2019-17666. Air Plan Approval; Illinois; Emissions Reduction Market System Sunsetting

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Proposed rule.

SUMMARY:

The Environmental Protection Agency (EPA) is proposing to approve a State Implementation Plan (SIP) revision submitted by the Illinois Environmental Protection Agency (Illinois EPA) on January 11, 2019, concerning the state's Emissions Reduction Market System (ERMS) program for the Chicago ozone nonattainment area (NAA) in Illinois. The revision sunsets the ERMS program and effectively removes from the SIP provisions in 35 Illinois Administrative Code (35 IAC) Part 205, as the ERMS program is no longer effective in providing any additional emissions reductions or environmental benefit. The submittal also includes a demonstration under section 110(l) of the Clean Air Act (CAA) that addresses emission impacts associated with the sunsetting of the program.

DATES:

Comments must be received on or before September 18, 2019.

ADDRESSES:

Submit your comments, identified by Docket ID No. EPA-R05-OAR-2019-0032 at http://www.regulations.gov,, or via email to [e-mail]. For comments submitted at Regulations.gov, follow the online instructions for submitting comments. Once submitted, comments cannot be edited or removed from Regulations.gov. For either manner of submission, EPA may publish any comment received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. EPA will generally not consider comments or comment contents located outside of the primary submission (i.e., on the web, cloud, or other file sharing system). For additional submission methods, please contact the person identified in the FOR FURTHER INFORMATION CONTACT section. For the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on making effective comments, please visit http://www2.epa.gov/​dockets/​commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT:

Francisco J. Acevedo, Mobile Source Program Manager, Control Strategies Section, Air Programs Branch (AR-18J), Environmental Protection Agency, Region 5, 77 West Jackson Boulevard, Chicago, Illinois 60604, [phone], [e-mail].

SUPPLEMENTARY INFORMATION:

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. This supplementary information section is arranged as follows:

I. What is the background for this action?

II. What changes have been made as part of the SIP revision?

III. What is EPA's analysis of the state's submittal?

IV. What action is EPA taking?

V. Incorporation by reference

VI. Statutory and Executive Order reviews

I. What is the background for this action?

The ERMS program was originally implemented in Illinois as a cap-and-trade program designed to reduce the emissions of volatile organic compounds (VOC ^[1] ) in the Chicago ozone NAA below the levels required by reasonably available control technology (RACT) and other regulations. The program was intended to achieve additional emission reductions needed for the post-1999 ozone Rate of Progress (ROP) plan for the now-revoked 1979 1-hour ozone standard, while providing sources with more flexibility than is typically present in “command and control” regulations. As part of this program, major VOC sources, i.e., industrial facilities emitting at least 25 tons per year, including at least 10 tons between May and September, were required to participate. ERMS addresses the period between May 1st through September 30th, known as the seasonal allotment period or season, as ozone typically forms in the hotter, sunnier days of the year.

The ERMS program is a cap-and-trade market system in which sources must hold allowances, known as Allotment Trading Units (ATUs), for their actual VOC emissions during the ERMS season. Every source in the ERMS program is issued ATUs each year based on its historical baseline emissions. An ATU is equivalent to 200 pounds of VOC. Sources with a surplus of ATUs can bank them for use in the following season or trade them to sources that exceeded their allotments. Under Illinois' program, ATUs have a two-season lifespan and if they are not used in the second season, they expire and are no longer allowed to be used to account for emissions at the source. Overall, VOC emissions are limited to the total number of available ATUs. To address stakeholder concerns that there may not have been enough ATUs available for purchase, the ERMS program also established an Alternative Compliance Market Account (ACMA), to which an amount equal to one percent of the annual amount of ATU allotments given to sources are deposited. These ATUs never expire while in the ACMA.

Annual allotments of ATUs to sources are made in early April before the start of the season. Trades of ATUs for the season's emissions must be made by December 31st and emissions compensation is performed by Illinois EPA in early January of every year. ATUs are removed from each source's account in an amount equivalent to the source's emissions during the prior season. Sources with an insufficient amount of ATUs in their account at that point must either buy them from the ACMA or borrow from the source's allotment for the next year.

The ERMS program was adopted by Illinois in 1997 and implemented in 2000 and approved as part of the Illinois SIP by EPA on October 15, 2001 (66 FR 52343). The program was amended in 2005 and those amendments were approved by EPA on July 7, 2008 (73 FR 38328).

