[Federal Register Volume 63, Number 148 (Monday, August 3, 1998)]
[Proposed Rules]
[Pages 41358-41367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20605]
[[Page 41357]]
_______________________________________________________________________
Part III
Environmental Protection Agency
_______________________________________________________________________
40 CFR Parts 72 and 73
Revisions to the Permits and Sulfur Dioxide Allowance System
Regulations Under Title IV of the Clean Air Act; Proposed Rule
Federal Register / Vol. 63, No. 148 / Monday, August 3, 1998 /
Proposed Rules
[[Page 41358]]
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 72 and 73
[FRL-6134-2]
RIN 2060-AH60
Revisions to the Permits and Sulfur Dioxide Allowance System
Regulations Under Title IV of the Clean Air Act
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: Title IV of the Clean Air Act (the Act), as amended by the
Clean Air Act Amendments of 1990, authorizes the Environmental
Protection Agency (EPA or Agency) to establish the Acid Rain Program.
The program sets emissions limitations to reduce acidic particles and
deposition and their serious, adverse effects on natural resources,
ecosystems, materials, visibility, and public health.
The allowance trading component of the Acid Rain Program allows
utilities to achieve sulfur dioxide emissions reductions in the most
cost-effective way. Allowances are traded among utilities and recorded
in EPA's Allowance Tracking System for use in determining compliance at
the end of each year. The Acid Rain Program's permitting, allowance
trading, and emissions monitoring requirements are set forth in the
``core rules'' promulgated on January 11, 1993. This proposal would
amend certain provisions in the permitting and Allowance Tracking
System rules for the purpose of improving the operation of the
Allowance Tracking System and the allowance market, while still
preserving the Act's environmental goals.
DATES: Comments. Comments on this action must be received on or before
September 2, 1998, unless a hearing is requested by August 13, 1998. If
a hearing is requested, written comments must be received by September
17, 1998.
Public Hearing. Anyone requesting a public hearing must contact the
EPA no later than August 13, 1998. If a hearing is held it will be held
on August 14, 1998, beginning at 8:30 am.
ADDRESSES: Comments. Comments should be submitted in duplicate, to: EPA
Air Docket, Attention, Docket No. A-98-15, U.S. Environmental
Protection Agency, 401 M Street, S.W., Washington, DC 20460.
Public Hearing. If a hearing is held it will take place at the EPA
Auditorium at 401 M St., S.W., Washington DC.
Docket. Docket No. A-98-15, containing supporting information used
in developing the proposed rule, is available for public inspection and
copying between 8:30 a.m. and 3:30 p.m., Monday through Friday, at
EPA's Air Docket Section, Waterside Mall, room 1500, 1st Floor, 401 M
Street, S.W., Washington, DC 20460. A reasonable fee may be charged for
copying.
FOR FURTHER INFORMATION CONTACT: Donna Deneen, Permits and Allowance
Market Branch, Acid Rain Division (6204J), U.S. Environmental
Protection Agency, 401 M Street S.W., Washington, DC 20460 (202-564-
9089).
SUPPLEMENTARY INFORMATION: The information in this preamble is
organized as follows:
I. Affected Entities
II. Background
III. Revisions
A. Allowance Transfer Deadline
B. Compliance Determination
C. Signature Requirement for Transfer Requests
D. Impacts of Revisions on Acid Rain Permits
IV. Administrative Requirements
A. Executive Order 12866
B. Paperwork Reduction Act
C. Unfunded Mandates Act
D. Regulatory Flexibility
E. Applicability of Executive Order 13045: Children's Health
Protection
I. Affected Entities
Entities potentially regulated by this action are fossil-fuel fired
boilers or turbines that serve generators producing electricity,
generate steam, or cogenerate electricity and steam. Regulated
categories and entities include:
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Examples of regulated
Category entities
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Industry.................................. Electric service providers,
boilers from a wide range
of industries.
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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 EPA is now aware
could potentially be regulated by this action. Other types of entities
not listed in the table could also be regulated. To determine whether
your facility is regulated by this action, you should carefully examine
the applicability criteria in Sec. 72.6 and Sec. 74.2 and the
exemptions in Secs. 72.7, 72.8, and 72.14 of title 40 of the Code of
Federal Regulations. If you have questions regarding the applicability
of this action to a particular entity, consult the persons listed in
the preceding FOR FURTHER INFORMATION CONTACT section.
II. Background
On January 11, 1993, EPA promulgated the ``core'' regulations that
implemented the major provisions of title IV of the Clean Air Act (CAA
or the Act), as amended on November 15, 1990, including the Permits
rule (40 CFR part 72) and the Sulfur Dioxide Allowance System rule (40
CFR part 73). Since promulgation, these rules have been applied to
three compliance years, 1995, 1996, and 1997 for which affected units
were required to meet the annual allowance holding requirements
established by the rules. During this time, the Agency has gained
experience in implementing these requirements and believes that certain
provisions in the rules should be revised to improve the operation of
the Allowance Tracking System and the allowance market. This proposal
contains changes to the allowance transfer deadline and compliance
determinations and clarifies the signature requirements for allowance
transfer requests.1 These revisions and the reasons for
their proposal are summarized below.
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\1\ In addition, Sec. 73.34(c)(4) is revised to eliminate the
reference to the direct sales provisions, which were previously
removed from part 73. 61 FR 28761, 28762 (1996).
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III. Revisions
A. Allowance Transfer Deadline
The ``allowance transfer deadline'' is the last day on which
allowance transfers may be submitted to EPA for recordation in a
compliance subaccount for use in meeting a unit's sulfur dioxide
(SO2) emissions limitation requirements for the year. 40 CFR
72.2 (definition of ``allowance transfer deadline''). EPA is proposing
to extend the allowance transfer deadline from the current date of
January 30 to March 1 (or February 29 in any leap year). As explained
below, this proposed change reflects the Agency's experience in
operating the Allowance Tracking System, particularly following the
1995, 1996, and 1997 compliance years, and the technological advances
that have been made regarding the submission of continuous emissions
monitoring system (CEMS) data.
EPA's reasoning for selecting the current date of January 30 for
the allowance transfer deadline is laid out in the preamble to the
January 11, 1993 core rules. 50 FR 3590, 3617 (1993). As the Agency
explained, it was anticipated that this date would provide utilities
with ample time to transact and submit allowance transfers at the end
of
[[Page 41359]]
the year, while giving EPA adequate time to complete its administrative
duties before the date (60 days after the end of the year) that excess
emissions offset plans were due. EPA's administrative duties involve
reviewing, recording, and notifying the authorized account
representatives of any transfers, and, if the authorized account
representatives review the notifications and submit error claims,
reviewing and resolving each error claim. The Agency noted that
extending the allowance transfer deadline to March 1 would leave no
time for these activities and was therefore not a viable option.
Id.2
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\2\ EPA also expressed concern that designated representatives
might need time between the allowance transfer deadline and March 1
to complete and submit excess emission offset plans. 56 63002, 63050
(1991). However, no utility has yet had to submit an offset plan.
