Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Final rule.

SUMMARY:

The Environmental Protection Agency (EPA) published the original Cross-State Air Pollution Rule (original CSAPR) on August 8, 2011, to address interstate transport of ozone pollution under the 1997 ozone National Ambient Air Quality Standards (NAAQS) and interstate transport of fine particulate matter (PM_2.5) pollution under the 1997 and 2006 PM_2.5 NAAQS. The EPA is finalizing this Cross-State Air Pollution Rule Update (CSAPR Update) to address interstate transport of ozone pollution with respect to the 2008 ozone NAAQS. This final rule will benefit human health and welfare by reducing ground-level ozone pollution. In particular, it will reduce ozone season emissions of oxides of nitrogen (NO_X) in 22 eastern states that can be transported downwind as NO_X or, after transformation in the atmosphere, as ozone, and can negatively affect air quality and public health in downwind areas.

For these 22 eastern states, the EPA is issuing Federal Implementation Plans (FIPs) that generally provide updated CSAPR NO_X ozone season emission budgets for the electric generating units (EGUs) within these states, and that implement these budgets via modifications to the CSAPR NO_X ozone season allowance trading program that was established under the original CSAPR. The EPA is finalizing these new or revised FIP requirements only for certain states that have failed to submit an approvable State Implementation Plan (SIP) addressing interstate emission transport for the 2008 ozone NAAQS. The FIPs require affected EGUs in each covered state to reduce emissions to comply with program requirements beginning with the 2017 ozone season (May 1 through September 30). This final rule partially addresses the EPA's obligation under the Clean Air Act to promulgate FIPs to address interstate emission transport for the 2008 ozone NAAQS. In conjunction with other federal and state actions to reduce ozone pollution, these requirements will assist downwind states in the eastern United States with attaining and maintaining the 2008 ozone NAAQS.

This CSAPR Update also is intended to address the July 28, 2015 remand by the United States Court of Appeals for the District of Columbia Circuit of certain states' original CSAPR phase 2 ozone season NO_X emission budgets. In addition, this rule updates the status of certain states' outstanding interstate ozone transport obligations with respect to the 1997 ozone NAAQS, for which the original CSAPR provided a partial remedy.

DATES:

This final rule is effective on December 27, 2016.

ADDRESSES:

The EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2015-0500. All documents in the docket are listed on the www.regulations.gov Web site. Although listed in the index, some information is not publicly available, e.g., 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 www.regulations.gov .

FOR FURTHER INFORMATION CONTACT:

Mr. David Risley, Clean Air Markets Division, Office of Atmospheric Programs (Mail Code 6204M), Environmental Protection Agency, 1200 Pennsylvania Avenue NW., Washington, DC 20460; telephone number: (202) 343-9177; email address: Risley.David@epa.gov.

SUPPLEMENTARY INFORMATION:

Preamble Glossary of Terms and Abbreviations

The following are abbreviations of terms used in the preamble.

CAA or Act Clean Air Act

CAIR Clean Air Interstate Rule

CAMx Comprehensive Air Quality Model With Extensions

CBI Confidential Business Information

CEMS Continuous Emission Monitoring Systems

CFR Code of Federal Regulations

CSAPR Cross-State Air Pollution Rule

EGU Electric Generating Unit

EPA U.S. Environmental Protection Agency

FIP Federal Implementation Plan

FR Federal Register

GWh Gigawatt Hours

ICR Information Collection Request

IPM Integrated Planning Model

Km Kilometer

lb/mmBtu Pounds per Million British Thermal Unit

LNB Low-NO_X Burners

mmBtu Million British Thermal Unit

MOVES Motor Vehicle Emission Simulator

NAAQS National Ambient Air Quality Standard

NBP NO_X Budget Trading Program

NEI National Emission Inventory

NO_X Nitrogen Oxides

NODA Notice of Data Availability

NSPS New Source Performance Standard

OFA Overfire Air

PM_2.5 Fine Particulate Matter

PPB Parts Per Billion

RIA Regulatory Impact Analysis

SC-CO₂ Social Cost of Carbon

SCR Selective Catalytic Reduction

SIP State Implementation Plan

SMOKE Sparse Matrix Operator Kernel Emissions

SNCR Selective Non-Catalytic Reduction

SO₂ Sulfur Dioxide

TSD Technical Support Document

Table of Contents

I. Executive Summary

A. Purpose of Regulatory Action

B. Major Provisions

C. Benefits and Costs

II. General Information

A. To whom does this final action apply?

III. Legal Authority

A. The EPA's Statutory Authority for the Final Rule

B. FIP Authority for Each State Covered by the Final Rule

IV. Air Quality Issues Addressed and Overall Approach for the Final Rule

A. The Interstate Transport Challenge Under the 2008 Ozone Standard

1. Background on the Nature of the Interstate Ozone Transport Problem

2. Events Affecting Application of the Good Neighbor Provision for the 2008 Ozone NAAQS

B. Approach To Address Ozone Transport Under the 2008 Ozone NAAQS via FIPS

1. Requiring Emission Reductions From Upwind States

2. Focusing on 2017 for Analysis and Implementation

3. The CSAPR Framework

4. Partial Versus Full Resolution of Transport Obligation

5. Why Focus on Eastern States

6. Short-Term NO_X Emissions

C. Responding to the Remand of CSAPR NO_X Ozone Season Emission Budgets

D. Addressing Outstanding Transport Obligations for the 1997 Ozone NAAQS

V. Analyzing Downwind Air Quality and Upwind State Contributions

A. Overview of Air Quality Modeling Platform

B. Emission Inventories

1. Foundation Emission Inventory Data Sets

2. Development of Emission Inventories for EGUs

3. Development of Emission Inventories for Non-EGU Point Sources

4. Development of Emission Inventories for Onroad Mobile Sources

5. Development of Emission Inventories for Commercial Marine Category 3 (Vessel)

6. Development of Emission Inventories for Other Nonroad Mobile Sources

7. Development of Emission Inventories for Nonpoint Sources

C. Definition of Nonattainment and Maintenance Receptors

D. Air Quality Modeling To Identify Nonattainment and Maintenance Receptors

E. Pollutant Transport From Upwind States

1. Air Quality Modeling To Quantify Upwind State Contributions

2. Application of Screening Threshold

3. Update to EGU Modeling for Quantifying Emission Budgets

VI. Quantifying Upwind State EGU NO_X Emission Budgets To Reduce Interstate Ozone Transport for the 2008 NAAQS

A. Introduction

B. Levels of Uniform Control Stringency

1. EGU NO_X Mitigation Strategies

2. Non-EGU NO_X Mitigation Strategies and Feasibility for the 2017 Ozone Season

3. Summary of EGU Uniform Control Stringency Represented by Marginal Cost of Reduction (Dollar per Ton)

C. EGU NO_X Reductions and Corresponding Emission Budgets

1. Evaluating EGU NO_X Reduction Potential

2. Quantifying Emission Budgets

D. Multi-Factor Test Considering Costs, EGU NO_X Reductions, and Downwind Air Quality Impacts

VII. Implementation Using the Existing CSAPR NO_X Ozone Season Allowance Trading Program and Relationship to Other Rules

A. Introduction

B. New and Revised FIPs

C. Updates to CSAPR NO_X Ozone Season Trading Program Requirements

1. Relationship of Allowances and Compliance for CSAPR Update States and States With Ongoing Original CSAPR Requirements

2. Use of Banked Vintage 2015 and 2016 CSAPR NO_X Ozone Season Trading Program Allowances for Compliance in CSAPR Update States

D. Feasibility of Compliance

E. FIP Requirements and Key Elements of the CSAPR Trading Programs

1. Applicability

2. State Budgets

3. Allocations of Emission Allowances

4. Variability Limits, Assurance Levels, and Penalties

5. Compliance Deadlines

6. Monitoring and Reporting and the Allowance Management System

7. Recordation of Allowances

F. Submitting a SIP

1. 2018 SIP Option

2. 2019 and Beyond SIP Option

3. SIP Revisions That Do Not Use the CSAPR Trading Program

4. Submitting a SIP To Participate in CSAPR for States Not Included in This Rule

G. Title V Permitting

H. Relationship to Other Emission Trading and Ozone Transport Programs

1. Interactions With Existing CSAPR Annual Programs, Title IV Acid Rain Program, NO_X SIP Call, and Other State Implementation Plans

2. Other Federal Rulemakings

VIII. Costs, Benefits, and Other Impacts of the Final Rule

IX. Summary of Changes to the Regulatory Text for the CSAPR FIPs and CSAPR Trading Programs

X. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review

B. Paperwork Reduction Act (PRA)

C. Regulatory Flexibility Act (RFA)

D. Unfunded Mandates Reform Act (UMRA)

E. Executive Order 13132: Federalism

F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments

G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks

H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution or Use

I. National Technology Transfer and Advancement Act (NTTAA)

J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations

K. Congressional Review Act (CRA)

L. Judicial Review and Determinations Under Section 307(b)(1) and (d)

I. Executive Summary

The EPA published the original Cross-State Air Pollution Rule (original CSAPR) on August 8, 2011 to address the interstate transport of emissions with respect to the 1997 ozone National Ambient Air Quality Standards (NAAQS) and the 1997 and 2006 fine particulate matter (PM_2.5) NAAQS. The EPA is finalizing this Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS (CSAPR Update) to address the interstate transport of emissions with respect to the 2008 ozone NAAQS. The 2008 ozone NAAQS is an 8-hour standard that was set at 75 parts per billion (ppb). The EPA proposed the CSAPR Update with respect to the 2008 ozone NAAQS on December 3, 2015 (80 FR 75706), and solicited comment on that action. The EPA provided an additional opportunity to comment on the air quality modeling platform and air quality modeling results that were used for the proposed CSAPR Update, through an August 4, 2015 Notice of Data Availability (NODA) (80 FR 46271) requesting comment on these data. This final rule is informed by comments received on the NODA and proposed CSAPR Update. This CSAPR Update also is intended to address the remand by the United States Court of Appeals for the District of Columbia Circuit of certain states' original CSAPR NO_X ozone season phase 2 emission budgets. Additionally, this rule updates the status of outstanding interstate ozone transport obligations for states that the original CSAPR provided a partial remedy with respect to the 1997 ozone NAAQS.

A. Purpose of Regulatory Action

The purpose of this rulemaking is to protect public health and welfare by reducing interstate emission transport that significantly contributes to nonattainment, or interferes with maintenance, of the 2008 ozone NAAQS in the eastern U.S. Ground-level ozone causes a variety of negative effects on human health, vegetation, and ecosystems. In humans, acute and chronic exposure to ozone is associated with premature mortality and a number of morbidity effects, such as asthma exacerbation. Ozone exposure can also negatively impact ecosystems, for example, by limiting tree growth.

Studies have established that ozone occurs on a regional scale (i.e., hundreds of miles) over much of the eastern U.S., with elevated concentrations occurring in rural as well as metropolitan areas. To reduce this regional-scale ozone transport, assessments of ozone control approaches have concluded that NO_X control strategies are effective. Further, studies have found that EGU NO_X emission reductions can be effective in reducing ozone pollution—specifically 8-hour peak concentrations, which is the form of the 2008 ozone standard. For example, studies have shown EGU NO_X reductions achieved under one of the EPA's prior interstate transport rulemakings known as the NO_X SIP Call were effective in reducing 8-hour peak ozone concentrations during the ozone season.

Clean Air Act (CAA or the Act) section 110(a)(2)(D)(i)(I), sometimes called the “good neighbor provision,” requires states to prohibit emissions that will contribute significantly to nonattainment or interfere with maintenance in any other state with respect to any primary or secondary NAAQS. The statute vests states with the primary responsibility to address interstate emission transport through the development of good neighbor State Implementation Plans (SIPs). The EPA supports state efforts to submit good neighbor SIPs for the 2008 ozone NAAQS and has shared information with states to facilitate such SIP submittals. However, the CAA also requires the EPA to fill a backstop role by issuing Federal Implementation Plans (FIPs) where states fail to submit good neighbor SIPs or the EPA disapproves a submitted good neighbor SIP.

On July 13, 2015, the EPA published a rule finding that 24 states failed to make complete submissions that address the requirements of section 110(a)(2)(D)(i)(I) related to the interstate transport of pollution as to the 2008 ozone NAAQS. See 80 FR 39961 (July 13, 2015) (effective August 12, 2015). This CSAPR Update finalizes FIPs for 13 of these states (Alabama, Arkansas, Illinois, Iowa, Kansas, Michigan, Mississippi, Missouri, Oklahoma, Pennsylvania, Tennessee, Virginia, and West Virginia). On June 15, 2016 and July 20, 2016, the EPA published additional rules finding that New Jersey and Maryland, respectively, also failed to submit transport SIPs for the 2008 ozone NAAQS. See 81 FR 38963 (June 15, 2016) (effective July 15, 2016); 81 FR 47040 (July 20, 2016) (Maryland, effective August 19, 2016). This final CSAPR Update also finalizes FIPs addressing the good neighbor provision for these two states. Additionally, the EPA is finalizing FIPs for seven states for which it finalized disapproval of the states' good neighbor SIPs for the 2008 ozone NAAQS: Indiana, Kentucky, Louisiana, New York, Ohio, Texas, and Wisconsin. The FIPs being promulgated partially address the EPA's outstanding CAA obligations to prohibit interstate transport of air pollution which will contribute significantly to nonattainment in, or interfere with maintenance by, any other state with respect to the 2008 ozone NAAQS. The EPA also determines that it has fully satisfied its FIP obligation as to 9 states (Florida, Georgia, Maine, Massachusetts, Minnesota, New Hampshire, North Carolina, South Carolina, and Vermont), which the EPA has determined do not contribute significantly to nonattainment in, or interfere with maintenance by, any other state with respect to the 2008 ozone NAAQS.

The EPA is finalizing a FIP for each of the 22 states subject to this rule, having found that they failed to submit a complete good neighbor SIP (15 states) or having issued a final rule disapproving their good neighbor SIP (7 states). However, even after these FIPs take effect, any state included in this rule can submit a good neighbor SIP at any time that, if approved by the EPA, could replace the FIP for that state. Additionally, CSAPR provides states with the option to submit abbreviated SIPs to customize the methodology for allocating CSAPR NO_X ozone season allowances while participating in the ozone season trading program and the EPA is extending that approach in this rule.

The 22 states for which the EPA is promulgating FIPs to reduce interstate ozone transport as to the 2008 ozone NAAQS are listed in Table I.A-1.

The final CSAPR Update addresses collective contributions of ozone pollution from states in the eastern U.S. and builds on previous eastern-focused efforts to address collective contributions to interstate transport, including the NO_X SIP Call, the Clean Air Interstate Rule, and the original CSAPR rules. The EPA is not finalizing FIPs to address interstate emission transport for western states, where there may be additional factors to consider in the EPA's and state's evaluations.

The EPA finds, in the final air quality modeling on which this rule is based, one state for which the EPA proposed a FIP in the proposed CSAPR Update rule, North Carolina, is not linked to any downwind nonattainment or maintenance receptors. Therefore, the EPA is not finalizing a FIP for North Carolina.

For 14 of the eastern states evaluated in this rule (Connecticut, Florida, Georgia, Maine, Massachusetts, Minnesota, Nebraska, New Hampshire, North Carolina, North Dakota, Rhode Island, South Carolina, South Dakota, and Vermont), the EPA has determined that emissions from those states do not significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS in downwind states. Accordingly, the EPA has determined that it need not require further emission reductions from sources in these states to address the good neighbor provision as to the 2008 ozone NAAQS.

Of the 22 states covered in this CSAPR Update, 21 states have original CSAPR NO_X ozone season FIP requirements with respect to the 1997 ozone NAAQS. One state, Kansas, has newly added CSAPR NO_X ozone season FIP requirements in this action. For the 22 states affected by one of the FIPs finalized in this action, the EPA is promulgating new FIPs with EGU NO_X ozone season emission budgets to reduce interstate transport for the 2008 ozone NAAQS.

One state, Georgia, has an ongoing original CSAPR NO_X ozone season FIP requirement with respect to the 1997 ozone NAAQS, but the EPA has found that is does not contribute to interstate transport with respect to the 2008 ozone NAAQS. The EPA did not reopen comment on Georgia's interstate transport obligation with respect to the 1997 ozone NAAQS in this rulemaking, so Georgia's original CSAPR NO_X ozone season requirements (including its emission budget) continue unchanged.

In addition to reducing interstate ozone transport with respect to the 2008 ozone NAAQS, this rule also addresses the status of outstanding interstate ozone transport obligations with respect to the 1997 ozone NAAQS. In the original CSAPR, the EPA promulgated FIPs for 25 states to address ozone transport with respect to the 1997 NAAQS. For 11 of these states, the original CSAPR rulemakings quantified ozone season NO_X emission reductions that were not necessarily sufficient to eliminate all significant contribution to downwind nonattainment or interference with downwind maintenance of the 1997 ozone NAAQS. Relying on modeling completed for this final rule, this action finds that, with implementation of the original CSAPR NO_X ozone season emission budgets, emissions from ten of these states no longer significantly contribute to downwind nonattainment or interference with maintenance for the 1997 ozone NAAQS. The EPA further finds that, with implementation of the CSAPR Update NO_X ozone season emission budgets, emissions from these ten states also no longer significantly contribute to downwind nonattainment or interference with maintenance for the 1997 ozone NAAQS. With respect to Texas, the modeling shows that emissions from within the state no longer significantly contribute to downwind nonattainment or interference with maintenance for the 1997 ozone NAAQS even without implementation of the original CSAPR NO_X ozone season emission budget. Accordingly, sources in Texas will no longer be subject to the emissions budget calculated to address the 1997 ozone NAAQS. However, as described earlier, this rule finalizes a new emissions budget for Texas designed to address interstate transport with respect to the 2008 ozone NAAQS.

This action is also intended to address the portion of the July 28, 2015 opinion of the United States Court of Appeals for the District of Columbia (D.C. Circuit) remanding without vacatur 11 states' CSAPR phase 2 NO_X ozone season emission budgets. EME Homer City Generation, L.P., v. EPA, No. 795 F.3d 118, 129-30, 138 (EME Homer City II). This action promulgates new NO_X ozone season budgets addressing interstate transport with respect to the 2008 ozone NAAQS that take effect in 2017, which replace the invalidated phase 2 budgets for 8 states, and also removes the remaining three states from the CSAPR NO_X ozone season trading program as a result of the EPA's finding that these three states do not significantly contribute to downwind nonattainment or interference with maintenance for the 2008 standard.

The EPA acknowledges that, in EME Homer City II, the D.C. Circuit also remanded without vacatur the CSAPR phase 2 SO₂ emission budgets as to four states. 795 F.3d at 129, 138. This final rule does not address the remand of these CSAPR phase 2 SO₂ annual emission budgets. On June 27, 2016, the EPA released a memorandum outlining the agency's approach for responding to the D.C. Circuit's July 2015 remand of the CSAPR phase 2 SO₂ annual emission budgets for Alabama, Georgia, South Carolina and Texas. The memorandum can be found at https://www3.epa.gov/airtransport/CSAPR/pdfs/CSAPR_SO2_Remand_Memo.pdf .

On October 1, 2015, the EPA strengthened the ground-level ozone NAAQS, based on extensive scientific evidence about ozone's effects on public health and welfare. While reductions achieved by this final rule will aid in attainment and maintenance of the 2015 standard, the CSAPR Update rule to reduce interstate emission transport with respect to the 2008 ozone NAAQS is a separate and distinct regulatory action and is not meant to address the CAA's good neighbor provision with respect to the 2015 ozone NAAQS final rule.

The EPA notes that the level of the annual PM_2.5 NAAQS was also revised after CSAPR was promulgated (78 FR 3086, January 15, 2013). However, this final rule does not address the 2012 PM_2.5 standard.

B. Major Provisions

To reduce interstate emission transport under the authority provided in CAA section 110(a)(2)(D)(i)(I), this rule further limits ozone season (May 1 through September 30) NO_X emissions from electric generating units (EGUs) in 22 eastern states using the same framework used by the EPA in developing the original CSAPR. The CSAPR framework provides a 4-step process to address the requirements of the good neighbor provision for ambient ozone or PM_2.5 standards: (1) Identifying downwind receptors that are expected to have problems attaining or maintaining clean air standards (i.e., NAAQS); (2) determining which upwind states contribute to these identified problems in amounts sufficient to “link” them to the downwind air quality problems; (3) for states linked to downwind air quality problems, identifying upwind emissions that significantly contribute to downwind nonattainment or interfere with downwind maintenance of a standard; and (4) for states that are found to have emissions that significantly contribute to nonattainment or interfere with maintenance of the NAAQS downwind, reducing the identified upwind emissions via regional emission allowance trading programs. Each time the relevant NAAQS are revised, this process can be applied for the new NAAQS. In this final action, the EPA applies this 4-step CSAPR framework to update CSAPR with respect to the 2008 ozone NAAQS.

The EPA is aligning implementation of this rule with relevant attainment dates for the 2008 ozone NAAQS, as required by the D.C. Circuit's decision in North Carolina v. EPA. The EPA's final 2008 Ozone NAAQS SIP Requirements Rule established the attainment deadline of July 20, 2018 for ozone nonattainment areas currently designated as Moderate. Because the attainment date falls during the 2018 ozone season, the 2017 ozone season will be the last full season from which data can be used to determine attainment of the NAAQS by the July 20, 2018 attainment date. Therefore, consistent with the court's instruction in North Carolina, the EPA establishes emission budgets and implementation of these emission budgets starting with the 2017 ozone season.

In order to apply the first and second steps of the CSAPR 4-step framework to interstate transport for the 2008 ozone NAAQS, the EPA used air quality modeling to project ozone concentrations at air quality monitoring sites to 2017. The EPA updated this modeling for the final rule, using the most current complete dataset available, taking into account comments submitted on the August 2015 Air Quality Modeling NODA and on the CSAPR Update rule proposal. For the final rule, the EPA evaluated modeling projections for air quality monitoring sites and considered current ozone monitoring data at these sites to identify receptors that are anticipated to have problems attaining or maintaining the 2008 ozone NAAQS. The EPA then uses air quality modeling to assess contributions from upwind states to these downwind receptors and evaluates these contributions relative to a screening threshold of 1 percent of the NAAQS. States with contributions that equal or exceed 1 percent of the NAAQS are identified as warranting further analysis for significant contribution to nonattainment or interference with maintenance. States with contributions below 1 percent of the NAAQS are considered to not significantly contribute to nonattainment or interfere with maintenance of the NAAQS in downwind states.

To apply the third step of the 4-step CSAPR framework, the EPA quantified emission budgets that limit allowable emissions and represent the emission levels that remain after each state makes EGU NO_X emission reductions that are necessary to reduce interstate ozone transport for the 2008 NAAQS. To establish the CSAPR Update emission budgets, the EPA evaluated levels of uniform NO_X control stringency, represented by an estimated marginal cost per ton of NO_X reduced. The EPA applied the CSAPR multi-factor test to evaluate cost, available emission reductions, and downwind air quality impacts to determine the appropriate level of uniform NO_X control stringency that addresses the impacts of interstate transport on downwind nonattainment or maintenance receptors. The EPA used this multi-factor assessment to gauge the extent to which emission reductions are needed, and to ensure those reductions do not represent over-control.

The multi-factor test generates a “knee in the curve” at a point where emission budgets reflect a control stringency with an estimated marginal cost of $1,400 per ton. This level of stringency in emission budgets represents the level at which incremental EGU NO_X reduction potential and corresponding downwind ozone air quality improvements are maximized with respect to marginal cost. That is, the ratio of emission reductions to marginal cost and the ratio of ozone improvements to marginal cost are maximized relative to the other emission budget levels evaluated. The EPA finds that very cost-effective EGU NO_X reductions can make meaningful and timely improvements in downwind ozone air quality to address interstate ozone transport for the 2008 ozone NAAQS for the 2017 ozone season. Further, this evaluation shows that emission budgets reflecting the $1,400 per ton cost threshold do not over-control upwind states' emissions relative to either the downwind air quality problems to which they are linked or the 1 percent contribution threshold that triggered further evaluation. As a result, the EPA is finalizing EGU NO_X ozone season emission budgets developed using uniform control stringency represented by $1,400 per ton. The emission budgets that the EPA is finalizing in FIPs for the CSAPR Update rule are summarized in table I.B-1.

Our analysis shows that there is uncertainty regarding whether or not meaningful, cost-effective non-EGU emission reductions are achievable for the 2017 ozone season. Therefore, non-EGU reductions are not included in the final rule.

For most states, the EGU NO_X ozone season emission budgets finalized in this action represent a partial remedy to address interstate emission transport for the 2008 ozone NAAQS. However, as stated in the proposal, the EPA believes that it is beneficial to implement, without further delay, EGU NO_X reductions that are achievable in the near term, particularly before the Moderate area attainment date of 2018. Generally, notwithstanding that additional reductions may be required to fully address the states' interstate transport obligations, the EGU NO_X emission reductions implemented by this final rule are needed for upwind states to eliminate their significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS and for downwind states with ozone nonattainment areas that are required to attain the standard by July 20, 2018.

To meet the fourth step of the four-step CSAPR framework (i.e., implementation), the FIPs contain enforceable measures necessary to achieve the emission reductions in each state. The FIPs contained in this CSAPR Update require power plants in covered states (i.e., states that significantly contribute to ozone nonattainment or interfere with maintenance of the ozone standard in the east) to participate in a CSAPR NO_X ozone season Group 2 allowance trading program. CSAPR's trading programs and the EPA's prior emission trading programs (e.g., CAIR and the NO_X SIP Call) provide a proven implementation framework for achieving emission reductions. In addition to providing environmental certainty (i.e., a cap on emissions), these programs also provide regulated sources with flexibility in choosing compliance strategies. By using the CSAPR allowance trading programs, the EPA is applying an implementation framework that was shaped by notice and comment in previous rulemakings and reflects the evolution of these programs in response to court decisions and practical experience gained by states, industry and the EPA. Further, this program is familiar to the EGUs that will be regulated under this rule, which means that monitoring, reporting, and compliance will continue as they are already conducted under CSAPR's current ozone season and annual programs.

The CSAPR Update establishes two trading groups within the CSAPR NO_X ozone season allowance trading program—Group 1 for Georgia and Group 2 for the 22 CSAPR Update states. At this time, Georgia is the only state included in the CSAPR NO_X ozone season Group 1 trading program. The EPA will issue distinct allowances for these trading groups; CSAPR NO_X ozone season Group 1 allowances and CSAPR NO_X ozone season Group 2 allowances. Covered entities demonstrate compliance by holding and surrendering one allowance for each ton of NO_X emitted during the ozone season. In order to ensure that the CSAPR NO_X ozone season trading program implements emission reductions needed to meet the Clean Air Act's good neighbor requirements for the CSAPR Update states, the EPA finalizes a prohibition on allowance usage between Georgia and the CSAPR Update states. However, the EPA provides an option for Georgia to voluntarily adopt via SIP an emission budget that is commensurate with CSAPR Update emission budgets that could include Georgia in the Group 2 trading program with the CSAPR Update states. Implementation of Group 1 and Group 2 trading programs is substantially the same as the original CSAPR NO_X ozone season trading program. For states with continuing obligations to address interstate transport with respect to the 1997 ozone NAAQS as well as obligations under this rule with respect to the 2008 ozone NAAQS, the EPA is coordinating the FIP requirements for the two NAAQS by providing that compliance with the 2008 ozone NAAQS FIP requirements simultaneously satisfies the state's transport obligations with respect to the less stringent 1997 ozone NAAQS. These states will therefore only be required to comply with the CSAPR NO_X ozone season Group 2 requirements.

For this CSAPR Update, the EPA considered whether, and to what extent, banked 2015 and 2016 CSAPR NO_X ozone season allowances should be eligible for compliance in the CSAPR Update rule states. As proposed, the CSAPR Update finalizes a limit on the number of banked allowances carried over based on the need to assure that the CAA objective of the CSAPR Update is achieved. This approach transitions some allowances for compliance to further ensure feasibility of implementing the CSAPR Update rule. The EPA proposed to use turn-in ratios calculated using a formula—essentially the same formula that the EPA is finalizing in this rule. Specifically, the final rule establishes a one-time allowance conversion that transitions a limited number of banked vintage 2015 and 2016 allowances for compliance use in CSAPR Update states. This allowance conversion limits the number of banked allowances to 1.5 years of states' aggregated CSAPR variability limits (approximately 99,700 allowances) in order to ensure that implementation of the trading program will result in NO_X emission reductions sufficient to address significant contribution to nonattainment or interference with maintenance of downwind pollution with respect to the 2008 ozone NAAQS.

The compliance requirements of this final rule are in addition to existing, on-the-books EPA and state environmental regulations. To the extent that new, unplanned actions may also reduce EGU NO_X emissions within a state included in the CSAPR Update, whether for compliance with other environmental requirements or for other reasons, such actions would help the state comply with its good neighbor requirements. The final FIP compliance requirements begin with the 2017 ozone season and will continue for subsequent ozone seasons to ensure that upwind states included in this rule meet their Clean Air Act obligation to address interstate emission transport with respect to the 2008 ozone NAAQS for 2017 and future years. Even after the attainment deadline has passed, areas are required to continue to attain and maintain the NAAQS, and these good neighbor emission limits will ensure that future emissions are consistent with states' ongoing good neighbor obligations.

The EPA is finalizing revisions to the Code of Federal Regulations (CFR), specifically: 40 CFR part 97, subparts BBBBB and EEEEE (federal CSAPR NO_X ozone season trading programs); 40 CFR 52.38(b) (CSAPR NO_X ozone season FIP requirements and rules on replacing or modifying the FIP requirements through a SIP revision); state-specific subparts of 40 CFR part 52 for 25 states (descriptions for these states of FIP requirements and consequences of SIP revisions related to ozone season NO_X emissions); and 40 CFR part 78 (provisions addressing the scope of coverage of the administrative appeal procedures) to address interstate transport for the 2008 ozone NAAQS. In addition, as proposed, various minor corrections are being finalized to these CFR sections and other sections of parts 52, 78, and 97 relating to the CSAPR ozone season and annual trading programs.

The remainder of this preamble is organized as follows: Section III describes the EPA's legal authority for this action; section IV describes the human health and environmental context, the EPA's overall approach for addressing interstate transport through use of the CSAPR framework, and the EPA's response to the remand of certain CSAPR NO_X ozone season emission budgets; section V describes the air quality modeling platform and emission inventories that the EPA used in its assessment of downwind receptors of concern and upwind state ozone contributions to those receptors for the final rule; section VI describes the EPA's approach to quantify upwind state obligations in the form of final EGU NO_X emission budgets; section VII details the implementation requirements including key elements of the CSAPR allowance trading program and deadlines for compliance; section VIII describes the expected costs, benefits, and other impacts of this rule; section IX discusses changes to the existing regulatory text for the CSAPR FIPs and the CSAPR trading programs; and section X discusses the statutes and executive orders affecting this rulemaking. The preamble sections include certain significant comments and responses to comments as they pertain to the topic covered in each section.

C. Benefits and Costs

The rule will achieve near-term emission reductions from the power sector, lowering ozone season NO_X in 2017 by 61,000 tons, compared to 2017 projections without the rule.

Consistent with Executive Order 13563, “Improving Regulation and Regulatory Review,” the EPA has estimated the costs and benefits of the rule. Estimates here are subject to uncertainties discussed further in the Regulatory Impact Analysis (RIA) in the docket. The estimated net benefits of the rule at 3 percent and 7 percent discount rates are $460 million to $810 million and $450 million to $790 million (2011$), respectively. The non-monetized benefits include reduced ecosystem impacts and improved visibility. Discussion of the rule's costs and benefits is provided in preamble section VIII and in the RIA, which is found in the docket for this final rule. The EPA's estimate of the rule's costs and quantified benefits is summarized in Table I.C-1.

II. General Information

A. To whom does this final action apply?

This rule affects EGUs, and regulates the following groups:

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities that the EPA is now aware will be regulated by this action. Other types of entities not listed in the table could also be regulated. To determine whether your entity is regulated by this action, you should carefully examine the applicability criteria found in 40 CFR 97.504 and 97.804. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the FOR FURTHER INFORMATION CONTACT section.

III. Legal Authority

A. The EPA's Statutory Authority for the Final Rule

The statutory authority for this final action is provided by the CAA as amended (42 U.S.C. 7401 et seq.). Specifically, sections 110 and 301 of the CAA provide the primary statutory underpinnings for this rule. The most relevant portions of section 110 are subsections 110(a)(1), 110(a)(2), and 110(a)(2)(D)(i)(I), and 110(c)(1).

Section 110(a)(1) provides that states must make SIP submissions “within 3 years (or such shorter period as the Administrator may prescribe) after the promulgation of a national primary ambient air quality standard (or any revision thereof),” and that these SIP submissions are to provide for the “implementation, maintenance, and enforcement” of such NAAQS. The statute directly imposes on states the duty to make these SIP submissions, and the requirement to make the submissions is not conditioned upon the EPA taking any action other than promulgating a new or revised NAAQS.

The EPA has historically referred to SIP submissions made for the purpose of satisfying the applicable requirements of CAA sections 110(a)(1) and 110(a)(2) as “infrastructure SIP” submissions. Section 110(a)(1) addresses the timing and general requirements for infrastructure SIP submissions, and section 110(a)(2) provides more details concerning the required content of these submissions. It includes a list of specific elements that “[e]ach such plan” submission must address. All states, regardless of whether the state includes areas designated as nonattainment for the relevant NAAQS, must have SIPs that meet the applicable requirements of section 110(a)(2), including provisions of section 110(a)(2)(D)(i)(I) described later and that are the focus of this rule.

Section 110(c)(1) requires the Administrator to promulgate a FIP at any time within 2 years after the Administrator: (1) Finds that a state has failed to make a required SIP submission, (2) finds a SIP submission to be incomplete pursuant to CAA section 110(k)(1)(C), or (3) disapproves a SIP submission, unless the state corrects the deficiency through a SIP revision that the Administrator approves before the FIP is promulgated.

Section 110(a)(2)(D)(i)(I), also known as the “good neighbor provision,” provides the basis for this action. It requires that each state SIP shall include provisions sufficient to “prohibit[] . . . any source or other type of emissions activity within the State from emitting any air pollutants in amounts which will—(I) contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to any [NAAQS].”

The EPA has previously issued three rules interpreting and clarifying the requirements of section 110(a)(2)(D)(i)(I) for states in the eastern half of the United States. These rules, and the associated court decisions addressing these rules, provide important guidance regarding the requirements of section 110(a)(2)(D)(i)(I).

The NO_X SIP Call, promulgated in 1998, addressed the good neighbor provision for the 1979 1-hour ozone NAAQS and the 1997 8-hour ozone NAAQS. The rule required 22 states and the District of Columbia to amend their SIPs and limit NO_X emissions that contribute to ozone nonattainment. The EPA set a NO_X ozone season budget for each covered state, essentially a cap on ozone season NO_X emissions in the state. Sources in the covered states were given the option to participate in a regional cap-and-trade program, known as the NO_X Budget Trading Program (NBP). The NO_X SIP Call was largely upheld by the D.C. Circuit in Michigan v. EPA, 213 F.3d 663 (D.C. Cir. 2000), cert. denied, 532 U.S. 904 (2001).

The Clean Air Interstate Rule (CAIR), promulgated in 2005, addressed both the 1997 PM_2.5 and the 1997 ozone standards under the good neighbor provision. CAIR required SIP revisions in 28 states and the District of Columbia to ensure that certain emissions of sulfur dioxide (SO₂) and/or NO_X—important precursors of regionally transported PM_2.5 (SO₂ and NO_X) and ozone (NO_X)—were prohibited. Like the NO_X SIP Call, states were given the option to participate in a regional cap-and-trade program to satisfy their SIP obligations. When the EPA promulgated the final CAIR in May 2005, the EPA also issued a national rule finding that states had failed to submit SIPs to address the requirements of CAA section 110(a)(2)(D)(i) with respect to the 1997 PM_2.5 and the 1997 ozone NAAQS. Those states were required by the CAA to have submitted good neighbor SIPs for those standards by July 2000. These findings of failure to submit triggered a 2-year clock for the EPA to issue FIPs to address interstate transport, and on March 15, 2006, the EPA promulgated FIPs to ensure that the emission reductions required by CAIR would be achieved on schedule. CAIR was remanded to the EPA by the D.C. Circuit in North Carolina, 531 F.3d 896 (D.C. Cir. 2008), modified on reh'g, 550 F.3d 1176. For more information on the legal considerations of CAIR and the D.C. Circuit holding in North Carolina, refer to the preamble of the original CSAPR rule.

In 2011, the EPA promulgated the original CSAPR to address the issues raised by the remand of CAIR and additionally to address the good neighbor provision for the 2006 PM_2.5 NAAQS. CSAPR requires 28 states to reduce SO₂ emissions, annual NO_X emissions, and/or ozone season NO_X emissions that significantly contribute to other states' nonattainment or interfere with other states' abilities to maintain these air quality standards. To accomplish implementation aligned with the applicable attainment deadlines, the EPA promulgated FIPs for each of the 28 states covered by CSAPR. The FIPs implement regional cap-and-trade programs to achieve the necessary emission reductions. States can submit good neighbor SIPs at any time that, if approved by the EPA, would replace the CSAPR FIP for that state. As discussed later, CSAPR was the subject of decisions by both the D.C. Circuit and the Supreme Court, which largely upheld the rule.

On August 21, 2012, the D.C. Circuit issued a decision in EME Homer City Generation, L.P. v. EPA, 696 F.3d 7 (D.C. Cir. 2012), vacating CSAPR and holding, among other things, that states had no obligation to submit good neighbor SIPs until the EPA had first quantified each state's good neighbor obligation. The implication of this decision was that the EPA did not have authority to promulgate the CSAPR FIPs as a result of states' failure to submit or the EPA's disapproval of good neighbor SIPs. The D.C. Circuit also held that the EPA erred in apportioning upwind emission reduction obligations using uniform cost thresholds, and that such approach may result in unnecessary over-control. The EPA sought review, first with the D.C. Circuit en banc and then with the Supreme Court. While the D.C. Circuit declined to consider the EPA's appeal en banc, on January 23, 2013, the Supreme Court granted the EPA's petition for certiorari.

On April 29, 2014, the Supreme Court issued a decision reversing the D.C. Circuit's EME Homer City opinion on CSAPR and held, among other things, that under the plain language of the CAA, states must submit SIPs addressing the good neighbor provision within 3 years of promulgation of a new or revised NAAQS, regardless of whether the EPA first provides guidance, technical data or rulemaking to quantify the state's obligation. Thus, the Supreme Court affirmed that states have an obligation in the first instance to address the good neighbor provision after promulgation of a new or revised NAAQS, a holding that also applies to states' obligation to address interstate transport for the 2008 ozone NAAQS. The Court also reversed the D.C. Circuit's holding that the EPA's use of cost to apportion upwind states' emission reduction obligations was impermissible, finding that the EPA's approach was a “permissible construction of the statute.” The Supreme Court remanded the litigation to the D.C. Circuit for further proceedings.

Finally, on July 28, 2015, the D.C. Circuit issued its opinion on CSAPR regarding the remaining legal issues raised by the petitioners on remand from the Supreme Court, EME Homer City II, 795 F.3d 118. This decision largely upheld the EPA's approach to addressing interstate transport in CSAPR, leaving the rule in place and affirming the EPA's interpretation of various statutory provisions and the EPA's technical decisions. The decision also remanded the rule without vacatur for reconsideration of the EPA's emission budgets for certain states. In particular and as discussed in section IV, the court declared invalid the CSAPR phase 2 NO_X ozone season emission budgets of 11 states, holding that those budgets over-control with respect to the downwind air quality problems to which those states were linked for the 1997 ozone NAAQS. The court's decision explicitly applies to 11 states: Florida, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia. Id. at 129-30, 138. The court also remanded without vacatur the CSAPR phase 2 SO₂ annual emission budgets for four states (Alabama, Georgia, South Carolina, and Texas) for reconsideration. Id. at 129, 138. The court instructed the EPA to act “promptly” in addressing these issues on remand. Id. at 132.

Section 301(a)(1) of the CAA also gives the Administrator of the EPA general authority to prescribe such regulations as are necessary to carry out her functions under the Act. Pursuant to this section, the EPA has authority to clarify the applicability of CAA requirements. In this action, among other things, the EPA is clarifying the applicability of section 110(a)(2)(D)(i)(I) by identifying NO_X emissions in certain states that must be prohibited pursuant to this section with respect to the 2008 ozone NAAQS.

In particular, the EPA is using its authority under sections 110 and 301 to promulgate FIPs that establish or revise EGU NO_X ozone season emission budgets for 22 eastern states to mitigate their significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS in another state. The EPA is also responding to the court's remand in EME Homer City II with respect to the remanded NO_X ozone season emission budgets.

B. FIP Authority for Each State Covered by the Final Rule

As discussed previously, all states have an obligation to submit SIPs that address the applicable requirements of CAA section 110(a)(2) within 3 years of promulgation of a new or revised NAAQS. With respect to the 2008 ozone NAAQS, states were required to submit SIPs addressing the good neighbor provision by March 12, 2011. If the EPA finds that a state has failed to submit a SIP to meet its statutory obligation to address section 110(a)(2)(D)(i)(I) or if the EPA disapproves a good neighbor SIP, then the EPA has not only the authority but the obligation, pursuant to section 110(c)(1), to promulgate a FIP to address the CAA requirement no later than 2 years after the finding or disapproval.

On July 13, 2015, the EPA published a rule finding that 24 states failed to make complete submissions that address the requirements of section 110(a)(2)(D)(i)(I) related to the interstate transport of pollution as to the 2008 ozone NAAQS. See 80 FR 39961 (July 13, 2015) (effective August 12, 2015). The finding action triggered a 2-year deadline for the EPA to issue FIPs to address the good neighbor provision for these states by August 12, 2017. The states included in this finding of failure to submit are: Alabama, Arkansas, California, Florida, Georgia, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Mexico, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Vermont, Virginia, and West Virginia.

Several additional eastern states—Connecticut, Delaware, Indiana, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Dakota, Ohio, Rhode Island, South Dakota, Texas, Wisconsin, and the District of Columbia—had previously submitted SIPs to address the requirements of section 110(a)(2)(D)(i)(I) for the 2008 ozone NAAQS. Since the EPA issued the findings notice, the agency has also received a SIP submission addressing the good neighbor provision for the 2008 ozone NAAQS from the states of Maine, New Hampshire, North Carolina, and Vermont. Maryland and New Jersey subsequently withdrew their good neighbor SIP submittals addressing the 2008 ozone standard. The EPA issued separate notices finding that Maryland and New Jersey failed to make complete submissions that address the requirements of section 110(a)(2)(D)(i)(I) related to the interstate transport of pollution as to the 2008 ozone NAAQS. See 81 FR 47040 (July 20, 2016) (Maryland, effective August 19, 2016); 81 FR 38963 (June 15, 2016) (New Jersey, effective July 15, 2016). The finding actions triggered a 2-year deadline for the EPA to issue FIPs to address the good neighbor provision for Maryland by August 19, 2018 and New Jersey by July 15, 2018.

To the extent that the EPA had not finalized action on these SIPs at proposal, the states were encouraged to evaluate their submissions in light of the information provided in the proposal with respect to interstate ozone transport for the 2008 ozone NAAQS. The EPA has finalized disapproval or partial disapproval of the good neighbor SIPs from Indiana, Kentucky, Louisiana, New York, Ohio, Texas and Wisconsin, triggering the EPA's authority and obligation to promulgate FIPs that implement the requirements of the good neighbor provision for those states. The EPA has approved good neighbor SIPs addressing the 2008 ozone standard submitted by Nebraska, North Dakota, and South Dakota. The EPA has not yet taken final action to approve or disapprove the SIPs submitted by Connecticut, Delaware, the District of Columbia, Maine, New Hampshire, North Carolina, Rhode Island, and Vermont. However, the EPA is not finalizing FIPs as to these states in this action. The EPA will review and act upon these states' SIPs in separate, future actions.

Comment: Some commenters have questioned the EPA's authority to propose FIPs for certain states before the EPA has either issued findings of failure to submit good neighbor SIPs or taken final action to approve or disapprove pending good neighbor SIPs submitted by those states. Commenters state that the EPA's development of FIPs prior to taking those actions upsets the balance of state and federal authority. Some commenters state that this approach is inconsistent with the sequencing of events envisioned by Congress in CAA section 110(c). Another commenter contends that the CAA contemplates that states should have an opportunity to correct any problems with its SIP in a timely fashion and avoid imposition of a FIP. The commenter states that, until the EPA proposes to disapprove a state's SIP, the state does not know what corrections would be necessary.

One commenter states that the Supreme Court's decision in EPA v. EME Homer City Generation means that the EPA may issue a FIP if more than two years have elapsed since the EPA found the state's SIP was inadequate. The commenter suggests that states should be given the opportunity to submit a SIP after the EPA establishes a state budget before a FIP is implemented. The commenter states that the EPA adhered to the CAA in prior transport rulemakings like the NO_X SIP Call and CAIR by allowing states to decide how to meet budgets quantified by the EPA.

Response: The EPA disagrees with commenters' contention that we cannot propose a FIP for a state prior to taking final action on the state's SIP. CAA section 110(c) provides that the EPA “shall promulgate a [FIP] at any time within two years after” the EPA either finds that a state has failed to make a required submission or disapproves a SIP, in whole or in part. As the Supreme Court confirmed in EPA v. EME Homer City Generation, “EPA is not obliged to wait two years or postpone its action even a single day: The Act empowers the Agency to promulgate a FIP `at any time' within the two-year limit.” 134 S. Ct. at 1601.

The EPA's proposal was not the “promulgation” of a FIP. Rather, the EPA is only finalizing FIPs for those states for which the EPA has either made a finding of failure to submit a SIP addressing the state's good neighbor obligation as to the 2008 ozone NAAQS or for which the EPA disapproved the state's good neighbor SIP. Accordingly, consistent with section 110(c), the EPA is only promulgating FIPs for those states that the EPA found have failed to address the statutory SIP obligation.

The EPA also disagrees that it was required to provide states with an opportunity to submit a SIP addressing the budgets calculated in this rule before promulgating a FIP. The Supreme Court clearly held that the Act does not “condition the duty to promulgate a FIP on EPA's having first quantified an upwind State's good neighbor obligations.” 134 S. Ct. at 1601. Nor does the Act “require EPA to furnish upwind States with information of any kind about their good neighbor obligations before a FIP issues.” Id. While the EPA has taken a different approach in some prior rulemakings by providing states with an opportunity to submit a SIP after the EPA quantified the states' budgets, the circumstances of this rule require a different approach. As discussed in more detail earlier, it is important for the EPA to assure that emission reductions are achieved, to the extent feasible, by the 2017 ozone season in order to assist downwind areas with meeting the July 20, 2018 attainment deadline for Moderate nonattainment areas. If the EPA were to permit states an opportunity to develop and submit state plans to address the emission reductions required by this rule before imposing a federal plan, the EPA could not ensure that these emission reductions would be achieved in a timely manner. However, states may submit SIPs to replace the FIPs promulgated in this final rule at any time. Some types of SIPs that a state might consider are outlined in more detail later in section VII.

In addition to the agency's general FIP authority and the comments received on that issue, there is a unique issue related to the EPA's FIP obligation for Kentucky. On March 7, 2013, the EPA finalized action on the State of Kentucky's SIP submission addressing, among other things, the good neighbor provision requirements for the 2008 ozone NAAQS. The EPA disapproved the submission as to the good neighbor requirements. In the notice, the EPA explained that the disapproval of the good neighbor portion of the state's infrastructure SIP submission did not trigger a mandatory duty for the EPA to promulgate a FIP to address these requirements. Citing the D.C. Circuit's decision EME Homer City I, the EPA explained that the court concluded states have no obligation to make a SIP submission to address the good neighbor provision for a new or revised NAAQS until the EPA first defines a state's obligations pursuant to that section. Therefore, because a good neighbor SIP addressing the 2008 ozone standard was not at that time required, the EPA indicated that its disapproval action would not trigger an obligation for the EPA to promulgate a FIP to address the interstate transport requirements.

On April 30, 2013, the Sierra Club filed a petition for review of the EPA's action in the United States Court of Appeals for the Sixth Circuit based on the agency's conclusion that the FIP clock was not triggered by the disapproval of Kentucky's good neighbor SIP. Subsequently, on April 29, 2014, the Supreme Court issued a decision reversing and vacating the D.C. Circuit's decision in EME Homer City. Following the Supreme Court decision, the EPA requested, and the Sixth Circuit granted, vacatur and remand of the portion of the EPA's final action on Kentucky's good neighbor SIP that determined that the FIP obligation was not triggered by the disapproval.

In this document, the EPA is correcting the portion of the Kentucky disapproval notice indicating that the FIP clock would not be triggered by the SIP disapproval. The EPA believes that the EPA's obligation to develop a FIP was triggered on the date of the judgment issued by the Supreme Court in EPA v. EME Homer City Generation, June 2, 2014, and the EPA is obligated to issue a FIP at any time within two years of that date. The EPA does not believe that the FIP obligation was triggered as of the date of the SIP disapproval because the controlling law as of that date was the D.C. Circuit decision in EME Homer City I, which held that states had no obligation to submit a SIP and the EPA had no authority to issue a FIP until the EPA first quantified each state's emission reduction obligation under the good neighbor provision. Accordingly, the most reasonable conclusion is that the EPA's FIP obligation was triggered when the Supreme Court clarified the state and federal obligations with respect to the good neighbor provision. Thus, the EPA finds that the FIP obligation was triggered as of June 2, 2014, and that the EPA was obligated to promulgate a FIP that corrects the deficiency by June 2, 2016.

IV. Air Quality Issues Addressed and Overall Approach for the Final Rule

A. The Interstate Transport Challenge Under the 2008 Ozone Standard

1. Background on the Nature of the Interstate Ozone Transport Problem

Interstate transport of NO_X emissions poses significant challenges with respect to attaining the 2008 ozone NAAQS in the eastern U.S. and thus presents a threat to public health and welfare. The following sections discuss the nature and sources of ozone, how ozone is transported in the atmosphere and across state boundaries, and ozone's impacts on human health and the environment.

a. Nature of ozone and the Ozone NAAQS. Ground-level ozone is not emitted directly into the air, but is a secondary air pollutant created by chemical reactions between oxides of nitrogen (NO_X), carbon monoxide (CO), methane (CH₄), and non-methane volatile organic compounds (VOCs) in the presence of sunlight. Emissions from electric utilities, industrial facilities, motor vehicles, gasoline vapors, and chemical solvents are some of the major anthropogenic sources of ozone precursors. The potential for ground-level ozone formation increases during periods with warmer temperatures and stagnant air masses; therefore ozone levels are generally higher during the summer months. Ground-level ozone concentrations and temperature are highly correlated in the eastern U.S. with observed ozone increases of 2-3 ppb per degree Celsius reported. Increased temperatures may also increase emissions of volatile man-made and biogenic organics and can indirectly increase anthropogenic NO_X emissions as well (e.g., increased electricity generation to power air conditioning).

The 2008 primary and secondary ozone standards are both 75 ppb as an 8-hour maximum level. Specifically, the standards require that an area may not exceed 75 ppb using the 3-year average of the fourth highest 24-hour maximum 8-hour rolling average ozone concentration.

b. Ozone transport. Precursor emissions can be transported downwind directly or, after transformation in the atmosphere, as ozone. Studies have established that ozone formation, atmospheric residence, and transport occurs on a regional scale (i.e., hundreds of miles) over much of the eastern U.S., with elevated concentrations occurring in rural as well as metropolitan areas. As a result of ozone transport, in any given location, ozone pollution levels are impacted by a combination of local emissions and emissions from upwind sources. The transport of ozone pollution across state borders compounds the difficulty for downwind states in meeting health-based air quality standards (i.e., NAAQS). Numerous observational studies have demonstrated the transport of ozone and its precursors and the impact of upwind emissions on high concentrations of ozone pollution. Bergin et al., for example, examined the impacts of statewide emissions of NO_X, SO₂, and VOCs on concentrations of ozone and fine particulate matter in the eastern U.S. They found on average 77 percent of each state's ground-level ozone is produced by precursor emissions from upwind states. Liao et al., showed the impacts of interstate transport of anthropogenic NO_X and VOC emissions on peak ozone formation in 2007 in the Mid-Atlantic U.S. Results suggest reductions in anthropogenic NO_X emissions from EGU and non-EGU sources from the Great Lakes region as well as northeastern and southeastern U.S. would be effective for decreasing area-mean peak ozone concentrations in the Mid-Atlantic.

The EPA has previously concluded in the NO_X SIP Call, CAIR, and CSAPR that, for reducing regional-scale ozone transport, a NO_X control strategy is effective. While substantial progress has been made in reducing ozone in many urban areas, regional-scale ozone transport is still an important component of peak ozone concentrations during the summer ozone season. Model assessments have looked at impacts on peak ozone concentrations after potential emission reduction scenarios for NO_X and VOCs for NO_X-limited and VOC-limited areas. For example, Jiang and Fast concluded that NO_X emission reductions strategies would be effective in lowering ozone mixing ratios in urban areas and Liao et al. showed NO_X reductions would reduce peak ozone concentrations in non-attainment areas in the Mid-Atlantic (i.e. a 10 percent reduction in EGU and non-EGU NO_X emissions would result in approximately a 6 ppb reduction in peak ozone concentrations in Washington, DC). Assessments of ozone conducted for the October 2015 Regulatory Impact Analysis of the Final Revisions to the National Ambient Air Quality Standards for Ground-Level Ozone (EPA-452/R-15-007) also show the importance of NO_X emissions on ozone transport. This analysis is in the docket for this rule and also can be found in the docket for the 2015 ozone NAAQS, Docket No. EPA-HQ-OAR-2013-0169-0057.

