bill.txt

H.R. /S.
IN THE XXXXX OF THE UNITED STATES
introduced the following bill; which was read twice and referred
to the Committee on

A BILL
To amend the Clean Air Act to reduce air pollution through
expansion of cap and trade programs, to provide an alternative
regulatory classification for units subject to the cap and trade
programs, and for other purposes.
1 Be it enacted by the Senate and House of Representa-2 tives of
the United States of America in Congress assembled, 3
4 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 5 (a) SHORT
TITLE.-This Act may be cited as the 6 ''Clear Skies Act of 2002''.
7 (b) TABLE OF CONTENTS.-The table of contents of 8 this Act is as
follows:
Sec. 1. Short title; table of contents. Sec. 2. Emission
Reduction Programs.
''TITLE IV- EMISSION REDUCTION PROGRAMS
''PART A-GENERAL PROVISIONS
''Sec. 401. (Reserved) "Sec. 402. Definitions. "Sec. 403.
Allowance system. "Sec. 404. Permits and compliance plans. "Sec.
405. Monitoring, reporting, and recordkeeping requirements. "Sec.
406. Excess emissions penalty; general compliance with other
provisions; enforcement. "Sec. 407. Election of additional units.
"Sec. 408. Clean coal technology regulatory incentives. "Sec. 409.
Auctions. "Sec. 410. Evaluation of limitations on total sulfur
dioxide, nitrogen oxides, and mercury emissions that start in
2018.
''PART B-SULFUR DIOXIDE EMISSION REDUCTIONS
''Subpart 1-Acid Rain Program
''Sec. 411. Definitions. ''Sec. 412. Allowance allocations.
''Sec. 413. Phase I sulfur dioxide requirements. ''Sec. 414. Phase
II sulfur dioxide requirements. ''Sec. 415. Allowances for states
with emission rates at or below .8 lbs/mmbtu. ''Sec. 416. Election
for additional sources. ''Sec. 417. Auctions, Reserve ''Sec. 418.
Industrial sulfur dioxide emissions. ''Sec. 419. Termination.
''Subpart 2-Sulfur Dioxide Allowance Program
''Sec. 421. Definitions.
"Sec. 422. Applicability. ''Sec. 423. Limitations on total
emissions. ''Sec. 424. Allocations. ''Sec. 425. Disposition of
sulfur dioxide allowances allocated under subpart 1. ''Sec. 426.
Incentives for sulfur dioxide emission control technology.
''Subpart 3-Western Regional Air Partnership
''Sec. 431. Definitions.
''Sec. 432. Applicability. "Sec. 433. Limitations on total
emissions. "Sec. 434. Allocations.
''PART C-NITROGEN OXIDES EMISSION REDUCTIONS
"Subpart 1-Acid Rain Program
''Sec. 441. Nitrogen Oxides Emission Reduction Program ''Sec.
442. Termination.
''Subpart 2-Nitrogen Oxides Allowance Program
''Sec. 451. Definitions. ''Sec. 452. Applicability. "Sec. 453.
Limitations on total emissions. ''Sec. 454. Allocations.
''Subpart 3-Ozone Season NOx Budget Program
''Sec. 461. Definitions. ''Sec. 462. General Provisions. "Sec.
463. Applicable Implementation Plan. ''Sec. 464. Termination of
Federal Administration of NOx Trading Program. "Sec. 465.
Carryforward of Pre-2008 Nitrogen Oxides Allowances.
''PART D-MERCURY EMISSION REDUCTIONS
''Sec. 471. Definitions. ''Sec. 472. Applicability. "Sec. 473.
Limitations on total emissions. ''Sec. 474. Allocations.
''PART E-NATIONAL EMISSION STANDARDS; RESEARCH; ENVIRONMENTAL
ACCOUNTABILITY; MAJOR SOURCE PRECONSTRUCTION REVIEW AND BEST
AVAILABLE RETROFIT CONTROL TECHNOLOGY REQUIREMENTS.
''Sec. 481. National emission standards for affected units.
''Sec. 482. Research, environmental monitoring, and assessment.
''Sec. 483. Major source preconstruction review and best
availability retrofit control technology requirements."
Sec. 3. Other amendments.

SEC. 2. EMISSION REDUCTION PROGRAMS.
Title IV of the Clean Air Act (relating to acid deposition
control) (42 U.S.C. 7651, et seq.) is amended to read as
follows:
''TITLE IV- EMISSION REDUCTION PROGRAMS
PART A. GENERAL PROVISIONS.
SEC. 401. (Reserved)
SEC. 402. DEFINITIONS.
As used in this title-


(1)
The term "affected EGU" shall have the meaning set forth
in section 421, 431, 451, or 471,as appropriate.


(2)
The term "affected facility" or "affected source" means a
facility or source that includes oneor more affected
units.



(3)
The term "affected unit" means-



(A)
Under this part, a unit that is subject to emission
reduction requirements orlimitations under part B, C, or D or, if
applicable, under a specified part or subpart or


(B)
Under subpart 1 of part B or subpart 1 of part C, a unit
that is subject to emissionreduction requirements or limitations
under that subpart.





(4)
The term "allowance" means-



(A)
an authorization, by the Administrator under this title,
to emit one ton of sulfur dioxide, one ton of nitrogen oxides, or
one ounce of mercury; or


(B)
under subpart 1 of part B, an authorization by the
Administrator under this title, to




emit one ton of sulfur dioxide. (5)(A) The term "baseline heat
input" means, except under subpart 1 of part B and section 407, the
average annual heat input used by a unit during the three years in
which the unit had the highest heat input for the period 1997
through 2001.



(B)
Notwithstanding subparagraph (A),



(i)
if a unit commenced operation during 2000, then "baseline
heat input" means the average annual heat input used by the unit
during 2000-2001; and


(ii)
if a unit commenced or commences operation during
2001-2004, then"baseline heat input" means the manufacturer's
design heat input capacity for the unit multiplied by eighty
percent for coal-fired units, fifty for combined cycle combustion
turbines, and five percent for simple cycle combustion
turbines.





(C)
A unit's heat input for a year shall be the heat
input-



(i)
required to be reported under section 405 for the unit,
if the unit wasrequired to report heat input during the year under
that section;


(ii)
reported to the Energy Information Administration for the
unit, if the unit wasnot required to report heat input under
section 405;


(iii) based on data for the unit reported to the State where
the unit is located asrequired by State law, if the unit was not
required to report heat input during the year under section 405 and
did not report to the Energy Information Administration; or
(iv) based on fuel use and fuel heat content data for the unit
from fuel purchaseor use records, if the unit was not required to
report heat input during the year under section 405 and did not
report to the Energy Information Administration and the State
.


(D)
By July 1, 2003, the Administrator shall promulgate
regulations, without notice andopportunity for comment, specifying
the format in which the information under subparagraphs (B)(ii) and
(C)(ii), (iii), or (iv) shall be submitted. By January 1, 2004, the
owner or operator of any unit under subparagraph (B)(ii) or
(C)(ii), (iii), or (iv) to


which allowances may be allocated under section 424, 434, 454,
or 474 shall submit to the Administrator such information. The
Administrator is not required to allocate allowances under such
sections to a unit for which the owner or operator fails to submit
information in accordance with the regulations promulgated under
this subparagraph.


(6)
The term "clearing price" means the price at which
allowances are sold at an auctionconducted by the Administrator or,
if allowances are sold at an auction conducted by the Administrator
at more than one price, the lowest price at which allowances are
sold at the auction.


(7)
The term "coal" means any solid fuel classified as
anthracite, bituminous, subbituminous, orlignite.


(8)
The term "coal-derived fuel" means any fuel (whether in a
solid, liquid, or gaseous state)produced by the mechanical,
thermal, or chemical processing of coal.


(9)
The term "coal-fired" with regard to a unit means, except
under subpart 1 of part B, subpart1 of part C, and sections 424 and
434, combusting coal or any coal-derived fuel alone or in
combination with any amount of any other fuel in any
year.



(10)
The term "cogeneration unit" means, except under subpart
1 of part B and subpart 1 ofpart C, a unit that produces through
the sequential use of energy:



(A)
electricity; and


(B)
useful thermal energy (such as heat or steam) for
industrial, commercial, heating, orcooling purposes.




(11)
The term "combustion turbine" means any combustion
turbine that is not self-propelled. The term includes, but is not
limited to, a simple cycle combustion turbine, a combined cycle
combustion turbine and any duct burner or heat recovery device used
to extract heat from the combustion turbine exhaust, and a
regenerative combustion turbine. The term does not include a
combined cycle combustion turbine in an integrated gasification
combined cycle plant.


(12)
The term "commence operation" with regard to a unit means
start up the unit's combustionchamber.



(13)
The term "compliance plan" means either-



(A)
a statement that the facility will comply with all
applicable requirements under thistitle, or


(B)
under subpart 1 of part B or subpart 1 of part C, a
schedule and description of themethod or methods for compliance and
certification by the owner or operator that the facility is in
compliance with the requirements of that subpart.




(14)
The term "continuous emission monitoring system" (CEMS)
means the equipment asrequired by section 405, used to sample,
analyze, measure, and provide on a continuous basis a permanent
record of emissions and flow (expressed in pounds per million
British thermal units (lbs/mmBtu), pounds per hour (lbs/hr) or such
other form as the Administrator may prescribe by regulations under
section 405.



(15)
The term "designated representative" means a responsible
person or official authorized bythe owner or operator of a unit and
the facility that includes the unit to represent the owner or
operator in matters pertaining to the holding, transfer, or
disposition of allowances , and the

submission of and compliance with permits, permit applications,
and compliance plans .


(16)
The term "duct burner" means a combustion device that
uses the exhaust from a combustion turbine to burn fuel for heat
recovery.


(17)
The term "facility" means all buildings, structures, or
installations located on one or moreadjacent properties under
common control of the same person or persons.


(18)
The term "fossil fuel" means natural gas, petroleum,
coal, or any form of solid, liquid, orgaseous fuel derived from
such material.


(19)
The term "fossil fuel-fired" with regard to a unit means
combusting fossil fuel, alone or incombination with any amount of
other fuel or material.


(20)
The term "fuel oil" means a petroleum-based fuel,
including diesel fuel or petroleumderivatives.


(21)
The term "gas-fired" with regard to a unit means, except
under subpart 1 of part B andsubpart 1 of part C, combusting only
natural gas or fuel oil, with natural gas comprising at least
ninety percent, and fuel oil comprising no more than ten percent,
of the unit's total heat input in any year.


(22)
The term "gasify" means to convert carbon-containing
material into a gas consistingprimarily of carbon monoxide and
hydrogen.


(23)
The term "generator" means a device that produces
electricity and, under subpart 1 ofpart B and subpart 1 of part C,
that is reported as a generating unit pursuant to Department of
Energy Form 860.


(24)
The term "heat input" with regard to a specific period of
time means the product (inmmBtu/time) of the gross calorific value
of the fuel (in mmBtu/lb) and the fuel feed rate into a unit (in lb
of fuel/time) and does not include the heat derived from preheated
combustion air, recirculated flue gases, or exhaust.


(25)
The term "integrated gasification combined cycle plant"
means any combination ofequipment used to gasify fossil fuels (with
or without other material) and then burn the gas in a combined
cycle combustion turbine.


(26)
The term "oil-fired" with regard to a unit means, except
under section 424 and 434, combusting fuel oil for more than ten
percent of the unit's total heat input, and combusting no coal or
coal-derived fuel, in any year.


(27)
The term "owner or operator" with regard to a unit or
facility means, except for subpart 1 of part B and subpart 1 of
part C, any person who owns, leases, operates, controls, or
supervises the unit or the facility.


(28)
The term "permitting authority" means the Administrator,
or the State or local air pollutioncontrol agency, with an approved
permitting program under title V of the Act.


(29)
The term "potential electrical output" with regard to a
generator means the nameplatecapacity of the generator multiplied
by 8,760 hours.


(30)
The term "source" means, except for sections 410, 481,
and 482, all buildings, structures,or installations located on one
or more adjacent properties under common control of the same person
or persons.



(31)
The term "State" means-



(A)
one of the 48 contiguous States, Alaska, Hawaii, the
District of Columbia, theCommonwealth of Puerto Rico, the Virgin
Islands, Guam, American Samoa, or the Commonwealth of the Northern
Mariana Islands; or


(B)
under subpart 1 of part B and subpart 1 of part C, one of
the 48 contiguous States or the District of Columbia;
or.


(C)
under subpart 3 of part B, Arizona, California, Colorado,
Idaho, Nevada, NewMexico, Oregon, Utah, and Wyoming.





(32)
The term "unit" means-



(A)
a fossil fuel-fired boiler, combustion turbine, or
integrated gasification combinedcycle plant; or


(B)
under subpart 1 of part B and subpart 1 of part C, a
fossil fuel-fired combustion




device. (33)The term "utility unit" shall have the meaning set
forth in section 411.
(34) The term "year" means calendar year.


SEC. 403. ALLOWANCE SYSTEM.



(a)
Allocations in General. - (1) For the emission limitation
programs under this title, the Administratorshall allocate annual
allowances for an affected unit, to be held or distributed by the
designated representative of the owner or operator in accordance
with this title as follows -



(A)
sulfur dioxide allowances in an amount equal to the
annual tonnage emission limitationcalculated under section 413,
414, 415, or 416 except as otherwise specifically provided
elsewhere in subpart 1 of part B, or in an amount calculated under
section 424 or 434.


(B)
nitrogen oxides allowances in an amount calculated under
section 454, and


(C)
mercury allowances in an amount calculated under section
474.





(2)
Notwithstanding any other provision of law to the
contrary, the calculation of the allocationfor any unit, and the
determination of any values used in such calculation, under
sections 424, 434, 454, and 474 shall not be subject to judicial
review.

(3) Allowances shall be allocated by the Administrator without
cost to the recipient, and shall be auctioned or sold by the
Administrator, in accordance with this title.



(b)
Allowance Transfer System.- Allowances allocated,
auctioned, or sold by the Administrator underthis title may be
transferred among designated representatives of the owners or
operators of affected facilities under this title and any other
person , as provided by the allowance system regulations
promulgated by the Administrator. With regard to sulfur dioxide
allowances, the Administrator shall implement this subsection under
40 CFR part 73 (2001), amended as appropriate by the Administrator.
With regard to nitrogen oxides allowances and mercury allowances,
the Administrator shall implement this subsection by promulgating
regulations not later than twenty-four months after the date of
enactment of the Clear Skies Act of 2002. The regulations under
this subsection shall establish the allowance system prescribed
under this section, including, but not limited to, requirements for
the allocation, transfer, and use of allowances under this title.
Such regulations shall prohibit the use of any allowance prior to
the calendar year for which the allowance was allocated or
auctioned and shall provide, consistent with the purposes of this
title, for the identification of unused allowances, and
for

such unused allowances to be carried forward and added to
allowances allocated in subsequent years, except as otherwise
provided in section 425. Such regulations shall provide, or shall
be amended to provide, that transfers of allowances shall not be
effective until certification of the transfer, signed by a
responsible official of the transferor, is received and recorded by
the Administrator.


(c)
Allowance Tracking System.--The Administrator shall
promulgate regulations establishing a system for issuing,
recording, and tracking allowances, which shall specify all
necessary procedures and requirements for an orderly and
competitive functioning of the allowance system. Such system shall
provide, by January 1, 2008, for one or more facility-wide accounts
for holding sulfur dioxide allowances, nitrogen oxides allowances,
and, if applicable, mercury allowances for all affected units at an
affected facility. With regard to sulfur dioxide allowances, the
Administrator shall implement this subsection under 40 CFR part 73
(2001), amended as appropriate by the Administrator. With regard to
nitrogen oxides allowances and mercury allowances, the
Administrator shall implement this subsection by promulgating
regulations not later than twenty-four months after the date of
enactment of the Clear Skies Act of 2002. All allowance allocations
and transfers shall, upon recordation by the Administrator, be
deemed a part of each unit's or facility's permit requirements
pursuant to section 404, without any further permit review and
revision.


(d)
Nature of Allowances.- A sulfur dioxide allowance,
nitrogen oxides allowance, or mercury allowance allocated,
auctioned, or sold by the Administrator under this title is a
limited authorization to emit one ton of sulfur dioxide, one ton of
nitrogen oxides, or one ounce of mercury, as the case may be, in
accordance with the provisions of this title. Such allowance does
not constitute a property right. Nothing in this title or in any
other provision of law shall be construed to limit the authority of
the United States to terminate or limit such authorization. Nothing
in this section relating to allowances shall be construed as
affecting the application of, or compliance with, any other
provision of this Act to an affected unit or facility, including
the provisions related to applicable National Ambient Air Quality
Standards and State implementation plans. Nothing in this section
shall be construed as requiring a change of any kind in any State
law regulating electric utility rates and charges or affecting any
State law regarding such State regulation or as limiting State
regulation (including any prudency review) under such a State law.
Nothing in this section shall be construed as modifying the Federal
Power Act or as affecting the authority of the Federal Energy
Regulatory Commission under that Act. Nothing in this title shall
be construed to interfere with or impair any program for
competitive bidding for power supply in a State in which such
program is established. Allowances, once allocated or auctioned to
a person by the Administrator, may be received, held, and
temporarily or permanently transferred in accordance with this
title and the regulations of the Administrator without regard to
whether or not a permit is in effect under title V or section 404
with respect to the unit for which such allowance was originally
allocated and recorded.


(e)
Prohibition.- (1) It shall be unlawful for any person to
hold, use, or transfer any allowance allocated, auctioned, or sold
by the Administrator under this title, except in accordance with
regulations promulgated by the Administrator.



(2)
It shall be unlawful for any affected unit or for the
affected units at a facility to emit sulfur dioxide, nitrogen
oxides, and mercury, as the case may be, during a year in excess of
the number of allowances held for that unit or facility for that
year by the owner or operator as provided in sections

412(c), 422, 432, 452, and 472.



(3)
The owner or operator of a facility may purchase
allowances directly from theAdministrator to be used only to meet
the requirements of sections 422, 432, 452, and 472, as the case
may be, for a specified year. Not later than thirty-six months
after the date of enactment of the Clear Skies Act of 2002, the
Administrator shall promulgate regulations providing for direct
sales of sulfur dioxide allowances, nitrogen oxides allowances, and
mercury allowances to an owner or operator of a facility. The
regulations shall provide that-



(A)
such allowances may be used only to meet the requirements
of section 422, 432, 452, and472, as the case may be, for such
facility and for a year specified by the Administrator,


(B)
each such sulfur dioxide allowance shall be sold for
$4,000, each such nitrogen oxidesallowance shall be sold for
$4,000, and each such mercury allowance shall be sold for
$2,187.50, with such prices adjusted for inflation based on the
Consumer Price Index on the date of enactment of the Clear Skies
Act of 2002 and annually thereafter,


(C)
the proceeds from any sales of allowances under
subparagraph (B) shall be deposited inthe United States
Treasury,


(D)
the allowances directly purchased for use for a specified
year shall be taken from, andreduce, the amount of sulfur dioxide
allowances, nitrogen oxides allowances, or mercury allowances, as
the case may be, that would otherwise be auctioned under section
423, 453, or 473 starting for the year after the specified year and
continuing for each subsequent year as necessary,



(E)
if an owner or operator does not use any such allowance
in accordance with paragraph(A),



(i)
the owner or operator shall hold the allowance for
deduction by the Administratorand


(ii)
the Administrator shall deduct the allowance, without
refund or other form ofrecompense, and offer it for sale in the
auction from which it was taken under subparagraph (D) or a
subsequent relevant auction as necessary.




