E7-18849. Approval and Promulgation of Air Quality Implementation Plans; Virginia; Clean Air Interstate Rule Budget Trading Programs

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Proposed rule.

SUMMARY:

EPA is proposing to approve a revision to the Virginia State Implementation Plan (SIP) submitted on March 30, 2007 and supplemented on April 30, 2007 and June 11, 2007. This revision addresses the requirements of EPA's Clean Air Interstate Rule (CAIR), promulgated on May 12, 2005 and subsequently revised on April 28, 2006 and December 13, 2006. EPA is proposing to determine that the SIP revision fully implements the CAIR requirements for Virginia. Therefore, as a consequence of the SIP approval, EPA will also withdraw the CAIR Federal Implementation Plans (FIP) that address sulfur dioxide (SO2), nitrogen oxides (NO_X) annual, and NOX ozone season emissions in Virginia. The CAIR FIPs for all States in the CAIR region were promulgated on April 28, 2006 and subsequently revised on December 13, 2006. The CAIR requires affected States to reduce emissions of SO2 and NOX that significantly contribute to, and interfere with maintenance of, the national ambient air quality standards (NAAQS) for fine particulates and/or ozone in any downwind state. The CAIR establishes State budgets for SO2 and NOX and requires States to submit SIP revisions that implement these budgets in States that EPA determined contribute to nonattainment in downwind states. States have the flexibility to choose which control measures to adopt to achieve the budgets, and may choose whether or not to participate in the EPA-administered cap-and-trade programs. In the SIP revision that EPA is proposing to approve, Virginia would meet CAIR requirements by participating in the EPA-administered cap-and-trade programs addressing SO2, NOX annual, and NOX ozone season emissions.

DATES:

Written comments must be received on or before October 25, 2007.

ADDRESSES:

Submit your comments, identified by Docket ID Number EPA-R03-OAR-2007-0381 by one of the following methods:

A. http://www.regulations.gov. Follow the on-line instructions for submitting comments.

B. E-mail: [e-mail].

C. Mail: EPA-R03-OAR-2007-0381, Marilyn Powers, Acting Chief, Air Quality Planning Branch, Mailcode 3AP21, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.

D. Hand Delivery: At the previously-listed EPA Region III address. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information.

Instructions: Direct your comments to Docket ID No. EPA-R03-OAR-2007-0381. EPA's policy is that all comments received will be included in the public docket without change, and may be made available online at http://www.regulations.gov,, including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through http://www.regulations.gov or e-mail. The http://www.regulations.gov Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through http://www.regulations.gov,, your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses.

Docket: All documents in the electronic docket are listed in the http://www.regulations.gov index. Although listed in the index, some information is not publicly available, i.e., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically in http://www.regulations.gov or in hard copy during normal business hours at the Air Protection Division, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the State submittal are available at the Virginia Department of Environmental Quality, 629 East Main Street, Richmond, Virginia 23219.

FOR FURTHER INFORMATION CONTACT:

Marilyn Powers, [phone], or by e-mail at [e-mail].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. What Action Is EPA Proposing To Take?