Further, studies have found that EGU NO_X emission reductions, particularly, can be effective in reducing ozone pollution as quantified by the form of the 2008 ozone standard, 8-hour peak concentrations. Specifically, studies have found that EGU NO_X emission reductions can be effective in reducing the upper end of the cumulative ozone distribution in the summer on a regional scale. Analysis of air quality monitoring data trends shows reductions in summertime ozone concurrent with implementation of EGU NO_X reduction programs. Gilliland et al. presented reductions in observed versus modeled ozone concentrations in the eastern U.S. downwind from major NO_X sources. The results showed significant reductions in ozone concentrations (10-25 percent) from observed measurements (CASTNET and AQS) between 2002 and 2005, linking reductions in EGU NO_X emissions from upwind states with ozone reductions downwind of the major source areas. Another study shows that EGU NO_X emissions can contribute between 5 ppb and 25 ppb to average 8-hour peak

ozone concentrations in Mid-Atlantic metropolitan statistical areas. Additionally, Gégo et al. showed that ground-level ozone concentrations were significantly reduced after the NO_X SIP Call in regions downwind of major EGUs in the Ohio River Valley.

Previous regional ozone transport efforts, including the NO_X SIP Call, CAIR, and CSAPR, required ozone season NO_X reductions from EGUs to address interstate transport of ozone. The EPA has taken comment on regulating EGU NO_X emissions to address interstate ozone transport in the notice-and-comment process for these rulemakings. The EPA received no significant adverse comments in any of these earlier proposals regarding the rules' focus on ozone season EGU NO_X reductions to address interstate ozone transport. Further, many comments received on the proposed CSAPR Update encouraged the EPA to seek further EGU NO_X reductions to address interstate transport for the 2008 ozone NAAQS. As described later in this document, the EPA's analysis finds that the power sector continues to be capable of making NO_X reductions that reduce interstate transport with respect to ground-level ozone.

c. Health and environmental effects. Exposure to ambient ozone causes a variety of negative effects on human health, vegetation, and ecosystems. In humans, acute and chronic exposure to ozone is associated with premature mortality and a number of morbidity effects, such as asthma exacerbation. In ecosystems, ozone exposure causes visible foliar injury, decreases plant growth, and affects ecosystem community composition. For more information on the human health and welfare and ecosystem effects associated with ambient ozone exposure, see the EPA's October 2015 Regulatory Impact Analysis of the Final Revisions to the National Ambient Air Quality Standards for Ground-Level Ozone (EPA-452/R-15-007) in the docket for this rule and can be also found in the docket for the 2015 ozone NAAQS, Docket No. EPA-HQ-OAR-2013-0169-0057.

2. Events Affecting Application of the Good Neighbor Provision for the 2008 Ozone NAAQS

On March 12, 2008, the EPA promulgated a revision to the NAAQS, lowering both the primary and secondary standards to 75 ppb. See National Ambient Air Quality Standards for Ozone, Final Rule, 73 FR 16436 (March 27, 2008). These revisions of the NAAQS, in turn, triggered a 3-year deadline of March 12, 2011, for states to submit SIP revisions addressing infrastructure requirements under CAA sections 110(a)(1) and 110(a)(2), including the good neighbor provision. During this 3-year SIP development period, on September 16, 2009, the EPA announced that it would reconsider the 2008 ozone NAAQS. To reduce the workload for states during the interim period of reconsideration, the EPA also announced its intention to propose staying implementation of the 2008 standards with respect to a number of the requirements. On January 6, 2010, the EPA proposed to revise the 2008 NAAQS for ozone from 75 ppb to a level within the range of 60 to 70 ppb. See 75 FR 2938 (January 19, 2010). The EPA indicated its intent to issue final standards based upon the reconsideration by summer 2011.

On August 8, 2011, the EPA published the original CSAPR, in response to the D.C. Circuit's remand of the EPA's prior federal transport rule, CAIR. See 76 FR 48208 (August 8, 2011). The original CSAPR addressed ozone transport under the 1997 ozone NAAQS, but did not address the 2008 ozone standard, because the 2008 ozone NAAQS was under reconsideration when CSAPR was finalized.

On September 2, 2011, consistent with the direction of the President, the Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget returned the draft final 2008 ozone rule the EPA had developed upon reconsideration to the agency for further consideration. In view of that action and the timing of the agency's ongoing periodic review of the ozone NAAQS required under CAA section 109 (as announced on September 29, 2008), the EPA decided to coordinate further proceedings on its voluntary reconsideration of the 2008 ozone standards with its ongoing periodic review of the ozone NAAQS. Implementation for the original 2008 ozone standards was renewed. However, a number of legal developments pertaining to the EPA's promulgation of the original CSAPR created uncertainty surrounding the EPA's statutory interpretation and implementation of the good neighbor provision.

On August 21, 2012, the D.C. Circuit issued a decision in EME Homer City Generation, L.P. v. EPA addressing several legal challenges to CSAPR and holding, among other things, that states had no obligation to submit good neighbor SIPs until the EPA had first quantified each state's good neighbor obligation. According to that decision, the submission deadline for good neighbor SIPs under the CAA would not necessarily be tied to the promulgation of a new or revised NAAQS. While the EPA disagreed with this interpretation of the statute and sought review of the decision in the D.C. Circuit and the U.S. Supreme Court, the EPA complied with the D.C. Circuit's ruling during the pendency of its appeal. In particular, the EPA indicated that, consistent with the D.C. Circuit's opinion, it would not at that time issue findings that states had failed to submit good neighbor SIPs for the 2008 ozone NAAQS.

On January 23, 2013, the Supreme Court granted the EPA's petition for certiorari. On April 29, 2014, the Supreme Court reversed the D.C. Circuit's EME Homer City opinion on CSAPR and held, among other things, that under the plain language of the CAA, states must submit SIPs addressing the good neighbor provision within 3 years of promulgation of a new or revised NAAQS, regardless of whether the EPA first provides guidance, technical data, or rulemaking to quantify the state's obligation. Thus, the Supreme Court affirmed that states have an obligation in the first instance to address the good neighbor provision after promulgation of a new or revised NAAQS, a holding that also applies to the states' obligation to address transport for the 2008 ozone NAAQS.

States were therefore required to submit SIPs addressing the good neighbor provision with respect to the 2008 ozone NAAQS by March 12, 2011. Under the Supreme Court's holding, to the extent that states have failed to submit SIPs to meet this statutory obligation or the EPA has disapproved SIPs, then the EPA has not only the authority, but the obligation, to promulgate FIPs to address the CAA requirement.

B. Approach To Address Ozone Transport Under the 2008 Ozone NAAQS via FIPs

1. Requiring Emission Reductions From Upwind States

As described in section IV.A.1.b, the EPA finds that upwind EGU emission reductions are generally effective at reducing interstate transport of ozone pollution. And as described in section VI, with respect to this rule, the EPA finds that upwind emission reductions are achievable and will result in important and meaningful decreases in harmful downwind ozone pollution.

At the same time, the EPA also notes that section 110(a)(2)(D)(i)(I) of the CAA only requires upwind states to prohibit emissions that will significantly contribute to nonattainment or interfere with maintenance of the NAAQS in other states. It does not shift to upwind states the full responsibility for ensuring that all areas in downwind states attain and maintain the NAAQS. Downwind states also have control responsibilities because, among other things, the Act requires each state to adopt enforceable plans (i.e., State Implementation Plans) to attain and maintain air quality standards. The requirements established for upwind states through this final rule will supplement downwind states' local emission control strategies. The downwind states' local control strategies, in conjunction with the emission reductions from upwind states that this rule will provide, promote attainment and maintenance of the 2008 ozone NAAQS.

The Clean Air Act's good neighbor provision requires states and the EPA to address interstate transport of air pollution that affects downwind states' ability to attain and maintain NAAQS. Other provisions of the CAA, namely sections 179B and 319(b), are available to deal with NAAQS exceedances not attributable to the interstate transport of pollution covered by the good neighbor provisions but caused by emission sources outside the control of a downwind state. These provisions address international transport and exceptional events, respectively.

Comment: Some commenters claimed that local measures should be evaluated first, before requiring upwind emission reductions, in terms of efforts to attain and maintain the 2008 ozone NAAQS. Commenters also claimed that the EPA failed to adequately evaluate local measures to reduce ozone concentrations at identified nonattainment and maintenance receptors.

Response: The EPA disagrees with these comments. First, the Clean Air Act makes no reference to considering local measures before upwind measures in planning for attainment and maintenance of a NAAQS. In fact, the EPA notes that commenters' local-first argument is at opposition with the NAAQS implementation schedule provided in the CAA. Specifically, the Clean Air Act requires upwind states to submit infrastructure SIPs, including requirements to address interstate transport, within three years of promulgation of a new or revised NAAQS. Submission of interstate transport SIP requirements is one of the first chronological actions in NAAQS implementation. States are required to submit attainment plans for Moderate ozone nonattainment areas within 3 years of nonattainment designation, which normally comes two to three years after promulgation of a new or revised NAAQS. Marginal ozone nonattainment areas that fail to meet their attainment deadlines and are reclassified as Moderate areas may be provided a new deadline upon reclassification to submit Moderate area plans. See CAA section 182(i). Depending on the designations schedule, Moderate area attainment plans would be due approximately 5 years after promulgation of a new or revised standards, i.e., 2 years after interstate transport SIPs, and plans for reclassified areas would follow even later. Commenters' request that the EPA not evaluate upwind obligations until downwind controls have been evaluated is therefore unavailing under the statutory structure. If states or the EPA waited until Moderate area attainment plans were due before requiring upwind reductions, then these upwind reductions would be delayed several years beyond the mandatory CAA schedule. Further, the CAA implementation timeline implies that requiring local reductions first would place an inequitable burden on downwind areas by requiring them to plan for attainment and maintenance without any upwind actions. Adhering to the CAA schedule provides that downwind areas are able to plan for attainment and maintenance while accounting for previously determined and quantified upwind actions.

Further, the commenters are incorrect in asserting that the EPA has not considered any local controls obligations at downwind receptors when quantifying upwind state emission reductions. As described further in section VI, when evaluating air quality improvements at each level of control stringency, the EPA assumed that the downwind state home to an identified receptor would make emission reductions at an equivalent level of control stringency. While this final rule does not mandate any particular level of reductions in downwind states, the analysis to quantify upwind state reductions assumes that downwind states share responsibility for addressing identified air quality problems with the upwind states.

2. Focusing on 2017 for Analysis and Implementation

The EPA is aligning the analysis and implementation of this final rulemaking with the 2017 ozone season (May 1-September 30) in order to assist downwind states with timely attainment of the 2008 ozone NAAQS. On March 6, 2015, the EPA's final 2008 Ozone NAAQS SIP Requirements Rule revised the attainment deadline for ozone nonattainment areas currently designated as Moderate to July 20, 2018. The EPA established this deadline in the 2015 Ozone SIP Requirements Rule after previously establishing a deadline of December 31, 2018, which was vacated by the D.C. Circuit Court in Natural Resources Defense Council v. EPA. In order to demonstrate attainment by this deadline, states will need to rely on design values calculated using ozone season data from 2015 through 2017, since the July 20, 2018 deadline does not afford enough time for measured data of the full 2018 ozone season. Therefore, consistent with the court's instruction in North Carolina, the EPA has identified achievable upwind emissions reductions and aligned implementation of these reductions, to the extent possible, for the 2017 ozone season. These 2017 reductions can positively influence air quality that would be used to demonstrate attainment. To the extent that ozone improvements in 2017 yield the 4th highest daily maximum 8-hour average concentrations for all monitors in the area that are below the level of the 2008 ozone NAAQS, states can request a 1-year attainment date extension under CAA section 181(a)(5), as interpreted in 40 CFR 51.1107.

The EPA has therefore conducted its analyses of downwind air quality problems and upwind state contributions based on projections to the 2017 ozone season. The EPA also limits its assessment of NO_X mitigation potential to those strategies that are feasible for the 2017 ozone season. This rulemaking also finalizes the 2017 ozone season as the initial control period for the finalized FIPs.

Comment: Several comments claimed that requiring reductions beginning with the 2017 ozone season does not provide sufficient time to implement emission reductions for compliance with this rulemaking's limitations on emissions.

Response: The EPA disagrees with these comments. In establishing its limitations on emissions (i.e., emission budgets and corresponding assurance levels), under the CSAPR Update rule the EPA explicitly took into account the fact that only certain emission reduction strategies can be implemented for the 2017 ozone season. Specifically, the agency considered activities that may be implemented quickly, such as turning on and optimizing existing SCR at power plants. The emission budgets are thus calculated to reflect only those activities that can be implemented by the 2017 ozone season. Further, the CSAPR Update rule provides regulated entities the ability to comply by means of the CSAPR limited interstate trading program, which gives flexibility in compliance and does not require any specific action for compliance at any specific facility, other than holding allowances to cover emitted tons of pollution. Within this allowance trading program, the EPA also facilitates compliance by carrying over some banked allowances that can be used for compliance with the CSAPR Update, starting in 2017. More information about compliance feasibility is provided in section VII. Additionally, the EPA provides an EGU NO_X Mitigation Strategies Final Rule TSD, which is found in the docket for this final rule that further discusses the feasibility of complying with this rule's emissions requirements.

3. The CSAPR Framework

The original CSAPR used a four-step framework to address the requirements of the good neighbor provision for the 1997 ozone NAAQS and the 1997 and 2006 PM_2.5 NAAQS. The EPA is following the same CSAPR framework in this CSAPR Update to identify and address the requirements of the good neighbor provision with respect to the newer 2008 ozone NAAQS. By applying the CSAPR framework with respect to the newer 2008 ozone NAAQS, the EPA is using an approach that is informed by public comment on the original CSAPR rulemaking and has been reviewed in litigation by the D.C. Circuit Court of Appeals and the Supreme Court. The four steps are: (1) Identifying downwind receptors that are expected to have problems attaining or maintaining clean air standards (i.e., NAAQS); (2) determining which upwind states contribute to these identified problems in amounts sufficient to “link” them to the downwind air quality problems; (3) for states linked to downwind air quality problems, identifying upwind emissions that significantly contribute to nonattainment or interfere with maintenance of a standard; and (4) for states that are found to have emissions that significantly contribute to nonattainment or interfere with maintenance of the NAAQS downwind, reducing the identified upwind emissions through regional emission allowance trading programs. The following subsections include summaries of the four steps and comments and responses on the application of the CSAPR framework from the proposal.

a. Step 1. In the original CSAPR, downwind air quality problems were assessed using modeled future air quality concentrations for a year aligned with attainment deadlines for the NAAQS considered in that rulemaking. The assessment of future air quality conditions generally accounts for on-the-books emission reductions and the most up-to-date forecast of future emissions in the absence of the transport policy being evaluated (i.e., base case conditions). The locations of downwind air quality problems are identified as those with monitors that are projected to be unable to attain (i.e., nonattainment receptor) or maintain (i.e., maintenance receptor) the standard. This final rule follows this same general approach. However, in this rule, the EPA also considers current monitored air quality data to further inform the projected identification of downwind air quality problems for this final rule. The proposed CSAPR Update put forward this change from the original CSAPR approach and commenters generally supported consideration of monitoring data. Further details and application of step one are described in section V of this rulemaking.

Comment: Some commenters challenged the methodology proposed by the EPA to identify maintenance receptors in the step 1 analysis. Commenters contend that maintenance receptors for purposes of the CSAPR Update analysis should only be identified as those areas that were previously designated nonattainment. The commenters explain that the proposed methodology for identifying maintenance receptors is inconsistent with how the statute defines maintenance areas in section 175A of the CAA. Other commenters contend that the EPA should not identify an area as a maintenance receptor where the area currently measures clean data. The commenters are concerned that it is arbitrary and capricious to treat clean data differently with respect to identifying nonattainment receptors and maintenance receptors.

Response: The EPA does not agree with the commenters' contention that it may only identify maintenance receptors as those areas that were once designated nonattainment. Such an interpretation would be contrary to the statutory process for SIP development. Area designations occur two to three years after promulgation of a new or revised NAAQS pursuant to CAA section 107(d)(1)(B)(i). State SIP submissions pursuant to CAA section 110(a)(1) and (2), including good neighbor SIPs, are also due three years after promulgation of a new or revised NAAQS. Attainment plans for those areas designated nonattainment are due between 18 months and 4 years after designation, depending on the pollutant, pursuant to the requirements of subpart D of title I of the CAA. Re-designations, including application of the requirements of CAA section 175A to develop a maintenance plan, by definition, occur after the initial designation and frequently well after the development and submission of the state's attainment plan.

Given that the statutory timeframe for development of the good neighbor SIP requires submission before the downwind state's development of an attainment plan, before an area is likely to be re-designated from nonattainment to attainment (with the attendant maintenance plan obligations), and in some cases before or at the same time designations for a new or revised standard might be finalized, the EPA does not believe it is reasonable to interpret the good neighbor provision to make states' emission reduction obligations dependent on either current or prior designations of downwind areas with potential air quality problems in other states. While circumstances related to implementation of the 2008 ozone NAAQS (described in more detail earlier) led many states to delay submission of good neighbor SIPs addressing that standard and while the EPA is, in this case, addressing its FIP obligation many years after designations were finalized, these circumstantial factors do not revise the Congressional intent inherent in the statutory structure just described.

Moreover, section 110(a)(1) instructs states to submit plans that provide for the “implementation, maintenance, and enforcement” of the NAAQS. Nothing in the provision indicates that states need only address maintenance of air quality in those areas that were once formally designated nonattainment as to a particular NAAQS. Therefore, where CAA section 110(a)(2)(D)(i)(I) instructs state plans to prohibit emissions activity within the state which will “interfere with maintenance” of the NAAQS in any other state, this provision is logically read consistent with section 110(a)(1) to require upwind states to address the maintenance of the NAAQS in all areas downwind. In this respect, the EPA does not agree with commenters that its identification of maintenance receptors for purposes of the good neighbor provision is constrained by the applicability of the provisions in CAA section 175A. Although the statute invokes the word “maintenance” in that provision to describe the requirements for maintenance plans that apply in areas that have been re-designated from nonattainment to attainment, the good neighbor provision neither implicitly nor explicitly indicates that a state's evaluation of whether it interferes with maintenance in another state should be limited to evaluation of areas subject to the requirements of section 175A.

Regardless of designation, any area may violate the NAAQS if emissions affecting air quality in that area are not adequately controlled. The court in North Carolina was specifically concerned with such areas when it rejected the view that “a state can never `interfere with maintenance' unless the EPA determines that at one point it `contribute[d] significantly to nonattainment.' ” 531 F.3d at 910. The court pointed out that areas barely attaining the standard due in part to emissions from upwind sources would have “no recourse” pursuant to such an interpretation. Id. Accordingly, the court instructed the EPA to give “independent significance” to the maintenance prong of CAA section 110(a)(2)(D)(i)(I) by separately identifying such downwind areas for purposes of defining states' obligations pursuant to the good neighbor provision.

In areas that are currently measuring clean data with respect to the 2008 ozone NAAQS, these measurements can be driven by a number of factors, including recent meteorology that is not conducive to ozone formation. Due to the variable nature of meteorology, the fact that such areas are currently attaining the standard does not address whether the areas might struggle to maintain the standard in the future, which was precisely the issue raised in North Carolina. The EPA's approach to defining maintenance receptors directly responds to these concerns raised by the D.C. Circuit in North Carolina. Thus, although the EPA has considered recent monitored data for purposes of identifying nonattainment receptors in this rulemaking, it does not believe the data should inform the agency's identification of maintenance receptors.

b. Step 2. The original CSAPR used a screening threshold of one percent of the NAAQS to identify upwind states that were “linked” to downwind air pollution problems. States were identified as needing further evaluation for actions to address transport if their air quality impact was greater than or equal to one percent of the NAAQS for at least one downwind problem receptor (i.e., nonattainment or maintenance receptor identified in step 1). For ozone, the impacts include those from total emissions within the state of anthropogenic volatile organic compounds (VOC) and NO_X from all sectors. The EPA evaluated a given state's contribution based on the average relative downwind impact calculated over multiple days. States whose air quality impacts to all downwind problem receptors were below this threshold did not require further evaluation for actions to address transport—that is, these states were determined to make insignificant contributions to downwind air quality problems and therefore have no emission reduction obligations under the good neighbor provision. The EPA used this threshold because it determined that much of the ozone nonattainment problem in the eastern half of the United States results from collective impacts of relatively small contributions from a number of upwind states. Use of the one percent threshold for CSAPR is discussed in the preambles to the proposed and final CSAPR rules. See 75 FR 45237 (Aug. 2, 2010); 76 FR 48238 (Aug. 8, 2011).

The EPA is using the same approach for identifying states that are linked to downwind nonattainment and maintenance receptors in this final rule because the EPA's analysis shows that much of the ozone nonattainment problem being addressed by this rule is still the result of the collective impacts of relatively small contributions from many upwind states. Therefore, application of a uniform threshold helps the EPA to identify those upwind states that should share responsibility for addressing the downwind nonattainment and maintenance problem to which they collectively contribute. Continuing to use one percent of the NAAQS as the screening metric to evaluate collective contribution from many upwind states also allows the EPA (and states) to apply a consistent framework to evaluate interstate emission transport under the “good neighbor” provision from one NAAQS to the next. Accordingly, the EPA has applied an air quality screening threshold calculated as one percent of the 2008 ozone NAAQS, 0.75 ppb, to identify those states “linked” to downwind nonattainment and maintenance receptors with respect to the 2008 ozone NAAQS which require further analysis to identify potential emission reductions. Consistent with the EPA's findings in the original CSAPR, the agency has determined that states with contributions to all downwind nonattainment and maintenance receptors below this threshold make insignificant contributions to downwind air quality problems and therefore have no emission reduction obligations under the good neighbor provision with respect to the 2008 ozone NAAQS. Application of step 2 is described in section V.

Comment: Some commenters supported the continued use of an air quality screening threshold of one percent of the NAAQS to identify upwind states requiring further analysis. However, some commenters opposed the use of the proposed one percent threshold because the commenters claim that the EPA had not technically demonstrated that continued use of the one percent screening metric is appropriate for linking an upwind state to a downwind nonattainment or maintenance receptor with respect to the 2008 ozone NAAQS. Some commenters believed that use of the one percent threshold was too stringent given that the proposed rule only focuses on emission reductions from one sector, EGUs. Other commenters believed that one percent (0.75 ppb) was not stringent enough, and they recommended using a lower value such as 0.5 ppb.

Response: The EPA continues to believe that it is appropriate to use a threshold of one percent of the NAAQS for identifying states which merit further analysis to determine if emission reductions may be warranted. The EPA has consistently determined in past analyses conducted for the NO_X SIP Call, CAIR, and CSAPR that ozone nonattainment problems generally result from relatively small contributions from many upwind states, along with contributions from in-state sources and in some cases, substantially larger contributions from a subset of particular upwind states.

The EPA determined that it is appropriate to use a low air quality threshold when analyzing states' collective contributions to downwind nonattainment and maintenance for ozone as well as PM_2.5.

To further support the EPA's evaluation of the appropriate screening threshold to use for this purpose, the EPA compiled the contribution modeling results from the air quality modeling conducted for this rule in order to analyze the impact of different possible thresholds. The EPA notes that similar contribution modeling data were available for comment in the docket for the proposed CSAPR Update. This compiled analysis demonstrates the reasonableness of continuing to use one percent as an air quality threshold to account for the combined impact of relatively small contributions from many upwind states. See the Air Quality Modeling Technical Support Document for the Final Cross-State Air Pollution Rule Update (AQM TSD). For each of the ozone receptors identified in the final CSAPR Update rule analysis, the EPA identified: (1) The total upwind state contributions, and (2) the amount of the total upwind state contribution that is captured at one percent, five percent, and half (0.5) percent of the NAAQS. The EPA continues to find that the total collective contribution from upwind states' sources represent a significant portion of the ozone concentrations at downwind nonattainment and maintenance receptor locations. This analysis shows that the one percent threshold generally captures a substantial percentage of the total pollution transport affecting downwind states without also implicating states that contribute insignificant amounts.

In response to commenters who advocated for a lower threshold, the EPA observes that the analysis shows that a lower threshold would result in relatively modest increases in the overall percentage of ozone pollution transport captured relative to the amounts captured at the one percent level at a majority of the receptors. A lower percent threshold could lead to emission reduction responsibilities in additional states that individually have a relatively small impact on those receptors, compared to other upwind states — an indicator that emission controls in those states are likely to have a smaller air quality impact at the downwind receptor.

In response to commenters who advocated for a higher threshold, the EPA observes that the analysis of a 5 percent threshold shows that a higher threshold would result in a relatively large reduction in the overall percentage of ozone pollution transport captured relative to the amounts captured at the one percent level at a majority of the receptors. In fact, at a 5 percent threshold there would not be any upwind states linked to the nonattainment and maintenance receptors in Texas.

As a result of our analyses of higher and lower thresholds, as described in the AQM TSD, the agency is not convinced that selecting a threshold below one percent or above one percent is necessary or desirable.

Comment: Some commenters suggested more specifically that a 0.5 ppb threshold would be more appropriate for upwind states contributing to downwind receptors in Texas. The commenters note that the lower threshold will add more states in the rule and address more of the maximum combined upwind state impacts to Texas' receptors.

Response: The EPA agrees that a lower threshold of 0.5 ppb would capture more of the upwind states that contribute to Texas receptors. However, the contribution of upwind state interstate transport to receptors in Texas is less than the upwind state interstate transport contribution identified for other downwind nonattainment and maintenance receptors in this rule. Therefore, the potential ozone reductions that would result from including additional upwind states are relatively small. The EPA believes it is therefore reasonable to use a uniform threshold for all states included in this rule.

c. Step 3. For states that are linked in step 2 to downwind air quality problems, the original CSAPR evaluated emission reductions available in upwind states by application of uniform levels of control stringency, represented by cost. The EPA evaluated NO_X reductions that were available in upwind states by applying uniform levels of control stringency to entities in these states. For each uniform level of control stringency evaluated, the EPA used a multi-factor test to evaluate cost, NO_X reduction potential, and downwind air quality impacts. This multi-factor test was used to select a uniform level of control stringency on the remaining allowable emissions—those available after reducing significant contribution to nonattainment or interference with maintenance of a NAAQS downwind. The use of uniform control stringency also reasonably apportions upwind responsibility among linked upwind states. This approach was upheld by the Supreme Court in EPA v. EME Homer City Generation.

In this final rule, the EPA applies this approach to establish EGU NO_X emission budgets that reflect NO_X reductions necessary to reduce interstate ozone transport for the 2008 NAAQS. In this process, the EPA also explicitly evaluates whether the budget quantified for each state would result in over-control, as required by the Supreme Court and the D.C. Circuit. Specifically, the multi-factor test is used to evaluate whether an upwind state is linked solely to downwind air quality problems that are resolved at a given uniform control stringency, or if upwind states reduce their emissions at a given uniform control stringency such that contributions from sources in the state no longer meet or exceed the one percent air quality contribution threshold. This evaluation of cost, NO_X reductions, and air quality improvements, including consideration of potential over-control, results in the EPA's quantification of upwind emissions that significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS downwind. The EPA's assessment of significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS and our development of EGU NO_X ozone season emission budgets is described in section VI of this document.

Comment: Some commenters claim that the CSAPR framework requires the same remedy for states linked solely to maintenance receptors as it does for states linked to nonattainment receptors and these commenters suggested that states linked solely to maintenance problems should have a different, less stringent requirement. These commenters contend that, as a result, the EPA has failed to given independent significance to the “interfere with maintenance” clause of CAA section 110(a)(2)(D)(i)(I) as compared to the “significant contribution” clause of that provision. The commenters contend that it constitutes over-control to impose budgets based on the same uniform control stringency to address both states that interfere with maintenance of the NAAQS in downwind states and those that significantly contribute to nonattainment in downwind states. The commenters cite the Supreme Court's opinion in EPA v. EME Homer City Generation, explaining that the EPA may only limit emissions “by just enough to permit an already-attaining State to maintain satisfactory air quality.” 134 S. Ct. at 1604 n.18.

Response: The EPA disagrees with these comments. The CSAPR framework gives independent meaning to the “maintenance” prong of CAA section 110(a)(2)(D)(i)(I) as required by D.C. Circuit's decision in North Carolina. By identifying those downwind areas that are at risk of exceeding the NAAQS if historical meteorology conducive to ozone formation occurs again, the EPA thereby defines upwind states linked to these areas as having a transport obligation. In its decision, on remand from the Supreme Court, the D.C. Circuit confirmed that the EPA's approach to identifying maintenance receptors in CSAPR comported with the court's prior instruction to give independent meaning to the “interfere with maintenance” prong in the good neighbor provision. EME Homer City II, 795 F.3d at 136. The EPA's analysis indicates that the maintenance receptors identified in this rulemaking are at risk of NAAQS violations and therefore should be afforded protection.

CAA section 110(a)(2)(D)(i)(I) requires that state implementation plans, or the EPA where such plans are insufficient, prohibit emissions which will interfere with maintenance of the NAAQS in downwind states. Once the EPA identifies maintenance receptors, the EPA is compelled by the CAA to prohibit emissions that would jeopardize the ability of these receptors to maintain the standard. Put another way, it would be inconsistent with the CAA for the EPA to identify receptors that are at risk of NAAQS violations given certain conditions due to transported upwind emissions and then not prohibit the emissions that place the receptor at risk.

Moreover, the Supreme Court has acknowledged that the “interfere with maintenance” clause of the good neighbor provision is ambiguous with respect to how the EPA should quantify and allocate the emission reduction obligations for states linked to downwind maintenance concerns. The Supreme Court clearly stated that “[n]othing in either clause of the Good Neighbor Provision provides the criteria by which EPA is meant to apportion responsibility.” EPA v. EME Homer City Generation, L.P., 134 S. Ct. at 1604 n.18 (emphasis in original). Thus, the EPA is afforded deference to develop an appropriate application of this requirement so long as it is a “permissible construction of the statute.” Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 843, 104 S. Ct. 2778, 2782 (1984). The Supreme Court held that it was a permissible interpretation of the statute to apportion responsibility for states linked to nonattainment receptors considering “both the magnitude of upwind States' contributions and the cost associated with eliminating them.” EPA v. EME Homer City Generation, L.P., 134 S. Ct. at 1606. It is equally reasonable and permissible to use these factors to apportion responsibility among upwind states linked to maintenance receptors because the goal in both instances is to prohibit the “amounts” of pollution that will either significantly contribute to nonattainment or interfere with maintenance of the NAAQS downwind. The EPA's contribution analysis demonstrates that the amounts of pollution prohibited through implementation of the budgets finalized in this rule will, under certain projected conditions, otherwise contribute to downwind nonattainment and interfere with maintenance of the 2008 ozone NAAQS in downwind states.

All of that being said, contrary to the commenters' contention, the CSAPR framework does not necessarily dictate that upwind states linked solely to maintenance receptors be subject to the same level of NO_X control stringency as upwind states linked to nonattainment receptors. Rather, the selection of NO_X control stringency is in part informed by the difficulty of resolving the identified downwind air quality problem to which each state is linked. (See the components, including air quality considerations, of the multi-factor test described in section VI.D.)The data and analysis for the CSAPR Update show that the maintenance-only receptors generally represent less severe air quality problems than the nonattainment receptors. Specifically, in the final CSAPR Update modeling, maintenance-only receptors have an average maximum design value that is 1.9 ppb above the 2008 ozone NAAQS while nonattainment receptors have an average maximum design value that is 3.1 ppb above the NAAQS. As described in section VI.D, the specific emission reduction obligation for each state is limited by the amount of air quality improvement needed to either attain or maintain the NAAQS at the particular receptor to which the state's emissions are linked. These data therefore demonstrate that states linked to maintenance-only receptors would generally have a lesser emission reduction obligation than states linked to nonattainment receptors, but for the partial nature of this rule.

The original CSAPR rulemaking provides an example of this differentiation of control stringency based on the severity of downwind air quality problems. In that rulemaking, some states reduced their significant contribution of SO₂ for purposes of addressing downwind PM_2.5 nonattainment and maintenance problems at a lower uniform cost control stringency, while other states needed to comply with budgets calculated at a higher uniform control stringency in order to resolve their transport obligations.

In the case of a full solution, which EPA is not promulgating in this action, a similar differentiation in the level of control stringency may emerge between the upwind states linked solely to maintenance and the upwind states linked to nonattainment. However, given the unique circumstances of this rulemaking and the need to obtain emission reductions on a tight timeframe in order to assist downwind states with meeting the downwind 2018 attainment deadline, the EPA is only quantifying a subset of each state's emission reduction obligation pursuant to the good neighbor provision. The EPA's analysis shows that even when all the emission reductions required by this rule are in place, both attainment and maintenance problems at downwind receptors may remain, and the EPA will need to evaluate whether the upwind states' emission reduction obligations should be more stringent considering other factors not addressed by this rule, including control strategies that can be implemented on a longer timeframe or by other source categories. Thus, the commenters are incorrect to state that the EPA is necessarily imposing the same remedy (in the form of the same level of control stringency) for states linked only to maintenance-only receptors as those linked to nonattainment receptors by way of applying the CSAPR framework. It is only due to the partial nature of the remedy provided by this rule that the EPA is finalizing a single uniform level of control stringency for all CSAPR Update states.

d. Step 4. Finally, the original CSAPR used allowance trading programs to implement the necessary emission reductions represented by the emission budgets identified in step 3. Emission allowances were issued to units covered by the trading program, and each covered unit can then retain and/or acquire however many allowances are needed to cover its ozone season NO_X emissions over the course of each control period; however, because the total number of allowances issued in each period is limited to the sum of the states' emission budgets, total emissions across all affected EGUs are similarly limited such that overall emissions are controlled. Additionally, the original CSAPR included variability limits, which define the amount by which collective emissions within a state may exceed the level of that state's budget in a given control period to account for variability in EGU operations while still ensuring that the necessary emission reductions are achieved in each state. The variability limits for the CSAPR NO_X ozone season trading program is 21 percent of each state's budget. CSAPR set assurance levels equal to the sum of each state's emission budget plus its variability limit. The original CSAPR included assurance provisions that would require additional allowance surrenders in the instance that emissions in the state exceed the state's assurance level. This limited interstate trading approach is responsive to previous court decisions. See discussion in section VII of this preamble. The EPA is applying this same approach to implement reductions in interstate transport for the 2008 ozone NAAQS in the CSAPR Update. Implementation of the CSAPR Update allowance trading program (CSAPR NO_X ozone season Group 2) is described in section VII of this final rule. This new program is substantially similar to the existing CSAPR NO_X ozone season program.

Comment: Some stakeholders have observed that a subset of existing post-combustion EGU NO_X controls (e.g., SCR) may not have operated in recent years because CAIR or CSAPR allowance prices were below the operating costs of the controls. These commenters suggest that, accordingly, CAIR or CSAPR did not achieve optimal environmental protection, as identified by requiring existing controls to operate.

Response: Regional allowance trading programs set a limit on the overall amount of allowable emissions. This limit reflects a reduction from uncontrolled emission levels and compliance is demonstrated through an allowance trading program that allows regulated entities the flexibility to determine their own compliance path. In states that participated in both CAIR and CSAPR ozone season programs, summer NO_X emissions dropped by 20 percent from 2009 to 2015, and compliance was demonstrated nearly 100 percent of the time due to rigorous emissions monitoring and allowance tracking. These outcomes, combined with air quality improvements, demonstrate the environmental achievements of these programs. The EPA notes that the allowance prices were low because of significant emission reductions that took place by other means (e.g., new low-emitting generating capacity coming online that replaced older, higher emitting generation as well as EGU retirements). These other means significantly reduced emissions and helped the power sector meet the CAIR and CSAPR emission budgets without relying on the use of allowances. In light of these and other dramatic reductions in power sector pollution, the supply of CAIR and CSAPR allowances rose and their prices fell. In this case, certain utilities appear to have turned off their emission controls, relying instead on purchased allowances. The EPA notes, however, that in this case, the overall net effect of these activities has been a significant reduction in emissions. The EPA expects that certain aspects of this final rule will alleviate some of these concerns about allowance prices. In particular, this action establishes new emission budgets to address the more stringent 2008 ozone NAAQS that are calculated based on a uniform cost that is reflective of, among other things, operating existing controls. See section VI in this preamble on EGU NO_X reductions and emission budgets.

4. Partial Versus Full Resolution of Transport Obligation

Given the unique circumstances surrounding the implementation of the 2008 ozone standard that have delayed state and the EPA's efforts to address interstate transport, at this time the EPA is focusing its efforts on the immediately available and cost-effective emission reductions that are achievable by the 2017 ozone season.

This rulemaking establishes (or revises currently established) FIPs for 22 eastern states under the good neighbor provision of the CAA. These FIPs contain requirements for EGUs in these states to reduce ozone season NO_X emissions beginning with the 2017 ozone season. As noted in section VI, the EPA has identified important EGU emission reductions that are cost-effective and achievable by the 2017 ozone season in the covered states through actions such as turning on and operating existing pollution controls. These readily available emission reductions will assist downwind states in attaining and maintaining the 2008 ozone NAAQS and will provide human health and welfare benefits through reduced exposure to ground-level ozone pollution.

While these reductions are necessary to assist downwind states in attaining and maintaining the 2008 ozone NAAQS, and are necessary to address good neighbor obligations for these states, the EPA acknowledges that they may not be sufficient to fully address these states' good neighbor obligations. With respect to the 2008 ozone standard, the EPA has generally not attempted to quantify the ozone season NO_X reductions that may be necessary to eliminate all significant contribution to nonattainment or interference with maintenance in other states. Given the time constraints for implementing NO_X reduction strategies, the EPA believes that implementation of a full remedy that includes emission reductions from EGUs as well as other sectors may not be achievable for 2017. However, a partial remedy is achievable for 2017 and therefore this rule focuses on these more immediately available reductions.

To evaluate full elimination of a state's significant contribution to nonattainment or interference with maintenance, non-EGU ozone season NO_X reductions and further EGU reductions that are achievable after 2017 should be considered. The EPA did not quantify non-EGU emissions reductions to address interstate ozone transport for the 2008 ozone NAAQS at this time because: (1) There is greater uncertainty in the non-EGU emission inventory estimates than for EGUs; and (2) based on current knowledge, there appear to be few non-EGU reductions that could be accomplished by the beginning of the 2017 ozone season. This is discussed further in section VI. Commenters generally agreed with the EPA that non-EGU emission reductions are not readily available for the 2017 ozone season but advocated that such reductions should be included as appropriate in future mitigation actions.

Because the reductions in this action are EGU-only and because the EPA has focused the policy analysis for this action on reductions available by the beginning of the 2017 ozone season, CSAPR update reductions will represent, for most states, a first, partial step to addressing a given upwind state's significant contribution to downwind air quality impacts for the 2008 ozone NAAQS. Generally, a final determination of whether the EGU NO_X reductions quantified in this rule represent a full or partial elimination of a state's good neighbor obligation for the 2008 NAAQS is subject to an evaluation of the contribution to interstate transport from non-EGUs and further EGU reductions that are achievable after 2017. However, the EPA believes that it is beneficial to implement, without further delay, EGU NO_X reductions that are achievable in the near term. The NO_X emission reductions in this final rule are needed (although they may not be all that is needed) for these states to eliminate their significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS.

Comment: Several commenters questioned whether the CAA authorizes the EPA to implement a “partial” remedy, and also suggested that the partial nature of the proposed rule might “circumvent” prior courts' instructions regarding over-control. Those commenters note that the statute does not describe a process for issuing a partial FIP, and suggest that the EPA may only issue a FIP that fully eliminates transported contribution from upwind States. These commenters also imply that the Supreme Court's approval of the EPA's use of costs in defining “significant contribution” in EME Homer City does not apply to the agency's approach in this rule because the commenters claim that “CSAPR was a transport rule that developed comprehensive state budgets [and][t]his proposed rule only addresses EGUs.”

Other commenters were concerned that the EPA is not meeting its statutory obligation to develop federal implementation plans that fully resolve downwind transport problems. These commenters argue that the EPA's own delay in preparing a rule to resolve interstate transport with respect to the 2008 ozone NAAQS caused the tight timeline now faced by the agency, and cannot be used as an excuse for failing to promulgate a full remedy by 2017. In the alternative, commenters argue that even if time constraints only allow the EPA to impose a partial remedy by the 2017 ozone season, the agency must provide a plan now for how it will achieve the rest of the necessary reductions in the future, and suggests the agency could do so by implementing a second implementation phase to go into effect after the 2017 ozone season.

Response: The EPA disagrees with commenters who suggest that the agency lacks authority to promulgate a partial FIP. As described in section III, the EPA's current statutory deadlines to promulgate FIPs extend until 2017 and 2018 for most states, and the EPA will remain mindful of those deadlines as it evaluates what further steps may be necessary to fully address interstate transport for the 2008 ozone NAAQS.

Nothing in section 110(c)(1) of the CAA suggests that the agency is barred from taking a partial step at this time (before its FIP deadline has passed), nor does the statutory text indicate Congress' intent to preclude the EPA from tackling this problem in a step-wise process. The D.C. Circuit has held on numerous occasions that agencies have the authority to tackle problems in an incremental fashion, particularly where a lack of resources or technical expertise make it difficult to immediately achieve the statute's full mandate. See, e.g., Grand Canyon Air Tour Coal. v. FAA, 154 F.3d 455, 478 (D.C. Cir. 1998); City of Las Vegas v. Lujan, 891 F.2d 927, 935 (D.C. Cir. 1989) (“`[A]gencies have great discretion to treat a problem partially . . .' [and a] court will not strike down agency action `if it were a first step toward a complete solution.'”); Gen'l Am. Transp. Corp. v. ICC, 872 F.2d 1048, 1059 (D.C. Cir. 1989); Nat'l Ass'n of Broadcasters v. FCC, 740 F.2d 1190, 1209-14 (D.C. Cir. 1984).

As explained previously, the EPA expects that a full resolution of upwind transport obligations would require emission reductions from sectors besides EGUs, including non-EGUs, and further EGU reductions that are achievable after 2017. Given the approaching July 2018 attainment deadline for the 2008 ozone NAAQS, developing a rule that would have covered additional sectors and emission reductions on longer compliance schedules would have required more of the EPA's resources over a longer rulemaking schedule to fully address. As discussed earlier in this document, the EPA is still in the process of developing information regarding available emission reductions from non-EGUs. Had the EPA waited to promulgate FIPs until that information was fully developed, we could not have assured emission reductions by 2017, in time to assist downwind states to meet the July 2018 attainment deadline. Accordingly, the EPA reasonably concluded that it was most prudent to promulgate a first step to address interstate transport for the 2008 ozone NAAQS that achieves those immediate reductions while addressing any remaining obligation that might be achievable on a longer timeframe in a separate rulemaking. The EPA intends to continue to collect information and undertake analyses for potential future emission reductions at non-EGUs that may be necessary to fully quantify states' interstate transport obligations in a future action.

The EPA further disagrees with commenters that its partial step here runs afoul of the Supreme Court and D.C. Circuit's instructions to avoid unnecessary over-control of upwind state emissions. As acknowledged by these commenters, due to its limited nature, this final action does not generally fully resolve downwind air quality problems, much less result in over-control of upwind state emissions relative to those air quality problems. See section VI for further discussion of the EPA's over-control analysis applied to address these courts' concerns. To the extent the EPA determines that it must require additional emission reductions in a later rulemaking to address interstate transport with respect to the 2008 ozone NAAQS, the EPA will also confirm that such reductions do not result in unnecessary over-control, consistent with the courts' instructions.

The EPA also disagrees that the Supreme Court's affirmation of its use of uniform control stringency to define significant contribution does not apply equally to this action. The commenters are mistaken insofar as they suggest that the original CSAPR regulated sources other than EGUs. This rule is identical to the original CSAPR rule in terms of the form of its remedy—an emission budget issued to each state, with allowances allocated to EGUs within the state. As in the original CSAPR, each state is free to submit a SIP to replace the FIP indicating that it will meet its emission budget via reductions from other sectors.

Furthermore, the EPA took a similar partial approach in quantifying interstate transport obligations with respect to the 1997 ozone NAAQS in the original CSAPR rulemaking. In that rule, the EPA's modeling indicated that there would be persistent nonattainment and maintenance problems at some receptors even after imposition of CSAPR's emission reductions. The EPA stated that, because additional emission reductions may be available at higher cost thresholds and from other sectors, such as non-EGUs, the emission reductions quantified in the rule did not necessarily fully quantify certain states' interstate transport obligation with respect to the 1997 ozone NAAQS. Therefore, for states linked to those receptors, the agency concluded that its FIP provided a partial remedy, and that more emission reductions might be required in order to fully satisfy the states' transport obligations. As discussed later, this action now concludes that the EPA has fulfilled its FIP obligation with respect to the 1997 ozone NAAQS.

Finally, the EPA disagrees with commenters who suggest that the agency's “own delay” in implementing a transport rule to address the 2008 ozone NAAQS led to the current circumstances the states and the EPA now face. Until mid-2014 when the Supreme Court reversed the D.C. Circuit's original vacatur of CSAPR, the governing judicial holding was that the EPA lacked legal authority to promulgate any FIP addressing 2008 ozone transport obligations until the agency first quantified each state's emission reduction obligation, allowed states time to submit SIPs, and acted on those SIPs. In July 2015, the D.C. Circuit issued its final decision generally upholding CSAPR, albeit subject to remand without vacatur of certain state budgets for reconsideration. The agency then proceeded on an expedited basis to issue a proposal to address its FIP obligation with respect to the 2008 ozone NAAQS in the fall of 2015. While commenters and the EPA may agree that it would be best if a full remedy could be possible by the 2017 ozone season such that downwind areas would receive those benefits in time for their Moderate area attainment deadlines, such a remedy simply is not feasible in the existing timeframe.

As noted previously, CAA section 110(c)(1) directs the EPA to promulgate a FIP “at any time within two years” of its disapproval or finding of failure to submit. For the majority of states affected, that timeframe will not end until 2017 or later, and as mentioned previously, North Carolina compels the EPA to identify upwind reductions and implementation programs to achieve these reductions by the 2017 ozone season. As the EPA has explained, it believes that reductions from other sectors besides EGUs should be evaluated in developing a full remedy, and the agency does not have sufficient information at this time to promulgate such a rule. Therefore, given these circumstances, the agency maintains that only requiring at this time necessary and achievable reductions by the 2017 ozone season is reasonable.

5. Why Focus on Eastern States

The final CSAPR Update focuses on collective contributions of ozone pollution from states in the east. In this action, the EPA is not addressing interstate emission transport in this action for the 11 western contiguous United States. The CSAPR framework builds on previous eastern-focused efforts to address collective contributions to interstate transport, including the NO_X Budget Trading Program, CAIR, and the original CSAPR rulemaking. However, for western states, the EPA believes that there may be geographically specific factors to consider in evaluating interstate ozone pollution transport. Accordingly, given the need for near-term 2017 analysis and implementation of the CSAPR Update FIPs, the EPA focused this rulemaking on eastern states where the CSAPR method for assessing collective contribution has proven effective.

The EPA did not propose CSAPR Update FIPs to address interstate emission transport for western states and it is not finalizing FIPs for any of these states. However, the EPA notes that western states are not relieved of their statutory obligation to address interstate transport under the section 110(a)(2)(D)(i)(I). The EPA and western states, working together, are continuing to evaluate interstate transport obligations on a case-by-case basis. The EPA will fulfill its backstop role with respect to issuing FIPs for western states if and when that becomes necessary. The EPA notes that a 2-year FIP clock has started for New Mexico and California following the July 13, 2015 finding of failure to submit. The EPA notes that analyses developed to support this rule, including air quality modeling and the EPA's assessment of EGU NO_X mitigation potential, contain data that can be useful for western states in developing SIPs. The data from these analyses are available in the docket for this rulemaking.⁸⁸

The proposed CSAPR Update solicited comment on whether to promulgate FIPs to address interstate ozone transport for the 2008 ozone NAAQS for western states, either in this rulemaking or in a subsequent rulemaking. Most commenters generally agreed with the EPA's proposal to exclude western states in this rule given that there may be geographically specific factors to consider in evaluating western states' interstate transport requirements.

6. Short-Term NO_X Emissions

In eastern states, the highest measured ozone days tend to occur within the hottest days or weeks of the summer. There tends to be a higher demand for electricity (for instance, to power air conditioners) on hotter days and with this increased power demand, ozone formation can increase causing peak ozone days. In discussions with representatives and officials of eastern states in April 2013 and April 2015, and in several letters to the EPA, officials from states that are part of the Ozone Transport Region (OTR) states suggested that EGU emissions transported from upwind states may disproportionally affect downwind ozone concentrations on peak ozone days in the eastern U.S. These representatives asked that the EPA consider additional peak day limits on EGU NO_X emissions.

Comment: The proposed CSAPR Update took comment on whether or not short-term (e.g., peak-day) EGU NO_X emissions disproportionately impact downwind ozone concentrations and, if they do, what EGU emission limits would be reasonable complements to the seasonal CSAPR requirement. Most commenters requested that the EPA not impose a short-term limit at this time.

Response: As noted previously, the EPA finds that NO_X ozone season trading programs are effective at reducing peak ozone concentrations, and the agency is therefore continuing with a seasonal approach in this final rule. The EPA will continue to look at this matter with an eye towards future rulemakings.

C. Responding to the Remand of CSAPR NO _X Ozone Season Emission Budgets

As noted previously, in EME Homer City II, the D.C. Circuit declared invalid the CSAPR phase 2 NO_X ozone season emission budgets of 11 states, holding that those budgets over-control with respect to the downwind air quality problems to which those states were linked for the 1997 ozone NAAQS. 795 F.3d at 129-30, 138. As to ten of these states, the court held that the EPA's 2014 modeling conducted to support the RIA for CSAPR demonstrated that air quality problems at the downwind locations to which those states were linked would resolve by phase 2 of the CSAPR program without further transport regulation (either CAIR or CSAPR). Id. at 129-30. With respect to Texas, the court held that the record reflected that the ozone air quality problems to which the state was linked could be resolved at a lower cost threshold. Id. The court therefore remanded those budgets to the EPA for reconsideration consistent with the court's opinion. Id. at 138. The court instructed the EPA to act “promptly” in addressing these issues on remand. Id. at 132.

The court's decision explicitly applies to 11 state budgets involved in that litigation: Florida, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia. Id. at 129-30, 138. The EPA is finalizing FIPs for eight of those states to address interstate transport with respect to the 2008 ozone NAAQS: Maryland, New Jersey, New York, Ohio, Pennsylvania, Texas, Virginia, and West Virginia. The FIPs incorporate revised emission budgets that replace the budgets promulgated in the CSAPR rule to address the 1997 ozone NAAQS, the same budgets remanded by the D.C. Circuit for reconsideration. Further, in this rule, these budgets will be effective for the 2017 ozone season, the same period in which the phase 2 budgets that were invalidated by the court are currently scheduled to become effective. Therefore, this action provides an appropriate and timely response to the court's remand by replacing the phase 2 budgets promulgated in the CSAPR to address the 1997 ozone NAAQS, which were declared invalid by the D.C. Circuit, with budgets developed to address the revised and more stringent 2008 ozone NAAQS.

For the three remaining original CSAPR ozone season states affected by this portion of the EME Homer City II decision, Florida, North Carolina, and South Carolina, the EPA is not finalizing FIPs because the EPA's analysis performed to support the final rule does not indicate that these states are linked to any identified downwind nonattainment or maintenance receptors with respect to the 2008 ozone standard. Because the 2008 ozone NAAQS is more stringent than the 1997 ozone NAAQS, this modeling necessarily indicates that Florida, North Carolina, and South Carolina are also not linked to any remaining air quality concerns with respect to the 1997 ozone standard for which the states were regulated in the original CSAPR. Accordingly, in order to address the Court's remand with respect to these three states' interstate transport responsibility under the 1997 ozone standard, the EPA is removing these states from the CSAPR ozone season trading program beginning in 2017 when the phase 2 ozone season emission budgets were scheduled to be implemented.

Comment: Some commenters contend that the D.C. Circuit's remand of the phase 2 ozone season emission budgets in EME Homer City II requires the EPA to calculate new budgets to address the states' transport obligations with respect to the 1997 ozone NAAQS. These commenters contend that the EPA has not fully responded to the court's remand until it quantifies new budgets.

Response: As described earlier, the D.C. Circuit remanded 10 of CSAPR's ozone season NO_X budgets because the EPA's 2014 modeling conducted to support the RIA for CSAPR demonstrated that air quality problems at the downwind locations to which those states were linked would resolve by phase 2 of the CSAPR program without further transport regulation. The court essentially found that, by phase 2 of the CSAPR program, the CSAPR record did not support the EPA's authority to require emission reductions from these 10 states in order to address the 1997 ozone NAAQS. Thus, absent any new analysis demonstrating that these states are linked to downwind air quality problems with respect to the 1997 ozone NAAQS, the EPA does not have the authority to subject these states to the CSAPR NO_X ozone season emissions program beginning in 2017 and therefore does not have the authority to calculate new emission budgets for these states to address that standard. For Florida, North Carolina, and South Carolina, the EPA is therefore relieving sources in the states from the obligation to comply with the NO_X ozone season trading program in response to the remand. For the remaining seven states, sources located in these states will no longer be subject to the phase 2 NO_X ozone season budgets calculated to address the 1997 standard; however, because these states are linked to downwind air quality problems with respect to the 2008 ozone NAAQS, the EPA is promulgating new ozone season NO_X emission budgets at 40 CFR 97.810(a). See also 40 CFR 52.38(b)(2)(ii) (relieving sources in all ten of these states of the obligation to comply with the remanded phase 2 NO_X ozone season emission budgets after 2016).

