Home » 2009 Issues » October 28, 2009 » ENV-43-09-00007-P CAIR Rules are the NYS Components of Regional Cap-and-Trade Programs That Apply Primarily to Large Fossil Fuel-Fired EGUs
ENV-43-09-00007-P CAIR Rules are the NYS Components of Regional Cap-and-Trade Programs That Apply Primarily to Large Fossil Fuel-Fired EGUs
10/28/09 N.Y. St. Reg. ENV-43-09-00007-P
NEW YORK STATE REGISTER
VOLUME XXXI, ISSUE 43
October 28, 2009
RULE MAKING ACTIVITIES
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
PROPOSED RULE MAKING
HEARING(S) SCHEDULED
I.D No. ENV-43-09-00007-P
CAIR Rules are the NYS Components of Regional Cap-and-Trade Programs That Apply Primarily to Large Fossil Fuel-Fired EGUs
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:
Proposed Action:
Amendment of Parts 200, 243, 244 and 245 of Title 6 NYCRR.
The CAIR rules are the NYS components of regional cap-and-trade programs that apply primarily to large fossil fuel-fired EGUs.
Purpose:
Mitigate interstate transport of NOx and SO2 to help reduce ozone and fine particulate formation in eastern U.S. CAIR states.
Public hearing(s) will be held at:
2:00 p.m., December 1, 2009 at Department of Environmental Conservation, 625 Broadway, Public Assembly Rm. 129-B, Albany, NY; 2:00 p.m., December 2, 2009 at NYSDEC, Region 8, Office Conference Rm., 6274 E. Avon-Lima Rd. (Rtes. 5 and 20), Avon, NY; 2:00 p.m., December 3, 2009 at NYSDEC Annex, Region 2, 11-15 47th Ave., Hearing Rm. 106, Long Island City, NY.
Interpreter Service:
Interpreter services will be made available to hearing impaired persons, at no charge, upon written request submitted within reasonable time prior to the scheduled public hearing. The written request must be addressed to the agency representative designated in the paragraph below.
Accessibility:
All public hearings have been scheduled at places reasonably accessible to persons with a mobility impairment.
Substance of proposed rule (Full text is posted at the following State website:www.dec.ny.gov):
The New York State Department of Environmental Conservation (the Department) proposes revisions to the terms of 6 NYCRR Part 243, CAIR NO Ozone Season Trading Program, 6 NYCRR Part 244, CAIR NO Annual Trading Program, and 6 NYCRR Part 245, CAIR SO Trading Program (collectively, the NYS CAIR rules) to incorporate changes made to the model federal regulations on which the three NYS CAIR rules are based, and make minor clarifications and corrections to the NYS CAIR rules.
The NYS CAIR rules are the New York State components of regional cap-and-trade programs that apply primarily to large fossil fuel-fired electricity generating units (EGUs) in a region encompassing the District of Columbia and 27 States in the eastern United States. With the exception of the inclusion of certain additional sources under Part 243, the NYS CAIR rules apply to EGUs having a nameplate capacity equal to or greater than 25 megawatts electrical (MWe) producing electricity for sale. Part 243 also covers all sources that were covered under Part 204, NO Budget Trading Program, including cement manufacturers, certain large industrial sources, and EGUs with a nameplate capacity equal to or greater than 15 MWe.
The NYS CAIR express terms contain provisions that detail requirements as to general provisions, designated representatives, permits, allowance allocations, compliance accounting, monitoring and reporting, and opt-in units. There were no substantial changes made to these provisions as part of this rulemaking beyond what is identified in this summary.
Changes were made to the definitions of "cogeneration unit," "biomass," and "total energy input," to be consistent with EPA's CAIR model rules. By changing the definitions of "cogeneration unit," "biomass," and "total energy input," the proposed rule revisions will comply with the mandate of 40 CFR section 51.123(o)(1) and (aa)(1), and 40 CFR section 51.124(o)(1).
The Department has revised the definition of "fossil fuel-fired" in Part 243 to include the cross reference to the applicability in 243-1.4(a)(3).
The Department has revised the definition of "non-electric generating unit" in section 243-1.2 to identify, by ORIS Code, the certain units owned by Eastman Kodak Company and International Paper.
The Department proposes to revise the number of control periods for which a new unit may receive NO allowances under sections 243-5.3(f)(3) and 244-5.3(c)(3) from six consecutive control periods to no more than four consecutive control periods.
The Department has deleted the text included in the definitions of "CAIR designated representative " and "Alternate CAIR designated representative" that referred to the Mercury Reduction Program for Coal-Fired Electric Utility Steam Generating Units established at 6 NYCRR Part 246.