Further, under part 77, as amended, any offset plan would simply
state that allowances are to be immediately deducted, except in an
extraordinary case when it could be shown that immediate deduction
would interfere with electric reliability. See 61 FR 68340, 68363
(1996).
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Now, based on nearly four years of experience with the Allowance
Tracking System, EPA believes that changing the allowance transfer
deadline to March 1 is a viable option. The allowance transfer
processing activities cited in the January 11, 1993 preamble as an
obstacle to changing the deadline have turned out to have little or no
impact on the designated representative's ability to submit or the
Agency's ability to review excess emissions offset plans or compliance
certifications, which are also due on March 1 (or February 29 in any
leap year).3 The primary reason EPA sends out transfer
notifications to authorized account representatives is so they can
check whether EPA made an error in processing transfer requests. EPA
notes that although it has processed over 2500 private transfers of
allowances since the Allowance Tracking System first opened for
business, only one claim of error by EPA has been submitted. Moreover,
if EPA makes an error, EPA is obligated to correct the error and make
the change effective as of the date the authorized account
representative originally submitted the transfer form. This makes it
unnecessary for the notification and error claim process to take place
prior to the excess emissions offset plan and compliance certification
deadline. Once authorized account representatives have sent to EPA
their final allowance transfer requests, they have all the information
they need to determine whether their units are in compliance and
whether an excess emissions offset plan is needed. Of course, a
transfer notification from EPA could be used as a check on those
determinations; however, that is not the only way authorized account
representatives can ensure their determinations are correct. For
example, they can set up internal procedures in their companies to
ensure accurate allowance accounting and can access the Agency web site
via the internet for current allowance account balances in the
Allowance Tracking System. Moreover, authorized account representatives
that find the transfer notification useful for cross-checking allowance
balances can still submit their last transfer requests ahead of March 1
so they can use the notifications to make this check.
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\3\ Under Sec. 72.90, the annual compliance certification report
is required to be submitted within 60 days after the end of the
calendar year.
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EPA considered extending the allowance transfer deadline by two
weeks, rather than a month. However, EPA believes that making the
deadline coincide with the deadline for other acid rain submissions
(i.e., the compliance certification report and any excess emissions
offset plan) would reduce potential confusion because persons
responsible for complying with the requirements could focus on one
deadline for all of their end-of-year allowance-related submissions.
The 1 month extension also provides companies with additional time
to make last minute adjustments to allowance holdings in order to
reflect the actual level of emissions during the prior calendar year.
Under the current rule, the allowance transfer deadline coincides with
the fourth-quarter monitoring report deadline, leaving little or no
time for such adjustments. This makes it difficult for utilities to
cross-check what they believe to be the final emissions results with
feedback from EPA on the fourth-quarter report and then make allowance
adjustments, as necessary. The additional time will be particularly
useful because designated representatives who submit their emissions
reports electronically now receive immediate electronic feedback on the
substantive portion of their submissions. (In the past, designated
representatives did not receive this feedback, on fourth quarter
reports submitted around the report deadline, until April because the
Agency performed this review manually.) This feedback will identify
problems with submitted data, which could affect how the utility should
allocate its allowances among its units' accounts. The extension will
help to ensure utilities have the time they need to resolve any
emissions data problems and transfer allowances among their units'
accounts as needed.
The extension also helps utilities that are contemplating changes
to their monitoring systems that could temporarily affect their
reported emissions rate. For example, while correcting a problem (e.g.,
with monitor data availability), a utility or its software vendor may
take corrective actions that cause a different problem (e.g., actions
that fail to account for missing data in the hourly record data base)
and result in the unit's emissions being under-reported. Under the
current rule, such an oversight could have a significant effect on
reported emissions, especially if a company takes corrective actions in
the last quarter of the year. The fourth-quarter monitoring report is
due January 30 and any feedback from a report submitted on that date
would provide the company with little or no time to make the necessary
adjustments among its accounts for the reporting year. With the
proposed extension of the allowance transfer deadline, companies that
take corrective actions at the end of the year would have an
opportunity to make any necessary allowance adjustments after receiving
EPA feedback on their monitoring reports, and companies that might
normally delay making such changes until after the end of the year
would no longer need to do so. In addition, the extension would provide
some additional time for correcting any inadvertent errors (whether or
not associated with corrective monitoring actions) concerning allowance
holdings, e.g., in how allowances were distributed by a utility among
its units' accounts.
In sum, EPA believes the allowance transfer deadline should be
extended to March 1 because this would: reduce potential confusion over
end-of-year submission deadlines; allow authorized account
representatives to make final transfer decisions after receiving
feedback on their fourth-quarter monitoring reports; and give utilities
additional time to avoid inadvertent errors. Moreover, EPA believes
that it can successfully administer the Allowance Tracking System and
carry out its other end-of-year administrative duties without any delay
between the allowance transfer deadline and the March 1 deadline for
utilities' submissions of compliance certifications. EPA requests
comment on the proposed allowance transfer deadline and, specifically,
whether the allowance transfer deadline should be extended from January
30 to March 1 (or February 29 in any leap year).
B. Compliance Determination
Today's proposed revisions also change how excess emissions are
determined at a unit at the end of a
[[Page 41360]]
compliance year. The proposed revisions would effectively reduce the
number of tons of excess emissions a unit would otherwise have after
deductions for compliance are made under Sec. 73.35(b)(2) by allowing
up to a certain number of allowances for that unit to be deducted from
the compliance subaccounts of other units at the same source that have
unused allowances.
EPA is proposing these revisions because of concern that (even with
an extended allowance transfer deadline) inadvertent, minor accounting
mistakes by utilities, which under the proposed revision would have no
significant environmental impact, could lead to excessively high excess
emissions penalty payments. Currently, the excess emissions penalty of
$2000, adjusted for inflation since 1990 (i.e., over $2500), per ton is
more than 10 times the current market value of an allowance and applies
to all excess emissions at a unit even if they result from inadvertent,
minor errors. As a result, companies have the potential of making
enormous excess emissions penalty payments (i.e., the excess emissions
penalty times excess emissions) for what may be unintentional, minor
mistakes when performing their end-of-year accounting of emissions and
allowances. Under the circumstances in which the proposed revisions
would apply, imposition of such penalty payments does not seem
necessary or desirable, given the nature of such potential mistakes.
For example, a company may have acquired enough allowances to cover all
the emissions at a source, but distributed them erroneously among the
units at the source because of a mistake in determining how many
allowances were needed in each unit's account or in designating the
amounts transferred among the units' accounts. In light of the
potential for such mistakes, especially in Phase II when the number of
units subject to the allowance holding requirement will more than
quadruple, the Agency believes that the proposed revisions offer a more
reasonable approach than the existing rule for ensuring that allowance
holding requirements under the Acid Rain Program are met.