With respect to Texas, because the court determined that the phase 2 ozone season budget was more stringent than necessary to address Texas' interstate transport obligation with respect to the 1997 ozone NAAQS, the EPA removed Texas's budget as a constraint in the 2017 air quality modeling. Even in the absence of this constraint, the updated 2017 air quality modeling shows that the predicted average DVs and maximum DVs are below the level of the 1997 ozone NAAQS for the downwind receptors of concern to which Texas was linked in the original CSAPR rulemaking with respect the 1997 ozone NAAQS. Accordingly, the EPA has concluded that it need not require additional emission reductions from sources in Texas in order to address the state's interstate transport obligation. Thus, sources in Texas will no longer be subject to the phase 2 NO_X ozone season budget calculated to address the 1997 standard; however, because Texas is linked to downwind air quality problems with respect to the 2008 ozone NAAQS, the EPA is promulgating a new ozone season NO_X emission budget to address that standard at 40 CFR 97.810(a). See also 40 CFR 52.38(b)(2)(ii) (relieving sources in Texas of the obligation to comply with the remanded phase 2 NO_X ozone season emission budgets after 2016).

Separately, various petitioners filed legal challenges in the D.C. Circuit to an EPA supplemental rule that added five states to the CSAPR ozone season trading program, 76 FR 80760 (Dec. 27, 2011). See Public Service Company of Oklahoma v. EPA, No. 12-1023 (D.C. Cir., filed Jan. 13, 2012). The case was held in abeyance during the pendency of the litigation in EME Homer City. The case remains pending in the D.C. Circuit as of the date of signature of this rule. The EPA notes that this rulemaking also promulgates FIPs for all five states added to CSAPR in the supplemental rule: Iowa, Michigan, Missouri, Oklahoma, and Wisconsin. These FIPs incorporate revised emission budgets that replace the budgets promulgated in the supplemental CSAPR rule to address the 1997 ozone NAAQS for these five states and will be effective for the 2017 ozone season. In light of the court's decision in EME Homer City II, the EPA examined the record supporting the CSAPR rulemaking and determined that, like the 10 states discussed earlier, the EPA's 2014 modeling conducted to support the RIA for CSAPR demonstrated that air quality problems at the downwind locations to which four of the states added to CSAPR in the supplemental rule, Iowa, Michigan, Oklahoma, and Wisconsin, were linked would resolve by phase 2 of the CSAPR program without further transport regulation (either CAIR or CSAPR). Accordingly, sources in these states will no longer be subject to the phase 2 NO_X ozone season budgets calculated to address the 1997 standard; however, because these states are linked to downwind air quality problems with respect to the 2008 ozone NAAQS, the EPA is promulgating new ozone season NO_X emission budgets at 40 CFR 97.810(a). See also 40 CFR 52.38(b)(2)(ii) (relieving sources in these four states of the obligation to comply with the original phase 2 NO_X ozone season emission budgets after 2016).

The D.C. Circuit also remanded without vacatur the CSAPR phase 2 SO₂ annual emission budgets for four states (Alabama, Georgia, South Carolina, and Texas) for reconsideration. 795 F.3d at 129, 138. This final rule does not address the remand of these CSAPR phase 2 SO₂ annual emission budgets. On June 27, 2016, the EPA released a memorandum outlining the agency's approach for responding to the D.C. Circuit's July 2015 remand of the CSAPR phase 2 SO₂ annual emission budgets for Alabama, Georgia, South Carolina, and Texas. The memorandum can be found at https://www3.epa.gov/airtransport/CSAPR/pdfs/CSAPR_SO2_Remand_Memo.pdf .

D. Addressing Outstanding Transport Obligations for the 1997 Ozone NAAQS

In the original CSAPR, the EPA noted that the reductions for 11 states may not be sufficient to fully eliminate all significant contribution to nonattainment or interference with maintenance for certain downwind areas with respect to the 1997 ozone NAAQS. The 11 states are: Alabama, Arkansas, Georgia, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Tennessee, and Texas. In the original CSAPR, the EPA did not require EGU NO_X reductions represented by costs that exceeded $500 per ton because it noted that, at cost thresholds higher than $500 per ton, non-EGU reductions should also be considered. Additionally, the EPA's analysis projected continued nonattainment and maintenance problems at downwind receptors to which these upwind states were linked after implementation of the CSAPR trading programs. Specifically, persistent ozone problems were expected in Baton Rouge, Louisiana; Houston, Texas; and Allegan, Michigan according to the remedy case modeling conducted for the final rule. At that time the EPA did not quantify further ozone season EGU or non-EGU NO_X reductions that would be needed in these states to fully resolve the good neighbor obligation under the CAA with respect to the 1997 ozone NAAQS.

To evaluate whether additional emission reductions would be needed in these 11 states to address the states' full good neighbor obligation for the 1997 ozone NAAQS, the EPA reviewed the 2017 air quality modeling conducted for this rule, which includes emission reductions associated with the CSAPR phase 2 ozone season budgets that were not remanded. The modeling included the phase 2 ozone season budgets for 10 of the states listed above—all but Texas. For each of these states, the updated 2017 air quality modeling shows that the predicted average DVs and maximum DVs for 2017 are below the level of the 1997 ozone NAAQS for the downwind receptors of concern to which the 11 states were linked in the original CSAPR rulemaking with respect the 1997 ozone NAAQS, meaning that these receptors no longer qualify as either nonattainment or maintenance receptors for that NAAQS. The 2017 air quality modeling also shows that there are no other nonattainment or maintenance receptors to which these states would be linked with respect to the 1997 ozone NAAQS. Thus, the EPA finds that, with implementation of the original CSAPR NO_X ozone season emission budgets in the states not subject to the remand, emissions within these ten states no longer significantly contribute to downwind nonattainment or interference with maintenance for the 1997 ozone NAAQS. Thus, the promulgation of the CSAPR NO_X ozone season budgets in those states satisfied the EPA's FIP obligation pertaining to the good neighbor provision for the 1997 ozone NAAQS. The EPA further finds that, with implementation of the CSAPR Update NO_X ozone season emission budgets, emissions from these ten states also no longer significantly contribute to downwind nonattainment or interference with maintenance for the 1997 ozone NAAQS.

Despite the EPA's conclusion in CSAPR that the 1997 ozone transport problems to which Texas was linked were not fully resolved, the court concluded in EME Homer City II that the ozone season emission budget finalized for Texas resulted in over-control as to the ozone air quality problems to which the state was linked. 795 F.3d at 129-30. As described earlier, in response to this determination, the EPA removed Texas's phase 2 ozone season budget as a constraint in the 2017 air quality modeling. Even in the absence of this constraint, the updated 2017 air quality modeling shows that the predicted average DVs and maximum DVs are below the level of the 1997 ozone NAAQS for the downwind receptors of concern to which Texas was linked in the original CSAPR rulemaking with respect the 1997 ozone NAAQS. Accordingly, the EPA has concluded that it need not require additional emission reductions from sources in Texas in order to address the states' interstate transport obligation with respect to the 1997 standard, and that the EPA has therefore fully addressed its FIP obligation with respect to Texas. Texas remains subject to the CSAPR Update in this final rulemaking with respect to the 2008 ozone NAAQS.

No Texas emissions were linked to expected ozone problems in Baton Rouge, Louisiana, and Allegan, Michigan. As noted previously receptors for these areas are no longer a concern for the 1997 ozone NAAQS. The EPA finds that Texas emissions no longer contribute significantly to nonattainment in, or interfere with maintenance by, any other state with respect to the 1997 ozone NAAQS. Thus, the EPA no longer has a FIP obligation pertaining to Texas emissions and the good neighbor provision for the 1997 ozone NAAQS.

V. Analyzing Downwind Air Quality and Upwind State Contributions

In this section, the agency describes the air quality modeling performed consistent with steps 1 and 2 of the CSAPR framework described earlier in order to (1) identify locations where it expects nonattainment or maintenance problems with respect to the 2008 ozone NAAQS for the 2017 analytic year chosen for this final rule, and (2) quantify the contributions from anthropogenic emissions from upwind states to downwind ozone concentrations at monitoring sites projected to be in nonattainment or have maintenance problems for the 2008 ozone NAAQS in 2017.

This section includes information on the air quality modeling platform used in support of the final rule with a focus on the base year and future base case emission inventories. The EPA also provides the projection of 2017 ozone concentrations and the interstate contributions for 8-hour ozone. The Final Rule AQM TSD in the docket for this rule contains more detailed information on the air quality modeling aspects of this rulemaking.

The EPA provided two separate opportunities to comment on the air quality modeling platform and air quality modeling results that were used for the proposed CSAPR Update. On August 4, 2015, the EPA published a Notice of Data Availability (80 FR 46271) requesting comment on these data. Specifically, in the NODA, the EPA requested comment on the data and methodologies related to the 2011 and 2017 emissions and the air quality modeling to project 2017 concentrations and contributions. In addition to the comments received via the NODA, the EPA also received comments on emissions inventories and air quality modeling in response to the proposed CSAPR Update. Comments on both the NODA and proposed rule were considered for this final rule.

A. Overview of Air Quality Modeling Platform

For the proposed rule, the EPA performed air quality modeling for three emissions scenarios: A 2011 base year, a 2017 baseline, and a 2017 control case that reflects the emission reductions expected from the rule.

The EPA selected 2011 as the base year to reflect the most recent National Emissions Inventory (NEI). In addition, the meteorological conditions during the summer of 2011 were generally conducive for ozone formation across much of the U.S., particularly the eastern U.S. As described in the AQM TSD, the EPA's guidance for ozone attainment demonstration modeling, hereafter referred to as the modeling guidance, recommends modeling a time period with meteorology conducive to ozone formation for purposes of projecting future year design values . The EPA therefore believes that meteorological conditions and emissions during the summer of 2011 provide an appropriate basis for projecting 2017 ozone concentrations in contributions.

As noted in section IV, the EPA selected 2017 as the projected analysis year to coincide with the attainment deadline for Moderate areas under the 2008 ozone NAAQS. The agency used the 2017 baseline emissions in its air quality modeling to identify future nonattainment and maintenance locations and to quantify the contributions of emissions from upwind states to 8-hour ozone concentrations at downwind locations. The air quality modeling of the 2017 baseline and 2017 illustrative control case emissions are used to inform the agency's assessment of the air quality impacts resulting from this rule.

For the final rule modeling, the EPA used the Comprehensive Air Quality Model with Extensions (CAMx) version 6.20 to simulate pollutant concentrations for the 2011 base year and the 2017 future year scenarios. This version of CAMx was the most recent, publicly available version of this model at the time that the EPA performed air quality modeling for this rule. CAMx is a grid cell-based, multi-pollutant photochemical model that simulates the formation and fate of ozone and fine particles in the atmosphere. The CAMx model applications were performed for a modeling region (i.e., modeling domain) that covers the contiguous 48 United States, the District of Columbia, and adjacent portions of Canada and Mexico using a horizontal resolution of 12 x 12 km. A map of the air quality modeling domain is provided in the AQM TSD.

The 2011-based air quality modeling platform includes 2011 base year emissions, 2017 future year projections of these emissions, and 2011 meteorology for air quality modeling with CAMx. In the remainder of this section, the EPA provides an overview of (1) the 2011 and 2017 emissions inventories, (2) the methods for identifying nonattainment and maintenance receptors along with a list of 2017 baseline nonattainment and maintenance receptors in the eastern U.S., (3) the approach to developing metrics to measure interstate contributions to 8-hour ozone, and (4) the predicted interstate contributions of upwind states to downwind nonattainment and maintenance in the eastern U.S. The EPA also identifies which predicted interstate contributions are at or above the screening threshold described in section IV, which the agency applies in step 2 of the CSAPR framework for purposes of identifying those upwind states that are linked to downwind air quality problems and which merit further analysis with respect to regulation of interstate transport of ozone for purposes of the 2008 ozone standard.

The EPA conducted an operational model performance evaluation of the 2011 modeling platform by comparing the 8-hour daily maximum ozone concentrations predicted during the May through September “ozone season” to the corresponding measured concentrations. This evaluation generally followed the approach described in the modeling guidance. Details of the model performance evaluation are described in the AQM TSD. The model performance results indicate that the 8-hour daily maximum ozone concentrations predicted by the 2011 CAMx modeling platform reflect the corresponding 8-hour observed ozone concentrations in the 12-km U.S. modeling domain. As recommended in the modeling guidance, the acceptability of model performance was judged by considering the 2011 CAMx performance results in light of the range of performance found in recent regional ozone model applications. These other modeling studies represent a wide range of modeling analyses that cover various models, model configurations, domains, years and/or episodes, and chemical mechanisms. Overall, the ozone model performance results for the 2011 CAMx simulations are within the range found in other recent peer-reviewed and regulatory applications. The model performance results, as described in the AQM TSD, demonstrate that the predictions from the 2011 modeling platform correspond to measured data in terms of the magnitude, temporal fluctuations, and spatial differences for 8-hour daily maximum ozone. These results provide confidence in the ability of the modeling platform to provide a reasonable projection of expected future year ozone concentrations and contributions.

Comment: The EPA received comments that model performance should be evaluated for the individual days that were used in calculating projected 2017 ozone design values and projected 2017 ozone contributions. Commenters said that, in cases where model performance on these individual days is poor, the impact of the poor performance on projected concentrations and contributions must be investigated and considered in the final results by removing or adjusting these days to account for model bias.

Response: The EPA is using air quality modeling to provide data for a set of representative days with meteorological conditions conducive for ozone formation and transport for use in projecting ozone design values and for calculating the average contribution metric. As described in sections V.D and V.E of this preamble, EPA is using air quality model predictions in a relative sense for estimating 2017 ozone design values and contributions. In this regard, the approach for projecting future design values is “anchored” by measured concentrations. As stated in the modeling guidance, it is reasoned that factors causing bias (either under or over-predictions) in the base year will also affect the future case. While good model performance remains a prerequisite for use of a model, problems posed by imperfect model performance on individual days are expected to be reduced when using the relative approach. Moreover, there are no universally accepted, generally applicable numerical bright-line criteria for determining which days might be candidates to exclude or adjust based on model performance for specific days at individual sites, as in the approach suggested by the commenter. Thus, the EPA disagrees that such an approach is necessary or appropriate for determining the sets of days used to provide data for projecting 2017 design values and for calculating the average contribution metric.

The results of the model performance evaluation, as described previously and in the AQM TSD, indicate that ozone predictions from the modeling platform correspond to measured data in terms of the magnitude, temporal fluctuations, and spatial differences for 8-hour daily maximum ozone. Prior court rulings are deferential to modeling choices in this regard. The D.C. Circuit has declined to “invalidate EPA's predictions solely because there might be discrepancies between those predictions and the real world.” The fact that a “model does not fit every application perfectly is not criticism; a model is meant to simplify reality in order to make it tractable.” The court has held that “it is only when the model bears no rational relationship to the characteristics of the data to which it is applied that we will hold that the use of the model was arbitrary and capricious.” As demonstrated by the EPA's model performance evaluation, the modeling platform used in this rulemaking provides reasonable projections of expected future year ozone concentrations and contributions, and is thus an appropriate basis on which to base the findings made in this action.

B. Emission Inventories

The EPA developed emission inventories for this rule including emission estimates for EGUs, non-EGU point sources, stationary nonpoint sources, onroad mobile sources, nonroad mobile sources, wild fires, prescribed fires, and for biogenic emissions that are not the result of human activities. The EPA's air quality modeling relies on this comprehensive set of emission inventories because emissions from multiple source categories are needed to model ambient air quality and to facilitate comparison of model outputs with ambient measurements.

To prepare the emission inventories for air quality modeling, the EPA processed the emission inventories using the Sparse Matrix Operator Kernel Emissions (SMOKE) Modeling System version 3.7 to produce the gridded, hourly, speciated, model-ready emissions for input to the CAMx air quality model. Additional information on the development of the emission inventories and on data sets used during the emissions modeling process for the final rule are provided in the TSD “Preparation of Emissions Inventories for the Version 6.3, 2011 Emissions Modeling Platform,” hereafter known as the “Final Rule Emissions Modeling TSD.” This TSD is available in the docket for this rule and at www.epa.gov/air-emissions-modeling/2011-version-6-air-emissions-modeling-platforms .

The emission inventories, methodologies, and data used for the proposal air quality modeling were provided for public comment in the August 4, 2015 NODA. Comments received on this NODA and on the proposal were considered for the final rule and the resulting data and procedures are documented in the Final Rule Emissions Modeling TSD.

1. Foundation Emission Inventory Data Sets

The EPA developed emission data representing the year 2011 to support air quality modeling of a base year from which future air quality could be forecasted. The primary basis for the 2011 inventories used in air quality modeling was the 2011 National Emission Inventory (NEI) version 2 (2011NEIv2), released in March 2015. Documentation on the 2011NEIv2 is available in the 2011 National Emissions Inventory, version 2 TSD available in the docket for this rule and at www.epa.gov/air-emissions-inventories/2011-national-emissions-inventory-nei-documentation . Updates to the 2011NEIv2 were incorporated between the proposed and the final rule in response to comments received on the NODA and on the proposal. The future base case scenario modeled for 2017 includes a representation of changes in activity data and of predicted emission reductions from on-the-books actions, including planned emission control installations and promulgated federal measures that affect anthropogenic emissions. The emission inventories for air quality modeling include sources that are held constant between the base and future years, such as biogenic emissions and emissions from agricultural, wild and prescribed fires. The land use data used for the computation of the biogenic emissions were updated from those used in the proposal modeling to use the 2011 National Land Cover Database (NLCD) along with other updated data sets related to forest species, elevation, and cropland data in response to comments received on the NODA. The base and future year emissions for Canada used for the proposed rule were held constant at 2010 levels. For the final rule, the 2010 inventories were updated to reflect closures of EGUs and reductions to onroad and nonroad mobile source emissions in 2017. Emissions for Mexico represent the year 2018 and were unchanged from the proposed rule inventories.

2. Development of Emission Inventories for EGUs

Annual NO_X and SO₂ emissions for EGUs in the 2011NEIv2 are based primarily on data from continuous emission monitoring systems (CEMS), with other EGU pollutants estimated using emission factors and annual heat input data reported to the EPA. For EGUs without CEMS, the EPA used data submitted to the NEI by the states. The final rule inventories include some updates to 2011 EGU stack parameters and emissions made in response to comments on the NODA and proposal. Between proposal and final, additional point sources in the inventory were identified as small EGUs. This resulted in increases to EGU NO_X emissions that were offset by equivalent reductions in non-EGU point source NO_X emissions in Arkansas, California, Florida, Idaho, Louisiana, Mississippi, New Hampshire, Oregon, and Texas. For more information on the details of how the 2011 EGU emissions were developed and prepared for air quality modeling, see the Final Rule Emissions Modeling TSD.

The EPA projected future 2017 baseline EGU emissions using version 5.15 of the Integrated Planning Model (IPM) ( www.epa.gov/airmarkets/power-sector-modeling ). IPM, developed by ICF Consulting, is a state-of-the-art, peer-reviewed, multi-regional, dynamic, deterministic linear programming model of the contiguous U.S. electric power sector. It provides forecasts of least cost capacity expansion, electricity dispatch, and emission control strategies while meeting energy demand and environmental, transmission, dispatch, and reliability constraints. The EPA has used IPM for over two decades to better understand power sector behavior under future business-as-usual conditions and to evaluate the economic and emission impacts of prospective environmental policies. The model is designed to reflect electricity markets as accurately as possible. The EPA uses the best available information from utilities, industry experts, gas and coal market experts, financial institutions, and government statistics as the basis for the detailed power sector modeling in IPM. The model documentation provides additional information on the assumptions discussed here as well as all other model assumptions and inputs.

To project future 2017 baseline EGU emissions for the CSAPR Update, the EPA adjusted the 2018 IPM version 5.15 base case results to account for three categories of differences between 2017 and 2018. The categories are: (1) Adjusting NO_X emissions for units with SCRs in 2018 but that are assumed not to operate or be installed in 2017; (2) adding NO_X emissions for units that are retiring in 2018 but are projected to operate in 2017; and (3) adjusting NO_X emissions for coal-fired units that are projected to convert to natural gas (i.e., “coal-to-gas”) in 2018, but are still projected to burn coal in 2017. These adjustments are discussed in greater detail in the IPM documentation found in the docket for this final rule.

The IPM version 5.15 base case accounts for comments received as a result of the NODAs released in 2013, 2014, and 2015. This base case also accounts for comments received on the proposed CSAPR Update as well as updated environmental regulations. Unlike the modeling for the proposed rule, which was conducted prior to the D.C. Circuit's issuance of EME Homer City II, this projected base case accounts for compliance with the original CSAPR by including as constraints all original CSAPR emission budgets with the exception of remanded phase 2 NO_X ozone season emission budgets for 11 states and phase 2 NO_X ozone season emission budgets for four additional states that were finalized in the original CSAPR supplemental rule. Specifically, to reflect original CSAPR ozone season NO_X requirements, the modeling includes as constraints the original CSAPR NO_X ozone season emission budgets for 10 states—Alabama, Arkansas, Georgia, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, and Tennessee.

The IPM projected base case also accounts for the effects of the finalized and effective MATS, New Source Review settlements, and on-the-books state rules through February 1, 2016 impacting SO₂, NO_X, directly emitted particulate matter, and CO₂, and final actions the EPA has taken to implement the Regional Haze Rule. The EPA's IPM base case also includes two federal non-air rules affecting EGUs: The Cooling Water Intake Structure (Clean Water Act section 316(b)) rule and the Coal Combustion Residuals (CCR) rule. The IPM modeling performed for the final CSAPR Update does not include the final Clean Power Plan (CPP). Documentation of IPM version 5.15 is in the docket and available online at www.epa.gov/airmarkets/power-sector-modeling .

Comment: Many comments requested that the agency not include the CPP in the 2017 projections informing policy decisions in this rule. This was in response to our discussion of this topic and request for comment in the proposal preamble and a memorandum to the docket (hereinafter referred to as the “Harvey Memo”). Commenters cited discrete CPP-related outputs in the 2017 modeling results, such as the retirement of model plants, for the proposed CSAPR Update and provided information indicating that retirements of the actual plants represented in the model were not expected to occur by 2017. Commenters specifically requested that EPA should not include the CPP in the base case modeling.

Response: We agree that the CPP should not be included in the base case modeling for this rule.

The EPA recognizes that, in general, including the illustrative modeling of the CPP, as a promulgated rule, in the baseline of the CSAPR Update would accord with typical practice. This typical practice is one common approach for ensuring that all power sector and air quality impacts evaluated in the CSAPR Update analysis are fully incremental to and independent of the impacts of preceding rules. However, the CSAPR requirements will be implemented at least five years before any requirements are applied to sources under the CPP, and there should be no meaningful impact of the CPP on power sector dispatch decisions in the timeframe of the CSAPR requirements, as analyzed here.

In the Harvey Memo prepared for the CSAPR Update proposal, we identified several key factors and uncertainties associated with measuring the effects of the CPP in 2017. We identified simplifying assumptions in the CPP modeling regarding the types of plans states may develop, and noted that the CPP does not have any pre-2022 requirements for sources and provides states and utilities with ample options to minimize near-term impacts. Harvey Memo, at 11-13. Therefore, we observed that in the context of the CPP, the model projected impacts in 2016-2018 are likely overstated due to the modeling structure's perfect foresight of future prices and market conditions that don't reflect real-world uncertainty. Id. at 6. We also noted the likelihood that states would choose implementation pathways that would completely avoid the actions that were forecast in the model to occur by 2018. For these reasons, the modeling results prior to 2020 were not relied upon for the CPP RIA. Id. at 13.

Commenters, particularly the regulated utilities, by and large agreed that these considerations were significant and atypical and urged the agency to exclude the CPP from the CSAPR Update modeling. Thus, while the EPA continues to believe that the modeling analysis for the CPP in the final CPP RIA was useful and reliable with respect to the model years analyzed for that rule (i.e., 2020, 2025, and 2030), we are excluding the CPP from the base case in this action.

For further discussion of the CPP, see discussion below at Section VII.H.2; see also Harvey Memo, at 5-11.

3. Development of Emission Inventories for Non-EGU Point Sources

The 2011 non-EGU point sources in the 2011 base case inventory match those in the proposal modeling, except for those sources that were updated as a result of comments including sources in Georgia, Illinois, North Carolina, and Oklahoma. Most changes were a result of the reclassification of sources as EGUs and amount to less than 2 percent of the non-EGU point NO_X emissions in each state. The largest change in terms of overall tonnage was 2,800 tons of reduction in Texas, 1,300 of which were offset by increases to the EGU sector and 1,500 tons of which were reductions of railroad equipment emissions based on a comment from the Texas Commission on Environmental Quality. In addition to comments related to emissions, some comments on stack parameters were received and incorporated. Details on the development of the 2011 emission inventories can be found in the Final Rule Emissions Modeling TSD and the 2011NEIv2 TSD.

Prior to air quality modeling, the emission inventories must be processed into a format that is appropriate for the air quality model to use. Details on the processing of the emissions for 2011 and on the development of the 2017 non-EGU emission inventories are available in the Final Rule Emissions Modeling TSD.

Projection factors and percent reductions in this rule reflect comments received as a result of the August 4, 2015 NODA and the proposed CSAPR Update. Non-EGU emissions for 2017 also changed from the proposal due to a correction to the order of precedence for the application of control programs. The largest tonnage change from the projected 2017 NO_X emissions in the proposal was a 2,200 ton increase in Wisconsin, an 8 percent increase. The largest percentage change to 2017 non-EGU point emissions was a 1,300 ton reduction in Oregon equivalent to 9 percent of non-EGU point emissions in the state and offset by an increase in EGU emissions. The 2017 non-EGU point emissions reflect emission reductions due to national and local rules, control programs, plant closures, consent decrees and settlements. Reductions from several Maximum Achievable Control Technology (MACT) and National Emission Standards for Hazardous Air Pollutants (NESHAP) standards are included. Projection approaches for corn ethanol and biodiesel plants, refineries and upstream impacts represent requirements pursuant to the Energy Independence and Security Act of 2007 (EISA).

For aircraft emissions at airports, the EPA developed projection factors based on activity growth projected by the Federal Aviation Administration Terminal Area Forecast (TAF) system, published in March 2013.

Point source and nonpoint oil and gas emissions are projected to 2018 using regional projection factors by product type using Annual Energy Outlook (AEO) 2014 projections to year 2018, the year for which all data sources needed to develop the projections were available. NO_X and VOC reductions that are co-benefits to the NESHAP and New Source Performance Standards (NSPS) for Stationary Reciprocating Internal Combustion Engines (RICE) are reflected for select source categories. In addition, Natural Gas Turbines and Process Heaters NSPS NO_X controls and NSPS Oil and Gas VOC controls are reflected for select source categories. The projection approach for oil and gas emissions was unchanged from that used for the proposal inventories, with the exception of changes incorporated in response to comments in Colorado, Oklahoma, Texas and Utah and due the correction of an error in the projection factors that had been applied at proposal to oil and gas emissions in Kansas. There were modest changes to NO_X emissions in New Mexico and North Dakota as a result of the correction to the order of precedence in the application of control programs. Details on the development of the projected point and nonpoint oil and gas emission inventories are available in the Final Rule Emissions Modeling TSD.

4. Development of Emission Inventories for Onroad Mobile Sources

The EPA developed the onroad mobile source emissions for states other than California using the EPA's Motor Vehicle Emissions Simulator, version 2014a (MOVES2014a), a newer version of MOVES than was used in the proposal modeling. The agency computed the emissions within SMOKE by multiplying the MOVES-based emission factors with the appropriate activity data. The agency also used MOVES emission factors to estimate emissions from refueling. Both 2011 and 2017 onroad mobile source activity data and model databases were updated for Ohio, New Jersey, North Carolina, and Texas in response to comments received on the NODA and on the proposed rule. Additional information on the approach for generating the onroad mobile source emissions is available in the Final Rule Emissions Modeling TSD. Onroad mobile source emissions for California were updated from the proposal using emissions submitted by the state in response to comments on the NODA.

In the future-year modeling for mobile sources, the EPA included all national measures known at the time of modeling. The future scenarios for mobile sources reflect projected changes to fuel usage and onroad mobile control programs finalized as of the date of the model run. In response to comments on the NODA, the EPA developed future year onroad mobile source emission factors and activity data for the final rule modeling that directly represented the year 2017, whereas in the proposal modeling the 2017 emissions were based on adjustments to 2018 emissions. Finalized rules that are incorporated into the mobile source emissions include: Tier 3 Standards (March 2014), the Light-Duty Greenhouse Gas Rule (March 2013), Heavy (and Medium)-Duty Greenhouse Gas Rule (August 2011), the Renewable Fuel Standard (February 2010), the Light Duty Greenhouse Gas Rule (April 2010), the Corporate-Average Fuel Economy standards for 2008-2011 (April 2010), the 2007 Onroad Heavy-Duty Rule (February 2009), and the Final Mobile Source Air Toxics Rule (MSAT2) (February 2007). Impacts of rules that were in effect in 2011 are reflected in the 2011 base year emissions at a level that corresponds to the extent to which each rule had penetrated into the fleet and fuel supply by the year 2011. Local control programs such as the California LEV III program are included in the onroad mobile source emissions. Activity data for onroad mobile sources was projected using AEO 2014. Updated onroad mobile source emissions in California for the final rule modeling of the year 2017 were provided by the California Air Resources Board.

5. Development of Emission Inventories for Commercial Marine Category 3 (Vessel)

The commercial marine category 3 vessel (“C3 marine”) emissions in the 2011 base case emission inventory for this rule are consistent with those in the proposal modeling and are equivalent to those in the 2011NEIv2. These emissions reflect reductions associated with the Emissions Control Area proposal to the International Maritime Organization control strategy (EPA-420-F-10-041, August 2010); reductions of NO_X, VOC, and CO emissions for new C3 engines that went into effect in 2011; and fuel sulfur limits that went into effect as early as 2010. The cumulative impacts of these rules through 2017 are incorporated in the 2017 projected emissions for C3 marine sources.

6. Development of Emission Inventories for Other Nonroad Mobile Sources

To develop the nonroad mobile source emission inventories other than C3 marine for the modeling platform, the EPA used monthly, county, and process level emissions output from the National Mobile Inventory Model (NMIM) ( http://www.epa.gov/otaq/nmim.htm ). State-submitted emissions data for nonroad sources were used for Texas and California. For Texas, these emissions are consistent with those in the 2011NEIv2, while the California emissions were consistent with those used in the proposal modeling. Locomotive emissions in Texas and North Carolina in the final rule modeling incorporated updates in response to comments received on the NODA.

In response to comments received on the NODA and the proposal, the EPA used NMIM to project nonroad mobile emissions directly to 2017, as opposed to adjusting 2018 emissions back to 2017 as was done for the proposal modeling. The nonroad mobile emission control programs include reductions to locomotives, diesel engines and marine engines, along with standards for fuel sulfur content and evaporative emissions. A comprehensive list of control programs included for mobile sources is available in the Final Rule Emissions Modeling TSD.

7. Development of Emission Inventories for Nonpoint Sources

The emissions for stationary nonpoint sources in the 2011 base case emission inventory are largely consistent with those in the proposal modeling and in the 2011NEIv2, although some updates to Connecticut, Massachusetts, North Carolina, Texas and also to portable fuel container emissions were made in response to comments on the NODA and the proposal. For more information on the nonpoint sources in the 2011 base case inventory, see the Final Rule Emissions Modeling TSD and the 2011NEIv2 TSD.

Where states provided the EPA with information about projected control measures or changes in nonpoint source emissions, the EPA incorporated those inputs in its projections. Updates to nonpoint emissions in North Carolina, Connecticut, Massachusetts, and Texas were incorporated in response to comments received on the NODA. The EPA included adjustments for state fuel sulfur content rules for fuel oil in the Northeast. Projected emissions for portable fuel containers reflect the impact of projection factors required by the final Mobile Source Air Toxics (MSAT2) rule and the EISA, including updates to cellulosic ethanol plants, ethanol transport working losses, and ethanol distribution vapor losses.

For the final rule, emissions for nonpoint oil and gas sources were updated in Colorado, Texas, and Oklahoma in response to comments received on the 2015 NODA, and an error was corrected in the projections for Kansas. The EPA developed regional projection factors for nonpoint oil and gas sources by product type based on Annual Energy Outlook (AEO) 2014 projections to year 2018. The agency reflected criteria air pollutant (CAP) co-benefit reductions resulting from the National Emission Standards for Hazardous Air Pollutants (NESHAP) for Reciprocating Internal Combustion Engines (RICE) and NSPS rules and Oil and Gas NSPS VOC controls for select source categories. Additional details on the projections are available in the Final Rule Emissions Modeling TSD.

C. Definition of Nonattainment and Maintenance Receptors

In this section, the EPA describes how it determines locations where nonattainment or maintenance problems are expected for the 2008 8-hour ozone NAAQS in the 2017 analytic future year chosen for this rule. The EPA then describes how it factored current monitored data into the identification of sites as having either nonattainment or maintenance concerns for the purposes of this rulemaking. These sites are used as the “receptors” for quantifying the contributions of emissions in upwind states to nonattainment and maintenance concerns in downwind locations.

In this rule, the EPA is relying on the CSAPR approach (as described below) to identify separate nonattainment and maintenance receptors in order to give independent effect to both the “contribute significantly to nonattainment” and the “interfere with maintenance” prongs of section 110(a)(2)(D)(i)(I), consistent with the D.C. Circuit's direction in North Carolina. In its decision on remand from the Supreme Court, the D.C. Circuit confirmed that the EPA's approach to identifying maintenance receptors in CSAPR comported with the court's prior instruction to give independent meaning to the “interfere with maintenance” prong in the good neighbor provision. EME Homer City II, 795 F.3d at 136.

In CSAPR, the EPA identified nonattainment receptors as those monitoring sites that are projected to have average design values that exceed the NAAQS. The EPA separately identified maintenance receptors as those receptors that would have difficulty maintaining the relevant NAAQS in a scenario that takes into account historical variability in air quality at that receptor. The original CSAPR approach for identifying nonattainment and maintenance receptors relied only upon air quality model projections of measured design values. In the original CSAPR, if the average design value in the analysis year was projected to exceed the NAAQS, then the monitoring site was identified as a nonattainment receptor without consideration of whether the monitoring site is currently measuring “clean data” (i.e., design values below the NAAQS based on the most recent three years of measured data). In prior transport rulemakings, such as the NO_X SIP Call and CAIR, the EPA defined nonattainment receptors as those areas that both currently monitor nonattainment and that the EPA projects will be in nonattainment in the future compliance year. The EPA explained that it had the most confidence in its projections of nonattainment for those counties that also measure nonattainment for the most recent period of available ambient data. In the original CSAPR, the EPA was compelled to deviate from this practice of incorporating monitored data into its evaluation of projected nonattainment receptors because the most recent monitoring data then available reflected large emission reductions from CAIR, which the original CSAPR was designed to replace. As recently affirmed by the D.C. Circuit, it was therefore reasonable for the EPA to decide not to compare monitored data reflecting CAIR emissions reductions to its modeling projections that instead excluded CAIR from its baseline.

As the EPA is not replacing an existing transport program in this CSAPR Update, the agency proposed to once again consider current monitored data as part of the process for identifying projected nonattainment receptors for this rulemaking. The agency received comments supporting the consideration of current monitored data for identifying projected nonattainment receptors. Thus, for the final CSAPR Update the EPA is identifying as nonattainment receptors those monitors that both currently measure nonattainment and that the EPA projects will be in nonattainment in 2017.

As noted previously, in the original CSAPR, the EPA identified maintenance receptors as those receptors that would have difficulty maintaining the relevant NAAQS in a scenario that takes into account historical variability in air quality at that receptor. The variability in air quality was determined by evaluating the “maximum” future design value at each receptor based on a projection of the maximum measured design value over the relevant base year period.

The EPA interprets the projected maximum future design value to be a potential future air quality outcome consistent with the meteorology that yielded maximum measured concentrations in the ambient data set analyzed for that receptor. The EPA also recognizes that previously experienced meteorological conditions (e.g., dominant wind direction, temperatures, air mass patterns) promoting ozone formation that led to maximum concentrations in the measured data may reoccur in the future. Therefore, the maximum design value gives a reasonable projection of future air quality at the receptor under a scenario in which such conditions do, in fact, reoccur. The projected maximum design value is used to identify upwind states whose emissions, under those circumstances, could interfere with the downwind area's ability to maintain the NAAQS.

For the final CSAPR Update, the EPA assesses the magnitude of the maximum projected design value for 2017 at each receptor in relation to the 2008 ozone NAAQS and, where such a value exceeds the NAAQS, the EPA determines that receptor to be a “maintenance” receptor for purposes of defining interference with maintenance, consistent with the method used in CSAPR and upheld by the D.C. Circuit in EME Homer City II. That is, monitoring sites with a maximum projected design value that exceeds the NAAQS are projected to have a maintenance problem in 2017.

In addition, those sites that are currently measuring clean data, but are projected to be nonattainment based on the average design value (and that, by definition, are projected to have a maximum design value above the standard) are also identified as maintenance-only receptors. Unlike nonattainment receptors, current clean monitored data does not disqualify a receptor from being identified as a maintenance receptor because the possibility of failing to maintain the NAAQS in the future, even in the face of current attainment of the NAAQS, is exactly what the maintenance prong of the good neighbor provision is designed to guard against.

Comment: The agency received comments that the EPA should not include as a downwind receptor any site that is currently measuring clean data. Commenters also raise concerns with the EPA's reliance on the projected maximum design value to determine whether an area should be identified as a maintenance receptor, particularly where the projected average design value is below the NAAQS. The commenters contend that this approach does not take into account the nationwide trend toward decreasing ozone design values and improving ozone air quality.

Response: The EPA disagrees with this comment based on several factors. First, current (i.e., 2013-2015) ozone design values in many portions of the eastern U.S. may be lower than what might otherwise have been expected due to cooler than normal temperatures during the summers of 2013, 2014, and 2015 which led to meteorological conditions which were generally unfavorable for the formation of high ozone concentrations. An examination of historical inter-annual variability in summer meteorological conditions in the East indicates that in spite of the relatively non-conducive meteorological conditions seen in the last 3 years, conditions more favorable to ozone formation have often occurred in the past and are likely to reoccur in the future, therefore leading to the risk of a violation of the NAAQS. See the AQM TSD for more details.

Second, ambient monitoring data for maintenance sites that are currently measuring attainment suggest that these sites are at risk of violating the NAAQS. Table V.D-3 provides the 2013-2015 design values and the 4th highest annual 8-hour daily maximum ozone concentrations used to calculate these design values for each of the maintenance receptors that are currently measuring attainment. The data in Table V.D-3 indicate (1) seven of the nine sites had measured 4th high values which exceed the level of the NAAQS in at least one of the years during this 3-year time period and (2) 4th high ozone concentration increased from 2014 to 2015 at all but one of these sites. There were increases in measured 4th high values between 2013 and 2015 at all but one of these sites (with the highest increase of 22 ppb occurring in Harris County TX), despite the fact that ozone precursor emissions are continuing to trend downward. In addition, preliminary monitoring for 2016 also indicates that ozone has increased, based on 4th high values, in 2016 compared to the concentrations that were measured in 2014 at most of the receptor sites. This shows that the influence of meteorology on measured ozone values can overwhelm the general downward trend in emissions. Thus, given the variability of meteorological conditions, there is every reason to believe that these maintenance sites that are currently measuring attainment are at risk of violating the NAAQS in 2017, as projected by the EPA's modeling.

The EPA believes it is therefore appropriate and reasonable to use the maximum design value to identify receptors that may have maintenance problems in the future. This approach uses measured data in order to establish potential air quality outcomes at each receptor that take into account the variable meteorological conditions present across the entire period of measured data (2009 to 2013). The EPA interprets the maximum future design value to be a potential future air quality outcome consistent with the meteorology that yielded maximum measured concentrations in the ambient data set analyzed for that receptor. The EPA construes the average design value at a receptor to be a reasonable projection of future air quality in that area under “average” conditions. However, the EPA also recognizes that previously experienced meteorological conditions (e.g., dominant wind direction, temperatures, air mass patterns) that promote ozone formation, may recur in the future. The maximum design value gives a reasonable projection of future air quality at the receptor under a scenario in which such conditions do, in fact, recur. It also identifies upwind emissions that under those circumstances could interfere with the downwind area's ability to maintain the NAAQS.

D. Air Quality Modeling To Identify Nonattainment and Maintenance Receptors

The following is a brief summary of the procedures for projecting future-year 8-hour ozone average and maximum design values to 2017 to determine nonattainment and maintenance receptors. Consistent with the EPA's modeling guidance the agency uses the air quality modeling results in a “relative” sense to project future concentrations. That is, the ratios of future year model predictions to base year model predictions are used to adjust ambient ozone design values up or down depending on the relative (percent) change in model predictions for each location. The modeling guidance recommends using measured ozone concentrations for the 5-year period centered on the base year as the air quality data starting point for future year projections. This average design value is used to dampen the effects of inter-annual variability in meteorology on ozone concentrations and to provide a reasonable projection of future air quality at the receptor under “average” conditions. Because the base year for this rule is 2011, the EPA is using the base period 2009-2013 ambient ozone design value data in order to project 2017 average design values in a manner consistent with the modeling guidance.

The approach for projecting future ozone design values involved the projection of an average of up to 3 design value periods, which include the years 2009-2013 (design values for 2009-2011, 2010-2012, and 2011-2013). The 2009-2011, 2010-2012, and 2011-2013 design values are accessible at www.epa.gov/airtrends/values.html . The average of the 3 design values creates a “5-year weighted average” value. The 5-year weighted average values were then projected to 2017. To project 8-hour ozone design values, the agency used the 2011 base year and 2017 future base-case model-predicted ozone concentrations to calculate relative response factors (RRFs) for the location of each monitoring site. The RRFs were applied to the 2009-2013 average ozone design values and the individual design values for 2009-2011, 2010-2012, and 2011-2013. Details of this approach are provided in the AQM TSD.

Projected design values that are greater than or equal to 76.0 ppb are considered to be violating the NAAQS in 2017. As noted previously, nonattainment receptors are those sites that are violating the NAAQS based on the most recent measured air quality data and also have projected average design values of 76.0 ppb or greater. Therefore, as an additional step, for those sites that are projected to be violating the NAAQS based on the average design values in 2017, the EPA examined the most recent measured design value data to determine if the site was currently violating the NAAQS. For the final rule, the agency examined ambient data for the 2013-2015 period, which is the most recent available measured design values at the time of this rule.

Maintenance-only receptors therefore include both (1) those sites with projected average design values above the NAAQS that are currently measuring clean data, and (2) those sites with projected average design values below the level of the NAAQS, but with projected maximum design values of 76.0 ppb or greater. The EPA notes that the 2017 ozone nonattainment receptors are inclusive of areas that, in addition to having projected nonattainment, may have maintenance issues in the future, since the maximum design values for each of these sites is always greater than or equal to the average design value.

Table V.D-1 contains the ambient 2009-2013 base period average and maximum 8-hour ozone design values, the 2017 projected baseline average and maximum design values, and the ambient 2013-2015 design values for the 6 sites in the eastern U.S. projected to be 2017 nonattainment receptors. Table V.D-2 contains this same information for the 13 maintenance-only sites in the eastern U.S. The design values for all monitoring sites in the U.S. are provided in docket.

Comment: The EPA received comments on the approach for projecting future year design values for monitoring sites located in certain coastal areas (i.e., monitoring sites located in southern Connecticut along Long Island Sound, in Wisconsin and Michigan along Lake Michigan and in Maryland along the Chesapeake Bay). Some commenters said that the relative response factors for coastal sites should be based on modeled ozone in the grid cell containing the monitoring site or “land” cells only, rather than the grid cell with the highest 2011 base case modeled value from among the 3 by 3 matrix of grid cells surrounding the monitoring site (i.e., the 3 x 3 matrix approach). Some commenters said that using the 3 x 3 approach for coastal sites can result in the use of modeled data from grid cells over water, which the commenters claim are not representative of the location of the monitor. These commenters contend that modeled values from “over water” cells are biased high and will overstate projected 2017 design values at coastal sites. In this regard, the commenters said EPA should consider using the modeled data in the grid cell containing the monitoring site or use the highest value in “over land” grid cells adjacent to the monitoring site.

Commenters examined model performance in the grid cell that contained the monitor and also compared these measured values to the “highest” modeled value in the 3 x 3 grid cell matrix surrounding the monitoring site. They contend that higher modeled ozone concentrations from the 3 x 3 matrix overstate concentrations measured at the monitoring site and, as a result, commenters claim that using the 3 x 3 modeled values will lead to inaccurate future model projections.

Response: EPA first notes that the modeling guidance recommends calculating relative response factors based on the highest values in the vicinity of the monitoring site (i.e., the 3 x 3 matrix approach) in part because limitations in the inputs and model physics can affect model precision at the grid cell level. Allowing some leeway in the precision of the predicted location of daily maximum ozone concentrations can help assure that possibly artificial, fine scale variations do not inadvertently impact an assessment of modeled ozone response. In addition, monitors are sometimes located very close to the border of two or more grid cells. For both of these reasons, choosing to calculate the model response from the nearby grid cell with the highest modeled ozone value is likely to be most representative of model response during high measured ozone conditions. In addition, coastal sites by the nature of their location near large water bodies often measure ozone concentrations in air from over the water when winds are blowing from the water to the land. Such wind flows can occur as part of a broader “synoptic scale” wind pattern and/or during more local scale onshore wind flows associated with a “sea breeze”, “sound breeze”, “lake breeze”, or “bay breeze” depending on the nature of the adjacent body of water. Thus, it is appropriate to consider modeled values from both “over water” and “over land” grid cells to represent ozone concentrations which may impact monitoring sites in coastal areas.

The commenters also compared measured ozone values at monitoring locations to the highest modeled concentrations in the 3 x 3 grid cells surrounding the monitor and found that modeled ozone in grid cells over the water (where there are no monitoring sites) often “over predicted” the measured values at the monitors. The commenters claim that this will lead to an overstatement of future year design values and inaccurate future year values. The EPA finds no basis for this conclusion. First, the components of the modeling system used for this final rule, (i.e., the photochemical grid model, the meteorological model, emissions models, and input data) are based on state-of-the-science methods and data that are designed to represent the physical and chemical processes associated with the formation, transport, and fate of ozone and precursor pollutants. The intent of the model evaluation is to use available measurements to gain confidence in the use of the modeling system not only to predict concentrations for times and locations where there are measurements, but also to provide credible estimates of base year concentrations in other locations which can be used to project future year concentrations. Second, the EPA is not using the absolute modeled concentrations to determine future year (2017) design values. As described in the preamble and the AQM TSD, the EPA projects future year design values based on the percent change (i.e., relative response) in ozone using predictions from a model simulation for 2011 and predictions from a corresponding model simulation for 2017. The relative response factors based on the modeled data from the3 x 3 matrix approach are applied to measured ozone design value.

For the final rule, the EPA performed an analysis that compared the 2017 projected design values based on applying the 3 x 3 matrix approach recommended in EPA's modeling guidance to an approach that relies exclusively on modeled values in the grid cell containing the monitoring (i.e., monitor-cell approach). This analysis was performed for ozone monitoring sites nationwide including the coastal sites of concern to commenters. A data file with the projected 2017 design values using the 3 x 3 matrix approach and the monitor-cell approach at individual monitoring sites can be found in the docket.

In our analysis we examined the data separately for each of four groupings of monitoring sites: (1) All sites nationwide, (2) all sites in the East, (3) all nonattainment and maintenance receptors identified in this rule, and (4) the set of coastal sites of particular concern to the commenters together with a coastal site in Harford Co., MD that is also receptor for this final rule. The specific set of 8 coastal sites analyzed as a separate group include Fairfield Co., CT sites 090010017, 090013007, and 090019003, New Haven Co., CT 090093002, Baltimore Co., MD 240053001, Harford Co., MD 240251001, Allegan Co., MI, 260050003, and Sheboygan Co, WI 551170006. Note that all of these sites, except for the site in Baltimore Co., MD are receptors for this final rule. The results indicate that the 3 x 3 approach results in lower or equivalent projected 2017 design values compared to the monitor-cell approach at 76 percent of the monitoring sites nationwide. That is, at a majority of the monitoring sites, the 3 x 3 approach which relies on the highest base year concentrations in the vicinity of the monitoring site tends to be more responsive to emissions reductions than only using data from the grid cell containing the monitor. For the Eastern U.S., 75 percent of the monitoring sites had lower projected 2017 design values with the 3 x 3 approach, compared to the monitor-cell approach. At 14 of the 19 nonattainment and maintenance receptors for this rule, the 3 x 3 approach design value is either lower or within 0.5 ppb of the corresponding value from the monitor-cell approach. Finally, for the 8 coastal sites, the 3 x 3 approach on balance does not result in an overall notable bias compared to the monitor-cell approach. Specifically, at half of these sites the 3 x 3 approach design value is lower or within 0.5 ppb of the corresponding value from the monitor-cell approach. EPA does not believe that it would be appropriate to use the 3 x 3 approach for some coastal receptors and the single monitor-cell approach for other coastal receptors, depending solely on the outcome as to which approach yields lower future design value at an individual receptor site. Based on the results of this analysis the EPA continues to believe that the 3 x 3 approach is appropriate for projecting design values for this rule and provides for regional consistency in the projection methodology across all sites.

Comment: Commenters contend that the EPA is not appropriately considering international emissions in the process of identifying downwind nonattainment and maintenance receptors. The commenters cite CAA section 179B and contend that it requires the Administrator to approve plans that would be sufficient to attain or maintain the NAAQS but for emissions emanating from outside of the U.S. They therefore contend that, where a receptor in the EPA's modeling would attain or maintain the standard when international emissions are accounted for, the EPA has no authority to require emissions from upwind states pursuant to section 110(a)(2)(D)(i)(I). Commenters state that such reduction requirements would constitute the over-control of emissions from upwind states.

The commenters explicitly recommend that the EPA exclude the projected contributions from Canada and Mexico from the projected design values before comparing the projections to the NAAQS for purposes of identifying receptors. Commenters further recommend that the EPA exclude a “conservatively calculated” 5 percent of EPA-estimated contributions attributable to the anthropogenic fraction of boundary concentrations. The commenters propose that this approach would result in fewer receptors and relieve upwind states of the obligation to make emission reductions associated with these receptors.

Response: The EPA disagrees with commenters that section 179B of the Clean Air Act obviates the good neighbor obligations imposed upon states by section 110(a)(2)(D)(i)(I) of the Act.

First, commenters misunderstand the provisions of section 179B. Section 179B permits the EPA to approve an attainment plan or plan revision for areas that could attain the relevant NAAQS by the statutory attainment date “but for” emissions emanating from outside the U.S. When applicable, this CAA provision relieves states from imposing control measures on emissions sources in the state's jurisdiction beyond those necessary to address reasonably controllable emissions from within the U.S. Specifically, CAA section 179B(a) provides that the EPA shall approve a plan for such an area if: (i) The plan meets all other applicable requirements of the CAA, and (ii) the submitting state can satisfactorily demonstrate that “but for emissions emanating from outside the United States,” the area would attain and maintain the relevant NAAQS. In addition, CAA section 179B(b) applies specifically to the ozone NAAQS and provides that if a state demonstrates that an ozone nonattainment area would have timely attained the NAAQS by the applicable attainment date “but for emissions emanating from outside of the United States,” then the area can avoid extension of the ozone attainment dates pursuant to CAA section 181(a)(5), the application of fee provisions of CAA section 185, and the mandatory reclassification provisions under CAA section 181(b)(2) for areas that fail to attain the ozone NAAQS by the applicable attainment date.

Commenters fail to acknowledge that, even if an area is impacted by emissions from outside the U.S., CAA section 179B does not affect the designations process. The designations process is meant to protect public health and welfare. Designating an area nonattainment for a particular NAAQS ensures that the public is informed that the air quality in a specific area exceeds the standard. Congress determined that in nonattainment areas, there should be adequate safeguards to protect public health and welfare. For example Congress required such areas to have nonattainment new source review permitting programs, to ensure that air quality is not further degraded. Accordingly, areas with design values above the NAAQS are designated nonattainment and classified with a classification as indicated by actual ambient air quality. As a result of designation and classification, the state is subject to the applicable requirements, including nonattainment new source review, conformity, and other measures prescribed for nonattainment areas by the CAA. Section 179B of the CAA does not provide for any relaxation of mandatory emissions control measures (including contingency measures) or the prescribed emissions reductions; it only eliminates the obligation for an attainment demonstration that demonstrates attainment and maintenance of the NAAQS, which is conditioned upon the state meeting all other attainment plan requirements, and voids certain consequences of an area's failure to attain, including mandatory reclassifications.

CAA section 179B also does not alter the CAA's general construct expressed in subpart 1 of part D that states with nonattainment areas are expected to adopt reasonable emissions controls to lessen emissions of criteria pollutants to promote citizen health protection. The construct ensures that states will take reasonable actions to mitigate the public health impacts of exposure to ambient levels of pollution that violate the NAAQS by imposing reasonable control measures on the sources that are within the jurisdiction of the state regardless of impacts from interstate or international emissions. The primary purpose of part D of Title I of the CAA is to achieve emission reductions so that people living in a nonattainment area receive the public health protection intended by the NAAQS.

In sum, section 179B provides an important tool that provides states relief from the requirement to demonstrate attainment—and from the more stringent planning requirements that would result from failure to attain—in areas where, even though the air agency has taken appropriate measures to address air quality in the influenced area, emissions from outside of the U.S. prevent attainment. The provision does not absolve states of the obligation to impose reasonable emission controls even where states can demonstrate that the area would attain “but for” the impact of international emissions. The commenters do not explain why, given the obligation of downwind states with designated nonattainment areas to impose reasonable controls on emissions, upwind states should not also be subject to a similar obligation to take certain reasonable steps to reduce emissions impacting those downwind areas.