Part 200 has been revised to include a listing of updated versions of federal regulations that are incorporated by reference into Parts 243, 244, and 245.
Text of proposed rule and any required statements and analyses may be obtained from:
Michael Miliani, P.E., NYSDEC, Division of Air Resources, 625 Broadway, Albany, NY 12233-3251, (518) 402-8396, email: CAIR@gw.dec.state.ny.us
Data, views or arguments may be submitted to:
Same as above.
Public comment will be received until:
December 10, 2009.
Additional matter required by statute:
Pursuant to Article 8 of the State Environmental Quality Review Act, a Short Environmental Assessment Form, a Negative Declaration and a Coastal Assessment Form have been prepared and are on file. This rule must be approved by the Environmental Board.
Summary of Regulatory Impact Statement
The New York State Department of Environmental Conservation (the Department) proposes to revise the terms of 6 NYCRR Part 243, CAIR NO Ozone Season Trading Program, 6 NYCRR Part 244, CAIR NO Annual Trading Program, and 6 NYCRR Part 245, CAIR SO Trading Program (collectively, the NYS CAIR rules) to incorporate changes to the model federal regulations on which the three NYS CAIR rules are based, and make minor clarifications and corrections to the NYS CAIR rules.
The NYS CAIR rules are the New York State components of regional cap-and-trade programs that apply primarily to large fossil fuel-fired electricity generating units (EGUs) in a region encompassing the District of Columbia and 27 States in the eastern United States. With the exception of the inclusion of certain additional sources under Part 243, the NYS CAIR rules apply to EGUs having a nameplate capacity greater than 25 megawatts electrical (MWe) producing electricity for sale. Part 243 also covers all sources that were covered under Part 204, NO Budget Trading Program, including cement manufacturers, certain large industrial sources, and EGUs with a nameplate capacity equal to or greater than 15 MWe.
The NYS CAIR rules originally took effect on October 19, 2007. The rules were promulgated in response to the determination of the United States Environmental Protection Agency (EPA) that New York State must submit, in compliance with federal Clean Air Act (CAA) section 110(a)(2)(D)(i)(I), State Implementation Plan (SIP) revisions that contain adequate provisions prohibiting sources and other activities from emitting NO and SO in amounts that will contribute significantly to nonattainment in, or interfere with maintenance by, one or more other States with respect to the fine particles (PM2.5) and 8-hour ozone National Ambient Air Quality Standards (NAAQS). 'See' 40 CFR section 51.123(a)(1) and (a)(2), and 40 CFR section 51.124(a). EPA offered three model rules for States to adopt in order to participate in regional NO and SO cap-and-trade programs that achieve the emissions reductions determined necessary by EPA to comply with the provisions of CAA section 110(a)(2)(D). 'See' 40 CFR sections 96.101-188, CAIR NO Annual Trading Program, 40 CFR sections 96.201-288, CAIR SO Trading Program, and 40 CFR sections 96.301-388, CAIR NO Ozone Season Trading Program. These federal regulations setting forth the SIP requirements and optional cap-and-trade programs were originally promulgated as part of the 'Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (Clean Air Interstate Rule); Revisions to Acid Rain Program; Revisions to the NO SIP Call; Final Rule', 70 FR 25162-405 (May 12, 2005) ('CAIR') (the federal CAIR rules).
Any State that promulgated regulations that followed the federal model rules, except for certain specifically allowed deviations, was assured of automatic approval of the regulations by EPA as SIP revisions. 40 CFR section 51.123(o) and (aa), and 40 CFR section 51.124(o). On September 17, 2007 (following approval for adoption by the State Environmental Board), the Department submitted the NYS CAIR rules to EPA as proposed SIP revisions. EPA approved the SIP revisions on January 24, 2008. 'See Approval and Promulgation of Implementation Plans; New York: Clean Air Interstate Rule', 73 Fed. Reg. 4109-4113.
On the same day that the NYS CAIR rules became effective, EPA promulgated revisions to the federal CAIR rules. 'See Revisions to Definition of Cogeneration Unit in Clean Air Interstate Rule (CAIR), CAIR Federal Implementation Plans, Clean Air Mercury Rule (CAMR); and Technical Corrections to CAIR, CAIR FIPs, CAMR, and Acid Rain Program Rules' 72 Fed. Reg. 59190-207 (October 19, 2007). These revisions consist of changes to the provisions that established the exemption for cogeneration units that exist in each program (primarily changes to the definitions of "cogeneration unit", "biomass", and "total energy input").