The major revisions for carrying out the proposed new approach are
to the compliance provisions of Sec. 73.35. Among other things, the
proposed revisions to Sec. 73.35 adjust the application of the ``Acid
Rain emissions limitation for sulfur dioxide'' when used to determine a
unit's excess emissions. The term ``excess emissions'' is defined in
Sec. 72.2 as ``[a]ny tonnage of sulfur dioxide emitted by an affected
unit during a calendar year that exceeds the Acid Rain emissions
limitation for sulfur dioxide for the unit''. The adjustment in
Sec. 73.35 of the application of the Acid Rain emissions limitation for
sulfur dioxide has the effect of adjusting the definition of excess
emissions.
To make this adjustment, the key provision that has been added is
proposed Sec. 73.35(b)(3).4 This new provision requires
that, after completing the annual compliance deductions in
Sec. 73.35(b)(2) for all affected units at the same source, the
Administrator may deduct, for a unit that would otherwise have excess
emissions, up to a certain amount of allowances from the compliance
subaccounts of other units at the same source that would otherwise have
unused allowances. This second deduction of allowances would reduce the
number of excess emissions at the unit by an equivalent amount. The
owners and operators of such unit would still be subject to the excess
emissions penalty and offset requirements, but for only the excess
emissions remaining for the unit after the second deduction.
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\4\ In addition, the definitions of ``allowance transfer
deadline,'' ``compliance subaccount,'' and ``current year
subaccount'' are revised to be consistent with proposed
Sec. 73.35(b)(3).
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The Agency considered allowing a unit that would otherwise have
excess emissions to use the unused allowances at other units at the
same source to completely eliminate all excess emissions without any
penalty. It rejected that approach, however, because of the Act's
pervasive unit-by-unit orientation, particularly with regard to
SO2 emissions. For example, under sections 402 (e.g., the
definitions of ``existing unit'' and ``utility unit''), 403(b), 403(e),
404(a), and 405, the applicability of title IV is determined on a unit-
by-unit basis. Further, section 403(a)(1) requires allocation of
allowances to, and sections 403(e), 404, 405, 406, 409, and 410 set
annual SO2 emission limitations for, individual units, and
not sources. Under section 411(a), excess emissions and penalties are
determined for each individual unit. Moreover, section 412(a) requires
unit-by-unit monitoring of emissions. Allowing in all cases the use of
allowances from other unit compliance subaccounts to completely
eliminate a unit's excess emissions would effectively change the unit
allowance holding requirement to a source allowance holding
requirement. Therefore, balancing, on one hand, the goal of retaining
in the regulations the general unit-by-unit orientation to compliance
reflected in title IV and, on the other hand, the perceived need for
some compliance flexibility to account for inadvertent, minor errors,
EPA proposes to allow a large portion (but not all) of the allowances
required to be deducted to come from subaccounts of other units at the
source. This approach would provide some flexibility but also maintain
a strong incentive for owners and operators to hold a sufficient number
of allowances in each unit compliance subaccount. EPA is also open to
comment on other ways of implementing this objective.
The number of allowances that could be deducted under proposed
Sec. 73.35(b)(3) would be related to the average price of an allowance.
The average allowance price is defined in Sec. 73.35(b)(3) as the
average price paid for a spot allowance at the auction held under
Sec. 73.70 during the year for which compliance is being determined.
The Agency proposes using the average price paid for a spot allowance
at the auction to determine the average price of allowances at the time
that compliance is being determined because a spot allowance is usable
in the year it is auctioned and the auction is an annual event
authorized under the Clean Air Act and results in allowance prices that
are generally available to the public. Advance allowances, which are
also auctioned, are not usable for 7 years. The Agency will publish the
average price paid for a spot allowance (as defined in
Sec. 73.35(b)(3)) in the Federal Register by October 15 of each
compliance year.
The formula for determining the number of allowances that can be
deducted from other unit accounts is proposed in Sec. 73.35(b)(3) and
incorporates the average price of an allowance as follows:
Maximum deduction from other units = Excess emissions if no
deduction from other units-[Excess emissions if no deduction from
other units x 3 (Average allowance price)/Excess emissions
penalty] 5
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\5\ ``Maximum deduction from other units'' is the maximum number
of allowances that may be deducted for the year for which compliance
is being established, for a unit otherwise having excess emissions
from the compliance subaccounts of other units at the same source,
rounded to the nearest allowance. ``Excess emissions if no deduction
from other units'' is the tons of excess emissions that a unit would
otherwise have if no allowances were deducted for the unit from
other units under proposed Sec. 73.35(b)(3). ``Excess emissions
penalty'' is the applicable dollar amount of the penalty for one ton
of excess emissions of sulfur dioxide under Sec. 77.6(b). ``Average
allowance price'' is a dollar amount (which the Administrator will
publish in the Federal Register by October 15 of each year) equaling
the total proceeds from the spot allowance auction (including EPA
Reserve allowances and any privately offered allowances) held under
Sec. 73.70 during the year divided by the number of allowances sold
at such auction, rounded to the nearest dollar.
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[[Page 41361]]
The formula applies to any unit that would otherwise have excess
emissions under the existing rule, with two exceptions. First, if the
amount calculated is less than zero, the maximum allowance deduction
from other units equals zero (i.e., a negative number of allowances
cannot be deducted). Second, if the amount calculated results in less
than 10 tons of excess emissions, the amount that can be deducted from
other accounts must be adjusted so that 10 tons of excess emissions, or
the tons of excess emissions that would result if no allowances could
be deducted from other unit accounts, whichever is less, remain for the
unit. This provision ensures that any unit that would have excess
emissions under the existing rule would continue to have some excess
emissions under the proposed rule.
For all other cases, the formula in proposed Sec. 73.35(b)(3) would
apply if a unit fails to hold enough allowances in its unit subaccount
to cover its emissions. Using the formula, the number of allowances
that could be deducted from other unit compliance subaccounts at the
same source would equal the tons of excess emissions that a unit would
otherwise have without applying Sec. 73.35(b)(3) minus a calculated
value. The calculated value (i.e., the term after the ``-'' sign in the
formula) represents 6 the number of tons emitted by a unit
which cannot be offset by allowances from other unit
accounts.7 This value also represents, assuming the maximum
allowances under the formula are deducted from other units' accounts,
the tons of excess emissions at the unit. These excess emissions would
be subject to the excess emissions penalty ($2000 in 1990 dollars per
ton of excess emissions, adjusted for inflation each year).8
Because there are fewer tons subject to the penalty (i.e., because the
tons for which allowances were deducted from other unit accounts are
not subject to the penalty), the total penalty payment would be less
than the total penalty payment under the existing rule. EPA proposes
that the maximum allowance deduction be based on three times the
allowance price (with a 10 ton minimum for excess emissions) because
the Agency believes the resulting penalty would provide adequate
incentive for compliance while reducing the penalty payment for
inadvertent, minor errors.
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\6\ When actually applying the formula, the term (without
rounding to the nearest ton) is subtracted from the ``tons of excess
emissions if no allowance deduction from other units'; rounding
takes place afterwards.
\7\ When this number is subtracted from the tons of excess
emissions the unit would otherwise have if no allowances could be
deducted from other units, the result is the maximum number of
allowances that can be deducted from other units.
\8\ For 1998, the inflation-adjusted penalty is $2,581 per ton
of excess emissions.