The commenters have not explained why the terms of section 179B require its application to EPA's evaluation of upwind state's interstate transport obligations. Section 179B is located in subpart D of title I, which addresses plan requirements for designated nonattainment areas. As just described, the specific terms of section 179B outline which nonattainment area requirements will and will not apply upon approval of a section 179B demonstration, none of which apply directly to upwind states via section 110(a)(2)(D)(i)(I). In particular, the good neighbor provision does not require upwind areas to “demonstrate attainment and maintenance” of the NAAQS. Rather, the statute requires upwind states to prohibit emissions which will “contribute significantly to nonattainment” or “interfere with maintenance” of a NAAQS. As discussed further in section IV.B.1, while upwind states must address their fair share of downwind air quality problems, the EPA has not interpreted this provision to hold upwind areas responsible for bringing downwind areas into attainment. Therefore, the relief provided by section 179B(a) and (b) from the obligation to demonstrate attainment, extension of the attainment date, and mandatory reclassifications, is simply not applicable to downwind states.

Even if section 179B were in some manner applicable to upwind states' transport obligations, the EPA does not believe that the contribution of international emissions should impact EPA's identification of downwind nonattainment and maintenance receptors affected by the interstate transport of emissions. These receptors represent areas that the EPA projects will have difficulty attaining and maintaining the NAAQS, and which therefore require adequate safeguards to protect public health and welfare. The EPA therefore does not agree that, when identifying downwind air quality problems for purposes of interstate transport, section 179B requires that we subtract the contributions of international emissions from the projected design values. This would be inconsistent with EPA's approach to area designations and is simply not required by the plain language of the statute. Moreover, such an interpretation would allow downwind and upwind areas to make no efforts to address clear violations of the NAAQS, leaving the area's citizens to suffer the health and environmental consequences of such inaction.

Moreover, just as any state with a nonattainment area—including downwind states—must take reasonable steps to control emissions even where an area is impacted by international emissions, the EPA believes that it is appropriate for upwind states to also adopt reasonable emissions controls to lessen the impact of emissions generated in their state and subsequently transported to downwind areas. As noted in Section IV of the preamble, the EPA does not view the obligation under the good neighbor provision as a requirement for upwind states to bear all of the burden for resolving downwind air quality problems. Rather, it is an obligation that upwind and downwind states share responsibility for addressing air quality problems. If, after implementation of reasonable emissions reductions by an upwind state, a downwind air quality problem persists, whether due to international emissions or emissions originating within the downwind state, the EPA can relieve the upwind state of the obligation to make additional reductions to address that air quality problem. But the statute does not absolve the upwind state of the obligation to make reasonable reductions in the first instance.

The EPA took just such an approach in the original CSAPR rulemaking when calculating annual SO₂ emissions budgets for states linked to downwind PM_2.5 air quality problems. There, the EPA imposed budgets based on a level of control stringency equivalent to $2,300 per ton of SO₂ emissions. Despite the persistence of downwind air quality problems to which certain upwind states were linked, the EPA concluded that this level of control stringency represented the upwind states' full transport obligation with respect to the PM_2.5 standards and additional controls were not reasonable because significant reductions could not be achieved at higher costs. 76 FR 48208, 48257-259.

Accordingly, the EPA also does not agree that imposing emission reductions on upwind states linked to areas affected by international emissions based on the implementation of reasonable control measures would result in over-control. As discussed in section VII.D of the preamble, the emissions reductions required by this rulemaking are based on relatively modest investments in turning on and optimizing already existing SCRS and installing a limited amount of combustion controls, which is feasibly and reasonably achieved by the 2017 ozone season. Moreover, the emissions reductions required by this rulemaking do not fully resolve most of the air quality problems identified in this rule. As discussed further in section VI.D, the D.C. Circuit has identified those circumstances that would constitute over-control pursuant to CAA section 110(a)(2)(D)(i)(I), and those circumstances are not present here.

E. Pollutant Transport From Upwind States

1. Air Quality Modeling To Quantify Upwind State Contributions

This section documents the procedures the EPA used to quantify the impact of emissions from specific upwind states on 2017 8-hour design values for identified downwind nonattainment and maintenance receptors. The EPA used CAMx photochemical source apportionment modeling to quantify the impact of emissions in specific upwind states on downwind nonattainment and maintenance receptors for 8-hour ozone. CAMx employs enhanced source apportionment techniques that track the formation and transport of ozone from specific emissions sources and calculates the contribution of sources and precursors (NO_X and VOC) to ozone for individual receptor locations. The strength of the photochemical model source apportionment technique is that all modeled ozone at a given receptor location in the modeling domain is tracked back to specific sources of emissions and boundary conditions to fully characterize culpable sources.

The EPA performed nationwide, state-level ozone source apportionment modeling using the CAMx Ozone Source Apportionment Technology/Anthropogenic Precursor Culpability Analysis (OSAT/APCA) technique to quantify the contribution of 2017 baseline NO_X and VOC emissions from all sources in each state to projected 2017 ozone concentrations at air quality monitoring sites. The EPA continues to believe that the OSAT/APCA tool is the most appropriate source apportionment technique for quantifying contributions for the purposes of this rule because it is constructed to provide source culpability data to inform the design of emissions control strategies. In the source apportionment model run, the EPA tracked the ozone formed from each of the following contribution categories (i.e., “tags”):

• States—anthropogenic NO_X and VOC emissions from each state tracked individually (emissions from all anthropogenic sectors in a given state were combined);
• Biogenics—biogenic NO_X and VOC emissions domain-wide (i.e., not by state);
• Boundary Concentrations—concentrations transported into the modeling domain;
• Tribes—the emissions from those tribal lands with point source inventory data in the 2011 NEI (contributions from individual tribes were not modeled);
• Canada and Mexico—anthropogenic emissions from sources in the portions of Canada and Mexico included in the modeling domain (contributions from Canada and Mexico were not modeled separately);
• Fires—combined emissions from wild and prescribed fires domain-wide (i.e., not by state); and
• Offshore—combined emissions from offshore marine vessels and offshore drilling platforms (i.e., not by state).

The contribution modeling provided contributions to ozone from anthropogenic NO_X and VOC emissions in each state, individually. The contributions to ozone from chemical reactions between biogenic NO_X and VOC emissions were modeled and assigned to the “biogenic” category. The contributions from wild fire and prescribed fire NO_X and VOC emissions were modeled and assigned to the “fires” category. The contributions from the “biogenic”, “offshore”, and “fires” categories are not assigned to individual states nor are they included in the state contributions.

The CAMx OSAT/APCA model run was performed for the period May 1 through September 30 using the projected 2017 baseline emissions and 2011 meteorology for this time period. The hourly contributions from each tag were processed to obtain the 8-hour average contributions corresponding to the time period of the 8-hour daily maximum concentration on each day in the 2017 model simulation. This step was performed for those model grid cells containing monitoring sites in order to obtain 8-hour average contributions for each day at the location of each site. The model-predicted contributions on the days with high modeled concentrations in 2017 were then applied in a relative sense to quantify the contributions to the 2017 average design value at each site. The resulting 2017 average contributions from each tag to each monitoring site in the eastern and western U.S. along with additional details on the source apportionment modeling and the procedures for calculating contributions can be found in the AQM TSD.

The average contribution metric is intended to provide a reasonable representation of the contribution from individual states to the projected 2017 design value, based on modeled transport patterns and other meteorological conditions generally associated with modeled high ozone concentrations at the receptor. An average contribution metric constructed in this manner is beneficial since the magnitude of the contributions is directly related to the magnitude of the design value at each site.

The largest contribution from each state in the East to any single 8-hour ozone nonattainment receptor in a downwind state is provided in Table V.E-1. The largest contribution from each state in the East to any single 8-hour ozone maintenance-only receptor in a downwind state is also provided in Table V.E-1.

2. Application of Screening Threshold

Once the EPA has quantified the magnitude of the contributions from each upwind state to downwind nonattainment and maintenance receptors, it then uses an air quality screening threshold to identify upwind states that contribute to downwind ozone concentrations in amounts sufficient to “link” them to the downwind nonattainment and maintenance receptors and justify further analysis of potential emission reductions to address significant contribution to nonattainment and interference with maintenance of the 2008 ozone NAAQS in other states. As discussed previously in section IV, the EPA is establishing an air quality screening threshold calculated as one percent of the 2008 ozone NAAQS. Specifically, the agency has calculated an 8-hour ozone value for this air quality threshold of 0.75 ppb.

States in the East whose contributions to a specific receptor meet or exceed the screening threshold are considered linked to that receptor; those states' ozone contributions and emissions (and available emission reductions) are analyzed further, as described in section VI, to determine whether and what emissions reductions might be required from each state. States in the East whose contributions are below the threshold are not included in the rule and are considered to make insignificant contributions to projected downwind air quality problems. Accordingly, as discussed in section IV, the EPA has determined that sources in these states need not make any further emissions reductions in order to address the good neighbor provision with respect to the 2008 ozone NAAQS.

Based on the maximum downwind contributions identified in Table V.E-1, the following states contribute at or above the 0.75 ppb threshold to downwind nonattainment receptors: Alabama, Arkansas, Illinois, Indiana, Kansas, Louisiana, Maryland, Michigan, Mississippi, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Texas, Virginia, and West Virginia. Based on the maximum downwind contributions in Table V.D-1, the following states contribute at or above the 0.75 ppb threshold to downwind maintenance-only receptors: Arkansas, Delaware, District of Columbia, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, West Virginia, and Wisconsin. In the proposed rule North Carolina was linked to a maintenance receptor in Baltimore Co., MD (site 240053001). North Carolina was not linked to any other receptor in the proposal. In the final rule modeling, this site is no longer projected to be a receptor because the 2017 average and maximum design values for this site are projected to be below the level of the NAAQS, and North Carolina is not linked to any other nonattainment or maintenance receptor, based on the final rule modeling.

Comment: The EPA received comments that the version of CAMx used for the proposal modeling (CAMx v6.11) did not include the most recent halogen chemistry that would affect ozone concentrations in saltwater marine atmospheres and transport of ozone from Florida to receptors in Texas. The commenter said that the EPA should include this chemistry in modeling for the final rule.

Response: In the EPA's 2017 modeling for the final rule, Florida is modeled to have an average contribution at the 0.75 ppb threshold to the 2017 design values at two receptors in Houston (i.e., Harris County sites 482010024 and 482011034). A report by the CAMx model developer on the impact of modeling with the latest CAMx halogen chemistry indicates that the updated chemistry results in lower modeled ozone in air transported over saltwater marine environments for multiple days. Specifically, the report notes that on days with multi-day transport across the Gulf of Mexico, modeling with the updated chemistry could lower 8-hour daily maximum ozone concentrations by up to 2 to 4 ppb in locations in eastern Texas, including Houston. Air parcel trajectories for individual days used in the EPA's calculation of the contribution from Florida to the Houston receptors confirm that on days with high modeled transport from Florida to the receptors in Houston, air travels for multiple days over the Gulf of Mexico from Florida before reaching the receptors in Houston (see the AQM TSD for more details).

In the final rule modeling, the EPA was not able to explicitly account for the updated chemistry because this chemistry had not yet been included by the model developer in the source apportionment tool in CAMx at the time the modeling was performed for this rule. However, because Florida's maximum contribution to receptors in Houston is exactly at the 0.75 ppb threshold, the agency believes that if it had performed the final rule modeling with the updated halogen chemistry, Florida's contribution would likely be below this threshold. Therefore, the EPA is not including Florida in the final rule because it finds that Florida's contribution to downwind nonattainment and maintenance receptors is insignificant when this updated halogen chemistry is considered. As described in the AQM TSD, the source-receptor transport pattern between Florida and Houston involving multi-day transport over the Gulf of Mexico is unique such that modeling with the updated halogen chemistry would not be expected to affect linkages from other upwind states to receptors in Houston or any other linkages from upwind states to downwind nonattainment and maintenance receptors for this final rule.

Based on the EPA's application of the 0.75 ppb threshold, the linkages between each upwind state and downwind nonattainment receptors and maintenance-only receptors in the eastern U.S. are provided in Table V.E-2 and Table V.E-3, respectively.

The EPA's modeling to quantify upwind state EGU NO_X emission budgets, described in section VI, used a more recent IPM version 5.15 base case projection as compared to the IPM projection used for air quality modeling described here in section V. This more recent IPM base case reflects minor updates to IPM model inputs. Because this more recent IPM base case projection was not used for the air quality modeling for the final rule, the aforementioned results do not account for updates which are subsequently included in the budget-setting analysis. In order to ensure that the budget-setting base case projection would not change any conclusions drawn from the air quality modeling, the EPA performed an assessment of the budget-setting base case using a method that relied on the EPA's air quality modeling contribution data as well as projected ozone concentrations from the EPA's 2017 illustrative policy case developed for the Regulatory Impact Analysis. For more information about these methods, refer to the Ozone Transport Policy Analysis Final Rule TSD. This assessment shows no change in the set of nonattainment or maintenance receptors identified here in section V. In addition to evaluating the status of downwind receptors identified for the rule, the EPA evaluated whether the budget-setting base case would reduce ozone contributions from upwind states to the extent that a previously linked state would have a maximum contribution less than the one percent threshold. This assessment shows that with the budget-setting base case, all previously identified states are expected to remain linked (i.e., contribute greater than or equal to one percent of the NAAQS) to at least one downwind nonattainment or maintenance receptor. Therefore, using the budget-setting base case for the final rule does not impact the scope of states linked to downwind nonattainment or maintenance receptors relative to the modeled base case.

Additionally, after the emissions and air quality modeling for the final rule were already underway, Pennsylvania published a new RACT rule that would require EGU and non-EGU NO_X reductions starting on January 1, 2017. The EPA recognizes that the implementation of this final state rule will precede the first control period for the final CSAPR Update rule. The agency believes it is reasonable to evaluate the potential influence of the Pennsylvania RACT rule on downwind receptors and state linkages identified for this final rule prior to evaluating any further EGU NO_X reductions for the CSAPR Update rule. Therefore, because Pennsylvania's new RACT rule was not represented explicitly in the emission inventory and air quality modeling already underway, the EPA first added an evaluation of emissions and air quality impacts expected to result from Pennsylvania's RACT rule before then evaluating air quality impacts of the further reductions that might be required under the CSAPR Update rule at each uniform control stringency identified. The EPA estimates that, for the adjusted historical emission level including Pennsylvania RACT, no nonattainment or maintenance receptors identified in section V dropped below 76 ppb and Pennsylvania's contribution to downwind ozone problems did not drop below one percent of the NAAQS. Therefore, the identified receptors and linked upwind states in section V remain unchanged.

VI. Quantifying Upwind State EGU NO_X Emission Budgets To Reduce Interstate Ozone Transport for the 2008 NAAQS

A. Introduction

This section describes the EPA's methodology for quantifying emission budgets to reduce interstate emission transport for the 2008 ozone NAAQS. The CSAPR Update emission budgets limit allowable emissions and represent the emission levels that remain after each state makes EGU NO_X emission reductions that are necessary to reduce interstate ozone transport for the 2008 NAAQS. The EPA's assessment of upwind state emission budgets in this rule reflects analysis of uniform NO_X emission control stringency. Each level of uniform NO_X control stringency represents an estimated marginal cost per ton of NO_X reduced and is characterized by a set of pollution control measures. The EPA applies a multi-factor test, the same multi-factor test that was used in the original CSAPR, to evaluate increasing levels of uniform NO_X control stringency. The multi-factor test considers cost, available emission reductions, and downwind air quality impacts to determine the appropriate level of uniform NO_X control stringency that addresses the impacts of interstate transport on downwind nonattainment or maintenance receptors. The uniform NO_X emission control stringency, represented by marginal cost, also serves to apportion the reduction responsibility among collectively-contributing upwind states. This approach to quantifying upwind state emission reduction obligations using uniform cost was reviewed by the Supreme Court in EPA v. EME Homer City Generation, which held that using such an approach to apportion emission reduction responsibilities among upwind states that are collectively responsible for downwind air quality impacts “is an efficient and equitable solution to the allocation problem the Good Neighbor Provision requires the Agency to address.” 134 S. Ct. at 1607.

There are four stages in developing the multi-factor test to quantify upwind state emission budgets as to the 2008 ozone NAAQS: (1) Identify levels of uniform NO_X control stringency (represented by an estimated marginal cost of control that is applied across linked upwind states); (2) evaluate NO_X emission reductions and corresponding NO_X emission budgets (i.e., remaining allowable emissions after reductions are made) at each identified level of uniform control stringency; (3) assess air quality improvements resulting at each level of control; and (4) select a level of control stringency by applying the multi-factor test to consider cost, available emission reductions, and downwind air quality impacts, including ensuring that the budgets do not unnecessarily over-control relative to the contribution threshold or downwind air quality.

The multi-factor evaluation informs the EPA's determination of appropriate EGU NO_X ozone season emission budgets necessary to reduce emissions that significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS for the 2017 ozone season and subsequent control periods. For most CSAPR Update states, the emission reductions achieved through implementation of these budgets will partially satisfy the EPA's good neighbor FIP obligation to fully prohibit emissions that contribute to downwind air quality problems with respect to the 2008 ozone NAAQS pursuant to CAA section 110 (a)(2)(D)(i)(I). For one state, Tennessee, the emission reductions achieved through implementation of its emission budget will fully satisfy the EPA's good neighbor FIP obligation for the 2008 ozone NAAQS. Section VII describes the EPA's approach to implementing these emission budgets through updates to the CSAPR NO_X ozone season trading program.

B. Levels of Uniform Control Stringency

The following subsections describe the EPA's analysis to establish levels of uniform control stringency for EGU and non-EGU point sources. Each level of uniform NO_X control stringency is characterized by a set of pollution control measures and represents an estimated marginal cost per ton of NO_X reduced. This section summarizes the EPA's findings when assessing NO_X reduction strategies and cost.

As described in section IV of this preamble, the EPA is quantifying near-term ozone season NO_X emission reductions to reduce interstate emission transport for the 2008 ozone NAAQS in order to assist downwind states with meeting the impending July 20, 2018 Moderate area attainment date. Although this final rule does not require or impose any specific technology standards on affected sources, the EPA limited its analysis of potential NO_X reductions in each upwind state to those that could be feasibly implemented for the 2017 ozone season, which is the last full ozone season prior to the July 20, 2018 attainment date. This approach ensures that the emission budgets are achievable for the 2017 ozone season. The EPA did not further analyze potential NO_X reductions from strategies that were deemed infeasible to implement for the 2017 ozone season for purposes of quantifying upwind state emission budgets, but the EPA anticipates considering those controls in any future action that may be necessary to address upwind states' full emission reduction obligations with respect to the 2008 ozone standard. For more details on these assessments, refer to the EGU NO_X Mitigation Strategies Final Rule TSD and the Assessment of Non-EGU NO_X Emission Controls, Cost of Controls, and Time for Compliance Final Rule TSD in the docket for this rule.

1. EGU NO_X Mitigation Strategies

In developing levels of uniform control stringency, the EPA considered all NO_X control strategies that are widely in use by EGUs: Fully operating existing Selective Catalytic Reduction (SCR), including both optimizing NO_X removal by existing, operational SCRs and turning on and optimizing existing idled SCRs; turning on existing idled SNCRs; installing state-of-the-art NO_X combustion controls; shifting generation to existing units with lower-NO_X emission rates within the same state; and installing new SCRs and SNCRs. For the reasons explained in the EGU NO_X Mitigation Strategies Final Rule TSD, the EPA determined that these EGU NO_X mitigation strategies are feasible for the 2017 ozone season, with the exception of installing new SCRs or SNCRs.

The following subsections describe the EPA's identification of uniform levels of NO_X emission control stringency. Each level of uniform NO_X control stringency represents an estimated marginal cost per ton of NO_X reduced and is characterized by a set of pollution control measures. The levels of NO_X control stringency identified are used in the EPA's multi-factor test described later on.

a. $800 per ton, representing optimizing existing and operating SCRs. Optimizing NO_X removal for existing and operating SCRs can significantly reduce EGU NO_X emissions quickly, using investments in pollution control technologies that have already been made. SCRs can achieve up to 90 percent reduction in EGU NO_X with sufficient reagent and installed catalyst. These controls are in widespread use across the U.S. power sector. In the 22 state CSAPR Update region, approximately 53 percent of coal-fired EGU capacity and 76 percent of natural gas combined cycle (NGCC) EGU capacity is equipped with SCR. Recent power sector data reveal that some SCR controls are being underused. In some cases, SCR controls are not fully operating (i.e., the controls could be operated at a greater NO_X removal rate). As described later on in this preamble, the EPA finds that optimizing existing and operating SCRs is a readily available approach for EGUs to reduce NO_X emissions.

The EPA identifies $800 per ton as a level of uniform control stringency that represents optimizing existing SCR controls that are already operating to some extent. The EPA's final analysis for the CSAPR Update rule is informed by comment on the proposal. This cost level is premised on variable costs, specifically additional reagent (i.e., ammonia or urea) and additional catalyst, being the primary costs incurred for optimizing an existing SCR unit that is already operating to some extent. More information about this analysis is available in the EGU NO_X Mitigation Strategies Final Rule TSD.

b. $1,400 per ton, representing turning on idled existing SCRs and installing state-of-the-art NO _X combustion controls.

Turning on idled, existing SCRs also can significantly reduce EGU NO_X emissions quickly, using investments in pollution control technologies that have already been made. Recent power sector data reveal that, in some cases, SCR controls have been idled for several seasons or years. The EPA finds that turning on idled SCRs is a readily available approach for EGUs to reduce NO_X emissions.

The EPA identifies $1,400 per ton as a level of uniform control stringency that represents turning on idled SCR controls. The EPA's analysis of this level of uniform control stringency for the final CSAPR Update is informed by comment on the proposal. While the costs of optimizing existing, operational SCRs include only variable costs (as described earlier), the cost of bringing existing SCR units that are currently idled back into service considers both variable and fixed costs. Variable and fixed costs include labor, maintenance and repair, reagent, parasitic load, and ammonia or urea. The EPA performed an in-depth cost assessment for all coal-fired units with SCRs. More information about this analysis is available in the EGU NO_X Mitigation Strategies Final Rule TSD, which is found in the docket for this rule.

The EPA also includes installing state-of-the-art combustion controls in the level of uniform control stringency represented by $1,400 per ton. State-of-the-art combustion controls such as low-NO_X burners (LNB) and over-fire air (OFA) can be installed quickly, and can significantly reduce EGU NO_X emissions. In the 22 state CSAPR Update Region, approximately 99 percent of coal-fired EGU capacity in the East is equipped with some form of combustion control. Combustion controls alone can achieve NO_X emission rates of 0.15 to 0.50 lbs/mmBtu. Once installed, combustion controls reduce NO_X emissions at all times of EGU operation. The EPA finds that the installation of state-of-the-art combustion controls is a readily available approach for EGUs to reduce NO_X emissions.

The cost of installing state-of-the-art combustion controls per ton of NO_X reduced is dependent on the combustion control type and unit type. The EPA estimates the cost per ton of state-of-the-art combustion controls to be $500 per ton to $1,200 per ton of NO_X removed. In specifying a representative marginal cost at which state-of-the-art combustion controls are widely available, the EPA uses the conservatively high end of this identified range of costs, $1,200 per ton. Because $1,200 per ton is similar in terms of EGU NO_X control stringency to $1,400 per ton, for purposes of the analysis that follows, the EPA includes installing state-of-the-art NO_X combustion controls in the uniform control stringency level represented by $1,400 per ton of NO_X removed.

c. $3,400 per ton, representing turning on idled existing SNCRs. Turning on idled existing SNCRs can also significantly reduce EGU NO_X emissions quickly, using investments in pollution control technologies that have already been made. SNCRs can achieve up to 25 percent reduction in EGU NO_X emissions (with sufficient reagent). These controls are in widespread use across the U.S. power sector. In the 22 state CSAPR Update region, approximately 10 percent of coal-fired EGU capacity is equipped with SNCR. Recent power sector data reveal that, in some cases, SNCR controls have been idled for several seasons or years. The EPA finds that turning on idled SNCRs is a readily available approach for EGUs to reduce NO_X emissions

The EPA identifies $3,400 per ton as a level of uniform control stringency that represents turning on and fully operating idled SNCRs. For existing SNCRs that have been idled, unit operators may need to restart payment of some fixed and variable costs associated with these controls. Fixed and variable costs include labor, maintenance and repair, reagent, parasitic load, and ammonia or urea. The majority of the total fixed and variable operating costs for SNCR is related to the cost of the reagent used (e.g., ammonia or urea) and the resulting cost per ton of NO_X reduction is sensitive to the NO_X rate of the unit prior to SNCR operation. For more details on this assessment, refer to the EGU NO_X Mitigation Strategies Final Rule TSD in the docket for this rule.

d. $5,000 per ton, representing installing new SCRs. The amount of time to retrofit with new SCR exceeds the implementation timeframes considered in this final rule. It would therefore not be feasible to retrofit new SCR to achieve EGU NO_X reductions for the 2017, or even 2018, ozone season. Exclusion of new SCR installation from this analysis reflects a determination only that these strategies are infeasible for implementation of this rule, not a determination that they are infeasible or inappropriate for consideration of NO_X reduction potential to address interstate emission transport over a longer timeframe. See EGU NO_X Mitigation Strategies Final Rule TSD for discussion of feasibility of EGU NO_X controls for the 2017 ozone season.

The EPA identifies $5,000 per ton as a level of uniform control stringency that represents retrofitting a unit with new SCR technology. The EPA evaluated this level of uniform NO_X emission control stringency, with the limitation that no new SCR systems were installed as a result of the EPA's analysis for the 2017 ozone season. The agency examined the cost for retrofitting a unit with new SCR technology, which typically attains controlled NO_X rates of 0.07 lbs/mmBtu, or less. Because this EGU NO_X reduction strategy is prospective and the EPA does not know the exact specifications of EGUs that may find this NO_X reduction strategy feasible and cost-effective beyond 2017, it performed a cost analysis using a representative electric generating unit. A coal-fired EGU with an uncontrolled NO_X rate of 0.35 lbs/mmBtu, retrofitted with an SCR to a lower emission rate of 0.07 lbs/mmBtu, results in a cost of approximately $5,000 per ton of NO_X removed. For more details on this assessment, refer to the EGU NO_X Mitigation Strategies Final Rule TSD in the docket for this rule.

e. $6,400 per ton, representing installing new SNCRs. The amount of time to retrofit with new SNCR exceeds the implementation timeframes considered in this final rule. It would therefore not be feasible to retrofit new SNCR to achieve EGU NO_X reductions for the 2017, or even 2018, ozone season. Exclusion of new SNCR installation from this analysis reflects a determination only that these strategies are infeasible for implementation of this rule, not a determination that they are infeasible or inappropriate for consideration of NO_X reduction potential to address interstate emission transport over a longer timeframe. See EGU NO_X Mitigation Strategies Final Rule TSD for discussion of feasibility of EGU NO_X controls for the 2017 ozone season.

The EPA identifies $6,400 per ton as a level of uniform control stringency that represents retrofitting a unit with new SNCR technology. The EPA evaluated this level of uniform NO_X emission control stringency, with the limitation that no new SNCR systems were installed as a result of the EPA's analysis for the 2017 ozone season. SNCR technology provides owners a low capital cost option for reducing NO_X emissions, albeit at the expense of higher operating costs. The higher cost per ton of NO_X removed reflects this technology's lower removal efficiency, which results in greater reagent consumption and escalates the cost of operating the SNCR relative to tons of NO_X removed. Owners may favor this technology to meet certain NO_X performance requirements for certain units. Because this EGU NO_X reduction strategy is prospective and the EPA does not know the exact specifications of EGUs that may find this NO_X reduction strategy feasible and cost-effective beyond 2017, the EPA performed a cost analysis using a representative electric generating unit. For a unit with a 40 percent capacity factor and using a NO_X emission reduction assumption of 25 percent, the cost is $6,500 per ton of NO_X removed. For more details on this assessment, refer to the EGU NO_X Mitigation Strategies Final Rule TSD in the docket for this rule.

2. Non-EGU NO_X Mitigation Strategies and Feasibility for the 2017 Ozone Season

The EPA is not at this time addressing non-EGU emission reductions in its efforts to reduce interstate emission transport for the 2017 ozone season with respect to the 2008 ozone NAAQS. As compared to EGUs, there is greater uncertainty in the EPA's current assessment of non-EGU point-source NO_X mitigation potential and the EPA believes more time is required for states and the EPA to improve non-EGU point source data and pollution control assumptions before including related reduction potential in this regulation. Further, the 2017 ozone season implementation timeframe for this rulemaking would limit the number of non-EGU source categories that could potentially implement NO_X emission reductions within that timeframe. Finally, using the best information available to the EPA, which was submitted for public comment with the proposed CSAPR Update, the EPA finds that there are more non-EGU point sources than EGU sources and that these sources on average emit less relative to EGUs. The implication of these fleet characteristics is that there are more individual sources to control and there are relatively fewer emission reductions available from each source. Considering these factors, the EPA finds substantial uncertainty regarding whether significant aggregate NO_X mitigation is achievable from non-EGU point sources for the 2017 ozone season.

In assessing the potentially available 2017 ozone season NO_X emission reductions from non-EGU sources, the EPA identified potential controls, the reduction potential of each control, the associated cost of each control using a nationwide average, and the timing for the installation of control. The EPA then evaluated the cost-effective controls that could be implemented by the 2017 ozone season. While there may be a few categories where cost-effective installation of non-EGU NO_X controls on a limited number of sources would be feasible by the 2017 ozone season, the EPA does not observe that significant, certain, and meaningful non-EGU NO_X reduction is in fact feasible for the 2017 ozone season. For example, one factor influencing uncertainty is that the EPA lacks sufficient information on the capacity and experience of suppliers and major engineering firms' supply chains to conclude that they would be able to execute the project work for non-EGU sources in the limited timeframe of this rule.

The EPA has evaluated the potential for ozone season NO_X reductions from non-EGU sources. A detailed discussion of this assessment was provided in the draft Non-EGU NO_X Mitigation Potential TSD, which was located in the docket for the proposed rule and was available for comment. The EPA did not receive any comments that changed its conclusions in the draft Non-EGU NO_X Mitigation Potential TSD. As commenters generally agreed with the EPA's assessment with respect to the regulation of non-EGUs in this rule, the TSD will be finalized with no substantive change from the proposal TSD. This TSD contains information shared at the proposal on non-EGU source category emissions, the EPA's tools for estimating emission reductions from non-EGU categories, brief discussions of available controls, costs, potential emission reductions for specific source categories and efforts, to date, to review and refine its estimates for certain states. There were no significant comments on the TSD, and the minor comments that were received will be addressed in the response to comments document. The EPA views this non-EGU assessment as a step toward future efforts to evaluate non-EGU categories that may be necessary to fully quantify upwind states' significant contribution to nonattainment or interference with maintenance.

Although the EPA is not analyzing non-EGU reductions for purposes of quantifying emission budgets in this final action, future EPA rulemakings or guidance could revisit the potential for reductions from non-EGU sources.

3. Summary of EGU Uniform Control Stringency Represented by Marginal Cost of Reduction (Dollar per Ton)

Table VI.B-1 lists the final EGU uniform NO_X emission control stringencies, represented by marginal cost per ton of NO_X reduced, that the EPA evaluated and the NO_X reduction strategy or policy that identified each uniform cost level.

The EPA finds that $800 per ton is the lowest marginal cost at which any specific EGU pollution control technology (i.e., optimizing existing and operating SCRs) is available and feasible in the timeframe for implementing this rule. The EPA's final analysis shows that no specific EGU NO_X reduction technologies are available at a lower cost than $800 per ton. The implication of this finding is that evaluating $500 per ton, which was assessed at proposal, for the final rule would not yield any EGU NO_X reduction potential attributable to specific pollution control technologies. As such, $800 per ton is the lowest uniform cost evaluated for the final CSAPR Update.

In the CSAPR Update proposal, the EPA also evaluated $10,000 per ton as a uniform level of control stringency. The EPA identified this level of control stringency as an upper bound for the analysis conducted for the proposed rule. However, the proposal's analysis showed that no specific EGU NO_X reduction technologies were available at a higher cost than $6,400 per ton. The EPA did not receive comment on the proposal indicating that there are additional EGU NO_X reduction technologies available between $6,400 per ton and $10,000 per ton. As a result, the EPA did not evaluate $10,000 per ton as a uniform level of control stringency for the final CSAPR Update.

The EPA finds that the selection of uniform cost thresholds presented in Table VI.B-1 is appropriate to evaluate potential EGU NO_X reductions and corresponding emission budgets to address interstate emission transport for the 2008 ozone NAAQS. The EPA has identified cost thresholds where control technologies are widely available and therefore where the most significant incremental emission reduction potential is expected. The EPA did not evaluate additional cost thresholds in between those selected because this analysis would not yield meaningful insights as to NO_X reduction potential as the EPA did not identify any control technologies that become available at such cost thresholds. Because these cost thresholds are linked to costs at which EGU NO_X mitigation strategies become widely available in each state, the cost thresholds represent the break points at which the most significant step-changes in EGU NO_X mitigation are expected.

C. EGU NO_X Reductions and Corresponding Emission Budgets

The EPA evaluated the EGU NO_X reduction potential for each identified uniform level of NO_X control stringency represented by marginal cost. This analysis applied the uniform control stringency to EGUs in each upwind state NO_X using IPM version 5.15. The EPA then used the modeled EGU NO_X reduction potential in combination with monitored EGU data to quantify emission budgets for each uniform level of NO_X control stringency. The next step of the process (described in the next subsection) evaluated air quality impacts of each set of emission budgets.

1. Evaluating EGU NO_X Reduction Potential

The EPA evaluates emission reductions from all EGU NO_X mitigation strategies available at each level of uniform NO_X control stringency. However, two components of this assessment are key to the level of reductions available and/or received significant comment at proposal. These components are the achievable NO_X rate for units with SCR and shifting generation to lower NO_X-emitting or zero-emitting EGUs.

One key input to the EPA's analysis of EGU NO_X reduction potential is the NO_X emission rate that can be achieved for EGUs with SCRs that are not optimized or are idled. This input influences the EPA's estimate of EGU NO_X reduction potential and corresponding NO_X ozone season emission budgets. To estimate EGU NO_X reduction potential from optimizing or turning-on idled SCRs, the EPA considers the delta between the non-optimized or idled NO_X emission rates and an achievable operating and optimized SCR NO_X emission rate. Assuming a higher achievable EGU NO_X emission rate for SCRs yields a higher emission budget and assuming a lower achievable EGU NO_X emission rate for SCRs yields a lower emission budget. For the final rule analysis, the EPA finds that an achievable 2017 EGU NO_X ozone season emission rate for units with SCR is 0.10 lbs/mmBtu. To determine this rate, the EPA evaluated coal-fired EGU NO_X ozone season emission data from 2009 through 2015 and calculated an average NO_X ozone season emission rate across the fleet of coal-fired EGUs with SCR for each of these seven years. The EPA finds it prudent to not consider the lowest or second lowest ozone season NO_X rates, which may reflect new SCR systems that have all new components (e.g., new layers of catalyst). Data from these new systems are not representative of ongoing achievable NO_X rates considering broken-in components and routine maintenance schedules. The EPA believes that the third lowest fleet-wide average coal-fired EGU NO_X rate for EGUs with SCR is representative of ongoing achievable emission rates. The EPA observes that the third lowest fleet-wide average coal-fired EGU NO_X rate for EGUs with SCR is 0.10 lbs/mmBtu. The EPA has implemented 0.10 lbs/mmBtu as an EGU NO_X rate ceiling in IPM. For more information about how this rate is implemented in IPM, see the EPA's IPM documentation, which can be found in the docket for this rulemaking or at www.epa.gov/powersectormodeling .

The EPA's analysis of SCR NO_X rates for the final rule differs from the proposal in two ways. First, the evaluation focuses on a more recent timeframe for analysis—2009 through 2015 compared to 2003 through 2014. The EPA believes this change is reasonable because there have been significant shifts in the power sector since 2003, particularly with respect to power sector economics (e.g., lower natural gas prices in response to shale gas development) and environmental regulations (e.g., CAIR and CSAPR). Because of these changes, the EPA considers it reasonable to evaluate SCR performance focusing on more recent historical data that better represent the current landscape of considerations affecting the power sector. The EPA chose 2009 because that is the first year of CAIR NO_X annual compliance. Second, the analysis focuses on the third best ozone season average rate as compared to the second best rate at proposal. The EPA believes that the second best rate, as discussed previously, could continue to capture disproportionately new SCR components and does not necessarily reflect achievable ongoing NO_X emission rates. Therefore, the EPA is finalizing analysis using the third best rate.

The proposed CSAPR Update put forward 0.075 lbs/mmBtu as a widely achievable EGU NO_X ozone season emission rate for coal-fired EGUs with SCR. As noted in the previous paragraph, the EPA has reassessed this assumption, partly in response to comment received on the proposal. Some of the key comments are summarized later and additional detail can be found in the Assessment of Non-EGU NO_X Emission Controls, Cost of Controls, and Time for Compliance Final TSD and the Response to Comments Document.

Comment: Some commenters suggested that the EPA's proposed coal-fired EGU NO_X ozone season emission rate of 0.075 lbs/mmBtu for units with SCR was too low and did not represent an achievable NO_X rate for the 2017 ozone season. These commenters provided several examples of changes in power sector economics that have significantly changed EGU dispatch in recent years and also changes in compliance planning for environmental regulations. These commenters suggested that the EPA should consider a shorter time-frame for evaluating SCR operation.

Response: The EPA acknowledges that various factors, both economic and regulatory, have influenced the power sector in recent years. The EPA believes that the achievable SCR NO_X rate and underlying assumptions that it is finalizing in this action are generally responsive to these comments. As discussed previously, for the purposes of evaluating EGU NO_X reduction potential, the EPA uses an EGU NO_X emission rate for units with SCR of 0.10 lbs/mmBtu as a ceiling in the IPM model. This rate reflects a generally achievable NO_X emission rate that is appropriate for the EPA's budget-setting purposes. The use of this rate to establish emission budgets was supported in comments by many power sector companies and their representative groups.

Comment: Other commenters noted that many coal-fired EGUs with SCR have demonstrated the ability to achieve NO_X emission rates of 0.06 lbs/mmBtu or lower. These commenters suggested that the EPA should use SCR NO_X ozone season emission rates that are lower than 0.075 lbs/mmBtu in quantifying emission budgets.

Response: The EPA acknowledges that many individual coal-fired EGUs with SCR have achieved rates lower than 0.075 lbs/mmBtu. However, in evaluating a regional environmental challenge (i.e., interstate transport of ozone pollution) and designing an analysis of EGU NO_X reduction potential in the many states in that region, the EPA believes it is prudent to consider a range of demonstrated NO_X emission rates and believes that an ozone season average is a more reasonable approach for identifying NO_X reduction potential using a uniform standard.

Another key input to the EPA's analysis of EGU NO_X reduction potential is shifting generation to existing, lower NO_X-emitting or zero-emitting EGUs within the same state. Shifting generation to existing lower NO_X-emitting or zero-emitting EGUs within the same state would be a readily available approach for EGUs to reduce NO_X emissions, and the EPA included this NO_X mitigation strategy in quantifying EGU NO_X reduction potential in the analyses informing this rule.

Regarding feasibility of shifting generation to existing lower-NO_X emitting or zero-emitting units within the same state for the 2017 ozone season, the EPA finds that this EGU NO_X reduction strategy is consistent with demonstrated EGU dispatch behavior. Power generators produce a relatively fungible product, electricity, and they operate within an interconnected electricity grid in which electricity generally cannot be stored in large volumes, so generation and use must be balanced in real time. See FERC v. Elec. Power Supply Ass'n, 136 S. Ct. 760, 768 (2016). Because of their uniquely interconnected and interdependent operations—so much so that the utility sector has been likened to a “complex machine” —power plants shift generation in the normal course of business. Every time a power plant either increases or decreases operations, that has implications for the overall amount of pollution emitted by other plants within the interconnected electricity grid, because those other plants must commensurately decrease or increase their operations to balance supply with demand. As a result, by shifting some generation from higher-emitting to lower-emitting plants, sources can achieve an effective degree of emission limitation that might otherwise have required them to make much more expensive investments in end-of-stack technologies at their particular plants. As a result, sources would likely use shifting generation measures to comply with standards whenever doing so is less expensive than end-of-stack controls, even if EPA considered only end-of-stack controls in determining those standards. Further, the flexibility that power plants have to shift generation in establishing dispatch patterns is synergistic with the flexibility afforded by implementation through an allowance trading program, as the EPA is finalizing in this CSAPR Update. Allowance prices can be seamlessly factored into dispatch decisions, which provides for an efficient approach to administering shifting generation for compliance with the CSAPR Update requirements, if EGUs so choose. For these reasons, it is therefore reasonable for the EPA to consider that sources may cost-effectively address their emissions through arrangements that incorporate cleaner forms of power generation.

For establishing emission budgets for the CSAPR Update, the EPA finds that shifting specified, small amounts of generation to existing lower NO_X-emitting or zero-emitting units could occur consistent with the near-term 2017 implementation timing for this rule. As a proxy for limiting the amount of generation shifting that is feasible for the 2017 ozone season, the EPA limited its assessment to shifting generation to other EGUs within the same state. The EPA believes that limiting its evaluation of shifting generation (which we sometimes refer to as re-dispatch) to the amount that could occur within the state transfer represents a conservatively small amount of generation-shifting because it does not capture further potential emission reductions that would occur if generation was shifted more broadly among units in different states within the interconnected electricity grid, which the EPA believes is feasible over time. However, this broader, interstate generation-shifting may involve greater complexity—due to, for example, the greater amount of demand, larger number of sources, and greater amount of infrastructure involved—and therefore may be more challenging to implement in the near term. Limiting our consideration of such generation-shifting potential to a small percentage of total generation-shifting potential is consistent with the limited amount of time that states and sources have to achieve the required reductions. EPA relied on the in-state limitation as a reasonable indication of the amount of EGU NO_X reduction potential from shifting generation to existing lower NO_X-emitting or zero-emitting units that states and sources can readily implement by the 2017 summer ozone season. Of course, sources are not limited to generation-shifting within state, and instead are free to shift generation across state lines to comply with the CSAPR Update requirements.

Regarding the cost of the amount of generation-shifting that would result from shifting generation to existing lower-NO_X emitting or zero-emitting units within the same state, the EPA finds that this NO_X reduction strategy occurs on a cost continuum rather than at a discrete marginal cost per ton of NO_X. In tracking power sector development over time, the EPA observes that shifting generation to existing lower-NO_X emitting or zero-emitting EGUs occurs in response to economic factors such as fuel costs. Similar to this response to economic factors, the EGU NO_X reduction potential analysis conducted for the CSAPR Update rule shows shifting generation occurring on a continuum in response to environmental policy, represented by marginal cost of NO_X reductions. In other words, unlike the retrofit pollution control technologies that are evaluated in this CSAPR Update, there is no discrete cost at which this EGU NO_X mitigation strategy is singularly widely available. Rather, relatively lower marginal NO_X costs incentivize some EGU NO_X reductions from shifting generation, while relatively higher marginal NO_X costs incentivize more EGU NO_X reductions from shifting generation. The EPA quantified NO_X reduction potential from this EGU NO_X reduction strategy at each uniform NO_X control stringency level analyzed. As described in the EGU NO_X Mitigation Strategies Final Rule TSD, the amount of generation shifting seen in the CSAPR Update is modest in comparison to ozone season-to-ozone season generation shifting seen in recent years.

Comment: Commenters raised concerns regarding the EPA's authority pursuant to CAA section 110(a)(2)(D)(i)(I) to analyze generation shifting as a NO_X reduction strategy for purposes of calculating budgets for the final rule. The commenters cite the statutory language requiring states to prohibit “any source . . . from emitting” pollutants that contribute to downwind nonattainment and maintenance as constraining the EPA's authority to require reductions only from existing sources. The commenters claim that this language prohibits the EPA's authority to require sources to re-dispatch to new or alternative existing emission sources as this does not constitute a control on a “source.” Commenters add that the proposed budgets make it impossible for states to comply without taking this measure. Some commenters claim that, while the EPA may not set budgets assuming generation shifting, re-dispatch can serve as a compliance option for EGUs to meet budgets quantified in this rule.

Some commenters cite to the EPA's reliance on generation shifting in developing the best system of emissions reductions (BSER) pursuant to CAA section 111(d) in the CPP. These commenters claim that the EPA cannot rely on the same justification used to consider generation shifting in the CPP because, unlike CO₂, NO_X is not a global, well-mixed pollutant with limited control options. These commenters also note that the EPA's assertion that section 111(d) permits consideration of generation shifting is subject to current litigation.

Response: The good neighbor provision requires state and federal plans implementing its requirements to “prohibit[ ] . . . any source or other type of emissions activity within the State from emitting any air pollutant in amounts which will” significantly contribute to nonattainment or interfere with maintenance of the NAAQS in any other state. CAA section 110(a)(2)(D)(i)(I) (emphasis added). The EPA's consideration of the potential for generation shifting in developing state budgets is consistent with this statutory requirement.

First, contrary to the commenters' contention, the statute does not limit the EPA's authority under the good neighbor provision to basing regulation only to control strategies for individual sources. The statute authorizes the state or EPA in promulgating a plan to prohibit emissions from “any source or other type of emissions activity within the State” that contributes (as determined by EPA) to the interstate transport problem with respect to a particular NAAQS. This broad statutory language shows that Congress was directing the states and the EPA to address a wide range of entities and activities that may be responsible for downwind emissions. However, this provision is silent as to the type of emission reduction measures that the states and the EPA may consider in establishing emission reduction requirements, and it does not limit those measures to individual source controls. The EPA reasonably interprets this provision to authorize consideration of a wide range of measures to reduce emissions from sources, which is consistent with the broad scope of this provision, as noted immediately above. In the case of power plants, those measures can include on-site technology-based control measures, but they can also include measures through which power plants reduce emissions by shifting generation from higher-emitting EGUs to lower-emitting EGUs. It should be noted that because of the integrated nature of the power sector, higher-emitting EGUs have a variety of methods for implementing generation-shifting. In addition, states can take action, such as imposing permit limits, that would result in generation shifting.

Moreover, the statute instructs the plan to prohibit emissions activity in “amounts” that significantly contribute to nonattainment or interfere with maintenance of downwind air quality. In identifying those amounts, the EPA has not mandated generation shifting, but rather has factored each state's capacity for re-dispatch into the calculation of the amounts of emission reductions that are achievable to address downwind air quality. The emission reductions are captured in state budgets, which are then implemented through the flexible CSAPR NO_X ozone season allowance trading program that allows each source to determine its own strategy for compliance, whether that be through implementation of on-site controls, re-dispatch, or the purchase of allowances. Indeed, no state would violate the provisions of the rule if sources within the state decided not to employ re-dispatch as a means of compliance. As discussed in Section VII, the EPA performed a feasibility analysis which demonstrates that regionally and for each CSAPR Update state, the trading program requirements promulgated by this rule can be met through cost-effective measures, even without re-dispatch.

Further, we note that while commenters urged EPA to allow sources to use generation shifting as a means of compliance with statewide emissions budgets, they do not explain why they believe that re-dispatch may be used by sources for compliance but that the EPA may not consider this anticipated and widely-used means of reducing emissions when quantifying the amount of reductions achievable from sources within the state. In fact, because these comments acknowledge that sources are able to implement generation-shifting for the purpose of reducing emissions, they support EPA's reliance on generation-shifting to quantify the amount of reductions required under the good neighbor provision. Moreover, these comments support the view that even if the EPA did not base the amount of required emission reductions on generation-shifting, sources would rely on generation-shifting to meet their requirements as long as it is less expensive than other emission controls.

Although the commenters contend that the consideration of shifting generation as a source of emission reductions is unprecedented, shifting generation is a well-established technique for reducing power plant emissions, which has already been incorporated into many other CAA programs. For example, when promulgating the original CSAPR rulemaking, the EPA considered shifting generation when establishing state budgets in the same manner in which the EPA has incorporated generation shifting into the analysis for this rule.

Finally, the commenters have not identified a clear conflict with the EPA's justification for considering generation shifting in the context of the CPP. The CPP was designed pursuant to the authority in CAA section 111(d), while the CSAPR Update is promulgated consistent with the requirements of the good neighbor provision at CAA section 110(a)(2)(D)(i)(I). As explained earlier, the good neighbor provision is permissibly interpreted to allow the EPA to consider generation shifting when defining the “amounts” of emission reductions that may be required to address each states' significant contribution to nonattainment and interference with maintenance of downwind air quality. Thus, while EPA is confident that its interpretation of section 111(d) to authorize generation-shifting will be upheld, the fact that litigants have challenged the EPA's authority pursuant to section 111(d) does not affect the EPA's authority pursuant to the good neighbor provision.

Moreover, the fact that there are factual differences between the nature of CO₂ and NO_X as air pollutants, does not constrain the EPA's authority to consider shifting generation when regulating NO_X emissions pursuant to the good neighbor provision. Rather, as described earlier, both rules regulate sources in the power sector that commonly engage in generation shifting as a means of achieving emission reductions of either CO₂ or NO_X. It is thus reasonable for the EPA to consider such practices in quantifying achievable emission reductions to address downwind air quality concerns. Furthermore, the rulemakings appropriately reflect the factual differences to the extent they are relevant (e.g., this rule includes assurance provisions constraining emissions in each state and CPP does not, which reflects the regional nature of NO_X and the global nature of CO₂).

Comment: Commenters contend that the EPA cannot consider generation shifting for purposes of developing state emission budgets because the Federal Energy Regulatory Commission (FERC) has exclusive authority over dispatch requirements under the Federal Power Act. These commenters claim that scheduling and dispatch are controlled by regional transmission organizations and independent system operators, pursuant to FERC approval. Additionally, the commenters note that EGUs already may have committed their capacity under long term power purchase agreements (PPAs), which the EPA lacks the authority to alter or abrogate. Other commenters contend that the EPA must at least confer with FERC to confirm that the generation shifting required by this rule do not impact grid reliability.

Response: The CSAPR Update is an air-pollution rule specifically authorized by the CAA. As discussed in response to the previous comment, shifting generation is a well-established technique for reducing power plant emissions, which has already been incorporated into many other CAA programs. This rule limits EGU NO_X emissions that interfere with downwind states' ability to attain and maintain the 2008 ozone NAAQS. The rule does not regulate any other aspect of energy generation, distribution, or sale. For these reasons, the CSAPR Update does not intrude on FERC's power under the Federal Power Act, 16 U.S.C. 791a, et seq., nor does the rule alter or abrogate the PPAs to which EGUs are subject. Like any pollution limits for the power industry (of which there are many under the CAA), the CSAPR Update will indirectly impact energy markets, but those impacts do not mean that the EPA has overstepped its authority.

The CSAPR Update does not require implementation of any specific control technology or compliance strategy. As described in section VII, the emission reductions quantified in this rule are implemented through EGU participation in a flexible allowance trading program. Sources may achieve these emission reductions in any manner they choose, including the purchasing of additional allowances if a particular source is constrained to reduce its emissions. Although sources have demonstrated ability to use re-dispatch as a compliance strategy (and indeed, some commenters concede they intend to do so here), such actions are not mandated by this rule. As discussed in Section VII, the EPA performed a feasibility analysis which demonstrates that regionally and for each CSAPR Update state, the trading program requirements promulgated by this rule can be met, even without re-dispatch.

Moreover, the EPA has evaluated the impact on electric reliability of the emission reductions required by this rule and found that compliance with the CSAPR Update requirements is consistent with maintaining electric reliability. For more information regarding this assessment, see the EGU NO_X Mitigation Strategies Final Rule TSD in the docket for this rule. The EPA also met with FERC during the development of the CSAPR Update to discuss compliance with the entirety of the rule, not only in relation to shifting generation. This meeting is documented in the docket for the CSAPR Update.

2. Quantifying Emission Budgets

In the proposed CSAPR Update, the EPA proposed setting emission budgets by considering monitored heat input (mmBtu) and modeled emission rates (lbs/mmBtu) from IPM. Specifically, the proposed CSAPR Update put forward a methodology to set emission budgets by multiplying monitored historical state-level heat input by model-projected 2017 state-level emission rates. The monitored historical data were based on 2014, which was the most recent complete ozone season dataset at the time of the proposal. The model-projected state-level emission rates were used to reflect EGU NO_X reduction potential. The proposed emission budgets were the lower of the calculated emission budget or the 2014 historical state-level emissions. The EPA took comment on all aspects of quantifying state emission budgets reflecting upwind EGU NO_X reduction potential.

The proposed CSAPR Update budget-setting approach differed from the finalized methodology in the original CSAPR, which used model-projected state-level emission data as emission budgets. The EPA received feedback on the finalized original CSAPR budget-setting approach through model input data submitted after the final rule that led to two revisions rules and in litigation on the original CSAPR. Considering this feedback, the EPA believed that it was reasonable to update the budget-setting methodology for the proposed CSAPR Update. The proposed approach is similar to the proposed approach used to quantify emission budgets for the original CSAPR.

The final rule methodology for setting emission budgets reflects the CSAPR Update proposal in that it retains the approach of multiplying historical state-level heat input by state-level emission rates that reflect EGU NO_X reduction potential. For the final CSAPR Update rule, the EPA is refining its methodology for establishing emission budgets that reflect EGU NO_X reduction potential by using historical state-level NO_X emission rates adjusted by modeled NO_X reduction potential. Specifically, the final rule's approach applies the change in modeled 2017 state-level emission rates (the budget-setting base case 2017 projected rates minus the cost threshold modeling 2017 projected rates) to historical 2015 state-level NO_X emission rates, such that the emission budgets assume the potential of each state to improve its historical NO_X rate by the same degree that it is projected to improve its NO_X rate when moving between the budget-setting base case 2014 projection and cost threshold projection.