In order to continue to participate in the regional cap-and-trade programs under CAIR, the Department was supposed to promulgate revisions to the NYS CAIR rules that comport with the federal revisions by January 1, 2009. 'See' 40 CFR section 51.123(o)(1) and (aa)(1), and 40 CFR section 51.124(o)(1). As indicated below, litigation over the federal CAIR rules disrupted the efforts of the Department to meet this deadline.
Each of the NYS CAIR rules provide, as do all corresponding rules in other States subject to CAIR, that certain units meeting the definition of "cogeneration unit" may be excluded from the definition of "electric generating unit" and thereby be exempt from the requirements of the rules. In order to be a cogeneration unit, a unit must have equipment used to produce electricity and useful thermal energy through sequential use of energy and must meet a specified efficiency standard, that is, the useful power plus one-half of useful thermal energy output of the unit must equal no less than a certain percentage of the total energy input, or in some cases, useful power must be no less than a certain percentage of total energy input. As presently written, the efficiency standard in the cogeneration unit definition applies to all energy input to the unit regardless of fuel type.
EPA summarized the reasons for changing the definition of "cogeneration unit" as follows:
EPA believes that biomass cogeneration units as a group have a particular set of characteristics that together may make it difficult for many units to meet the efficiency standard in the cogeneration unit definition unless the units co-fire significant amounts of fossil fuel, such as coal. These characteristics are: fuels with relatively high moisture content, units designated for relatively low pressure and temperature conditions for industrial processes, and relatively small boilers and steam turbines that are inherently less efficient due to their size. EPA recognizes that there are some existing biomass cogeneration units (e.g., those that co-fire coal, natural gas, or oil for a large portion of their heat input) that might be able to meet the efficiency standard, as discussed in the following section.
The cogeneration unit definition finalized in the CAIR model cap-and-trade rules, the CAIR FIPs, CAMR, the CAMR Hg model cap-and-trade rule and in the proposed CAMR Federal Plan includes all energy input in the efficiency calculation. EPA believes that the inclusion of energy input from all fuels - rather than from all fuels except biomass - has the unanticipated and unintended consequence of making it very difficult for existing biomass cogeneration units to qualify as cogeneration units unless they co-fire significant amounts of fossil fuel, such as coal. Preventing these existing units from qualifying as cogeneration units is not consistent with the purposes of the efficiency standard. These units were originally designed to, and still do, produce significant amounts of useful thermal energy (relative to their total energy output) and to achieve efficiency gains over non-cogeneration units. Under these circumstances, application of the original efficiency standard to existing biomass cogeneration units does not seem to promote the purposes of the standard. In addition, application of this standard as originally written had the paradoxical result that existing biomass cogeneration units burning greater amounts of fossil fuels (therefore likely having greater emissions) were much more likely to meet the efficiency requirement and thus qualify as cogeneration units exempt from emission limits under the CAIR model cap-and-trade programs and CAMR model cap-and-trade rule, while existing biomass cogeneration units burning less coal (therefore likely having lower emissions) were less likely to meet the requirement and qualify for the exemption.
72 Fed. Reg. at 59194-95
Under 40 CFR section 51.123(aa)(2)(i), states subject to CAIR were allowed to bring non-EGUs covered by the NO SIP Call into the CAIR NO Season Trading Program. EPA described the intent behind this provision as follows:
The EPA is allowing States affected by the NO SIP Call that wish to use EPA's model trading rule to include non-EGUs currently covered by the NO SIP Call in the CAIR ozone season NO trading program. This will ensure that non-EGUs in the NO SIP Call will continue to be able to trade with EGUs as they currently do under the NO SIP Call. This will not require States to get additional reductions form non-EGUs. Budgets for these units would remain the same as they are currently under the NO SIP Call. States will, however, be required to modify their existing NO SIP Call regulations to reflect the replacement of the NO SIP Call with the CAIR ozone season NO trading program. The EPA will continue to operate the NO SIP Call trading program until implementation of the CAIR begins in 2009. The EPA will no longer operate the NO SIP Call trading program after the 2008 ozone season and the CAIR ozone season NO trading program will replace the NO SIP Call trading program. If States affected by the NO SIP Call do not wish to use EPA's CAIR ozone season NO trading program to achieve reductions from non-EGU boilers and turbines required by the NO SIP Call, they would be required to submit a SIP Revision deleting the requirements related to non-EGU participation in the NO SIP Call Budget Trading Program and replacing them with new requirements that achieve the same level of reduction.