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In general, the extent to which the total penalty payment is
reduced as a result of the revisions depends on the average market
price of an allowance and the excess emissions per ton penalty. For
instance, if three times the average market price of an allowance is 14
percent of the per ton excess emissions penalty, then the total penalty
payment for the unit would be about 9 14 percent of the
payment that would have resulted without the revisions. An exception is
where three times the average market price of an allowance is equal to
or greater than the per ton excess emissions penalty, in which case no
allowances would be deducted from other unit accounts and the total
penalty payment would be the same as under the existing rule. A second
exception is where three times the market price of an allowance, when
used in the formula, results in less than 10 tons of excess emissions.
In that case, the allowable allowance deduction from other unit
accounts would be adjusted so that the lesser of 10 tons of excess
emissions or the number of tons of excess emissions that would result
if no allowances could be deducted from other units would remain for
the unit.
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\9\ The relationship is approximate because the formula requires
rounding to the nearest allowance.
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This approach would reduce the total excess emissions penalty
payment owed for the unit while still ensuring, as intended by
Congress, that compliance would be always cheaper than emitting more
pollution than lawfully permitted.10 It would also encourage
use of the proposed provisions only in extraordinary or extenuating
circumstances and not as a matter of course. EPA is soliciting comment
on the formula in proposed Sec. 73.35(b)(3) and on any alternative
formulas that could be used to determine the number of allowances that
could be deducted from other unit compliance subaccounts at the same
source. Comment is specifically requested concerning: whether the limit
(in the proposed formula) on the number of allowances used from other
units should be based on three times the market price of an allowance
(and incorporate a 10 ton minimum); whether the limit should be raised
or lowered; and whether, with the limit, there would continue to be
appropriate incentives for compliance.
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\10\ See Senate Rep. No. 101-228 at 336, December 20, 1989,
(explaining that ``[t]he [excess emissions] fee, adjusted annually
to keep pace with inflation, is designed to be high enough that
pollution control options [e.g., acquiring allowances] will always
be cheaper than continuing to emit more pollution than lawfully
permitted.''
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The allowances deducted under proposed Sec. 73.35(b)(3) are limited
to those that are in the compliance subaccounts of other units at the
same source as the unit with excess emissions. This same-source
limitation ensures that only one designated representative is involved
in the deduction of allowances from other unit compliance subaccounts
and that changes necessary to existing contracts involving allowance
agreements among different owners of units are minimized. This approach
also limits the extent of deviation from title IV's general unit-by-
unit orientation by allowing a unit to use only allowances held for
other units that are at the same geographic location, i.e., at the same
plant.
In Sec. 73.35(b)(3)(i), EPA proposes two options for implementing
the provisions allowing, for a unit with excess emissions, deductions
of allowances from the compliance subaccounts of other units at the
source. EPA would implement only one of the two options. The options
are described below.
1. Option 1
Under Option 1, deductions from other unit compliance subaccounts
are automatic unless the authorized account representative requests
that no such deductions be made. This would allow the Agency to make
these deductions immediately after all other compliance deductions are
made and would reduce the risk of delay of final compliance
determinations. The proposed provision also specifies the order of unit
compliance subaccounts for which allowances would be deducted from
other unit compliance subaccounts and the order of the other unit
compliance subaccounts from which the allowances would be deducted,
allowing authorized account representatives to know in advance the
sequence of deduction. The sequence is based on the Allowance Tracking
System account numbers of the units involved. Allowances would be
deducted first for the unit that has the lowest account number of the
units at the source and then for each subsequent unit, in order of
increasing account number and ending with the unit with the highest
account number at the source. Likewise, allowances would be deducted
from the unit with unused allowances that has the lowest account number
at the source and then for each unit that has unused allowances, in
[[Page 41362]]
order of increasing account numbers at that source. Under this ordering
scheme, alphabetical characters would have values increasing in
alphabetical order and lower values than all numeric characters, and
the sort would begin on the left-most character and end on the right-
most character of each 12 character account number. This order is
consistent with how alphabetical and numeric characters are internally
represented and sorted in the Agency's mainframe computer that runs the
Allowance Tracking System, making this a cost effective approach for
handling the deductions. An example of the order of unit compliance
subaccounts from which (or for which) allowances would be deducted is
as follows: 00038700PFLG, 00038700PFL4, 000387004GT2. Within a
compliance subaccount, allowances would be deducted under
Sec. 73.35(b)(3) on a first-in, first-out (FIFO) accounting basis.
EPA considered that, under this approach in Option 1, authorized
account representatives would not have the discretion to choose the
order of the compliance subaccounts for which and from which allowances
are to be deducted. This may be a concern especially where the owners
or their ownership shares are different for different units at a
source. If, however, an authorized account representative objects to
the order described above (which is set forth in proposed
Sec. 73.35(b)(3)), a notification may be submitted at any time by the
allowance transfer deadline that identifies the units for which
Sec. 73.35(b)(3) is not to be applied. If such notification is
submitted for a unit and the unit fails to meet the unit allowance
holding requirement reflected in Sec. 73.35(b)(1) and (2), none of the
allowances from other unit compliance subaccounts would be used to
reduce the total amount of excess emissions at the unit. If no
notification is submitted, the Agency would automatically make the
deductions from the other units at the source, and the tons of excess
emissions would be reduced.
2. Option 2
EPA is also proposing a second option for deducting allowances from
other units at the sources. Under Option 2, the authorized account
representative would be allowed to submit for a unit, within 15 days of
receiving notice from the Agency of a unit's failure to hold sufficient
allowances in its unit account, the identification of the serial
numbers of the allowances (held in compliance subaccounts of other
units at the source) that are to be deducted under Sec. 73.35(b)(3) and
the compliance subaccounts from which those allowances would be
deducted. Like the first alternative, the authorized account
representative could choose not to have allowances deducted from other
compliance subaccounts. A disadvantage of this alternative is that it
would likely delay the Agency's end of year compliance determination
and extend the allowance freeze by at least two weeks because of the
time it would take to mail notification and wait for a response. The
Agency is soliciting comment on both Option 1 and Option 2.
The changes in today's proposal allowing allowances to be deducted
for a unit from other unit accounts are consistent with the provisions
in title IV governing excess emissions, i.e., sections 403(g), 411(a)
and (b), and 414 of the Act. Section 403(g) is a general prohibition
barring an affected unit from emitting sulfur dioxide in excess of the
number of allowances ``held for that unit for that year by the owner or
operator of the unit'' (42 U.S.C. 7651b(g)), section 411(a) establishes
the owner or operator's liability for an excess emissions penalty and
offset if sulfur dioxide is emitted at a unit in excess of the
allowances ``the owner or operator holds for use for the unit for that
calendar year'' (42 U.S.C. 7651j(a)), and section 414 states that the
operation of an affected unit to emit sulfur dioxide in excess of
allowances ``held for the unit'' is deemed a violation of the Act and
that each ton emitted in excess of allowances held constitutes a
separate violation (42 U.S.C. 7651m). In all three provisions, the Act
refers to holding allowances ``for'' a unit but does not specifically
dictate the account in which those allowances must be held. See also 42
U.S.C. 7651b(f) and 7651j(b).
Under the January 11, 1993 Acid Rain core rules, these statutory
provisions were generally interpreted to mean allowances for a unit
could be held only in the compliance subaccount of the unit for which
allowances were being deducted. The Agency, however, believes this
interpretation should be reconsidered and revised to provide some
compliance flexibility while balancing the need for compliance
flexibility with the general unit-by-unit orientation of title IV.
Because of the multiple references to allowances held ``for'' a unit,
the Agency believes the language is broad enough to support today's
proposed interpretation, which allows most (but not all) of the
allowances to be deducted from the compliance subaccount of other units
at the same source and thus establishes a limited departure from the
general unit-by-unit orientation for compliance.
Allowing a unit to use allowances from the compliance subaccounts
of other units at the same source is consistent with the limited
exception to unit-by-unit compliance currently allowed for units
sharing a common stack but not individually monitoring emissions under
part 75. Under existing Sec. 73.35(e), the authorized account
representative for affected units that share a common stack and lack
individual-unit monitoring may arbitrarily assign a percentage of
allowances to be deducted from the compliance subaccount for each unit.
This assignment, which can be submitted as late as 60 days after the
end of the year when the annual compliance report is due, can result in
100 percent of the required allowance deduction coming from the
compliance subaccount of only one of the units sharing the common
stack. Such a single deduction would not necessarily represent the
emissions from each unit, because each unit sharing the common stack
may have discharged some portion of the emissions measured. Thus, under
the existing regulations, allowances already can be deducted, under
limited circumstances, from the compliance subaccounts of other units
at the same source. This limited exception to unit-by-unit compliance
is allowed in order to avoid requiring monitoring of the ducts of each
common stack unit, which may not be physically possible, and to
minimize the need for redesigning stack and duct configurations to make
individual-unit monitoring possible. See, e.g., Docket # A-90-51,
Response to Public Comment on the Core Rules of the Acid Rain Program,
Volume III at p. M-393 (October 1992). Although there are a number of
affected units under the Acid Rain Program that are subject to the
common stack provision (i.e., 23 percent of the affected units
operating in 1996 reported SO2 or NOX data that
included the emissions from two or more units), EPA has seen no adverse
effects on the functioning of the Acid Rain Program during the first
three years of compliance determinations.
Like the common stack provisions, today's revisions would permit
allowances to be deducted for a unit that would otherwise have excess
emissions from the compliance subaccounts of other units at the same
source even though the emissions involved did not come from those other
units. However, unlike the common stack provision, the proposed
revisions would limit the number of allowances that could be deducted
from the compliance subaccounts of other units. The reason for this
difference is that the
[[Page 41363]]
common stack provisions address primarily situations where it may not
be feasible to monitor the emissions from individual units sharing a
common stack. In contrast, today's revisions would address primarily
cases where feasibility of monitoring is not at issue, but because of
inadvertent, minor errors in accounting for emissions or in handling
allowances, a unit fails to hold enough allowances in its compliance
subaccount at the end of the year. Because today's revisions apply to
units that, absent inadvertent, minor errors, could have complied with
the individual unit allowance holding requirement, the Agency believes
it is appropriate to strike a balance between, on one hand, compliance
flexibility to reduce total excess emission penalty payments for
failing to hold enough allowances because of inadvertent, minor errors
and, on the other hand, maintenance of the general unit-by-unit
orientation of title IV. Today's proposed revision reflects this
balancing of objectives by allowing deductions of allowances from other
units but limiting the extent of such deductions so that significant
excess emissions penalty payments would still result from failing to
hold sufficient allowances in the unit's own compliance subaccount.
This approach would ensure that utilities would continue to strive to
meet the unit allowance holding requirement.
Today's proposed changes, while designed primarily to address the
consequences of making inadvertent, minor errors, would apply to all
allowance holding violations and would not require a demonstration
concerning the nature of the error. The Agency maintains that it would
be difficult, and costly in terms of time and resources, to investigate
and determine why a unit compliance subaccount failed to hold
sufficient allowances and to distinguish between unintentional, minor
errors and other errors. Since the proposed allowance deduction
flexibility is not limited to inadvertent, minor errors, that is an
additional reason for limiting that flexibility, i.e., by limiting the
number of allowances that can be deducted from other units at a source.
This limitation would provide an incentive to avoid any errors and
would minimize any abuse of this flexibility. EPA believes that
generally the total amount of excess emissions penalty payment (i.e.,
which, at the 1997 auction price of an allowance, would be about 14
percent of the penalty payments under the existing rule) that would
remain even if unused allowances were available from other units at the
source would deter companies from using this provision except in
extraordinary situations.
In sum, the adjustment to the allowance holding requirement in
today's proposal addresses the potential for inadvertent, minor errors
by utilities regulated under the Acid Rain Program and provides a
reasonable approach for addressing such errors. EPA requests comment on
all aspects of this proposed revision, including the options presented
concerning notification by the authorized account representative and
the effect, if any, of the revision on the auction or market price of
allowances traded during the year or on trading behavior. EPA also
requests comment on how Option 1 and Option 2 would apply to a source
that has two authorized account representatives under Sec. 74.4(c)
(i.e., one for the utility units, and one for the opt-in units, at the
same source).
C. Signature Requirement for Transfer Requests
Under the current rule, Sec. 73.50(b)(1) requires authorized
account representatives seeking recordation of an allowance transfer to
submit a request for the transfer that contains, among other things,
signatures of the authorized account representatives for both the
transferor and the transferee accounts. The Agency proposes to add
Sec. 73.50(b)(2) to clarify that the authorized account representative
for a transferee account can meet the signature requirement by
submitting, along with or in advance of a transfer request from the
authorized account representative for any transferor account, a signed
statement identifying the accounts into which any transfer of
allowances, on or after the date of EPA's receipt of the statement, is
authorized. The signed statement would state that, upon receipt by the
Administrator, the authorization is binding on the authorized account
representative and on any new authorized account representative
11 for all such allowance transfers into the specified
accounts until such time as EPA receives a signed statement from the
authorized account representative retracting the authorization.
Proposed Sec. 73.50(b)(2) sets forth the specific language that would
be included in the statement. Under existing Secs. 72.23 (a) and (b),
any new authorized account representative would, in fact, be bound by
such a statement. Once the statement is received and an allowance
transfer request is received and processed, EPA would still send both
authorized account representatives transfer confirmation reports of any
recorded transfer so that the authorized account representatives of
both accounts have the opportunity to review the transfer after it has
been recorded.
---------------------------------------------------------------------------
\11\ Binding future authorized account representatives to the
statement ensures that the reduced burden resulting from submitting
a signature in advance is not lost automatically when an authorized
account representative changes.