This approach uses the EPA's IPM EGU NO_X reduction potential modeling in a relative sense by applying the projected 2017 change in state-level EGU NO_X emission rates to 2015 historical data. This approach is similar to the EPA's method for projecting ambient air quality concentrations described in section V. The EPA is finalizing this refinement to the proposed approach in response to comment received on the proposal. The primary improvement of this approach relevant to comment received is that it circumvents quantifying in emission budgets any modeled EGU NO_X reduction potential (e.g., modeled retirements) that occurs in the budget-setting base case projection.

However, this approach also circumvents quantifying in emission budgets any known EGU NO_X reduction activities (e.g., announced new SCR at existing EGUs, announced coal-to-gas conversions, or announced retirements) occurring between the historical 2015 data and the modeled projection 2017 data.

To account for known changes in the final rule budget-setting methodology, the EPA developed an adjusted historical dataset. This adjusted historical data starts with 2015 state-level monitored and reported EGU NO_X emissions and heat input. The dataset is then adjusted for three categories of known changes in the power sector occurring between 2015 and 2017: Announced new SCR at existing EGUs; announced coal-to-gas conversions; and announced retirements. These important adjustments ensure that the emission budgets established by this rule reflect EGU NO_X reductions both from already announced power sector changes and further EGU NO_X reductions quantified in the EPA's EGU NO_X reduction potential analysis. Accounting for known EGU NO_X reduction activities in establishing emission budgets ensures that the emission budgets reflect the best available information in terms of achievable EGU NO_X reductions and remaining emission levels. To account for announced new SCR at existing EGUs, the EPA adjusts the 2015 emissions at the relevant units as though the new SCR had been operating at that time (assuming no change in heat input at those units). Similarly, to account for announced coal-to-gas conversions, the EPA adjusts the 2015 emissions at the relevant units as though the conversion had already taken place (assuming no change in heat input at those units). To account for announced retirements, the EPA subtracts the 2015 emissions from these units and replaces them by adding assumed emissions for an equivalent amount of generation using state-wide average emission rates after accounting for the retirement. Preserving some emissions associated with the generation from retired units, assuming that generation will be replaced by other EGUs in the state, ensures that the budget-setting approach accounts for known retirements but estimates the emission impact using generation replacement assumptions with conservatively high NO_X emission rates. In other words, the EPA assumes that the retired generation is replaced by the average remaining EGU composition within the state rather than by newer lower-emitting generation.

Comment: Commenters supported the EPA's consideration of historical monitored data to quantify emission budgets and advocated that the EPA further utilize historical data in its budget-setting methodology. For example, some commenters proposed an alternative budget-setting methodology that was grounded entirely in historical data, with NO_X control assumptions applied. Commenters also suggested that the budget-setting base case projection emission rates were unduly influenced by model-projected changes for the 2017 analysis year and that this created emission budgets that did not reflect achievable NO_X emission levels.

Response: In response to these comments, the agency considered approaches to isolate model-projected changes in the power sector occurring in the budget-setting base case projection and model-projected changes that result from the application of uniform cost threshold analysis. As discussed previously, for the final rule, the EPA is refining its method for calculating emission budgets in response to these comments. In doing so, the EPA is also finalizing a budget-setting methodology that further relies on historical data, which is further aligned with comment received on the proposal.

The approach for applying this budget-setting methodology to the EPA's EGU NO_X reduction potential analysis uses a three step process, applied to each control stringency level. First, the EPA uses the state-level modeled EGU NO_X emission rate from the 2017 budget-setting base case projection and subtracts the state-level modeled EGU NO_X emission rate from the 2017 cost threshold projection (e.g., $1,400 per ton). This yields the EPA's assessment of policy-related EGU NO_X reduction potential in the form of a reduction in state-level NO_X emission rate. Second, the EPA subtracts this modeled change in state-level NO_X emission rate from the adjusted historical state-level EGU NO_X emission rate. This yields a cleaner state-level EGU NO_X emission rate that is grounded in historical data and reflects policy-related EGU NO_X reduction potential. Third, the EPA multiplies the resulting EGU NO_X emission rate by 2015 historical heat input. This multiplication yields state-specific ozone season EGU NO_X emission budgets for 2017 that are grounded in historical data and reflect EGU NO_X reduction potential modeled in IPM. Similar to the proposal, the final CSAPR Update establishes emission budgets as the lower of the calculated emission budget or the 2015 historical (unadjusted) state-level emissions.

In conducting the IPM modeling of each cost threshold, the EPA limited IPM's evaluation of NO_X mitigation strategies to those that can be implemented for the 2017 ozone season, which is the compliance timeframe for this rulemaking. The agency analyzed levels of uniform EGU NO_X control using IPM, where each level is represented by marginal NO_X costs listed in Table VI.C-1 in this preamble. The analysis applied these uniform levels of control to EGUs in the 48 contiguous United States and the District of Columbia, starting with 2017. The analysis included EGUs with a capacity (electrical output) greater than 25 MW, which reflects the CSAPR Update rule applicability criteria. The Ozone Transport Policy Analysis Final Rule TSD, which is in the docket for this rule, provides further details of the EPA's analysis of ozone season NO_X emission reductions occurring at each level of uniform control stringency for the 2017 ozone season.

As described in in Section V, air quality data for the CSAPR Update indicates that the District of Columbia contributes at or above the 1 percent threshold to a downwind maintenance receptor in Harford County, Maryland. Moreover, in Step 3 of the CSAPR framework, the EPA's analysis finds that there are no EGUs in the District of Columbia that meet the CSAPR Update applicability criteria (i.e., EGUs with a capacity greater than 25 MW). Therefore, the EPA does not calculate or finalize an EGU NO_X ozone season emission budget for the District.

The 2015 historical data, adjusted historical data, and EGU NO_X ozone season emission budgets calculated using each cost threshold identified in the final emission budget-setting approach can be found in Tables VI.C-1 and VI.C.2.

D. Multi-Factor Test Considering Costs, EGU NO _X Reductions, and Downwind Air Quality Impacts

Next, the EPA applied the multi-factor test to consider cost, available emission reductions, and downwind air quality impacts to determine the appropriate level of uniform NO_X control stringency, feasible for 2017, that addresses the impacts of interstate transport on downwind nonattainment or maintenance receptors. This test evaluates these factors to determine the appropriate stopping point for quantifying upwind state obligations to address interstate ozone transport, including whether the identified downwind ozone problems (i.e., nonattainment or maintenance problems) are resolved.

Combining costs, EGU NO_X reductions, and corresponding improvements in downwind ozone concentrations results in a “knee in the curve” at a point where emission budgets reflect a control stringency with an estimated marginal cost of $1,400 per ton. This level of stringency in emission budgets represents the level at which incremental EGU NO_X reduction potential and corresponding downwind ozone air quality improvements are maximized with respect to marginal cost. That is, the ratio of emission reductions to marginal cost and the ratio of ozone improvements to marginal cost are maximized relative to the other emission budget levels evaluated. Further, more stringent emission budget levels (e.g., emission budgets reflecting $3,400 per ton or greater) yield fewer additional emission reductions and fewer air quality improvements relative to the increase in control costs. This evaluation shows that significant EGU NO_X reductions are available at reasonable cost and that these reductions can provide improvements in downwind ozone concentrations at the identified nonattainment and maintenance receptors for the final rule.

To assess downwind air quality impacts for each nonattainment or maintenance receptor identified in this rulemaking, the EPA evaluated the air quality change at that receptor expected from the progressively more stringent upwind EGU NO_X emission budgets quantified for each uniform NO_X control stringency level. This assessment provides the downwind ozone improvements for consideration and provides air quality data that is used to evaluate over-control.

In order to assess the air quality impacts of the various control stringencies, the EPA evaluated changes resulting from the application of the emission budgets to states that are linked to each receptor as well as the state containing the receptor. By applying each budget level to the state containing the receptor, the EPA ensures that it is accounting for the downwind state's fair share. For states that were not linked to that receptor, the air quality change at that receptor was evaluated assuming emissions equal to the adjusted historic emission level, including Pennsylvania RACT. This method holds each upwind state responsible for its fair share of the downwind problems to which it is linked. Reductions made by other states in order to address air quality problems at other receptors do not increase or decrease this fair share. This approach removes state equity considerations from this component of the multi-factor test and preserves the apportionment of upwind responsibility to the assessment of uniform control stringency represented by cost, which the Supreme Court found to be “an efficient and equitable solution to the allocation problem the Good Neighbor Provision requires the Agency to address.” 134 S. Ct. at 1607.

For this assessment, the EPA used an ozone air quality assessment tool (ozone AQAT) to estimate downwind changes in ozone concentrations related to upwind changes in emission levels. This tool is similar to the AQAT tool used in the original CSAPR to evaluate changes in PM_2.5 concentrations. The ozone AQAT uses simplifying assumptions regarding the relationship between each state's change in EGU NO_X emissions and the corresponding change in ozone concentrations at nonattainment and maintenance receptors to which that state is linked. This method is calibrated using two CAMx air quality modeling scenarios that fully account for the non-linear relationship between emissions and air quality associated with atmospheric chemistry. See the Ozone Transport Policy Analysis Final Rule TSD for additional details.

For each emission budget level and for each receptor, the EPA evaluated the magnitude of the change in concentration and determined whether the estimated concentration would resolve the receptor's nonattainment or maintenance concern by lowering the average or maximum design values below 76 ppb, respectively.

As an example, the EPA evaluated the Harford County, Maryland receptor with all linked states and Maryland meeting emission budgets reflecting controls available at $800 per ton of NO_X emissions reduced. Adding up the state-by-state changes in air quality contributions resulting from the changes in emissions, this assessment showed a 0.1 ppb reduction in expected ozone design values. After subtracting this air quality improvement from the design values quantified in section V of this preamble, the residual design values at this site are still expected to exceed the 2008 ozone NAAQS with an average design value of 79.0 ppb and a maximum design value of 81.6 ppb. Next, the EPA evaluated this receptor with all linked states and Maryland meeting emission budgets reflecting controls available at $1,400 per ton. This assessment showed a 0.4 ppb reduction in expected ozone design values. At emission budgets reflecting $1,400 per ton, the residual design values at this site are expected to continue to exceed the 2008 ozone NAAQS with an average design value of 78.7 ppb and a maximum design value of 81.3 ppb. Next, the EPA evaluated this receptor with all linked states and Maryland meeting emission budgets reflecting controls available at $3,400 per ton. This assessment showed a 0.6 ppb reduction in expected ozone design values. At emission budgets reflecting $3,400 per ton, the residual design values at this site are expected to continue to exceed the 2008 ozone NAAQS with an average design value of 78.5 ppb and a maximum design value of 81.2 ppb. Next, the EPA evaluated this receptor with all linked states and Maryland meeting emission budgets reflecting controls available at $5,000 per ton. This assessment showed a 0.7 ppb reduction in expected ozone design values. At emission budgets reflecting $5,000 per ton, the residual design values at this site are expected to continue to exceed the 2008 ozone NAAQS with an average design value of 78.4 ppb and a maximum design value of 81.1 ppb. Next, the EPA evaluated this receptor with all linked states and Maryland meeting emission budgets reflecting controls available at $6,400 per ton. This assessment showed a 0.7 ppb reduction in expected ozone design values. At emission budgets reflecting $6,400 per ton, the residual design values at this site are expected to continue to exceed the 2008 ozone NAAQS with an average design value of 78.4 ppb and a maximum design value of 81.0 ppb.

Generally, the EPA evaluated the air quality improvements at each monitoring site for the emission budgets associated with each progressively more stringent emission budget. For more information about how this assessment was performed and the results of the analysis for each receptor, refer to the Ozone Transport Policy Analysis Final Rule TSD.

As part of this analysis, the EPA evaluates potential over-control with respect to whether (1) the expected ozone improvements would be sufficient or greater than necessary to resolve the downwind ozone pollution problem (i.e., resolving nonattainment or maintenance problems) or (2) the expected ozone improvements would reduce upwind state ozone contributions to below the screening threshold (i.e., one percent of the NAAQS).

In EME Homer City, the Supreme Court held that the EPA cannot “require[] an upwind State to reduce emissions by more than the amount necessary to achieve attainment in every downwind State to which it is linked.” 134 S. Ct. at 1608. On remand from the Supreme Court, the D.C. Circuit held that this means that the EPA might overstep its authority “when those downwind locations would achieve attainment even if less stringent emissions limits were imposed on the upwind States linked to those locations.” EME Homer City II, 795 F.3d at 127. The D.C. Circuit qualified this statement by noting that this “does not mean that every such upwind State would then be entitled to less stringent emission limits. Some of those upwind States may still be subject to the more stringent emissions limits so as not to cause other downwind locations to which those States are linked to fall into nonattainment.” Id. at 14-15. As the Supreme Court explained, “while EPA has a statutory duty to avoid over-control, the Agency also has a statutory obligation to avoid `under-control,' i.e., to maximize achievement of attainment downwind.” 134 S. Ct. at 1609. The Court noted that “a degree if imprecision is inevitable in tackling the problem of interstate air pollution.” Id. “Required to balance the possibilities of under-control and over-control, EPA must have leeway in fulfilling its statutory mandate.” Id.

Consistent with these instructions from the Supreme Court and the D.C. Circuit, the EPA first evaluated whether reductions resulting from the $800 per ton emission budgets can be anticipated to resolve any downwind nonattainment or maintenance problems (as defined in section V) and by how much. This assessment shows that the emission budgets reflecting $800 per ton would resolve maintenance problems at one downwind maintenance receptors—Philadelphia, Pennsylvania (maximum design value of 75.8 ppb). The EPA's assessment shows that no state included in the CSAPR Update is linked solely to the Philadelphia receptor that is resolved at the $800 per ton level of control stringency.

Next, the EPA evaluated whether reductions resulting from the $1,400 per ton emission budgets can be anticipated to resolve any further downwind nonattainment or maintenance problems. For the 22 CSAPR Update states, the EPA assessed further EGU NO_X reductions of emission budgets reflecting $1,400 per ton and found that the emission budgets reflecting $1,400 per ton would resolve nonattainment and maintenance problems at one downwind nonattainment receptors—Jefferson County, Kentucky (maximum design value of 75.7 ppb)—and would resolve maintenance problems at one additional downwind maintenance receptor—Hamilton County, Ohio (maximum design value of 75.1 ppb). The EPA's assessment shows that this control level does resolve the only identified nonattainment or maintenance problems to which Tennessee is linked—the Hamilton County, Ohio and Philadelphia, Pennsylvania receptors. However, no other no state included in the CSAPR Update is linked solely to these receptors that are resolved at the $1,400 per ton level of control stringency.

In light of the improvements at the maintenance receptors to which Tennessee is linked, the EPA evaluated the magnitude of those improvements and whether the air quality problems could have been resolved at a lower level of control stringency. At the emission budgets reflecting $1,400 per ton, the EPA's assessment demonstrates that the receptors to which Tennessee is linked would just be maintaining the standard, with maximum design values of 75.5 (Philadelphia) and 75.1 ppb (Hamilton County), which the EPA truncates to compare against the 2008 ozone standard. Consistent with the manner in which the EPA truncates design values to evaluate NAAQS attainment, these concentrations are equal to the level of the 2008 ozone NAAQS at 75 ppb. Therefore, the emission reductions that would be achieved by emission budgets reflecting $1,400 per ton would not result in air quality improvements at these receptors significantly better than the standard such that emission reductions might constitute over-control as to the receptors. On the contrary, the emission reductions achieved in upwind states by emission budgets reflecting $1,400 per ton are necessary to bring the maximum design value at the receptors into alignment with the standard. The EPA finds that, based on the information supporting this final rule, the $1,400 per ton emission budget level would not constitute over-control for Tennessee or for any other state included in the CSAPR Update.

In EME Homer City, the Supreme Court also held that “EPA cannot require a State to reduce its output of pollution . . . at odds with the one percent threshold the Agency has set.” 134 S. Ct. at 1608. The Court explained that “EPA cannot demand reductions that would drive an upwind State's contribution to every downwind State to which it is linked below one percent of the relevant NAAQS.” Id. Accordingly, the EPA evaluated the potential for over-control with respect to the one percent threshold applied in this rulemaking at each relevant emission budget level. Specifically, the EPA evaluated whether the emission budget levels would reduce upwind EGU emissions to a level where the contribution from any upwind state would be below the one percent threshold that linked the upwind state to the downwind receptors. If the EPA found that any state's emission budget would decrease its contribution below the one percent threshold to every downwind receptor to which it is linked, then it would adjust the state's reduction obligation accordingly. The EPA's assessment reveals that there is not over-control with respect to the one percent threshold at any of the evaluated uniform cost emission budget levels in any upwind state. Most relevant, the EPA finds that under the $800 per ton and $1,400 per ton emission budgets, all 22 eastern states that contributed greater than or equal to the one percent threshold in the base case continued to contribute greater than or equal to one percent of the NAAQS to at least one downwind nonattainment or maintenance receptor. For more information about this assessment, refer to the Ozone Transport Policy Analysis Final Rule TSD.

Considering the EPA's findings with respect to application of the multi-factor test and over-control, the EPA is finalizing ozone season EGU NO_X emission budgets reflecting $1,400 per ton of EGU NO_X control for all CSAPR Update states. The EPA finds that the finalized Tennessee emission budget fully addresses Tennessee's good neighbor obligation with respect to the 2008 ozone NAAQS. For the remaining CSAPR Update states, final emission budgets reflecting $1,400 per ton of EGU NO_X control represent a partial solution for these states' good neighbor obligation with respect to the 2008 ozone NAAQS.

In establishing emission budgets reflecting $1,400 per ton of EGU NO_X control, the EPA notes that combustion controls are the only EGU NO_X reduction strategy that the EPA generally considers feasible for the 2017 ozone season in quantifying emission budgets for the final CSAPR Update and that also requires new construction. For this unique reason, in developing each state emission budget, the EPA specifically considered the number of EGUs with NO_X reduction potential from installing state-of-the-art combustion controls, 2015 reliance on these EGUs for electricity generation in the state, and the magnitude of reductions relative to the resulting emission budgets.

These data indicate that nearly all of the EGU NO_X reduction potential for one state, Arkansas, comes from installing state-of-the-art combustion controls. The EPA's analysis for the final rule finds that two units at White Bluff and two units at Independence power plants in Arkansas have significant EGU NO_X reduction potential from the installation of state-of-the-art combustion controls. The NO_X reduction potential from these units is uniquely significant relative to Arkansas' resulting emission budget. The agency's analysis finds approximately 3,000 tons of ozone season NO_X reduction potential from these 4 units in Arkansas. If the EPA were to calculate a 2017 emission budget for Arkansas that includes reductions attributable to combustion controls, these reductions would be equivalent to 33 percent of Arkansas' resulting emission budget. The NO_X reduction potential from installing combustion controls has an outsized effect on Arkansas' resulting emission budget relative to other states. Arkansas is unique with respect to emission reduction potential achievable from combustion controls relative to its corresponding emission budget. In all other states covered by this rule, reduction potential from combustion controls relative to the CSAPR Update rule emission budgets is 11 percent or less. While the EPA does not anticipate that sources in any other state would have difficulty installing upgraded combustion controls for the 2017 ozone season, for the reasons described earlier, the relatively low number of expected emissions reductions from those controls means that failure of any of these sources to install such controls would not lead the state to exceed the assurance levels and incur CSAPR assurance penalties.

Further, these units at White Bluff and Independence power plants in Arkansas, combined, accounted for nearly 40 percent of the state's 2015 heat input. Compared to other CSAPR Update states, Arkansas is also uniquely situated in this regard. In all other states covered by this rule, the percentage of state-level heat input from units with reduction potential from installation of combustion controls is 20 percent or less. The CSAPR allowance trading program allows Arkansas' utilities the option to choose alternative compliance paths. However, the EPA considers that if their compliance path included combustion controls for these units, then it may be difficult to schedule outage time to upgrade all four of the Arkansas units to state-of-the-art combustion controls for the 2017 ozone season and supply adequate electricity to meet demand in the state.

If, due to the unique feasibility concerns discussed earlier, the Arkansas units could not install upgraded controls for the 2017 ozone season, Arkansas utilities could exceed the CSAPR assurance level in 2017. In such circumstances, Arkansas utilities would not only need to purchase allowances for compliance, but they would also face the CSAPR assurance provision penalty, meaning that for emissions exceeding the assurance level, utilities would need to surrender three allowances for each ton of emissions.

In light of these unique circumstances, the EPA believes that it is prudent and appropriate to finalize for Arkansas a 2017 ozone season emission budget for Arkansas that does not account for EGU NO_X reduction potential from combustion controls and a 2018 ozone season emission budget for Arkansas that does account for EGU NO_X reduction potential from combustion controls. This approach provides utilities an extra year to upgrade combustion controls in the event that this is their chosen CSAPR Update compliance path. This extra year allows for upgrades to be made across four shoulder seasons (fall 2016, spring 2017, fall 2017, and spring 2018).

The emission budgets that the EPA is finalizing in FIPs for the CSAPR Update rule are summarized in table VI.E-2.

The EPA's selection of emission budgets for this rule is specific to, and appropriate for, defining near-term achievable upwind obligations with respect to the 2008 ozone NAAQS in states where a FIP is necessary. The EPA does not intend—nor does it believe it would be justified in doing so in any event—that the cost-level-based determinations in this rule impose a constraint for selection of cost levels in addressing transported pollution with respect to future NAAQS and/or any revisions to these FIPs for any other future transport rules that the EPA may develop to address any potential remaining obligation as to the current NAAQS, for which different cost levels may be appropriate.

In addition to 22 states identified previously, the EPA also assessed the potential for EGU NO_X reductions in Delaware and the District of Columbia. This assessment finds that the District of Columbia does not have any affected EGUs. As a result, despite the District of Columbia's linkage to the Harford County, Maryland receptor, the District does not have any EGU NO_X reduction potential. The EPA also has not taken action to approve or disapprove a pending good neighbor SIP addressing the 2008 ozone NAAQS. Given that the District of Columbia does not have any affected sources and the District's SIP is still before the agency, the EPA is not finalizing a FIP for the District in this action. Also, the EPA's assessment of EGU NO_X reduction potential shows zero reductions available in Delaware in 2017 at any evaluated cost threshold because they are already equivalently controlled. Given this information and the fact that Delaware's SIP is also still pending before the agency, we are not promulgating a FIP for Delaware in this rule. The EPA will consider the information developed for this rule, as appropriate, in evaluating the good neighbor SIPs for these areas, and if the EPA ultimately disapproves those SIPs, the EPA will address any resulting FIP obligation separately.

The proposed CSAPR Update sought comment on whether or not to include Wisconsin in the final CSAPR Update considering that the modeling data for the proposal showed zero NO_X reduction potential for Wisconsin under the proposed EGU NO_X control stringency. Unlike our analysis at proposal, the EGU NO_X emission reduction potential analysis for the final rule shows that EGUs in Wisconsin and all 22 CSAPR Update states have EGU emission reductions available using the uniform control stringency represented by $1,400 per ton. Further, ozone season emission budgets that the EPA is finalizing in the CSAPR Update represent reductions from 2015 emission levels for Wisconsin and all 22 CSAPR Update states. The EPA is therefore including each of the 22 CSAPR Update states in the final CSAPR Update to ensure that each state achieves NO_X emission reductions to address significant contribution to nonattainment or interference with maintenance of downwind pollution with respect to the 2008 ozone NAAQS.

VII. Implementation Using the Existing CSAPR NO_X Ozone Season Allowance Trading Program and Relationship to Other Rules

A. Introduction

This section addresses step four of the CSAPR framework by describing how the EPA will implement and enforce the EGU emission budgets quantified in section VI, which represent the remaining EGU emissions after reducing those amounts of each state's emissions that significantly contribute to downwind nonattainment or interfere with maintenance of the 2008 ozone NAAQS in downwind states. See Table VI.E-2 for final emission budgets. The EPA is finalizing FIPs with respect to the 2008 ozone NAAQS for each of the 22 states covered by this rule. The FIPs will require affected EGUs to participate in the CSAPR NO_X ozone season trading program subject to the final emission budgets. The EPA is updating the CSAPR NO_X ozone season program requirements in 40 CFR part 97 to reflect these CSAPR NO_X ozone season emission budgets and final CSAPR Update Rule trading program requirements.

The CSAPR NO_X ozone season trading program is a market-based approach that implements emission reductions needed to meet the CAA's good neighbor requirements. The emission budgets establish state-level aggregate emission caps that specify the quantity of emissions authorized from affected EGUs. The EPA creates individual authorizations (“allowances”) to emit a specific quantity (i.e., 1 ton) of ozone season NO_X. The total number of allowances equals the level of the emission budgets, which partially address interstate emission transport under the good neighbor provision for the 2008 ozone NAAQS. To be in compliance, each participant must hold allowances equal to its actual emissions for each control period. It may buy or sell (trade) them with other market participants. Each affected EGU can design its own compliance strategy—emission reductions and allowance purchases or sales—to minimize its compliance cost. And it can adjust its compliance strategy in response to changes in technology or market conditions. The compliance flexibility provided by the CSAPR NO_X ozone season trading program does not prescribe unit-specific and technology-specific NO_X mitigation. While the EPA establishes emission budgets that reflect emission reductions that can be achieved by certain near-term and cost effective EGU NO_X mitigation strategies (e.g., turning on idled SCRs), no particular EGU NO_X reduction strategy is required for any specific EGU to demonstrate compliance with the CSAPR Update rule.

In order to ensure that each upwind state addresses its significant contribution to nonattainment or interference with maintenance and to accommodate inherent year-to-year variability in state-level EGU operations, the CSAPR NO_X ozone season trading program includes variability limits and assurance provisions. These provisions are unchanged from those established in the original CSAPR with the exception of each CSAPR Update state having a revised variability limit and assurance level that corresponds with its revised emission budget. The CSAPR assurance provisions require additional allowance surrender penalties (a total of 3 allowances per ton of emissions) on emissions that exceed a state's CSAPR NO_X ozone season assurance level, or 121 percent of the emission budget.

When the EPA finalized the original CSAPR in 2011, the rule established regional trading programs designed to cost-effectively reduce transported emissions of SO₂ and NO_X from power plants in eastern states that affect air quality in downwind states. See 76 FR 48272 and 48273 (August 8, 2011). The EPA envisioned that this approach to implementing necessary emission reductions could be used to address transport obligations under other existing NAAQS and future NAAQS revisions. See 76 FR 48211 and 48246 (August 8, 2011). The EPA is finalizing implementation of the CSAPR Update emission budgets using the CSAPR NO_X ozone season allowance trading program, with certain updates. Using the familiar CSAPR trading program to implement these near-term EGU reductions for the 2008 ozone standard provides many significant advantages, including certainty in emission reductions achieved by dint of caps on emissions and air quality-assured allowance trading, ease of transition to the new emission budgets, the economic and administrative efficiency of trading approaches, and the flexibility afforded to sources regarding compliance.

The first control period for the requirements finalized in these FIPs is the 2017 ozone season (May 1, 2017-September 30, 2017). Affected EGUs within each covered state must demonstrate compliance with FIP requirements for the 2017 ozone season and each subsequent ozone season unless and until the state submits a SIP that the EPA approves as replacing the FIP, or the EPA promulgates another federal rule replacing or revising the FIP.

In this section of the preamble, the following topics are addressed: New and revised FIPs; updates to CSAPR NO_X ozone season trading requirements, including trading program structure and treatment of banked allowances; feasibility of compliance; key elements of the CSAPR trading programs; replacing the FIP with a SIP; title V permitting; and the relationship of this rule to other emission trading and ozone transport programs (NO_X SIP Call, CSAPR trading programs, CPP).

B. New and Revised FIPs

As explained in section III in this preamble, the EPA is finalizing new or revised FIP requirements only for those states where the EPA has the authority and obligation to promulgate a FIP addressing the state's interstate transport obligation pursuant to CAA section 110(a)(2)(D)(i)(I) for the 2008 ozone NAAQS. That is, the EPA is finalizing new or revised FIP requirements for certain states where the EPA either found that the state failed to submit a complete good neighbor SIP or disapproved a good neighbor SIP for that state. Moreover, the EPA is only finalizing new or revised FIP requirements for those states identified in sections V and VI of this preamble, whose emissions significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS in other eastern states. For those states that contribute below the one percent threshold applied in section V of this preamble, the EPA concludes that the state's emissions do not significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS. There is therefore no need to impose further emission limits on sources within those states through issuance of new or revised FIP requirements.

Of the 22 states required to participate in the CSAPR NO_X ozone season trading program under this CSAPR Update, 21 states already comply with the original CSAPR NO_X ozone season requirements with respect to the 1997 ozone NAAQS. For those 21 states, the EPA is revising their existing FIP requirements to require compliance with updated budgets at the levels in Table VI.E-2. One state, Kansas, has newly added CSAPR NO_X ozone season compliance requirements in this action. For Kansas, the agency is establishing new FIP requirements to require compliance with a budget at the level in Table VI.E-2.

One state, Georgia, has a continued compliance requirement under the original CSAPR NO_X ozone season program with respect to the 1997 ozone NAAQS and is not found to significantly contribute to nonattainment or interfere with maintenance of the 2008 ozone NAAQS in other states. Therefore, Georgia's CSAPR NO_X ozone season requirements (including its emission budget) continue unchanged pursuant to the state's previously-defined obligation that was quantified to address the 1997 ozone NAAQS, and the EPA is not making any changes to the existing FIP requirements for Georgia contained in 40 CFR part 52.

Three states (Florida, North Carolina, and South Carolina) are currently subject to the CSAPR NO_X ozone season trading program with respect to the 1997 ozone NAAQS under the original CSAPR. However, as described in section IV of this preamble, the phase 2 NO_X ozone season budgets for these three states were remanded to the EPA for reconsideration by the D.C. Circuit in EME Homer City II, 795 F.3d at 138. In this final rule, the EPA finds that emissions from Florida, North Carolina, and South Carolina do not significantly contribute to nonattainment or interfere with maintenance of either the 1997 ozone NAAQS or the 2008 ozone NAAQS in other states. Accordingly, starting with the 2017 ozone season, these three states will no longer be subject to CSAPR NO_X ozone season trading program requirements and EGUs in these states will not be allocated further allowances nor obligated to demonstrate compliance with CSAPR NO_X ozone season requirements. The EPA is revising 40 CFR part 52 to remove CSAPR NO_X ozone season program requirements for these three states.

C. Updates to CSAPR NO_X Ozone Season Trading Program Requirements

For the CSAPR Update rule, the EPA is finalizing certain updates to the CSAPR NO_X ozone season trading program to transition the existing original CSAPR NO_X ozone season trading program, designed to address the 1997 ozone NAAQS, to address new requirements as to interstate emission transport for the 2008 ozone NAAQS. These changes will be effective for the 2017 ozone season control period. In this context, the EPA determines the extent to which allowances issued under emission budgets established to address interstate transport with respect to the 1997 ozone NAAQS would or would not be eligible for compliance under this rule for affected EGUs with emission budgets established to address interstate transport for the 2008 ozone NAAQS. In developing approaches to transition the CSAPR trading program, the EPA weighed several factors, including achieving the environmental goal of the CSAPR Update (i.e., achieving necessary emission reductions to address interstate transport with respect to the 2008 ozone NAAQS) and feasibility of implementing the CSAPR Update rule. The EPA proposed and took comment on several approaches regarding this transition of the original CSAPR NO_X ozone season program to address interstate emission transport for the more recent 2008 ozone NAAQS.

The EPA considered whether CSAPR NO_X ozone season allowances issued in 2017 and thereafter to affected EGUs in original CSAPR states without updated CSAPR NO_X ozone season trading program budgets (i.e., Georgia) can be used for compliance in the 22 CSAPR Update states and vice versa. As described later on, this final rule prohibits the use of allowances for compliance between Georgia and the CSAPR Update states because of the differences in air quality goals (i.e., the 1997 ozone NAAQS versus the 2008 ozone NAAQS) and the different NO_X control stringency used to establish emission budgets necessary to achieve those air quality goals. The EPA is implementing this prohibition by establishing two distinct trading groups with distinct allowances within the CSAPR NO_X ozone season allowance trading program. The EPA provides an option for Georgia to voluntarily adopt via SIP a commensurate CSAPR Update emission budget that would obviate this prohibition by including Georgia in the trading group with the CSAPR Update states.

The EPA also considered whether, and to what extent, banked 2015 and 2016 CSAPR NO_X ozone season allowances issued under original CSAPR NO_X ozone season emission budgets should be eligible for compliance in CSAPR Update states in 2017 and beyond. As described later on, this rule establishes a one-time allowance conversion that transitions a limited number of banked 2015 and 2016 allowances (approximately 99,700 allowances) for compliance use in CSAPR Update states. This allowance conversion is designed to limit the potential use of banked allowances to no more than one year of the CSAPR variability limits in order to ensure that implementation of the trading program will result in NO_X emission reductions sufficient to address significant contribution to nonattainment or interference with maintenance of downwind pollution with respect to the 2008 ozone NAAQS. However, the conversion also facilitates compliance with the CSAPR Update by carrying over some allowances that can be used for compliance.

1. Relationship of Allowances and Compliance for CSAPR Update States and States With Ongoing Original CSAPR Requirements

The final rule establishes two trading groups within the CSAPR NO_X ozone season allowance trading program. Group 2 is newly established and is comprised of the 22 CSAPR Update states. Group 1, at this time, consists of Georgia. The CSAPR Update rule ozone season Group 1 and Group 2 trading programs are codified under 40 CFR part 97, subparts BBBBB for Group 1 and EEEEE for Group 2, to enact the EGU NO_X ozone season emission budgets for the 2008 ozone NAAQS. Section 52.38(b) has been amended to update which sources are subject to the requirements of the respective subparts of part 97 for control periods after 2016.

The EPA will issue distinct allowances for these trading groups, CSAPR NO_X ozone season Group 1 allowances and CSAPR NO_X ozone season Group 2 allowances, for the 2017 ozone season control period and subsequent control periods. Covered entities may transfer, trade (buy and sell), and bank (save) these allowances. Pursuant to the CSAPR trading program regulations, compliance is demonstrated by holding and surrendering one allowance for each ton of ozone season NO_X emitted during the control period (i.e., ozone season). The CSAPR Update finalizes provisions governing compliance that prohibit the use of Group 1 allowances for compliance in Group 2 states or the use of Group 2 allowances for compliance in Group 1 states. Aside from revised emission budgets for CSAPR NO_X ozone season Group 2 states and the prohibition of using Group 1 allowances for compliance in Group 2 states, and vice versa, the CSAPR Update rule NO_X ozone season trading programs' implementation requirements (e.g., monitoring, reporting, assurance provisions) are substantively identical to the original CSAPR NO_X ozone season trading program.

In the original CSAPR SO₂ annual allowance trading program, the EPA discussed its concern with permitting the use of allowances for compliance between groups of states linked to air pollution problems that are more easily resolved and groups of states linked to air pollution problems that are more persistent. The EPA was concerned that allowance trading between these groups of states could undermine the capacity of the rule to achieve the emission reductions required by the good neighbor provision of the CAA. Specifically, trading between these groups could lead to greater emission reductions in states linked to more easily resolved air pollution problems and fewer emission reductions in states linked to more persistent air pollution problems. This concern arose, in part, because the EPA identified different levels of significant contribution to nonattainment or interference with maintenance for these groups of states. As a result, these groups' emission budgets were established using different levels of control stringency. Allowing trading between groups of states with emission budgets representing substantially different uniform costs could lead to allowance transfers from EGUs in states with less stringent emission budgets to EGUs in states with more stringent emission budgets. The EPA was concerned that allowing trading between such groups of states could increase the risk of emissions within a state exceeding the CSAPR emission budget or assurance level. For these reasons, the original CSAPR rulemaking prohibited the use of CSAPR SO₂ Group 1 allowances in SO₂ Group 2 states and vice versa.

In similar fashion, in order to ensure that the CSAPR NO_X ozone season trading program implements emission reductions needed to meet the CAA's good neighbor requirements for the CSAPR Update states, the EPA is finalizing a prohibition on allowance usage between Georgia and the CSAPR Update states. Specifically, for the final CSAPR Update rule, the EPA determines that allowances issued in 2017 and thereafter under the original CSAPR will not be eligible for compliance in the 22 CSAPR Update states, and vice versa. The EPA is finalizing this prohibition because states participating in the original CSAPR NO_X ozone season program (i.e., Georgia) are doing so to address interstate emission transport for the 80 ppb 1997 ozone NAAQS, while CSAPR Update States are addressing interstate emission transport for the 75 ppb 2008 ozone NAAQS. The air quality assessment performed for this rule shows that ozone pollution problems with respect to the 75 ppb standard are relatively more robust than ozone problems with respect to the 80 ppb standard. Further, due in part to these differences in ozone pollution risk represented by the two standards, the EPA has identified different levels of significant contribution to nonattainment or interference with maintenance for these groups and the corresponding emission budgets and assurance levels reflect different levels of EGU NO_X control stringency. The original CSAPR NO_X ozone season emission budgets and assurance levels reflect $500 per ton of NO_X emissions reduced while the CSAPR Update emission budgets and assurance levels reflect $1,400 per ton of NO_X emissions reduced. The EPA finds this substantial difference in uniform cost could lead to allowance transfers from EGUs in Georgia to EGUs in CSAPR Update states. Specifically, the EPA notes that the ratio of marginal cost of ozone season NO_X control reflected in these emission budgets is nearly three-to-one, which is similar to the three-to-one assurance provision allowance surrender penalty that is incurred on emissions that exceed any state's assurance level (121 percent of the emission budget). The EPA finds that allowing trading between Georgia and the CSAPR Update states could increase the risk that emissions in CSAPR Update states exceed their emission budget or their assurance level.

The EPA does not expect that the prohibition of using CSAPR Update rule NO_X ozone season Group 2 allowances for compliance in Group 1 states will create significant concern regarding feasibility of compliance for Group 1 states. Georgia's ozone season emissions have been well below its original CSAPR NO_X ozone season emission budget for several years. The EPA anticipates that units within the state will continue to meet compliance obligations even without the ability to use CSAPR Update rule NO_X ozone season Group 2 allowances for compliance. Further, the EPA is quantifying an optional CSAPR Update rule EGU NO_X ozone season emission budget for Georgia, using the same methods and uniform cost as budgets for CSAPR Update states. This emission budget reflects protection of downwind air quality under the 2008 ozone NAAQS. If Georgia chooses to adopt this emission budget via a revised SIP submittal, then the EPA believes that such a SIP submission may be approvable and Georgia may thereby opt into the CSAPR Update rule NO_X ozone season Group 2 trading program and use the CSAPR Update rule NO_X ozone season Group 2 allowances for compliance.

Comment: Commenters suggested that if states subject to the original CSAPR for the 1997 ozone NAAQS are not found to significantly contribute to nonattainment or interfere with maintenance for the 2008 ozone NAAQS, then allowances issued in those states should not be part of the remedy, since there is no physical connection between NO_X allowances issued for those states and the downwind ozone nonattainment or maintenance problem that another state's reductions must address for a different NAAQS.

Response: In light of the specific differences in ozone pollution problems addressed, level of significant contribution to nonattainment or interference with maintenance, and marginal cost of NO_X reduction used to establish emission budgets for the original CSAPR and the CSAPR Update rule, the EPA agrees that it is reasonable to prohibit the use of CSAPR Update rule NO_X ozone season Group 1 allowances for compliance in Group 2 states and vice versa, as described previously.

Comment: Commenters suggested that there should not be a prohibition on using allowances between these groups of states and that the CSAPR assurance provisions are sufficient to ensure that emission reductions are made in upwind states.

Response: The assurance provisions provide limited flexibility around the finalized emission budgets developed using uniform control stringency to accommodate inherent variability in average power sector operations. For example, assurance levels are intended to accommodate specific unusual events, such as sudden and unexpected outages of a unit, or severe weather. The assurance level is intended to function as a not-to-exceed cap that includes both the state budget—established to reduce significant contribution to and interference with maintenance of the 2008 ozone NAAQS in downwind states—and the variability limit. The flexibility provided by the assurance provisions is not designed to address interstate trading in the case of two groups of states that are addressing different ozone pollution problems, levels of significant contribution to nonattainment or interference with maintenance, or levels of EGU NO_X reduction stringency in emission budgets. Further, as described previously, the EPA finds that were it to authorize use of allowances issued to EGUs in Georgia for compliance in CSAPR Update states, the risk of emissions in a CSAPR Update state exceeding its emission budget or assurance level would increase.

2. Use of Banked Vintage 2015 and 2016 CSAPR NO_X Ozone Season Trading Program Allowances for Compliance in CSAPR Update States

In this subsection, the EPA describes its approach to transition a limited number of allowances that were banked in 2015 and 2016 under the original CSAPR EGU NO_X ozone season emission budgets into the allowances that can be used for compliance in CSAPR Update states in 2017 and thereafter. As proposed, the EPA is finalizing a limit on the number of banked allowances carried over based on the need to assure that the CAA objective of the CSAPR Update is achieved. This approach transitions some allowances for compliance to further ensure feasibility of implementing the CSAPR Update rule.

Specifically, the EPA is including in this final rule a method for ensuring that emissions in the CSAPR Update region do not exceed a specified level—this is, emissions up to the sum of the states' seasonal emissions budgets and variability limits—as a result of the use of banked allowances. The method is captured in a formula or ratio, the numerator of which is the total number of banked allowances at the end of the 2016 ozone season and the denominator of which is 1.5 times the aggregated variability limits finalized in this rule. The ratio is then applied to the banked vintage 2015 and 2016 allowances in each account to yield the number of banked allowances available to each account holder in 2017.

When proposing this approach, the EPA described how sources in states with new or updated budgets could use all of their banked allowances, but at a turn-in ratio significantly higher than one under which only one allowance would be used to cover each ton of emissions (e.g., a four-for-one or a two-for-one turn-in ratio). The EPA proposed to use turn-in ratios calculated using the proposed formula described above—essentially the same formula that the EPA is including in this final rule. At proposal, the EPA explained that the ratio of the banked vintage 2015 and 2016 allowances to the aggregated ozone season variability limits was designed to limit the magnitude of the emission impact of sources' use of banked allowances to that of the emissions level that would result from all states emitting up to the sum of their budgets and their variability limits for one or two years. (See 80 FR 75747.) The formulaic ratio when applied to the actual bank and emissions levels would yield a conversion factor for banked allowances that would be used to implement the proposed emissions limitation.

The final approach described in this section—a one-time conversion of aggregated banked vintage 2015 and 2016 allowances to 2017 vintage allowances equivalent to 1.5 years of the aggregated CSAPR Update variability limits—is virtually identical to the approach we laid out in the NPRM. In particular, it is identical to the proposal in terms of the formula used to assess the number of banked allowances relative to the CSAPR Update variability limits. Further, the value for the principal input to this formula that the EPA is updating in this final rule—the aggregated variability limits—is very similar to the value for this input at proposal. The EPA has refined this approach to converting the banked allowances based on comments we received that urged us to simplify implementation. The final approach limits the influence of banked allowances via a one-time conversion, which has the same impact on the allowance bank as an ongoing turn-in ratio, but provides simplified implementation of the CSAPR Update rule. Further, because the EPA will perform the conversion at one time and each allowance going forward will equate to one ton of emissions, the EPA does not find it necessary to finalize rounding the conversion ratio to the nearest whole number.

The denominator in the conversion formula—1.5 times the states' aggregated variability limits—represents the number of banked allowances that will be available for use toward compliance with the CSAPR Update. Under the CSAPR implementation framework, variability limits are established to allow the units in a state to emit above the state's emission budget in a single control period when necessary because of year-to-year variability in power sector operations. The variability limits operate in conjunction with, but are distinct from, the state emission budgets. The purpose of the state emission budgets is to ensure that each state achieves necessary emission reductions, as required under CAA section 110(a)(2)(D)(i)(I). The purpose of the variability limits, and the assurance provisions that require additional allowances to be surrendered when emissions from covered sources within a state exceed those limits, is to ensure that the requirement for each state to reduce emissions necessary to address its downwind air quality impacts is implemented in a manner consistent with normal year-to-year variability in power sector operations while keeping any emissions above the budget within acceptable limits.

In the proposal, the EPA requested comment on a range of turn-in ratios for banked allowances derived from the formula described previously, including a four-for-one ratio based on the sum of covered states' variability limits for one year and a two-for-one ratio based on the sum of covered states' variability limits for two years. Commenters expressed a wide range of views, from those advocating for no use of banked allowances to those advocating for the use of all banked allowances with no turn-in ratio, as well others advocating for turn-in ratios between these extremes. However, commenters generally did not address the specific topic of whether one, two, or a different number of years of variability limits would represent an appropriate quantity of banked allowances to allow to be used for compliance with the CSAPR Update.

The EPA has determined that it is appropriate to use as the formula denominator the sum of covered states' variability limits for 1.5 years. As noted above, the purpose of the variability limits is to accommodate year-to-year variability in power sector operations at the state level. In theory, a bank based on the sum of all covered states' variability limits would be sufficient to accommodate such variability for all states simultaneously—in other words, the maximum amount of permissible emissions consistent with the purpose and design of the variability limits—for one year. Because it is unlikely that normal year-to-year power sector variability would cause all states to need to exceed their emissions budgets in the same year, the EPA considers the sum of the states' variability limits for one year a reasonable maximum for the number of allowances that would ever need to be used for compliance to address potential variability in power sector operations. However, the EPA's experience with implementing market-based trading programs is that in historical practice most sources typically do not use every available allowance for compliance, but instead keep some in reserve in order to ensure compliance (e.g., to avoid penalties in the event of unforeseen emissions and/or problems with preliminary data calculations). The EPA believes that using the states' variability limits for 1.5 years instead of one year provides sources with sufficient allowances to accommodate maximum year-to-year variability in power sector operations while also addressing the manner in which allowance holdings are actually managed and used. Thus, the EPA believes that providing allowances equivalent to 1.5 years of covered states' variability limits fulfills the primary purpose we described in our proposal—limiting the use of banked allowances to no more than one year of states' aggregated variability limits—while acknowledging the historical practice in market-based trading programs of sources keeping some allowances in reserve from year to year in order to provide planning and operating flexibility over multi-year periods. The EPA believes that this ratio provides an appropriate balance of these considerations, while providing a bank any larger would be inconsistent with the rule's purpose of achieving emission reductions required by CAA section 110(a)(2)(D)(i)(I).

The numerator in the conversion formula is the number of banked allowances to be converted. At proposal, the EPA anticipated, based on 2014 emissions data, that there would be approximately 210,000 banked allowances following the 2015 and 2016 ozone seasons. As commenters correctly predicted, based on more recent data, the size of the anticipated bank is now larger. Based on 2015 emissions data, the EPA anticipates that there will be approximately 350,000 banked allowances entering the CSAPR NO_X ozone season trading program by the start of the 2017 ozone season control period. As explained in more detail below, this anticipated total of banked allowances reflects the fact that the seasonal NO_X emissions budgets established in CSAPR are to a significant extent not acting to constrain actual NO_X emission levels during the ozone season. Affected units overall are emitting less than their budgeted levels by a substantial margin and therefore do not have to use all of their allowances to comply with the requirements of CSAPR; as a result, the bank is growing substantially, especially relative to the emissions reductions that this rule is designed to achieve.

This amount of anticipated banked allowances is greater than the sum of all the state emission budgets established in this CSAPR Update and is roughly five times the total emission reduction potential that informs the emission budgets imposed by this rule. This number of anticipated banked allowances is also approximately five times larger than the aggregated CSAPR Update variability limits. Without imposing a limit on the transitioned vintage 2015 and 2016 banked allowances, the number of banked allowances would increase the risk of emissions exceeding the CSAPR Update emission budgets or assurance levels and would be large enough to let all affected sources emit up to the CSAPR Update assurance levels for five consecutive ozone seasons.

In prior ozone season emissions trading programs, such as the Ozone Transport Commission's NO_X Budget Program and the NO_X Budget Trading Program implemented in conjunction with the NO_X SIP Call, allowance deduction provisions (in some cases known as “flow control”) were included in order to prevent banked allowances from being used in a single ozone season in quantities that would result in excess total emissions. Similarly under the CSAPR Update rule, the conversion ratio together with the assurance provisions will address the large size of the existing CSAPR bank with respect to the 2017 ozone season.

Limiting the influence of the banked allowances is critical to achieving the goal of reducing ozone formation, because reduction in ozone depends on reductions in precursor emissions contemporaneous with the meteorological conditions conducive to the formation of ozone. Hence the rule is designed with ozone season-specific budgets intended to achieve emission reductions by the 2017 ozone season in order to assist downwind states with meeting the July 2018 Moderate area attainment date for the 2008 ozone NAAQS. See North Carolina, 531 F.3d at 911-12 (instructing the EPA to coordinate upwind state emission reductions with downwind attainment deadlines). Other Clean Air Act programs designed to address public health and environmental problems that result from cumulative emissions permit sources to comply by over-controlling emissions in earlier years and using the resulting banked reductions to offset emissions in later years. In contrast, states, and when acting to meet its FIP obligations, the EPA, must ensure that the goal of improved air quality will be achieved and can do so only if emissions are reduced to specified levels during each ozone season.

This approach to limiting the influence of banked allowances also serves the goal of ensuring that emission reductions are achieved in each state. A bank of allowances that is five times the CSAPR Update variability limit would increase the risk of EGUs exceeding their states' CSAPR assurance levels, and thereby impede the ability of the assurance provisions to meaningfully limit emissions in each state. These circumstances would undermine compliance with CAA section 110(a)(2)(D)(i)(I), which requires that “[e]ach state must eliminate its own significant contribution to downwind pollution.” North Carolina, 531 F.3d at 921. The assurance provisions, as finalized in the original CSAPR rulemaking, were designed to address this requirement by imposing a penalty in the event that EGUs exceed the state assurance levels. 76 FR at 48294-98. If EGUs' incentive to constrain emissions is compromised by the availability of a large bank of allowances, the EPA could no longer ensure that appropriate state-level emissions reductions are achieved.

While the bank of allowances reflects actions taken by sources in CSAPR to reduce emissions, it also reflects other factors unique to the regulatory history of CSAPR. In particular, the CSAPR budgets were established based on information available in 2010 and 2011. As promulgated in 2011, CSAPR required the budgets to be implemented in 2012 (Phase 1) and 2014 (Phase 2). As a result of litigation, the emissions budgets did not take effect until 2015. Between 2011 and 2015, the power sector responded to increases in natural gas supply, declines in natural gas prices, and increasing penetration of wind and other low- or zero-emitting renewable energy resources. Consequently, by the time the CSAPR ozone season budgets were implemented in the 2015 ozone season, they were no longer binding on state emission levels, even though they were anticipated to be binding when developed in 2011. The original CSAPR emission budgets for the 2015 ozone season were about 628,000 tons in aggregate, but actual emissions were about 451,000 tons, resulting in a substantial bank of allowances after the 2015 ozone season. In addition, based on emissions data for May and June of 2016 (i.e., the first two months of the 2016 ozone season under the trading program), ozone season NO_X emissions have declined 15 percent compared to the comparable period in 2015, which we anticipate will lead to a yet larger bank of allowances. In this final rule, the 2017 emission budgets plus the 21 percent variability limits total about 381,000 tons in aggregate, compared to 2015 emissions from the relevant states of about 399,000 tons. The bank of CSAPR allowances fostered in part by the unique circumstances of CSAPR's implementation is thus of a size that is so large relative to the budgets under this final CSAPR Update rule that, if all of the banked allowances were used without restriction, all states would exceed their emissions budgets for several successive ozone seasons. In that case, use of the bank would impede the achievement of the reductions needed to reduce ozone levels and assist downwind states with attainment and maintenance of the NAAQS by the 2017 ozone season. For these reasons, the implementation of the conversion ratio derived from the formula that is established in the final rule is necessary to limit the use of banked allowances and assure that reductions will actually occur and contribute to improved air quality in time to assist downwind states with meeting their attainment dates.

Some commenters objected to any limitation on the use of banked allowances, in part noting the additional compliance flexibility that banked allowances provide. But as explained above, without limitation, the number of banked allowances could undermine the capacity of the rule to achieve the emission reductions required by the good neighbor provision of the CAA—timely emission reductions in upwind areas that are necessary to avoid significant contribution to nonattainment or interference with maintenance of the 2008 ozone NAAQS in downwind areas. Specifically, the CSAPR Update establishes emission budgets that represent the remaining EGU emissions after reducing those amounts of each state's emissions that significantly contribute to downwind nonattainment or interfere with maintenance of the 2008 ozone NAAQS in downwind states, as required under CAA section 110(a)(2)(D)(i)(I). In other words, the CSAPR Update establishes an emission budget for each state that is its good neighbor obligation. If made available in its entirety for compliance with the CSAPR Update, then the anticipated 350,000 banked allowances would inherently increase the risk of states exceeding their emission budget by providing a total number of allowances for compliance in 2017 that is more than double the 22 state sum of emission budgets. The CSAPR allowance trading program already provides some flexibility in the form of the CSAPR variability limits and corresponding assurance levels to allow states to meet their good neighbor obligation while respecting inherent variability in electricity generation. However, the anticipated 350,000 banked allowances, if fully available for compliance, would also increase the risk of EGUs exceeding their states' CSAPR assurance level by providing allowances for compliance greater than five times the CSAPR variability limit. These excess allowances could be used for compliance irrespective of the need to achieve the CAA good neighbor obligation while complying with typical year-to-year variability on which the assurance levels are based. The allowance bank would thereby further undermine the capacity of the rule to achieve the emission reductions required by the good neighbor provision of the CAA by increasing the risk that emissions would exceed not only the emission budgets, but also the assurance levels.