II. What changes have been made as part of the SIP revision?

For areas that fail to meet the National Ambient Air Quality Standards (NAAQS) for ozone, states are required by the CAA to develop a SIP for attaining and maintaining the NAAQS. Section 182(c)(2)(B) of the CAA further requires that states must continue to reduce VOC emissions in those areas at rate of 9% over a subsequent three-year period. Illinois EPA relied on VOC emission reductions from the ERMS program as part of the post-1999 ozone ROP plan for the 2000-2002 milestone period as required under the now-revoked 1979 1-hour ozone NAAQS. The ROP plan was approved into the SIP on November 11, 2001 (66 FR 56904). At that time, Illinois EPA estimated in its ROP plan that the ERMS program would achieve a VOM reduction of 12.6 tons per summer day. Those reductions represented nearly 7% of the total Chicago NAA VOC ROP plan emissions reductions needed for that milestone period.

Illinois achieved all the reductions needed under the ROP plan for the Chicago NAA, but the state is now terminating the ERMS program, as it is no longer effective in providing environmental benefit. Since the implementation of ERMS in 2000, actual emissions from sources in ERMS have continued to decrease. These emissions reductions are due to various factors including the fact that some of the original affected sources have permanently shut down. New sources and emission units that have become subject to ERMS do not emit at the rate of these older, shut down sources. Additionally, as discussed below, several state and Federal regulations addressing VOC emissions have been promulgated since ERMS began and have led to a decline in both allowable and actual emissions and make it very unlikely that emissions will return to the previous levels from when ERMS was first implemented. With emissions being significantly lower than when the ERMS program began, there is a large surplus of ATUs. A high percentage of ATUs issued in a given year are no longer used to offset emissions and simply expire. As part of this SIP submittal, Illinois EPA is requesting EPA's approval of the state's action to sunset the ERMS program as of April 30, 2018 which would therefore allow EPA to remove 35 IAC Part 205 provisions from the SIP. Illinois EPA has also submitted an anti-backsliding analysis in accordance with section 110(l) of the CAA to demonstrate that the discontinuation of the ERMS program as of April 30, 2018 will not interfere with attainment or maintenance of any applicable NAAQS, RFP, or any other applicable requirement set forth in the CAA.

III. What is EPA's analysis of the state's submittal?

Our primary consideration for determining the approvability of the Illinois revisions to remove the ERMS program from the SIP is whether these revisions comply with section 110(l) of the CAA. Section 110(l) of the CAA provides that EPA cannot approve a SIP revision if that revision interferes with any applicable requirement regarding attainment and reasonable further progress or any other requirement established in the CAA. EPA can, however, approve a SIP revision that removes or modifies control measures in the SIP once the state makes a “noninterference” demonstration that such removal or modification will not interfere with attainment of the NAAQS, or any other CAA requirement.

As part of Illinois' section 110(l) analysis, Illinois EPA evaluated the impact of existing state and Federal VOC regulations that became effective after 1997 to demonstrate that shutting down the ERMS program will not cause an increase in emissions. Federally enforceable permit limits were also evaluated, as Illinois EPA has the authority to set such emission limitations in construction and operating permits, pursuant to 415 ILCS 5/9.1 of the Environmental Protection Act (the Act). The list of enforceable state regulations can be found in Table 1, and the list of Federal regulations can be found in Tables 2 and 3 below.

State Regulations

CAA Section 110 requires states to develop and implement plans to attain and maintain the NAAQS. In addition, the CAA contains provisions requiring states to update the SIP whenever there has been a revision to a state regulation within the plan, or when there is a new or revised NAAQS that may require a change to an attainment demonstration or maintenance plan. These plans and revisions are required to be submitted, reviewed, and approved by EPA. The Act provides the Illinois Pollution Control Board with the authority to develop rules and regulations necessary for meeting the NAAQS (415 ILCS 5/5). Table 1 lists all the RACT source categories that are included as regulations in Illinois' SIP under Title 35 IAC Part 218 for the Chicago NAA that have further reduced emissions for these sources since the adoption of the ERMS program.