---------------------------------------------------------------------------
The Agency believes the existing rules already allow for this
approach. Existing Sec. 73.50(b)(1) allows the Administrator to specify
a format for submitting a transfer request, which means the
Administrator can already allow information from each authorized
account representative to come in separately. Further, under existing
Sec. 73.50(b)(1), the transferee authorized account representative
certifies the transfer by attesting to the language in the allowance
transfer form, which is also set forth in Sec. 72.21(b). This is the
same language to which he or she would attest when authorizing
transfers in advance. Moreover, existing Sec. 73.50(b)(1)(iii) through
(v) specifies the information (i.e., the signatures and identification
numbers of the authorized account representatives and the date of the
signatures) that must be submitted by both authorized account
representatives, but does not require the information from both
individuals to come in simultaneously. Therefore, the Administrator is
not precluded from accepting a signature from an authorized account
representative for the transferee account that is submitted prior to
the submission of the signature of the authorized account
representative for the transferor account. In light of the minimal, if
any, protection that simultaneously submitted signatures would provide
to the parties,12 it is unnecessary for both signatures to
come in at the same time. Hence, under the existing regulations, EPA
can allow a signature of the transferee authorized account
representative to be submitted prior to the signature of the transferor
authorized account representative. Nevertheless, EPA believes that
clarifying, through specific rule language, that this approach can be
used would be helpful to authorized account representatives who wish to
authorize, in advance, future transfers into an account and reduce
their burden by eliminating the need for each party to the transfer to
see and sign the allowance transfer form. Proposed
[[Page 41364]]
Sec. 73.50(b)(2) is added to make this clarification.
---------------------------------------------------------------------------
\12\ The two-signature requirement, required in section 403(b)
of the Act, was apparently intended to protect the transferor and
transferee during the transfer process, but it is the parties'
private agreement, not the allowance transfer form submitted to EPA,
that protects the transferor and transferee.
---------------------------------------------------------------------------
Today's clarification is spurred by a desire to put in place a
system that allows for submitting transfer requests electronically to
the Agency. According to comments received from both industry and
environmental organizations, such a system would increase efficiency,
reduce personnel requirements, reduce data entry errors and paperwork,
make the Allowance Tracking System more attractive to users, and result
in a more vibrant and active market. See, e.g., Docket # A-91-43,
Response to Public Comment on the Core Rules of the Acid Rain Program,
Volume I at p. A-27. In response, the Agency has been working with
utility representatives in an effort to put in place Electronic Data
Interchange (EDI) technology, a uniform standard set by the American
National Standards Institute for electronic interchange of business
transactions, to address this issue. Comments by experts familiar with
established protocols for EDI have indicated that requiring two
signatures on the same submission makes implementation of the EDI
technology much more difficult. Proposed Sec. 73.50(b)(2) would make it
clear to utilities that they have the option of submitting a signature
in advance, which would remove this obstacle and make it easier to use
EDI.13 In the meantime, in light of the Agency's existing
authority to do so, the Agency has begun to accept signature statements
from authorized account representatives who want to take advantage of
this option immediately for transfer requests submitted either in hard
copy or electronically.
---------------------------------------------------------------------------
\13\ EPA considered completely eliminating the signature
requirement for the authorized account representative for the
transferee account; however, the Agency is constrained from doing so
by statutory language in section 403(b) of the Act, which states
that ``[t]ransfers of allowances shall not be effective until
written certification of the transfer, signed by a responsible
official of each party to the transfer, is received and recorded by
the Administrator.'' 42 U.S.C. 7651b(b).
---------------------------------------------------------------------------
The streamlining benefit of having the signature of the authorized
account representative for the transferee account submitted prior to
any specific transfer request is consistent with the general purposes
of section 403(d) of the statute. This provision requires that the
Administrator specify ``all necessary procedures and requirements for
an orderly and competitive functioning of the allowance system.'' 42
U.S.C. 7651b(d). Because an advance signature authorization from the
authorized account representative for the transferee account would make
subsequent allowance transfers less burdensome (both EDI-initiated and
hard copy-initiated transfers), it would enhance the operation of the
Allowance Tracking System and the allowance market as a whole.
For the above reasons, the Agency has added Sec. 73.50(b)(2) to
clarify that a signature statement from the authorized account
representative for the transferee account can be submitted prior to the
signature of the authorized account representative for the transferor
account.
D. Impacts of Revisions on Acid Rain Permits
Today's proposed revisions are designed so that the contents of
existing acid rain permits and the State regulations required to issue
acid rain permits would not have to be changed in order for the
revisions to become effective. With the exception of changes in the
definitions of ``allowance transfer deadline,'' ``compliance
subaccount,'' and ``current year subaccount,'' all of today's revisions
are made in 40 CFR part 73. Forty CFR part 73 governs EPA's operation
of the Allowance Tracking System and does not contain any requirements
for permitting or any other activities for which State permitting
authorities are responsible. For this reason, 40 CFR part 73 has not
been, and is not required to be, adopted by State permitting
authorities under Sec. 72.72. Thus, it would be unnecessary for State
permitting authorities to revise the acid rain permits they have issued
or regulations they have adopted to reflect today's proposed changes to
40 CFR part 73.
Similarly, the proposed changes could go into effect without State
permitting authorities revising acid rain permits or regulations to
reflect the two revised definitions in 40 CFR part 72. Under existing
Sec. 72.50(b), each Acid Rain permit is deemed to incorporate the
definitions in Sec. 72.2. Consequently, even if an acid rain permit
would be issued before the proposed changes to the Sec. 72.2
definitions would be adopted and become effective, the Agency would
propose to apply the final revised definitions to the units covered by
the permit in determining end-of-year compliance for all calendar years
for which the existing allowance transfer deadline (January 30) is on
or after the effective date of the revised definitions. Moreover, the
revised definitions would not affect the permitting activities of State
permitting authorities under 40 CFR part 72 and would be adopted in the
federal rules to implement changes made in EPA's operation of the
Allowance Tracking System under 40 CFR part 73.
While the final revised definitions in Sec. 72.2 would be applied
for any calendar year ending on or after the effective date of the
federal rule revision, State permitting authorities should revise their
own regulations to reflect such new definitions after they are
finalized. This would avoid any potential confusion on the part of
regulated entities and the public as to how end-of-year compliance
would be determined.
IV. Administrative Requirements
A. Executive Order 12866
Under Executive Order 12866 (58 FR 51735 (October 4, 1993)), the
Agency must determine whether the regulatory action is ``significant''
and therefore subject to Office of Management and Budget (OMB) review
and the requirements of the Executive Order. The Order defines
``significant regulatory action'' as one that is likely to result in a
rule that may:
(1) Have an annual effect on the economy of $100 million or more
or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities;
(2) Create a serious inconsistency or otherwise interfere with
an action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements,
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
Pursuant to the terms of Executive Order 12866, it has been
determined that this rule is a ``significant regulatory action''
because the rule seems to raise novel legal or policy issues. As such,
this action was submitted to OMB for review. Any written comments from
OMB to EPA, any written EPA response to those comments, and any changes
made in response to OMB suggestions or recommendations are included in
the docket. The docket is available for public inspection at the EPA's
Air Docket Section, which is listed in the ADDRESSES section of this
preamble.
B. Unfunded Mandates Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), P.L.
104-4, establishes requirements for federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
[[Page 41365]]
analysis, before promulgating a proposed or final rule that includes a
federal mandate that may result in expenditure by State, local, and
tribal governments, in aggregate, or by the private sector, of $100
million or more in any one year. Section 205 generally requires that,
before promulgating a rule for which a written statement must be
prepared, EPA identify and consider a reasonable number of regulatory
alternatives and adopt the least costly, most cost-effective, or least
burdensome alternative that achieves the objectives of the rule. The
provisions of section 205 do not apply when they are inconsistent with
applicable law. Moreover, section 205 allows EPA to adopt an
alternative other than the least costly, most cost-effective, or least
burdensome alternative if the Administrator explains why that
alternative was not adopted. Finally, section 203 requires that, before
establishing any regulatory requirements that may significantly or
uniquely affect small governments, EPA must have developed a small
government agency plan. The plan must provide for notifying any
potentially affected small governments to have meaningful and timely
input in the development of EPA regulatory proposals with significant
federal intergovernmental mandates, and informing, educating, and
advising small governments on compliance with the regulatory
requirements.
Because the proposed rule is estimated to result in the expenditure
by State, local, and tribal governments or the private sector of less
than $100 million in any one year, the Agency has not prepared a
budgetary impact statement or specifically addressed the selection of
the least costly, most cost-effective, or least burdensome alternative.
Because small governments will not be significantly or uniquely
affected by this rule, the Agency is not required to develop a plan
with regard to small governments.
The proposed revisions to parts 72 and 73 will potentially reduce
the burden on regulated entities by streamlining the allowance transfer
process, extending the allowance transfer deadline, and providing more
flexible allowance holding requirements. The revisions will not
otherwise have any significant impact on State, local, and tribal
governments.
C. Paperwork Reduction Act
This action proposing revisions to parts 72 and 73 will not impose
any new information collection burden subject to the Paperwork
Reduction Act (44 U.S.C. 3501, et seq.). In fact, if anything, the
revisions reduce burden by clarifying that the signature of the
authorized account representative for a transferee account can be
submitted in advance of an allowance transfer form, eliminating the
need for that authorized account representative to see and sign future
allowance transfer forms. To the extent any new information will be
required by proposed revisions concerning the holding of allowances in
other units' compliance subaccounts, the Agency projects that less than
ten companies per year will be affected by those revisions. Overall,
the revisions will result in no material change in the type or amount
of information collected under the existing ICR. OMB has previously
approved the relevant information collection requirements contained in
parts 72 and 73 under the provisions of the Paperwork Reduction Act and
has assigned OMB control number 2060-0258. 58 FR 3590, 3650 (1993).
Burden means the total time, effort, or financial resources
expended by persons to generate, maintain, retain, or disclose or
provide information to or for a Federal agency. This includes the time
needed to review instructions; develop, acquire, install, and utilize
technology and systems for the purposes of collecting, validating, and
verifying information, processing and maintaining information, and
disclosing and providing information; adjust the existing ways to
comply with any previously applicable instructions and requirements;
train personnel to be able to respond to a collection of information;
search data sources; complete and review the collection of information;
and transmit or otherwise disclose the information.
Copies of the ICR may be obtained from the Director, Regulatory
Information Division; EPA; 401 M St. SW (mail code 2137); Washington,
DC 20460 or by calling (202) 564-2740. Include the ICR and/or OMB
number in any correspondence.
D. Regulatory Flexibility
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq.,
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
Small entities include small businesses, small not-for-profit
enterprises, and small government jurisdictions.
This proposed rule would not have a significant impact on a
substantial number of small entities. As discussed above, the revisions
would reduce the burden on regulated entities by streamlining and
adding flexibility to the regulations. Therefore, I certify that this
action will not have a significant economic impact on a substantial
number of small entities.
E. Applicability of Executive Order 13045: Children's Health Protection
This proposed rule is not subject to Executive Order 13045,
entitled Protection of Children from Environmental Health Risks and
Safety Risks (62 FR 19885 (1997)), because it does not involve
decisions on environmental health risks or safety risks that may
disproportionately affect children.
List of Subjects in 40 CFR Parts 72 and 73
Environmental protection, Acid rain, Administrative practice and
procedure, Air pollution control, Compliance plans, Electric utilities,
Penalties, Reporting and recordkeeping requirements, Sulfur dioxide.
Dated: July 28, 1998.
Carol M. Browner,
Administrator, U.S. Environmental Protection Agency.
For the reasons set out in the preamble, title 40, chapter I of the
Code of Federal Regulations is proposed to be amended as follows:
PART 72--[AMENDED]
1. The authority citation for part 72 continues to read as follows:
Authority: 42 U.S.C. 7601 and 7651, et seq.
Sec. 72.2 [Amended]
2. Section 72.2 is amended by:
i. Removing from the definition of ``Allowance transfer deadline''
the words ``January 30 or, if January 30'' and adding, in their place,
the words ``March 1 (or February 29 in any leap year) or, if such
day''; and removing the word ``unit's'', after the words ``meeting
the'';
ii. Removing from the definition of ``Compliance subaccount'' the
word ``unit's'', after the words ``meeting the''; and
iii. Adding to the definition of ``Current year subaccount'' the
words ``, or any other affected unit at the same source to the extent
provided under Sec. 73.35(b)(3),'' after the words ``for use by the
unit'' and removing from the same definition the word ``its'' and
adding, in its place, the word ``the''.
3. Section 72.40 is amended by adding to paragraph (a)(1) the words
``, or in the compliance subaccount of another affected unit at the
same source
[[Page 41366]]
to the extent provided in Sec. 73.35(b)(3),'' after the words ``under
Sec. 73.34(c) of this chapter)''.
PART 73--[AMENDED]
4. The authority citation for part 73 continues to read as follows:
Authority: 42 U.S.C. 7601 and 7651, et seq.
Sec. 73.34 [Amended]
5. Section 73.34 is amended by removing from paragraph (c)(4) the
words ``or direct sale pursuant to subpart E of this part''.
6. Section 73.35 is amended by revising paragraph (a)(2) and adding
paragraph (b)(3) to read as follows:
Sec. 73.35 Compliance.
(a) * * *
(2) Such allowance is:
(i) Recorded in the unit's compliance subaccount; or
(ii) Transferred to the unit's compliance subaccount, with the
transfer submitted correctly pursuant to subpart D for recordation in
the compliance subaccount for the unit by not later than the allowance
transfer deadline of the calendar year following the year for which
compliance is being established in accordance with subpart D of this
part; or
(iii) Held in the compliance subaccount of another affected unit at
the same source in accordance with paragraph (b)(3) of this section.