The EPA believes that allowing for banking of excess emission reductions is a positive element of a trading-based program such as this one. Banking encourages early reductions, provides certainty, and creates flexibility in order to achieve the public health goal more cost-effectively and reliably. When use of banked allowances can undermine the environmental goal rather than help to achieve it, however, it is reasonable and appropriate to restructure the use of banked allowances. For these reasons, when the EPA finalized the original CSAPR provisions, the agency explicitly reserved its authority to eliminate or revise allowances issued in a given compliance year. The existing regulations for the current NO_X ozone season trading program explain that an allowance is “a limited authorization to emit one ton of NO_X during the control period in one year.” 40 CFR 97.506(c)(6). The regulations continue by providing the Administrator the “authority to terminate or limit the use and duration of such authorization to the extent the Administrator determines is necessary or appropriate to implement any provision of the Clean Air Act.” Id. 97.506(c)(6)(ii). The regulations also clearly state that such allowances do not constitute property rights. Id. 97.506(c)(7). The EPA also notes that banked allowances were accrued against 2015 and 2016 implementation of seasonal emission budgets that were established to address interstate emission transport for the 80 ppb 1997 ozone NAAQS. Banked compliance instruments with respect to the 1997 ozone NAAQS in 2015 or 2016 are not inherently interchangeable with emission reductions needed to address interstate emission transport for the 75 ppb 2008 ozone NAAQS starting in 2017.

However, provided that it can do so without jeopardizing the good neighbor objectives of the CSAPR Update rule, the EPA believes that permitting some allowances banked under the original CSAPR to be used to meet compliance with the CSAPR Update can facilitate compliance with the requirements of the latter. As described in section VI, the EPA is establishing emission budgets that it finds to be feasible for the 2017 ozone season. As a result, the EPA believes that it is feasible to implement the final CSAPR Update rule emission budgets that the EPA is promulgating in this action, even without availability of banked allowances for compliance. However, in order to ensure implementation feasibility, the EPA is finalizing an approach that transitions a limited number of banked allowances into the CSAPR NO_X ozone season Group 2 program for compliance starting with the 2017 ozone season. By providing for the use of some banked allowances for compliance with the CSAPR Update rule, the EPA provides immediate but limited compliance flexibility that will support the feasibility of meeting emission budgets for the 2017 ozone season and variation in power sector operations. The CSAPR Update assurance level reflects the upper bound variation in power sector generation that the EPA would expect in any given year. Thus, the carryover of converted banked allowances equal to 1.5 years' worth of variability limits provides the affected fleet with the ability to accommodate potential variation from the mean in its load and emission patterns in the initial year of the program and also maintain a small reserve of allowances, while balancing the need to ensure that emissions are reduced, on average, to the level of the budgets and within the assurance levels in subsequent years. For a further discussion of additional implementation feasibility provided by this approach, see section VII.C.

Considering these factors—especially the EPA's obligation to achieve the NO_X emission reductions needed to address transport with respect to the 2008 NAAQS—the EPA believes it is reasonable—even required—to restrict the number of banked allowances carried over.

To enable the use of banked 2015 and 2016 vintage allowances for compliance with the CSAPR Update, the EPA is finalizing a one-time conversion that transitions a number of allowances equivalent to 1.5 years of the sum of states' CSAPR NO_X ozone season Group 2 variability limits (the variability limits are 21 percent of the regional total emission budgets), or approximately 99,700 allowances. The one-time conversion of the 2015 and 2016 banked allowances will be made using a calculated ratio, or equation, to be applied in early 2017 once compliance reconciliation (or “true-up”) for the 2016 ozone season program is completed. The EPA will use an equation to derive the ratio by dividing the number of all 2015 and 2016 post-true-up banked CSAPR NO_X ozone season allowances being converted by 1.5 times the sum of the 2017 CSAPR Update variability limits quantified in Table VII.C-2 in this preamble. As soon as practicable and not later than March 1, 2018, which is the compliance deadline for the 2017 control period, and pending notification of all allowance holders, the EPA will freeze allowance accounts and convert the original CSAPR NO_X ozone season 2015 and 2016 banked allowances to the 2017 vintage CSAPR Update rule NO_X ozone season Group 2 allowances. These allowances may then be used in 2017 and thereafter on a 1-to-1 (one allowance to one ton of ozone season emissions) basis for compliance in Group 2 states.

Dividing the bank by 1.5 times the collective variability limits results in the ratio that the EPA will apply to convert each source's banked 2015 and 2016 original CSAPR NO_X ozone season allowances to 2017 CSAPR Update rule NO_X ozone season Group 2 allowances. The resulting post-conversion bank will be equivalent to 1.5 times the sum of states' CSAPR NO_X ozone season Group 2 variability limits, or approximately 99,700 allowances. Based on current data, the EPA notes that this conversion ratio would be approximately 3.5 to 1, but the ratio could be lower or higher depending on 2016 emissions. By instituting the one-time conversion of banked 2015 and 2016 allowances, the EPA is limiting the use of such allowances for purposes of assuring that emission reductions necessary to address interstate transport with respect to the 2008 ozone standard are achieved.

As of the conversion date (see 40 CFR 97.526(c)(1)), the EPA will convert all 2015 and 2016 allowances held in any account, other than a Georgia source's compliance account, to Group 2 allowances. This includes banked 2015 and 2016 allowances held in accounts in non-CSAPR Update states (i.e., Florida, North Carolina, and South Carolina). The ratio will be determined by dividing the number of allowances held in all such accounts (i.e., every general account and every compliance account except for a compliance account for a Georgia source) by 1.5 times the sum of the variability limits for all states other than Georgia. Starting with the 2017 ozone season control period, only CSAPR NO_X ozone season Group 2 allowances can be used for compliance with the CSAPR Update rule ozone season program. Any remaining CSAPR NO_X ozone season 2015 and 2016 allowances that are not converted to Group 2 allowances may only be used for compliance by affected sources in states that are subject to the original CSAPR ozone season program to meet obligations for the 1997 ozone NAAQS (the only such state is Georgia).

A source in the state of Georgia that chooses to have some or all of its banked 2015 and 2016 allowances converted to Group 2 allowances may move any of its 2015 and 2016 banked allowances out of a compliance account and into a general account. These allowances in the general account will then be subject to conversion to Group 2 allowances.

The EPA proposed and took comment on a range of options for how to treat the use of banked 2015 and 2016 CSAPR NO_X ozone season allowances by EGUs in the 22 CSAPR Update states. As described previously, the EPA proposed that sources in states with new or updated budgets could use all of their banked allowances, but at a ratio significantly higher than one allowance to cover each ton (e.g., at a four-for-one turn-in ratio). Additionally, the proposed CSAPR Update solicited comment on less and more restrictive approaches to address use of the CSAPR EGU NO_X ozone allowance bank. Specifically, the EPA sought comment on: (1) Allowing banked 2015 and 2016 CSAPR NO_X ozone allowances to be used for compliance with the CSAPR Update for the 2008 ozone NAAQS starting in 2017 at a one-for-one ratio, or (2) completely disallowing the use of banked 2015 and 2016 CSAPR NO_X ozone allowances for compliance with the CSAPR Update for the 2008 ozone NAAQS starting in 2017. The EPA also solicited comment on whether and how the assurance provision penalty might be increased, in conjunction with any of the above approaches, to address the relationship of the allowance bank to emissions occurring under this revised program from 2017 onward. At this time, the EPA is not changing the assurance provision penalty or its application.

Comment: Some commenters suggested that implementation by way of ongoing turn-in ratios would be cumbersome and complicated because it requires affected EGUs to hold allowances for compliance that are equivalent to differing ratios of tons of emissions.

Response: The EPA agrees with the commenters who observed that an allowance trading program in which a CSAPR NO_X ozone season allowance issued in 2017 and thereafter would be worth one ton of emissions while a CSAPR NO_X ozone season allowance issued in 2015 or 2016 would be worth less than one ton of emissions is overly complex. These differing emission equivalents of otherwise similar compliance tools (i.e., allowances) would add a layer of complexity to ongoing compliance demonstrations. Implementing a ratio by way of a one-time conversion, instead, has the same impact on emission reductions as an ongoing turn-in ratio in that the emissions equivalent of the banked allowances will be reduced consistent with the ratio, but the implementation of the ratio through a one-time conversion simplifies implementation of the CSAPR Update rule, which supports efficient and accurate compliance planning.

Comment: Some commenters requested that the EPA not limit the use of banked vintage 2015 and 2016 CSAPR NO_X ozone season allowances in the final CSAPR Update, suggesting that the EPA had not demonstrated that use of these allowances would undermine the goals of the CSAPR Update. These commenters suggested that the assurance levels are adequately protective of the CSAPR Update emission reduction requirements.

Response: The EPA disagrees with these comments. As discussed previously, the EPA anticipates a large number of banked allowances entering the 2017 CSAPR ozone season control period. Allowing unlimited use of this magnitude of vintage 2015 and 2016 CSAPR NO_X ozone season allowances in the 2017 control period and going forward would put the emission reduction requirements of the CSAPR Update rule in jeopardy and undermine the realization of the emission reductions needed under the good neighbor provisions of the CAA to avoid significant contribution to nonattainment and interference with maintenance of the 2008 ozone NAAQS in downwind areas.

Comment: Some commenters recommended that the EPA completely disallow the use of banked 2015 and 2016 CSAPR NO_X ozone allowances for compliance with the CSAPR Update for the 2008 ozone NAAQS starting in 2017.

Response: A key feature of allowance trading programs is that they provide sources an economically efficient strategy for integrating current and future compliance. Banking of allowances for later use also creates incentives to make early emission reductions, which often result in improved air quality earlier than otherwise required. The EPA has seen early reductions and banking in implementing other trading programs over the past 20 years, such as the Acid Rain Program and the NO_X SIP Call. The EPA believes such an economic incentive, and the associated environmental benefits, is conditioned on the expectation that the resulting banked allowances will have some value in the future of that program. The approach that the EPA is finalizing provides a means for the existing 2015 and 2016 CSAPR NO_X ozone season allowances to retain some value, while appropriately mitigating the potential adverse impact of the allowance bank on the emission-reducing actions needed from affected EGUs in states with obligations to address interstate transport for the 2008 ozone NAAQS.

Comment: Commenters contend that discounting allowances by a turn-in ratio essentially penalizes sources for early action.

Response: Commenters did not provide quantitative analysis that the turn-in ratio would reduce the overall economic value of the allowance holdings nor even address the question of whether or how the diminution of the number of allowances available would affect the value of each individual allowance or that of the overall bank—especially in view of the fact that the NO_X emissions budgets are more constraining. Because the allowance bank value is a product of both allowance quantity and allowance price, the conclusion that any reduction in quantity inherently reduces the bank value is flawed because it ignores the likely increase in price. Similarly, it merits noting the high likelihood that some portion of the banked allowance price reflects larger dynamics in the power markets, such as lower natural gas prices in recent years, as opposed to explicit early actions.

D. Feasibility of Compliance

In practice, the EGU emission budgets that the EPA is finalizing in this action are achievable for each of the 22 states through operating and optimizing existing SCR controls, operating existing SNCR controls, installing state-of-the-art combustion controls, shifting generation to lower NO_X-emitting or non-emitting units, using allowances that the EPA has allocated to EGUs (including banked allowances), or obtaining allowances on the allowance market. The EPA believes that this rule provides sufficient lead time to comply with the 2017 ozone season requirements.

To further examine the compliance feasibility of the state NO_X ozone season budgets, the EPA performed an analysis of state-level achievable NO_X ozone season emissions for 2017 that is independent of the IPM-based assessment used to establish the emission budgets. This analysis relied on the most recent ozone season data for 2015. For the covered states, these data were adjusted to account for announced retirements, announced new SCR at existing units, and announced coal-to-gas conversions at existing units. The EPA then applied certain control assumptions directly to the reported unit-level data. Specifically, this analysis applied EGU NO_X reductions for turning on idled SCR, optimizing all SCR to historically demonstrated NO_X emission rates, installing state-of-the-art combustion controls, and turning on idled SNCR.

The EPA evaluated the feasibility of turning on idled SCRs for the 2017 ozone season. Based on past practice, the EPA finds that idled controls can be restored to operation in no more than a few months. This timeframe is informed by many electric utilities' previous, long-standing practice of utilizing SCRs to reduce EGU NO_X emissions during the ozone season while putting the systems into protective lay-up during non-ozone season months. For example, this was the long-standing practice of many EGUs that used SCR systems for compliance with the NO_X Budget Trading Program. It was quite typical for SCRs to be turned off following the September 30 end of the ozone season control period. These controls would then be put in protective lay-up for several months of non-use before being returned to operation by May 1 of the following ozone season. In the 22 state CSAPR Update region, 2005 EGU NO_X emission data suggest that 125 EGUs operated SCR systems in the summer ozone season while idling these controls for the remaining seven non-ozone season months of the year.¹⁶³ Based on EGUs' past experience and the frequency of this practice, the EPA finds that idled SCRs can be restored to operation in no more than a few months. Further, because turning on idled SCRs requires inherently more steps than fully operating existing operating SCR or turning on idled SNCR, the EPA finds that these additional EGU NO_X reduction strategies are also feasible within a few months. The lead-time for compliance with this rule is longer than this timeframe. More details on these analyses can be found in the EGU NO_X Mitigation Strategies Final Rule TSD.

The EPA also finds that, generally, state-of-the-art combustion controls require a short installation time—typically, four weeks to install along with a scheduled outage (with order placement, fabrication, and delivery occurring beforehand). Feasibility of installing combustion controls was examined by the EPA in the original CSAPR where industry demonstrated the ability to install LNB controls on a large unit (800 MW) in under six months. More details on these analyses can be found in the EGU NO_X Mitigation Strategies Final Rule TSD.

As described in section VI, to establish emission budgets, the EPA made a data-informed assumption with respect to the reasonable achievable SCR NO_X rate (0.10 lbs/mmBtu) for units that are not operating SCR optimally. In order to independently evaluate whether emission budgets that rely on this assumption are achievable, the EPA used actual SCR rates for existing units that reflect demonstrated unit-level achievable SCR performance. Specifically, the EPA used the lower of 2015 NO_X rates (the most recent demonstrated achievable SCR NO_X rate) and each unit's third lowest historical ozone season NO_X rate. This approach reflects SCR units operating in a manner consistent with demonstrated SCR performance capability at each unit. This analysis does not account for further EGU NO_X reduction potential from shifting generation to lower NO_X-emitting or non-emitting units. As discussed in section VI and further in the EGU NO_X Mitigation Strategies Final Rule TSD, the EPA believes shifting generation to lower NO_X-emitting or non-emitting units is feasible to implement for the 2017 ozone season but the agency has not developed an approach to assess generation shifting that is independent of the IPM-based assessment discussed previously.

The EPA's analysis showed that, with known fleet changes and accounting for NO_X reduction potential from SCR, SNCR, and combustion controls, all CSAPR Update rule states would be at or below their 2017 CSAPR Update rule assurance level while continuing to otherwise operate consistent with 2015 behavior. The analysis showed that, with known changes occurring prior to 2017, optimizing SCR and SNCR, and installing combustion controls, the 22 states would lower their emissions to approximately 306,000 tons—approximately 3 percent below their aggregated CSAPR Update rule budgets, and each state would be below its assurance level. Moreover, this analysis does not reflect the NO_X reduction potential from generation shifting that is also available for compliance planning. The state-level summary of this 2017 analysis is provided in Table VII.D-1. For further discussion of implementation feasibility, see the EGU NO_X Mitigation Strategies Final Rule TSD.

The allowance trading program used to implement the emission reductions in this rulemaking further promotes compliance feasibility. With this approach, an individual source has the flexibility to forgo any physical changes to its combustion or post-combustion process and simply acquire allowances from another source for compliance. Therefore, any unit-specific limitations in regard to permitting, installing, and/or modifying controls or other elements of plant operation do not jeopardize compliance, as the sources have alternative compliance options. Allowance markets are well established, liquid, and will carry a number of already available banked allowances. Regarding market liquidity, the EPA observes that as of August 15, 2016 (part way through the second CSAPR NO_X ozone season compliance period) more than 1,200 private transfers have taken place involving more than 260,000 CSAPR NO_X ozone season allowances. In particular, the combined flexibility of a bank and a liquid market ensures that any unit with unique circumstances regarding its control configuration can continue to operate in its current fashion. Trading flexibility further enhances system reliability because affected units may cover emissions from any reliability-relevant operations with allowances available in the marketplace.

Stakeholders have a history and familiarity with trading programs. Congress has enacted, and the EPA has promulgated, many rules that allow EGUs and other sources to meet their emission limits by trading allowances with other sources. In a trading program, the EPA authorizes a source to meet its emission limit by purchasing emission allowances generated from other sources, typically ones that implement or enhance their pollution control devices to reduce emissions to the point where they are able to sell allowances. As a result, the availability of trading reduces overall costs to the industry by using the marketplace to incentivize particular sources that have the lowest control costs to implement and operate pollution controls.

The combination of control optimization feasibility, recent trends in emission reductions, on-the-way emission reductions, allowance trading, a pre-existing bank, and assurance levels support the feasibility of the CSAPR Update rule 2017 emission budgets finalized in this action.

Further supporting the feasibility of this rule's compliance obligation is the trend in recent emission reductions. While 2014 ozone season NO_X emissions for the 22 covered states were approximately 466,000 tons, they dropped by 14 percent in 2015 to 400,000. Moreover, the 2016 ozone season emissions are anticipated to be approximately 380,000 tons. This pace of reduction illustrates the speed and adaptability in the fleet's response to market conditions. It shows a trend in emission reductions that is consistent with the level of reductions anticipated by the CSAPR Update rule budgets.

Comment: The EPA received comment highlighting the significant drop in the CSAPR Update rule budgets for 2017 relative to the CSAPR phase 1 and phase 2 budgets finalized in the original CSAPR rulemaking to address the 1997 ozone standard. Some commenters asserted this significant percent difference between the two illustrated a feasibility concern.

Response: The EPA views a comparison of the original CSAPR phase 1 and 2 budgets as a poor metric for assessing feasibility of sources' compliance with the budgets being finalized in the CSAPR Update rule. As noted previously, states are already well below their current CSAPR budgets: Reported 2015 emissions for the 21 states subject to the NO_X ozone season trading program pursuant to both the original CSAPR rulemaking and the CSAPR Update rule total 390,000 tons in aggregate. For these 21 states, CSAPR phase 1 budgets aggregate to 535,000 tons and phase 2 budgets aggregate to 502,000 tons. Thus, aggregate 2015 emissions from these states are already more than 100,000 tons below the original CSAPR budgets. Based upon the first two quarters of emissions data, 2016 emissions are anticipated to be even lower. These actual emissions make a more appropriate assessment of what emission reductions are feasible for the 2017 ozone season. Moreover, CSAPR Update rule states have limited flexibility to exceed the emission budgets if needed for compliance feasibility by using banked allowances.

E. FIP Requirements and Key Elements of the CSAPR Trading Programs

The original CSAPR established a NO_X ozone season allowance trading program that allows affected sources within each state to use allowances from other sources within the same trading group for compliance, pursuant to certain monitoring requirements as codified in 40 CFR part 75. In the CSAPR NO_X ozone season trading program, sources are required to hold one CSAPR ozone season allowance for each ton of NO_X emitted during the ozone season. The EPA is utilizing that same regional trading approach, with updated emission budgets, trading groups, and certain additional revisions described later on, as the compliance remedy implemented through the FIPs to address interstate transport for the 2008 ozone NAAQS. The EPA is using the existing NO_X ozone season allowance trading system that was established under CSAPR in 40 CFR part 97, subpart BBBBB for Group 1, and as promulgated in Subpart EEEEE for Group 2, to implement the emission reductions identified and quantified in the FIPs for this action.

1. Applicability

In this rule, the EPA is finalizing the same applicability provisions as the original CSAPR, without change. Under the general CSAPR applicability provisions, a covered unit is any stationary fossil-fuel-fired boiler or combustion turbine serving at any time on or after January 1, 2005, a generator with nameplate capacity exceeding 25 MW, which is producing electricity for sale, with the exception of certain cogeneration units and solid waste incineration units. See 76 FR 48273 (August 8, 2011), for a discussion on applicability in the final CSAPR rule. The EPA is finalizing the same applicability provisions as the original CSAPR for the CSAPR Update rule NO_X ozone season trading program Groups 1 and 2. See 40 CFR 97.504 and 40 CFR 97.804. The EPA is codifying these provisions as described in section IX.

2. State Budgets

The EPA is promulgating CSAPR NO_X ozone season emission budgets, as provided in table VII.E-1 in this preamble and in 40 CFR 97.810, for the 22 states in this final rule. This includes the NO_X ozone season emission budgets, new unit set-asides, and Indian country new unit set-asides for 2017 and beyond.

The EPA is establishing new or revised CSAPR NO_X ozone season emission budgets for the 22 eastern states subject to FIPs in this final rule to address interstate transport for the 2008 ozone NAAQS. For the 21 of these 22 states that are currently covered by the original CSAPR ozone season program, the requirement to comply with the budgets established to address the 2008 ozone NAAQS will replace the current requirement to comply with the budgets established to address the 1997 ozone NAAQS. For Kansas, which is newly brought into the CSAPR NO_X ozone season program, the EPA is finalizing a new EGU NO_X ozone season emission budget designed to address interstate transport for the 2008 ozone standard.

The EPA is implementing the emission budgets finalized in this rule by allocating allowances to sources in those states equal to the budgets for compliance starting in 2017. The EPA is finalizing allowance allocations for existing units for CSAPR NO_X ozone season Group 2 states through this rulemaking. Portions of the state budgets will be set aside for new units, and the EPA will use the processes set forth in the CSAPR regulations to annually allocate allowances to the new units in each state from the new unit set-asides.

3. Allocations of Emission Allowances

For states participating in the CSAPR NO_X ozone season Group 2 program, the EPA will issue CSAPR NO_X ozone season Group 2 allowances to be used for compliance starting with the 2017 ozone season. This section explains that, for most states, the EPA is allocating these allowances up to each state's budget to existing units and new units in that state by applying the same allocation methodology finalized in the original CSAPR. This methodology considers both a unit's historical heat input and its maximum historical emissions. See 76 FR 48284, August 8, 2011. A different approach is taken for Alabama, Missouri, and New York, as described later on. This section also describes allocation to the new unit set-asides and Indian country new unit set-asides in each state; allocation to units that are not operating; and the recordation of allowance allocations in source compliance accounts.

a. Allocations to existing units. The EPA will implement each state's EGU NO_X ozone season emission budget in the CSAPR NO_X ozone season Group 2 trading program by allocating the number of emission allowances to covered units within that state equal to the tonnage of that specific state's budget, as calculated in section VI. See Table VI.E-2. The portion of a state budget allocated to existing units in that state is the state budget minus the state's new unit set-aside and minus the state's Indian country new unit set-aside. The new unit set-asides are portions of each budget reserved for new units that might locate in each state or in Indian country in the future. For the existing source level allocations, see the TSD called, “Unit Level Allocations and Underlying Data for the CSAPR for the 2008 Ozone NAAQS,” in the docket for this rulemaking. The only allowance allocations that are being updated in this final rule are allocations of NO_X ozone season allowances under the CSAPR NO_X ozone season Group 2 program. This final rule does not change allowance allocations for the CSAPR NO_X ozone season Group 1 trading program or allocations of CSAPR SO₂ or NO_X annual allowances.

For the purpose of allocations, the original CSAPR regulations defined an “existing unit” as one that commenced commercial operation prior to January 1, 2010. For the 22 states subject to FIPs in this rulemaking, the EPA is modifying the definition of an “existing unit” for purposes of the NO_X ozone season Group 2 program to include those units that commenced commercial operation prior to January 1, 2015. This change will allow these units to be directly allocated allowances from each state's budget as existing units and will allow the new unit set-asides to be fully reserved for any future new units locating in covered states or Indian country. The EPA did not propose, and is not finalizing, any change in the definition of “existing units” for sources located in states subject to the original CSAPR regulations (i.e., sources located in Georgia with respect to allocation of the CSAPR NO_X ozone season Group 1 allowances, and sources located in all covered states with respect to allocations of CSAPR SO₂ or NO_X annual allowances).

The EPA proposed to apply the methodology finalized in the original CSAPR for allocating emission allowances to existing units. This methodology allocates allowances to each unit based on the unit's share of the state's heat input, limited by the unit's maximum historical emissions. As discussed in the original CSAPR final rule (See 76 FR 48288-9, August 8, 2011), the EPA finds this allowance allocation approach to be fuel-neutral, control-neutral, transparent, based on reliable data, and similar to allocation methodologies previously used in the NO_X SIP Call and Acid Rain Program. The EPA is therefore finalizing the continued application of this methodology for allocating allowances to existing sources in this final rule (except as otherwise noted later on with respect to existing sources in Alabama, Missouri, and New York).

This final rule uses the average of the three highest years of heat input data out of a consecutive five-year period to establish the heat input baseline for each unit. These heat input data are used to calculate each unit's proportion of state-level heat input (the unit's three year average heat input divided by the state's average heat input). As a first step, the EPA applies this proportion to the total amount of existing unit allowances to be allocated to quantify unit-level allocations. However, the EPA constrains the unit-level allocations so as not to exceed the maximum historical baseline emissions, calculated as the highest year of emissions out of a consecutive eight-year period. The proposal evaluated 2010-2014 heat input data and 2007-2014 emissions data, which was the most recent data available at that time. The final rule relies on 2011-2015 heat input data and 2008-2015 emission data, which is currently the most recent complete dataset.

For the states of Alabama, Missouri, and New York, the EPA is not applying the methodology described previously. Instead, for these states only, the EPA is allocating allowances to existing units in the state according to methodologies for allocating ozone season NO_X allowances under the current CSAPR NO_X Ozone Season Trading Program that have been adopted into state regulations and submitted to the EPA for approval as SIP revisions, but with the states' methodologies applied to the final budgets established in this rule. This approach is consistent with the proposal, in which the EPA indicated that where a state had adopted state regulations to govern the allocation of allowances under the current CSAPR NO_X ozone season program and had included those regulations in an approved SIP revision, if the state regulations by their terms would govern allocations under a revised budget, or if it was clear how the state's approved methodology could be used by the EPA to compute allocations using the revised budget, the state's regulations or methodology would be used to govern the allowance allocations under the final rule. These three states have adopted state regulations regarding the allocation of CSAPR allowances for ozone season NO_X emissions and have made SIP submittals seeking incorporation of the regulations into their SIPs. Although the EPA has not acted on those SIP submittals (because they concern the current NO_X ozone season trading program to which the sources in these three states will no longer be subject after 2016), the EPA has determined that it is clear how the allocation methodologies reflected in the state-adopted regulations can be used to compute allocations under the final budgets for this rule. The EPA took comment in the proposal on this topic. As explained in the proposal, these possible approaches could avert the need for a state to submit another SIP revision to implement the same allocation provisions under this rule that the state has already implemented or sought to implement under CSAPR before adoption of this rule. Since the agency received no adverse comments on using this modified allocation approach for states with an EPA-approved SIP revision under the current rule, the EPA is finalizing this approach for these three states. Further discussion of how these three states' methodologies were used to determine the allocations of allowances to existing units in the states is included in the CSAPR Allowance Allocations Final Rule TSD.

As discussed later on, states have several options under CSAPR to submit SIP revisions which, if approved, may result in the replacement of the EPA's default allocations with state-determined allocations for control periods in 2018 or later years. The provisions described previously will not preclude any state from submitting an alternative allocation methodology for later compliance years through a SIP revision. See section VII.F for further details on the development of approvable SIP submissions.

b. Allocations to new units. Consistent with the revision to the definition of “existing unit” described earlier, for purposes of the final rule a “new unit” that is eligible to receive allocations from the “new unit set-aside” for a state includes any covered unit that commences commercial operation on or after January 1, 2015, as well as a unit that becomes covered by meeting applicability criteria subsequent to January 1, 2015; a unit that relocates to a different state covered by a FIP promulgated by this final rule; and an “existing” covered unit that stops operating for two consecutive years but resumes commercial operation at some point thereafter. To the extent that states seek approval of SIPs with different allocation provisions than those provided by CSAPR, these SIPs may also define new units differently.

The EPA is also finalizing allocations to a new unit set-aside (NUSA) for each state equal to a minimum of 2 percent of the total state budget, plus the projected amount of emissions from planned units in that state. For instance, if planned units in a state are projected to emit 3 percent of the state's NO_X ozone season emission budget, then the new unit set-aside for the state would be set at 5 percent, the sum of the minimum 2 percent set-aside plus an additional 3 percent for planned units. This is the same approach currently used to implement the NUSA for all CSAPR trading programs. See 76 FR 48292. Pursuant to the CSAPR regulations, new units may receive allocations starting with the first year they are subject to the allowance-holding requirements of the rule. If the allowances in the NUSA remain unallocated to new units, the allowances from the set-asides are redistributed to existing units before each compliance deadline. For more detail on the CSAPR new unit set-aside provisions, see 40 CFR 97.811(b) and 97.812.

c. Allocations to new units in Indian Country. Clean Air Act programs on Indian reservations and other areas of Indian country over which a tribe or the EPA has demonstrated that a tribe has jurisdiction are implemented either by a tribe through an EPA-approved tribal implementation plan (TIP) or the EPA through a FIP. Tribes may, but are not required to, submit TIPs. Under the EPA's Tribal Authority Rule (TAR), 40 CFR 49.1-49.11, the EPA is authorized to promulgate FIPs for Indian country as necessary or appropriate to protect air quality if a tribe does not submit and get EPA approval of a TIP. See 40 CFR 49.11(a); see also 42 U.S.C. 7601(d)(4). To date, no tribes have sought approval of a TIP implementing the good neighbor provision at CAA section 110(a)(2)(D)(i)(I) with respect to the 2008 ozone NAAQS. The EPA has therefore determined that it is necessary and appropriate for EPA to implement the FIPs in any affected Indian reservations or other areas of Indian country over which a tribe has jurisdiction. There are no existing units that would qualify as “covered units” under the final CSAPR Update in Indian country located in the states covered by this rule.

The EPA is finalizing its proposal to apply the CSAPR approach for allocating allowances to any new units locating in Indian country. Under the CSAPR approach, allowances to possible future new units locating in Indian country are allocated by the EPA from an Indian country new unit set-aside established for each state with Indian country. See 40 CFR 97.811(b)(2) and 97.812(b). The EPA reserves 0.1 percent of the total state budget for new units in Indian country within that state (5 percent of the minimum 2 percent new unit set-aside, without considering any increase in a state's new unit set-aside amount for planned units). Because states generally have no SIP authority in these areas, the EPA will continue to allocate such allowances to sources locating in such areas of Indian country within a state over which a tribe or EPA has demonstrated that a tribe has jurisdiction, even if the state submits a SIP to replace the applicable FIP. 40 CFR 52.38(b)(9)(vi) and (vii) and 52.38(b)(10). Unallocated allowances from a state's Indian country new unit set-aside are returned to the state's new unit set-aside and allocated according to the methodology described previously.

d. Allocations to units that do not operate and the new unit set-aside. The EPA is finalizing its proposal to apply the CSAPR approach for allocating to units that do not operate and to the new unit set-aside. The EPA is codifying the existing CSAPR provision under which a covered unit that does not operate for a period of two consecutive years will receive allowance allocations for a total of up to five years of non-operation. 40 CFR 97.811(a)(2). This approach mitigates concerns that loss of allowance allocations could be an economic consideration that would cause a unit, which would otherwise retire, to continue operations in order to retain ongoing allowance allocations. Pursuant to this provision, starting in the fifth year after the first year of non-operation, allowances allocated to such units will instead be allocated to the new unit set-aside for the state in which the non-operating unit is located. This approach allows the balance of allowance allocations to shift over time from existing units to new units, aligned with transition of the EGU fleet from older generating resources to newer ones. Allowances in the new unit set-aside that are not used by new units are reallocated to existing units in the state. The EPA proposed to retain this timeline for allowance allocation for non-operating units and it is finalizing that proposal.

4. Variability Limits, Assurance Levels, and Penalties

In the original CSAPR, the EPA developed assurance provisions, including variability limits and assurance levels (with associated compliance penalties), to ensure that each state will meet its pollution control obligations and to accommodate inherent year-to-year variability in state-level EGU operations.

The original CSAPR budgets, and the updated CSAPR emission budgets finalized in this document, reflect EGU operations in an “average year.” However, year-to-year variability in EGU operations occurs due to the interconnected nature of the power sector and from changing weather patterns, changes in electricity demand, or disruptions in electricity supply from other units or from the transmission grid. Recognizing this, the trading program provisions finalized in the original CSAPR rulemaking include variability limits, which define the amount by which an individual state's emissions may exceed the level of its budget in a given year to account for this variability in EGU operations. A state's budget plus its variability limit equals a state's assurance level, which acts as a cap on each state's NO_X emissions during a control period (that is, during the May-September ozone season in the case of this rule). The new NO_X ozone season trading program provisions established for affected sources in the 22 states subject to this rule contain equivalent assurance provisions.

These variability limits ensure that the trading program can accommodate the inherent variability in the power sector while also ensuring that each state eliminates the amount of emissions within the state, in a given year, that must be eliminated to meet the statutory mandate of section 110(a)(2)(D)(i)(I). Moreover, the structure of the program, which achieves required emission reductions through limits on the total number of allowances allocated, assurance provisions, and penalty mechanisms, ensures that the variability limits only allow the amount of temporal and geographic shifting of emissions that is likely to result from the inherent variability in power generation, and not from decisions to avoid or delay the installation of necessary controls.

To establish the variability limits in the original CSAPR, the EPA analyzed historical state-level heat input variability as a proxy for emissions variability, assuming constant emission rates. See 76 FR 48265, August 8, 2011. The variability limits for ozone season NO_X in the original CSAPR were calculated as 21 percent of each state's budget, and these variability limits for the NO_X ozone season trading program were then codified in 40 CFR 97.510 along with the state budgets. The EPA performed an updated analysis to ensure the 21 percent variability limits used in the original CSAPR rule were also valid for purposes of implementing the new and revised budgets finalized in this rule. The EPA's updated analysis demonstrates that variability considering recent data remains consistent (i.e., within 1 percent) with the assessment conducted for the original CSAPR rulemaking. This analysis may be found in the TSD called, Power Sector Variability Final CSAPR Update TSD, in the docket for this rulemaking. The EPA is therefore setting variability limits for the 22 states covered by this rule calculated as 21 percent of each state's new or revised budget and codifying these variability limits in 40 CFR 97.810.

Table VII.E-2 shows the final EGU NO_X ozone season Group 2 emission budgets, variability limits, and assurance levels for each state.

The assurance provisions include penalties that are triggered when the state emissions as a whole exceed the state's assurance level. The original CSAPR provided that, when the EGUs in a state exceed that state's assurance level in a given year, some of those sources will be assessed a 3-to-1 allowance surrender on the excess tons, as described later on. Each excess ton above the assurance level must be met with one allowance for normal compliance plus two additional allowances to satisfy the penalty. The penalty is designed to deter state-level emissions from exceeding assurance levels. This was described in the original CSAPR as air quality-assured trading that accounts for variability in the electricity sector but also ensures that the necessary emission reductions occur within each covered state. If the EGU emissions in a state do not exceed the state's assurance level, no penalties are incurred by any source. Establishing assurance levels with compliance penalties therefore responds to the court's holding in North Carolina requiring the EPA to ensure that sources in each state are required to eliminate emissions that significantly contribute to nonattainment or interfere with maintenance of the NAAQS in another state.

To assess the penalty under the assurance provisions, the EPA evaluates whether any state's total EGU emissions in a control period exceeded the state's assurance level, and if so, the EPA then determines which owners and operators of units in the state exceeded the common designated representative's (DR) share of the state assurance level and, therefore, will be subject to an allowance surrender requirement. Since a DR often represents multiple sources, the EPA evaluates which groups of units at the common DR level had emissions exceeding the respective common DR's share of the state assurance level. This provision is triggered only if two criteria are met: (1) The group of sources and units with a common DR are located in a state where the total state EGU emissions for a control period exceed the state assurance level; and (2) that group with the common DR had emissions exceeding the respective DR's share of the state assurance level. The EPA is finalizing equivalent assurance provisions, modified only as necessary to allow the provisions to work in the same way despite the presence of factors that could otherwise alter their operation, such as converted banked allowances, the possible election by Georgia to bring its sources into the Group 2 program through a SIP revision, and the possible election by other states to bring non-EGUs and additional allowances into the program through SIP revisions. These differences are discussed in section IX in this preamble. For more information on the CSAPR assurance provisions generally, see 76 FR 48294 (August 8, 2011).

5. Compliance Deadlines

As discussed in sections II.A., III.B., and IV.A., the rule requires sources to comply with the new and revised NO_X emission budgets for the 2017 ozone season (May 1 through September 30) in order to ensure that necessary NO_X emissions reductions are made as expeditiously as practicable to assist downwind states' attainment and maintenance of the 2008 ozone NAAQS. The compliance deadline is coordinated with the attainment deadline for that standard and the rule includes provisions to ensure that all necessary reductions occur at sources within each individual state. Thus, under the new CSAPR NO_X Ozone Season Group 2 Trading Program established by this rule at subpart EEEEE of 40 CFR part 97, the first control period is the 2017 ozone season (i.e., May 1, 2017 through September 30, 2017).

The deadline by which sources must hold Group 2 allowances in their compliance accounts at least equal to their emissions during the control period is March 1 of the year following the control period, which is the same as the deadline for holding allowances under the CSAPR annual trading programs. This is a change from the current CSAPR NO_X Ozone Season Trading Program provisions, which set a deadline of December 1 of the year of the control period, and is intended to simplify compliance and program administration and thereby reduce costs for both regulated parties and the EPA. Under these coordinated deadlines, the date by which Group 2 sources will be required to hold Group 2 allowances for compliance for purposes of the 2017 control period is March 1, 2018.

6. Monitoring and Reporting and the Allowance Management System

Monitoring and reporting in accordance with the provisions of 40 CFR part 75 are required for all units subject to the CSAPR NO_X ozone season trading programs and for all units covered under this final rule for the 2008 ozone NAAQS requirements. The EPA finalizes that the monitoring system certification deadline by which monitors are installed and certified for compliance use generally will be May 1, 2017, the beginning of the first control period in this rule, with potentially later deadlines for units that commence commercial operation less than 180 days before that date. Similarly, the EPA is finalizing that the first period in which emission reporting is required would be the quarter that includes May 1, 2017 (the second quarter of the year that covers April, May, and June). These monitoring and reporting deadlines are analogous to the current deadlines under the original CSAPR.

Under part 75, a unit has several options for monitoring and reporting, including the use of a CEMS; an excepted monitoring methodology based in part on fuel-flow metering for certain gas- or oil-fired peaking units; low-mass emissions monitoring for certain non-coal-fired, low emitting units; or an alternative monitoring system approved by the Administrator through a petition process. In addition, sources can submit petitions to the Administrator for alternatives to specific CSAPR and part 75 monitoring, recordkeeping, and reporting requirements. Each CEMS must undergo rigorous initial certification testing and periodic quality assurance testing thereafter, including the use of relative accuracy test audits (RATAs) and 24-hour calibrations. In addition, when a monitoring system is not operating properly, standard substitute data procedures are applied and result in a conservative estimate of emissions for the period involved.

Further, part 75 requires electronic submission of a quarterly emissions report to the Administrator, in a format prescribed by the Administrator. The report will contain all of the data required concerning ozone season NO_X emissions.

Units currently subject to CSAPR NO_X ozone season or CSAPR NO_X annual trading program requirements monitor and report NO_X emissions in accordance with part 75, so most sources will not have to make any changes to monitoring and reporting practices. In fact, only units in Kansas, which are currently subject to the CSAPR NO_X annual trading program but not the CSAPR NO_X ozone season trading program, will need to start newly reporting ozone season NO_X mass emissions. These emissions are already measured under the annual program, so the change will be a minor reporting modification and the sources will not be required to install new monitoring systems. Units in the following states monitor and report NO_X emissions under the CSAPR NO_X ozone season trading program and will continue to do so without change under the CSAPR ozone update for the 2008 NAAQS: Alabama, Arkansas, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, West Virginia, and Wisconsin.

7. Recordation of Allowances

The EPA is establishing deadlines for recording allocations of ozone season NO_X allowances to sources affected under this rule that generally parallel the recordation deadlines under the existing CSAPR trading programs, but with later deadlines reflecting the fact that this program is starting two years later than the existing CSAPR trading programs. Specifically, allocations to existing units for the first two control periods under the new program (2017 and 2018) will be recorded by January 9, 2017. This recordation deadline is four months before the start of the first control period for the new program (May 1, 2017) and 14 months before the date by which sources are required to hold allowances sufficient to cover their emissions for that first control period (March 1, 2018, as discussed previously), giving sources ample time to engage in allowance trading activities consistent with their preferred compliance strategies. Allowance allocations for 2019 and 2020 will be recorded by July 1, 2018; allocations for 2021 and 2022 will be recorded by July 1, 2019; and allocations for 2023 and 2024 will be recorded by July 1, 2020. Allowances for each succeeding control period will be recorded by July 1 of the fourth year before the year of the control period, matching the recordation schedule for the existing CSAPR trading programs. These deadlines apply to recordation of both allocations based on the default allocation provisions under 40 CFR 97.811 and 97.812 and allocations provided by states pursuant to approved SIP revisions. As under the CSAPR annual programs, allocations to new units from the NUSAs and Indian country NUSAs are made in two rounds, with first-round allocations recorded by August 1 of the year of the control period and second-round allocations recorded by February 15 of the year after the year of the control period. (In a change from the current CSAPR NO_X Ozone Season Trading Program provisions, the second-round recordation deadline is now coordinated with the analogous deadline for the CSAPR annual programs.) For 2018 allocations, the EPA will defer recordation if a state submits a timely letter indicating an intent to submit a SIP revision that if approved would substitute state-determined allocations for the default allocations determined by the EPA. The recordation provisions for the new program are codified in 40 CFR 97.821.

Consistent with the first recordation deadline described previously for allocations to existing units under the new trading program, the EPA is also delaying the deadline in 40 CFR 97.521(c) for recordation of allowances for the 2017 and 2018 control periods under the existing NO_X ozone season trading program (i.e., allocations for sources in Georgia) to January 9, 2017. As explained in the proposal, the reason for extending this deadline was to avoid the possible need to take back allowances recorded under the existing NO_X ozone season trading program in cases where state budgets might have been reduced under that program by this final rule.

F. Submitting a SIP

Any state may replace the FIP finalized in this rule with a SIP at any time if approved by the EPA. “Abbreviated” and “full” SIP options finalized in the original CSAPR rulemaking continue to be available. An abbreviated SIP allows a state to submit a SIP that would provide for state-based allocation provisions in the CSAPR NO_X ozone season trading program that are then incorporated into the FIP the EPA has established for that state. A second approach, referred to as a full SIP, allows a state to adopt state provisions that would require sources in the state to continue to use the EPA-administered CSAPR trading program through an approved SIP, rather than a FIP. In addition to the abbreviated and full SIP options, as under the original CSAPR rulemaking, the EPA provides states with an opportunity to adopt state-determined allowance allocations for existing units for the second control period under this rule—in this case, the 2018 control period—through streamlined SIP revisions. See 76 FR 48208 at 48326-48332 (August 8, 2011) for additional discussion on full and abbreviated SIP options and 40 CFR 52.38(b). Once the state has made a SIP submission, the EPA will evaluate the submission(s) for completeness. The EPA's criteria for determining completeness of a SIP submission are codified at 40 CFR part 51, appendix V.

1. 2018 SIP Option

The EPA will allow a state to submit a SIP revision establishing allowance allocations for existing units for the second compliance year (2018) for the new and revised budgets in order to replace the FIP-based allocations finalized in this rule. The process will be the same as under the original CSAPR rulemaking with deadlines shifted roughly 2 years: A state that wishes to take advantage of this option must submit a letter to EPA by December 27, 2016, indicating its intent to submit a complete SIP revision by April 1, 2017. The SIP must provide in an EPA-prescribed format a list of existing units and their allocations for the 2018 control period. If a state does not submit a letter of intent to submit a SIP revision, FIP allocations will be recorded by January 9, 2017. If a state submits a timely letter of intent but fails to submit a SIP revision, FIP allocations will be recorded by April 15, 2017. If a state submits a timely letter of intent followed by a timely SIP revision that is approved, the approved SIP allocations will be recorded by October 1, 2017.

2. 2019 and Beyond SIP Option

For the 2019 control period and later, the EPA is finalizing revisions to the regulations at 40 CFR 52.38(b) that provide additional options to submit abbreviated or full SIP revisions to modify or replace the FIP allowance allocations in 2019 or later years. The deadline for SIP submittals to modify or replace the FIP allocations for 2019 and 2020 is December 1, 2017. The deadline for the state to then submit state allocations for 2019 and 2020 is June 1, 2018 and the deadline for the EPA to record those allocations is July 1, 2018. A state may submit by December 1, 2018, a SIP revision applicable to control periods starting in 2021 or 2022, with state allocations due June 1, 2019, and allocation recordation by July 1, 2019. See section IV of this preamble and 76 FR 48208 at 48326-48332 (August 8, 2011) for additional discussion on full and abbreviated SIP options and 40 CFR 52.38(b).

3. SIP Revisions That Do Not Use the CSAPR Trading Program

Each state has the authority under the CAA to replace the FIP finalized in this rule by submitting a transport SIP revision that does not use the CSAPR NO_X ozone season trading program. The EPA will evaluate such SIPs to determine whether they include adequate and enforceable provisions ensuring that the emission reductions will be achieved based on the particular control strategies selected by each state. The SIP revision could include the following general elements: (1) A comprehensive baseline statewide NO_X emission inventory (which includes growth and existing control requirements); (2) a list and description of control measures to satisfy the state emission reduction obligation and a demonstration showing when each measure will be in place by the time the SIP is approved and replaces the CSAPR FIP; (3) fully-adopted state rules providing for such NO_X controls during the ozone season; (4) for EGUs greater than 25 MWe and large boilers and combustion turbines with a rated heat input capacity of 250 mmBtu per hour or greater, Part 75 monitoring, and for other units, monitoring and reporting procedures sufficient to demonstrate that sources are complying with the SIP; and (5) a projected inventory demonstrating that state measures along with federal measures will achieve the necessary emission reductions in a timely manner considering ozone NAAQS attainment dates. The SIPs must meet the requirements for public hearing, be adopted by the appropriate board or authority, and establish by a practically enforceable regulation a permit schedule and date for each affected source or source category to achieve compliance. For further information on replacing a FIP with a SIP, see the discussion in the final CSAPR rulemaking (76 FR 48326, August 8, 2011).

4. Submitting a SIP To Participate in CSAPR for States Not Included in This Rule

There could be circumstances where a state that is not obligated to reduce NO_X emissions in order to address interstate transport requirements (such as Florida, North Carolina, or South Carolina for purposes of this final rule) may wish to participate in the CSAPR NO_X ozone season trading program in order to serve a different regulatory purpose. For example, the state may have a pending request for redesignation of an area to attainment that relies on participation in the trading program as part of the state's demonstration that emissions will not exceed certain levels; or the state may wish to rely on participation in the trading program for purposes of a SIP revision to satisfy certain obligations under the Regional Haze Rule. Further, as discussed previously, Georgia may wish to join the CSAPR NO_X ozone season Group 2 trading program in order to trade with other Group 2 states.

The EPA took comment on whether the EPA should revise the CSAPR regulations to allow the EPA to approve a SIP revision in which a state seeks to participate in the NO_X ozone season trading program for a purpose other than addressing ozone transport obligations.

The EPA is finalizing revisions to CSAPR regulations to allow Georgia to opt-in to the CSAPR NO_X ozone season Group 2 trading group if it adopts, as part of a SIP revision, a NO_X ozone season emission budget no higher than the emission budget that reflects EGU NO_X mitigation strategies represented by a uniform cost of $1,400 per ton for EGUs in Georgia. Such an emission budget is provided by this final rule. As discussed previously, Georgia submitted comments indicating an interest in allowing its sources to trade with other states, although without any change to its budget. The EPA has already discussed the reasons for rejecting the specific option most favored by Georgia in comments. By providing Georgia with the option to bring the state's sources into the Group 2 program through a SIP revision, the EPA is allowing Georgia to implement its expressed preference for broader trading if that preference continues to apply even when conditioned on adoption of a more stringent budget.

The EPA also took comment on whether the EPA should revise the CSAPR regulations to allow the EPA to approve a SIP revision in which a state seeks to participate in the NO_X ozone season trading program for a purpose other than addressing ozone transport obligations. The EPA received no comments indicating that states had an interest in this option at this time, and the EPA is therefore not finalizing this option at this time.

G. Title V Permitting

This rule, like CSAPR, does not establish any permitting requirements independent of those under title V of the CAA and the regulations implementing title V, 40 CFR parts 70 and 71. All major stationary sources of air pollution and certain other sources are required to apply for title V operating permits that include emission limitations and other conditions as necessary to assure compliance with the applicable requirements of the CAA, including the requirements of the applicable State Implementation Plan. CAA sections 502(a) and 504(a), 42 U.S.C. 7661a(a) and 7661c(a). The “applicable requirements” that must be addressed in title V permits are defined in the title V regulations (40 CFR 70.2 and 71.2 (definition of “applicable requirement”)).

The EPA anticipates that, given the nature of the units subject to this transport rule and given that many of the units covered here are already subject to CSAPR, most of the sources at which the units are located are already subject to title V permitting requirements. For sources subject to title V, the interstate transport requirements for the 2008 ozone NAAQS that are applicable to them under the final FIPs are “applicable requirements” under title V and therefore must be addressed in the title V permits. For example, requirements concerning designated representatives, monitoring, reporting, and recordkeeping, the requirement to hold allowances covering emissions, the assurance provisions, and liability are “applicable requirements” that must be addressed in the permits.

Title V of the CAA establishes the basic requirements for state title V permitting programs, including, among other things, provisions governing permit applications, permit content, and permit revisions that address applicable requirements under final FIPs in a manner that provides the flexibility necessary to implement market-based programs such as the trading programs established by CSAPR and updated by this ozone interstate transport rule. 42 U.S.C. 7661a(b).

In CSAPR, the EPA established standard requirements governing how sources covered by the rule would comply with title V and its regulations. 40 CFR 97.506(d). Under this rule, those same requirements would continue to apply to sources already in the CSAPR NO_X ozone season trading program and to any newly affected sources that have been added to address interstate transport of the 2008 ozone NAAQS. For example, the title V regulations provide that a permit issued under title V must include “[a] provision stating that no permit revision shall be required under any approved . . . emissions trading and other similar programs or processes for changes that are provided for in the permit.” 40 CFR 70.6(a)(8) and 71.6(a)(8). Consistent with these provisions in the title V regulations, in CSAPR, the EPA included a provision stating that no permit revision is necessary for the allocation, holding, deduction, or transfer of allowances. 40 CFR 97.806(d)(1). This provision is also included in each title V permit for an affected source. This final rule maintains the approach taken under CSAPR that allows allowances to be traded (or allocated, held, or deducted) without a revision to the title V permit of any of the sources involved.

Similarly, this final rule also continues to support the means by which sources in the CSAPR NO_X ozone season trading program can use the title V minor modification procedure to change their approach for monitoring and reporting emissions, in certain circumstances. Specifically, sources may use the minor modification procedure so long as the new monitoring and reporting approach is one of the prior-approved approaches under CSAPR (i.e., approaches using a continuous emission monitoring system, an excepted monitoring system under appendices D and E to part 75, a low mass emissions excepted monitoring methodology under 40 CFR 75.19, or an alternative monitoring system under subpart E of part 75), and the permit already includes a description of the new monitoring and reporting approach to be used. See 40 CFR 97.806(d)(2); 40 CFR 70.7(e)(2)(i)(B) and 40 CFR 71.7(e)(1)(i)(B). As described in the EPA's 2015 guidance, the agency suggests in its template that sources may comply with this requirement by including a table of all of the approved monitoring and reporting approaches under the rule, and the applicable requirements governing each of those approaches. Inclusion of the table in a source's title V permit therefore allows a covered unit that seeks to change or add to their chosen monitoring and recordkeeping approach to easily comply with the regulations governing the use of the title V minor modification procedure.

Under CSAPR, in order to employ a monitoring or reporting approach different from the prior-approved approaches discussed previously, unit owners and operators must submit monitoring system certification applications to the EPA establishing the monitoring and reporting approach actually to be used by the unit, or, if the owners and operators choose to employ an alternative monitoring system, to submit petitions for that alternative to the EPA. These applications and petitions are subject to EPA review and approval to ensure consistency in monitoring and reporting among all trading program participants. The EPA's responses to any petitions for alternative monitoring systems or for alternatives to specific monitoring or reporting requirements are posted on the EPA's Web site. The EPA maintains the same approach in this final rule.

Consistent with the EPA's approach under CSAPR, the applicable requirements resulting from these FIPs must be incorporated into affected sources' existing title V permits either pursuant to the provisions for reopening for cause (40 CFR 70.7(f) and 40 CFR 71.7(f)) or the standard permit renewal provisions (40 CFR 70.7(c) and 71.7(c)). For sources newly subject to title V that are affected sources under the final FIPs, the initial title V permit issued pursuant to 40 CFR 70.7(a) should address the final FIP requirements.

As in CSAPR, the approach to title V permitting under the FIPs imposes no independent permitting requirements and should reduce the burden on sources already required to be permitted under title V and on permitting authorities.