Table 1—State VOC Control Programs

RACT Categories	Rule citation (title 35 IAC part 218)	Compliance date
Industrial cleaning solvents	218 Subpart F	1/1/2012
Flat wood paneling coatings	218.204(p)	5/1/2012
Flexible packaging printing lines	218 Subpart H	8/1/2010
Lithographic printing lines	218 Subpart H	8/1/2010
Letterpress printing lines	218 Subpart H	8/1/2010
Paper, film, and foil coatings	218 Subpart H	5/1/2011
Large appliance coatings	218.204(h)(2)	5/1/2011
Metal furniture coatings	218.204(g)(2)	5/1/2011
Miscellaneous metal and plastic parts coatings	218.204(q)	5/1/2012
Automobile and light-duty truck assembly coatings	218.204(a)(2)	5/1/2012
Miscellaneous industrial adhesives	218 Subpart JJ	5/1/2012
Fiberglass boat manufacturing	218 Subpart JJ	5/1/2012

New Source Performance Standards (NSPS)

CAA Section 111 authorizes EPA to develop and update NSPS regulations that apply to specific categories of stationary sources. NSPS applies to new, modified, and reconstructed affected sources. These standards may include equipment specifications, emission limitations, work practice standards, measurement methods, recordkeeping, and reporting requirements. Illinois EPA has delegated authority to implement and enforce these standards under the Act (415 ILCS 5/9.1).

Illinois EPA identified several NSPS regulations that apply to certain sources in ERMS, shown in Table 2, that became effective or have been updated since 1997, whose emissions reductions can be used to offset reductions from the ERMS program.

Table 2—Federal Measures—NSPS

Category	North American Industry Classification System (NAICS)	Code of Federal Regulation	Last amended
Petroleum Refineries	324110	40 CFR 60 subpart J-Ja	12/01/2015
Coal Preparation and Processing Plants	324199, 331110	40 CFR 60 subpart Y	10/08/2009
Surface Coating of Metal Furniture	337127	40 CFR 60 subpart EE	10/17/2000
Metal Coil Surface Coating	332812	40 CFR 60 subpart TT	10/17/2000
Beverage Can Surface Coating	332431, 332812	40 CFR 60 subpart WW	10/17/2000
Bulk Gasoline Terminals	324110, 493190, 486910, 486110	40 CFR 60 subpart XX	12/19/2003
Petroleum Refineries Equipment Leaks	324110	40 CFR 60 subpart GGG-GGGa	06/02/2008
Onshore Natural Gas Plants—VOC Equip. Leaks	211112, 486110, 486210	40 CFR 60 subpart KKK	08/16/2012
Nonmetallic Mineral Processing	327999	40 CFR 60 subpart OOO	04/28/2009
Plastic Parts for Business Machines (surface coating)	326112, 326113	40 CFR 60 subpart TTT	10/17/2000
Flexible Vinyl and Urethane Coating and Printing	322220	40 CFR 60 subpart FFF	10/17/2000
Oil and Gas production, Transmission, and Distribution	211112, 486110, 486210	40 CFR 60 subpart OOOO	06/03/2016

National Emission Standards for Hazardous Air Pollutants (NESHAP)

In accordance with Section 112 of the CAA, EPA established NESHAP standards to regulate specific categories of stationary sources that emit hazardous air pollutants. Some of the listed hazardous air pollutants are also VOCs. Illinois EPA has delegated authority to implement and enforce these standards under the Act (415 ILCS 5/9.1).

Illinois EPA identified several NESHAP regulations that also control VOC emissions and apply to certain sources in ERMS. Table 3 lists the NESHAP regulations that became effective or were amended after 1997 and whose emissions reductions can be used to offset reductions from the ERMS program.