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

III. What Are the General Requirements of CAIR and the CAIR FIPs?

IV. What Are the Types of CAIR SIP Submittals?

V. Analysis of Virginia's CAIR SIP Submittal

A. State Budgets for Allowance Allocations

B. CAIR Cap-and-Trade Programs

C. Applicability Provisions for Non-EGU NOX SIP Call Sources

D. NOX Allowance Allocations

E. Allocation of NOX Allowances From Compliance Supplement Pool (CSP)

F. Individual Opt-in Units

VI. Information Pertaining to SIP Submittals From the Commonwealth of Virginia

VII. Proposed Actions

VIII. Statutory and Executive Order Reviews

I. What Action Is EPA Proposing To Take?

EPA is proposing to approve a revision to Virginia's SIP, submitted on March 30, 2007 and supplemented on April 30, 2007 and June 11, 2007. In its SIP revision, Virginia would meet CAIR requirements by requiring certain electric generating units (EGUs) to participate in the EPA-administered CAIR cap-and-trade programs addressing SO2, NOX annual, and NOX ozone season emissions. EPA is proposing to determine that the Virginia SIP, as revised, will meet the applicable requirements of CAIR. Any final action approving Virginia's SIP revision will be taken by the Regional Administrator for Region 3. As a consequence of the SIP approval, the EPA Administrator will issue a final rule to withdraw the FIPs addressing SO2, NOX annual, and NOX ozone season emissions for Virginia, which will delete and reserve 40 CFR 52.2440 and 2441. The withdrawal of the CAIR FIPs for Virginia is a conforming amendment that must be made once the SIP is approved because EPA's authority to issue the FIPs was premised on a deficiency in the SIP for Virginia. Once the SIP to implement CAIR is fully approved, EPA no longer has authority for the FIPs. Thus, EPA will not have the option of maintaining the FIPs following the full SIP approval. Accordingly, EPA does not intend to offer an opportunity for a public hearing or an additional opportunity for written public comment on the withdrawal of the FIPs.

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

The CAIR was published by EPA on May 12, 2005 (70 FR 25162). In this rule, EPA determined that 28 States and the District of Columbia contribute significantly to nonattainment and interfere with maintenance of the NAAQS for fine particles (PM2.5) and/or 8-hour ozone in downwind States in the eastern part of the country. As a result, EPA required those upwind States to revise their SIPs to include control measures that reduce emissions of SO2, which is a precursor to PM2.5 formation, and/or NOX, which is a precursor to both ozone and PM2.5 formation. For jurisdictions that contribute significantly to downwind PM2.5 nonattainment, CAIR sets annual State-wide emission reduction requirements (i.e., budgets) for SO2 and annual State-wide emission reduction requirements for NOX. Similarly, for jurisdictions that contribute significantly to 8-hour ozone nonattainment, CAIR sets State-wide emission reduction requirements for NOX for the ozone season (May 1st to September 30th). Under CAIR, States may implement these reduction requirements by participating in the EPA-administered cap-and-trade programs or by adopting any other control measures.

Section 110(a)(2)(D) of the CAA requires states to reduce emissions that significantly contribute to nonattainment or interfere with maintenance of the NAAQS in downwind states. CAIR explains to subject States what must be included in their SIPs to address the requirements of section 110(a)(2)(D) with respect to the 8-hour ozone and PM2.5 NAAQS. EPA made national findings, effective on May 25, 2005, that the States had failed to submit SIPs meeting the requirements of section 110(a)(2)(D). The SIPs were due in July 2000, three years after the promulgation of the 8-hour ozone and PM2.5 NAAQS. These findings started a 2-year clock for EPA to promulgate a FIP to address the requirements of section 110(a)(2)(D). Under CAA section 110(c)(1), EPA may issue a FIP anytime after such findings are made and must do so within two years unless a SIP revision correcting the deficiency is approved by EPA before the FIP is promulgated.

On April 28, 2006 (71 FR 25328), EPA promulgated FIPs for all States covered by CAIR in order to ensure the emissions reductions required by CAIR are achieved on schedule. Each CAIR State is subject to the FIPs until the State fully adopts, and EPA approves, a SIP revision meeting the requirements of CAIR. The CAIR FIPs require EGUs to participate in the EPA-administered CAIR SO2, NOX annual, and NOX ozone season trading programs, as appropriate. The SO2, NOX annual, and NOX ozone season trading programs of the CAIR FIPs impose essentially the same requirements as, and are integrated with, the respective CAIR SIP trading programs. The integration of the FIP and SIP trading programs means that these trading programs will work together to create, effectively, a single trading program for each regulated pollutant (SO2, NOX annual, and NOX ozone season) in all States covered by the CAIR FIP or SIP trading program for that pollutant. The CAIR FIP also allows States to submit abbreviated SIP revisions that, if approved by EPA, will automatically replace or supplement certain CAIR FIP provisions (e.g., the methodology for allocating NOX allowances to sources in the State), while the CAIR FIP remains in place for all other provisions.