H. Relationship to Other Emission Trading and Ozone Transport Programs

1. Interactions With Existing CSAPR Annual Programs, Title IV Acid Rain Program, NO_X SIP Call, and Other State Implementation Plans

a. CSAPR Annual Programs. Nothing in this rule affects any CSAPR NO_X annual or CSAPR SO₂ Group 1 or CSAPR SO₂ Group 2 requirements. The CSAPR annual program requirements were premised on the 1997 and 2006 PM_2.5 NAAQS that are not being addressed in this rulemaking. The CSAPR NO_X annual trading program and the CSAPR SO₂ Group 1 and Group 2 trading programs remain in place and will continue to be administered by the EPA.

The EPA acknowledges that, in addition to the ozone budgets discussed previously, the D.C. Circuit has remanded for reconsideration the CSAPR SO₂ budgets for Alabama, Georgia, South Carolina, and Texas. EME Homer City II, 795 F.3d at 138. This rule does not address the remand of these CSAPR phase 2 SO₂ emission budgets. On June 27, 2016, the EPA released a memorandum outlining the agency's approach for responding to the D.C. Circuit's July 2015 remand of the CSAPR phase 2 SO₂ annual emission budgets for Alabama, Georgia, South Carolina and Texas. The memorandum can be found at https://www3.epa.gov/airtransport/CSAPR/pdfs/CSAPR_SO ₂ _Remand_Memo.pdf.

b. Title IV Interactions. This rule will not affect any Acid Rain Program requirements. Acid Rain Program SO₂ and NO_X requirements are established in Title IV of the Clean Air Act, and will continue to apply independently of this rule's provisions. Any Title IV sources that are subject to provisions of this rule are still required to comply with Title IV requirements, including the requirement to hold Title IV allowances to cover SO₂ emissions at the end of a compliance year.

c. NO _X SIP Call Interactions. States subject to both the NO_X SIP Call and the final CSAPR Update will be required to comply with the requirements of both rules. The final CSAPR Update rule requires NO_X ozone season emission reductions from EGUs greater than 25 MW in most NO_X SIP Call states and at levels greater than required by the NO_X SIP Call. Therefore, compliance with the budgets established under the CSAPR Update would satisfy the requirements of the NO_X SIP Call for these large EGU units.

The NO_X SIP Call states used the NO_X Budget Trading Program (NBP) model rule to comply with the NO_X SIP Call requirements for EGUs serving a generator with a nameplate capacity greater than 25 MW and large non-EGUs with a maximum rated heat input capacity greater than 250 mmBTU/hr. (In some states, EGUs smaller than 25 MW were also part of the NBP as a carryover from the Ozone Transport Commission NO_X Budget Trading Program.) When the EPA promulgated CAIR and the CAIR FIPs, it allowed states, via SIP, to adopt SIP revisions modifying the applicability provisions of the CAIR NO_X Ozone Season Trading Program to include all NO_X Budget Trading Program units in that program as a way to continue to meet the requirements of the NO_X SIP Call for these sources.

In CSAPR, however, the EPA allowed states, via SIP, to expand applicability of the trading program to EGUs smaller than 25 MW but did not allow the expansion of applicability to include large non-EGU sources. The EPA explained that the reason for excluding large non-EGU sources was based on a concern that emissions from these sources were generally much lower than the portion of each state's NO_X SIP Call budget amount attributable to these large non-EGUs, and we were therefore concerned that surplus allowances created as a result of an overestimation of baseline emissions (the main basis for the non-EGU portion of the NO_X Budget Trading Program budget) and subsequent shutdowns of these large non-EGUs (since 1999 when the NO_X SIP Call was promulgated) would prevent needed reductions by the EGUs to address significant contribution to downwind air quality impacts. See 76 FR 48323 (August 8, 2011).

Since then, states have had to find appropriate ways to ensure that their rules continue to show compliance with emissions reduction obligations of the NO_X SIP Call, particularly for large non-EGUs. Most states that used the CAIR NO_X Ozone Season Trading Program as a means of complying with the NO_X SIP Call obligations for large non-EGUs are still working to find suitable solutions now that CSAPR has replaced CAIR.

Therefore, the EPA is finalizing provisions to allow any NO_X SIP Call state subject to a FIP promulgated by this rule to voluntarily submit a SIP revision with a revised budget level that is environmentally neutral to address the state's NO_X SIP Call requirement for ozone season NO_X reductions. The SIP revision could include a provision to expand the applicability of the CSAPR NO_X ozone season trading program in that state to include all NO_X Budget Trading Program units, including large non-EGUs. Analysis shows that these units (mainly large non-EGU boilers, combustion turbines, and combined cycle units with a maximum rated heat input capacity greater than 250 mmBtu/hr) continue to emit well below their portion of the NO_X SIP Call budget. In order to ensure that the necessary amount of EGU emission reductions occur for purposes of addressing interstate transport with respect to the 2008 ozone NAAQS in covered states that submit such a SIP revision, the corresponding state ozone season emission budget amount could be increased by no more than the lesser of the highest ozone season NO_X emissions in the last 3 years from those units or the portion of the NO_X Budget Trading Program Budget attributable to large non-EGUs. The environmental impact would be neutral using this approach. This approach addresses requests by states for help in determining an appropriate way to address the continuing NO_X SIP Call requirement as to non-EGU sources.

The variability limits established for EGUs remain unchanged as a result of including these non-EGUs. The assurance provisions apply to EGUs, and emissions from non-EGUs would not affect the assurance levels. The provisions of the new Group 2 trading program exclude the emissions and allowance allocations of any non-EGUs participating in the program from any determination of whether a state exceeds its assurance level or whether any group of sources exceeds its share of the responsibility for any exceedance of a state's assurance level. Similarly, the provisions limit the total allocations that can be taken into account for such purposes by all the EGUs in the state to the state budget and thereby prevent any additional allowances issued by the state as a result of expanded program applicability from unduly influencing determinations of shares of responsibility for any exceedance of the state's assurance level. For additional discussion of the specific regulatory provisions involved, see section IX of this preamble.

The NO_X SIP Call generally requires that states choosing to rely on large EGUs and large non-EGUs for meeting NO_X SIP Call emission reduction requirements must establish a NO_X mass emissions cap on each source and require part 75, subpart H monitoring. As an alternative to source-by-source NO_X mass emission caps, a state may impose NO_X emission rate limits on each source and use maximum operating capacity for estimating NO_X mass emissions or may rely on other requirements that the state demonstrates to be equivalent to either the NO_X mass emission caps or the NO_X emission rate limits that assume maximum operating capacity. Collectively, the caps or their alternatives cannot exceed the portion of the state budget for those sources. See 40 CFR 51.121(f)(2) and (i)(4). If a state chooses to expand the applicability of the CSAPR NO_X ozone season trading program to other sources in the state through a voluntary SIP revision to include all the NO_X Budget Trading Program units in the CSAPR NO_X ozone season trading program, the cap requirement would be met through the new budget and the monitoring requirement would be met through the trading program provisions, which require part 75 monitoring. The EPA will work with states to ensure that NO_X SIP Call obligations continue to be met.

d. Other State Implementation Plans. The EPA has not conducted any technical analysis to determine whether compliance with this rule will satisfy other requirements for EGUs in any attainment or nonattainment areas (e.g., RACT or BART). For that reason, the EPA is not making determinations nor establishing any presumptions that compliance with the final rule satisfies any other requirements for EGUs. Based on analyses that states conduct on a case-by-case basis, states may be able to conclude that compliance with the rule for certain EGUs fulfills other SIP requirements. The EPA encourages states to work with their regional office on these issues.

2. Other Federal Rulemakings

a. Clean Power Plan. On August 3, 2015, the EPA finalized the Clean Power Plan (CPP). The Clean Air Act—under section 111(d)—creates a partnership between the EPA, states, tribes and U.S. territories—with the EPA setting a goal and states and tribes choosing how they will meet it. The CPP follows that approach. The CPP establishes interim and final CO₂ emission performance rates for certain existing power plants, under CAA section 111(d). States then develop and implement plans that ensure that the affected power plants in their state—either individually, together, or in combination with other measures—achieve these rates or equivalent state rate- or mass-based goals. The CPP includes interim emission performance rates (or equivalent state goals) to be achieved over the years 2022 to 2029 and the final CO₂ emission performance rates (or equivalent state goals) to be achieved in 2030 and after.

On February 9, 2016, the Supreme Court granted applications to stay the Clean Power Plan, pending judicial review of the rule in the D.C. Circuit, including any subsequent review by the Supreme Court. The EPA firmly believes the Clean Power Plan will be upheld when the courts address its merits because the Clean Power Plan rests on strong scientific and legal foundations. The stay means that no one has to comply with the Clean Power Plan while the stay is in effect. During the pendency of the stay, states are not required to submit plans to EPA, and EPA will not take any action to impose or enforce any such obligations. The Supreme Court's orders granting the stay did not discuss the parties' differing views of whether and how the stay would affect the CPP's compliance deadlines, and they did not expressly resolve that issue. In this context, the question of whether and to what extent tolling is appropriate will need to be resolved once the validity of the CPP is finally adjudicated.

Because mandatory emission reductions under the CPP would not begin until several years after the 2017 implementation of the CSAPR Update rule, the EPA does not anticipate significant interactions with the CPP and the near-term (i.e., starting in 2017) ozone season EGU NO_X emission reduction requirements under this rule. See section V.B of the preamble for further information on this point. However the EPA notes that actions taken to reduce CO₂ emissions (e.g., deployment of zero-emitting generation) may also reduce ozone season NO_X emissions. The EPA is also cognizant of the potential influence of addressing interstate ozone transport on CO₂ emissions. As states and utilities undertake the near- and longer-term planning to reduce emissions of these pollutants, they will have the opportunity to consider how compliance with this rule can anticipate, or be consistent with, greenhouse gas mitigation. Some EGU NO_X mitigation strategies, most notably shifting generation from higher NO_X-emitting coal-fired units to existing low NO_X-emitting units or zero-emitting units, can potentially also reduce CO₂ emissions. As the EPA has structured the interstate transport obligations that would be established by this rule as requirements to limit aggregate affected EGU emissions and the EPA is not enforcing source-specific emission reduction requirements, EGU owners have the flexibility to plan for compliance with the interstate ozone transport requirements in ways that are consistent with state and EGU strategies to reduce CO₂ emissions.

b. 2015 Ozone Standard. On October 1, 2015, the EPA strengthened the ground-level ozone NAAQS to 70 ppb, based on extensive scientific evidence about ozone's effects on public health and welfare. This rule updating the CSAPR NO_X ozone season trading program to address interstate emission transport with respect to the 2008 ozone NAAQS is a separate and distinct regulatory action and is not meant to address the CAA's good neighbor provision with respect to the strengthened 2015 ozone NAAQS.

The EPA is mindful of the need to address ozone transport for the 2015 ozone NAAQS. The statutory deadline for the EPA to finalize area designations is October 1, 2017. Further, good neighbor SIPs from states are due on October 1, 2018. The steps taken under this rule to reduce interstate ozone transport will help states make progress toward attaining and maintaining the 2015 ozone NAAQS. Moreover, to facilitate the implementation of the CAA good neighbor provision with respect to the 2015 ozone NAAQS, the EPA intends to provide additional information regarding steps 1 and 2 of the CSAPR framework in the fall of 2016. In particular, the EPA expects to conduct and release modeling necessary to assist states to identify projected nonattainment and maintenance receptors with respect to the 2015 ozone NAAQS and identify the upwind state emissions that contribute significantly to these receptors.

VIII. Costs, Benefits, and Other Impacts of the Final Rule

The EPA evaluated the costs, benefits, and impacts of compliance with the final EGU NO_X ozone season emission budgets developed using uniform control stringency represented by $1,400 per ton. In addition, the EPA also assessed compliance with one more and one less stringent alternative EGU NO_X ozone season emission budgets, developed using uniform control stringency represented by $3,400 per ton and $800 per ton, respectively. The EPA evaluated the impact of implementing these emission budgets to reduce interstate transport for the 2008 ozone NAAQS in 2017. More details for this assessment can be found in the Regulatory Impact Analysis (RIA) in the docket for this final rule.

The EPA notes that its analysis of the regulatory control alternatives (i.e., the final rule and more and less stringent alternatives) is illustrative in nature, in part because the EPA will implement the EGU NO_X emission budgets via a regional NO_X ozone season allowance trading program. This implementation approach provides utilities with the flexibility to determine their own compliance path. The EPA's assessment develops and analyzes one possible scenario for implementing the NO_X budgets finalized by this action and one possible scenario for implementing the more and less stringent alternatives. Furthermore, the emission budgets evaluated for the CSAPR Update regulatory control alternative in this benefit and cost analysis are illustrative because they differ somewhat from the budgets finalized in this rule. (The budgets for the more and less stringent alternative also differ somewhat from the budgets represented by $3,400 per ton and $800 per ton reported in Table VI.C-1). However, the RIA also reports the costs and emissions changes associated with the finalized budgets. Further details on the illustrative nature of this analysis can be found in the RIA in the docket for this rule.

For this final rule, the EPA analyzed the costs to the electric power sector and emissions changes using IPM. The IPM is a dynamic linear programming model that can be used to examine the economic impacts of air pollution control policies throughout the contiguous United States for the entire power system. Documentation for IPM can be found in the docket for this rulemaking or at www.epa.gov/powersectormodeling .

Table VIII.1 provides the projected 2017 EGU emissions reductions for the evaluated regulatory control alternatives.

The EPA estimates the costs associated with compliance with the illustrative regulatory control alternative for the final CSAPR Update to be approximately $68 million annually. These costs represent the private compliance cost of reducing NO_X emissions to comply with the final rule and does not include monitoring, recordkeeping, and reporting costs. Table VIII.2 provides the estimated costs for the evaluated regulatory control scenarios, including the final rule and more and less stringent alternatives. Estimates are in 2011 dollars.

In this analysis, the EPA monetized the estimated benefits associated with reducing population exposure to ozone and PM_2.5 from reductions in NO_X emissions and co-benefits of decreased emissions of CO₂, but was unable to quantify or monetize the potential co-benefits associated with reducing exposure to NO₂ as well as ecosystem effects and reduced visibility impairment from reducing NO_X emissions. Among the benefits it could quantify, the EPA estimated combinations of health benefits at discount rates of 3 percent and 7 percent (as recommended by the EPA's Guidelines for Preparing Economic Analyses [U.S. EPA, 2014] and OMB's Circular A-4 [OMB, 2003]) and climate co-benefits of CO₂ reductions at discount rates of 5 percent, 3 percent, 2.5 percent, and 3 percent (95th percentile) (as recommended by the interagency working group). The EPA estimates the monetized ozone-related benefits of the final rule to be $370 million to $610 million (2011$) in 2017 and the PM_2.5-related co-benefits of the final rule to be $93 million to $210 million (2011$) using a 3 percent discount rate and $83 million to $190 million (2011$) using a 7 percent discount rate. Further, the EPA estimates CO₂-related co-benefits of $54 to $87 million (2011$). Additional details on this analysis are provided in the RIA for this final rule. Tables VIII.3 and VIII.5 summarize the quantified monetized human health and climate benefits of the rule and the more and less stringent control alternatives. Table VIII.4 summarizes the estimated avoided ozone- and PM_2.5-related health incidences for the final rule and the more and less stringent control alternatives.

The EPA combined this information to perform a benefit-cost analysis for this final rule (shown in table VIII.6 and for the more and less stringent alternatives—shown in the RIA in the docket for this rule).

There are additional important benefits that the EPA could not monetize. Due to current data and modeling limitations, the EPA's estimates of the co-benefits from reducing CO₂ emissions do not include important impacts like ocean acidification or potential tipping points in natural or managed ecosystems. Unquantified benefits also include the potential co-benefits from reducing direct exposure to NO_X as well as from reducing ecosystem effects and visibility impairment by reducing NO_X emissions. Based upon the foregoing discussion, it remains clear that the benefits of this final action are substantial, and far exceed the costs. Additional details on benefits, costs, and net benefits estimates are provided in the RIA for this rule.

The EPA provides a qualitative assessment of economic impacts associated with electricity price changes to consumers that may result from this final rule. This assessment can be found in the RIA for this rule in the docket.

Executive Order 13563 directs federal agencies to consider the effect of regulations on job creation and employment. According to the Executive Order, “our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation. It must be based on the best available science” (Executive Order 13563, 2011). Although benefit-cost analyses that are consistent with standard economic theory have not typically included a separate analysis of regulation-induced employment impacts, regulatory impact analyses prepared by the EPA do include analysis of employment impacts. Employment impacts are of particular concern and questions may arise about their existence and magnitude.

States have the responsibility and flexibility to implement policies and practices as part of developing SIPs for compliance with the emission budgets found in this final rule. Given the wide range of approaches that may be used and industries that could be affected, quantifying the associated employment impacts is difficult. The EPA provides an analysis of employment impacts for the final rule in the RIA. The employment analysis includes quantitative estimation of employment changes related to installation and operation of new pollution control equipment, ongoing expenditures on pollution control, changes in electricity generation and fuel use, and qualitative discussion of employment trends both for the electric power sector and in related fuel markets for the illustrative CSAPR update alternative.

IX. Summary of Changes to the Regulatory Text for the CSAPR FIPs and CSAPR Trading Programs

This section describes amendments to the regulatory text in the CFR for the CSAPR FIPs and the CSAPR NO_X ozone season trading program related to the findings and remedy discussed throughout this preamble. This section also describes other minor corrections to the existing CFR text for the CSAPR FIPs and the CSAPR trading programs more generally.

As a preliminary matter, it is worth noting that two of the changes made from the proposal to the final rule after consideration of comments dramatically simplify the final regulatory text as compared to the proposed amendments. First, because the final rule does not allow post-2016 allowances issued to sources in Georgia to be used for compliance by sources in other states, the final regulatory text establishes a new, separate CSAPR NO_X Ozone Season Group 2 Trading Program in a new subpart EEEEE of part 97 for sources subject to this rule instead of including those sources in the existing trading program in subpart BBBBB of part 97 (which is renamed the CSAPR NO_X Ozone Season Group 1 Trading Program and will now apply only to sources in Georgia). Second, the final text addresses the use of banked 2015 and 2016 allowances to meet compliance obligations under this rule by providing for a one-time conversion of Group 1 allowances to Group 2 allowances instead of creating an ongoing process of “tonnage equivalent” determinations. These two simplifying changes largely eliminate the need for substantive amendments to the existing Group 1 trading program regulations other than to address the one-time conversion of the banked allowances, as discussed in section IX.B of this preamble. Although the changes do result in the creation of new subpart EEEEE of part 97, the provisions of the new subpart parallel the existing subpart BBBBB provisions with only a small number of exceptions.

A. Amendments to the CSAPR FIPs in Part 52

The CSAPR FIPs related to ozone season NO_X emissions are set forth in § 52.38(b) as well as CFR sections specific to each covered state. The principal amendments to those FIPs made by this rule appear in § 52.38(b)(1) and (2) as well as the state-specific CFR sections. The amendments to § 52.38(b)(1) expand the overall set of CSAPR trading programs addressing ozone season NO_X emissions to include the new Group 2 trading program in subpart EEEEE of part 97 in addition to the current Group 1 trading program in subpart BBBBB of part 97. The amendments to § 52.38(b)(2) identify the states whose sources are required under the FIPs to participate in each of the respective trading programs with regard to their emissions occurring in particular years. More specifically, § 52.38(b)(2)(ii) ends the requirement to participate in the Group 1 program after the 2016 control period for sources in all states whose sources currently participate in that program except Georgia, and § 52.38(b)(2)(iii) establishes the requirement for the 22 states covered by this rule to participate in the Group 2 program starting with the 2017 control period. These changes in requirements are replicated, as applicable, in the state-specific CFR sections for the respective states.

The options for states covered by this rule to modify or replace the FIPs implementing the emission reduction requirements under this rule are finalized substantially as proposed, but generally as new options to modify or replace subpart EEEEE requirements instead of as changes to the existing options to modify or replace subpart BBBBB requirements. Thus, new § 52.38(b)(7), (8), and (9) establish options to replace allowance allocations for the 2018 control period, to adopt an abbreviated SIP revision for control periods in 2019 or later years, and to adopt a full SIP revision for control periods in later years, respectively. These options generally replicate the analogous options in § 52.38(b) (3), (4) and (5) with regard to the subpart BBBBB program. To make use of the 2018 option, a state must notify the EPA by December 27, 2016 of its intent to submit to the EPA by April 1, 2017 a state-approved spreadsheet with allowance allocations to existing units. The submission deadline for an abbreviated or full SIP affecting 2019 or 2020 allocations is December 1, 2017. The revised FIPs also clarify that in cases where a FIP represents a partial rather than full remedy for the state's obligation to address interstate air pollution, an approved SIP revision replacing that FIP would also be a partial rather than full remedy for that obligation, unless provided otherwise in the EPA's approval. (As discussed in section VI of this preamble, for all covered states except Tennessee, the emission reduction requirements established in this rule represent partial rather than full remedies to the respective states' interstate transport obligations with regard to the 2008 ozone NAAQS.)

The abbreviated and full SIP options under the Group 2 program do have one important difference from the similar options under the Group 1 program, namely that § 52.38(b)(8)(ii) and (9)(ii) include an option for a state to expand applicability to include non-EGUs in the state that were previously subject to the NO_X Budget Trading Program. As discussed in section VII.F of this preamble, in conjunction with such an expansion, the state may also issue an additional amount of allowances. New § 52.38(b)(10)(ii) clarifies that a SIP revision requiring a state's sources—EGUs or non-EGUs—to participate in the Group 2 trading program would satisfy the state's obligations to adopt control measures for such sources under the NO_X SIP Call.

The option discussed in section VII.C.1 of this preamble for Georgia to replace the FIP requiring its sources to participate in the Group 1 program with a SIP revision requiring its sources to participate in the Group 2 program is set forth in § 52.38(b)(6). This option is generally similar to the full SIP option under § 52.38(b)(9) for states whose sources are already subject to the Group 2 program under a FIP. The provisions would allow Georgia to elect (subject to EPA approval) to allocate Group 2 allowances for future control periods under the SIP revision (even if the EPA had already commenced allocations of Group 1 allowances to Georgia sources for those control periods) instead of having the EPA convert the Group 1 allowances already allocated for future years into Group 2 allowances under § 97.526(c)(2), as described later on. Approval by the EPA of a Georgia SIP revision of this nature would also result in the conversion of all remaining Group 1 allowances banked from earlier control periods into Group 2 allowances under § 97.526(c)(3), as also described later on.

New § 52.38(b)(11)(ii) preserves the EPA's authority to carry out conversions of Group 1 allowances to Group 2 allowances in all compliance accounts (as well as all general accounts) following any SIP revision that would otherwise lead to automatic withdrawal of a CSAPR FIP with regard to particular sources.

Finally, new § 52.38(b)(12) and (13), respectively, contain updatable lists of states with approved SIP revisions to modify or replace the CSAPR FIPs requiring participation in either the Group 1 program or the Group 2 program. Similar updatable lists for states with SIPs related to the NO_X Annual, SO₂ Group 1, and SO₂ Group 2 programs are added at new §§ 52.38(a)(8) and 52.39(l) and (m), respectively. With the addition of these updatable lists, all previously approved and future CSAPR SIP revisions will be acknowledged in centralized CFR locations and will no longer be acknowledged through amendments to the individual states' FIPs.

B. Amendments to the Group 1 Trading Program Provisions in Subpart BBBBB of Part 97

As noted previously, the EPA's determinations regarding the separation of Georgia allowances and the one-time conversion of banked allowances dramatically simplify the amendments in the final rule compared to the proposed amendments. Most significantly, in place of the proposed amendments designed to implement the concept of “tonnage equivalents,” which would have affected multiple sections of the Group 1 regulations throughout subpart BBBBB, the final regulatory text implements the one-time conversion of banked Group 1 allowances to Group 2 allowances through amendments limited to the Group 1 trading program banking provisions in § 97.526. Specifically, new § 97.526(c)(1) sets forth the schedule and mechanics for a default one-time conversion of most Group 1 allowances that remain banked following the completion of deductions for compliance for the 2016 control period. The conversion will be applied to banked Group 1 allowances held in any general account and in any compliance account except a compliance account for a source located in Georgia. The owner or operator of a Georgia source can retain banked Group 1 allowances for future use in the Group 1 program simply by keeping the allowances in the source's compliance account as of the conversion date or, alternatively, can elect to have banked allowances converted to Group 2 allowances simply by transferring the allowances from the source's compliance account to a general account prior to the conversion date. The conversion factor is determined based on the ratio of the total number of banked Group 1 allowances being converted to 1.5 times the sum of the variability limits for all states covered by the Group 2 program.

Two additional conversion provisions in § 97.526(c)(2) and (3) apply only if Georgia submits and the EPA approves a SIP revision requiring sources in Georgia to participate in the Group 2 program. In that case, under § 97.526(c)(2) the EPA would replace the allocations of Group 1 allowances to Georgia sources already recorded for future control periods with allocations of Group 2 allowances, using a conversion factor determined based on the ratio of Georgia's emissions budget under the Group 1 program to its emissions budget under the Group 2 program. Under § 97.526(c)(3) the EPA would convert any remaining banked Group 1 allowances from prior control periods using a conversion factor based on the ratio of the total number of Group 1 allowances being converted to 1.5 times Georgia's variability limit under the Group 2 program. Allowances would be converted under these provisions regardless of the accounts in which they were held.

Additional provisions of § 97.526(c) address special circumstances. Under § 97.526(c)(4), if Group 1 allowances are removed for conversion from the compliance account for a source located in Florida, North Carolina, or South Carolina, the owner or operator can identify to the EPA a different account to receive the Group 2 allowances. This provision is necessary because sources in these states will not be participating in the Group 2 program, and Group 2 allowances cannot be recorded in any compliance account other than a compliance account for a source with a unit affected under the Group 2 program.

Under § 97.526(c)(5), the EPA may group multiple general accounts under common ownership for purposes of performing conversion computations. Because allowances are only recorded as whole allowances, allowance conversion computations will necessarily be rounded to whole allowances. The purpose of the grouping provision is to ensure that, given rounding, the total quantities of Group 2 allowances issued are not unduly affected by how the Group 1 allowances are distributed across multiple general accounts under common ownership, with potentially adverse consequences to achievement of the emission reductions required under the rule.

There is a possibility under the Group 1 program that some new Group 1 allowances could be issued after the conversions to Group 2 allowances have already taken place. Under § 97.526(c)(6), the EPA may convert these allowances to Group 2 allowances as if they had been issued and recorded before the general conversions.

Owners and operators of non-Georgia sources generally will not be able to retain banked Group 1 allowances (except to the extent that they also own or operate sources in Georgia and choose to hold Group 1 allowances in the compliance accounts for those sources). However, new § 97.526(c)(7) authorizes the use of Group 2 allowances to satisfy obligations to hold Group 1 allowances that might arise after the conversion date, such as an obligation to hold additional allowances because of excess emissions or for compliance with the assurance provisions. When held for this purpose, a single Group 2 allowance may satisfy the obligation to hold more than one Group 1 allowance, as though the conversion were reversed.

Beyond the conversion provisions, additional amendments to the Group 1 program align certain deadlines under the Group 1 program with the comparable deadlines under the new Group 2 program and the CSAPR annual programs. Although these changes were not addressed in the proposal, the EPA expects them to be noncontroversial because they impose no additional burdens and are designed to simplify program compliance and administration, thereby tending to reduce costs for both regulated parties and the EPA. Specifically, the date as of which allowances equal to emissions in the preceding control period must be held in a source's compliance account under the Group 1 program is being amended from December 1 of the year of the control period to March 1 of the following year. This change is accomplished through an amendment to the definition of “allowance transfer deadline” in § 97.502. In addition, the deadlines for providing notices regarding the units that are eligible for second-round allocations of NUSA allowances and for allocating and recording those allowances are being amended from September 15 and November 15 of the year of the control period to December 15 of the year of the control period and February 15 of the following year, respectively. These changes are accomplished through amendments to §§ 97.511(b)(1)(iii) and (iv) and (2)(iii) and (iv), 97.512(a)(9)(i) and (b)(9)(i), and 97.521(i).

The final substantive revision to the Group 1 trading program in the final regulatory text is in § 97.521(c), where the deadline for the EPA to record Group 1 allowances for the control periods in 2017 and 2018 is amended to January 9, 2017, as discussed in section VII.E.7 of this preamble.

Additional proposed amendments to the Group 1 trading program regulations establishing new amounts for budgets, new unit set-asides, Indian country new unit set-asides, and variability limits and new deadlines for compliance, allowance recordation, monitor certification, and reporting are not being finalized because they concern budgets and sources under the new Group 2 trading program instead of the Group 1 trading program. The substance of the proposed amendments to deadlines is reflected in the new Group 2 trading program regulations in various subsections of new subpart EEEEE. Similarly, the amounts of the budgets, new unit set-asides, Indian country new unit set-asides, and variability limits as finalized in this rule are reflected in § 97.810 of the new Group 2 trading program regulations.

C. Group 2 Trading Program Provisions in Subpart EEEEE of Part 97

The Group 2 trading program regulations in new subpart EEEEE of part 97 generally parallel the existing Group 1 trading program regulations in subpart BBBBB of part 97 but reflect the amounts of the budgets, new unit set-asides, Indian country new unit set-asides, and variability limits established in this rule, all of which are set forth in § 97.810. That same section sets forth the amounts of a Group 2 budget, new unit set-aside, and variability limit which Georgia could adopt in a SIP revision that would be approvable under new § 52.38(b)(6).

Under § 97.806(c)(3)(i), the obligation to hold one Group 2 allowance for each ton of emissions during the control period begins with the 2017 control period, two years later than the analogous start date for the Group 1 program. The deadlines for certifying monitoring systems under § 97.830(b) and for beginning quarterly reporting under § 97.834(d)(1) are similarly two years later than the analogous Group 1 program deadlines. However, the start date for the assurance provisions for the Group 2 program under § 97.806(c)(3)(ii) is May 1, 2017. The allowance recordation deadlines under § 97.821 begin generally two years later than the comparable recordation deadlines under the Group 1 program but reach the same schedule by July 1, 2020, which is the deadline for recordation of allowances for the control period in 2024 under both programs.

Additional differences in the Group 2 program regulations relative to the Group 1 program regulations concern the use of converted Group 1 allowances. In general, the Group 2 regulations allow a Group 2 allowance that was allocated to any account as a replacement for removed Group 1 allowances to be used for all of the purposes for which any other Group 2 allowance may be used. This is accomplished by adding references to § 97.526(c)—the section under which the conversions are carried out—to the definitions of “allocate” and “CSAPR NO_X Ozone Season Group 2 allowance” in § 97.802 as well as the default order for deducting allowances for compliance purposes under § 97.824(c)(2).

Any Group 2 allowances allocated based on conversion of Group 1 allowances allocated for future years—specifically, the Group 2 allowances that could be allocated under § 97.526(c)(2) if the EPA approved a SIP revision from Georgia requiring Georgia sources to participate in the Group 2 program—would also be treated like any other Group 2 allowance for purposes of determining shares of responsibility for exceedances under the assurance provisions. New paragraph (2)(ii) of the definition of “common designated representative's share” in § 97.802 establishes this equivalence. However, allocations of Group 2 allowances converted from banked Group 1 allowances must be excluded for purposes of determining such shares of responsibility because such converted allowances do not represent allowances allocated from the current control period's emissions budgets. This exclusion is addressed in new paragraph (2)(i) of the definition of “common designated representative's share” in § 97.802.

Consistent with the proposal, the EPA has determined that, in order to facilitate NO_X SIP Call compliance, a state should be allowed to expand applicability of the Group 2 program to include any sources that previously participated in the NO_X Budget Trading Program, and that the state should be able to issue an amount of allowances beyond the CSAPR Update state budget if applicability is expanded. The EPA has further determined, again consistent with the proposal, that the assurance provisions should continue to apply only to emissions from the sources subject to the Group 2 program before any such expansion. Accordingly, the Group 2 program rules reflect certain revisions to the assurance provisions so as to exclude any additional units and allowances brought into the program through such a SIP revision.

In order to exclude the additional units, new definitions of “base CSAPR NO_X Ozone Season Group 2 unit” and “base CSAPR NO_X Ozone Season Group 2 source” are added in § 97.802 which exclude units that would not have been included in the program under § 97.804. All provisions related to the assurance provisions are amended to reference only such “base” units and sources. The amended provisions are §§ 97.802 (the definitions of “assurance account”, “common designated representative”, and “common designated representative's share”), 97.806(c)(2) and (3)(ii), and 97.825. The exclusion of the additional allowances from the determination of shares of responsibility for exceedances of the assurance provisions is accomplished through an amendment to paragraph (2) of the definition of “common designated representative's share” in § 97.802.

Finally, amendments to §§ 97.816, 97.818, and 97.820(c)(1) and (5) reduce the administrative compliance burden for sources in the transition from the Group 1 program to the Group 2 program by providing that certain one-time or periodic submissions made for purposes of compliance with the Group 1 program will be considered valid for purposes of the Group 2 program as well. The submissions treated in this manner are a certificate of representation or notice of delegation submitted by a designated representative and an application for a general account or notice of delegation submitted by an authorized account representative.

C. Administrative Appeal Procedures in Part 78

The final rule amends the administrative appeal provisions in part 78 in order to make the procedures of that part applicable to determinations of the EPA Administrator under the new Group 2 program in subpart EEEEE of part 97 in the same manner as the procedures are applicable to similar determinations under the other CSAPR trading programs and previous EPA trading programs. These amendments concern the list in § 78.1(a)(1) of CFR sections (and analogous SIP revisions) generally giving rise to determinations subject to the part 78 procedures; the list in § 78.1(b) of certain determinations that are expressly subject to those procedures; the list in § 78.3(a) of the types of persons who may seek review under the procedures; the list in § 78.3(c) of the required contents of petitions for review; the list in § 78.3(d) of matters for which a right of review is not provided; and the requirements in § 78.4(a)(1) as to who must sign a filing.

In addition, consistent with the proposal, under new § 78.1(b)(14)(viii), determinations of the EPA Administrator under § 97.526(c) regarding the removal of Group 1 allowances from accounts and the allocation in their place of Group 2 allowances are added to the list of determinations expressly subject to the part 78 procedures.

D. Nomenclature Changes

The EPA is finalizing the proposal to change the nomenclature in the CFR from “Transport Rule” to “Cross-State Air Pollution Rule” and from “TR” to “CSAPR”. The change affects subparts AAAAA, BBBBB, CCCCC, and DDDDD of part 97, part 78, and all the CSAPR FIP sections in part 52 of 40 CFR.

In order to minimize administrative burden associated with the nomenclature changes, the regulations for all of the CSAPR trading programs (including the new subpart EEEEE) include provisions allowing continued use of the acronym “TR” instead of the acronym “CSAPR” in SIP revisions and in submissions by regulated parties. Language for this purpose has been included in §§ 97.502 (introductory text), 97.516, and 97.520(c)(1) and (2).

E. Technical Corrections and Clarifications

The final rule also finalizes technical corrections and clarifications throughout the sections of parts 52, 78, and 97 implementing CSAPR, including the sections implementing CSAPR's other three emissions trading programs. The EPA received no adverse comments on any of the technical corrections that were discussed in the proposal. The final rule contains some additional technical corrections that the EPA considers similarly noncontroversial.

The most common category of these minor changes consists of corrections to cross-references that as originally published indicated incorrect locations because of typographical errors or indicated correct locations but did not use the correct CFR format. In virtually all cases, the intended correct cross-reference can be determined from context, but the corrections clarify the regulations. Besides the corrections to cross-references, most of the remaining corrections address typographical errors.

A small number of the CFR changes correct errors that are not cross-references or obviously typographical errors. While the EPA views these corrections as noncontroversial, and no adverse comments were received regarding the corrections described in the proposal, they merit a short explanation.

The phrase “with regard to the State” or “the State and” has been added in a number of locations in §§ 52.38 and 52.39 where it was inadvertently omitted. The added phrase clarifies that when the EPA approves a state's SIP revision as modifying or replacing provisions in a CSAPR trading program, the modification or replacement is effective only with regard to that particular state. Correcting the omissions of these phrases makes the language concerning SIP revisions consistent for all the types of SIP revisions under all the CSAPR trading programs.

The phrase “in part” has been removed from the existing FIP language in various sections of part 52 for certain states with Indian country to clarify that in order to replace a CSAPR FIP affecting the sources in these states, a SIP revision must fully, not “in part,” correct the SIP deficiency identified by the EPA as the basis for the FIP. The intended purpose of the words “in part”—specifically, to indicate that approval of a state's SIP revision would apply only to sources in the state and would not relieve any sources in Indian country within the borders of the state from obligations under the FIP—is already served by other language in those FIPs, and is further clarified by addition of the phrase “for those sources and units” (referencing the units in the state). The corrections make the language in these CSAPR FIPs consistent with the FIP language for the remaining CSAPR FIPs that address states with Indian country. Analogous changes to the general CSAPR FIP language in §§ 52.38(a)(5) and (6) and (b)(5) and (6) and 52.39(f), (i), and (j) have removed the phrase “in whole or in part” (referencing states without Indian country and states with Indian country, respectively) while adding language distinguishing the effect that the EPA's approval of a SIP revision has on sources in the state from the lack of effect on any sources in Indian country within the borders of the state.

Language has been added to § 78.1 clarifying that determinations by the EPA Administrator under the CSAPR trading programs that are subject to the part 78 administrative appeal procedures are subject to those procedures whether the source in question participates in a CSAPR federal trading program under a FIP or a CSAPR state trading program under an approved SIP revision. This approach is consistent with the approach taken under CAIR FIPs and SIPs and with the EPA's intent in CSAPR, as evidenced by the lack of any proposal or discussion in the CSAPR rulemaking regarding deviation from the historical approach taken under CAIR. This approach is also consistent with provisions in §§ 52.38 and 52.39 prohibiting approvable SIP revisions from altering certain provisions of the CSAPR trading programs, including the provisions specifying that administrative appeal procedures for determinations of the EPA Administrator under the trading programs are set forth in part 78.

The phrase “steam turbine generator” has been changed to “generator” in the list of required equipment in the definition of a “cogeneration system” in § 97.502. Absent this correction, a combustion turbine in a facility that uses the combustion turbine in combination with an electricity generator and heat recovery steam generator, but no steam turbine, to produce electricity and useful thermal energy would not meet the definition of a “cogeneration unit.” The correction clarifies that a combustion turbine in such a facility should be able to qualify as a “cogeneration unit” (assuming it meets other relevant criteria) under the CSAPR trading programs, as it could under the CAIR trading programs. The consistency of this approach with the EPA's intent in the CSAPR rulemaking is evidenced by the lack of any proposal or discussion in that rulemaking regarding the concept of narrowing the set of facilities qualifying for an applicability exemption as cogeneration units. To the contrary, as discussed in the preamble to the CSAPR proposal (75 FR 45307, August 2, 2010), the definition of “cogeneration system” was created in CSAPR to potentially broaden the set of facilities qualifying for the exemption, specifically by facilitating qualification as “cogeneration units” for certain units that might not meet the required levels of efficiency on an individual basis but that operate as components of multi-unit “cogeneration systems” that do meet the required levels of efficiency.

The deadline for recording certain allowance allocations under § 97.521(j) has been changed from “the date on which” the EPA receives the necessary allocation information to “the date 15 days after the date on which” the EPA receives the information. The EPA's lack of intention in the CSAPR rulemaking to establish the deadline as defined prior to the correction is evidenced by the impracticability of complying with such a deadline.

A change to a description of a required notice under the assurance provisions in § 97.525(b)(2)(iii)(B) has modified the phrase “any adjustments” to the phrase “calculations incorporating any adjustments” in order to clarify that the required notice will identify not only any adjustments made to previously noticed calculations, but also the complete calculations with (or without) such adjustments. The intended meaning is clear from the subsequent provisions that use this document as the point of reference for the complete calculations used in the succeeding administrative procedures.

The final rule also makes several additional technical corrections and clarifications. One set of corrections addresses the inconsistent treatment in the regulations of allowances initially distributed to sources by means of auction mechanisms instead of zero-cost allocation mechanisms. The original CSAPR regulations gave states the option to distribute allowances by auction under the provisions of an approved SIP revision, and some of the trading program provisions expressly accounted for that possibility. See, e.g., §§ 52.38(b)(4) and (5); 97.502 (definitions of “common designated representative's share”, “CSAPR NO_X Ozone Season Group 1 allowance and “record”), and 97.521. However, other trading program provisions, including some that define the allowances that can be used for compliance, failed to address the possible use of allowances acquired in an auction held pursuant to an approved SIP revision. The technical corrections have addressed this inadvertent omission principally by adding a definition of “auction” in § 97.502 and by adding references to auctioned allowances in provisions describing allowances available for use in compliance in §§ 97.506(c)(4)(i) and (ii), 97.524(a)(1) and (d), and 97.525(a). Additional changes recognizing the possible existence of auctioned allowances have been made in § 97.802 (definitions of “Allowance Management System” and Allowance Management System account”) and in §§ 97.523(b) and 97.524(c)(2)(i) and (ii).

Technical corrections have been made to the definitions of “heat input”, “heat input rate”, “heat rate”, “maximum heat input rate”, and “potential electrical output capacity” in § 97.502 in order to express the definitions in correct and clearly identified units of measurement. The corrections clarify the regulations and do not change any regulatory requirement for any unit.

In a provision in § 97.506(c)(2)(ii) stating the deadline to hold allowances for purposes of the assurance provisions, the phrase “after such control period” has been corrected to say “after the year of such control period”. The change makes the deadline as described in this section consistent with the deadline as already described correctly in § 97.525(b)(4)(i).

In § 97.520(c)(5)(v), incorrect references to the “designated representative” have been replaced with references to the “authorized account representative”. The EPA's intent to use the term “authorized account representative” is clear from the cross-references to other paragraphs of § 97.520(c)(5) where that term, rather than the term “designated representative”, is used.

In § 97.521, a new paragraph (j) has been added to correct the inadvertent omission of any recordation deadline for second-round allocations of allowances from an Indian country NUSA. The deadlines in the new paragraph are identical to the recordation deadlines for second-round allocations of allowances from a NUSA. The EPA's intent for such deadlines to apply is evident from the provisions of §§ 97.511(b)(2) and 97.512(b) which establish schedules for the determination of allocations of allowances from Indian country NUSAs that are fully synchronized with the schedules for determination of allocations of allowances from other NUSAs.

The provisions concerning full CSAPR SIP revisions in §§ 52.38(a)(5)(iv) and (b)(5)(v) and 52.39(f)(4) and (i)(4) have been amended to include more comprehensive lists of the specific CSAPR trading program provisions that concern administration of Indian country NUSAs and that therefore should not be incorporated by a state into a full CSAPR SIP revision. The language has also been modified to clarify that mere “references to” units in Indian country within a state's borders are not impermissible in such SIP revisions, as long as the SIP revisions do not impose any obligations on any units in Indian country and as long as the SIP revisions remain substantively identical to the federal trading program regulations (except as otherwise expressly permitted) notwithstanding any references to units in Indian country.

In the state-specific sections of part 52, the EPA has corrected instances from the original CSAPR rulemaking where language to address sources and units in Indian country within a state's borders was inadvertently omitted from or included in the state-specific FIP language for certain states. Specifically, language addressing sources and units in Indian country has been added to the FIP language concerning annual NO_X and SO₂ emissions for Alabama in §§ 52.54(a)(1) and 52.55(a), respectively, and has been removed from the FIP language concerning annual NO_X and SO₂ emissions for Tennessee in §§ 52.2240(d)(1) and 52.2241(c)(1), respectively. These revisions make the state-specific FIP language consistent with the existing general FIP language in §§ 52.38(a)(2) and 52.39(b) and (c) making CSAPR FIP requirements applicable to any units in Indian country located within the borders of each state listed in those sections

In several provisions in part 78, cross-references that previously referred to part 97 in its entirety have been clarified to refer to only the portions of part 97 related to particular non-CSAPR trading programs, consistent with the intent of the provisions when promulgated. Specifically, general references to part 97 in §§ 78.1(a)(1) and (b)(6) and 78.3(a)(3), (c)(7), and (d) have been replaced by references to either subparts A through J (federal NO_X Budget Trading Program); subparts AA through II, AAA through III, and AAAA through IIII (CAIR); or subparts AAAAA, BBBBB, CCCCC, DDDDD, and EEEEE (CSAPR). In several of these sections the more precise reference lists have been further clarified through reorganization. For the same reason, former appendices A through D to part 97 have been redesignated as appendices A through D to subpart E of part 97, and the cross-references to those appendices in subpart E of part 97 have been updated.

In § 78.3(a)(10) and (11), the phrase “and that is appealable under § 78.1(a)” has been added in order to correct an inadvertent omission and clarify that, like the other paragraphs of § 78.3(a), these paragraphs are subject to the limits set in § 78.1(a). The provisions of § 78.3(a) concern the types of persons who may petition for administrative review, while the provisions of § 78.1 address the subject matter over which administrative review may be sought. The words being added to § 78.3(a)(10) and (11) are present in each of the other parallel provisions in § 78.3(a). The EPA's intent to include the words being added is evident from the fact that, without the added words, these two paragraphs concerning the persons who may petition for administrative review could be misread as expanding the matters for which administrative review may be sought, in conflict with the provisions of § 78.1(a).

X. Statutory and Executive Order Reviews

Additional information about these statutes and Executive Orders can be found at http://www2.epa.gov/laws-regulations/laws-and-executive-orders .

A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review

This action is an economically significant regulatory action that was submitted to the Office of Management and Budget (OMB) for review. Any changes made in response to OMB recommendations have been documented in the docket. The EPA prepared an analysis of the potential costs and benefits associated with this action. This analysis, which is contained in the “Regulatory Impact Analysis for the Final Cross-State Air Pollution Rule Update for the 2008 Ozone NAAQS”, is available in the docket and is briefly summarized in section VIII of this preamble.

Consistent with Executive Orders 12866 and 13563, the EPA estimated the costs and benefits for three regulatory control alternatives: The final rule EGU NO_X ozone season emission budgets and more and less stringent alternatives. This final action reduces ozone season NO_X emissions from EGUs in 22 eastern states. Actions taken to comply with the EGU NO_X ozone season emission budgets also reduce emissions of other criteria air pollutants, including annual NO_X and associated PM_2.5 concentrations, and CO₂. The benefits associated with these co-pollutant reductions are referred to as co-benefits, as these reductions are not the primary objective of this rule.

The RIA for this rule analyzed illustrative compliance approaches for implementing the FIPs. This action establishes EGU NO_X ozone season emission budgets for 22 states and implements these budgets via the existing CSAPR NO_X ozone season allowance trading program.

The EPA evaluated the costs, benefits, and impacts of implementing the EGU NO_X ozone season emission budgets developed using uniform control stringency represented by $1,400 per ton. In addition, the EPA also assessed implementation of one more and one less stringent alternative EGU NO_X ozone season emission budgets, developed using uniform control stringency represented by $3,400 per ton and $800 per ton, respectively. The EPA evaluated the impact of implementing these emission budgets to reduce interstate transport for the 2008 ozone NAAQS in 2017. More details for this assessment can be found in the Regulatory Impact Analysis in the docket for this rule.

The EPA notes that its analysis of the regulatory control alternatives (i.e., the final rule and more and less stringent alternatives) is illustrative in nature, in part because the EPA implements the EGU NO_X emission budgets via a regional NO_X ozone season allowance trading program. This implementation approach provides utilities with the flexibility to determine their own compliance path. The EPA's assessment develops and analyzes one possible scenario for implementing the NO_X budgets in this action and one possible scenario for implementing the more and less stringent alternatives. Furthermore, the emission budgets evaluated for the CSAPR Update regulatory control alternative in this benefit and cost analysis are illustrative because they differ somewhat from the budgets finalized in this rule. (The budgets for the more and less stringent alternative also differ somewhat from the budgets represented by $3,400 per ton and $800 per ton reported in Table VI.C-1). However, the RIA also reports the costs and emissions changes associated with the finalized budgets. Further details on the illustrative nature of this analysis can be found in the RIA in the docket for this rule.

The EPA estimates the costs associated with compliance with the illustrative regulatory control alternative to be approximately $68 million (2011$) annually. These costs represent the private compliance cost of reducing NO_X emissions to comply with the final rule.

In this analysis, the EPA monetized the estimated benefits associated with the reduced exposure to ozone and PM_2.5 and co-benefits of decreased emissions of CO₂, but was unable to quantify or monetize the potential co-benefits associated with reducing exposure to NO₂ as well as ecosystem effects and reduced visibility impairment from reducing NO_X emissions. Specifically, the EPA estimated combinations of health benefits at discount rates of 3 percent and 7 percent (as recommended by the EPA's Guidelines for Preparing Economic Analyses [U.S. EPA, 2014] and OMB's Circular A-4 [OMB, 2003]) and climate co-benefits of CO₂ reductions at discount rates of 5 percent, 3 percent, 2.5 percent, and 3 percent (95th percentile) (as recommended by the interagency working group). The EPA estimates the monetized ozone-related benefits of the final rule to be $370 million to $610 million (2011$) in 2017 and the PM_2.5-related co-benefits of the rule to be $93 million to $210 million (2011$) using a 3 percent discount rate and $83 million to $190 million (2011$) using a 7 percent discount rate. Further, the EPA estimates CO₂-related co-benefits of $54 to $87 million (2011$). Additional details on this analysis are provided in the RIA for this final rule. Tables X.A-1, X.A-2, and X.A-3 summarize the quantified human health and climate benefits and the costs of the rule and the more and less stringent control alternatives.

The EPA combined this information to perform a benefit-cost analysis for this action (shown in table VIII.6 and for the more and less stringent alternatives—shown in the RIA in the docket for this rule).

There are additional important benefits that the EPA could not monetize. Due to current data and modeling limitations, the EPA's estimates of the co-benefits from reducing CO₂ emissions do not include important impacts like ocean acidification or potential tipping points in natural or managed ecosystems. Unquantified benefits also include co-benefits from reducing direct exposure to NO₂ as well as from reducing ecosystem effects and visibility impairment from reducing NO_X emissions. Based upon the foregoing discussion, it remains clear that the benefits of this action are substantial, and far exceed the costs. Additional details on benefits, costs, and net benefits estimates are provided in the RIA for this final rule.

B. Paperwork Reduction Act (PRA)

The information collection activities in this rule have been submitted for approval to the OMB under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq. The Information Collection Request (ICR) document that the EPA prepared has been assigned EPA ICR number 2391.05. You can find a copy of the ICR in the docket for this rule, and it is briefly summarized here. The information collection requirements are not enforceable until OMB approves them.

The information generated by information collection activities under CSAPR is used by the EPA to ensure that affected facilities comply with the emission limits and other requirements. Records and reports are necessary to enable the EPA or states to identify affected facilities that may not be in compliance with the requirements. The recordkeeping requirements require only the specific information needed to determine compliance. These recordkeeping and reporting requirements are established pursuant to CAA sections 110(a)(2)(D) and (c) and 301(a) (42 U.S.C. 7410(a)(2)(D) and (c) and 7601(a)) and are specifically authorized by CAA section 114 (42 U.S.C. 7414). Reported data may also be used for other regulatory and programmatic purposes. All information submitted to the EPA for which a claim of confidentiality is made will be safeguarded according to EPA policies in 40 CFR part 2, subpart B, Confidentiality of Business Information.

All of the EGUs that are subject to changed information collection requirements under this rule are already subject to information collection requirements under CSAPR. Most of these EGUs also are already subject to information collection requirements under the Acid Rain Program (ARP) established under Title IV of the 1990 Clean Air Act Amendments. Both CSAPR and the ARP have existing approved ICRs: EPA ICR Number 2391.03/OMB Control Number 2060-0667 (CSAPR) and EPA ICR Number 1633.16/OMB Control Number 2060-0258 (ARP). The burden and costs of the information collection requirements covered under the CSAPR ICR are estimated as incremental to the information collection requirements covered under the ARP ICR. Most of the information used to estimate burden and costs in this ICR was developed for the existing CSAPR and ARP ICRs.

This rule changes the universe of sources subject to certain information collection requirements under CSAPR but does not change the substance of any CSAPR information collection requirements. The burden and costs associated with the changes in the reporting universe are estimated as reductions from the burden and costs under the existing CSAPR ICR. (This rule does not change any source's information collection requirements with respect to the ARP.) The EPA intends to incorporate the burden and costs associated with the changes in the reporting universe under this rulemaking into the next renewal of the CSAPR ICR.

Respondents/affected entities: Entities potentially affected by this action are EGUs in the states of Florida, Kansas, North Carolina, and South Carolina that meet the applicability criteria for the CSAPR NO_X ozone season Group 1 and Group 2 trading programs in 40 CFR 97.504 and 97.804.

Respondent's obligation to respond: Mandatory (sections 110(a), 110(c), and 301(a) of the Clean Air Act).

Estimated number of respondents: 138 sources in Florida, Kansas, North Carolina, and South Carolina with one or more EGUs.

Frequency of response: Quarterly, occasionally.

Total estimated burden: Reduction of 12,879 hours (per year). Burden is defined at 5 CFR 1320.3(b).

Total estimated cost: Reduction of $1,347,291 (per year), includes reduction of $409,786 operation and maintenance costs.

The burden and cost estimates above reflect the reduction in burden and cost for Florida sources with EGUs that would no longer be required to report NO_X mass emissions and heat input data for the ozone season to the EPA under the rule and that are not subject to similar information collection requirements under the Acid Rain Program. Because these EGUs would no longer need to collect NO_X emissions or heat input data under 40 CFR part 75, the estimates above also reflect the reduction in burden and cost to collect and quality assure these data and to maintain the associated monitoring equipment.

