00-28707. Approval and Promulgation of Air Quality Implementation Plans; New Hampshire; New Hampshire-Nitrogen Oxides Budget and Allowance Trading Program

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Direct final rule.

SUMMARY:

EPA is approving State Implementation Plan (SIP) revisions submitted by the State of New Hampshire. This action consists of approving regulations in New Hampshire, as well as a case-specific order and two emission quantification protocols for Public Service of New Hampshire (PSNH). The regulations and order are part of a regional nitrogen oxide ( NO_X) reduction program designed to reduce stationary source NO_X emissions during the ozone season in the Ozone Transport Region (OTR) of the northeastern United States. Section 184(a) of the Clean Air Act defines the OTR as the States of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and the Consolidated metropolitan Statistical Area that includes the District of Columbia. These SIP revisions were submitted pursuant to section 110 of the Clean Air Act (CAA).

DATES:

This direct final rule is effective on January 16, 2001 without further notice, unless EPA receives adverse comment by December 14, 2000. If adverse comment is received, EPA will publish a timely withdrawal of the direct final rule in the Federal Register and inform the public that the rule will not take effect.

ADDRESSES:

Comments may be mailed to David Conroy, Manager, Air Quality Planning Unit, Office of Ecosystem Protection (mail code CAQ), U.S. Environmental Protection Agency, Region I, One Congress Street, Suite 1100, Boston, MA 02114-2023. Copies of the documents relevant to this action are available for public inspection during normal business hours, by appointment at the Office Ecosystem Protection, U.S. Environmental Protection Agency, Region I, One Congress Street, 11th floor, Boston, MA, and at the New Hampshire Air Resources Division, Department of Environmental Services, 6 Hazen Drive, P.O. Box 95, Concord, NH 03301.

FOR FURTHER INFORMATION CONTACT:

Dan Brown, [phone] or at [e-mail].

SUPPLEMENTARY INFORMATION:

I. Background

A. Clean Air Act Requirements

Sections 182(b)(1)(A) and 182(c)(2)(A) of the CAA require States with areas classified as “moderate,” “serious,” and “severe” ozone nonattainment to submit revisions to their applicable SIPs to provide for specific annual reductions in emissions of volatile organic compounds (VOCs) and oxides of nitrogen as necessary to attain the national primary ambient air quality standard for ozone. Additionally, section 110 of the Act requires that such plans be subject to public notice, comment, and hearing procedures and that the States adopt and submit the plans to EPA.

As part of New Hampshire's efforts to meet the CAA requirements, on July 27, 1998, the New Hampshire Department of Environmental Services (NH DES) submitted a request to revise its SIP by adding CHAPTER Env-A 3200 “ NO_X BUDGET TRADING PROGRAM” and Final RACT Order ARD-98-001. The regulations and order impose statewide and source-specific caps on NO_X emissions from certain industrial equipment (e.g., electric utility boilers, industrial boilers, combustion turbines, etc.). New Hampshire's CHAPTER Env-A 3200 is based closely on a model rule which was developed using the EPA's economic incentive program (EIP) guidance (67 FR 16690, April 7, 1994) as the regulatory framework.

B. The OTC MOU Program

The model rule used by New Hampshire was developed by the Northeast States for Coordinated Air Use Management (NESCAUM) and the Mid-Atlantic Regional Air Management Association (MARAMA) entitled, “NESCAUM/MARAMA NO_X Budget Model Rule.” The NESCAUM/MARAMA model rule was issued on May 1, 1996. The basis for the model rule was a memorandum of understanding entitled, “Memorandum of Understanding Among the States of the Ozone Transport Commission on Development of a Regional Strategy Concerning the Control of Stationary Source Nitrogen Oxide Emissions,” dated September 27, 1994, otherwise known as the “OTC MOU.”

The OTC MOU committed the MOU signatory States to require certain major stationary sources to reduce their NO_X emissions through several regulatory stages. The NO_X RACT regulations required by section 182 of the Clean Air Act have reduced emissions at major stationary sources of NO_X since 1995. Those reductions are considered “phase I” of the OTC program. Under “phase II” of the program, the MOU committed the signatory states to imposing a cap on regional NO_X emissions during the five month periods between May 1 through September 30 of 1999, 2000, 2001, and 2002. The third stage of the OTC program, i.e., “phase III,” will tighten the regional cap and is set to begin on May 1, 2003 and continue in each ozone season thereafter.