70 Fed. Reg. at 25290.
The CAIR NO Ozone Season Trading Program is the successor program to Part 204, NO Budget Trading Program. The NO Budget Trading Program was New York State's NO cap-and-trade program promulgated in compliance with the NO SIP Call. In accord with 40 CFR section 51.123(aa)(2)(i), the Department is making Part 243 explicitly applicable to certain units owned or operated by Eastman Kodak Company (Kodak) and International Paper (IP) that were classified as non-EGUs under Part 204.
Numerous legal challenges to the federal CAIR rules were decided in 'North Carolina v. EPA', 531 F.3d 896 (D.C. Cir. 2008). In this opinion issued on July 11, 2008, the court vacated the federal CAIR rules and the associated Federal Implementation Plan. The Court relied on several grounds to vacate CAIR: the Court concluded that EPA failed to measure each upwind State's significant contribution to downwind nonattainment as required by CAA section 110(a)(2)(D); the Court found that EPA interpreted and applied CAA section 110(a)(2)(D) in a manner that effectively read the "interfere with maintenance" provision out of the statute; the Court held that EPA ignored its statutory mandate to promulgate CAIR consistent with Title I of the CAA because EPA's use of a second phase of CAIR in 2015 to achieve reductions that would eliminate significant contribution from upwind States left downwind States (most facing 2010 attainment dates) with the obligation to attain the ozone and PM2.5 NAAQS without the elimination of the upwind State's significant contribution to downwind nonattainment (which would force downwind areas to make greater reductions than CAA section 110(a)(2)(D) requires); EPA based its determination of each upwind State's SO emissions budget on the number of allowances that the State's EGUs received under CAA Title IV - the Federal Acid Rain Program - which the Court held was arbitrary, capricious, or not otherwise in accordance with law; the Court held that EPA's method of setting the NO budgets for upwind states was arbitrary and capricious and had the effect of making states with mainly oil- and gas-fired EGUs subsidize reductions in States with mainly coal-fired (and thus more polluting) EGUs; and the Court held that CAA section 110(a)(2)(D) gave EPA no authority to terminate or limit Title IV allowances. The Court also held that any State that chose not to adopt EPA's cap-and-trade programs, but which had filed SIP revisions that satisfied CAA section 110(a)(2)(D) by prohibiting emissions within the State from contributing significantly to downwind nonattainment, could not be forced by EPA to adopt SIP provisions that directed the retirement of excess Title IV allowances.
By a decision issued on December 23, 2008, the Court in 'North Carolina' responded to EPA's petition for rehearing by remanding the case to EPA without vacatur. EPA was directed to conduct further proceedings consistent with the Court's July 11, 2008. The court did not provide a deadline or schedule for EPA action on the remand. Thus, the federal CAIR rules and, by extension, the NYS CAIR rules, remain in effect until EPA promulgates new rules that repeal or replace the federal CAIR rules.
Because of the original July 11, 2008 decision vacating the federal CAIR rules, the Department ceased rulemaking activity aimed at complying with the January 1, 2009 SIP revision deadline set forth in 40 CFR section 51.123(o)(1) and (aa)(1), and 40 CFR section 51.124(o)(1). The present rulemaking is aimed at fulfilling the mandated SIP obligations.
The New York State Legislature has given the Department the primary authority to formulate and implement the SIP. The provisions of State law treated below, taken together, clearly empower the Department to promulgate and implement the proposed revisions to the NYS CAIR rules and submit the revisions to EPA for approval into the SIP. The statutory authority to promulgate Parts 243, 244, and 245 derives primarily from the Department's obligation to prevent and control air pollution, as set out in Environmental Conservation Law (ECL) at Sections 1-0101, 19-1013, 19-0105, 19-0301, 19-0303, 19-0311 and 3-0301. The legislative objectives underlying the above statutory authority are essentially directed toward promoting the safety, health and welfare of the public, and protecting the State's natural environment.
By promulgating and implementing the proposed revisions to the NYS CAIR rules, the Department will be amending rules that control emissions of NO and SO that contribute to local and regional nonattainment of the ozone and PM2.5 NAAQS. The amendments to certain definitions in the NYS CAIR rules will comply with federal mandates to conform the NYS CAIR rules to the changes made by EPA to the federal model regulations of which the NYS CAIR rules are based and will provide more clarity to the NYS CAIR rules.