(F)
if the direct sales of allowances result in the removal
of all sulfur dioxide allowances,nitrogen oxides allowances, or
mercury allowances, as the case may be, from auctions under section
423, 453, or 473 for three consecutive years, the Administrator
shall conduct a study to determine whether revisions to the
relevant allowance trading program are necessary and shall report
the results to the Congress.




(4)
Allowances may not be used prior to the calendar year for
which they are allocated orauctioned. Nothing in this section or in
the allowance system regulations shall relieve the Administrator of
the Administrator's permitting, monitoring and enforcement
obligations under this Act, nor relieve affected facilities of
their requirements and liabilities under this Act.


(f)
Competitive Bidding for Power Supply.- Nothing in this
title shall be construed to interfere with orimpair any program for
competitive bidding for power supply in a State in which such
program is established.



(g)
Applicability of the Antitrust Laws.-

(1) Nothing in this section affects-


(A)
the applicability of the antitrust laws to the transfer,
use, or sale of allowances, or


(B)
the authority of the Federal Energy Regulatory Commission
under any provision oflaw respecting unfair methods of competition
or anticompetitive acts or practices.




(2)
As used in this section, "antitrust laws" means those
Acts set forth in section 1 of theClayton Act (15 U.S.C. 12), as
amended.


(h)
Public Utility Holding Company Act.- The acquisition or
disposition of allowances pursuant to thistitle including the
issuance of securities or the undertaking of any other financing
transaction in connection with such allowances shall not be subject
to the provisions of the Public Utility Holding Company Act of
1935.


(i)
Interpollutant Trading.- Not later than July 1, 2009, the
Administrator shall furnish to the Congress astudy evaluating the
environmental and economic consequences of amending this title to
permit trading sulfur dioxide allowances for nitrogen oxides
allowances.


(j)
International Trading.- Not later than 24 months after
the date of enactment of the Clear Skies Actof 2002, the
Administrator shall furnish to the Congress a study evaluating the
feasibility of international trading of sulfur dioxide allowances,
nitrogen oxides allowances, and mercury allowances.




SEC. 404. PERMITS AND COMPLIANCE PLANS.



(a)
Permit Program.- The provisions of this title shall be
implemented, subject to section 403, bypermits issued to units and
facilities subject to this title and enforced in accordance with
the provisions of title V, as modified by this title. Any such
permit issued by the Administrator, or by a State with an approved
permit program, shall prohibit-



(1)
annual emissions of sulfur dioxide, nitrogen oxides, and
mercury in excess of the number ofallowances required to be held in
accordance with sections 412(c), 422, 432, 452, and 472,


(2)
exceedances of applicable emissions rates under section
441,


(3)
the use of any allowance prior to the year for which it
was allocated or auctioned, and


(4)
contravention of any other provision of the permit. No
permit shall be issued that is inconsistent with the requirements
of this title, and title V as applicable.




(b)
Compliance Plan.- Each initial permit application shall
be accompanied by a compliance plan for thefacility to comply with
its requirements under this title. Where an affected facility
consists of more than one affected unit, such plan shall cover all
such units, and such facility shall be considered a "facility"
under section 502(c). Nothing in this section regarding compliance
plans or in title V shall be construed as affecting
allowances.



(1)
Submission of a statement by the owner or operator, or
the designated representative of theowners and operators, of a unit
subject to the emissions limitation requirements of sections
412(c), 413, 414, and 441, that the unit will meet the applicable
emissions limitation requirements of such sections in a timely
manner or that, in the case of the emissions limitation
requirements of sections 412(c), 413, and 414, the owners and
operators will hold sulfur dioxide allowances in the amount
required by section 412(c), shall be deemed to meet the proposed
and approved compliance planning requirements of this section and
title V, except that, for any unit that will meet the requirements
of this title by means of an alternative method of compliance
authorized under section 413 (b), (c), (d), or (f), section 416,
and section 441 (d) or (e), the proposed and approved compliance
plan, permit application and permit shall include, pursuant to
regulations promulgated by the Administrator, for each alternative
method of compliance a comprehensive description of the schedule
and means by which the

unit will rely on one or more alternative methods of compliance
in the manner and time authorized under subpart 1 of part B or
subpart 1 of part C.


(2)
Submission of a statement by the owner or operator, or
the designated representative, of afacility that includes a unit
subject to the emissions limitation requirements of sections 422,
432, 452, and 472 that the owner or operator will hold sulfur
dioxide allowances, nitrogen oxide allowances, and mercury
allowances, as the case may be, in the amount required by such
sections shall be deemed to meet the proposed and approved
compliance planning requirements of this section and title V with
regard to subparts A through D.


(3)
Recordation by the Administrator of transfers of
allowances shall amend automatically allapplicable proposed or
approved permit applications, compliance plans and
permits.


(c)
Permits.- The owner or operator of each facility under
this title that includes an affected unit subject to title V shall
submit a permit application and compliance plan with regard to the
applicable requirements under sections 412(c), 422, 432, 441, 452,
and 472 for sulfur dioxide emissions, nitrogen oxide emissions, and
mercury emissions from such unit to the permitting authority in
accordance with the deadline for submission of permit applications
and compliance plans under title V. The permitting authority shall
issue a permit to such owner or operator, or the designated
representative of such owner or operator, that satisfies the
requirements of title V and this title.


(d)
Amendment of Application and Compliance Plan.- At any
time after the submission of anapplication and compliance plan
under this section, the applicant may submit a revised application
and compliance plan, in accordance with the requirements of this
section.


(e)
Prohibition.- (1) It shall be unlawful for an owner or
operator, or designated representative,required to submit a permit
application or compliance plan under this title to fail to submit
such application or plan in accordance with the deadlines specified
in this section or to otherwise fail to comply with regulations
implementing this section.


(2)
It shall be unlawful for any person to operate any
facility subject to this title except incompliance with the terms
and requirements of a permit application and compliance plan
(including amendments thereto) or permit issued by the
Administrator or a State with an approved permit program. For
purposes of this subsection, compliance, as provided in section
504(f), with a permit issued under title V which complies with this
title for facilities subject to this title shall be deemed
compliance with this subsection as well as section
502(a).


(3)
In order to ensure reliability of electric power, nothing
in this title or title V shall beconstrued as requiring termination
of operations of a unit serving a generator for failure to have an
approved permit or compliance plan under this section, except that
any such unit may be subject to the applicable enforcement
provisions of section 113.


(f)
Certificate of Representation.- No permit shall be issued
under this section to an affected unit or facility until the
designated representative of the owners or operators has filed a
certificate of representation with regard to matters under this
title, including the holding and distribution of allowances and the
proceeds of transactions involving allowances.




SEC. 405 . MONITORING, REPORTING, AND RECORDKEEPING
REQUIREMENTS.



(a)
Applicability.- (1)(A) The owner and operator of any
facility subject to this title shall be required to install and
operate CEMS on each affected unit subject to subpart 1 of part B
or subpart 1 of part C at

the facility, and to quality assure the data, for sulfur
dioxide, nitrogen oxides, opacity, and volumetric flow at each such
unit.


(B)
The Administrator shall, by regulations , specify the
requirements for CEMS undersubparagraph (A), for any alternative
monitoring system that is demonstrated as providing information
with the same precision, reliability, accessibility, and timeliness
as that provided by CEMS, and for recordkeeping and reporting of
information from such systems. Such regulations may include
limitations on the use of alternative compliance methods by units
equipped with an alternative monitoring system as may be necessary
to preserve the orderly functioning of the allowance system, and
which will ensure the emissions reductions contemplated by this
title. Where 2 or more units utilize a single stack, a separate
CEMS shall not be required for each unit, and for such units the
regulations shall require that the owner or operator collect
sufficient information to permit reliable compliance determinations
for each such unit.


(2)(A) The owner and operator of any facility subject to this
title shall be required to install and operate CEMS to monitor the
emissions from each affected unit at the facility, and to quality
assure the data, for -


(i)
sulfur dioxide, opacity, and volumetric flow for all
affected units subject to subpart 2of part B at the
facility,


(ii)
nitrogen oxides for all affected units subject to subpart
2 of part C at the facility, and


(iii) mercury for all affected units subject to part D at the
facility.
(B)(i) The Administrator shall, by regulations, specify the
requirements for CEMS under subparagraph (A), for any alternative
monitoring system that is demonstrated as providing information
with the same precision, reliability, accessibility, and timeliness
as that provided by CEMS, for recordkeeping and reporting of
information from such systems, and, if necessary under section 474,
for monitoring, recordkeeping, and reporting of the mercury content
of fuel.
(ii) Notwithstanding the requirements of clause (i), the
regulations under clause (i) mayspecify an alternative monitoring
system for determining mercury emissions to the extent that the
Administrator determines that CEMS for mercury with appropriate
vendor guarantees are not commercially available.
(iii) The regulations under clause (i) may include limitations
on the use of alternativecompliance methods by units equipped with
an alternative monitoring system as may be necessary to preserve
the orderly functioning of the allowance system, and which will
ensure the emissions reductions contemplated by this title.


(iv)
Except as provided in clause (v), the regulations under
clause (i) shall not require aseparate CEMS for each unit where two
or more units utilize a single stack and shall require that the
owner or operator collect sufficient information to permit reliable
compliance determinations for such units.


(v)
The regulations under clause (i) may require a separate
CEMS for each unit wheretwo or more units utilize a single stack
and another provision of the Act requires data under subparagraph
(A) for an individual unit.


(b) Deadlines. - (1).
Upon commencement of commercial operation of each new utility
unit under subpart 1 of part B, the unit shall comply with the
requirements of subsection (a)(1).
(2) By the later of January 1, 2009 or the date on which the
unit commences operation, theowner or operator of each affected
unit under subpart 2 of part B shall install and operate CEMS,
quality assure the data, and keep records and reports in accordance
with the regulations issued under paragraph (a)(2) with regard to
sulfur dioxide, opacity, and volumetric flow.


(3)
By the later of January 1 of the year before the first
covered year or the date on which theunit commences operation, the
owner or operator of each affected unit under subpart 3 of part B
shall install and operate CEMS, quality assure the data, and keep
records and reports in accordance with the regulations issued under
paragraph (a)(2) with regard to sulfur dioxide and volumetric
flow.


(4)
By the later of January 1, 2007 or the date on which the
unit commences operation, theowner or operator of each affected
unit under subpart 2 of part C shall install and operate CEMS,
quality assure the data, and keep records and reports in accordance
with the regulations issued under paragraph (a)(2) with regard to
nitrogen oxides, and


(5)
By the later of January 1, 2009 or the date on which the
unit commences operation, theowner or operator of each affected
unit under part D shall install and operate CEMS, quality assure
the data, and keep records and reports in accordance with the
regulations issued under paragraph (a)(2) with regard to
mercury.


(c)
Unavailability of Emissions Data.- If CEMS data or data
from an alternative monitoring systemapproved by the Administrator
under subsection (a) is not available for any affected unit during
any period of a calendar year in which such data is required under
this title, and the owner or operator cannot provide information,
satisfactory to the Administrator, on emissions during that period,
the Administrator shall deem the unit to be operating in an
uncontrolled manner during the entire period for which the data was
not available and shall, by regulation , prescribe means to
calculate emissions for that period. The owner or operator shall be
liable for excess emissions fees and offsets under section 406 in
accordance with such regulations. Any fee due and payable under
this subsection shall not diminish the liability of the unit's
owner or operator for any fine, penalty, fee or assessment against
the unit for the same violation under any other section of this
Act.


(d)
With regard to sulfur dioxide, nitrogen oxides, opacity,
and volumetric flow, the Administrator shallimplement subsections
(a) and (c) under 40 CFR part 75 (2001), amended as appropriate by
the Administrator. With regard to mercury, the Administrator shall
implement subsections (a) and (c) by issuing regulations not later
than January 1, 2008.


(e)
Prohibition.- It shall be unlawful for the owner or
operator of any facility subject to this title tooperate a facility
without complying with the requirements of this section, and any
regulations implementing this section.




SEC. 406. EXCESS EMISSIONS PENALTY; GENERAL COMPLIANCE WITH
OTHER PROVISIONS; ENFORCEMENT.


(a)
Excess Emissions Penalty.- (1) The owner or operator of
any unit subject to the requirements of section 441 that emits
nitrogen oxides for any calendar year in excess of the unit's
emissions limitation requirement shall be liable for the payment of
an excess emissions penalty, except where such emissions were
authorized pursuant to section 110(f). That penalty shall be
calculated on the basis of the number of tons emitted in excess of
the unit's emissions limitation requirement multiplied by
$2,000.


(2)
The owner or operator of any unit subject to the
requirements of section 412(c) that emitssulfur dioxide for any
calendar year before 2008 in excess of the sulfur dioxide
allowances the owner or


operator holds for use for the unit for that calendar year shall
be liable for the payment of an excess emissions penalty, except
where such emissions were authorized pursuant to section 110(f).
That penalty shall be calculated as follows:



(A)
the product of the unit's excess emissions (in tons)
multiplied by the clearing priceof sulfur dioxide allowances sold
at the most recent auction under section 417, if within thirty days
after the date on which the owner or operator was required to hold
sulfur dioxide allowances-



(i)
the owner or operator offsets the excess emissions in
accordance with paragraph (b)(1); and


(ii)
the Administrator receives the penalty required under
this subparagraph.




(B)
if the requirements of clause (A)(i) or (A)(ii) are not
met, three hundred percent ofthe product of the unit's excess
emissions (in tons) multiplied by the clearing price of sulfur
dioxide allowances sold at the most recent auction under section
417.




(3)
If the units at a facility that are subject to the
requirements of section 412(c) emit sulfurdioxide for any calendar
year after 2007 in excess of the sulfur dioxide allowances that the
owner or operator of the facility holds for use for the facility
for that calendar year, the owner or operator shall be liable for
the payment of an excess emissions penalty, except where such
emissions were authorized pursuant to section 110(f). That penalty
shall be calculated under paragraph (4)(A) or (4)(B).



(4)
If the units at a facility that are subject to the
requirements of section 422, 432, 452, or 472emit sulfur dioxide,
nitrogen oxides, or mercury for any calendar year in excess of the
sulfur dioxide allowances, nitrogen oxides allowances, or mercury
allowances, as the case may be, that the owner or operator of the
facility holds for use for the facility for that calendar year, the
owner or operator shall be liable for the payment of an excess
emissions penalty, except where such emissions were authorized
pursuant to section 110(f). That penalty shall be calculated as
follows:




(A)
the product of the units' excess emissions (in tons or,
for mercury emissions, inounces) multiplied by the clearing price
of sulfur dioxide allowances, nitrogen oxides allowances, or
mercury allowances, as the case may be, sold at the most recent
auction under section 423, 453, or 473, if within thirty days after
the date on which the owner or operator was required to hold sulfur
dioxide, nitrogen oxides allowance, or mercury allowances as the
case may be-



(i)
the owner or operator offsets the excess emissions in
accordance with paragraph (b)(1); and


(ii)
the Administrator receives the penalty required under
this subparagraph.




(B)
if the requirements of clause (A)(i) or (A)(ii) are not
met, three hundred percent ofthe product of the units' excess
emissions (in tons or, for mercury emissions, in ounces) multiplied
by the clearing price of sulfur dioxide allowances, nitrogen oxides
allowances, or mercury allowances, as the case may be, sold at the
most recent auction under section 423, 453, or 473.





(5)
Any penalty under paragraph 1, 2, 3, or 4 shall be due
and payable without demand to the Administrator as provided in
regulations issued by the Administrator. With regard to the penalty
under paragraph 1, the Administrator shall implement this paragraph
under 40 CFR part 77 (2001), amended as appropriate by the
Administrator. With regard to the penalty under paragraphs 2, 3,
and 4, the

Administrator shall implement this paragraph by issuing
regulations no later than twenty-four months after the date of
enactment of the Clear Skies Act of 2002. Any such payment shall be
deposited in the United States Treasury. Any penalty due and
payable under this section shall not diminish the liability of the
unit's owner or operator for any fine, penalty or assessment
against the unit for the same violation under any other section of
this Act.


(b)
Excess Emissions Offset.- (1) The owner or operator of
any unit subject to the requirements ofsection 412(c) that emits
sulfur dioxide during any calendar year before 2008 in excess of
the sulfur dioxide allowances held for the unit for the calendar
year shall be liable to offset the excess emissions by an equal
tonnage amount in the following calendar year, or such longer
period as the Administrator may prescribe. The Administrator shall
deduct sulfur dioxide allowances equal to the excess tonnage from
those held for the facility for the calendar year, or succeeding
years during which offsets are required, following the year in
which the excess emissions occurred.


(2)
If the units at a facility that are subject to the
requirements of section 412(c) emit sulfur dioxide for a year after
2007 in excess of the sulfur dioxide allowances that the owner or
operator of the facility holds for use for the facility for that
calendar year, the owner or operator shall be liable to offset the
excess emissions by an equal amount of tons in the following
calendar year, or such longer period as the Administrator may
prescribe. The Administrator shall deduct sulfur dioxide allowances
equal to the excess emissions in tons from those held for the
facility for the year, or succeeding years during which offsets are
required, following the year in which the excess emissions
occurred.


(3)
If the units at a facility that are subject to the
requirements of section 422, 432, 452, or 472emit sulfur dioxide,
nitrogen oxides, or mercury for any calendar year in excess of the
sulfur dioxide allowances, nitrogen oxides allowances, or mercury
allowances, as the case may be, that the owner or operator of the
facility holds for use for the facility for that calendar year, the
owner or operator shall be liable to offset the excess emissions by
an equal amount of tons or, for mercury, ounces in the following
calendar year, or such longer period as the Administrator may
prescribe. The Administrator shall deduct sulfur dioxide
allowances, nitrogen oxide allowances, or mercury allowances, as
the case may be, equal to the excess emissions in tons or, for
mercury, ounces from those held for the facility for the year, or
succeeding years during which offsets are required, following the
year in which the excess emissions occurred.


(c)
Penalty Adjustment.-- The Administrator shall, by
regulation, adjust the penalty specified insubsection (a)(1) for
inflation, based on the Consumer Price Index, on November 15, 1990
and annually thereafter.



(d)
Prohibition.- It shall be unlawful for the owner or
operator of any unit or facility liable for a penaltyand offset
under this section to fail



(1)
to pay the penalty under subsection (a) or


(2)
to offset excess emissions as required by subsection
(b).




(e)
Savings Provision.- Nothing in this title shall limit or
otherwise affect the application of section 113,114, 120, or 304
except as otherwise explicitly provided in this title.



(f)
Except as expressly provided, compliance with the
requirements of this title shall not exempt orexclude the owner or
operator of any facility subject to this title from compliance with
any other applicable requirements of this Act. Notwithstanding any
other provision of the Act, no State or political subdivision
thereof shall restrict or interfere with the transfer, sale, or
purchase of allowances

under this title.


(g)
Violation by any person subject to this title of any
prohibition of, requirement of, or regulation promulgated pursuant
to this title shall be a violation of this Act. In addition to the
other requirements and prohibitions provided for in this title, the
operation of any affected unit or the affected units at a facility
to emit sulfur dioxide, nitrogen oxides, or mercury in violation of
section 412(c), 422, 432, 452, and 472, as the case may be, shall
be deemed a violation, with each ton or, in the case of mercury,
each ounce emitted in excess of allowances held constituting a
separate violation.




SEC. 407. ELECTION FOR ADDITIONAL UNITS.