II. Chapter Env-A 3200 “ NO_X BUDGET TRADING PROGRAM”

New Hampshire's Chapter Env-A 3200 contains both phase II and phase III NO_X budget program reduction requirements. New Hampshire's NO_X budget regulations set a statewide, five month (May through October) NO_X “budget,” or mass emission limit in tons, to reduce the aggregate emissions from large fossil fuel fired combustion equipment by as much as 75% from a 1990 baseline. In order to achieve the aggregate NO_X reductions, the regulations proportion NO_X “allowances” (in tons) to the facilities with emission units subject to the program. The regulations require each owner or operator of each unit to hold, by December 31 of each year, at least as many NO_X allowances in their compliance account as total tons of NO_X emitted during the previous five month ozone season.

Under the NO_X Budget regulations, NO_X allowances may be bought or sold and unused allowances may be banked from one year to another in a central registry administered by EPA. The program requires NO_X emissions to be monitored by either a continuous emission monitoring system (CEMS) or equivalent, although the use of alternatives is allowed where approved by the State and EPA. The program began on May 1, 1999. Starting in 2002 and occurring every three years after, New Hampshire and the OTC will conduct an audit of the program to ensure that the expected reductions are occurring.

III. RACT Order 98-001 & Emission Quantification Protocols for Public Service of New Hampshire

In addition to Chapter Env-A 3200, on July 27, 1998, New Hampshire also submitted Final RACT Order 98-001 which was issued to PSNH under Part Env-A 1211. First, the order requires PSNH's unit #2 at its Merrimack Station (MK2) to meet an emission limitation of 15.4 tons of NO_X per 24 hour calendar day by May 31, 1999. This limit can be met directly at MK2 or through the use of approved emission credits generated in the ozone season at other facilities. Second, the order requires PSNH to meet an emissions cap of 4,662 tons during the period between May 1 and October 1 for the combined NO_X emissions from the following units: units #1 and #2 at Merrimack Station, unit #1 at Newington Station, and units #4, #5, and #6 at Schiller Station, during the years 1999, 2000, 2001, and 2002. Beginning on May 1, 2003, the order requires those units, to comply with an ozone season cap of 3,627 tons, minus any tons allocated to new sources subject to the program. Additionally, the order requires the PSNH units to meet a NO_X cap of 8,208 tons between October 1 and April 30 of each year, beginning in 1999.

Order ARD 98-001 also contains provisions that allow PSNH to generate discrete emission reductions (DERs) according to the requirements of Chapter Env-A 3100, New Hampshire's discrete emission reduction trading regulation, by reducing emissions below the NO_X limitations contained in Env-A 1211, Order ARD 97-001, and all other applicable emission limits. However, because Env-A 3100 has not yet been approved into the New Hampshire SIP, New Hampshire submitted the emission reduction protocols as case-specific SIP revisions. The SIP submittal included two credit generation protocols, as well as the credits created by the protocols that were generated by PSNH from May 1, 1995 through September 30, 1997.

IV. EPA Evaluation

Based on the EIP, EPA finds the NO_X cap and trade regulations, case-specific NO_X RACT order, and quantification protocols fully approvable. See “Technical Support Document for the Approval of New Hampshire's CHAPTER Env-A 3200 NO_X BUDGET TRADING PROGRAM and Final RACT Order 98-001,” dated January 7, 1999, for EPA's detailed evaluation. The technical support document is available, upon request, from the EPA Regional Office listed in the ADDRESSES section of this document.

V. Issues

One issue related to New Hampshire's NO_X Budget Trading Program involves the overlap of New Hampshire's NO_X Budget Trading Program and the EPA's NO_X SIP Call summarized below.

A. NO_X SIP Call

From 2003 onward, the geographic size of the market for allowances issued by New Hampshire will be directly affected by the promulgation of EPA's rule entitled, “Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone,” otherwise known as the “ NO_X SIP call.” See 63 FR 57356, October 27, 1998, aff'd in part, State of Michigan v. U.S. EPA, No. 98-1497 (D.C. Cir., March 3, 2000).