On April 28, 2006 (71 FR 25287 and 71 FR 25303), EPA published two additional CAIR-related final rules that added the States of Delaware and New Jersey to the list of States subject to CAIR for PM2.5, and announced EPA's final decisions on reconsideration of five issues, without making any substantive changes to the CAIR requirements.

III. What Are the General Requirements of CAIR and the CAIR FIPs?

The CAIR establishes State-wide emission budgets for SO2 and NOX and is to be implemented in two phases. The first phase of NOX reductions starts in 2009 and continues through 2014, while the first phase of SO2 reductions starts in 2010 and continues through 2014. The second phase of reductions for both NOX and SO2 starts in 2015 and continues thereafter. The CAIR requires States to implement the budgets by either: (1) Requiring EGUs to participate in the EPA-administered cap-and-trade programs; or (2) adopting other control measures of the State's choosing and demonstrating that such control measures will result in compliance with the applicable State SO2 and NOX budgets.

The May 12, 2005 and April 28, 2006 CAIR rules provide model rules that States must adopt (with certain limited changes, if desired) if they want to participate in the EPA-administered trading programs. With two exceptions, only States that choose to meet the requirements of CAIR through methods that exclusively regulate EGUs are allowed to participate in the EPA-administered trading programs. One exception is for States that adopt the opt-in provisions of the model rules to allow non-EGUs individually to opt into the EPA-administered trading programs. The other exception is for States that include all non-EGUs from their NOX SIP Call trading programs in their CAIR NOX ozone season trading programs.

IV. What Are the Types of CAIR SIP Submittals?

States have the flexibility to choose the type of control measures they will use to meet the requirements of CAIR. EPA anticipates that most States will choose to meet the CAIR requirements by selecting an option that requires EGUs to participate in the EPA-administered CAIR cap-and-trade programs. For such States, EPA has provided two approaches for submitting and obtaining approval for CAIR SIP revisions. States may submit full SIP revisions that adopt the model CAIR cap-and-trade rules. If approved, these SIP revisions will fully replace the CAIR FIPs. Alternatively, States may submit abbreviated SIP revisions. These SIP revisions will not replace the CAIR FIPs; however, the CAIR FIPs provide that, when approved, the provisions in these abbreviated SIP revisions will be used instead of or in conjunction with, as appropriate, the corresponding provisions of the CAIR FIPs (e.g., the NOX allowance allocation methodology).

A State submitting a full SIP revision may either adopt regulations that are substantively identical to the model rules or incorporate by reference the model rules. The CAIR provides that States may only make limited changes to the model rules if the States want to participate in the EPA-administered trading programs. A full SIP revision may change the model rules only by altering their applicability and allowance allocation provisions to:

1. Include NOX SIP Call trading sources that are not EGUs under CAIR in the CAIR NOX ozone season trading program;

2. Provide for State allocation of NOX annual or ozone season allowances using a methodology chosen by the State;

3. Provide for State allocation of NOX annual allowances from the compliance supplement pool (CSP) using the State's choice of allowed, alternative methodologies; or

4. Allow units that are not otherwise CAIR units to opt individually into the CAIR SO2, NOX annual, or NOX ozone season trading programs under the opt-in provisions in the model rules.

An approved CAIR full SIP revision addressing EGUs' SO2, NOX annual, or NOX ozone season emissions will replace the CAIR FIP for that State for the respective EGU emissions.

V. Analysis of Virginia's CAIR SIP Submittal

EPA believes that Virginia clearly intends, by this SIP submittal, to replace the CAIR FIP with a State plan that is based on the CAIR model rule and allow subject sources, non-EGUs from its NO_X SIP Call budget trading program, and opt-in units meeting the CAIR opt-in criteria to participate in the EPA-administered regional CAIR trading program. However, EPA also believes that there are some provisions of the amendments to Virginia regulations (9 VAC 5-140) that could be interpreted in a way that might be inconsistent with the Commonwealth's intent. These specific provisions pertain to definitions associated with Virginia's participation in the regional CAIR trading program, definitions associated with the State's decision to bring its non-EGUs from its NO_X SIP Call budget trading program into the CAIR trading program, and a definition of the term “most stringent state of federal NO_X emissions limitation” that is based upon the model rule but has been expanded to include the situation where more than one fuel is allowed by a permit.

On September 12, 2007, EPA sent a letter to the Virginia Department of Environmental Quality (VADEQ) asking the Commonwealth to confirm that EPA correctly understood how Virginia intended to interpret and implement these regulatory definitions. In response to EPA's letter, VADEQ sent a letter dated September 17, 2007, confirming in writing its interpretations of these regulatory provisions. EPA has reviewed VADEQ's interpretations and has determined that they clarify the language of the Virginia regulations and are also consistent with having the EPA-administered CAIR trading program become effective in Virginia. In addition, the letter accepts EPA's recommendation that the Commonwealth promulgate and codify clarifying amendments to these provisions of its regulations at the earliest opportunity.

A. State Budgets for Allowance Allocations

The CAIR NOX annual and NO_X ozone season budgets were developed from historical heat input data for EGUs. Using these data, EPA calculated annual and ozone season regional heat input values, which were multiplied by 0.15 lb/MMBtu, for phase 1, and 0.125 lb/MMBtu, for phase 2, to obtain regional NOX budgets for 2009-2014 and for 2015 and thereafter, respectively. EPA derived the State NOX annual and NO_X ozone season budgets from the regional budgets using State heat input data adjusted by fuel factors.

The CAIR State SO2 budgets were derived by discounting the tonnage of emissions authorized by annual allowance allocations under the Acid Rain Program under title IV of the CAA. Under CAIR, each allowance allocated in the Acid Rain Program for the years in phase 1 of CAIR (2010 through 2014) authorizes 0.5 ton of SO2 emissions in the CAIR trading program, and each Acid Rain Program allowance allocated for the years in phase 2 of CAIR (2015 and thereafter) authorizes 0.35 ton of SO2 emissions in the CAIR trading program.

In today's action, EPA is proposing approval of Virginia's SIP revision that adopts the budgets established for the Commonwealth in CAIR. These budgets are: 36,074 tons for NO_X annual emissions from 2009 through 2014, and 30,062 tons from 2015 and thereafter; 20,098 tons for NO_X ozone season emissions from 2009 through 2014, and 17,432 tons from 2015 and thereafter; and 63,478 tons for SO₂ emissions from 2010 through 2014, and 44,435 tons from 2015 and thereafter. Virginia's SIP revision sets these budgets as the total amounts of allowances available for allocation for each year under the EPA-administered cap-and-trade programs. The NO_X ozone season budget properly reflects the inclusion of NO_X SIP Call trading program units in the CAIR NO_X ozone season program.

B. CAIR Cap-and-Trade Programs

The CAIR NO_X annual and ozone-season model trading rules both largely mirror the structure of the NO_X SIP Call model trading rule in 40 CFR part 96, subparts A through I. While the provisions of the NO_X annual and NO_X ozone-season model rules are similar, there are some differences. For example, the NO_X annual model rule (but not the NO_X ozone season model rule) provides for a CSP under which allowances may be awarded for early reductions of NO_X annual emissions. As a further example, the NO_X ozone season model rule reflects the fact that the CAIR NO_X ozone season trading program replaces the NO_X SIP Call trading program after the 2008 ozone season and is coordinated with the NO_X SIP Call program. The NO_X ozone season model rule provides incentives for early emissions reductions by allowing banked, pre-2009 NO_X SIP Call allowances to be used for compliance in the CAIR NO_X ozone-season trading program.

In addition, States have the option of continuing to meet their NO_X SIP Call requirement by participating in the CAIR NO_X ozone season trading program and including all their NO_X SIP Call trading sources in that program.

The provisions of the CAIR SO₂ model rule are also similar to the provisions of the NO_X annual and NO_X ozone season model rules. However, the SO₂ model rule is coordinated with the ongoing Acid Rain SO₂ cap-and-trade program under title IV of the CAA. The SO₂ model rule uses the title IV allowances for compliance, with each title IV allowance allocated for 2010-2014 authorizing only 0.50 ton of emissions and each allowance allocated for 2015 and thereafter authorizing only 0.35 ton of emissions. Banked title IV allowances allocated for years before 2010 can be used at any time in the CAIR SO₂ cap-and-trade program, with each such allowance authorizing 1 ton of emissions. Title IV allowances are to be freely transferable among sources covered by the Acid Rain Program and sources covered by the CAIR SO₂ cap-and-trade program.

EPA also used the CAIR model trading rules as the basis for the trading programs in the CAIR FIPs. The CAIR FIP trading rules are virtually identical to the CAIR model trading rules, with changes made to account for federal rather than state implementation. The CAIR model SO₂, NO_X annual, and NO_X ozone season trading rules and the respective CAIR FIP trading rules are designed to work together as integrated SO₂, NO_X annual, and NO_X ozone season trading programs.

In its SIP revision, Virginia chooses to implement its CAIR budgets by requiring EGUs to participate in the EPA-administered cap-and-trade programs for SO₂, NO_X annual, and NO_X ozone season emissions. Virginia's full CAIR SIP revision adopts, with certain allowed changes, the CAIR model cap-and-trade rules for SO₂, NO_X annual, and NO_X ozone season emissions.

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

In general, the CAIR model trading rules apply to any stationary, fossil-fuel-fired boiler or stationary, fossil-fuel-fired combustion turbine serving at any time, since the later of November 15, 1990 or the start-up of the unit's combustion chamber, a generator with nameplate capacity of more than 25 MWe producing electricity for sale.

States have the option of bringing in, for the CAIR NO_X ozone season program only, those units in the State's NO_X SIP Call trading program that are not EGUs as defined under CAIR. EPA advises States exercising this option to add the applicability provisions in the State's NO_X SIP Call trading rule for non-EGUs to the applicability provisions in 40 CFR 96.304 in order to include in the CAIR NO_X ozone season trading program all units required to be in the State's NO_X SIP Call trading program that are not already included under 40 CFR 96.304. Under this option, the CAIR NO_X ozone season program must cover all large industrial boilers and combustion turbines, as well as any small EGUs (i.e., units serving a generator with a nameplate capacity of 25 MWe or less) that the State currently requires to be in the NO_X SIP Call trading program.

Virginia has chosen to expand the applicability provisions of the CAIR NO_X ozone season trading program to include all non-EGUs in the Commonwealth's NO_X SIP Call trading program, and has incorporated into CAIR the definitions from its NO_X SIP Call trading program that are required in order to cover all the large industrial boilers and combustion turbines that are currently or may become subject to the rule.

D. NO _X Allowance Allocations

Under the NO_X allowance allocation methodology in the CAIR model trading rules and in the CAIR FIP, NO_X annual and NO_X ozone season allowances are allocated to units that have operated for five years, based on heat input data from a three-year period that are adjusted for fuel type by using fuel factors of 1.0 for coal, 0.6 for oil, and 0.4 for other fuels. The CAIR model trading rules and the CAIR FIP also provide a new unit set-aside from which units without five years of operation are allocated allowances based on the units' prior year emissions.

States may establish in their SIP submissions a different NO_X allowance allocation methodology that will be used to allocate allowances to sources in the States if certain requirements are met concerning the timing of submission of units' allocations to the Administrator for recordation and the total amount of allowances allocated for each control period. In adopting alternative NO_X allowance allocation methodologies, States have flexibility with regard to:

1. The cost to recipients of the allowances, which may be distributed for free or auctioned;

2. The frequency of allocations;

3. The basis for allocating allowances, which may be distributed, for example, based on historical heat input or electric and thermal output; and

4. The use of allowance set-asides and, if used, their size.

Virginia has retained most aspects of the NO_X annual and NO_X ozone season model trading rules pertaining to allowance allocations, but has changed the basis for allocating allowances, and the use and size of the allowance set-asides, within the flexibilities described. The Commonwealth uses a commencement of operation date of January 1, 2006 for purposes of calculating the average baseline heat input. The CAIR NO_X units that commenced operation prior to this date receive allowance allocations in accordance with the model rule. The CAIR NO_X units that commence operation after this date receive allocations in accordance with expanded provisions that allow for computation of an average heat input for units operating from between one to five years. Virginia chose not to adjust for fuel type in its computation of average heat input.

Virginia has also chosen to modify the NO_X annual and NO_X ozone season model rule provisions pertaining to the set aside. It has established a new unit set aside that consists of four percent of the total Commonwealth budget from 2009 through 2013 and one percent from 2014 and after. It has also established an annual, voluntary public health set-aside that will be retired, and a one percent energy efficiency/renewable energy set-aside for each control period.

E. Allocation of NO _X Allowances From Compliance Supplement Pool (CSP)

The CAIR establishes a CSP to provide an incentive for early reductions in NO_X annual emissions. The CSP consists of 200,000 CAIR NO_X annual allowances of vintage 2009 for the entire CAIR region, and a State's share of the CSP is based upon the projected magnitude of the emission reductions required by CAIR in that State. States may distribute CSP allowances, one allowance for each ton of early reduction, to sources that make NO_X reductions during 2007 or 2008 beyond what is required by any applicable State or Federal emission limitation. States also may distribute CSP allowances based upon a demonstration of need for an extension of the 2009 deadline for implementing emission controls.

The CAIR NO_X annual model trading rule establishes specific methodologies for allocations of CSP allowances. States may choose an allowed, alternative CSP allocation methodology to be used to allocate CSP allowances to sources in the States.

The CSP for Virginia is comprised of 5,134 tons of NO_X. Virginia has chosen to distribute the CSP, but has modified the provisions of the CAIR NO_X annual model trading rule concerning the allocation of allowances from the CSP. Virginia requires that CAIR NO_X units that are part of a group of units under single ownership, with combined emissions of NO_X that exceeded 40,000 tons in 2004, collectively reduce emissions in 2007 and/or 2008 by an amount equal in number to the CSP, and establishes a methodology for allocating to such units from the CSP. This change is within the flexibility of the CAIR NO_X annual model rule.

F. Individual Opt-in Units

The opt-in provisions of the CAIR SIP model trading rules allow certain non-EGUs (i.e., boilers, combustion turbines, and other stationary fossil-fuel-fired devices) that do not meet the applicability criteria for a CAIR trading program to participate voluntarily in (i.e., opt into) the CAIR trading program. A non-EGU may opt into one or more of the CAIR trading programs. In order to qualify to opt into a CAIR trading program, a unit must vent all emissions through a stack and be able to meet monitoring, recordkeeping, and recording requirements of 40 CFR part 75. The owners and operators seeking to opt a unit into a CAIR trading program must apply for a CAIR opt-in permit. If the unit is issued a CAIR opt-in permit, the unit becomes a CAIR unit, is allocated allowances, and must meet the same allowance-holding and emissions monitoring and reporting requirements as other units subject to the CAIR trading program. The opt-in provisions provide for two methodologies for allocating allowances for opt-in units, one methodology that applies to opt-in units in general and a second methodology that allocates allowances only to opt-in units that the owners and operators intend to repower before January 1, 2015.

States have several options concerning the opt-in provisions. States may adopt the CAIR opt-in provisions entirely or may adopt them but exclude one of the methodologies for allocating allowances. States may also decline to adopt the opt-in provisions at all.

For the CAIR NO_X annual trading program, the CAIR NO_X ozone season trading program, and the CAIR SO₂ trading program, Virginia has chosen to allow non-EGUs meeting certain requirements to opt into the CAIR NO_X annual trading program. Virginia has adopted both of the methodologies for allocating allowances that are in the model rule.

VI. Information Pertaining to SIP Submittals From the Commonwealth of Virginia

In 1995, Virginia adopted legislation that provides, subject to certain conditions, for an environmental assessment (audit) “privilege”' for voluntary compliance evaluations performed by a regulated entity. The legislation further addresses the relative burden of proof for parties either asserting the privilege or seeking disclosure of documents for which the privilege is claimed. Virginia's legislation also provides, subject to certain conditions, for a penalty waiver for violations of environmental laws when a regulated entity discovers such violations pursuant to a voluntary compliance evaluation and voluntarily discloses such violations to the Commonwealth and takes prompt and appropriate measures to remedy the violations. Virginia's Voluntary Environmental Assessment Privilege Law, Va. Code Sec. 10.1-1198, provides a privilege that protects from disclosure documents and information about the content of those documents that are the product of a voluntary environmental assessment. The Privilege Law does not extend to documents or information (1) that are generated or developed before the commencement of a voluntary environmental assessment; (2) that are prepared independently of the assessment process; (3) that demonstrate a clear, imminent and substantial danger to the public health or environment; or (4) that are required by law.

On January 12, 1998, the Commonwealth of Virginia Office of the Attorney General provided a legal opinion that states that the Privilege law, Va. Code Sec. 10.1-1198, precludes granting a privilege to documents and information “required by law,” including documents and information “required by Federal law to maintain program delegation, authorization or approval,” since Virginia must “enforce Federally authorized environmental programs in a manner that is no less stringent than their Federal counterparts * * *.” The opinion concludes that “[r]egarding § 10.1-1198, therefore, documents or other information needed for civil or criminal enforcement under one of these programs could not be privileged because such documents and information are essential to pursuing enforcement in a manner required by Federal law to maintain program delegation, authorization or approval.”

Virginia's Immunity law, Va. Code Sec. 10.1-1199, provides that “[t]o the extent consistent with requirements imposed by Federal law,” any person making a voluntary disclosure of information to a state agency regarding a violation of an environmental statute, regulation, permit, or administrative order is granted immunity from administrative or civil penalty. The Attorney General's January 12, 1998 opinion states that the quoted language renders this statute inapplicable to enforcement of any Federally authorized programs, since “no immunity could be afforded from administrative, civil, or criminal penalties because granting such immunity would not be consistent with Federal law, which is one of the criteria for immunity.”

Therefore, EPA has determined that Virginia's Privilege and Immunity statutes will not preclude the Commonwealth from enforcing its program consistent with the Federal requirements. In any event, because EPA has also determined that a state audit privilege and immunity law can affect only state enforcement and cannot have any impact on Federal enforcement authorities, EPA may at any time invoke its authority under the CAA, including, for example, sections 113, 167, 205, 211 or 213, to enforce the requirements or prohibitions of the state plan, independently of any state enforcement effort. In addition, citizen enforcement under section 304 of the CAA is likewise unaffected by this, or any, state audit privilege or immunity law.

VII. Proposed Action

EPA is proposing to approve Virginia's full CAIR SIP revision submitted on March 30, 2007, and supplemented on April 30, 2007 and June 11, 2007. Under the SIP revision, Virginia is choosing to participate in the EPA-administered cap-and-trade programs for SO₂, NO_X annual, and NO_X ozone season emissions. The SIP revision meets the applicable requirements in 40 CFR 51.123(o) and (aa), with regard to NO_X annual and NO_X ozone season emissions, and 40 CFR 51.124(o), with regard to SO₂ emissions. EPA is proposing to determine that the SIP revision will meet the requirements of CAIR. As a consequence of the SIP approval, the Administrator of EPA will issue, without providing an opportunity for a public hearing or an additional opportunity for written public comment, a final rule to withdraw the CAIR FIPs for SO₂, NO_X annual, and NO_X ozone season emissions for Virginia. EPA is soliciting public comments on the issues discussed in this document. These comments will be considered before taking final action.

VIII. Statutory and Executive Order Reviews

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this proposed action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)). This action merely proposes to approve state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Because this rule proposes to approve pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). This proposed rule also does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999), because it merely proposes to approve a state rule implementing a Federal requirement, and does not alter the relationship or the distribution of power and responsibilities established in the CAA. This proposed rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it approves a state rule implementing a Federal standard.

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

List of Subjects in 40 CFR Part 52

• Environmental protection
• Air pollution control
• Nitrogen dioxide
• Ozone
• Reporting and recordkeeping requirements
• Sulfur oxides

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

Dated: September 19, 2007.

William T. Wisniewski,

Acting Regional Administrator, Region III.