(a)
Applicability.- The owner or operator of any unit that is
not an affected EGU under subpart 2 ofpart B and subpart 2 of part
C and whose emissions of sulfur dioxide and nitrogen oxides are
vented only through a stack or duct may elect to designate such
unit as an affected unit under subpart 2 of part B and subpart 2 of
part C. If the owner or operator elects to designate a unit that is
coal-fired and emits mercury vented only through a stack or duct,
the owner or operator shall also designate the unit as an affected
unit under part D.


(b)
Application.- The owner or operator making an election
under subsection (a) shall submit anapplication for the election to
the Administrator for approval.


(c)
Approval.- If an application for an election under
subsection (b) meets the requirements ofsubsection (a), the
Administrator shall approve the designation as an affected unit
under subpart 2 of part B and subpart 2 of part C and, if
applicable, under part D, subject to the requirements in
subsections (d) through (g).


(d)
Establishment of Baseline.- (1) After approval of the
designation under subsection (c), the owner oroperator shall
install and operate CEMS on the unit, and shall quality assure the
data, in accordance with the requirements of paragraph (a)(2) and
subsections (c) through (e) of section 405, except that, where two
or more units utilize a single stack, separate monitoring shall be
required for each unit.


(2)
The baselines for heat input and sulfur dioxide, nitrogen
oxides, and mercury emission rates,as the case may be, for the unit
shall be the unit's heat input and the emission rates of sulfur
dioxide, nitrogen oxides, and mercury for a year starting after
approval of the designation under subsection (c). The Administrator
shall issue regulations requiring all the unit's baselines to be
based on the same year and specifying minimum requirements
concerning the percentage of the unit's operating hours for which
quality assured CEMS data must be available during such
year.


(e)
Emission Limitations.- After approval of the designation
of the unit under paragraph (c), the unitshall become:


(1)
an affected unit under subpart 2 of part B, and shall be
allocated sulfur dioxide allowancesunder paragraph (f), starting
the later of January 1, 2010 or January 1 of the year after the
year on which the unit's baselines are based under subsection
(d);


(2)
an affected unit under subpart 2 of part C, and shall be
allocated nitrogen oxides allowancesunder paragraph (f), starting
the later of January 1, 2008 or January 1 of the year after the
year on which the unit's baselines are based under subsection (d);
and


(3)
if applicable, an affected unit under part D, and shall
be allocated mercury allowances,starting the later of January 1,
2010 or January 1 of the year after the year on which the unit's
baselines are based under subsection (d).



(f)
Allocations and Auction Amounts.- (1) The Administrator
shall promulgate regulations determiningthe allocations of sulfur
dioxide allowances, nitrogen oxides allowances, and, if applicable,
mercury allowances for each year during which a unit is an affected
unit under subsection (e). The regulations shall provide for
allocations equal to fifty percent of the following amounts, as
adjusted under paragraph (2):



(A)
the lesser of the unit's baseline heat input under
subsection (d) or the unit's heat input forthe year before the year
for which the Administrator is determining the allocations;
multiplied by



(B)
the lesser of-



(i)
the unit's baseline sulfur dioxide emission rate,
nitrogen oxides emission rate, ormercury emission rate, as the case
may be,


(ii)
the unit's sulfur dioxide emission rate, nitrogen oxides
emission rate, or mercuryemission rate, as the case may be, during
2002, as determined by the Administrator based, to the extent
available, on information reported to the State where the unit is
located; or




(iii) the unit's most stringent State or federal emission
limitation for sulfur dioxide,nitrogen oxides, or mercury
applicable to the year on which the unit's baseline heat input is
based under subsection (d).


(2)
The Administrator shall reduce the allocations under
paragraph (1) by 1.0 percent in thefirst year for which the
Administrator is allocating allowances to the unit, by an
additional 1.0 percent of the allocations under paragraph (1) each
year starting in the second year through the twentieth year, and by
an additional 2.5 percent of the allocations under paragraph (1)
each year starting in the twenty-first year and each year
thereafter. The Administrator shall make corresponding increases in
the amounts of allowances auctioned under sections 423, 453, and
473.


(g)
Withdrawal.- The Administrator shall promulgate
regulations withdrawing from the approveddesignation under
subsection (c) any unit that qualifies as an affected EGU under
subpart 2 of part B, subpart 2 of part C, or part D after the
approval of the designation of the unit under subsection
(c).


(h)
The Administrator shall promulgate regulations
implementing this section within 24 months of thedate of enactment
of the Clear Skies Act of 2003.




SEC. 408. CLEAN COAL TECHNOLOGY REGULATORY INCENTIVES.


(a)
Definition.- For purposes of this section, "clean coal
technology" means any technology, includingtechnologies applied at
the precombustion, combustion, or post combustion stage, at a new
or existing facility which will achieve significant reductions in
air emissions of sulfur dioxide or oxides of nitrogen associated
with the utilization of coal in the generation of electricity,
process steam, or industrial products, which is not in widespread
use as of the date of enactment of this title.



(b)
Revised Regulations for Clean Coal Technology
Demonstrations.-




(1)
Applicability.- This subsection applies to physical or
operational changes to existing facilitiesfor the sole purpose of
installation, operation, cessation, or removal of a temporary or
permanent clean coal technology demonstration project. For the
purposes of this section, a clean coal technology demonstration
project shall mean a project using funds appropriated under the
heading "Department of Energy- Clean Coal Technology", up to a
total amount of $2,500,000,000 for commercial demonstration of
clean coal technology, or similar projects

funded through appropriations for the Environmental Protection
Agency. The Federal contribution for a qualifying project shall be
at least 20 percent of the total cost of the demonstration
project.


(2)
Temporary projects.- Installation, operation, cessation,
or removal of a temporary cleancoal technology demonstration
project that is operated for a period of five years or less, and
which complies with the State implementation plans for the State in
which the project is located and other requirements necessary to
attain and maintain the national ambient air quality standards
during and after the project is terminated, shall not subject such
facility to the requirements of section 111 or part C or D of title
I.


(3)
Permanent projects.- For permanent clean coal technology
demonstration projects thatconstitute repowering as defined in
section 411 , any qualifying project shall not be subject to
standards of performance under section 111 or to the review and
permitting requirements of part C for any pollutant the potential
emissions of which will not increase as a result of the
demonstration project.


(4)
EPA regulations.- Not later than 12 months after November
15, 1990 , the Administratorshall promulgate regulations or
interpretive rulings to revise requirements under section 111 and
parts C and D, as appropriate, to facilitate projects consistent in
this subsection. With respect to parts C and D, such regulations or
rulings shall apply to all areas in which EPA is the permitting
authority. In those instances in which the State is the permitting
authority under part C or D, any State may adopt and submit to the
Administrator for approval revisions to its implementation plan to
apply the regulations or rulings promulgated under this
subsection.




(c)
Exemption for Reactivation of Very Clean Units.- Physical
changes or changes in the method ofoperation associated with the
commencement of commercial operations by a coal-fired utility unit
after a period of discontinued operation shall not subject the unit
to the requirements of section 111 or part C of the Act where the
unit (1) has not been in operation for the two-year period prior to
November 15, 1990 , and the emissions from such unit continue to be
carried in the permitting authority's emissions inventory on
November 15, 1990, (2) was equipped prior to shut-down with a
continuous system of emissions control that achieves a removal
efficiency for sulfur dioxide of no less than 85 percent and a
removal efficiency for particulates of no less than 98 percent, (3)
is equipped with low-NOx burners prior to the time of commencement,
and (4) is otherwise in compliance with the requirements of this
Act.




SEC. 409 AUCTIONS.



(a)
Commencing in 2005 and in each year thereafter, the
Administrator shall conduct auctions, asrequired under sections
423, 424, 426, 453, 454, 473, and 474, at which allowances shall be
offered for sale in accordance with regulations promulgated by the
Administrator no later than twenty-four months after the date of
enactment of the Clear Skies Act of 2002. Such regulations may
provide allowances to be offered for sale before or during the year
for which such allowances may be used to meet the requirement to
hold allowances under section 422, 452, and 472. Such regulations
shall specify the frequency and timing of auctions and may provide
for more than one auction of sulfur dioxide allowances, nitrogen
oxides allowances, or mercury allowances during a year. Each
auction shall be open to any person. A person wishing to bid for
allowances in the auction shall submit to the

Administrator (by a date set, and on a bid schedule provided,
by the Administrator) offers to purchase specified numbers of
allowances at specified prices. Allowances purchased at the auction
may be used for any purpose and at any time after the auction,
subject to the provisions of this title.



(b)
Default auction procedures.- If the Administrator is
required to conduct an auction of allowancesunder subsection (a)
before regulations have been promulgated under that subsection,
such auction shall be conducted as follows-



(1)
The auction shall be held on the first business day in
October of the year in which theauction is required or, in the
absence of such a requirement, of the year before the first year
for which the allowances may be used to meet the requirements of
section 403(e)(2).


(2)
The auction shall be open to any person.


(3)
In order to bid for allowances included in the auction, a
person shall submit, and theAdministrator must receive by the date
three business days before the auction, one or more offers to
purchase a specified amount of such allowances at a specified price
on a sealed bid schedule to be provided by the Administrator. The
bidder shall state in the bid schedule that the bidder is willing
to purchase at the specified price fewer allowances than the
specified amount and shall identify the account in the Allowance
Tracking System under section 403(c) in which the allowances
purchased are to be placed. Each bid must include a certified check
or, using a form to be provided by the Administrator, a letter of
credit for the specified amount of allowances multiplied by the bid
price payable to the U.S. EPA. The bid schedule, and check or
letter of credit, shall be sent to the address specified on the bid
schedule.



(4)
The Administrator shall auction the allowances
by:



(A)
determining whether each bid meets the requirements of
paragraph (3);


(B)
listing the bids (including the specified amounts of
allowances and the specified bidprices) meeting the requirements of
paragraph (3) in order, from highest to lowest bid
price;


(C)
for each bid price, summing the amounts of allowances
specified in the bids listedunder subparagraph (B) with the same or
a higher bid price;


(D)
identifying the bid price with the highest sum of
allowances under subparagraph (C)that does not exceed the total
amount of allowances available for auction;



(E)
setting as the sales price in the auction:



(i)
the bid price identified under subparagraph (D) if that
bid price has a sum ofallowances under subparagraph (C) equal to
the total amount of allowances available for auction; or


(ii)
the next lowest bid price after the bid price identified
under subparagraph (D), if the bid price identified under
subparagraph (D) has a sum of allowances under subparagraph (C)
less than the total amount of allowances available for auction;
and





(F)
starting with the first bid listed under subparagraph (B)
and ending with the bidlisted immediately before the bid with a bid
price equal to the sales price, selling the amounts of allowances
specified in each bid to the person who submitted the
bid.




(i)
If the amount of remaining allowances available for
auction equals or is lessthan the amount of allowances specified in
the bid with a bid price equal to the

sales price, the Administrator shall sell the amount of
remaining allowances to the person who submitted that bid.


(ii)
If there is more than one bid with a bid price equal to
the sales price and theamount of remaining allowances available for
auction is less than the total of the amounts of allowances
specified in such bids, the Administrator shall sell the amount of
the remaining allowances to the persons who submitted those bids on
a pro rata basis.






(5)
After the auction, the Administrator will publish the
names of winning and losing bidders,their bids, and the sales
price. The Administrator will provide the successful bidders notice
of the allowances that they have purchased within thirty days after
payment is collected by the Administrator. After the conclusion of
the auction, the Administrator will return payment to unsuccessful
bidders and the appropriate portion of payment to successful
bidders who offered to purchase a larger amount of allowances than
the amount that they are sold or to pay a bid price exceeding the
sales price and will add any unsold allowances to the next relevant
auction.




(c)
The Administrator may by delegation or contract provide
for the conduct of auctions under theAdministrator's supervision by
other departments or agencies of the United States Government or by
nongovernmental agencies, groups, or organizations.


(d)
The proceeds from any auction conducted under this title
shall be deposited in the United StatesTreasury.




SEC. 410. EVALUATION OF LIMITATIONS ON TOTAL SULFUR DIOXIDE,
NITROGEN OXIDES, AND MERCURY EMISSIONS THAT START IN 2018.


(a)
Evaluation. (1) The Administrator, in consultation with
the Secretary of Energy, shall study whether the limitations on the
total annual amounts of allowances available starting in 2018 for
sulfur dioxide under section 423, nitrogen oxides under section
453, and mercury under section 473 should be adjusted.



(2)
As part of the study, the Administrator shall address the
following factors concerning the pollutants under paragraph
(a)(1):



(A)
the need for further emission reductions from affected
EGUs under subpart 2 ofpart B, subpart 2 of part C, or part D and
other sources to attain or maintain the national ambient air
quality standards;


(B)
whether the benefits of the limitations on the total
annual amounts of allowancesavailable starting in 2018 justify the
costs and whether adjusting any of the limitations would provide
additional benefits which justify the costs of such adjustment,
taking into account both quantifiable and non-quantifiable
factors;


(C)
the marginal cost effectiveness of reducing emissions for
each pollutant;


(D)
the relative marginal cost effectiveness of reducing
sulfur dioxide and nitrogen oxide emissions from affected EGUs
under subpart 2 of part B and subpart 2 of part C, as compared to
the marginal cost effectiveness of controls on other sources of
sulfur dioxide, nitrogen oxides and other pollutants that can be
controlled to attain or maintain national ambient air quality
standards;



(E)
the feasibility of attaining the limitations on the total
annual amounts of allowances

available starting in 2018 given the available control
technologies and the ability to install control technologies by
2018, and the feasibility of attaining alternative limitations on
the total annual amounts of allowances available starting in 2018
under paragraph (a)(1) for each pollutant, including the ability to
achieve alternative limitations given the available control
technologies, and the feasibility of installing the control
technologies needed to meet the alternative limitation by
2018;


(F)
the results of the most current research and development
regarding technologiesand strategies to reduce the emissions of one
or more of these pollutants from affected EGUs under subpart 2 of
part B, subpart 2 of part C, or part D, as applicable and the
results of the most current research and development regarding
technologies for other sources of the same pollutants;


(G)
the projected impact of the limitations on the total
annual amounts of allowancesavailable starting in 2018 and the
projected impact of adjusting any of the limitations on the total
annual amounts of allowances available starting in 2018 under
paragraph (a)(1) on the safety and reliability of affected EGUs
under subpart 2 of part B, subpart 2 of part C, or part D and on
fuel diversity within the power generation sector;



(H)
the most current scientific information relating to
emissions, transformation and deposition of these pollutants,
including studies evaluating:



(i)
the role of emissions of affected EGUs under subpart 2 of
part B, subpart 2of part C, or part D in the atmospheric formation
of pollutants for which national ambient air quality standards
exist;


(ii)
the transformation, transport, and fate of these
pollutants in the atmosphere,other media, and biota;


(iii) the extent to which effective control programs in other
countries wouldprevent air pollution generated in those countries
from contributing to nonattainment, or interfering with the
maintenance of any national ambient air quality standards;


(iv)
whether the limitations starting in 2010 or 2018 will
result in an increase inthe level of any other pollutant and the
level of any such increase; and


(v)
speciated monitoring data for particulate matter and the
effect of variouselements of fine particulate matter on public
health;





(I)
the most current scientific information relating to
emissions, transformation and deposition of mercury, including
studies evaluating:



(i)
known and potential human health and environmental
effects of mercury;


(ii)
whether emissions of mercury from affected EGUs under
part D contributesignificantly to elevated levels of mercury in
fish;


(iii) human population exposure to mercury;
(iv) the relative marginal cost effectiveness of reducing
mercury emissions fromaffected EGUs under part D, as compared to
the marginal cost effectiveness of controls on other sources of
mercury.



(J)
a comparison of the extent to which sources of mercury
not located in the UnitedStates contribute to adverse affects on
terrestrial or aquatic systems as opposed to the

contribution from affected EGUs under part D, and the extent to
which effective mercury control programs in other countries could
minimize such impairment; and


(K)
an analysis of the effectiveness and efficiency of the
sulfur dioxide allowanceprogram under subpart 2 of part B, the
nitrogen oxides allowance program under subpart 2 of part C, and
the mercury allowance program under part D.




(3)
As part of the study, the Administrator shall take into
account the most current informationavailable pursuant to the
review of the air quality criteria for particulate matter under
section 108.



(b)
Peer Review Procedures. The draft results of the study
under subsection (a) and related technical documents shall be
subject to an independent and external peer review in accordance
with this section. Any documents that are to be considered by the
Administrator in the study must be independently peer reviewed no
later than July 1, 2008. The peer review required under this
section shall not be subject to the Federal Advisory Committee Act
(5 U.S.C. App.). The Administrator shall:




(1)
conduct the peer review in an open manner. Such peer
review shall




(A)
be conducted through a formal panel that is broadly
representative and involvesqualified specialists who



(i)
are selected primarily on the basis of their technical
expertise relevant to theanalyses required under this section and
to the decision whether or not to adjust the total annual amounts
of allowances available starting in 2018 under paragraph
(a)(1);


(ii)
are independent of the agency;


(iii) disclose to the agency prior technical or policy
positions they have taken onthe issues under consideration;
and
(iv) disclose to the agency their sources of personal and
institutional fundingfrom the private or public sectors;


(B)
contain a balanced presentation of all considerations,
including minority reports;


(C)
provide adequate protections for confidential business
information and tradesecrets, including requiring panel members or
participants to enter into confidentiality agreements;


(D)
afford an opportunity for public comment; and


(E)
be completed by no later than January 1, 2009.




(2)
respond, in writing, to all significant peer review and
public comments; and



(3)
certify that



(A)
each peer review participant has the expertise and
independence required underthis section; and


(B)
the agency has adequately responded to the peer review
comments as requiredunder this section.






(c)
Recommendation to Congress. The Administrator, in
consultation with the Secretary of Energy, should submit to
Congress no later than July 1, 2009, a recommendation whether to
revise the limitations on the total annual amounts of allowances
available starting in 2018 under paragraph (a)(1). The
recommendation shall include the final results of the study under
subsections (a) and (b) and shall address the factors described in
paragraph (a)(2). The Administrator may submit separate


recommendations addressing sulfur dioxide, nitrogen oxides, or
mercury at any time after the study has been completed under
paragraph (a)(2) and the peer review process has been completed
under subsection (b).
PART B. SULFUR DIOXIDE EMISSION REDUCTIONS
SUBPART 1. ACID RAIN PROGRAM.
SEC. 411. DEFINITIONS. For purposes of this subpart


(1)
The term "actual 1985 emission rate", for electric
utility units means the annual sulfurdioxide or nitrogen oxides
emission rate in pounds per million Btu as reported in the NAPAP
Emissions Inventory, Version 2, National Utility Reference File.
For nonutility units, the term "actual 1985 emission rate" means
the annual sulfur dioxide or nitrogen oxides emission rate in
pounds per million Btu as reported in the NAPAP Emission Inventory,
Version 2.


(2)
The term "allowable 1985 emissions rate" means a
federally enforceable emissionslimitation for sulfur dioxide or
oxides of nitrogen, applicable to the unit in 1985 or the
limitation applicable in such other subsequent year as determined
by the Administrator if such a limitation for 1985 does not exist.
Where the emissions limitation for a unit is not expressed in
pounds of emissions per million Btu, or the averaging period of
that emissions limitation is not expressed on an annual basis, the
Administrator shall calculate the annual equivalent of that
emissions



(3)
The term "alternative method of compliance" means a
method of compliance in accordancewith one or more of the following
authorities:



(A)
a substitution plan submitted and approved in accordance
with subsections 413 (b) and (c); or


(B)
a Phase I extension plan approved by the Administrator
under section 413(d), usingqualifying phase I technology as
determined by the Administrator in accordance with that section
.





