RESPONSE TO EPA NOx SIP CALL
On May 21, 2002, the Board adopted a final regulation concerning Emissions Trading, 9 VAC 5 Chapter 140, which establishes a NOx Budget Trading Program in response to the EPA NOx SIP Call. The final regulation was published in the Virginia Register on June 17, 2002 and became effective on July 17, 2002. On June 25, 2002, the regulation was submitted to EPA as Virginia's response to the NOx SIP Call, along with the initial allocations for the affected units. On July 23, 2002 (67 FR 48032), EPA issued a notice determining the submittal to be administratively complete.
On November 12, 2002 (67 FR 68542), EPA issued a notice proposing to approve Virginia's NOx budget trading program, with the exception of its NOx allowance banking provisions. According to EPA, the program does not meet federal requirements with regard to the start date for flow control. The current VA program regulation uses 2006 as the start date, and EPA indicates that "Virginia must revise its regulation at 9 VAC-140-550 to establish the start of flow control to be 2005. The EPA action is actually a conditional approval. A correctly revised VA regulation would need to be submitted within one year from the date (upcoming, probably near the end of December, beginning of January) of the final conditional approval. Otherwise, EPA's conditional approval will convert to a final disapproval and trigger a sanctions clock.
The submittal of June 25, 2002 included the cover letter; regulation enclosure cover and regulation; hearing certification enclosure; public testimony enclosure cover and testimony; and trading program budget demonstration enclosure. The trading program budget demonstration included the initial allocations to the units affected by the regulation; electric generating units and non-electrical generating units.
BACKGROUND
Many areas in the eastern half of the United States have petitioned EPA regarding their inability to achieve the ozone standard due to significant amounts of ozone and oxides of nitrogen (NOx), a precursor to ozone, being transported across state boundaries. EPA made a determination (Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone; 63 FR 57491, October 27, 1998, as amended at 63 FR 71225, December 24, 1998; 64 FR 26305, May 14, 1999; and 65 FR 11230, March 2, 2000) that sources in 22 states and the District of Columbia emitted NOx in amounts that significantly contribute to nonattainment of the ozone NAAQS in one or more downwind states. EPA also required that each of the affected upwind jurisdictions (sometimes referred to as upwind states) submit SIP revisions prohibiting those amounts of NOx emissions that significantly contribute to downwind air quality problems. Virginia was included as one of the upwind states.
The rulemaking, known as the NOx SIP Call Rule (40 CFR 51.121), also includes statewide NOx emissions budget levels that each state must achieve by the year 2007. Furthermore, the rule also identifies specific source categories that are covered by the budget; these include electric generating units (EGU's) with a nameplate capacity greater than 25 MWe and non-electric generating units (non-EGU's) above 250 mm Btu. Failure to achieve the budget will result in a Federal Implementation Plan (FIP) which EPA has promulgated as 40 CFR Part 97 (65 FR 2727, January 18, 2000).
The NOx SIP Call Rule identifies Virginia, along with other states and the District of Columbia, as having substantially inadequate SIPs to comply with requirements of the Clean Air Act that address interstate transport of nitrogen oxides in amounts that will contribute significantly to ozone nonattainment in one or more other States with respect to the ozone national ambient air quality standard. It mandates that, for each jurisidiction identified, a SIP revision be submitted to EPA that imposes enforceable mechanisms to ensure that, collectively, all sources identified in the budget will not exceed the NOx emissions projected for the year 2007 ozone season. The SIP revisions must include control measures to limit the amount of NOx so that the jurisdiction's budget is not exceeded. The control measures must be implemented no later that May 1, 2003 (later adjusted by the United States Court of Appeals for the District of Columbia Circuit to May 31, 2004). Emission reductions used to demonstrate compliance with the revision must occur during the ozone season. The revision must include a description of enforcement methods, including monitoring compliance with each selected control measure and procedures for handling violations. For large electric generators and industrial boilers, the control measures must include a NOx mass emissions cap on each source and impose a NOx emission rate so the State can comply with the 2007 ozone budget.
The NOx SIP Call Rule permits the states to include a budget-trading program as an option in their SIP revisions. The use of this type of program is allowed under 40 CFR 51.121(p), and EPA provides a model NOx budget trading rule (hereafter called the EPA Model Rule) in 40 CFR Part 96 (63 FR 57514, October 27, 1998) of the NOx SIP Call Rule. In fact, EPA encourages states to use the EPA Model Rule, and if the state chooses this approach, the state's SIP revision will be automatically approved according to 40 CFR 51.121(p).
The original NOx SIP Call Rule had a SIP submittal deadline of September 30, 1999, but this was later changed to October 30, 2000 to accommodate the delay caused by the litigation.
On October 27, 2000, the Commonwealth submitted a NOx Budget Trading Program draft regulation based on 40 CFR Part 96; however, the draft regulation was not fully adopted and the submittal did not meet EPA's criteria for being administratively complete. On November 8, 2000, the State Air Pollution Control Board approved 9 VAC 5 Chapter 140 (hereafter called the proposed regulation) and authorized it for release to seek public comment. The Board-approved proposed regulation had only minor variations from the draft regulation submitted on October 27, 2000.
By letter of December 18, 2000, the EPA Regional Administrator notified the Governor that the Commonwealth's submittal contained significant problems that would affect its approvability. On December 26, 2000 (65 FR 81366), EPA issued a finding that Virginia did not submit a complete, fully adopted SIP in response to the NOx SIP Call. The notice became effective January 25, 2001.
On December 12, 2000, the Department submitted the proposed regulation to the Regional Office of EPA for preliminary review. Included in the submittal, along with the proposed regulation, was a copy of the Virginia version of the EPA Model Rule which shows the changes Virginia made to the EPA Model Rule to develop the proposed regulation. By letter of March 9, 2001, EPA Region III provided its comments on the proposed regulation. It should be noted that the EPA provided both (i) comments that identified certain changes that must be made to gain approval of the proposed regulation by EPA and (ii) comments suggesting changes to improve the quality of the proposed regulation. The mandatory changes addressed the value of the emission trading budget for EGUs and the compliance supplement pool, both of which are larger in the proposed regulation than in the EPA NOx SIP Call Rule. The other comments suggested changes to make the proposed regulation consistent with the version of the federal regulation (40 CFR Part 97) that is to be used if EPA should impose a federal implementation plan on the Commonwealth.Two events took place after approval of the proposed regulation by the air board on November 8, 2000, that required the board to consider additional issues during the adoption of the final regulation that are outside the normal process.
First, the authority under the Virginia Code for the proposed regulation was amended. In Chapter 580, 2001 Acts of the Assembly, the provisions of Section 10.1-1322.3 were amended in such a way that necessitated changes to the proposed regulation subject to the comment period. Chapter 580 allowed the board to address any changes necessary to comply with the legislation after the public comment period (see below).
That the provision of this act shall not be construed to require the State Air Pollution Control Board to reinitiate the regulatory process for the development of the regulations required by this act and that any changes made to comply with the provisions of this act may be made following the public comment period on the proposed regulations approved for public comment by the State Air Pollution Control Board on November 8, 2000.
Second, on June 8, 2001, the United States Court of Appeals for the District of Columbia remanded the growth factors that EPA used for the EGUs emissions budgets in the NOx SIP Call Rule for reconsideration. This leaves open the possibility that the budgets may be revised by EPA.
Additional information on these issues may be found in the agency background document for the proposal under the section titled "Additional Issues for Public Comment" found on page 6.
On July 16, 2001, the Department issued a notice seeking comment on (i) the proposed regulation, 9 VAC 5 Chapter 140 (ii) the costs and benefits of the proposal and (iii) the additional issues identified below.
In general, the Department requested comment regarding how to redraft the proposed regulation to meet the requirements of the new legislation. However, there were specific issues relative to the changes required by the new legislation on which the Department requested comment. The Department also requested comment on how to redraft the proposed regulation to address the EPA comments in combination with the court decision. In addition, there were other specific issues on which the Department requested comment. The details of these issues may be found in the agency background document.
A public hearing was held August 22, 2001, and the comment period closed September 14, 2001. Action by the Board on the final regulation was expected at the January 2002 meeting but was delayed until the February 27, 2002, meeting to allow time for the new administration to review the final regulation. Final action was taken on the regulation at the February 27 meeting, but publication of the final regulation in the Virginia Register on March 25, 2002 was accompanied by a notice of suspension and reopening for public comment. This action was taken due to the substantive differences between the proposed regulation and the final. The second comment period closed on April 24, 2002, and the Board approved the final regulation at its May 21, 2002 meeting. The final regulation was published in the Virginia Register on June 17, 2002, and became effective on July 17, 2002. The final regulation was accompanied by the agency background document and the responses to the second comment period. The responses to the first comment period were included with the submittal to EPA discussed at the beginning of this document.
Should you have any questions, feel free to contact Beth Major by phone (804-698-4423) or e-mail (memajor@deq.virginia.gov).
Any documents related to the NOx SIP Call not provided on this web site will be made available in accordance with the agency's procedures for compliance with the Virginia Freedom of Information Act.