The EPA estimates that the rule causes no change in information collection burden or cost for EGUs in Kansas that would be required to report NO_X mass emissions and heat input data for the ozone season to the EPA or for EGUs in North Carolina or South Carolina that would no longer be required to report NO_X emissions and heat input data for the ozone season to the EPA. The EGUs in Kansas, North Carolina, and South Carolina already are and would remain subject to requirements to report NO_X mass emissions and heat input data for the entire year to the EPA under the CSAPR NO_X Annual Trading Program, and the requirements related to ozone season reporting are a subset of the requirements related to annual reporting. Similarly, the EPA estimates that the rule causes no change in information collection burden or cost for EGUs in Florida that are subject to the Acid Rain Program because of the close similarity between the information collection requirements under CSAPR and under the Acid Rain Program. The EPA also estimates that the rule causes no change in information collection burden or cost for EGUs in the states have been covered by the current CSAPR NO_X Ozone Season Group 1 Trading Program and starting in 2017 will be covered by the new CSAPR NO_X Ozone Season Group 2 Trading Program because the information collection requirements applicable to an individual source under the two programs are identical.

The comments received in response to the proposal included no comments regarding the ICR for this final rule, but did include one comment regarding the existing CSAPR ICR. The comment noted that the existing CSAPR ICR should have been renewed in order to remain valid past July 31, 2014, but that OMB had not acted on the EPA's renewal submission as of that date. The commenter is correct as to those facts, but the commenter's apparent suggestion that the existing CSAPR ICR may have lapsed as of that date is incorrect. The EPA made a timely renewal submission for that ICR, and an agency may continue to collect information pursuant to a previously approved ICR if a timely renewal submission for the ICR has been made, pending OMB action on the submission. 5 CFR 1320.10(e)(2). Further, prior to the date when the comment was submitted, OMB did in fact approve the EPA's renewal submission for the CSAPR ICR.

More information on the ICR analysis is included in the docket for this rule.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for the EPA's regulations in 40 CFR are listed in 40 CFR part 9. When OMB approves this ICR, the Agency will announce that approval in the Federal Register and publish a technical amendment to 40 CFR part 9 to display the OMB control number for the approved information collection activities contained in this final rule.

C. Regulatory Flexibility Act (RFA)

I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. The small entities subject to the requirements of this action are small businesses, small organizations, and small governmental jurisdictions.

The EPA has lessened the impacts for small entities by excluding all units 25 MWe or less. This exclusion, in addition to the exemptions for cogeneration units and solid waste incineration units, eliminates the burden of higher costs for a substantial number of small entities located in the 22 states for which the EPA is finalizing FIPs.

Within these states, the EPA identified a total of 365 potentially affected EGUs (i.e., greater than 25 MWe) warranting examination in its RFA analysis. Of these, the EPA identified 30 potentially affected EGUs that are owned by 11 entities that met the Small Business Administration's criteria for identifying small entities. The EPA estimated the annualized net compliance cost to these 11 small entities to be approximately $23.9 million in 2017. Of the 11 small entities considered in this analysis, 1 entity may experience compliance costs greater than 1 or 3 percent of generation revenues in 2017. The EPA notes that this entity is located in a cost of service market, where the agency typically expects that entities should be able to recover all of their costs of complying with the final rule.

The EPA has concluded that there is no significant economic impact on a substantial number of small entities (no SISNOSE) for this rule. Details of this analysis are presented in the RIA, which is in the public docket.

D. Unfunded Mandates Reform Act (UMRA)

This action does not contain an unfunded mandate of $100 million or more as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. The EPA has determined that this rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. According to the EPA's analysis, the total net economic impact on government owned entities (state- and municipality-owned utilities and subdivisions) is expected to be $20.5 million in 2017. Note that the EPA expects the rule to potentially have an impact on 11 municipality-owned entities and 1 state-owned entity. This analysis does not examine potential indirect economic impacts associated with the rule, such as employment effects in industries providing fuel and pollution control equipment, or the potential effects of electricity price increases on government entities. For more information on the estimated impact on government entities, refer to the RIA, which is in the public docket.

E. Executive Order 13132: Federalism

This action does not have federalism implications. It will 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.

F. Executive Order 13175: Consultation and Coordination With Indian Tribal Governments

This action has tribal implications. However, it will neither impose substantial direct compliance costs on federally recognized tribal governments, nor preempt tribal law.

This final action implements EGU NO_X ozone season emissions reductions in 22 eastern states. However, at this time, none of the existing or planned EGUs affected by this rule are owned by tribes or located in Indian country. This action may have tribal implications if a new affected EGU is built in Indian country. Additionally, tribes have a vested interest in how this rule affects air quality.

In developing the original CSAPR, which was published on August 8, 2011 to address interstate transport of ozone pollution under the 1997 ozone NAAQS, the EPA consulted with tribal officials under the EPA Policy on Consultation and Coordination with Indian Tribes early in the process of developing that regulation to permit them to have meaningful and timely input into its development. A summary of that consultation is provided in 76 FR 48346 (August 8, 2011).

The EPA received comments from several tribal commenters regarding the availability of CSAPR allowance allocations to new units in Indian country. The EPA responded to these comments by instituting Indian country new unit set-asides in the final CSAPR. In order to protect tribal sovereignty, these set-asides are managed and distributed by the federal government regardless of whether CSAPR in the adjoining or surrounding state is implemented through a FIP or SIP. While there are no existing affected EGUs in Indian country covered by the CSAPR Update, the Indian country set-asides will ensure that any future new units built in Indian country will be able to obtain the necessary allowances. The CSAPR Update maintains the Indian country new unit set-aside and adjusts the amounts of allowances in each set-aside according to the same methodology of the original CSAPR rule, with one small correction.

The EPA consulted with tribal officials under the EPA Policy on Consultation and Coordination with Indian Tribes early in the process of developing this regulation to permit them to have meaningful and timely input into its development. The EPA informed tribes of its development of this rule on a regularly scheduled National Tribal Air Association—EPA air policy monthly conference call (January 29, 2015) and gave an overview of the proposed rule on a separate call (November 17, 2015). In December 2015, the EPA offered consultation to tribal officials under the EPA Policy on Consultation and Coordination with Indian Tribes to permit them to have meaningful and timely input into the development of the final rule. The EPA sent letters to all 566 federally-recognized tribes informing them of this action, offering consultation and requesting comment on this rulemaking. Letters were also sent via email to tribal air staff. The EPA received no requests for consultation on this rule.

As part of the public comment process, we received one letter from the National Tribal Air Association (NTAA) that highlighted the need for an Indian country new unit set aside for the Poarch Band of Creek Indians in Alabama. EPA made this adjustment in the final rule and addressed the NTAA's other comments in the Response to Comments document, available in the docket, for this final action.

In order to help tribes to better understand this final action and how it could affect their communities, the EPA is providing an interactive map of affected sources and Indian country. This map will be available online. The EPA will continue to engage with tribes as part of the outreach strategy for this final rule.

G. Executive Order 13045: Protection of Children From Environmental Health Risks and Safety Risks

The EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the Order has the potential to influence the regulation. This action is not subject to Executive Order 13045 because it does not involve decisions on environmental health or safety risks that may disproportionately affect children. However, the EPA believes that the ozone-related benefits, PM_2.5-related co-benefits, and CO₂-related co-benefits would further improve children's health.

H. Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution or Use

This action, which is a significant regulatory action under Executive Order 12866, is likely to have a significant effect on the supply, distribution, or use of energy. The EPA noted in the proposal that one aspect of this rule that could affect energy supply, disposition, or use was the EPA's proposing and taking comment on a range of options with respect to use of 2015 vintage and 2016 vintage CSAPR NO_X ozone season allowances for compliance with 2017 and later ozone season requirements. The EPA did not finalize actions that could have eliminated the allowance bank but is converting the 2015 and 2016 vintage CSAPR allowances to a currency that can be used for compliance in 2017 and beyond. The EPA prepared a Statement of Energy Effects for the regulatory control alternative as follows: The agency estimates no change in retail electricity prices on average across the contiguous U.S. in 2017 as a result of this rule, and a much less than 1 percent reduction in coal-fired electricity generation in 2017 as a result of this rule. The EPA projects that utility power sector delivered natural gas prices will change by less than 1 percent in 2017. For more information on the estimated energy effects, refer to the RIA, which is in the public docket.

I. National Technology Transfer and Advancement Act (NTTAA)

This rulemaking does not involve technical standards.

J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and Low-Income Populations

The EPA believes that this action does not have disproportionately high and adverse human health or environmental effects on minority populations, low-income populations and/or indigenous peoples, as specified in Executive Order 12898 (59 FR 7629, February 16, 1994).

The EPA notes that this action updates CSAPR to reduce interstate ozone transport with respect to the 2008 ozone NAAQS. This rule uses the EPA's authority in CAA section 110(a)(2)(d) to reduce NO_X pollution that significantly contributes to downwind ozone nonattainment or maintenance areas. As a result, the rule will reduce exposures to ozone in the most-contaminated areas (i.e., areas that are not meeting the 2008 ozone NAAQS). In addition, the rule separately identifies both nonattainment areas and maintenance areas. This requirement reduces the likelihood that areas close to the level of the standard will exceed the current health-based standards in the future. The EPA implements these emission reductions using the CSAPR EGU NO_X ozone season emissions trading program with assurance provisions.

The EPA recognizes that some communities have voiced concerns in the past about emission trading and the potential for emission increases in any location from an environmental justice perspective. The EPA believes that CSAPR mitigated these concerns and that this final rule, which applies the CSAPR framework to reduce interstate ozone pollution and implement these reductions, will also alleviate community concerns.

Ozone pollution from power plants has both local and regional components: part of the pollution in a given location—even in locations near emission sources—is due to emissions from nearby sources, and part is due to emissions that travel hundreds of miles and mix with emissions from other sources.

It is important to note that the section of the Clean Air Act providing authority for this rule, section 110(a)(2)(D), unlike some other provisions, does not dictate levels of control for particular facilities. In developing the original CSAPR, the EPA considered several alternative implementation approaches, and found that none of the approaches could ensure that all affected power plants would decrease their emissions. For example, under an alternative approach that required direct emission controls on individual facilities, the emission rate for each facility would have been limited but individual facilities could emit more pollution overall by increasing their power output.

CSAPR allows sources to trade allowances with other sources in the same or different states while firmly limiting any emissions shifting that may occur by requiring a strict emission ceiling in each state (the assurance level). In addition, assurance provisions in the existing CSAPR regulations that will remain in place under this rule outline the allowance surrender penalties for failing to meet the assurance level; there are additional allowance penalties as well as financial penalties for failing to hold an adequate number of allowances to cover emissions.

This approach reduces EGU emissions in each state that significantly contribute to downwind nonattainment or maintenance areas, while allowing power companies to adjust generation as needed and ensure that the country's electricity needs will continue to be met. The EPA maintains that the existence of these assurance provisions, including the penalties imposed when triggered, will ensure that state emissions will stay below the level of the budget plus variability limit.

In addition, all sources must hold enough allowances to cover their emissions. Therefore, if a source emits more than its allocation in a given year, either another source must have used less than its allocation and be willing to sell some of its excess allowances, or the source itself had emitted less than its allocation in one or more previous years (i.e., banked, or saved, allowances for future use).

In summary, the CSAPR addresses community concerns about localized hot spots and reduces ambient concentrations of pollution where they are most needed by sensitive and vulnerable populations by: Considering the science of ozone transport to set strict state emission budgets to reduce significant contributions to ozone nonattainment and maintenance (i.e., the most polluted) areas; implementing air quality-assured trading; requiring any emissions above the level of the allocations to be offset by emission decreases; and imposing strict penalties for sources that contribute to a state's exceedance of its budget plus variability limit. In addition, it is important to note that nothing in this final rule allows sources to violate their title V permit or any other federal, state, or local emissions or air quality requirements.

It is also important to note that CAA section 110(a)(2)(D), which addresses transport of criteria pollutants between states, is only one of many provisions of the CAA that provide the EPA, states, and local governments with authorities to reduce exposure to ozone in communities. These legal authorities work together to reduce exposure to these pollutants in communities, including for minority, low-income, and tribal populations, and provide substantial health benefits to both the general public and sensitive sub-populations.

The EPA informed communities of its development of this rule on an Environmental Justice community call (January 28, 2015) and two National Tribal Air Association—EPA air policy conference calls (January 29, 2015 and November 17, 2015). The EPA will continue to engage with communities and tribes as part of the outreach strategy for this final rule.

K. Congressional Review Act (CRA)

This action is subject to the CRA, and the EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is a “major rule” as defined by 5 U.S.C. 804(2).

L. Judicial Review and Determinations Under Section 307(b)(1) and (d)

Section 307(b)(1) of the CAA indicates which Federal Courts of Appeal have venue for petitions of review of final actions by the EPA. This section provides, in part, that petitions for review must be filed in the Court of Appeals for the District of Columbia Circuit if (i) the agency action consists of “nationally applicable regulations promulgated, or final action taken, by the Administrator,” or (ii) such action is locally or regionally applicable, if “such action is based on a determination of nationwide scope or effect and if in taking such action the Administrator finds and publishes that such action is based on such a determination.”

The EPA finds that any final action related to this rulemaking is “nationally applicable” and of “nationwide scope and effect” within the meaning of section 307(b)(1). Through this rulemaking action, the EPA interprets section 110 of the CAA, a provision which has nationwide applicability. In addition, the rule applies to 22 States. The rule is also based on a common core of factual findings and analyses concerning the transport of pollutants between the different states subject to it. For these reasons, the Administrator determines that this final action is of nationwide scope and effect for purposes of section 307(b)(1). Thus, pursuant to section 307(b) any petitions for review of any final actions regarding the rulemaking would be filed in the Court of Appeals for the District of Columbia Circuit within 60 days from the date any final action is published in the Federal Register.

In addition, pursuant to sections 307(d)(1)(C) and 307(d)(1)(V) of the CAA, the Administrator determines that this action is subject to the provisions of section 307(d). CAA section 307(d)(1)(B) provides that section 307(d) applies to, among other things, to “the promulgation or revision of an implementation plan by the Administrator under CAA section 110(c).” 42 U.S.C. 7407(d)(1)(B). Under section 307(d)(1)(V), the provisions of section 307(d) also apply to “such other actions as the Administrator may determine.” 42 U.S.C. 7407(d)(1)(V). The agency has complied with procedural requirements of CAA section 307(d) during the course of this rulemaking.

List of Subjects

40 CFR Part 52

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

40 CFR Part 78

• Environmental protection
• Acid rain
• Administrative practice and procedure
• Air pollution control
• Electric utilities
• Nitrogen oxides
• Reporting and recordkeeping requirements
• Sulfur oxides

40 CFR Part 97

• Environmental protection
• Administrative practice and procedure
• Air pollution control
• Intergovernmental relations
• Nitrogen oxides
• Ozone
• Reporting and recordkeeping requirements

For the reasons stated in the preamble, parts 52, 78, and 97 of chapter I of title 40 of the Code of Federal Regulations are amended as follows:

PART 52—APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

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

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

2. Sections 52.38, 52.39, 52.54, 52.55, 52.584, 52.585, 52.731, 52.732, 52.789, 52.790, 52.840, 52.841, 52.882, 52.883, 52.940, 52.941, 52.1084, 52.1085, 52.1186, 52.1187, 52.1240, 52.1241, 52.1326, 52.1327, 52.1428, 52.1429, 52.1584, 52.1585, 52.1684, 52.1685, 52.1784, 52.1785, 52.1882, 52.1883, 52.2040, 52.2041, 52.2140, 52.2141, 52.2240, 52.2241, 52.2283, 52.2284, 52.2440, 52.2441, 52.2540, 52.2541, 52.2587, and 52.2588 are amended by removing the text “TR” wherever it appears and adding in its place the text “CSAPR”.

Subpart A—General Provisions

3. Section 52.36, paragraph (e)(1)(i) is amended by removing the text “paragraphs (a) through (e)” and adding in its place the text “paragraphs (a) through (c)”.

4. Section 52.38 is amended by:

a. Revising the section heading;

b. After the text “NO _X Ozone Season” wherever it appears adding the text “Group 1”;

c. In paragraph (a)(2), removing the words “the sources in” and adding in their place the words “sources in each of”;

d. In paragraph (a)(3)(ii), after the text “2016, of” adding the word “the”;

e. In paragraph (a)(3)(v)(A), removing the word “paragraph” and adding in its place the word “paragraphs”;

f. In paragraph (a)(4)(i)(B), table heading, removing the word “annual” and adding in its place the word “Annual”, and removing the word “administrator” and adding in its place the words “the Administrator”;

g. In paragraph (a)(4)(ii), removing the words “section for” and adding in their place the words “section applicable to”;

h. Revising paragraph (a)(5) introductory text;

i. In paragraph (a)(5)(i)(B), table heading, removing the word “annual” and adding in its place the word “Annual”, and removing the word “administrator” and adding in its place the words “the Administrator”;

j. Revising paragraphs (a)(5)(iv) and (v);

k. In paragraph (a)(5)(vi), removing the text “paragraphs (a)(5)(i) and (ii)” and adding in its place the text “paragraph (a)(5)(i)”;

l. Revising paragraph (a)(6);

m. In paragraph (a)(7), removing the words “a State” and adding in their place the words “the State”;

n. Adding paragraph (a)(8);

o. Revising paragraphs (b)(1) and (2);

p. In paragraph (b)(3) introductory text, removing the text “paragraph (b)(2)” and adding in its place the text “paragraph (b)(2)(i) or (ii)”;

q. In paragraph (b)(3)(ii), after the text “2016, of” adding the word “the”;

r. In paragraph (b)(3)(v)(A), removing the word “paragraph” and adding in its place the word “paragraphs”;

s. In paragraph (b)(4) introductory text, removing the text “paragraph (b)(2)” and adding in its place the text “paragraph (b)(2)(i)”;

t. Revising paragraph (b)(4)(i);

u. In paragraph (b)(4)(ii) introductory text, after the words “with regard to” adding the words “the State and”;

v. In paragraph (b)(4)(ii)(B), table heading, removing the word “administrator” and adding in its place the words “the Administrator”;

w. Revising paragraph (b)(5) introductory text, paragraph (b)(5)(i), and paragraph (b)(5)(ii) introductory text;

x. In paragraph (b)(5)(ii)(B), removing the words “auction of” and adding in their place the words “auctions of”, and removing from the table heading the word “administrator” and adding in its place the words “the Administrator”;

y. In paragraph (b)(5)(ii)(C), removing the words “any control” and adding in their place the words “any such control”;

z. In paragraph (b)(5)(iii), after the words “May adopt” adding a comma;

aa. Revising paragraphs (b)(5)(v) through (vii), and (b)(6) and (7); and

bb. Adding paragraphs (b)(8) through (13).

The revisions and additions read as follows:

5. Section 52.39 is amended by:

a. Revising the section heading;

b. In paragraph (d)(2), after the text “2016, of” adding the word “the”;

c. In paragraph (d)(5)(i), removing the word “paragraph” and adding in its place the word “paragraphs”;

d. In paragraph (e)(1) introductory text, after the words “with regard to” adding the words “the State and”;

e. In paragraph (e)(1)(ii), removing the words “auction of” and adding in their place the words “auctions of”, and removing from the table heading the word “administrator” and adding in its place the words “the Administrator”;

f. Revising paragraph (f) introductory text;

g. In paragraph (f)(1) introductory text, removing the text “control period in 2017 and” and adding in its place the text “State and the control period in 2017 or”;

h. In paragraph (f)(1)(i), removing the words “for such” and adding in their place the words “for any such”;

i. In paragraph (f)(1)(ii), removing the words “auction of” and adding in their place the words “auctions of”, and removing from the table heading the word “administrator” and adding in its place the words “the Administrator”;

j. In paragraph (f)(1)(iv), removing the text “paragraphs (f)(2)(ii) and (iii)” and adding in its place the text “paragraphs (f)(1)(ii) and (iii)”;

k. Revising paragraphs (f)(4) and (5);

l. In paragraph (f)(6), removing the text “hold an auction under paragraph (f)(1)(ii) and (iii)” and adding in its place the text “hold an auction under paragraph (f)(1)”;

m. In paragraph (g) introductory text, after the words “with regard to” adding the words “the State and”;

n. In paragraph (g)(2), after the text “2016, of” adding the word “the”;

o. In paragraph (g)(5)(i), removing the word “paragraph” and adding in its place the word “paragraphs”;

p. In paragraph (h)(1) introductory text, removing the text “control period in 2017 and” and adding in its place the text “State and the control period in 2017 or”;

q. In paragraph (h)(1)(ii), removing the words “auction of” and adding in their place the words “auctions of”, and removing from the table heading the word “administrator” and adding in its place the words “the Administrator”;

r. In paragraph (h)(2), removing the text “hold an auction under paragraph (h)(1)(ii) and (iii)” and adding in its place the text “hold an auction under paragraph (h)(1)”;

s. Revising paragraph (i) introductory text;

t. In paragraph (i)(1) introductory text, removing the text “control period in 2017 and” and adding in its place the text “State and the control period in 2017 or”;

u. In paragraph (i)(1)(ii), removing the words “auction of” and adding in their place the words “auctions of”, and removing from the table heading the word “administrator” and adding in its place the words “the Administrator”;

v. Revising paragraphs (i)(4) and (5);

w. In paragraph (i)(6), removing the text “hold an auction under paragraphs (i)(1)(ii) and (iii)” and adding in its place the text “hold an auction under paragraph (i)(1)”;

x. Revising paragraph (j);

y. In paragraph (k), removing the words “a State” and adding in their place the words “the State”; and

z. Adding paragraphs (l) and (m).

The revisions and additions read as follows:

Subpart B—Alabama

6. Section 52.54 is amended by:

a. Revising paragraph (a)(1);

b. Removing paragraph (a)(3); and

c. Revising paragraph (b).

The revisions read as follows:

7. Section 52.55 is amended by:

a. Revising paragraph (a); and

b. Removing paragraph (c).

The revisions read as follows:

Subpart E—Arkansas

8. Section 52.184 is revised to read as follows:

Subpart K—Florida

9. Section 52.540 is amended by:

a. Revising paragraph (a); and

b. Removing and reserving paragraph (b).

The revisions read as follows:

Subpart L—Georgia

10. Section 52.584 is amended by:

a. In paragraph (b)(1), removing the words “Ozone Season” and adding in their place the text “Ozone Season Group 1”; and

b. In paragraph (b)(2), removing the words “Ozone Season” two times and adding in their place the text “Ozone Season Group 1”.

Subpart O—Illinois

11. Section 52.731 is amended by revising paragraph (b) to read as follows:

Subpart P—Indiana

12. Section 52.789 is amended by revising paragraph (b) to read as follows:

Subpart Q—Iowa

13. Section 52.840 is amended by:

a. In paragraph (a)(1), removing the words “in part”, and after the text “§ 52.38(a)” adding the words “for those sources and units”; and

b. Revising paragraph (b).

The revisions read as follows:

14. Section 52.841, paragraph (a) is amended by removing the words “in part”, and after the text “§ 52.39” adding the words “for those sources and units”.

Subpart R—Kansas

15. Section 52.882 is amended by:

a. In paragraph (a)(1), removing the words “in part”, and after the text “§ 52.38(a)” adding the words “for those sources and units”;

b. Removing paragraph (a)(3); and

c. Adding paragraph (b).

The additions read as follows:

16. Section 52.883, paragraph (a) is amended by removing the words “in part”, and after the text “§ 52.39” adding the words “for those sources and units”.

Subpart S—Kentucky

17. Section 52.940 is amended by revising paragraph (b) to read as follows:

Subpart T—Louisiana

18. Section 52.984 is amended by revising paragraph (d) to read as follows:

Subpart V—Maryland

19. Section 52.1084 is amended by revising paragraph (b) to read as follows:

Subpart X—Michigan

20. Section 52.1186 is amended by:

a. In paragraph (d)(1), removing the words “in part”, and after the text “§ 52.38(a)” adding the words “for those sources and units”; and

b. Revising paragraph (e).

The revisions read as follows:

21. Section 52.1187 is amended by:

a. In paragraph (c)(1), removing the words “in part”, and after the text “§ 52.39” adding the words “for those sources and units”; and

b. In paragraph (c)(2), removing the word “Maryland's” and adding in its place the word “Michigan's”.

Subpart Y—Minnesota

22. Section 52.1240, paragraph (c)(1) is amended by removing the words “in part”, and after the text “§ 52.38(a)” adding the words “for those sources and units”.

23. Section 52.1241, paragraph (c)(1) is amended by removing the words “in part”, and after the text “§ 52.39” adding the words “for those sources and units”.

Subpart Z—Mississippi

24. Section 52.1284 is revised to read as follows:

Subpart AA—Missouri

25. Section 52.1326 is amended by:

a. Removing paragraph (a)(3); and

b. Revising paragraph (b).

The revisions read as follows:

Subpart CC—Nebraska

26. Section 52.1428 is amended by:

a. In paragraph (a), removing the words “in part”, and after the text “§ 52.38(a)” adding the words “for those sources and units”; and

b. Removing paragraph (c).

27. Section 52.1429 is amended by:

a. In paragraph (a), removing the words “in part”, and after the text “§ 52.39” adding the words “for those sources and units”; and

b. Removing paragraph (c).

Subpart FF—New Jersey

28. Section 52.1584 is amended by revising paragraph (e) to read as follows:

Subpart HH—New York

29. Section 52.1684 is amended by:

a. In paragraph (a)(1), removing the words “in part”, and after the text “§ 52.38(a)” adding the words “for those sources and units”; and

b. Revising paragraph (b).

The revisions read as follows:

30. Section 52.1685, paragraph (a) is amended by removing the words “in part”, and after the text “§ 52.39” adding the words “for those sources and units”.

Subpart II—North Carolina

31. Section 52.1784 is amended by:

a. In paragraph (a)(1), removing the words “in part”, and after the text “§ 52.38(a)” adding the words “for those sources and units”;

b. Revising paragraph (b)(1); and

c. Removing and reserving paragraph (b)(2).

The revisions read as follows:

32. Section 52.1785, paragraph (a) is amended by removing the words “in part”, and after the text “§ 52.39” adding the words “for those sources and units”.

Subpart KK—Ohio

33. Section 52.1882 is amended by revising paragraph (b) to read as follows:

Subpart LL—Oklahoma

34. Section 52.1930 is revised to read as follows:

Subpart NN—Pennsylvania

35. Section 52.2040 is amended by revising paragraph (b) to read as follows:

Subpart PP—South Carolina

36. Section 52.2140 is amended by:

a. In paragraph (a)(1), removing the words “in part”, and after the text “§ 52.38(a)” adding the words “for those sources and units”;

b. Revising paragraph (b)(1); and

c. Removing and reserving paragraph (b)(2).

The revisions read as follows:

37. Section 52.2141, paragraph (a) is amended by removing the words “in part”, and after the text “§ 52.39” adding the words “for those sources and units”.

Subpart RR—Tennessee

38. Section 52.2240 is amended by:

a. In paragraph (d)(1), removing the last sentence; and

b. Revising paragraph (e).

The revisions read as follows:

39. Section 52.2241, paragraph (c)(1) is amended by removing the last sentence.

Subpart SS—Texas

40. Section 52.2283 is amended by:

a. In paragraph (c)(1), removing the words “in part”, and after the text “§ 52.38(a)” adding the words “for those sources and units”; and

b. Revising paragraph (d).

The revisions read as follows:

41. Section 52.2284, paragraph (c)(1) is amended by removing the words “in part”, and after the text “§ 52.39” adding the words “for those sources and units”.

Subpart VV—Virginia

42. Section 52.2440 is amended by revising paragraph (b) to read as follows:

Subpart XX—West Virginia

43. Section 52.2540 is amended by revising paragraph (b) to read as follows:

Subpart YY—Wisconsin

44. Section 52.2587 is amended by:

a. In paragraph (d)(1), removing the words “in part”, and after the text “§ 52.38(a)” adding the words “for those sources and units”; and

b. Revising paragraph (e).

The revisions read as follows:

45. Section 52.2588, paragraph (c)(1) is amended by removing the words “in part”, and after the text “§ 52.39” adding the words “for those sources and units”.

PART 78—APPEAL PROCEDURES

46. The authority citation for part 78 continues to read as follows:

Authority: 42 U.S.C. 7401, 7403, 7410, 7411, 7426, 7601, and 7651, et seq.

47. Section 78.1 is amended by:

a. Removing the text “TR” wherever it appears and adding in its place the text “CSAPR”;

b. Revising paragraphs (a)(1) and (b)(2)(iv) and (v);

c. In paragraph (b)(3)(iii), after the semicolon adding the word “and”;

d. In paragraph (b)(3)(iv), removing the semicolon and adding in its place a period;

e. Revising paragraph (b)(6) introductory text;

f. In paragraph (b)(9)(iv), after the text “§ 96.361” adding the words “of this chapter”;

g. In paragraph (b)(12)(iv), after the text “§ 97.361” adding the words “of this chapter”;

h. In paragraph (b)(13)(i), after the words “decision on” adding the word “the”;

i. Revising paragraph (b)(14)(i);

j. In paragraphs (b)(14)(ii), (iii) and (v), after the words “Ozone Season” adding the text “Group 1”;

k. Adding paragraph (b)(14)(viii);

l. In paragraphs (b)(15)(i) and (b)(16)(i), after the words “decision on” adding the word “the”;

m. In paragraphs (b)(16)(ii), (iii), and (v), removing the text “Group 1” and adding in its place the text “Group 2”; and

n. Redesignating paragraph (b)(17) as paragraph (b)(18) and adding a new paragraph (b)(17).

The revisions and additions read as follows:

48. Section 78.3 is amended by:

a. In paragraph (a)(1) introductory text, removing the words “of this part”;

b. Revising paragraph (a)(3) introductory text;

c. In paragraph (a)(8) introductory text and paragraph (a)(9) introductory text, after the text “part 97” adding the words “of this chapter”;

d. Revising paragraph (a)(10) introductory text and paragraph (a)(11) introductory text;

e. In paragraph (b)(1), removing the words “of this part” two times; and

f. Revising paragraphs (b)(3)(i), (c)(7), and (d).

The revisions read as follows:

49. Section 78.4 is amended by:

a. Revising paragraph (a)(1)(i);

b. In paragraph (a)(1)(ii), removing the word “filing” and adding in its place the word “filings”;

c. Revising paragraph (a)(1)(iii); and

d. In paragraphs (d), (e)(1), and (g), removing the words “of this part”.

The revisions read as follows:

PART 97—FEDERAL NO_X BUDGET TRADING PROGRAM, CAIR NO_X AND SO₂ TRADING PROGRAMS, AND CSAPR NO_X AND SO₂ TRADING PROGRAMS

50. The authority citation for part 97 continues to read as follows:

Authority: 42 U.S.C. 7401, 7403, 7410, 7426, 7601, and 7651, et seq.

51. The heading of part 97 is revised to read as set forth above.

Subpart E—NO_X Allowance Allocations

52. Section 97.40 is amended by removing the text “appendix C of this part” and adding in its place the text “appendix C to this subpart”.

53. Section 97.41, paragraph (a) is amended by removing the text “appendices A and B of this part” and adding in its place the text “appendices A and B to this subpart”.

54. Section 97.43 is amended by:

a. In paragraph (c)(3), removing the text “appendix D of this part” and adding in its place the text “appendix D to this subpart”; and

b. In paragraph (c)(4), removing the text “appendix D of this part” two times and adding in its place the text “appendix D to this subpart”.

Subpart AAAAA—CSAPR NO_X Annual Trading Program

55. The heading of subpart AAAAA of part 97 is revised to read as set forth above.

56. Section 97.401 is amended by removing the text “Transport Rule (TR) NO _X Annual Trading Program” and adding in its place the text “Cross-State Air Pollution Rule (CSAPR) NO_X Annual Trading Program”.

57. Sections 97.402 through 97.435 are amended by removing the text “TR” wherever it appears and adding in its place the text “CSAPR”.

58. Section 97.402 is amended by:

a. Revising the introductory text and the definitions “Allowable NO _X emission rate” and “Allowance Management System”;

b. In the definition “Allowance Management System account”, removing the word “holding” and adding in its place the text “auction, holding”;

c. Revising the definition “Alternate designated representative”;

d. Adding in alphabetical order the definition “Auction”;

e. In the definition “Cogeneration system”, removing the words “steam turbine”;

f. In the definition “Commence commercial operation”, paragraph (2) introductory text, after the words “defined in” adding the word “the”;

g. In the definition “Common designated representative's share”, paragraph (2), removing the words “and of the total” and adding in their place the words “and the total”;

h. Placing the newly amended definitions “CSAPR NO _X Annual allowance”, “CSAPR NO_X Annual allowance deduction or deduct CSAPR NO_X Annual allowances”, “CSAPR NO_X Annual allowances held or hold CSAPR NO₄ Annual allowances”, “CSAPR NO_X Annual emissions limitation”, “CSAPR NO_X Annual source”, “CSAPR NO_X Annual Trading Program”, “CSAPR NO_X Annual unit”, “CSAPR NO_X Ozone Season Trading Program”, “CSAPR SO₂ Group 1 Trading Program”, and “CSAPR SO₂ Group 2 Trading Program” in alphabetical order in the section;

i. In the newly amended definition heading “CSAPR NO _X Annual allowances held or hold CSAPR NO₄ Annual allowances”, removing the text “NO₄” and adding in its place the text “NO_X”;

j. Removing the newly amended definition “CSAPR NO _X Ozone Season Trading Program”;

k. Adding in alphabetical order the definitions “CSAPR NO _X Ozone Season Group 1 Trading Program” and “CSAPR NO_X Ozone Season Group 2 Trading Program”;

l. Revising the newly amended definitions “CSAPR SO ₂ Group 1 Trading Program” and “CSAPR SO₂ Group 2 Trading Program” and the definition “Designated representative”;

m. In the definition “Fossil fuel”, paragraph (2), removing the text “§§ ” and adding in its place the text “§ ”;

n. Removing the definition “Gross electrical output”;

o. Revising the definitions “Heat input”, “Heat input rate”, and “Heat rate”;

p. In the definition heading “Maximum design heat input”, after the words “heat input” adding the word “rate”;

q. Italicizing the words “Annual unit” in the newly amended definition heading “Newly affected CSAPR NO _X Annual unit”;

r. Revising the definition “Potential electrical output capacity”; and

s. In the definition “Sequential use of energy”, paragraph (2), after the word “from” adding the word “a”.

The revisions and additions read as follows:

59. Section 97.403 is amended by:

a. Adding in alphabetical order the list entry “CSAPR—Cross-State Air Pollution Rule”;

b. Removing the list entry “kW—kilowatt electrical”;

c. Removing the list entry “kWh—kilowatt hour” and adding in its place the entry “kWh—kilowatt-hour”;

d. Removing the list entry “MWh—megawatt hour” and adding in its place the entry “MWh—megawatt-hour”; and

e. Adding in alphabetical order the list entries “SIP—State implementation plan” and “TR—Transport Rule”.

60. Section 97.404 is amended by:

a. In paragraph (b)(1)(i)(B), removing the word “electric” and adding in its place the word “electrical”;

b. In paragraph (b)(2)(ii), removing the text “paragraph (b)(1)(i)” and adding in its place the text “paragraph (b)(2)(i)”; and

c. Italicizing the headings of paragraphs (c)(1) and (2).

61. Section 97.405, paragraph (b) is amended by italicizing the heading.

62. Section 97.406 is amended by:

a. Italicizing the headings of paragraphs (c)(1) and (2) and (c)(4) through (7);

b. In paragraph (c)(2)(ii), after the words “immediately after” adding the words “the year of”;

c. In paragraph (c)(4) heading, after the words “Vintage of” adding the text “CSAPR NO _X Annual”; and

d. In paragraphs (c)(4)(i) and (ii), after the word “allocated” adding the words “or auctioned”.

63. Section 97.410 is amended by:

a. Revising the section heading;

b. In paragraph (a) introductory text, removing the text “unit-set asides” and adding in its place the text “unit set-asides”;

c. In paragraphs (a)(1) through (23):

i. Removing the words “annual trading” wherever they appear and adding in their place the words “Annual trading”;

ii. Removing the text “NO_X annual new” wherever it appears and adding in its place the word “new”; and

iii. Removing the text “NO_X annual Indian” wherever it appears and adding in its place the word “Indian”;

d. Adding and reserving paragraphs (a)(11)(vi) and (a)(16)(vi);

e. In paragraphs (b)(1) through (23), removing the text “NO _X annual”; and

f. Revising paragraph (c).

The revisions read as follows:

64. Section 97.411 is amended by:

a. Revising the section heading;

b. Italicizing the headings of paragraphs (b)(1) and (2);

c. In paragraph (b)(1)(iii), after the text “November 30 of” adding the word “the”;

d. In paragraph (b)(1)(iv)(B), removing the words “the each” and adding in their place the word “each”;

e. In paragraph (b)(2)(iii), after the text “November 30 of” adding the word “the”;

f. In paragraph (b)(2)(iv)(B), removing the words “the each” and adding in their place the word “each”;

g. In paragraph (c)(1)(ii), removing the text “§ 52.38(a)(3), (4), or (5)” and adding in its place the text “§ 52.38(a)(4) or (5)”;

h. In paragraph (c)(5)(i)(B), after the text “§ 52.38(a)(4) or (5)” adding the words “of this chapter”;

i. In paragraph (c)(5)(ii) introductory text, removing the words “this paragraph” and adding in their place the words “this section”;

j. In paragraph (c)(5)(ii)(B), after the text “§ 52.38(a)(4) or (5)” adding the words “of this chapter”; and

k. In paragraph (c)(5)(iii), removing the words “this paragraph” and adding in their place the words “this section”.

The revision reads as follows:

65. Section 97.412 is amended by:

a. Revising the section heading;

b. In paragraph (a)(2), removing the text “§§ ” and adding in its place the text “§ ”;

c. In paragraph (a)(4)(i), removing the text “paragraph (a)(1)(i) through (iii)” and adding in its place the text “paragraphs (a)(1)(i) through (iii)”;

d. In paragraph (a)(4)(ii), after the text “paragraph (a)(4)(i)” adding the words “of this section”;

e. In paragraph (a)(9)(i), after the text “November 30 of” adding the word “the”;

f. In paragraph (b)(4)(ii), after the text “paragraph (b)(4)(i)” adding the words “of this section”;

g. In paragraph (b)(9)(i), after the text “November 30 of” adding the word “the”; and

h. In paragraph (b)(10)(ii), after the text “§ 52.38(a)(4) or (5)” adding the words “of this chapter”.

The revision reads as follows:

66. Section 97.416 is amended by:

a. In paragraph (a)(1), removing the word “Country” and adding in its place the word “country”; and

b. Adding paragraph (c).

The addition reads as follows:

67. Section 97.420 is amended by:

a. Italicizing the headings of paragraphs (c)(1) through (6);

b. Adding paragraph (c)(1)(iv);

c. In paragraph (c)(2)(i) introductory text, removing the text “paragraph (b)(1)” and adding in its place the text “paragraph (c)(1)”;

d. Adding paragraph (c)(2)(iv):

e. In paragraph (c)(4)(i), removing the text “paragraph (b)(1)” and adding in its place the text “paragraph (c)(1)”;

f. In paragraph (c)(5)(iii)(D), removing the words “authorized representative” and adding in their place the words “authorized account representative”; and

g. In paragraph (c)(5)(v), removing the word “designated” two times and adding in its place the words “authorized account”.

The additions read as follows:

68. Section 97.421 is amended by:

a. Revising the section heading;

b. In paragraphs (c), (d), and (e), removing the word “period” and adding in its place the word “periods”;

c. In paragraph (i), after the text “through (12)” removing the comma;

d. Revising paragraph (j); and

e. Redesignating paragraph (k) as paragraph (l) and adding a new paragraph (k).

The revisions and additions read as follows:

69. Section 97.422 is amended by revising the section heading to read as follows:

70. Section 97.423 is amended by:

a. Revising the section heading; and

b. In paragraph (b), after the word “allocated” adding the words “or auctioned”.

The revision reads as follows:

71. Section 97.424 is amended by:

a. Revising the section heading;

b. In paragraph (a)(1), after the word “allocated” adding the words “or auctioned”;

c. Revising paragraphs (c)(2)(i) and (ii); and

d. In paragraph (d), after the word “allocated” adding the words “or auctioned”.

The revisions read as follows:

72. Section 97.425 is amended by:

a. Revising the section heading;

b. In paragraph (a)(1), after the word “allocated” adding the words “or auctioned”;

c. In paragraph (b)(2)(iii) introductory text, removing the text “paragraph (b)(1)(i)” and adding in its place the text “paragraph (b)(1)(ii)”;

d. In paragraph (b)(2)(iii)(B), after the words “availability of” adding the words “the calculations incorporating”;

e. In paragraph (b)(4)(i), after the words “established for” removing the word “the”; and

f. In paragraph (b)(6)(iii)(B), after the word “appropriate” removing the word “at”.

The revision reads as follows:

73. Section 97.426, paragraph (b) is amended by removing the text “97.427, or 97.428” and adding in its place the text “§ 97.427, or § 97.428”.

74. Section 97.428, paragraph (b) is amended by removing the text “paragraph (a)(1)” and adding in its place the text “paragraph (a)”.

75. Section 97.430 is amended by:

a. Revising paragraph (b) introductory text and paragraphs (b)(1) and (2);

b. In paragraph (b)(3) introductory text, removing the text “§§ 75.4(e)(1) through (e)(4)” and adding in its place the text “§ 75.4(e)(1) through (4)”; and

c. In paragraph (b)(3)(iii), after the text “§ 75.66” adding the words “of this chapter”.

The revisions read as follows:

76. Section 97.431 is amended by:

a. Italicizing the headings of paragraphs (d)(1) through (3), (d)(3)(i) through (iv), (d)(3)(iv)(A) through (D), and (d)(3)(v); and

b. In paragraph (d)(3) introductory text, removing the text “§§ ” and adding in its place the text “§ ”.

77. Section 97.434 is amended by:

a. In paragraph (b), after the words “comply with” adding the word “the”; and

b. Revising paragraphs (d)(1) and (3).

The revisions read as follows:

78. Section 97.435 is amended by redesignating paragraphs (b)(i) through (v) as paragraphs (b)(1) through (5).

Subpart BBBBB—CSAPR NO_X Ozone Season Group 1 Trading Program

79. The heading of subpart BBBBB of part 97 is revised to read as set forth above.

80. Section 97.501 is amended by removing the text “Transport Rule (TR) NO _X Ozone Season Trading Program” and adding in its place the text “Cross-State Air Pollution Rule (CSAPR) NO_X Ozone Season Group 1 Trading Program”.

81. Sections 97.502 through 97.508 and 97.511 through 97.535 are amended by:

a. Removing the text “TR” wherever it appears and adding in its place the text “CSAPR”; and

b. After the words “Ozone Season” wherever they appear adding the text “Group 1”.

82. Section 97.502 is amended by:

a. Revising the introductory text and the definitions “Allowable NO _X emission rate” and “Allowance Management System”;

b. In the definition “Allowance Management System account”, removing the word “holding” and adding in its place the text “auction, holding”;

c. Revising the definition “Allowance transfer deadline”;

d. In the definition “Alternate designated representative”, after the words “the alternate designated representative” removing the comma;

e. Adding in alphabetical order the definition “Auction”;

f. In the definition “Cogeneration system”, removing the words “steam turbine”;

g. In the definition “Commence commercial operation”, paragraph (2) introductory text, after the words “defined in” adding the word “the”;

h. In the definition “Common designated representative's share”, paragraph (2), removing the words “and of the total” and adding in their place the words “and the total”;

i. Placing the newly amended definitions “CSAPR NO _X Annual Trading Program”, “CSAPR NO_X Ozone Season allowance”, “CSAPR NO_X Ozone Season allowance deduction or deduct CSAPR NO_X Ozone Season allowances”, “CSAPR NO_X Ozone Season allowances held or hold CSAPR NO_X Ozone Season allowances”, “CSAPR NO_X Ozone Season emissions limitation”, “CSAPR NO_X Ozone Season source”, “CSAPR NO_X Ozone Season Trading Program”, “CSAPR NO_X Ozone Season unit”, “CSAPR SO₂ Group 1 Trading Program”, and “CSAPR SO₂ Group 2 Trading Program” in alphabetical order in the section;

j. Revising the newly amended definition “CSAPR NO _X Ozone Season Group 1 Trading Program”;

k. Adding in alphabetical order the definitions “CSAPR NO _X Ozone Season Group 2 allowance” and “CSAPR NO_X Ozone Season Group 2 Trading Program”;

l. Revising the newly amended definitions “CSAPR SO ₂ Group 1 Trading Program” and “CSAPR SO₂ Group 2 Trading Program”;

m. In the definition “Designated representative”, after the words “the designated representative” removing the comma;

n. In the definition “Fossil fuel”, paragraph (2), removing the text “§§ ” and adding in its place the text “§ ”;

o. Removing the definition “Gross electrical output”;

p. Revising the definitions “Heat input”, “Heat input rate”, and “Heat rate”;

q. In the definition heading “Maximum design heat input”, after the words “heat input” adding the word “rate”;

r. Revising the definition “Potential electrical output capacity”;

s. In the definition “Sequential use of energy”, paragraph (2), after the word “from” adding the word “a”; and

t. Revising the definition “State”.

The revisions and additions read as follows:

83. Section 97.503 is amended by:

a. Adding in alphabetical order the list entry “CSAPR—Cross-State Air Pollution Rule”;

b. Removing the list entry “kW—kilowatt electrical”;

c. Removing the list entry “kWh—kilowatt hour” and adding in its place the entry “kWh—kilowatt-hour”;

d. Removing the list entry “MWh—megawatt hour” and adding in its place the entry “MWh—megawatt-hour”; and

e. Adding in alphabetical order the list entries “SIP—State implementation plan” and “TR—Transport Rule”.

84. Section 97.504 is amended by:

a. In paragraph (b)(1)(i)(B), removing the word “electric” and adding in its place the word “electrical”;

b. In paragraph (b)(2)(ii), removing the text “paragraph (b)(1)(i)” and adding in its place the text “paragraph (b)(2)(i)”, and removing the text “NO _X” and adding in its place the text “NO_X”; and

c. Italicizing the headings of paragraphs (c)(1) and (2).

85. Section 97.505, paragraph (b) is amended by italicizing the heading.

86. Section 97.506 is amended by:

a. Italicizing the headings of paragraphs (c), (c)(1) and (2), and (c)(4) through (7);

b. In paragraph (c)(2)(ii), after the words “immediately after” adding the words “the year of”;

c. In paragraph (c)(3)(i), after the paragraph designation “(i)” adding a space;

d. In paragraph (c)(4) heading, after the words “Vintage of” adding the text “CSAPR NO _X Ozone Season Group 1”; and

e. In paragraphs (c)(4)(i) and (ii), after the word “allocated” adding the words “or auctioned”.

87. Section 97.510 is amended by:

a. Revising the section heading;

b. Revising paragraph (a) introductory text;

c. In paragraphs (a)(1) through (25):

i. Removing the words “ozone season trading” wherever they appear and adding in their place the text “Ozone Season Group 1 trading”;

ii. Removing the text “NO_X ozone season new” wherever it appears and adding in its place the word “new”; and

iii. Removing the text “NO_X ozone season Indian” wherever it appears and adding in its place the word “Indian”;

d. Adding and reserving paragraphs (a)(2)(vi), (a)(13)(vi), (a)(17)(vi), and (a)(18)(vi);

e. Revising paragraph (b) introductory text;

f. In paragraphs (b)(1) through (25), removing the text “NO _X ozone season”; and

g. Revising paragraph (c).

The revisions read as follows:

88. Section 97.511 is amended by:

a. Revising the section heading;

b. Italicizing the headings of paragraphs (b)(1) and (2);

c. Revising paragraph (b)(1)(iii);

d. In paragraph (b)(1)(iv)(B), removing the words “the each” and adding in their place the word “each”, and revising the second sentence;

e. Revising paragraph (b)(2)(iii);

f. In paragraph (b)(2)(iv)(B), removing the words “the each” and adding in their place the word “each”, revising the second sentence, and after the newly revised second sentence adding a paragraph break before the paragraph designation “(v)” for the following paragraph (b)(2)(v);

g. In paragraph (c)(1)(ii), removing the text “§ 52.38(b)(3), (4), or (5)” and adding in its place the text “§ 52.38(b)(4) or (5)”, and removing the text “January 1” and adding in its place the text “May 1”;

h. In paragraph (c)(5)(i)(B), after the text “§ 52.38(b)(4) or (5)” adding the words “of this chapter”, and removing the word “Annual” and adding in its place the text “Ozone Season Group 1”;

i. In paragraph (c)(5)(ii) introductory text, removing the words “this paragraph” and adding in their place the words “this section”;

j. In paragraph (c)(5)(ii)(B), after the text “§ 52.38(b)(4) or (5)” adding the words “of this chapter”; and

k. In paragraph (c)(5)(iii), removing the words “this paragraph” and adding in their place the words “this section”.

The revisions read as follows:

89. Section 97.512 is amended by:

a. Revising the section heading;

b. In paragraph (a)(2), removing the text “§§ ” and adding in its place the text “§ ”;

c. In paragraph (a)(4)(i), removing the text “paragraph (a)(1)(i) through (iii)” and adding in its place the text “paragraphs (a)(1)(i) through (iii)”;

d. In paragraph (a)(4)(ii), after the text “paragraph (a)(4)(i)” adding the words “of this section”;

e. Revising paragraph (a)(9)(i);

f. In paragraph (b)(4)(ii), after the text “paragraph (b)(4)(i)” adding the words “of this section”;

g. Revising paragraph (b)(9)(i); and

h. In paragraph (b)(10)(ii), after the text “§ 52.38(b)(4) or (5)” adding the words “of this chapter”.

The revisions read as follows:

90. Section 97.516 is amended by:

a. In paragraph (a)(1), removing the word “Country” and adding in its place the word “country”; and

b. Adding paragraph (c).

The addition reads as follows:

91. Section 97.520 is amended by:

a. Italicizing the headings of paragraphs (c)(1) through (6);

b. Adding paragraph (c)(1)(iv);

c. In paragraph (c)(2)(i) introductory text, removing the text “paragraph (b)(1)” and adding in its place the text “paragraph (c)(1)”;

d. Adding paragraph (c)(2)(iv);

e. In paragraph (c)(4)(i), removing the text “paragraph (b)(1)” and adding in its place the text “paragraph (c)(1)”;

f. In paragraph (c)(5)(iii)(D), removing the words “authorized representative” and adding in their place the words “authorized account representative”; and

g. In paragraph (c)(5)(v), removing the word “designated” two times and adding in its place the words “authorized account”.

The additions read as follows:

92. Section 97.521 is amended by:

a. Revising the section heading;

b. Revising paragraph (c);

c. In paragraphs (d) and (e), removing the word “period” and adding in its place the word “periods”;

d. Revising paragraphs (i) and (j); and

e. Redesignating paragraph (k) as paragraph (l) and adding a new paragraph (k).

The revisions and additions read as follows:

93. Section 97.522 is amended by revising the section heading to read as follows:

94. Section 97.523 is amended by:

a. Revising the section heading; and

b. In paragraph (b), after the word “allocated” adding the words “or auctioned”.

The revision reads as follows:

95. Section 97.524 is amended by:

a. Revising the section heading;

b. In paragraph (a)(1), after the word “allocated” adding the words “or auctioned”;

c. Revising paragraphs (c)(2)(i) and (ii); and

d. In paragraph (d), after the word “allocated” adding the words “or auctioned”.

The revisions read as follows:

96. Section 97.525 is amended by:

a. Revising the section heading;

b. In paragraph (a)(1), after the word “allocated” adding the words “or auctioned”;

c. In paragraph (b)(2)(iii) introductory text, removing the text “paragraph (b)(1)(i)” and adding in its place the text “paragraph (b)(1)(ii)”;

d. In paragraph (b)(2)(iii)(B), after the words “availability of” adding the words “the calculations incorporating”;

e. In paragraph (b)(4)(i), after the words “established for” removing the word “the”; and

f. In paragraph (b)(6)(iii)(B), after the word “appropriate” removing the word “at”.

The revision reads as follows:

97. Section 97.526 is amended by:

a. In paragraph (b), removing the text “§ 97.528” and adding in its place the text “§ 97.528 or removed under paragraph (c) of this section”; and

b. Adding paragraph (c).

The addition reads as follows:

98. Section 97.528, paragraph (b) is amended by removing the text “paragraph (a)(1)” and adding in its place the text “paragraph (a)”.

99. Section 97.530 is amended by:

a. Revising paragraph (b) introductory text and paragraphs (b)(1) through (3);

b. In paragraph (b)(4) introductory text, removing the text “§§ 75.4 (e)(1) through (e)(4)” and adding in its place the text “§ 75.4 (e)(1) through (4)”; and

c. In paragraph (b)(4)(iii), after the text “§ 75.66” adding the words “of this chapter”.

The revisions read as follows:

100. Section 97.531 is amended by:

a. Italicizing the headings of paragraphs (d)(1) through (3), (d)(3)(i) through (iv), (d)(3)(iv)(A) through (D), and (d)(3)(v);

b. In paragraph (d)(3) introductory text, removing the text “§§ ” and adding in its place the text “§ ”; and

c. Redesignating paragraphs (d)(3)(v)(A)(1) through (5) as paragraphs (d)(3)(v)(A)( 1) through (5).

101. Section 97.534 is amended by:

a. In paragraph (b), after the words “comply with” adding the word “the”;

b. Revising paragraphs (d)(1) and (2);

c. Redesignating paragraph (d)(6) as paragraph (d)(5)(ii); and

d. In paragraph (e)(3), removing the text “paragraph (d)(2)(ii)” and adding in its place the text “paragraph (d)(1)(ii)(B)”.

The revisions read as follows:

102. Section 97.535 is amended by:

a. Redesignating paragraphs (b)(i) through (v) as paragraphs (b)(1) through (5); and

b. In the newly redesignated paragraph (b)(4), removing the colon and adding in its place a semicolon.

Subpart CCCCC—CSAPR SO₂ Group 1 Trading Program