(4)
The term "baseline" means the annual quantity of fossil
fuel consumed by an affected unit,measured in millions of British
Thermal Units ("mmBtu's"), calculated as follows:




(A)
For each utility unit that was in commercial operation
prior to January 1, 1985, thebaseline shall be the annual average
quantity of mmBtu's consumed in fuel during calendar years 1985,
1986, and 1987, as recorded by the Department of Energy pursuant to
Form 767. For any utility unit for which such form was not filed,
the baseline shall be the level specified for such unit in the 1985
National Acid Precipitation Assessment Program (NAPAP) Emissions
Inventory, Version 2, National Utility Reference File (NURF) or in
a corrected data base as established by the Administrator pursuant
to paragraph (3). For non-utility units, the baseline is the NAPAP
Emissions Inventory, Version 2. The Administrator, in the
Administrator's sole discretion, may exclude periods during which a
unit is shutdown for a continuous period of four calendar months or
longer, and make appropriate adjustments under this paragraph. Upon
petition of the owner or operator of any unit, the Administrator
may make

appropriate baseline adjustments for accidents that caused
prolonged outages.


(B)
For any other nonutility unit that is not included in the
NAPAP Emissions Inventory,Version 2, or a corrected data base as
established by the Administrator pursuant to paragraph (3), the
baseline shall be the annual average quantity, in mmBtu consumed in
fuel by that unit, as calculated pursuant to a method which the
Administrator shall prescribe by regulation to be promulgated not
later than eighteen months after November 15, 1990 .


(C)
The Administrator shall, upon application or on his own
motion, by December 31, 1991, supplement data needed in support of
this subpart and correct any factual errors in data from which
affected Phase II units' baselines or actual 1985 emission rates
have been calculated. Corrected data shall be used for purposes of
issuing allowances under this subpart. Such corrections shall not
be subject to judicial review, nor shall the failure of the
Administrator to correct an alleged factual error in such reports
be subject to judicial review.





(5)
The term "basic Phase II allowance allocations"
means:



(A)
For calendar years 2000 through 2009 inclusive,
allocations of allowances made bythe Administrator pursuant to
section 412 and subsections (b)(1), (3), and (4); (c)(1), (2), (3),
and (5); (d)(1), (2), (4), and (5); (e); (f); (g) (1), (2), (3),
(4), and (5); (h)(1);


(i)
and (j) of section 414.


(B)
For each calendar year beginning in 2010, allocations of
allowances made by theAdministrator pursuant to section 412 and
subsections (b)(1), (3), and (4); (c)(1), (2), (3), and (5);
(d)(1), (2), (4) and (5); (e); (f); (g)(1), (2), (3), (4), and (5);
(h)(1) and (3); (i) and (j) of section 414.




(6)
The term "capacity factor" means the ratio between the
actual electric output from a unitand the potential electric output
from that unit.


(7)
The term "commenced" as applied to construction of any
new electric utility unit means thatan owner or operator has
undertaken a continuous program of construction or that an owner or
operator has entered into a contractual obligation to undertake and
complete, within a reasonable time, a continuous program of
construction.


(8)
The term "commenced commercial operation" means to have
begun to generate electricityfor sale.


(9)
The term "construction" means fabrication, erection, or
installation of an affected unit.


(10)
The term "existing unit" means a unit (including units
subject to section 111) thatcommenced commercial operation before
November 15, 1990. Any unit that commenced commercial operation
before November 15, 1990 which is modified, reconstructed, or
repowered after November 15, 1990 shall continue to be an existing
unit for the purposes of this subpart. For the purposes of this
subpart, existing units shall not include simple combustion
turbines, or units which serve a generator with a nameplate
capacity of 25 MWe or less.


(11)
The term "independent power producer" means any person
who owns or operates, inwhole or in part, one or more new
independent power production facilities.



(12)
The term "new independent power production facility"
means a facility that-




(A)
is used for the generation of electric energy, 80 percent
or more of which is sold at

wholesale;


(B)
is nonrecourse project-financed (as such term is defined
by the Secretary of Energywithin 3 months of the date of the
enactment of the Clean Air Act Amend- meats of 1990);
and


(C)
is a new unit required to hold allowances under this
subpart.




(13)
The term "industrial source" means a unit that does not
serve a generator that produceselectricity, a "non-utility unit" as
defined in this section, or a process source .



(14)
The term "life-of-the-unit, firm power contractual
arrangement" means a unit participationpower sales agreement under
which a utility or industrial customer reserves, or is entitled to
receive, a specified amount or percentage of capacity and
associated energy generated by a specified generating unit (or
units) and pays its proportional amount of such unit's total costs,
pursuant to a contract either-



(A)
for the life of the unit;


(B)
for a cumulative term of no less than 30 years, including
contracts that permit anelection for early termination;
or


(C)
for a period equal to or greater than 25 years or 70
percent of the economic usefullife of the unit determined as of the
time the unit was built, with option rights to purchase or release
some portion of the capacity and associated energy generated by the
unit (or units) at the end of the period.




(15)
The term "new unit" means a unit that commences
commercial operation on or afterNovember 15, 1990.


(16)
The term "nonutility unit" means a unit other than a
utility unit.


(17)
The term "Phase II bonus allowance allocations" means,
for calendar year 2000 through2009, inclusive, and only for such
years, allocations made by the Administrator pursuant to section
412, subsections (a)(2), (b)(2), (c)(4), (d)(3) (except as
otherwise provided therein), and (h)(2) of section 414, and section
415.


(18)
The term "qualifying phase I technology" means a
technological system of continuousemission reduction which achieves
a 90 percent reduction in emissions of sulfur dioxide from the
emissions that would have resulted from the use of fuels which were
not subject to treatment prior to combustion.


(19)
The term "repowering" means replacement of an existing
coal-fired boiler with one of thefollowing clean coal technologies:
atmospheric or pressurized fluidized bed combustion, integrated
gasification combined cycle, magneto-hydrodynamics, direct and
indirect coal-fired turbines, integrated gasification fuel cells,
or as determined by the Administrator, in consultation with the
Secretary of Energy, a derivative of one or more of these
technologies, and any other technology capable of controlling
multiple combustion emissions simultaneously with improved boiler
or generation efficiency and with significantly greater waste
reduction relative to the performance of technology in widespread
commercial use as of November 15, 1990.


(20)
The term "reserve" means any bank of allowances
established by the Administrator under


this subpart. (21)(A) The term "utility unit" means-


(i)
a unit that serves a generator in any State that produces
electricity for sale,or


(ii)
a unit that, during 1985, served a generator in any State
that producedelectricity for sale.





(B)
Notwithstanding subparagraph (A), a unit described in
subparagraph (A) that-



(i)
was in commercial operation during 1985, but


(ii)
did not, during 1985, serve a generator in any State that
produced electricityfor sale shall not be a utility unit for
purposes of this subpart.




(C)
A unit that cogenerates steam and electricity is not a
"utility unit" for purposes of thissubpart unless the unit is
constructed for the purpose of supplying, or commences construction
after November 15, 1990 and supplies, more than one-third of its
potential electric output capacity and more than 25 megawatts
electrical output to any utility power distribution system for
sale.




SEC. 412. ALLOWANCE ALLOCATION.
(a)(1) Except as provided in sections 414(a)(2), 415(a)(3), and
416, beginning January 1, 2000, the Administrator shall not
allocate annual allowances to emit sulfur dioxide pursuant to
section 414 in such an amount as would result in total annual
emissions of sulfur dioxide from utility units in excess of 8.90
million tons except that the Administrator shall not take into
account unused allowances carried forward by owners and operators
of affected units or by other persons holding such allowances,
following the year for which they were allocated. If necessary to
meeting the restrictions imposed in the preceding sentence, the
Administrator shall reduce, pro rata, the basic Phase II allowance
allocations for each unit subject to the requirements of section
414. Subject to the provisions of section 417, the Administrator
shall allocate allowances for each affected unit at an affected
source annually, as provided in paragraphs


(2)
and (3) and section 404. Except as provided in sections
416, the removal of an existing affected unit or source from
commercial operation at any time after November 15, 1990 (whether
before or after January 1, 1995, or January 1, 2000) shall not
terminate or otherwise affect the allocation of allowances pursuant
to section 413 or 414 to which the unit is entitled. Prior to June
1, 1998, the Administrator shall publish a revised final statement
of allowance allocations, subject to the provisions of section
414(a)(2).


(b)
New Utility Units.- (1) After January 1, 2000 and through
December 31, 2007, it shall be unlawfulfor a new utility unit to
emit an annual tonnage of sulfur dioxide in excess of the number of
allowances to emit held for the unit by the unit's owner or
operator.


(2)
Starting January 1, 2008, a new utility unit shall be
subject to the prohibition in subsection(c)(3).


(3)
New utility units shall not be eligible for an allocation
of sulfur dioxide allowances under subsection (a)(1), unless the
unit is subject to the provisions of subsection (g)(2) or (3) of
section 414. New utility units may obtain allowances from any
person, in accordance with this title. The owner or operator of any
new utility unit in violation of subsection (b)(1) or subsection
(c)(3) shall be liable for fulfilling the obligations specified in
section 406.


(c)
Prohibition.- (1) It shall be unlawful for any person to
hold, use, or transfer any allowance allocatedunder this subpart,
except in accordance with regulations promulgated by the
Administrator.


(2)
For any year 1995 through 2007, it shall be unlawful for
any affected unit to emit sulfurdioxide in excess of the number of
allowances held for that unit for that year by the owner or
operator of the unit.



(3)
Starting January 1, 2008, it shall be unlawful for the
affected units at a source to emit a totalamount of sulfur dioxide
during the year in excess of the number of allowances held for the
source for that year by the owner or operator of the
source.

(4) Upon the allocation of allowances under this subpart, the
prohibition in paragraphs (2) and


(3)
shall supersede any other emission limitation applicable
under this subpart to the units for which such allowances are
allocated.


(d)
In order to insure electric reliability, regulations
establishing a system for issuing, recording, and tracking
allowances under section 403(b) and this subpart shall not prohibit
or affect temporary increases and decreases in emissions within
utility systems, power pools, or utilities entering into allowance
pool agreements, that result from their operations, including
emergencies and central dispatch, and such temporary emissions
increases and decreases shall not require transfer of allowances
among units nor shall it require recordation. The owners or
operators of such units shall act through a designated
representative. Notwithstanding the preceding sentence, the total
tonnage of emissions in any calendar year (calculated at the end
thereof) from all units in such a utility system, power pool, or
allowance pool agreements shall not exceed the total allowances for
such units for the calendar year concerned, including for calendar
years after 2007, allowances held for such units by the owner or
operator of the sources where the units are located. (e)Where there
are multiple holders of a legal or equitable title to, or a
leasehold interest in, an affected unit, or where a utility or
industrial customer purchases power from an affected unit (or
units) under life-of-the-unit, firm power contractual arrangements,
the certificate of representation required under section 404(f)
shall state (1) that allowances under this subpart and the proceeds
of transactions involving such allowances will be deemed to be held
or distributed in proportion to each holder's legal, equitable,
leasehold, or contractual reservation or entitlement, or (2) if
such multiple holders have expressly provided for a different
distribution of allowances by contract, that allowances under this
subpart and the proceeds of transactions involving such allowances
will be deemed to be held or distributed in accordance with the
contract. A passive lessor, or a person who has an equitable
interest through such lessor, whose rental payments are not based,
either directly or indirectly, upon the revenues or income from the
affected unit shall not be deemed to be a holder of a legal,
equitable, leasehold, or contractual interest for the purpose of
holding or distributing allowances as provided in this subsection,
during either the term of such leasehold or thereafter, unless
expressly provided for in the leasehold agreement. Except as
otherwise provided in this subsection, where all legal or equitable
title to or interest in an affected unit is held by a single
person, the certification shall state that all allowances under
this subpart received by the unit are deemed to be held for that
person.




SEC. 413. PHASE I SULFUR DIOXIDE REQUIREMENTS.


(a)
Emission Limitations.- (1) After January 1, 1995, each
source that includes one or more affectedunits listed in table A is
an affected source under this section. After January 1, 1995, it
shall be unlawful for any affected unit (other than an eligible
phase I unit under section 413(d)(2)) to emit sulfur dioxide in
excess of the tonnage limitation stated as a total number of
allowances in table A for phase I, unless


(A)
the emissions reduction requirements applicable to such
unit have been achieved pursuant tosubsection (b) or (d), or (B)
the owner or operator of such unit holds allowances to emit not
less than the unit's total annual emissions, except that, after
January 1, 2000, the emissions limitations established in this
section shall be superseded by those established in section 414.
The owner or operator of any unit in violation of this section
shall be fully liable for such violation including, but not limited
to, liability for fulfilling the obligations specified in section
406.



(2)
Not later than December 31, 1991, the Administrator shall
determine the total tonnage ofreductions in the emissions of sulfur
dioxide from all utility units in calendar year 1995 that will
occur as a result of compliance with the emissions limitation
requirements of this section, and shall establish a reserve of
allowances equal in amount to the number of tons determined thereby
not to exceed a total of 3.50 million tons. In making such a
determination, the Administrator shall compute for each unit
subject to the emissions limitation requirements of this section
the difference between:



(A)
the product of its baseline multiplied by the lesser of
each unit's allowable 1985emissions rate and its actual 1985
emissions rate, divided by 2,000, and


(B)
the product of each unit's baseline multiplied by 2.50
lbs/mmBtu divided by2,000,and sum the computations. The
Administrator shall adjust the foregoing calculation to reflect
projected calendar year 1995 utilization of the units subject to
the emissions limitations of this subpart that the Administrator
finds would have occurred in the absence of the imposition of such
requirements. Pursuant to subsection (d), the Administrator shall
allocate allowances from the reserve established herein under until
the earlier of such time as all such allowances in the reserve are
allocated or December 31, 1999.




(3)
In addition to allowances allocated pursuant to paragraph
(1), in each calendar yearbeginning in 1995 and ending in 1999,
inclusive, the Administrator shall allocate for each unit on Table
A that is located in the States of Illinois, Indiana, or Ohio
(other than units at Kyger Creek, Clifty Creek and Joppa Steam),
allowances in an amount equal to 200,000 multiplied by the unit's
pro rata share of the total number of allowances allocated for all
units on Table A in the 3 States (other than units at Kyger Creek,
Clifty Creek, and Joppa Steam) pursuant to paragraph (1). Such
allowances shall be excluded from the calculation of the reserve
under paragraph (2).



(b)
Substitutions.- The owner or operator of an affected unit
under subsection (a) may include in itssection 404 permit
application and proposed compliance plan a proposal to reassign, in
whole or in part, the affected unit's sulfur dioxide reduction
requirements to any other unit(s) under the control of such owner
or operator. Such proposal shall specify-



(1)
the designation of the substitute unit or units to which
any part of the reduction obligations ofsubsection (a) shall be
required, in addition to, or in lieu of, any original affected
units designated under such subsection;


(2)
the original affected unit's baseline, the actual and
allowable 1985 emissions rate for sulfurdioxide, and the authorized
annual allowance allocation stated in table A;


(3)
calculation of the annual average tonnage for calendar
years 1985, 1986, and 1987, emittedby the substitute unit or units,
based on the baseline for each unit, as defined in section 411(4),
multiplied by the lesser of the unit's actual or allowable 1985
emissions rate;



(4)
the emissions rates and tonnage limitations that would be
applicable to the original and

substitute affected units under the substitution proposal;


(5)
documentation, to the satisfaction of the Administrator,
that the reassigned tonnage limitswill, in total, achieve the same
or greater emissions reduction than would have been achieved by the
original affected unit and the substitute unit or units without
such substitution; and


(6)
such other information as the Administrator may
require.




(c)
Administrator's Action on Substitution Proposals.- (1)
The Administrator shall take final action onsuch substitution
proposal in accordance with section 404(c) if the substitution
proposal fulfills the requirements of this subsection. The
Administrator may approve a substitution proposal in whole or in
part and with such modifications or conditions as may be consistent
with the orderly functioning of the allowance system and which will
ensure the emissions reductions contemplated by this title. If a
proposal does not meet the requirements of subsection(b), the
Administrator shall disapprove it. The owner or operator of a unit
listed in table A shall not substitute another unit or units
without the prior approval of the Administrator.


(2)
Upon approval of a substitution proposal, each substitute
unit, and each source with suchunit, shall be deemed affected under
this title, and the Administrator shall issue a permit to the
original and substitute affected source and unit in accordance with
the approved substitution plan and section 404. The Administrator
shall allocate allowances for the original and substitute affected
units in accordance with the approved substitution proposal
pursuant to section 412. It shall be unlawful for any source or
unit that is allocated allowances pursuant to this section to emit
sulfur dioxide in excess of the emissions limitation provided for
in the approved substitution permit and plan unless the owner or
operator of each unit governed by the permit and approved
substitution plan holds allowances to emit not less than the units
total annual emissions. The owner or operator of any original or
substitute affected unit operated in violation of this subsection
shall be fully liable for such violation, including liability for
fulfilling the obligations specified in section 406. If a
substitution proposal is disapproved, the Administrator shall
allocate allowances to the original affected unit or units in
accordance with subsection (a).



(d)
Eligible Phase I Extension Units.- (1) The owner or
operator of any affected unit subject to anemissions limitation
requirement under this section may petition the Administrator in
its permit application under section 404 for an extension of 2
years of the deadline for meeting such requirement, provided that
the owner or operator of any such unit holds allowances to emit not
less than the unit's total annual emissions for each of the 2 years
of the period of extension. To qualify for such an extension, the
affected unit must either employ a qualifying phase I technology,
or transfer its phase I emissions reduction obligation to a unit
employing a qualifying phase I technology. Such transfer shall be
accomplished in accordance with a compliance plan, submitted and
approved under section 404, that shall govern operations at all
units included in the transfer, and that specifies the emissions
reduction requirements imposed pursuant to this title.

(2) Such extension proposal shall-


(A)
specify the unit or units proposed for designation as an
eligible phase I extensionunit;



(B)
provide a copy of an executed contract, which may be
contingent upon theAdministrator approving the proposal, for the
design engineering, and construction of the qualifying phase I
technology for the extension unit, or for the unit or units to
which

the extension unit's emission reduction obligation is to be
transferred;


(C)
specify the unit's or units' baseline, actual 1985
emissions rate, allowable 1985emissions rate, and projected
utilization for calendar years 1995 through 1999;


(D)
require CEMS on both the eligible phase I extension unit
or units and the transferunit or units beginning no later than
January 1, 1995; and


(E)
specify the emission limitation and number of allowances
expected to be necessaryfor annual operation after the qualifying
phase I technology has been installed.




(3)
The Administrator shall review and take final action on
each extension proposal in order ofreceipt, consistent with section
404, and for an approved proposal shall designate the unit or units
as an eligible phase I extension unit. The Administrator may
approve an extension proposal in whole or in part, and with such
modifications or conditions as may be necessary, consistent with
the orderly functioning of the allowance system, and to ensure the
emissions reductions contemplated by this subpart.



