missouri has chosen to expand the applicability provisions of the CAIR NO_X ozone season trading program to include all current and future non-EGUs in the State's NO_X SIP Call trading program. The NO_X SIP Call region of the State includes the eastern one-third of the State of Missouri (70 FR 46860).

D. NO _X Allowance Allocations

Under the NO_X allowance allocation methodology in the CAIR model trading rules and in the CAIR FIP, NO_X 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.

States may establish in their SIP submissions a different NO_X 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 NO_X 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.

Missouri has chosen to replace the provisions of the CAIR NO_X annual model trading rule concerning the allocation of NO_X annual allowances with its own methodology. Missouri has chosen to distribute NO_X annual allowances to individual facilities based upon the total of their individual unit's pro-rata share of the total heat input for all affected units in the State. The State has provided a table in rule 10 CSR 10-6.362 that provides for permanent allocations to units in Phases I and II. Additionally, the State's rule creates an energy efficiency renewable resource set-aside of 300 allowances for each year of the program. The purpose for establishing this set-aside is to serve as an incentive for saving or generating electricity through the implementation of energy efficiency and renewable generation projects. If the number of allowances awarded each year are fewer than allowances allocated to the set-aside, the State will transfer surplus allowances to the accounts of the electric utilities on a pro-rata basis in the same proportion as allocations to the units listed in the rule. Missouri's rule provides that, by May 31 of the year for which allowances are requested from the set-aside, the State will complete the process of determining what projects are eligible and how many allowances should be provided, and of awarding the allowances to the projects. EPA interprets the rule to provide that, by the May 31 deadline, the State will transfer to the appropriate allowance tracking system accounts the allocations awarded to the eligible projects, as well as the surplus allowances provided to electric utilities.

As with the annual program described above, Missouri has chosen to replace the provisions of the CAIR NO_X ozone season model trading rule concerning allowance allocations with its own methodology. Missouri has chosen to distribute NO_X ozone season allowances to individual facilities based upon the total of their individual unit's pro-rata share of the State's total heat input for all affected units in the State. The State has provided a table in rule 10 CSR 10-6.364 that provides for permanent allocations to NO_X ozone season units in Phases I and II. As mentioned above, Missouri has chosen to expand the applicability provisions of the CAIR NO_X ozone season trading program to include all current and future non-EGUs in the State's NO_X SIP Call trading program. By doing so, the three non-EGUs listed in Table II of Missouri's NO_X SIP Call rule, 10 CSR 10-6.360, are provided CAIR NO_X ozone season allowances totaling 59 allowances in Table II of 10 CSR 10-6.364 that are in addition to the State's initial allocation for both Phase I and Phase II of the CAIR NO_X ozone season trading program. The number of allowances provided to the non-EGUs in the CAIR NO_X ozone trading program are equivalent to the amount they received under Missouri's NO_X SIP Call rule.

E. Allocation of NO _X Allowances From Compliance Supplement Pool

The CAIR establishes a compliance supplement pool (CSP) to provide an incentive for early reductions in NO_X annual emissions. The CSP consists of 200,000 CAIR NO_X annual allowances of vintage 2009 for the entire CAIR region, and a State's share of the CSP is based upon the projected magnitude of the emission reductions required by CAIR in that State. States may distribute CSP allowances, one allowance for each ton of early reduction, to sources that make NO_X 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 annual NO_X model trading rule 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 the States.

Missouri has chosen to distribute CSP allowances using an allocation methodology that retains much of the CSP model rule language of 40 CFR 96.143. The State's methodology differs in two main ways. First, the State has added additional criteria for units subject to the Acid Rain Program that do not have an applicable NO_X emission limit to be able to apply for allocations from the CSP by limiting their emissions below what limit would have applied had the unit been limited by Acid Rain Program or State NO_X emission rate limits. Secondly, the State has chosen to modify the distribution methodology in the event the CSP is over-prescribed. If more requests for allocations have been made than CSP allowances exist, the State will divide the CSP into two pools. The smaller of the two pools is for units that combust tires and the larger pool is for the remaining units.

F. Individual Opt-in Units

The opt-in provisions of the CAIR SIP model trading rules allow 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. States may adopt the CAIR opt-in provisions entirely or may adopt them but exclude one of the methodologies for allocating allowances. States may also decline to adopt the opt-in provisions at all.

Missouri has chosen to allow non-EGUs meeting certain requirements to opt into the CAIR trading programs by adopting by reference the entirety of EPA's model rule provisions for opt-in units in the CAIR SO₂, CAIR NO_X annual, and CAIR NO_X ozone season trading programs.

V. Final Action

EPA is taking final action to approve Missouri's full CAIR SIP revision submitted on May 18, 2007. Under this SIP revision, Missouri is choosing to participate in the EPA-administered cap-and-trade programs for SO₂, NO_X annual, and NO_X ozone season emissions. EPA has determined that the SIP revision meets the applicable requirements in 40 CFR 51.123(o) and (aa), with regard to NO_X annual and NO_X ozone season emissions, and 40 CFR 51.124(o), with regard to SO₂ emissions. EPA has determined that the SIP as revised will meet the requirements of CAIR. The Administrator of EPA will also issue, without providing an opportunity for a public hearing or an additional opportunity for written public comment, a final rule to withdraw the CAIR FIPs concerning SO₂, NO_X annual, and NO_X ozone season emissions for Missouri. The Administrator's action will delete and reserve 40 CFR 52.1341 and 40 CFR 52.1342. EPA will take final action to withdraw the CAIR FIPs for Missouri in a separate rulemaking.

VI. When Is This Action Effective?

Under 5 U.S.C. 553(d), a rule generally cannot be effective less than 30 days prior to publication of the rule. However, a rule can be made effective less than 30 days prior to publication if the rule “grants or recognizes an exemption, or relieves a restriction” or “as otherwise provided by the agency for good cause”. EPA finds that there is good cause to make this approval effective on December 14, 2007. This CAIR SIP approval allows EPA to immediately record allowances as distributed under the approved State rule and, thus, allow sources to begin trading.

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 approves State law as meeting Federal requirements and would impose no additional requirements beyond those imposed by State law. Accordingly, the Administrator certifies that this rule will 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 approves pre-existing requirements under State law and does 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 rule also does not have tribal implications because it will 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 action also does not have Federalism implications because it does 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 approves a State rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the CAA. This 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 approves 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 CAA. 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 CAA. 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 rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq.).

The Congressional Review Act, 5 U.S.C. 801, et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 12, 2008. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

• Environmental protection
• Air pollution control
• Carbon monoxide
• Incorporation by reference
• Intergovernmental relations
• Lead
• Nitrogen dioxide
• Ozone
• Particulate matter
• Reporting and recordkeeping requirements
• Sulfur oxides
• Volatile organic compounds

Chapter I, title 40 of the Code of Federal Regulations is amended as follows:

PART 52—[AMENDED]

1. The authority citation for part 52 continues to read as follows:

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

Subpart AA—Missouri

2. In § 52.1320(c) the table is amended under Chapter 6 by adding entries in numerical order for 10-6.362, 10-6.364 and 10-6.366 to read as follows: