[Federal Register: June 24, 2002 (Volume 67, Number 121)]
[Proposed Rules]               
[Page 42519-42524]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24jn02-24]                         

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[NC-94;100-200225(a); FRL-7236-2]

 
Approval and Promulgation of Implementation Plans: North 
Carolina: Nitrogen Oxides Budget and Allowance Trading Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve a State Implementation Plan (SIP) 
revision submitted by the State of North Carolina, through the North 
Carolina Department of Environmental and Natural Resources (NCDENR), on 
September 18, 2001. This revision responds to the EPA's regulation 
entitled, ``Finding of Significant Contribution and Rulemaking for 
Certain States in the Ozone Transport Assessment Group Region for 
Purposes of Reducing Regional Transport of Ozone,'' otherwise known as 
the NOX SIP Call. This revision establishes and requires a 
nitrogen oxides (NOX) allowance trading program for large 
electric generating and industrial units and internal combustion 
engines beginning in 2004. The revision includes a budget demonstration 
and initial source allocations that demonstrate that North Carolina 
will achieve the required NOX emission reductions in 
accordance with the timelines set forth in EPA's NOX SIP 
Call. The intended effect of this SIP revision is to reduce emissions 
of NOX in order to help areas in the Eastern United States 
attain the national ambient air quality standard for ozone. EPA is 
proposing to approve North Carolina's NOX reduction and 
trading program because it meets the requirements of the Phase I and 
Phase II NOX SIP Call that will significantly reduce ozone 
transport in the eastern United States.
    North Carolina has included credits from an Inspection and 
Maintenance (I/M) Program as part of its SIP demonstration. North 
Carolina's I/M rules will be approved in a separate document and will 
be approved prior to the final approval of this NOX 
submittal.

DATES: Written comments must be received on or before July 24, 2002.

ADDRESSES: All comments should be addressed to: Randy Terry at the EPA, 
Region 4 Air Planning Branch, 61 Forsyth Street, SW., Atlanta, Georgia 
30303-8960.
    Copies of documents relative to this action are available at the 
following addresses for inspection during normal business hours:

Environmental Protection Agency, Region 4, Air Planning Branch, 61 
Forsyth Street, SW., Atlanta, Georgia 30303-8960.
North Carolina Department of Environment and Natural Resources, 512 
North Salisbury Street, Raleigh, North Carolina 27604.

FOR FURTHER INFORMATION CONTACT: Randy Terry, Regulatory Development 
Section, Air Planning Branch, Air, Pesticides and Toxics Management 
Division, Region 4, Environmental Protection Agency, Atlanta Federal 
Center, 61 Forsyth Street, SW., Atlanta, Georgia 30303-8960. The 
telephone number is (404) 562-9032. Mr. Terry can also be reached via 
electronic mail at terry.randy@epa.gov.

SUPPLEMENTARY INFORMATION: Section 51.121 of EPA's regulations requires 
North Carolina to adopt rules to restrict emissions of nitrogen oxides 
such that the caps specified in the federal rule for North Carolina are 
attained and maintained. See 40 CFR 51.121. Section 51.121 originally 
required rules to be submitted to EPA for approval as part of the SIP 
by September 30, 1999. Because of a court ruling this date was delayed 
a year, until October 30, 2000. On October 30, 2000, NCDENR submitted 
temporary NOX emission control rules to the EPA for 
adoption. These rules were revised in North Carolina's September 18, 
2001, submittal. These rules were submitted to meet the requirements of 
the NOX SIP Call until the permanent North Carolina 
NOX rules could undergo the entire process of becoming state 
approved and effective. Although these rules are temporary, they are 
fully effective and the state has met the requirements in their statute 
that eliminates the sunset provision. Additionally, on March 21, 2002, 
North Carolina submitted a response letter to EPA, providing 
clarification and interpretation of the temporary rules and positively 
addressing all of EPA's outstanding comments. Therefore, EPA can 
proceed to propose approving the temporary rule, as established in 
North Carolina's March 21, 2002 letter, to meet the NOX SIP 
Call.
    The information in this proposal is organized as follows:

I. EPA's Action
    A. What action is EPA proposing today?
    B. Why is EPA proposing this action?
    C. What are the NOX SIP Call general requirements?
    D. What is EPA's NOX budget and allowance trading 
program?
    E. What guidance did EPA use to evaluate North Carolina's 
submittal?
    F. What is the result of EPA's evaluation of North Carolina's 
program?
II. North Carolina's Control of NOX Emissions
    A. When did North Carolina submit the SIP revision to EPA in 
response to the NOX SIP Call?
    B. What is the North Carolina's NOX Budget Trading 
Program?
    C. What is the Compliance Supplement Pool?
    D. What is the New Source Set-Aside program?
III. Proposed Action
    What is the Relationship of Today's Proposal to EPA's Findings 
Under the Section 126 Rule?
IV. Administrative Requirements

[[Page 42520]]

I. EPA's Action

A. What Action Is EPA Proposing Today?

    EPA is proposing to approve revisions to North Carolina's SIP 
concerning the adoption of its NOX Reduction and Trading 
Program, submitted on October 30, 2000, and revised on September 18, 
2001.

B. Why Is EPA Proposing This Action?

    EPA is proposing this action because North Carolina's 
NOX reduction and trading program regulations, as explained 
in North Carolina's March 21, 2002 letter, meet the requirements of the 
Phase I and Phase II NOX SIP Call. Therefore, EPA is 
proposing full approval of North Carolina's NOX Reduction 
and Trading Program.

C. What Are the NOX SIP Call General Requirements?

    On October 27, 1998, EPA published a final rule entitled, ``Finding 
of Significant Contribution and Rulemaking for Certain States in the 
Ozone Transport Assessment Group Region for Purposes of Reducing 
Regional Transport of Ozone,'' otherwise known as the NOX 
SIP Call. See 63 FR 57356. The NOX SIP Call requires 22 
states and the District of Columbia to meet statewide NOX 
emission budgets during the five month period from May 1 through 
September 30, called the ozone season (or control period), in order to 
reduce the amount of ground level ozone that is transported across the 
eastern United States. A court decision by the United States Court of 
Appeals at the District of Columbia Circuit (D.C. Circuit) on March 3, 
2000, concerning the NOX SIP call (Michigan v. EPA, 213 F.3d 
663 (D.C. Cir 2000)) reduced the number of states from 22 to 19.
    EPA identified NOX emission reductions by source 
category that could be achieved by using highly cost-effective 
controls. The source categories included were large electric generating 
units (EGUs) and non-electric generating units (non-EGUs), internal 
combustion (IC) engines, and cement kilns. EPA determined state-wide 
NOX emission budgets based on the implementation of these 
cost effective controls for each affected jurisdiction to be met by the 
year 2007. Although states are not required to address IC engines until 
Phase II of the NOX SIP call, North Carolina has addressed 
IC engines in this revision. The NOX SIP Call allows states 
the flexibility to decide which source categories to regulate in order 
to meet the statewide budgets.
    In the NOX SIP Call notice, EPA suggested that imposing 
statewide NOX emissions caps on large EGUs and non-EGUs 
would provide a highly cost effective means for states to meet their 
NOX budgets. In fact, the state-specific budgets were set 
assuming an emission rate of 0.15 pounds NOX per million 
British thermal units (lb. NOX/mmBtu) at EGUs, multiplied by 
the projected heat input (mmBtu/hr). The NOX SIP Call state 
budgets also assumed on average a 60 percent reduction from non-EGUs. 
The non-EGU control assumptions were applied at units where the heat 
input capacities were greater than 250 mmBtu per hour, or in cases 
where heat input data were not available or appropriate, at units with 
actual emissions greater than one ton per day. The NOX SIP 
Call regulation gives the state the flexibility to determine what 
control strategy to use to meet the statewide NOX budget.
    To assist the states in their efforts to meet the SIP Call, the 
NOX SIP Call notice included a model NOX 
allowance trading regulation, called ``NOX Budget Trading 
Program for State Implementation Plans (40 CFR part 96) that could be 
used by states to develop their regulations. The NOX SIP 
Call notice explained that if states developed an allowance trading 
regulation consistent with the EPA model rule, they could participate 
in a regional allowance trading program that would be administered by 
the EPA. See 63 FR 57458-57459.
    There were several periods during which EPA received comments on 
various aspects of the NOX SIP Call emissions inventories. 
On March 2, 2000, EPA published additional technical amendments to the 
NOX SIP Call in the Federal Register (65 FR 11222). On March 
3, 2000, the D.C. Circuit issued its decision on the NOX SIP 
Call that largely upheld EPA's position. Michigan v. EPA, 213 F.3d 663. 
The D.C. Circuit denied petitioners' requests for rehearing or 
rehearing en banc on July 22, 2000. However, the D.C. Circuit Court 
remanded four specific elements to EPA for further action: The 
definition of electric generating unit, the level of control for 
stationary internal combustion engines, the geographic extent of the 
NOX SIP Call for Georgia and Missouri, and the inclusion of 
Wisconsin. On March 5, 2001, the U.S. Supreme Court declined to hear an 
appeal by various utilities, industry groups and a number of upwind 
states from the D.C. Circuit's ruling on EPA's NOX SIP Call 
rule.
    EPA published a proposal that addresses the remanded portion of the 
NOX SIP Call on February 22, 2002 (67 FR 8396). Any 
additional emissions reductions required as a result of a final 
rulemaking on that proposal will be reflected in the second phase 
portion (Phase II) of the State's emission budget. In a memo dated 
April 11, 2000, EPA adjusted North Carolina's NOX emission 
budget to reflect the Court's decision regarding internal combustion 
engines and cogeneration facilities. Although the Court did not order 
EPA to modify North Carolina's budget, the EPA believes these 
adjustments were consistent with the Court's decision. However, in its 
SIP revision, North Carolina declined to use the revised budget as set 
forth in the April 11, 2000 memo and chose to use the more stringent 
budget set forth in the March 2, 2000, document (65 FR 11222). North 
Carolina has agreed to revise these reductions if they differ in the 
final Phase II notice.

D. What Is EPA's NOX Budget and Allowance Trading Program?

    EPA's model NOX budget and allowance trading rule, 40 
CFR part 96, sets forth a NOX allowance trading program for 
large EGUs and non-EGUs. A state can voluntarily choose to adopt EPA's 
model rule in order to allow sources within its borders to participate 
in regional allowance trading. The NOX SIP Call notice 
contains a full description of the EPA's model NOX budget 
trading program. See 63 FR 57514-57538 and 40 CFR part 96. 
Additionally, states can adopt a modified trading rule that will still 
ensure the budgets are met. North Carolina opted to modify EPA's 
trading rule consistent with the flexibility offered to the states.
    Allowance trading, in general, uses market forces to reduce the 
overall cost of compliance for pollution sources, such as power plants, 
while maintaining emission reductions and environmental benefits. One 
type of market-based program is an emissions budget and allowance 
trading program, commonly referred to as a ``cap and trade'' program.
    In a cap and trade program, the state (or EPA) sets a regulatory 
limit, or emissions budget, in mass emissions (budget) from a specific 
group of sources. The budget limits the total number of allowances for 
each source covered by the program during a particular control period. 
When the budget is set at a level lower than the current emissions, the 
effect is to reduce the total amount of emissions during the control 
period. After setting the budget, the state (or EPA) then assigns, or 
allocates, allowances to the participating entities up to the level of

[[Page 42521]]

the budget. Each allowance authorizes the emission of a quantity of 
pollutant, e.g., one ton of airborne NOX.
    At the end of the control period, each source must demonstrate that 
its actual emissions during the control period were less than or equal 
to the number of available allowances it holds. Sources that reduce 
their emissions below their allocated allowance level may sell their 
extra allowances. Sources that emit more than the amount of their 
allocated allowance level may buy allowances from the sources with 
extra reductions. In this way, the budget is met in the most cost-
effective manner.

E. What Guidance Did EPA Use To Evaluate North Carolina's Submittal?

    The final NOX SIP Call rule included a model 
NOX budget trading program regulation. See 40 CFR part 96. 
EPA used the model rule and 40 CFR 51.121-51.122 to evaluate North 
Carolina's NOX reduction and trading program SIP submittal. 
North Carolina's submittal includes the IC engine requirements, but IC 
engines are not a part of North Carolina's trading program.

F. What Is the Result of EPA's Evaluation of North Carolina's Program?

    After review of North Carolina's September 18, 2001, NOX 
SIP submittal, EPA has determined that it meets the requirements of the 
NOX SIP Call and is therefore approvable. The North Carolina 
NOX reduction and trading program is consistent with EPA's 
guidance and meets the requirements of both the Phase I and II 
NOX SIP Call. EPA finds the NOX control measures 
(i.e. required reductions for large EGUs, non-EGUs, and IC engines) in 
North Carolina's NOX reduction and trading program 
approvable. Also, EPA finds that the submittal contains the necessary 
information to demonstrate that North Carolina has the legal authority 
to implement and enforce the control measures and that the State will 
appropriately distribute the compliance supplement pool. Furthermore, 
EPA proposes to find that the submittal demonstrates that the 
requirements concerning compliance dates and schedules, monitoring, 
recordkeeping, and emission reporting will be met.

II. North Carolina's Control of NOX Emissions

A. When Did North Carolina Submit the SIP Revision to EPA in Response 
to the NOX SIP Call?

    On October 30, 2000, NCDENR submitted temporary NOX 
emissions control rules to meet the requirements of the Phase I and 
Phase II NOX SIP Call and included a schedule for adoption 
of the final permanent version. On September 18, 2001, NCDENR submitted 
a revised version of these rules to meet the requirements of the Phase 
I and Phase II NOX SIP Call.

B. What Is the North Carolina's NOX Budget Trading Program?

    North Carolina proposes, as in the model rule, to allow large EGUs, 
boilers and turbines to participate in the multi-state cap and trade 
program. North Carolina does not have any cement kilns and thus does 
not include them in the NOX SIP Call. North Carolina's SIP 
revision to meet the requirements of the NOX Budget Trading 
Program includes the adoption of rules 15A NCAC 2D .1401 Definitions, 
.1402 Applicability, .1403 Compliance Schedules, .1404 Recordkeeping, 
Reporting, Monitoring, .1409 Stationary Internal Combustion Engines, 
.1416 Emission Allocations for Utility Companies, .1417 Emission 
Allocations for large Combustion Sources, .1418 New Electric Generating 
Units, Large Boilers, and Large I/C Engines, .1419 Nitrogen Oxide 
Budget Trading Program, .1420 Periodic Review and Reallocations, .1421 
Allocation for New Growth of Major Point Sources, .1422 Compliance 
Supplement Pool and Early Emission Reduction Credits, and .1423 Large 
Internal Combustion Engines.
    North Carolina's NOX budget trading program establishes 
and requires a NOX allowance trading program for large EGUs 
and non-EGUs. The regulations under section .1400 establish a 
NOX cap and allowance trading program for the ozone control 
seasons beginning May 1, 2004.
    The State of North Carolina has adopted regulations that are 
consistent with 40 CFR part 96. Therefore, pursuant to 40 CFR 
51.121(p)(1), North Carolina's SIP revision is approved as satisfying 
the State's NOX emissions reduction obligations. Under 
section .1400, North Carolina allocates NOX allowances to 
the EGU and non-EGU units that are subject to the requirements of the 
trading program. The NOX trading program applies to EGUs 
with a nameplate capacity greater than 25MW that sell electricity to 
the grid, as well as non-EGUs that have a maximum design heat input 
greater than 250 mmbtu per hour. Each NOX allowance permits 
a source to emit one ton of NOX during the seasonal control 
period. NOX allowances may be bought or sold. Unused 
NOX allowances may be banked for future use, with certain 
limitations.
    Section .1400 sets out the NOX budget trading program. 
This section, for the most part, incorporates by reference the EPA 
model rule, 40 CFR part 96, NOX Budget Trading Program. 
However, the section does contain several exceptions to the part 96 
rules. These exceptions include the procedures and schedules for 
submitting and processing permit applications, dates and schedules for 
complying with monitoring requirements, the provisions on set-asides 
for new source allocations, and the distribution of the compliance 
supplement pool. These rules allow sources not covered under the 
NOX SIP Call to opt into the NOX Budget Trading 
Program. As discussed below, the NOX budget trading program 
cannot be used to (1) meet an emission limit if compliance with that 
emission limit is required as part of the SIP to attain or maintain the 
ambient air quality standard for ozone; and (2) obtain offsets needed 
to comply with the offset requirement of the nonattainment area major 
new source review rule.
    In Rule .1403(c)(3), North Carolina deviated from the model rule to 
require the owner or operator of a source to submit their permit 
application by October 1, 2003. Rule .1403(c)(3) also requires the 
owner or operator to install and implement any required monitoring, 
recordkeeping, and reporting requirements prior to May 1, 2004. EPA has 
evaluated these deviations and find that they are approvable under the 
flexibilities provided within the model rule.
    Under Rule .1402(h), the State allows a unit that restricts its 
fuel use to only natural gas or fuel oil and limits its NOX 
emissions to 25 tons (through an operating hours limitation) or less 
during a control period (through a federally enforceable permit) to be 
exempted from the requirements of the trading program. The State has 
clearly required that the unit meet both the fuel use and the operating 
hours restrictions throughout section .1402. Therefore, EPA believes 
this section is approvable.
    North Carolina rules require that all sources must comply with part 
75 monitoring to participate in the trading program. Source owners will 
monitor their NOX emissions by using systems that meet the 
requirements of 40 CFR part 75, subpart H, and report resulting data to 
EPA electronically. Each NOX budget unit complies with the 
program by demonstrating at the end of each control period that actual 
emissions do not exceed the amount of allowances held for that period. 
However, regardless of the number of allowances a unit holds, it cannot 
emit at levels that would violate other federal or state limits, for 
example, reasonably available control technology (RACT), new source

[[Page 42522]]

performance standards, and title IV (the Federal Acid Rain Program). 
North Carolina's regulation .1419(h) requires that NOX 
emission allocations obtained under the NOX budget trading 
program shall not be used to meet the emission limits for a source if 
compliance with that emission limit is required as part of the SIP to 
attain or maintain the ambient air quality ozone standard. Sources 
covered under rule .0531 Nonattainment Area Major Source Review of the 
North Carolina SIP shall not use the NOX budget trading 
program to comply with the requirements of rule .0531.
    Rule .1423, Large Internal Combustion Engines, establishes the 
emission limits and the monitoring, recordkeeping, and reporting 
requirements for large internal combustion engines covered under Rule 
15A NCAC 2D .1418. A detailed list identifies the sources covered under 
this Rule and gives the basic emission limitations. The rule allows 
adjustments to be made to the basic emission limitations to account for 
engine efficiency and details which monitoring procedures to use. The 
facilities that contain sources affected by the IC engine rule are 
Transcontinental Gas Pipeline Company, Station 160, in Rockingham 
county, Transcontinental Gas Pipeline Company, Station 150, in Iredell 
county, and Transcontinental Gas Pipeline Company, Station 155, in 
Davidson county. The rule requires IC engines to reduce emissions by 90 
percent. These IC engines are not part of the NOX budget 
trading program.
    North Carolina's submittal demonstrates that the Phase I and II 
emissions budgets established by EPA in the March 2, 2000, notice (65 
FR 11222) will be met. North Carolina's NOX budget trading 
program emissions budget includes reductions based upon an I/M 
reduction credit. This credit is generated by North Carolina through 
the implementation of an expanded (I/M) Motor Vehicle Program. With the 
use of the Mobile 5B model, North Carolina has calculated that it will 
have a reduction credit to help offset emissions from EGU and non-EGU 
sources.
    North Carolina's SIP submittal demonstrates that the Phase I and 
Phase II NOX emission budgets established by EPA will be met 
as follows:
    To determine its total emissions budget for 2007, North Carolina 
added the total emissions for affected EGUs, combustion turbines 
(combustion turbine serving a generator with a nameplate capacity 
greater than 25 megawatts electrical and selling any amount of 
electricity), affected non-EGUs (those fossil fuel-fired industrial 
boilers with a maximum design heat input greater than 250 million Btu 
per hour), and internal combustion engines (including (1) rich burn 
stationary IC engines rated at equal or greater than 2,400 brake 
horsepower, (2) lean burn stationary IC engines rated at equal or 
greater than 2,400 brake horsepower, (3) diesel stationary IC engines 
rated at equal or greater than 3,000 brake horsepower, and (4) duel 
fuel stationary IC engines rated at equal or greater than 2,400 brake 
horsepower). North Carolina then subtracted from this sum the I/M 
reduction credit which was gained from the implementation of its 
expanded I/M Motor Vehicle Program, incorporating the On-Board 
Diagnostic testing procedure. The difference between the allocations 
distributed to the participants in the trading program and the total 
allocations available is the amount of the allocations available for 
new sources.
    North Carolina then used the totals allocated to the State in the 
March 2, 2000 Federal Register Notice (65 FR 11222) for area sources, 
nonroad mobile sources, and highway mobile sources. The remaining 
emissions for North Carolina were classified as non-affected point 
sources (sources which are not required to implement any controls based 
on the NOX SIP Call)

                          NOX Emissions Budget
------------------------------------------------------------------------
                                                         North Carolina
                                       EPA 2007 NOX     2007 NOX budget
          Source category            budget emissions  emissions  (tons/
                                       (tons/season)        season)
------------------------------------------------------------------------
EGUs...............................            31,821            31,451
Non-EGUs...........................            26,434             2,205
New Permitted CT's.................  ................               976
IC Engines.........................  ................               352
I/M Reduction Credit...............  ................            (4,385)
Credit Available for New Growth....  ................             3,306
Non-Affected Point Sources.........  ................            24,350
Area Sources.......................            11,067            11,067
Non-road Sources...................            22,005            22,005
Highway Sources....................            73,695            73,695
                                    ------------------------------------
    Total..........................           165,022           165,022
------------------------------------------------------------------------

    In the event that the North Carolina NOX budget is 
inconsistent with the final budget promulgated by EPA in the Phase II 
notice, North Carolina will revise its SIP, as clarified in the March 
21, 2001 letter.

C. What Is the Compliance Supplement Pool?

    To provide additional flexibility for complying with emission 
control requirements associated with the NOX SIP Call, the 
final NOX SIP Call rule provided each affected state with a 
compliance supplement pool. The compliance supplement pool is a 
quantity of NOX allowances that may be used to cover excess 
emissions from sources that are unable to meet control requirements 
during the 2004 and 2005 ozone season. Allowances from the compliance 
supplement pool will not be valid for compliance past the 2005 ozone 
season. The NOX SIP Call included these provisions in order 
to address commenters' concerns about the possible adverse effect that 
the control requirements might have on the reliability of the 
electricity supply or on other industries required to install controls 
as the result of a state's response to the NOX SIP Call.
    A state may issue some or all of the compliance supplement pool via 
two mechanisms. First, a state may issue some or all of the pool to 
sources that establish a baseline, monitor according to part 75, and 
demonstrate NOX reductions in an ozone season beyond any 
applicable requirements of the Clean Air Act after September 30, 1999, 
and before May 31, 2004, (i.e., early

[[Page 42523]]

reduction credits). This allows sources that cannot install controls 
prior to May 31, 2004, to purchase other sources' early reduction 
credits in order to comply. Second, a state may issue some or all of 
the pool to sources that demonstrate a need for an extension of the May 
31, 2004, compliance deadline due to undue risk to the electricity 
supply or other industrial sectors, and where early reductions are not 
available. See 40 CFR 51.121(e)(3). Carolina Power and Light Co. and 
Duke Power Co. have opted to participate in the early reduction credit 
program.
    Rule .1422, Compliance Supplement Pool and Early Emission Reduction 
Credits sets out the procedures for allocating the compliance 
supplement pool under 40 CFR 51.121(e)(3). Allocations are given based 
on early reductions. Carolina Power and Light and Duke Power Company 
are the only sources eligible for these allocations. To receive the 
compliance supplement pool allocations, the companies must document a 
reduction in emissions of nitrogen oxides between September 30, 1999 
and May 1, 2003. North Carolina's rule gives the allocations to the two 
companies up front. The two utility companies are required to submit 
interim reports in 2001 and 2002 containing information related to 
early reductions. The rule contains procedures used to reduce the 
allocations for Carolina Power and Light Co. and Duke Power Co. if 
either or both do not earn enough early reductions to cover the 
allocated compliance supplement pool credits. The rule also provides 
procedures for using the credits in 2003, since North Carolina sources 
are subject to the 126 Rule. However, since EPA has finalized a rule 
harmonizing the compliance dates for section 126 and the NOX 
SIP Call, this section is moot.

D. What Is the New Source Set-Aside Program?

    North Carolina's SIP provides for new source set-asides. 15A NCAC 
2D .1421, Allocation for New Growth of Major Point Sources. The Rule 
establishes an allocation pool from which emission allocations of 
nitrogen oxides may be allocated to sources permitted after October 31, 
2000. It also establishes procedures for requesting allocations and for 
approving allocations. Eligible sources are EGUs greater than 25 
megawatts electrical non-EGUs with a maximum design heat input greater 
than 250 million Btu per hour. The request cannot exceed the lesser of 
the estimated emissions during the ozone season or estimated allowable 
emissions during the ozone season. This section includes the procedures 
for approving a request for allowance allocations and allocating 
allowances, and describes the procedure for determining preliminary 
allowance allocations. (The preliminary emission allocation is 
primarily for the source's planning purposes and is not reported to the 
EPA.) The procedures for determining the final emission allocations are 
also included. This determination is made at the end of the season so 
that the allocation that the source receives offsets its actual 
emissions. The source receives the lesser of its actual emissions, its 
allowable emissions, and its preliminary allocation from the new source 
allocation pool. The Director is required to issue final allocations 
and to notify the source and EPA of the final allocations issued by 
November 1, and also to make available credits from the I/M motor 
vehicle program to the new source allocation pool each year beginning 
in 2008. Any remaining allowances in the new source allocation pool are 
carried over to the next ozone season. Once a source has made a request 
for a new source allocation, it does not have to resubmit that request 
in following years. However, once a source receives an allowance 
allocation under 15A NCAC 2D .1420, it is no longer eligible for an 
allocation under 15A NCAC 2D .1421.

III. Proposed Action

    EPA is proposing to approve North Carolina's SIP revision 
consisting of its NOX reduction and trading program, which 
was submitted on September 18, 2001. EPA finds that North Carolina's 
submittal is fully approvable because it meets the both the Phase I and 
Phase II requirements of the NOX SIP Call.

What Is the Relationship of Today's Proposal to EPA's Findings Under 
the Section 126 Rule?

    In the April 30, 2002, Federal Register document (67 FR 21522), EPA 
reset the EGU compliance date and other related dates, such as the 
monitoring certification date, under 40 CFR part 97, also known as the 
section 126 rule. The EPA also reset the dates for non-EGU sources to 
match the new date for EGUs. The new compliance date is May 31, 2004. 
The purpose of the April 30, 2002, document was to realign the section 
126 Rule with the NOX SIP Call.

IV. Administrative Requirements

    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 
proposed 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 (Public Law 104-4).
    This proposed rule also does not have tribal implications because 
it will 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). This action also does not 
have Federalism implications because it does not have substantial 
direct effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government, as specified 
in Executive Order 13132 (64 FR 43255, August 10, 1999). This action 
merely proposes to approve a state rule implementing a Federal 
standard, and does not alter the relationship or the distribution of 
power and responsibilities established in the Clean Air Act. This 
proposed rule also is not subject to Executive Order 13045 ``Protection 
of Children from Environmental Health Risks and Safety Risks'' (62 FR 
19885, April 23, 1997), because it is not economically significant.
    In reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the Clean Air Act. In 
this context, in the absence of a prior existing requirement for the 
State to use voluntary consensus standards (VCS), EPA has no authority 
to disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission

[[Page 42524]]

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. This 
proposed rule does not impose an information collection burden under 
the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 
et seq.).

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Intergovernmental 
relations, Nitrogen dioxide, Ozone, Reporting and recordkeeping 
requirements, Volatile organic compounds.

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

    Dated: June 12, 2002.
A. Stanley Meiburg,
Acting Regional Administrator, Region 4.
[FR Doc. 02-15876 Filed 6-21-02; 8:45 am]
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