(4)
In order to determine the number of proposals eligible
for allocations from the reserve undersubsection (a)(2) and the
number of allowances remaining available after each proposal is
acted upon, the Administrator shall reduce the total number of
allowances remaining available in the reserve by the number of
allowances calculated according to subparagraphs (A), (B) and (C)
until either no allowances remain available in the reserve for
further allocation or all approved proposals have been acted upon.
If no allowances remain available in the reserve for further
allocation before all proposals have been acted upon by the
Administrator, any pending proposals shall be disapproved. The
Administrator shall calculate allowances equal to-



(A)
the difference between the lesser of the average annual
emissions in calendar years1988 and 1989 or the projected emissions
tonnage for calendar year 1995 of each eligible phase I extension
unit, as designated under paragraph (3), and the product of the
unit's baseline multiplied by an emission rate of 2.50 lbs/mmBtu,
divided by 2,000;


(B)
the difference between the lesser of the average annual
emissions in calendar years1988 and 1989 or the projected emissions
tonnage for calendar year 1996 of each eligible phase I extension
unit, as designated under paragraph (3), and the product of the
unit's baseline multiplied by an emission rate of 2.50 lbs/mmBtu,
divided by 2,000; and


(C)
the amount by which (i) the product of each unit's
baseline multiplied by anemission rate of 1.20 lbs/mmBtu, divided
by 2,000, exceeds (ii) the tonnage level specified under
subparagraph (E) of paragraph (2) of this subsection multiplied by
a factor of 3.





(5)
Each eligible Phase I extension unit shall receive
allowances determined under subsection(a)(1) or (c) of this
section. In addition, for calendar year 1995, the Administrator
shall allocate to each eligible Phase I extension unit, from the
allowance reserve created pursuant to subsection (a)(2), allowances
equal to the difference between the lesser of the average annual
emissions in calendar years 1988 and 1989 or its projected
emissions tonnage for calendar year 1995 and the product of the
unit's baseline multiplied by an emission rate of 2.50 lbs/mmBtu,
divided by 2,000. In calendar year 1996, the Administrator shall
allocate for each eligible unit, from the allowance reserve created
pursuant to subsection (a)(2), allowances equal to the difference
between the lesser of the average annual emissions

in calendar years 1988 and 1989 or its projected emissions
tonnage for calendar year 1996 and the product of the unit's
baseline multiplied by an emission rate of 2.50 lbs/mmBtu, divided
by 2,000. It shall be unlawful for any source or unit subject to an
approved extension plan under this subsection to emit sulfur
dioxide in excess of the emissions limitations provided for in the
permit and approved extension plan, unless the owner or operator of
each unit governed by the permit and approved plan holds allowances
to emit not less than the unit's total annual emissions.


(6)
In addition to allowances specified in paragraph (4) ,
the Administrator shall allocate foreach eligible Phase I extension
unit employing qualifying Phase I technology, for calendar years
1997, 1998, and 1999, additional allowances, from any remaining
allowances in the reserve created pursuant to subsection (a)(2),
following the reduction in the reserve provided for in paragraph
(4), not to exceed the amount by which (A) the product of each
eligible unit's baseline times an emission rate of 1.20 lbs/mmBtu,
divided by 2,000, exceeds (B) the tonnage level specified under
subparagraph (E) of paragraph (2) of this subsection.


(7)
After January 1, 1997, in addition to any liability under
this Act, including under section 406, if any eligible phase I
extension unit employing qualifying phase I technology or any
transfer unit under this subsection emits sulfur dioxide in excess
of the annual tonnage limitation specified in the extension plan,
as approved in paragraph (2) of this subsection, the Administrator
shall, in the calendar year following such excess, deduct
allowances equal to the amount of such excess from such unit's
annual allowance allocation. (e)(1) In the case of a unit that
receives authorization from the Governor of the State in which such
unit is located to make reductions in the emissions of sulfur
dioxide prior to calendar year 1995 and that is part of a utility
system that meets the following requirements:


(A)
the total coal-fired generation within the utility system
as a percentage of total system generationdecreased by more than 20
percent between January 1,1980, and December 31, 1985; and (B) the
weighted capacity factor of all coal-fired units within the utility
system averaged over the period from January 1, 1985, through
December 31, 1987, was below 50 percent, the Administrator shall
allocate allowances under this paragraph for the unit pursuant to
this subsection. The Administrator shall allocate allowances for a
unit that is an affected unit pursuant to section 414 (but is not
also an affected unit under this section) and part of a utility
system that includes 1 or more affected units under section 414 for
reductions in the emissions of sulfur dioxide made during the
period 1995-1999 if the unit meets the requirements of this
subsection and the requirements of the preceding sentence, except
that for the purposes of applying this subsection to any such unit,
the prior year concerned as specified below, shall be any year
after January 1, 1995 but prior to January 1, 2000.



(2)
In the case of an affected unit under this section
described in subparagraph (A), theallowances allocated under this
subsection for early reductions in any prior year may not exceed
the amount which (A) the product of the unit's baseline multiplied
by the unit's 1985 actual sulfur dioxide emission rate (in lbs. per
mmBtu), divided by 2,000, exceeds (B) the allowances specified for
such unit in Table A. In the case of an affected unit under section
414 described in subparagraph (A), the allowances awarded under
this subsection for early reductions in any prior year may not
exceed the amount by which (i) the product of the quantity of
fossil fuel consumed by the unit (in mmBtu) in the prior year
multiplied by the lesser of 2.50 or the most stringent emission
rate (in lbs. per mmBtu) applicable to the unit under the
applicable implementation plan, divided by 2,000, exceeds (ii) the
unit's

actual tonnage of sulfur dioxide emission for the prior year
concerned. Allowances allocated under this subsection for units
referred to in subparagraph (A) may be allocated only for emission
reductions achieved as a result of physical changes or changes in
the method of operation made after November 15, 1990, including
changes in the type or quality of fossil fuel consumed.


(3)
In no event shall the provisions of this paragraph be
interpreted as an event of force majeureor a commercial
impractibility or in any other way as a basis for excused
nonperformance by a utility system under a coal sales contract in
effect before November 15, 1990 .


TABLE A.- AFFECTED SOURCES AND UNITS IN PHASE I AND THEIR SULFUR
DIOXIDE ALLOWANCES (TONS)
State Plant Name Alabama Colbert
E.C. Gaston
Florida Big Bend
Crist Georgia Bowen
Hammond
J. McDonough Wansley Yates
Generator Phase I Allowances

Illinois Baldwin
Coffeen
Grand Tower Hennepin Joppa Steam
Kincaid
Meredosia
Vermilion Indiana Bailly
Breed Cayuga
Clifty Creek
E. W. Stout
F. B. Culley
F. E. Ratts Gibson 33
4 8,910 5 9,410 6 24,760 7 21,480 1 42,010 2 44,420 3 42,550 1
11,790 2 35,670 4 5,910 2 18,410 1 12,590 2 10,770 3 12,270 4
11,360 5 11,420 6 10,620 1 31,530 2 33,810 3 13,890 2 8,880 7
11,180 8 15,630 1 18,500 1 33,370 2 34,130 1 20,150 2 19,810 3
20,410 4 20,080 5 19,360 6 20,380 5 3,880 6 4,770 7 23,610 2 4,290
3 16,970 1 8,330 2 8,480 1 40,400 2 41,010 3 41,080 1 C. P. Crane 1
10,330

22 9,230
3 Morgantown 1 35,260
4 2 38,480
5 Michigan J. H. Campbell 1 19,280
6 2 23,060
7 Minnesota High Bridge 6 4,270
8 Mississippi Jack Watson 4 17,910
9 5 36,700 10Missouri Asbury 1 16,190 11 James River 5 4,850 12
Labadie 1 40,110 13 2 37,710 14 3 40,310 154 35,940 16 Montrose 1
7,390 17 2 8,200 183 10,090 19 New Madrid 1 28,240 202 32,480 21
Sibley 3 15,580 22 Sioux 1 22,570 232 23,690 24 Thomas Hill 1
10,250 25 2 19,390 26 New Hampshire Merrimack 1 10,190 27 2 22,000
28 New 29 Jersey B.L. England 1 9,060 30 2 11,720 31 New York
Dunkirk 3 12,600 324 14,060 33 Greenidge 4 7,540 34 Milliken 1
11,170 352 12,410 36 Northport 1 19,810 37 2 24,110 383 26,480 39
Port Jefferson 3 10,470 40 4 12,330 41Ohio Ashtabula 5 16,740 42
Avon Lake 8 11,650 Cheswick Conemaugh

Hatfield's Ferry
Martins Creek Portland Shawville
Sunbury Tennessee Allen
Cumberland Gallatin
Johnsonville
West Virginia Albright Fort Martin
Harrison 37
2 31,100 3 53,820 1 39,170
1 59,790 2 66,450 1 37,830 2 37,320 3 40,270 1 12,660 2 12,820 1
5,940 2 10,230 1 10,320 2 10,320 3 14,220 4 14,0703 8,760 4 11,450
1 15,320 2 16,770 3 15,670 1 86,700 2 94,840 1 17,870 2 17,310 3
20,020 4 21,260 1 7,790 2 8,040 3 8,410 4 7,990 5 8,240 6 7,890 7
8,980 8 8,700 9 7,080 10 7,550 3 12,0001 41,590 2 41,200 1 48,620 2
46,150




(f)
Energy Conservation and Renewable Energy.-




(1)
Definitions.- As used in this subsection:



(A)
Qualified energy conservation measure.- The term
"qualified energy conservationmeasure" means a cost effective
measure, as identified by the Administrator in consultation with
the Secretary of Energy, that increases the efficiency of the use
of electricity provided by an electric utility to its
customers.


(B)
Qualified renewable energy.- The term "qualified
renewable energy" means energyderived from biomass, solar,
geothermal, or wind as identified by the Administrator in
consultation with the Secretary of Energy.


(C)
Electric utility.- The term "electric utility" means any
person, State agency, orFederal agency, which sells electric
energy.





(2)
Allowances for emissions avoided through energy
conservation and renewable energy.-




(A)
In general.- The regulations under paragraph (4) of this
subsection shall providethat for each ton of sulfur dioxide
emissions avoided by an electric utility, during the applicable
period, through the use of qualified energy conservation measures
or qualified renewable energy, the Administrator shall allocate a
single allowance to such electric utility, on a
first-come-first-served basis from the Conservation and
Renewable

Energy Reserve established under subsection (g), up to a total
of 300,000 allowances for allocation from such Reserve.



(B)
Requirements for issuance.- The Administrator shall
allocate allowances to anelectric utility under this subsection
only if all of the following requirements are met:



(i)
Such electric utility is paying for the qualified energy
conservation measuresor qualified renewable energy directly or
through purchase from another person.



(ii)
The emissions of sulfur dioxide avoided through the use
of qualified energyconservation measures or qualified renewable
energy are quantified in accordance with regulations promulgated by
the Administrator under this

(II) The qualified energy conservation measures or qualified
renewableenergy, or both, are consistent with that plan.
(III) Electric utilities subject to the jurisdiction of a State
regulatoryauthority must have such plan approved by such authority.
For electric utilities not subject to the jurisdiction of a State
regulatory authority such plan shall be approved by the entity with
rate-making authority for such utility.


(iv)
In the case of qualified energy conservation measures
undertaken by aState regulated electric utility, the Secretary of
Energy certifies that the State regulatory authority with
jurisdiction over the electric rates of such electric utility has
established rates and charges which ensure that the net income of
such electric utility after implementation of specific cost
effective energy conservation measures is at least as high as such
net income would have been if the energy conservation measures had
not been implemented. Upon the date of any such certification by
the Secretary of Energy, all allowances which, but for this
paragraph, would have been allocated under subparagraph (A) before
such date, shall be allocated to the electric utility. This clause
is not a requirement for qualified renewable energy.


(v)
Such utility or any subsidiary of the utility's holding
company owns oroperates at least one affected unit.





(C)
Period of applicability.--Allowances under this
subsection shall be allocated onlywith respect to kilowatt hours of
electric energy saved by qualified energy conservation measures or
generated by qualified renewable energy after January 1, 1992 and
before the earlier of (i) December 31, 2000, or (ii) the date on
which any electric utility steam generating unit owned or operated
by the electric utility to which the allowances are allocated
becomes subject to this subpart (including those sources that elect
to become

affected by this title, pursuant to section 417).



(D)
Determination of avoided emissions.-

(i) Application.- In order to receive allowances under this
subsection, anelectric utility shall make an application
which-


(I)
designates the qualified energy conservation measures
implementedand the qualified renewable energy sources used for
purposes of avoiding emissions,


(II)
calculates, in accordance with subparagraphs (F) and (G),
thenumber of tons of emissions avoided by reason of the
implementation of such measures or the use of such renewable energy
sources; and


(III) demonstrates that the requirements of subparagraph (B)
have beenmet. Such application for allowances by a State-regulated
electric utility shall require approval by the State regulatory
authority with jurisdiction over such electric utility. The
authority shall review the application for accuracy and compliance
with this subsection and the rules under this subsection. Electric
utilities whose retail rates are not subject to the jurisdiction of
a State regulatory authority shall apply directly to the
Administrator for such approval.



(E)
Avoided emissions from qualified energy conservation
measures.- For the purposesof this subsection, the emission tonnage
deemed avoided by reason of the implementation of qualified energy
conservation measures for any calendar year shall be a tonnage
equal to the product of multiplying-



(i)
the kilowatt hours that would otherwise have been
supplied by the utilityduring such year in the absence of such
qualified energy conservation measures, by


(ii)
0.004, and dividing by 2,000.




(F)
Avoided emissions from the use of qualified renewable
energy.- The emissionstonnage deemed avoided by reason of the use
of qualified renewable energy by an electric utility for any
calendar year shall be a tonnage equal to the product of
multiplying- (i) the actual kilowatt hours generated by, or
purchased from, qualified renewable energy, by (ii) 0.004, and
dividing by 2,000.



(G)
Prohibitions.-



(i)
No allowances shall be allocated under this subsection
for theimplementation of programs that are exclusively
informational or educational in nature.


(ii)
No allowances shall be allocated for energy conservation
measures orrenewable energy that were operational before January 1,
1992.








(3)
Savings provision.- Nothing in this subsection precludes
a State or State regulatoryauthority from providing additional
incentives to utilities to encourage investment in demand-side
resources.



(4)
Regulations.-The Administrator shall implement this
subsection under 40 CFR part 73 (2001), amended as appropriate by
the Administrator. Such regulations shall list energy
conservation

measures and renewable energy sources which may be treated as
qualified energy conservation measures and qualified renewable
energy for purposes of this subsection. Allowances shall only be
allocated if all requirements of this subsection and the rules
promulgated to implement this subsection are complied with. The
Administrator shall review the determinations of each State
regulatory authority under this subsection to encourage consistency
from electric utility to electric utility and from State to State
in accordance with the Administrator's rules. The Administrator
shall publish the findings of this review no less than
annually.


(g)
Conservation and Renewable Energy Reserve.- The
Administrator shall establish a Conservationand Renewable Energy
Reserve under this subsection. Beginning on January 1, 1995, the
Administrator may allocate from the Conservation and Renewable
Energy Reserve an amount equal to a total of 300,000 allowances for
emissions of sulfur dioxide pursuant to section 411. In order to
provide 300,000 allowances for such reserve, in each year beginning
in calendar year 2000 and until calendar year 2009, inclusive, the
Administrator shall reduce each unit's basic Phase II allowance
allocation on the basis of its pro rata share of 30,000 allowances.
Notwithstanding the prior sentence, if allowances remain in the
reserve one year after the date of enactment of the Clear Skies Act
of 2002, the Administrator shall allocate such allowances for
affected units under section 414 on a pro rata basis. For purposes
of this subsection, for any unit subject to the emissions
limitation requirements of section 414, the term "pro rata basis"
refers to the ratio which the reductions made in such unit's
allowances in order to establish the reserve under this subsection
bears to the total of such reductions for all such
units.



(h)
Alternative Allowance Allocation for Units in Certain
Utility Systems With Optional Baseline.-




(1)
Optional baseline for units in certain systems.-- In the
case of a unit subject to the emissionslimitation requirements of
this section which (as of November 15, 1990 )-



(A)
has an emission rate below 1.0 lbs/mmBtu,


(B)
has decreased its sulfur dioxide emissions rate by 60
percent or greater since 1980,and



(C)
is part of a utility system which has a weighted average
sulfur dioxide emissions ratefor all fossil fueled-fired units
below 1.0 lbs/mmBtu, at the election of the owner or operator of
such unit, the unit's baseline may be calculated



(i)
as provided under section 411, or


(ii)
by utilizing the unit's average annual fuel consumption
at a 60 percentcapacity factor. Such election shall be made no
later than March 1, 1991.






(2)
Allowance allocation.- Whenever a unit referred to in
paragraph (1) elects to calculate itsbaseline as provided in clause
(ii) of paragraph (1), the Administrator shall allocate allowances
for the unit pursuant to section 412(a), this section, and section
414 (as basic Phase II allowance allocations) in an amount equal to
the baseline selected multiplied by the lower of the average annual
emission rate for such unit in 1989, or 1.0 lbs./mmBtu. Such
allowance allocation shall be in lieu of any allocation of
allowances under this section and section 414.







SEC. 414. PHASE II SULFUR DIOXIDE REQUIREMENTS.



(a)
Applicability.- (1) After January 1, 2000, each existing
utility unit as provided below is subject tothe limitations or
requirements of this section. Each utility unit subject to an
annual sulfur dioxide tonnage

emission limitation under this section is an affected unit
under this subpart. Each source that includes one or more affected
units is an affected source. In the case of an existing unit that
was not in operation during calendar year 1985, the emission rate
for a calendar year after 1985, as determined by the Administrator,
shall be used in lieu of the 1985 rate. The owner or operator of
any unit operated in violation of this section shall be fully
liable under this Act for fulfilling the obligations specified in
section 406.


(2)
In addition to basic Phase II allowance allocations, in
each year beginning in calendar year2000 and ending in calendar
year 2009, inclusive, the Administrator shall allocate up to
530,000 Phase II bonus allowances pursuant to subsections
(b)(2),(c)(4), (d)(3)(A) and (B), and (h)(2) of this section and
section 415.


(3)
In addition to basic Phase II allowance allocations and
Phase II bonus allowanceallocations, beginning January 1, 2000,the
Administrator shall allocate for each unit listed on Table A in
section 413 (other than units at Kyger Creek, Clifty Creek, and
Joppa Steam) and located in the States of Illinois, Indiana, Ohio,
Georgia, Alabama, Missouri, Pennsylvania, West Virginia, Kentucky,
or Tennessee allowances in an amount equal to 50,000 multiplied by
the unit's pro rata share of the total number of basic allowances
allocated for all units listed on Table A (other than units at
Kyger Creek, Clifty Creek, and Joppa Steam). Allowances allocated
pursuant to this paragraph shall not be subject to the 8,900,000
ton limitation in section 412(a).


(b)
Units Equal to, or Above, 75 MWe and 1.20 lbs/mmBtu.- (1)
Except as otherwise provided inparagraph (3), after January 1,
2000, it shall be unlawful for any existing utility unit that
serves a generator with nameplate capacity equal to, or greater,
than 75 MWe and an actual 1985 emission rate equal to or greater
than 1.20 lbs/mmBtu to exceed an annual sulfur dioxide tonnage
emission limitation equal to the product of the unit's baseline
multiplied by an emission rate equal to 1.20 lbs/mmBtu, divided by
2,000, unless the owner or operator of such unit holds allowances
to emit not less than the unit's total annual emissions or, for a
year after 2007, unless the owner or operator of the source that
includes such unit holds allowances to emit not less than the total
annual emissions of all affected units at the source.