By changing the definitions of "cogeneration unit", "biomass", and "total energy input", the proposed rule revisions will comply with the mandate of 40 CFR section 51.123(o)(1) and (aa)(1), and 40 CFR section 51.124(o)(1). The Department has committed to EPA to revise the definition of "fossil fuel-fired" in Part 243. As previously written, the definition did not include the cross reference to the applicability in 243-1.4(a)(3). The Department has revised the "fossil fuel-fired" definition to include this reference.
There are units owned or operated by Kodak and IP that produce, but do not sell, electricity. These units were classified as non-EGUs under Part 204. If these units, while subject to Part 243, begin to sell electricity to any utility power distribution system, these units would be considered EGUs but would likely qualify for the cogeneration unit exemption under section 243-1.4(b). Should the Kodak and IP units become exempt from Part 243, the Department would be obligated to achieve other emissions reductions at least equivalent to those lost due to the inapplicability of Part 243 to these units. Rather than accept the loss of these important emissions reductions under Part 243, the Department has chosen to explicitly retain the Kodak and IP units as non-EGUs under Part 243. This is being accomplished by revising the definition of "non-electric generating unit" in section 243-1.2 to identify, by ORIS Code, the relevant units at Kodak and IP.
This proposed revision serves to clarify, rather than change, the status of the Kodak and IP units as non-EGUs under Part 243. These units are currently regulated under Part 243 and have been allocated allowances under section 243-5.3(e). None of the Kodak or IP units were accounted for by EPA when it established New York State's ozone season NO trading budgets as recorded at 40 CFR section 96.340 and reflected in 6 NYCRR section 243-5.3(a)(1). Therefore, the Department accounted for the 2,860 tons of NO emissions contained in the section 204-5.3(a)(3) non-EGU sector budget by creating the non-EGU sector budget at section 243-5.3(a)(4) in the same amount.
The Department proposes to revise the number of control periods for which a new unit may receive NO allowances under sections 243-5.3(f)(3) and 244-5.3(c)(3) from six consecutive control periods to no more than four consecutive control periods so that the Department's allowance allocation methodology will comport with established EPA administrative practices.
The Department has deleted the text included in the definitions of "CAIR designated representative" and "Alternate CAIR designated representative" that referred to the Mercury Reduction Program for Coal-Fired Electric Utility Steam Generating Units established at 6 NYCRR Part 246. The original text was included in the definition so that it would comport with the federal CAIR model rules which provided that all designated representatives under the CAIR, Acid Rain, and Clean Air Mercury (CAMR) programs must be the same person. Since the CAMR program was found unlawful and vacated by the court in 'State of New Jersey v. EPA", 517 F.3rd 574 (D.C. Cir. 2008), the Department sees no reason to retain this unnecessary requirement.
The proposed revisions to the NYS CAIR rules incorporate changes made by EPA to the model federal regulations on which the three NYS CAIR rules are based. The minor clarifications and corrections to the NYS CAIR rules do not impose additional costs on the regulated parties, the Department, or other State or local government entities.
This rulemaking is not expected to either increase or decrease the number or complexity of recordkeeping or reporting requirements that apply to sources subject to the NYS CAIR rules.
The proposed minor clarifications and corrections to the NYS CAIR rules are not expected to result in any additional recordkeeping, reporting, or other requirement for any local government entity. They do not duplicate, overlap, or conflict with any other State or federal requirements.
The Department has no permissible alternative to the revisions that incorporate the changes required by 40 CFR section 51.123(o)(1) and (aa)(1), and 40 CFR section 51.124(o)(1). In its September 17, 2007 SIP submission to EPA, the Department committed to correct the error in the definition of "fossil fuel-fired" in section 243-1.2. See 'Approval and Promulgation of Implementation Plans; New York: Clean Air Interstate Rule; Proposed Rule', 72 Fed. Reg. 55723-29 (October 1, 2007). This commitment is now a SIP obligation that the Department must fulfill. See 40 CFR section 52.1670(c)(113).
The proposed revisions do not result in the imposition of requirements that exceed any minimum standards of the federal government for the same or similar subject areas and do not impose any new compliance obligations on regulated entities.
Regulatory Flexibility Analysis, Rural Area Flexibility Analysis and Job Impact Statement
The proposed revisions to Parts 243, 244, and 245 include minor clarifications and corrections that do not substantially change the structure or operation of these rules. The revisions incorporate changes to the model federal regulations on which the three NYS CAIR rules are based. The Department has determined that the revisions to Parts 243, 244, and 245 will not impose any additional reporting, recordkeeping, other costs or compliance requirements on affected sources. The revisions will not have any adverse impacts on small businesses, local governments, or on public or private entities in rural areas, or on jobs and employment opportunities.