Option 1
(b) * * *
(3)(i) If, after the Administrator completes the deductions under
paragraph (b)(2) of this section for all affected units at the same
source, a unit would otherwise have excess emissions and one or more
other affected units at the source would otherwise have unused
allowances in their compliance subaccounts and available for such other
units under paragraphs (a)(1) and (a)(2)(i) and (ii) of this section
for the year for which compliance is being established, the
Administrator will deduct such allowances from the compliance
subaccounts of the units otherwise having unused allowances, and reduce
the tons of excess emissions otherwise at the unit by an equal amount,
up to the amount calculated as follows:
Maximum deduction from other units = Excess emissions if no
deduction from other units-[Excess emissions if no deduction from
other units x 3 (Average allowance price) / Excess emissions
penalty]
Where:
``Maximum deduction from other units'' is the maximum number of
allowances that may be deducted, for the year for which compliance
is being established, for a unit otherwise having excess emissions
from the compliance subaccounts of other units at the same source,
rounded to the nearest allowance.
``Excess emissions if no deduction from other units'' is the
tons of excess emissions that a unit would otherwise have if no
allowances were deducted for the unit from other units under this
paragraph (b)(3)(i) or paragraph (b)(3)(ii) of this section.
``Excess emissions penalty'' is the applicable dollar amount of the
penalty for one ton of excess emissions of sulfur dioxide for the
year under Sec. 77.6(b) of this chapter.
``Average allowance price'' is a dollar amount (which the
Administrator will publish in the Federal Register by October 15 of
each year) equaling the total proceeds from the spot allowance
auction (including EPA Reserve allowances and any privately offered
allowances) held under Sec. 73.70 during the year divided by the
number of allowances sold at such auction, rounded to the nearest
dollar.
(ii) Notwithstanding paragraph (b)(3)(i) of this section,
(A) If the amount calculated is less than or equal to zero, the
maximum allowance deduction from other units will equal zero; and
(B) If the amount calculated is greater than zero and results in
less than 10 tons of excess emissions, the maximum allowance deduction
from other units shall be adjusted so that 10 tons of excess emissions,
or the tons of excess emissions that would result if no allowances
could be deducted from other units, whichever is less, remain for the
unit.
(iii) Beginning with the unit having the lowest Allowance Tracking
System account number and ending with the unit having the highest
account number (with account numbers sorted beginning on the left-most
character and ending on the right-most character of each 12 character
account number and with the letter characters assigned values in
alphabetical order and less than all numeric characters), the
Administrator will deduct allowances in accordance with paragraphs
(b)(3)(i) and (ii) of this section:
(A) For each unit, at the source, otherwise having excess
emissions; and
(B) From each unit, at the source, otherwise having unused
allowances in its compliance subaccount.
(iv) Allowances in a compliance subaccount will be deducted under
paragraphs (b)(3)(i) and (ii) of this section on a first-in, first-out
(FIFO) accounting basis in accordance with paragraph (c)(2) of this
section.
(v) Notwithstanding paragraphs (b)(3)(i) and (ii) of this section,
if the Administrator receives a written notification by the authorized
account representative for a source, on or before the allowance
transfer deadline for the year for which compliance is being
established, that the provisions in paragraphs (b)(3)(i) and (ii) of
this section are not to be applied to specified units at the source,
the Administrator will not make any deductions under paragraphs
(b)(3)(i) and (ii) of this section for the specified units at the
source.
Option 2
(b) * * *
(3)(i) If, after the Administrator completes the deductions under
paragraph (b)(2) of this section for all affected units at the same
source, a unit would otherwise have excess emissions and one or more
other affected units at the source would otherwise have unused
allowances in their compliance subaccounts and available for such other
units under paragraph (a)(1) and (a)(2)(i) and (ii) of this section for
the year for which compliance is being established, the Administrator
will notify in writing the authorized account representative that he or
she may specify which of such allowances are to be deducted from the
compliance subaccounts of the units otherwise having unused allowances
in order to reduce the tons of excess emissions otherwise at the unit
by an equal amount, up to the amount calculated as follows:
Maximum deduction from other units = Excess emissions if no
deduction from other units-[Excess emissions if no deduction from
other units x 3 (Average allowance price) / Excess emissions
penalty]
Where:
``Maximum deduction from other units'' is the maximum number of
allowances that may be deducted for the year for which compliance is
being established, for a unit otherwise having excess emissions from
the compliance subaccounts of other units at the same source,
rounded to the nearest allowance.
``Excess emissions if no deduction from other units'' is the
tons of excess emissions that a unit would otherwise have if no
allowances were deducted for the unit from other units under this
paragraph (b)(3)(i) or paragraph (b)(3)(ii) of this section.
``Excess emissions penalty'' is the applicable dollar amount of the
penalty for one ton of excess emissions of sulfur dioxide under
Sec. 77.6(b) of this chapter.
``Average allowance price'' is a dollar amount (which the
Administrator will publish in the Federal Register by October 15 of
each year) equaling the total proceeds from the spot allowance
auction (including EPA Reserve allowances and any privately offered
allowances) held under Sec. 73.70 during the year divided by the
number of allowances sold at such auction, rounded to the nearest
dollar.
(ii) Notwithstanding paragraph (b)(3)(i) of this section,
[[Page 41367]]
(A) If the amount calculated is less than or equal to zero, the
maximum allowance deduction from other units will equal zero; and
(B) If the amount calculated is greater than zero and results in
less than 10 tons of excess emissions, the maximum allowance deduction
from other units shall be adjusted so that 10 tons of excess emissions,
or the tons of excess emissions that would result if no allowances
could be deducted from other units, whichever is less, remain for the
unit.
(iii) If the authorized account representative submits within 15
days of receipt of a notification under paragraph (b)(3)(i) of this
section a written request specifying allowances to be deducted in
accordance with paragraph (b)(3)(i) of this section, the Administrator
will deduct such allowances, and reduce the tons of excess emissions
otherwise at the unit by an equal amount, up to the amount calculated
under paragraph (b)(3)(i) of this section.
7. Section 73.50 is amended by redesignating paragraph (b)(2) as
(b)(3) and adding new paragraph (b)(2) as follows:
Sec. 73.50 Scope and submission of transfers.
* * * * *
(b) * * *
(2)(i) The authorized account representative for the transferee
account can meet the requirements in paragraphs (b)(1)(ii) and (iii) of
this section by submitting, in a format prescribed by the
Administrator, a statement signed by the authorized account
representative and identifying each account into which any transfer of
allowances, submitted on or after the date on which the Administrator
receives such statement, is authorized. Such authorization shall be
binding on any authorized account representative for such account and
shall apply to all transfers into the account that are submitted on or
after such date of receipt, unless and until the Administrator receives
a statement in a format prescribed by the Administrator and signed by
the authorized account representative retracting the authorization for
the account.
(ii) The statement under paragraph (b)(2)(i) of this section shall
include the following: ``By this signature, I authorize any transfer of
allowances into each Allowance Tracking System account listed herein,
except that I do not waive any remedies under 40 CFR part 73, or any
other remedies under State or federal law, to obtain correction of any
erroneous transfers into such accounts. This authorization shall be
binding on any authorized account representative for such account
unless and until a statement signed by the authorized account
representative retracting this authorization for the account is
received by the Administrator.''
* * * * *
[FR Doc. 98-20605 Filed 7-31-98; 8:45 am]
BILLING CODE 6560-50-U