(2)
In addition to allowances allocated pursuant to paragraph
(1) and section 412(a) as basicPhase II allowance allocations,
beginning January 1, 2000, and for each calendar year thereafter
until and including 2009, the Administrator shall allocate annually
for each unit subject to the emissions limitation requirements of
paragraph (1) with an actual 1985 emissions rate greater than 1.20
lbs/mmBtu and less than 2.50lbs/mmBtu and a baseline capacity
factor of less than 60 percent, allowances from the reserve created
pursuant to subsection (a)(2) in an amount equal to 1.20 lbs/mmBtu
multiplied by 50 percent of the difference, on a Btu basis, between
the unit's baseline and the unit's fuel consumption at a 60 percent
capacity factor.



(3)
After January 1, 2000, it shall be unlawful for any
existing utility unit with an actual 1985emissions rate equal to or
greater than 1.20 lbs/mmBtu whose annual average fuel consumption
during 1985, 1986, and 1987 on a Btu basis exceeded 90 percent in
the form of lignite coal which is located in a State in which, as
of July 1, 1989, no county or portion of a county was designated
nonattainment under section 107 of this Act for any pollutant
subject to the requirements of section 109 of this Act to exceed an
annual sulfur dioxide tonnage limitation equal to the product of
the unit's baseline multiplied by the lesser of the unit's actual
1985 emissions rate or its allowable 1985 emissions rate, divided
by

2,000, unless the owner or operator of such unit holds
allowances to emit not less than the unit's total annual emissions
or, for a year after 2007, unless the owner or operator of the
source that includes such unit holds allowances to emit not less
than the total annual emissions of all affected units at the
source.


(4)
After January 1, 2000, the Administrator shall allocate
annually for each unit, subject to theemissions limitation
requirements of paragraph (1), which is located in a State with an
installed electrical generating capacity of more than 30,000,000 kw
in 1988 and for which was issued a prohibition order or a proposed
prohibition order (from burning oil), which unit subsequently
converted to coal between January 1, 1980 and December 31, 1985,
allowances equal to the difference between (A) the product of the
unit's annual fuel consumption, on a Btu basis, at a 65 percent
capacity factor multiplied by the lesser of its actual or allowable
emissions rate during the first full calendar year after
conversion, divided by 2,000, and (B) the number of allowances
allocated for the unit pursuant to paragraph(1): Provided, That the
number of allowances allocated pursuant to this paragraph shall not
exceed an annual total of five thousand. If necessary to meeting
the restriction imposed in the preceding sentence the Administrator
shall reduce, pro rata, the annual allowances allocated for each
unit under this paragraph.


(c)
Coal or Oil-fired Units Below 75 MWe and Above 1.20
lbs/mmBtu.- (1) Except as otherwiseprovided in paragraph (3), after
January 1, 2000, it shall be unlawful for a coal or oil-fired
existing utility unit that serves a generator with nameplate
capacity of less than 75 MWe and an actual 1985 emission rate equal
to, or greater than, 1.20 lbs/mmBtu and which is a unit owned by a
utility operating company whose aggregate nameplate fossil fuel
steam-electric capacity is, as of December 31, 1989, equal to, or
greater than, 250 MWe to exceed an annual sulfur dioxide emissions
limitation equal to the product of the unit's baseline multiplied
by an emission rate equal to 1.20 lbs/mmBtu, divided by 2,000,
unless the owner or operator of such unit holds allowances to emit
not less than the unit's total annual emissions or, for a year
after 2007, unless the owner or operator of the source that
includes such unit holds allowances to emit not less than the total
annual emissions of all affected units at the source.


(2)
After January 1, 2000, it shall be unlawful for a coal or
oil-fired existing utility unit thatserves a generator with
nameplate capacity of less than 75 MWe and an actual 1985 emission
rate equal to, or greater than, 1.20 lbs/mmBtu (excluding units
subject to section 111 of the Act or to a federally enforceable
emissions limitation for sulfur dioxide equivalent to an annual
rate of less than 1.20 lbs/mmBtu) and which is a unit owned by a
utility operating company whose aggregate nameplate fossil fuel
steam-electric capacity is, as of December 31, 1989, less than 250
MWe, to exceed an annual sulfur dioxide tonnage emissions
limitation equal to the product of the unit's baseline multiplied
by the lesser of its actual 1985 emissions rate or its allowable
1985 emissions rate, divided by 2,000, unless the owner or operator
of such unit holds allowances to emit not less than the unit's
total annual emissions or, for a year after 2007, unless the owner
or operator of the source that includes such unit holds allowances
to emit not less than the total annual emissions of all affected
units at the source.



(3)
After January 1, 2000 it shall be unlawful for any
existing utility unit with a nameplatecapacity below 75 MWe and an
actual 1985 emissions rate equal to, or greater than, 1.20
lbs/mmBtu which became operational on or before December 31, 1965,
which is owned by a utility operating company with, as of December
31,1989, a total fossil fuel steam-electric generating capacity
greater than 250 MWe, and less than 450 MWe which serves fewer than
78,000 electrical customers as of November 15, 1990 to exceed an
annual sulfur dioxide emissions tonnage limitation equal to
the

product of its baseline multiplied by the lesser of its actual
or allowable 1985 emission rate, divided by 2,000, unless the owner
or operator holds allowances to emit not less than the units total
annual emissions or, for a year after 2007, unless the owner or
operator of the source that includes such unit holds allowances to
emit not less than the total annual emissions of all affected units
at the source. After January 1, 2010, it shall be unlawful for each
unit subject to the emissions limitation requirements of this
paragraph to exceed an annual emissions tonnage limitation equal to
the product of its baseline multiplied by an emissions rate of 1.20
lbs/mmBtu, divided by 2,000, unless the owner or operator holds
allowances to emit not less than the unit's total annual emissions
or, for a year after 2007, unless the owner or operator of the
source that includes such unit holds allowances to emit not less
than the total annual emissions of all affected units at the
source.


(4)
In addition to allowances allocated pursuant to paragraph
(1) and section 412(a) as basicPhase II allowance allocations,
beginning January 1, 2000, and for each calendar year thereafter
until and including 2009, inclusive, the Administrator shall
allocate annually for each unit subject to the emissions limitation
requirements of paragraph (1) with an actual 1985 emissions rate
equal to, or greater than, 1.20 lbs/mmBtu and less than 2.50
lbs/mmBtu and a baseline capacity factor of less than 60 percent,
allowances from the reserve created pursuant to subsection (a)(2)
in an amount equal to


1.20 lbs/mmBtu multiplied by 50 percent of the difference, on a
Btu basis, between the unit's baselineand the unit's fuel
consumption at a 60 percent capacity factor.


(5)
After January 1, 2000, it shall be unlawful for any
existing utility unit with a nameplatecapacity below 75 MWe and an
actual 1985 emissions rate equal to, or greater than, 1.20lbs/mmBtu
which is part of an electric utility system which, as of November
15, 1990 , (A) has at least 20 percent of its fossil-fuel capacity
controlled by flue gas desulfurization devices, (B) has more than
10 percent of its fossil-fuel capacity consisting of coal-fired
units of less than 75 MWe, and (C) has large units (greater than
400 MWe) all of which have difficult or very difficult FGD Retrofit
Cost Factors (according to the Emissions and the FGD Retrofit
Feasibility at the 200 Top Emitting Generating Stations, prepared
for the United States Environmental Protection Agency on January
10, 1986) to exceed an annual sulfur dioxide emissions tonnage
limitation equal to the product of its baseline multiplied by an
emissions rate of 2.5 lbs/mmBtu, divided by 2,000, unless the owner
or operator holds allowances to emit not less than the unit's total
annual emissions or, for a year after 2007, unless the owner or
operator of the source that includes such unit holds allowances to
emit not less than the total annual emissions of all affected units
at the source. After January 1, 2010, it shall be unlawful for each
unit subject to the emissions limitation requirements of this
paragraph to exceed an annual emissions tonnage limitation equal to
the product of its baseline multiplied by an emissions rate of 1.20
lbs/mmBtu, divided by 2,000, unless the owner or operator holds for
use allowances to emit not less than the unit's total annual
emissions or, for a year after 2007, unless the owner or operator
of the source that includes such unit holds allowances to emit not
less than the total annual emissions of all affected units at the
source.



(d)
Coal-fired Units Below 1.20 lbs/mmBtu.-- (1) After
January1, 2000, it shall be unlawful for anyexisting coal-fired
utility unit the lesser of whose actual or allowable 1985 sulfur
dioxide emissions rate is less than 0.60 lbs/mmBtu to exceed an
annual sulfur dioxide tonnage emission limitation equal to the
product of the unit's baseline multiplied by (A) the lesser of 0.60
lbs/mmBtu or the unit's allowable 1985

emissions rate, and (B) a numerical factor of 120 percent,
divided by 2,000, unless the owner or operator of such unit holds
allowances to emit not less than the unit's total annual emissions
or, for a year after 2007, unless the owner or operator of the
source that includes such unit holds allowances to emit not less
than the total annual emissions of all affected units at the
source.



(2)
After January 1, 2000, it shall be unlawful for any
existing coal-fired utility unit the lesser ofwhose actual or
allowable 1985 sulfur dioxide emissions rate is equal to, or
greater than, 0.60 lbs/mmBtu and less than 1.20 lbs/mmBtu to exceed
an annual sulfur dioxide tonnage emissions limitation equal to the
product of the unit's baseline multiplied by (A) the lesser of its
actual 1985 emissions rate or its allowable 1985 emissions rate,
and (B) a numerical factor of 120 percent, divided by 2,000, unless
the owner or operator of such unit holds allowances to emit not
less than the unit's total annual emissions or, for a year after
2007, unless the owner or operator of the source that includes such
unit holds allowances to emit not less than the total annual
emissions of all affected units at the source.

(3)(A) In addition to allowances allocated pursuant to
paragraph (1) and section 412(a) as basic Phase II allowance
allocations, at the election of the designated representative of
the operating company, beginning January 1, 2000, and for each
calendar year thereafter until and including 2009, the
Administrator shall allocate annually for each unit subject to the
emissions limitation requirements of paragraph (1) allowances from
the reserve created pursuant to subsection (a)(2) in an amount
equal to the amount by which (i) the product of the lesser of 0.60
lbs/mmBtu or the unit's allowable 1985 emissions rate multiplied by
the unit's baseline adjusted to reflect operation at a 60 percent
capacity factor, divided by 2,000, exceeds (ii) the number of
allowances allocated for the unit pursuant to paragraph (1) and
section 403(a)(1) as basic Phase II allowance allocations.


(B)
In addition to allowances allocated pursuant to paragraph
(2) and section 412(a) as basic Phase II allowance allocations, at
the election of the designated representative of the operating
company, beginning January 1, 2000, and for each calendar year
thereafter until and including 2009, the Administrator shall
allocate annually for each unit subject to the emissions limitation
requirements of paragraph (2) allowances from the reserve created
pursuant to subsection (a)(2) in an amount equal to the amount by
which (i) the product of the lesser of the unit's actual 1985
emissions rate or its allowable 1985 emissions rate multiplied by
the unit's baseline adjusted to reflect operation at a 60 percent
capacity factor, divided by 2,000, exceeds (ii) the number of
allowances allocated for the unit pursuant to paragraph (2) and
section 412(a) as basic Phase II allowance allocations.


(C)
An operating company with units subject to the emissions
limitation requirements of thissubsection may elect the allocation
of allowances as provided under subparagraphs (A) and (B). Such
election shall apply to the annual allowance allocation for each
and every unit in the operating company subject to the emissions
limitation requirements of this subsection. The Administrator shall
allocate allowances pursuant to subparagraphs (A) and (B) only in
accordance with this subparagraph.


(4)
Notwithstanding any other provision of this section, at
the election of the owner or operator,after January 1, 2000, the
Administrator shall allocate in lieu of allocation, pursuant to
paragraph (1), (2), (3), (5), or (6), allowances for a unit subject
to the emissions limitation requirements of this subsection which
commenced commercial operation on or after January 1, 1981 and
before December 31, 1985, which was subject to, and in compliance
with, section 111 of the Act in an amount equal to the unit's
annual fuel consumption, on a Btu basis, at a 65 percent capacity
factor multiplied by the unit's allowable 1985 emissions rate,
divided by 2,000.


(5)
For the purposes of this section, in the case of an
oil-and gas-fired unit which has beenawarded a clean coal
technology demonstration grant as of January 1, 1991, by the United
States Department of Energy, beginning January 1, 2000, the
Administrator shall allocate for the unit allowances in an amount
equal to the unit's baseline multiplied by 1.20 lbs/mmBtu, divided
by 2,000.


(e)
Oil and Gas-fired Units Equal to or Greater Than
0.60lbs/mmBtu and Less Than 1.20 lbs/mmBtu.-After January 1, 2000,
it shall be unlawful for any existing oil and gas-fired utility
unit the lesser of whose actual or allowable 1985 sulfur dioxide
emission rate is equal to, or greater than, 0.60 lbs/mmBtu, but
less than 1.20 lbs/mmBtu to exceed an annual sulfur dioxide tonnage
limitation equal to the product of the unit's baseline multiplied
by (A) the lesser of the unit's allowable 1985 emissions rate or
its actual 1985 emissions rate and (B) a numerical factor of 120
percent divided by 2,000, unless the owner or operator of such unit
holds allowances to emit not less than the unit's total annual
emissions or, for a year after 2007, unless the owner or operator
of the source that includes such unit holds allowances to emit not
less than the total annual emissions of all affected units at the
source.


(f)
Oil and Gas-fired Units Less Than 0.60 lbs/mmBtu.- (1)
After January 1, 2000, it shall be unlawfulfor any oil and
gas-fired existing utility unit the lesser of whose actual or
allowable 1985 emission rate is less than 0.60 lbs/mmBtu and whose
average annual fuel consumption during the period 1980 through 1989
on a Btu basis was 90 percent or less in the form of natural gas to
exceed an annual sulfur dioxide tonnage emissions limitation equal
to the product of the unit's baseline multiplied by (A) the lesser
of


0.60 lbs/mmBtu or the unit's allowable 1985 emissions, and (B) a
numerical factor of 120 percent,divided by 2,000, unless the owner
or operator of such unit holds allowances to emit not less than the
unit's total annual emissions or, for a year after 2007, unless the
owner or operator of the source that includes such unit holds
allowances to emit not less than the total annual emissions of all
affected units at the source.


(2)
In addition to allowances allocated pursuant to paragraph
(1) as basic Phase II allowanceallocations and section 412(a),
beginning January 1, 2000, the Administrator shall, in the case of
any unit operated by a utility that furnishes electricity, electric
energy, steam, and natural gas within an area consisting of a city
and 1 contiguous county, and in the case of any unit owned by a
State authority, the output of which unit is furnished within that
same area consisting of a city and 1 contiguous county, the
Administrator shall allocate for each unit in the utility its pro
rata share of 7,000 allowances and for each unit in the State
authority its pro rata share of 2,000 allowances.


(g)
Units That Commence Operation Between 1986 and December
31,1995.- (1) After January 1,2000, it shall be unlawful for any
utility unit that has commenced commercial operation on or after
January 1, 1986, but not later than September 30, 1990 to exceed an
annual tonnage emission limitation equal to the product of the
unit's annual fuel consumption, on a Btu basis, at a 65 percent
capacity factor multiplied by the unit's allowable 1985 sulfur
dioxide emission rate (converted, if necessary, to pounds per
mmBtu), divided by 2,000 unless the owner or operator of such unit
holds allowances to emit not less than the unit's total annual
emissions or, for a year after 2007, unless the owner or operator
of the source that includes such unit holds allowances to emit not
less than the total annual emissions of all affected units at the
source.


(2)
After January 1, 2000, the Administrator shall allocate
allowances pursuant to section 411to each unit which is listed in
table B of this paragraph in an annual amount equal to the
amount


specified in table B.
TABLE B

Notwithstanding any other paragraph of this subsection, for
units subject to this paragraph, the Administrator shall not
allocate allowances pursuant to any other paragraph of this
subsection, provided that the owner or operator of a unit listed on
Table B may elect an allocation of allowances under another
paragraph of this subsection in lieu of an allocation under this
paragraph.


(3)
Beginning January 1, 2000, the Administrator shall
allocate to the owner or operator of anyutility unit that commences
commercial operation, or has commenced commercial operation, on or
after October 1, 1990, but not later than December 31, 1992
allowances in an amount equal to the product of the unit's annual
fuel consumption, on a Btu basis, at a 65 percent capacity factor
multiplied by the lesser of 0.30 lbs/mmBtu or the unit's allowable
sulfur dioxide emission rate (converted, if necessary, to pounds
per mmBtu), divided by 2,000.


(4)
Beginning January 1, 2000, the Administrator shall
allocate to the owner or operator of anyutility unit that has
commenced construction before December 31, 1990 and that commences
commercial operation between January 1, 1993 and December 31, 1995,
allowances in an amount equal to the product of the unit's annual
fuel consumption, on a Btu basis, at a 65 percent capacity factor
multiplied by the lesser of 0.30 lbs/mmBtu or the unit's allowable
sulfur dioxide emission rate (converted, if necessary, to pounds
per mmBtu), divided by 2,000.



(5)
After January 1, 2000, it shall be unlawful for any
existing utility unit that has completedconversion from
predominantly gas fired existing operation to coal fired operation
between January 1, 1985 and December 31, 1987, for which there has
been allocated a proposed or final prohibition order pursuant to
section 301(b) of the Powerplant and Industrial Fuel Use Act of
1978 (42 U.S.C. 8301 et seq, repealed 1987) to exceed an annual
sulfur dioxide tonnage emissions limitation equal to the product of
the unit's annual fuel consumption, on a Btu basis, at a 65 percent
capacity factor multiplied by the lesser of 1.20 lbs/mmBtu or the
unit's allowable 1987 sulfur dioxide emissions rate, divided by
2,000, unless the owner or operator of such unit has obtained
allowances equal to its actual emissions

or, for a year after 2007, unless the owner or operator of the
source that includes such unit holds allowances to emit not less
than the total annual emissions of all affected units at the
source.



(6)
(A) Unless the Administrator has approved a designation
of such facility under section 417,the provisions of this subpart
shall not apply to a "qualifying small power production facility"or
"qualifying cogeneration facility" (within the meaning of section
3(17)(C) or 3(18)(B) of the Federal Power Act) or to a"new
independent power production facility" if, as of November 15,
1990,



(i)
an applicable power sales agreement has been
executed;


(ii)
the facility is the subject of a State regulatory
authority order requiring an electricutility to enter into a power
sales agreement with, purchase capacity from, or (for purposes of
establishing terms and conditions of the electric utility's
purchase of power) enter into arbitration concerning, the
facility;


(iii) an electric utility has issued a letter of intent or
similar instrument committing topurchase power from the facility at
a previously offered or lower price and a power sales agreement is
executed within a reasonable period of time; or
(iv) the facility has been selected as a winning bidder in a
utility competitive bidsolicitation.


(h)
Oil and Gas-fired Units Less Than 10 Percent Oil
Consumed.- (1) After January 1, 2000, it shall beunlawful for any
oil- and gas-fired utility unit whose average annual fuel
consumption during the period 1980 through 1989 on a Btu basis
exceeded 90 percent in the form of natural gas to exceed an annual
sulfur dioxide tonnage limitation equal to the product of the
unit's baseline multiplied by the unit's actual 1985 emissions rate
divided by 2,000 unless the owner or operator of such unit holds
allowances to emit not less than the unit's total annual emissions
or, for a year after 2007, unless the owner or operator of the
source that includes such unit holds allowances to emit not less
than the total annual emissions of all affected units at the
source.