Table 3—Federal Measures—NESHAP

Category	NAICS	Code of Federal Regulation	Last amended
Benzene Waste Operations	324110, 325130, 324199	40 CFR 61 subpart FF	12/04/2003
Synthetic Organic Chemical Manufacturing Industry	325120, 325130, 325211, 325412, 325510, 325520, 325910, 325998	40 CFR 63 subpart F, G, H, I	12/21/2006
Gasoline Distribution Facilities	324110, 424710, 486910, 493190	40 CFR 63 subpart R	12/19/2003
Pulp and Paper Industry (MACT I & III)	322212, 322219, 322220	40 CFR 63 subpart S	09/11/2012
Halogenated Solvent Cleaning	331110, 331210, 331318, 332322, 332431, 332439, 332811, 332812, 332813, 333120, 336111, 337110, 339991	40 CFR 63 subpart T	05/03/2007
Group I Polymers and Resins	323111, 325212, 325412	40 CFR 63 subpart U	04/21/2011
Petroleum Refineries	324110	40 CFR 63 subpart CC	07/13/2016
Oil and Natural Gas Production Facilities	211112	40 CFR 63 subpart HH	08/16/2012
Wood Furniture Manufacturing Operations	337110, 337122	40 CFR 63 subpart JJ	12/21/2011
Printing and Publishing Industry	323111	40 CFR 63 subpart KK	12/21/2011
Generic MACT I & II	325211	40 CFR 63 subpart YY	10/08/2014
Pharmaceuticals Production Industry	325412	40 CFR 63 subpart GGG	04/21/2011
Natural Gas Transmission and Storage Facilities	211112, 486110, 486210	40 CFR 63 subpart HHH	08/16/2012
Group IV Polymers and Resins	325212	40 CFR 63 subpart JJJ	03/27/2014
Polyether Polyols Production	325211	40 CFR 63 subpart PPP	03/27/2014
Petroleum Refineries	324110	40 CFR 63 subpart UUU	12/01/2015
Publicly Owned Treatment Works	221320	40 CFR 63 subpart VVV	12/22/2008
Manufacturing of Nutritional Yeast	311999	40 CFR 63 subpart CCCC	05/21/2001
Plywood and Composite Wood Products	321911, 321999	40 CFR 63 subpart DDDD	02/16/2006
Organic Liquids Distribution	325211	40 CFR 63 subpart EEEE	04/23/2008
Miscellaneous Organic Chemical Manufacturing	325510, 325520, 325910, 325998	40 CFR 63 subpart FFFF	12/22/2008
Solvent Extraction for Vegetable Oil Production	311221	40 CFR 63 subpart GGGG	04/12/2001
Surface Coating of Automobiles and Light-Duty Trucks	336111, 336390, 323120	40 CFR 63 subpart IIII	04/24/2007
Paper and Other Web Coating	322212, 322219, 322220, 323111, 323120	40 CFR 63 subpart JJJJ	12/04/2002
Surface Coating of Metal Cans	332431, 332812, 332999	40 CFR 63 subpart KKKK	11/13/2003
Surface Coating of Miscellaneous Metal Parts and Products	336111, 336390	40 CFR 63 subpart MMMM	04/20/2006
Surface Coating of Large Appliances	333120, 332999, 333312	40 CFR 63 subpart NNNN	07/23/2002
Printing, Coating, and Dyeing of Fabrics and Other Textiles	339991	40 CFR 63 subpart OOOO	08/04/2004
Surface Coating of Plastic Parts and Products	336112	40 CFR 63 subpart PPPP	04/19/2004
Surface Coating of Wood Building Products	321911	40 CFR 63 subpart QQQQ	05/28/2003
Surface Coating of Metal Furniture	337127	40 CFR 63 subpart RRRR	05/23/2003
Surface Coating of Metal Coil	332812, 332813, 332322, 332999	40 CFR 63 subpart SSSS	06/10/2002
Leather Finishing Operations	316110	40 CFR 63 subpart TTTT	02/27/2002
Cellulose Products Manufacturing	326121	40 CFR 63 subpart UUUU	08/10/2005
Reinforced Plastic Composites Production	325211, 325991, 335313	40 CFR 63 subpart WWWW	08/25/2005
Coke Ovens: Pushing, Quenching, and Battery Stacks	331110, 324199	40 CFR 63 subpart CCCCC	04/14/2003
Integrated Iron and Steel Manufacturing Facilities	331110	40 CFR 63 subpart FFFFF	05/20/2003
Miscellaneous Coating Manufacturing	325510, 325520, 325910, 325998	40 CFR 63 subpart HHHHH	12/11/2003
Asphalt Processing and Asphalt Roofing Manufacturing	324110, 324122	40 CFR 63 subpart LLLLL	04/20/2006

Emissions Demonstration for Section 110(l)

As part of Illinois EPA's section 110(l) demonstration, the state analyzed the allowable ATUs under the ERMS program and compared them with the allowable VOC emissions under current federally enforceable state and Federal measures that have been implemented since 1997. The analysis shows that total allowable VOC emissions under the current federally enforceable state and Federal measures are lower than the total allowable emissions under ERMS.

To track the emissions inventory in Illinois, the Illinois EPA uses a custom-developed enterprise database system called the Integrated Comprehensive Environmental Management System (ICEMAN). Included in ICEMAN are subsystems that deal with permit tracking, fee billing, inspections, annual emissions reporting, emissions inventory, and ERMS.