The NO_X SIP call requires specified States to submit SIP revisions to prohibit specified amounts of NO_X emissions, in order to reduce emissions in each of those States to a level within the statewide NO_X emissions budget established in the NO_X SIP call final rule. The NO_X SIP call gives States the flexibility to choose any mix of pollution-reduction measures that will achieve the required reductions. The NO_X SIP call, however, suggests that imposing statewide NO_X emissions caps on large fossil-fuel fired industrial boilers and electricity generators would provide a cost effective means for States to meet their NO_X budgets. In fact, the NO_X SIP call State budgets were set at levels which reflect the NO_X reduction possible assuming a 0.15 lbs/mmBtu-based cap being applied to the large industrial boilers and electricity generators.

One option to comply with the NO_X SIP call is the adoption of a State rule based on the EPA's model NO_X Budget Trading Program (40 CFR part 96), which was finalized in the October 1998 NO_X SIP call rule. Part 96 sets forth a cap-and-trade program for NO_X emissions that employs a cap on total NO_X emissions for the ozone season. This mechanism ensures that emissions reductions are achieved and maintained, while providing the cost-effectiveness of a market-based system. The NO_X SIP call requires the covered states to adopt regulations which implement control strategies starting in 2003 in order to achieve the specific statewide budgets by 2007.

Although EPA's notice of proposed rulemaking (NPR) for the NO_X SIP call (November 7, 1997) examined the effects of transport from the 36 States and the District of Columbia which made up the ozone transport assessment group (OTAG) region, EPA has not yet finalized the NO_X SIP call for all 37 entities specified in the October 1998 final rulemaking notice. EPA is continuing to evaluate air quality modeling for 15 States which were part of the OTAG region, including New Hampshire, in order to make a final determination of whether they significantly contribute to the transport of ozone. Whether New Hampshire ultimately will be part of the NO_X SIP call is uncertain at this time.

B. Overlap of OTC and NO_X SIP call Allowance Trading Programs

Based on the SIP submittals by Connecticut, Massachusetts, New Jersey, and Rhode Island, EPA anticipates that the OTR States which are part of the OTC NO_X budget and allowance trading program and, which are subject to the NO_X SIP call, will participate in a regional cap and trade program to meet the NO_X SIP call requirements. Therefore, the issue associated with the approval of the New Hampshire program relates to the fact that although New Hampshire is an OTC state, it is not a NO_X SIP call state.

EPA is currently administering the emissions tracking and allowance tracking systems for the OTC NO_X budget program. EPA will also be administering the NO_X SIP call emissions and allowance tracking systems. This means that for States subject to both the OTC and NO_X SIP call programs, 1999 through 2002 NO_X allowances will be tracked in the OTC allowance tracking system, and then eligible 2003 and beyond allowances will be tracked in the NO_X SIP call allowance tracking system.

The New Hampshire regulations are not considered a NO_X SIP call submission nor is today's SIP action an approval of trading these allowances for NO_X SIP call purposes. Therefore, because the OTC phase III NO_X cap in New Hampshire is not as stringent as a NO_X SIP call cap would be, New Hampshire OTC phase III allowances will not be transferable to accounts in the NO_X SIP call tracking system. As of May 1, 2003, New Hampshire's NO_X allowances will not be available for compliance purposes in NO_X SIP call affected States. However, because the NO_X SIP call program requirements would be more stringent than the OTC program requirements, NO_X SIP call program allowances will be available for sources to meet the New Hampshire OTC phase III emission limits.

Final Action: EPA is approving New Hampshire's CHAPTER Env-A 3200 “ NO_X BUDGET TRADING PROGRAM,” Order ARD 98-001, and two emission quantification protocols.

The EPA is publishing this action without prior proposal because the Agency views this as a noncontroversial amendment and anticipates no adverse comments. However, in the proposed rules section of this Federal Register publication, EPA is publishing a separate document that will serve as the proposal to approve the SIP revision should relevant adverse comments be filed. This rule will be effective January 16, 2001 without further notice unless the Agency receives relevant adverse comments by December 14, 2000.