(2)
In addition to allowances allocated pursuant to paragraph
(1) and section 412(a) as basicPhase II allowance allocations,
beginning January 1, 2000, and for each calendar year thereafter
until and including 2009, the Administrator shall allocate annually
for each unit subject to the emissions limitation requirements of
paragraph (1) allowances from the reserve created pursuant to
subsection (a)(2) in an amount equal to the unit's baseline
multiplied by 0.050 lbs/mmBtu, divided by 2,000.


(3)
In addition to allowances allocated pursuant to paragraph
(1) and section 412(a), beginningJanuary 1, 2010, the Administrator
shall allocate annually for each unit subject to the emissions
limitation requirements of paragraph (1) allowances in an amount
equal to the unit's baseline multiplied by 0.050 lbs/mmBtu, divided
by 2,000.



(i)
Units in High Growth States.- (1) In addition to
allowances allocated pursuant to this section andsection 412(a) as
basic Phase II allowance allocations, beginning January 1, 2000,
the Administrator shall allocate annually allowances for each unit,
subject to an emissions limitation requirement under this section,
and located in a State that-



(A)
has experienced a growth in population in excess of 25
percent between 1980 and 1988according to State Population and
Household Estimates, With Age, Sex, and Components of Change:
1981-1988 allocated by the United States Department of Commerce,
and


(B)
had an installed electrical generating capacity of more
than 30,000,000 kw in 1988, in anamount equal to the difference
between (A) the number of allowances that would be
allocated




for the unit pursuant to the emissions limitation requirements
of this section applicable to the unit adjusted to reflect the
unit's annual average fuel consumption on a Btu basis of any three
consecutive calendar years between 1980 and 1989 (inclusive) as
elected by the owner or operator and (B) the number of allowances
allocated for the unit pursuant to the emissions limitation
requirements of this section: Provided, That the number of
allowances allocated pursuant to this subsection shall not exceed
an annual total of 40,000. If necessary to meeting the 40,000
allowance restriction imposed under this subsection the
Administrator shall reduce, pro rata, the additional annual
allowances allocated to each unit under this subsection.


(2)
Beginning January 1, 2000, in addition to allowances
allocated pursuant to this section andsection 403(a)(1) as basic
Phase II allowance allocations, the Administrator shall allocate
annually for each unit subject to the emissions limitation
requirements of subsection (b)(1), (A) the lesser of whose actual
or allowable 1980 emissions rate has declined by 50 percent or more
as of November 15, 1990 , (B) whose actual emissions rate is less
than 1.2 lbs/mmBtu as of January 1, 2000, (C) which commenced
operation after January 1, 1970, (D) which is owned by a utility
company whose combined commercial and industrial kilowatt-hour
sales have increased by more than 20 percent between calendar year
1980 and November 15, 1990 , and (E) whose company-wide fossil-fuel
sulfur dioxide emissions rate has declined 40 percent or more from
1980 to 1988, allowances in an amount equal to the difference
between (i) the number of allowances that would be allocated for
the unit pursuant to the emissions limitation requirements of
subsection (b)(1) adjusted to reflect the unit's annual average
fuel consumption on a Btu basis for any three consecutive years
between 1980 and 1989 (inclusive) as elected by the owner or
operator and (ii) the number of allowances allocated for the unit
pursuant to the emissions limitation requirements of subsection
(b)(1): Provided, That the number of allowances allocated pursuant
to this paragraph shall not exceed an annual total of 5,000. If
necessary to meeting the 5,000 allowance restriction imposed in the
last clause of the preceding sentence the Administrator shall
reduce, pro rata, the additional allowances allocated to each unit
pursuant to this paragraph.


(j)
Certain Municipally Owned Power Plants.- Beginning
January1, 2000, in addition to allowancesallocated pursuant to this
section and section 412(a) as basic Phase II allowance allocations,
the Administrator shall allocate annually for each existing
municipally owned oil and gas-fired utility unit with nameplate
capacity equal to, or less than, 40 MWe, the lesser of whose actual
or allowable 1985 sulfur dioxide emission rate is less than 1.20
lbs/mmBtu, allowances in an amount equal to the product of the
unit's annual fuel consumption on a Btu basis at a 60 percent
capacity factor multiplied by the lesser of its allowable 1985
emission rate or its actual 1985 emission rate, divided by
2,000.


SEC. 415. ALLOWANCES FOR STATES WITH EMISSIONS RATES AT OR
BELOW


0.80 LBS/MMBTU.



(a)
Election of Governor.- In addition to basic Phase II
allowance allocations, upon the election of theGovernor of any
State, with a 1985 state-wide annual sulfur dioxide emissions rate
equal to or less than, 0.80 lbs/mmBtu, averaged over all fossil
fuel-fired utility steam generating units, beginning January 1,
2000, and for each calendar year thereafter until and including
2009, the Administrator shall allocate, in lieu of other Phase II
bonus allowance allocations, allowances from the reserve created
pursuant to

section 414(a)(2) to all such units in the State in an amount
equal to 125,000 multiplied by the unit's pro rata share of
electricity generated in calendar year 1985 at fossil fuel-fired
utility steam units in all States eligible for the election.


(b)
Notification of Administrator.- Pursuant to section
412(a), each Governor of a State eligible to make an election under
paragraph (a) shall notify the Administrator of such election. In
the event that the Governor of any such State fails to notify the
Administrator of the Governor's elections, the Administrator shall
allocate allowances pursuant to section 414


(c)
Allowances After January 1, 2010.-- After January 1,
2010, the Administrator shall allocateallowances to units subject
to the provisions of this section pursuant to section
414.




SEC. 416. ELECTION FOR ADDITIONAL SOURCES.


(a)
Applicability.- The owner or operator of any unit that is
not, nor will become, an affected unit undersection 412(b), 413, or
414 , that emits sulfur dioxide, may elect to designate that unit
or source to become an affected unit and to receive allowances
under this subpart. An election shall be submitted to the
Administrator for approval, along with a permit application and
proposed compliance plan in accordance with section 404. The
Administrator shall approve a designation that meets the
requirements of this section, and such designated unit shall be
allocated allowances, and be an affected unit for purposes of this
subpart.


(b)
Establishment of Baseline.- The baseline for a unit
designated under this section shall be establishedby the
Administrator by regulation, based on fuel consumption and
operating data for the unit for calendar years 1985, 1986, and
1987, or if such data is not available, the Administrator may
prescribe a baseline based on alternative representative
data.


(c)
Emission Limitations.- (1) For a unit for which an
election, along with a permit application andcompliance plan, is
submitted to the Administrator under paragraph (a) before January
1, 2002, annual emissions limitations for sulfur dioxide shall be
equal to the product of the baseline multiplied by the lesser of
the unit's 1985 actual or allowable emission rate in lbs/mmBtu, or,
if the unit did not operate in 1985, by the lesser of the unit's
actual or allowable emission rate for a calendar year after 1985
(as determined by the Administrator), divided by 2,000.


(2)
For a unit for which an election, along with a permit
application and compliance plan, issubmitted to the Administrator
under paragraph (a) on or after January 1, 2002, annual emissions
limitations for sulfur dioxide shall be equal to the product of the
baseline multiplied by the lesser of the unit's 1985 actual or
allowable emission rate in lbs/mmBtu, or, if the unit did not
operate in 1985, by the lesser of the unit's actual or allowable
emission rate for a calendar year after 1985 (as determined by the
Administrator), divided by 4,000.


(d)
Allowances and Permits.- The Administrator shall issue
allowances to an affected unit under thissection in an amount equal
to the emissions limitation calculated under subsection (c) , in
accordance with section 412. Such allowance may be used in
accordance with, and shall be subject to, the provisions of section
412. Affected sources under this section shall be subject to the
requirements of sections 404, 405, 406, and 412.



(e)
Limitation.- Any unit designated under this section shall
not transfer or bank allowances producedas a result of reduced
utilization or shutdown, except that, such allowances may be
transferred or carried forward for use in subsequent years to the
extent that the reduced utilization or shutdown results

from the replacement of thermal energy from the unit designated
under this section, with thermal energy generated by any other unit
or units subject to the requirements of this subpart, and the
designated unit's allowances are transferred or carried forward for
use at such other replacement unit or units. In no case may the
Administrator allocate to a source designated under this section
allowances in an amount greater than the emissions resulting from
operation of the source in full compliance with the requirements of
this Act. No such allowances shall authorize operation of a unit in
violation of any other requirements of this Act.


(f)
Implementation.- The Administrator shall implement this
section under 40 CFR part 74 (2001),amended as appropriate by the
Administrator.


SEC. 417 AUCTIONS, RESERVE. (a) Special Reserve of
Allowances.-For purposes of establishing the Special Allowance
Reserve, the Administrator shall withhold-


(1)
2.8 percent of the allocation of allowances for each year
from 1995 through 1999 inclusive;and


(2)
2.8 percent of the basic Phase II allowance allocation of
allowances for each year beginning


in the year 2000 which would (but for this subsection) be issued
for each affected unit at an affected source. The Administrator
shall record such withholding for purposes of transferring the
proceeds of the allowance sales under this subsection. The
allowances so withheld shall be deposited in the Reserve under this
section.


(b)
Auction Sales.- (1) Subaccount for auctions.- The
Administrator shall establish an AuctionSubaccount in the Special
Reserve established under this section. The Auction Subaccount
shall contain allowances to be sold at auction under this section
in the amount of 150,000 tons per year for each year from 1995
through 1999, inclusive and 250,000 tons per year for each year
from 2000 through 2009, inclusive.



(2)
Annual auctions.- Commencing in 1993 and in each year
thereafter until 2010, theAdministrator shall conduct auctions at
which the allowances referred to in paragraph (1) shall be offered
for sale in accordance with regulations promulgated by the
Administrator. The allowances referred to in paragraph (1) shall be
offered for sale at auction in the amounts specified in table C.
The auction shall be open to any person. A person wishing to bid
for such allowances shall submit (by a date set by the
Administrator) to the Administrator (on a sealed bid schedule
provided by the Administrator) offers to purchase specified numbers
of allowance sat specified prices. Such regulations shall specify
that the auctioned allowances shall be allocated and sold on the
basis of bid price, starting with the highest-priced bid and
continuing until all allowances for sale at such auction have been
allocated. The regulations shall not permit that a minimum price be
set for the purchase of withheld allowances. Allowances purchased
at the auction may be used for any purpose and at any time after
the auction, subject to the provisions of this subpart and subpart
2 .



(3)
Proceeds.- (A) Notwithstanding section 3302 of title 31
of the United States Code or anyother provision of law, within 90
days of receipt, the Administrator shall transfer the proceeds from
the auction under this section, on a pro rata basis, to the owners
or operators of the affected units at an affected source from whom
allowances were withheld under subsection (b). No funds transferred
from a purchaser to a seller of allowances under this paragraph
shall be held by any officer or employee of the United States or
treated for any purpose as revenue to the United States or the
Administrator.


(B)
At the end of each year, any allowances offered for sale
but not sold at the auctionshall be returned without charge, on a
pro rata basis, to the owner or operator of the affected units from
whose allocation the allowances were withheld. Within 170 days
after the date of enactment of the Clear Skies Act of 2002, any
allowance withheld under paragraph (a)(2) but not offered for sale
at an auction shall be returned without charge, on a pro rata
basis, to the owner or operator of the affected units from whose
allocation the allowances were withheld.


(4)
Recording by EPA.- The Administrator shall record and
publicly report the nature, pricesand results of each auction under
this subsection, including the prices of successful bids, and shall
record the transfers of allowances as a result of each auction in
accordance with the requirements of this section. The transfer of
allowances at such auction shall be recorded in accordance with the
regulations promulgated by the Administrator under this subpart
.




(c)
Changes in Auctions and Withholding.- Pursuant to
rulemaking after public notice and comment the Administrator may at
any time after the year 1998 (in the case of advance auctions) and
2005 (in the case of spot auctions) decrease the number of
allowances withheld and sold under this section.


(d)
Termination of Auctions.- The Administrator shall
terminate the withholding of allowances and the auction sales under
this section on December 31, 2009. Pursuant to regulations under
this section, the Administrator may by delegation or contract
provide for the conduct of sales or auctions under the
Administrator's supervision by other departments or agencies of the
United States Government or by nongovernmental agencies, groups, or
organizations.


(e)
The Administrator shall implement this section under 40
CFR part 73 (2001), amended asappropriate by the
Administrator.


TABLE C- NUMBER OF ALLOWANCES AVAILABLE FOR AUCTION
Year of Sale Spot Auction (same year) Advance Auction



SEC. 418. INDUSTRIAL SO2 EMISSIONS.


(a)
Report.- Not later than January 1, 1995 and every 5 years
thereafter, the Administrator shall transmit to the Congress a
report containing an inventory of national annual sulfur dioxide
emissions from industrial sources (as defined in section 411(11) ),
including units subject to section 414(g)(2) , for all years for
which data are available, as well as the likely trend in such
emission over the following twenty-year period. The reports shall
also contain estimates of the actual emission reduction in each
year resulting from promulgation of the diesel fuel desulfurization
regulations under section 214.


(b)
5.60 Million Ton Cap.- Whenever the inventory required by
this section indicates that sulfur dioxideemissions from industrial
sources, including units subject to section 414(g)(2) , and may
reasonably be expected to reach levels greater than 5.60 million
tons per year, the Administrator shall take such actions under the
Act as may be appropriate to ensure that such emissions do not
exceed 5.60 million tons per year. Such actions may include the
promulgation of new and revised standards of performance for new
sources, including units subject to section 414(g)(2), under
section 111(b) , as well as promulgation of standards of
performance for existing sources, including units subject to
section 414(g)(2) , under authority of this section. For an
existing source regulated under this section, "standard of
performance" means a standard which the Administrator determines is
applicable to that source and which reflects the degree of emission
reduction achievable through the application of the best system of
continuous emission reduction which (taking into consideration the
cost of achieving such emission reduction, and any nonair quality
health and environmental impact and energy requirements) the
Administrator determines has been adequately demonstrated for that
category of sources.


(c)
Election.- Regulations promulgated under section 414(b)
shall not prohibit a source from electing to become an affected
unit under section 417 .




SEC. 419. TERMINATION.
Starting January 1, 2010, the owners or operators of affected
units and affected facilities under sections 412(b) and (c) and 416
and shall no longer be subject to the requirements of sections 412
through 417.
SUBPART 2. SULFUR DIOXIDE ALLOWANCE PROGRAM.


SEC. 421. DEFINITIONS.
For purposes of this subpart-



(1)
The term "affected EGU" means:



(A)
for a unit serving a generator before the date of
enactment of the Clear Skies Act of2002, a unit in a State serving
a generator with a nameplate capacity of greater than 25 megawatts
that produced or produces electricity for sale during 2001 or any
year thereafter, except for a cogeneration unit that produced or
produces electricity for sale equal to less than one-third of the
potential electrical output of the generator that it served or
serves during 2001 and each year thereafter; and



(B)
for a unit commencing service of a generator on or after
the date of enactment ofthe Clear Skies Act of 2002, a unit in a
State serving a generator that produces electricity for sale during
any year starting with the year the unit commences service of
a

generator, except for a gas-fired unit serving one or more
generators with total nameplate capacity of 25 megawatts or less,
or a cogeneration unit that produces electricity for sale equal to
less than one-third of the potential electrical output of the
generator that it serves, during each year starting with the year
the unit commences service of a generator.


(C)
Notwithstanding paragraphs (A) and (B), the term
"affected EGU" does notinclude a solid waste incineration unit
subject to section 129 or a unit for the treatment, storage, or
disposal of hazardous waste subject to section 3005 of the Solid
Waste Disposal Act.




(2)
The term "coal-fired" with regard to a unit means, for
purposes of section 424, combusting coal or any coal-derived fuel
alone or in combination with any amount of any other fuel in any
year during 1997 through 2001 or, for a unit that commenced
operation during 2001-2004, a unit designed to combust coal or any
coal-derived fuel alone or in combination with any other
fuel.


(3)
The term "Eastern bituminous" means bituminous that is
from a mine located in a State eastof the Mississippi
River.


(4)
The term "general account" means an account in the
Allowance Tracking System undersection 403(c) established by the
Administrator for any person under 40 CFR §73.31(c) (2001), amended
as appropriate by the Administrator.


(5)
The term "oil-fired" with regard to a unit means, for
purposes of section 424, combusting fuel oil for more than ten
percent of the unit's total heat input, and combusting no coal or
coalderived fuel, in any year during 1997 through 2001 or, for a
unit that commenced operation during 2001-2004, a unit designed to
combust oil for more than ten percent of the unit's total heat
input and not to combust any coal or coal-derived fuel
coal.


(6)
The term "unit account" means an account in the Allowance
Tracking System under section403(c) established by the
Administrator for any unit under 40 CFR §73.31(a) and (b) (2001),
amended as appropriate by the Administrator.




SEC. 422. APPLICABILITY.
Starting January 1, 2010, it shall be unlawful for the affected
EGUs at a facility to emit a total amount of sulfur dioxide during
the year in excess of the number of sulfur dioxide allowances held
for such facility for that year by the owner or operator of the
facility.


SEC. 423. LIMITATIONS ON TOTAL EMISSIONS.
For affected EGUs for 2010 and each year thereafter, the
Administrator shall allocate sulfur dioxide allowances under
section 424, and shall conduct auctions of sulfur dioxide
allowances under section 409, in the amounts in Table A.
TABLE A..- TOTAL SO2 ALLOWANCES ALLOCATED OR AUCTIONED FOR
EGUS
1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
26 27

28 29 SEC. 424. EGU ALLOCATIONS. 30 (a) By January 1, 2007, the
Administrator shall promulgate regulations determining allocations
of sulfur 31 dioxide allowances for affected EGUs for each year
during 2010 through 2060. The regulations shall 32 provide that- 33
(1)(A) Ninety-five percent of the total amount of sulfur dioxide
allowances allocated each year 34 to affected EGUs under section
423 shall be allocated based on the sulfur dioxide allowances that
were allocated under subpart 1 for 2010 or thereafter and are held
in unit accounts and general accounts in the Allowance Tracking
System under section 403(c).
(B) The Administrator shall allocate sulfur dioxide allowances
to each facility's account andeach general account in the Allowance
Tracking System under section 403(c) as follows:


(i)
The Administrator shall determine the amount of sulfur
dioxide allowances allocated under subpart 1 for 2010, and each
subsequent year, that are recorded in each unit account and each
general account in the Allowance Tracking System as of 12:00 noon,
Eastern Standard time, on the date 180 days after enactment of the
Clear Skies Act of 2002. The Administrator shall determine this
amount in accordance with 40 CFR part 73 (2001), amended as
appropriate by the Administrator, except that the Administrator
shall discount all sulfur dioxide allowances allocated for 2011 or
later at a rate of 7% per year.


(ii)
The Administrator shall determine for each unit account
and each general account inthe Allowance Tracking System an amount
of sulfur dioxide allowances equal to the allocation amount under
subparagraph (A) multiplied by the ratio of the amount of sulfur
dioxide allowances determined to be recorded in that account under
clause (i) to the total amount of sulfur dioxide allowances
determined to be recorded in all unit accounts and general accounts
in the Allowance Tracking System under clause (i).