The emissions inventory contains all permitted sources along with previously permitted sources that are now subject to the Registration of Smaller Sources program. Emissions are maintained at the process level and are then summed to obtain the source level emissions. Each emission unit that is required to be reported on an ERMS seasonal report has an indicator selected in the database identifying it as such. This allows for easy review of the seasonal reports to ensure the owner or operator of the unit is reporting for the appropriate emission units.

The emissions inventory is maintained by Illinois EPA's Inventory and Data Support Unit of the Air Quality Planning Section. Immediately after a construction or operating permit is issued by the Permit Section, the issued permit and its application comes to the Inventory and Data Support Unit for updating of the emission units, emissions (especially allowable emissions), and other inventory data as necessary.

As part of their section 110(l) demonstration, Illinois EPA compared each ERMS source's allotment of ATUs to the allowable VOM emissions under the substitute measures as follows:

Each entity that received ATUs for the 2016 season was identified. This included sources receiving allotments or Emissions Reductions Generators (ERGs), in addition to the ACMA account receiving ATUs from the allotment, shutdowns, or ERGs. The list was then expanded to include sources which did not receive an allotment but whose emissions were large enough to require obtaining ATUs to cover their emissions. These sources are primarily new participating sources. This established the collection of sources included in the demonstration that the proposed termination of the ERMS program is approvable as a SIP revision consistent with CAA Section 110(l).

For calculating allowable emissions under current state and Federal measures, the sum of the annual allowable emissions from each individual emission process was obtained from ICEMAN and summed to the source level. These allowable emissions are based on permanent and federally enforceable state and Federal regulations or from federally enforceable construction permit conditions that limit VOC emissions.

Currently under ERMS, sources are allowed to emit 101,654 ATUs, which equates to 10,165.40 tons/season. Annual allowable emissions from federally enforceable state and Federal measures for the same ERMS sources are 23,967.79 tons. Since ERMS is a seasonal program, the annual allowable emissions from substitution measures must be multiplied by 5/12th, which equals 9,986.58 tons/season. Thus, it is clearly shown that emissions allowed under currently implemented and federally enforceable measures are 178.82 tons/season less than those allowed under the current ERMS rule on its own. Illinois EPA concludes, and EPA agrees, that there will be no increase in allowable VOC emissions due to the discontinuation of the ERMS program.

Therefore, Illinois' SIP revision demonstrates that the sunset of the ERMS program is approvable under Section 110(l) of the CAA, that Illinois will continue to meet its SIP obligations, and that the SIP revision will not interfere with the progress to meet and/or maintain the ozone NAAQS in Chicago NAA.

IV. What action is EPA taking?

EPA is proposing to approve the revision to the Illinois SIP submitted by the Illinois EPA on January 11, 2019, because the sunset of Illinois' ERMS program in the SIP meets all applicable requirements and would not interfere with reasonable further progress or attainment of the ozone NAAQS. As a result, EPA is proposing to remove the ERMS provisions (35 IAC Part 205) from the SIP.

V. Incorporation by Reference

In this document, EPA is proposing to amend regulatory text that includes incorporation by reference. As described in the proposed amendments to 40 CFR part 52 set forth below, EPA is proposing to remove provisions of the EPA-Approved Illinois Regulations and Statutes from the Illinois State Implementation Plan, which is incorporated by reference in accordance with the requirements of 1 CFR part 51.

IV. Statutory and Executive Order Reviews

Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);
• Is not expected to be an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because this action is not significant under Executive Order 12866;
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.);
• 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);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

List of Subjects in 40 CFR Part 52

• Environmental protection
• Air pollution control
• Incorporation by reference
• Volatile organic compounds

Dated: August 6, 2019.

Cathy Stepp,

Regional Administrator, Region 5.

For the reasons stated in the preamble, EPA proposes to amend 40 CFR part 52 as set forth below:

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.

Subpart O—Illinois

2. In § 52.720, the table in paragraph (c) is amended by removing the undesignated headings “Subchapter b: Alternative Reduction Program” “Part 205: Emissions Reduction Market System” and all the undesignated subheadings and entries up to and including “205.760”.

Footnotes

1.  Illinois uses the term “Volatile Organic Material” (VOM) rather than VOC. The state's definition of VOM is equivalent to EPA's definition of VOC at 40 CFR 51.100. The two terms are interchangeable when discussing volatile organic emissions. For consistency with the CAA and EPA policy, this rulemaking uses the term VOC.