If the EPA receives such comments, then EPA will publish a notice withdrawing the final rule and informing the public that the rule will not take effect. All public comments received will then be addressed in a subsequent final rule based on the proposed rule. The EPA will not institute a second comment period on the proposed rule. Only parties interested in commenting on this action should do so at this time.

VI. Administrative Requirements

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. This action merely approves state law as meeting federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). For the same reason, this rule also does not significantly or uniquely affect the communities of tribal governments, as specified by Executive Order 13084 (63 FR 27655, May 10, 1998). This rule 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, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999), because it merely approves a state rule implementing a federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. As required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996), in issuing this rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct. EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1988) by examining the takings implications of the rule in accordance with the “Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings' issued under the executive order. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by January 16, 2001. Interested parties should comment in response to the proposed rule rather than petition for judicial review, unless the objection arises after the comment period allowed for in the proposal. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

• Environmental protection
• Air pollution control
• Incorporation by reference
• Intergovernmental relations
• Nitrogen dioxide
• Ozone
• Particulate matter
• Reporting and recordkeeping requirements

Dated: September 6, 2000.

Mindy S. Lubber,

Regional Administrator, EPA-New England.

Part 52 of chapter I, title 40 of the Code of Federal Regulations is amended as follows:

PART 52—[AMENDED]

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

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

Subpart EE—New Hampshire

2. Section 52.1520 is amended by adding paragraphs (c)(57) and (c)(64) to read as follows:

§ 52.1520

Identification of plan.

* * * * *

(c) * * *

(57) Revision to the State Implementation Plan submitted by the New Hampshire Air Resources Division on July 27, 1998.

(i) Incorporation by reference.

(A) Regulation Chapter Env-A 3200 NO_X Budget Trading Program adopted and effective on July 17, 1998.

(ii) Additional materials.

(A) Letter from the New Hampshire Air Resources Division dated July 27, 1998 submitting Chapter Env-A 3200 NO_X Budget Trading Program as a revision to the New Hampshire State Implementation Plan.

* * * * *

(64) Revisions to the State Implementation Plan submitted by the New Hampshire Air Resources Division on July 27, 1998.

(i) Incorporation by reference.

(A) Order ARD 98-001 issued by the New Hampshire Department of Environmental Services to Public Service Company of New Hampshire on July 17, 1998, with attachments: Discrete emission reduction protocol for Public Service of New Hampshire's Schiller Station, Units 4, 5 and 6, submitted to the New Hampshire Department of Environmental Services on April 10, 1998; and Discrete emission reduction protocol for Public Service of New Hampshire's Newington Station, Unit 1, submitted to the New Hampshire Department of Environmental Services on April 10, 1998.

(ii) Additional materials.

(A) Letter from the New Hampshire Air Resources Division dated July 17, 1998 submitting Final RACT Order 98-001 as a revision to the New Hampshire State Implementation Plan.

* * * * *

3. In § 52.1525, Table 52.1525 is amended by revising the column heading “Comments” to read “Explanation”; adding a new state citation for “Part Env-A 3200” in numerical order to the entries for “Part Env-A”; and by adding Source specific “Order ARD 98-001” in numerical order to the entries for “Order ARD” as follows:

§ 52.1525

EPA-approved New Hampshire state regulations.

* * * * *

Table 52.1525.—EPA—Approved Rules and Regulations ¹—New Hampshire

Title/subject	State citation chapter 2	Date submitted by State	Date approved by EPA	Federal Register citation	52.1520	Explanation
* * * * * * *
NOX Budget Trading Program	Part Env-A 3200	7/27/98	11/14/00	65 FR 68082	(c)(57)	Approval of OTC NOX budget and allowance trading program.
* * * * * * *
Source specific order	Order ARD 98-001	7/17/98	11/14/00	65 FR 68082	(c)(64)	Source-specific NOX RACT order and discrete emission reduction protocols for Public Service of New Hampshire.
* * * * * * *
NOX Budget Trading Program	Part Env-A 3200	7/27/98	11/14/00	65 FR 68082	(c)(57)	Approval of OTC NOX budget and allowance trading program.
* * * * * * *
1 These regulations are applicable statewide unless otherwise noted in the Explanation section.
2 When the New Hampshire Department of Environmental Services was established in 1987, the citation chapter title for the air regulations changed from CH Air to Env-A.