(iii) The Administrator shall allocate to each facility's
account in the Allowance TrackingSystem an amount of sulfur dioxide
allowances equal to the total amount of sulfur dioxide allowances
determined under clause (ii) for the unit accounts of the units at
the facility and to each general account in the Allowance Tracking
System the amount of sulfur dioxide allowances determined under
clause (ii) for that general account.
(2)(A) Three and one-half percent of the total amount of sulfur
dioxide allowances allocated each year for affected EGUs under
section 423 shall be allocated for units at a facility that are
affected EGUs as of December 31, 2004, that commenced operation
before January 1, 2001, and that are not allocated any sulfur
dioxide allowances under subpart 1.
(B) The Administrator shall allocate each year for the units
under subparagraph (A) an amountof sulfur dioxide allowances
determined by-


(i)
For such units at the facility that are coal-fired,
multiplying 0.40 lb/mmBtu by thetotal baseline heat input of such
units and converting to tons;


(ii)
For such units at the facility that are oil-fired,
multiplying 0.20 lb/mmBtu by the totalbaseline heat input of such
units and converting to tons;


(iii) For all such other units at the facility that are not
covered by clause (i) or (ii),multiplying 0.05 lb/mmBtu by the
total baseline heat input of such units and converting to tons;


(iv)
If the total of the amounts for all facilities under
clauses (i), (ii), and (iii) exceeds theallocation amount under
subparagraph (A), multiplying the allocation amount under
subparagraph (A) by the ratio of the total of the amounts for the
facility under clauses (i), (ii), and (iii) to the total of the
amounts for all facilities under clauses (i), (ii), and (iii);
and


(v)
Allocating to each facility the lesser of the total of
the amounts for the facility under


clauses (i), (ii), and (iii) or, if the total of the amounts for
all facilities under clauses (i),
(ii), and (iii) exceeds the allocation amount under subparagraph
(A), the amount under
clause (iv). The Administrator shall add to the amount of sulfur
dioxide allowances
allocated under paragraph (3) any unallocated allowances under
this paragraph. (3)(A) One and one-half percent of the total amount
of sulfur dioxide allowances allocated each year for affected EGUs
under section 423 shall be allocated for units that are affected
EGUs as of December 31, 2004, that commence operation on or after
January 1, 2001 and before January 1, 2005, and that are not
allocated any sulfur dioxide allowances under subpart 1.
(B) The Administrator shall allocate each year for the units
under subparagraph (A) an amountof sulfur dioxide allowances
determined by-


(i)
For such units at the facility that are coal-fired or
oil-fired, multiplying 0.19 lb/mmBtuby the total baseline heat
input of such units and converting to tons;


(ii)
For all such other units at the facility that are not
covered by clause (i), multiplying


0.02 lb/mmBtu by the total baseline heat input of such units and
converting to tons;


(iv)
If the total of the amounts for all facilities under
clauses (i) and (ii) exceeds theallocation amount under
subparagraph (A), multiplying the allocation amount under
subparagraph (A) by the ratio of the total of the amounts for the
facility under clauses (i) and (ii) to the total of the amounts for
all facilities under clauses (i) and (ii); and


(v)
Allocating to each facility the lesser of the total of
the amounts for the facility underclauses (i) and (ii) or, if the
total of the amounts for all facilities under clauses (i) and (ii)
exceeds the allocation amount under subparagraph (A), the amount
under clause (iv). The Administrator shall allocate to the
facilities under paragraphs (1) and (2) on a pro rata basis (based
on the allocations under those paragraphs) any unallocated
allowances under this paragraph.


(b) For each year 2010 through 2060, if the Administrator has
not promulgated the regulationsdetermining allocations under
paragraph (a) by July 1 that is eighteen months before January 1 of
such year, then-



(1)
The Administrator shall:



(A)
allocate, for such year, to each unit with coal as its
primary or secondary fuel orresidual oil as its primary fuel listed
in the Administrator's Emissions Scorecard 2000, Appendix B, Table
B1 an amount of sulfur dioxide allowances determined by multiplying
eighty percent of the allocation amount under section 423 by the
ratio of such unit's heat input in the Emissions Scorecard 2000,
Appendix B, Table B1 to the total of the heat input in the
Emissions Scorecard 2000, Appendix B, Table B1 for all units with
coal as their primary or secondary fuel or residual oil as their
primary fuel;


(B)
record in each facility's account in the Allowance
Tracking System under section403(c) for such year the total of the
amounts of sulfur dioxide allowances for the units at such facility
determined under subparagraph (A); and


(C)
auction an amount of sulfur dioxide allowances equal to
five percent of theallocation amount under section 423 and conduct
the auction on the first business day in October following the
respective promulgation deadline under subsection (b) and in
accordance with section 409.




(2)
Notwithstanding any other provision of law to the
contrary, the determination of the amountof sulfur dioxide
allowances under subparagraph (1)(A) and the recording of sulfur
dioxide allowances under subparagraph (1)(B) shall not be subject
to judicial review.


(3)
Notwithstanding the provisions to the contrary in section
423, the Administrator shall notallocate or record fifteen percent
of the allocation amount under section 423 for such
year.




SEC. 425. DISPOSITION OF SULFUR DIOXIDE ALLOWANCES ALLOCATED
UNDER SUBPART 1.


(a)
After allocating allowances under section 424(a)(1), the
Administrator shall remove from the unitaccounts and general
accounts in the Allowance Tracking System under section 403(c) and
from the Special Allowance Reserve under section 418 all sulfur
dioxide allowances allocated or deposited under subpart 1 for 2010
or later.


(b)
The Administrator shall promulgate regulations as
necessary to assure that the requirement to holdallowances under
section 422 may be met using sulfur dioxide allowances allocated
under subpart 1 for 1995 through 2009.




SEC. 426. INCENTIVES FOR SULFUR DIOXIDE EMISSION CONTROL
TECHNOLOGY.


(a)
Reserve.- The Administrator shall establish a reserve of
250,000 sulfur dioxide allowancescomprising 83,334 sulfur dioxide
allowances for 2010, 83,333 sulfur dioxide allowances for 2011, and
83,333 sulfur dioxide allowances for 2012.


(b)
Application.- By July 1, 2004 an owner or operator of an
affected EGU that commenced operationbefore 2001 and that during
2001 combusted Eastern bituminous may submit an application to the
Administrator for sulfur dioxide allowances from the reserve under
subsection (a). The application shall include-


(1)
a statement that the owner or operator will install and
commence operation of specified sulfur dioxide control technology
at the unit within 24 months after approval of the application
under subsection (c) if the unit is allocated the sulfur dioxide
allowances requested under paragraph (4). The owner or operator
shall provide a description of the control technology.


(2)
a statement that, during the period starting with the
commencement of operation of sulfurdioxide technology under
paragraph (1) through 2009, the unit will combust Eastern
bituminous at a percentage of the unit's total heat input equal to
or exceeding the percentage of total heat input combusted by the
unit in 2001 if the unit is allocated the sulfur dioxide allowances
requested under paragraph (4).


(3)
a demonstration that the unit will achieve, while
combusting fuel in accordance withparagraph (2) and operating the
sulfur dioxide control technology specified in paragraph (1), a
specified tonnage of sulfur dioxide emission reductions during the
period starting with the commencement of operation of sulfur
dioxide technology under subparagraph (1) through 2009. The tonnage
of emission reductions shall be the difference between emissions
monitored at a location at the unit upstream of the control
technology described in paragraph (1) and emissions monitored at a
location at the unit downstream of such control technology, while
the unit is combusting fuel in accordance with paragraph
(2).


(4)
a request that EPA allocate for the unit a specified
number of sulfur dioxide allowances fromthe reserve under
subsection (a) for the period starting with the commencement of
operation of the sulfur dioxide technology under paragraph (1)
through 2009.


(5)
a statement of the ratio of the number of sulfur dioxide
allowances requested underparagraph (4) to the tonnage of sulfur
dioxide emissions reductions under paragraph (3).



(c)
Approval or Disapproval.-Through adjudicative
determinations subject to notice and opportunityfor comment, the
Administrator shall-

(1) determine whether each application meets the requirements
of subsection (b);


(2)
list the applications meeting the requirements of
subsection (b) and their respectiveallowance-to-emission-reduction
ratios under paragraph (b)(5) in order, from lowest to highest, of
such ratios;


(3)
for each application listed under paragraph (2), multiply
the amount of sulfur dioxideemission reductions requested by each
allowance-to-emission-reduction ratio on the list that equals or is
less than the ratio for the application;


(4)
sum, for each allowance-to-emission-reduction ratio in
the list under paragraph (2), theamounts of sulfur dioxide
allowances determined under paragraph (3);


(5)
based on the calculations in paragraph (4), determine
which allowance-to-emission-reduction ratio on the list under
paragraph (2) results in the highest total amount of allowances
that does not exceed 250,000 allowances; and


(6)
approve each application listed under paragraph (2) with
a ratio equal to or less than theallowance-to-emission-reduction
ratio determined under paragraph (5) and disapprove all the other
applications.


(d)
Monitoring.- An owner or operator whose application is
approved under subsection (c) shall install,and quality assure data
from , a CEMS for sulfur dioxide located upstream of the sulfur
dioxide control technology under paragraph (b)(1) at the unit and a
CEMS for sulfur dioxide located downstream of such control
technology at the unit during the period starting with the
commencement of operation of such control technology through 2009.
The installation of the CEMS and the quality assurance of data
shall be in accordance with subparagraph (a)(2)(B) and subsections
(c) through (e) of section 405, except that, where two or more
units utilize a single stack, separate monitoring shall be required
for each unit.


(f)
Allocations.- By July 1, 2010, for the units for which
applications are approved under paragraph (c),the Administrator
shall allocate sulfur dioxides allowances as follows:



(1)
For each unit, the Administrator shall multiply the
allowance-to-emission-reduction ratio ofthe last application that
EPA approved under subsection (c) by the lesser of:



(A)
the total tonnage of sulfur dioxide emissions reductions
achieved by the unit, duringthe period starting with the
commencement of operation of the sulfur dioxide control technology
under subparagraph (b)(1) through 2009, through use of such control
technology; or


(B)
the tonnage of sulfur dioxide emission reductions under
paragraph (b)(3).





(2)
If the total amount of sulfur dioxide allowances
determined for all units under paragraph (1)exceeds 250,000 sulfur
dioxide allowances, the Administrator shall multiply 250,000 sulfur
dioxide allowances by the ratio of the amount of sulfur dioxide
allowances determined for each unit under

paragraph (1) to the total amount of sulfur dioxide allowances
determined for all units under paragraph (1).


(3)
The Administrator shall allocate to each unit the lesser
of the amount determined for that unit under paragraph (1) or, if
the total amount of sulfur dioxide allowances determined for all
units under paragraph (1) exceeds 250,000 sulfur dioxide
allowances, under paragraph (2). The Administrator shall auction
any unallocated allowances from the reserve under this section and
conduct the auction by the first business day in October 2010 and
in accordance with section 409.


SUBPART 3. WESTERN REGIONAL AIR PARTNERSHIP.


SEC. 431. DEFINITIONS.
For purposes of this subpart-



(1)
The term "adjusted baseline heat input" means the average
annual heat input used by a unitduring the three years in which the
unit had the highest heat input for the period from the eighth
through the fourth year before the first covered year.




(A)
Notwithstanding paragraph (1), if a unit commences
operation during such periodand-



(i)
on or after January 1 of the fifth year before the first
covered year, then"adjusted baseline heat input" shall mean the
average annual heat input used by the unit during the fifth and
fourth years before the first covered year; and


(ii)
on or after January 1 of the fourth year before the first
covered year, then"adjusted baseline heat input" shall mean the
annual heat input used by the unit during the fourth year before
the first covered year.





(B)
A unit's heat input for a year shall be the heat
input



(i)
required to be reported under section 405 for the unit,
if the unit wasrequired to report heat input during the year under
that section;


(ii)
reported to the Energy Information Administration for the
unit, if the unit wasnot required to report heat input under
section 405;




(iii) based on data for the unit reported to the State where
the unit is located asrequired by State law, if the unit was not
required to report heat input during the year under section 405 and
did not report to the Energy Information Administration; or
(iv) based on fuel use and fuel heat content data for the unit
from fuel purchaseor use records, if the unit was not required to
report heat input during the year under section 405 and did not
report to the Energy Information Administration and the State.



(2)
The term "affected EGU" means an affected EGU under
subpart 2 that is in a State andthat:



(A)
in 2000, emitted 100 tons or more of sulfur dioxide and
was used to produceelectricity for sale; or


(B)
in any year after 2000, emits 100 tons or more of sulfur
dioxide and is used toproduce electricity for sale.




(3)
The term "coal-fired" with regard to a unit means, for
purposes of section 434, a unit combusting coal or any coal-derived
fuel alone or in combination with any amount of any other fuel in
any year during the period from the eighth through the fourth year
before the first covered year.



(4)
The term "covered year" means:(A)(1) the third year after
the year 2018 or later when the total annual sulfur dioxide
emissions of all affected EGUs in the States first exceed 271,000
tons; or



(2)
the third year after the year 2013 or later when the
Administrator determines byregulation that the total annual sulfur
dioxide emissions of all affected EGUs in the States are reasonably
projected to exceed 271,000 tons in 2018 or any year thereafter.
The Administrator may make such determination only if all the
States submit to the Administrator a petition requesting that the
Administrator issue such determination and make all affected EGUs
in the States subject to the requirements of sections 432 through
434; and


(B)
each year after the "covered year" under subparagraph
(A).




(5)
The term "oil-fired" with regard to a unit means, for
purposes of section 434, a unitcombusting fuel oil for more than
ten percent of the unit's total heat input, and combusting no coal
or coal-derived fuel, in any year during the period from the eighth
through the fourth year before the first covered year.




SEC. 432. APPLICABILITY.
Starting January 1 of the first covered year, it shall be
unlawful for the affected EGUs at a facility to emit a total amount
of sulfur dioxide during the year in excess of the number of sulfur
dioxide allowances held for such facility for that year by the
owner or operator of the facility.


SEC. 433. LIMITATIONS ON TOTAL EMISSIONS.
For affected EGUs, the total amount of sulfur dioxides
allowances that the Administrator shall allocate for each covered
year under section 434 shall equal 271,000 tons.


SEC. 434. EGU ALLOCATIONS.
(a) By January 1 of the year before the first covered year, the
Administrator shall promulgateregulations determining, for each
covered year, the allocations of sulfur dioxide allowances for the
units at a facility that are affected EGUs as of December 31 of the
fourth year before the covered year by-


(1)
For such units at the facility that are coal-fired,
multiplying 0.40 lb/mmBtu by the totaladjusted baseline heat input
of such units and converting to tons;


(2)
For such units at the facility that are oil-fired,
multiplying 0.20 lb/mmBtu by the totaladjusted baseline heat input
of such units and converting to tons;


(3)
For all such other units at the facility that are not
covered by paragraph (1) or (2),multiplying 0.05 lb/mmBtu by the
total adjusted baseline heat input of such units and converting to
tons; and


(4)
Multiplying the allocation amount under section 433 by
the ratio of the total of the amounts for the facility under
paragraphs (1), (2), and (3) to the total of the amounts for all
facilities


under paragraphs (1), (2), and (3).
(b) For each covered year, if the Administrator has not
promulgated the regulations determiningallocations under paragraph
(a) by July 1 that is eighteen months before January 1 of such
year, then-



(1)
The Administrator shall:



(A)
allocate, for such year, to each affected EGU with coal
as its primary or secondaryfuel or residual oil as its primary fuel
listed in the Administrator's Emissions Scorecard 2000, Appendix B,
Table B1 an amount of sulfur dioxide allowances determined by
multiplying eighty percent of the allocation amount under section
433 by the ratio of such unit's heat input in the Emissions
Scorecard 2000, Appendix B, Table B1 to the total of the heat input
in the Emissions Scorecard 2000, Appendix B, Table B1 for all
affected EGUs with coal as their primary or secondary fuel or
residual oil as their primary fuel;


(B)
record in each facility's account in the Allowance
Tracking System under section403(c) for such year the sum of the
amounts of sulfur dioxide allowances for the units at such facility
determined under subparagraph (A); and


(C)
auction an amount of sulfur dioxide allowances equal to
five percent of theallocation amount under section 433 and conduct
the auction on the first business day in October following the
respective promulgation deadline under subsection (b) and in
accordance with section 409.




(2)
Notwithstanding any other provision of law to the
contrary, the determination of the amountof sulfur dioxide
allowances under subparagraph (1)(A) and the recording of sulfur
dioxide allowances under subparagraph (1)(B) shall not be subject
to judicial review.


(3)
Notwithstanding the provisions to the contrary in section
433, the Administrator shall notallocate or record fifteen percent
of the allocation amount under section 433 for such
year.


PART C- NITROGEN OXIDES EMISSION REDUCTIONS.
SUBPART 1. ACID RAIN PROGRAM.


SEC. 441. NITROGEN OXIDES EMISSION REDUCTION PROGRAM.


(a)
Applicability.- On the date that a coal-fired utility
unit becomes an affected unit pursuant to sections413 or 414, or on
the date a unit subject to the provisions of section 413(d), must
meet the SO2 reduction requirements, each such unit shall become an
affected unit for purposes of this section and shall be subject to
the emission limitations for nitrogen oxides set forth
herein.



(b)
Emission Limitations.-




(1)
The Administrator shall by regulation establish annual
allowable emission limitations for nitrogen oxides for the types of
utility boilers listed below, which limitations shall not exceed
the rates listed below: Provided, That the Administrator may set a
rate higher than that listed for any type of utility boiler if the
Administrator finds that the maximum listed rate for that boiler
type cannot be achieved using low NOx burner technology. The
Administrator shall implement this paragraph under 40 CFR §76.5
(2001). The maximum allowable emission rates are as
follows:



(A)
for tangentially fired boilers, 0.45 lb/mmBtu;


(B)
for dry bottom wall-fired boilers (other than units
applying cell burner technology),


0.50 lb/mmBtu. After January 1, 1995, it shall be unlawful for
any unit that is anaffected unit on that date and is of the type
listed in this paragraph to emit nitrogen oxides in excess of the
emission rates set by the Administrator pursuant to this
paragraph.



(2)
The Administrator shall, by regulation, establish
allowable emission limitations on alb/mmBtu, annual average basis,
for nitrogen oxides for the following types of utility
boilers:



(A)
wet bottom wall-fired boilers;


(B)
cyclones;


(C)
units applying cell burner technology;






(D)
all other types of utility boilers.The Administrator
shall base such rates on the degree of reduction achievable through
the retrofit application of the best system of continuous emission
reduction, taking into account available technology, costs and
energy and environmental impacts; and which is comparable to the
costs of nitrogen oxides controls set pursuant to subsection
(b)(1). The Administrator may revise the applicable emission
limitations for tangentially fired and dry bottom, wall-fired
boilers (other than cell burners) to be more stringent if the
Administrator determines that more effective low NOx burner
technology is available: Provided, That, no unit that is an
affected unit pursuant to section 413 and that is subject to the
requirements of subsection (b) (1), shall be subject to the revised
emission limitations, if any. The Administrator shall implement
this paragraph under 40 CFR §§76.6 and 76.7 (2001).



(c)
Alternative Emission Limitations.-The permitting
authority shall, upon request of an owner or operator of a unit
subject to this section, authorize an emission limitation less
stringent than the applicable limitation established under
subsection(b)(1) or (b)(2) upon a determination that-



(1)
a unit subject to subsection (b)(1) cannot meet the
applicable limitation using low NOxburner technology; or


(2)
a unit subject to subsection (b)(2) cannot meet the
applicable rate using the technology on




which the Administrator based the applicable emission
limitation. The permitting authority shall base such determination
upon a showing satisfactory to the permitting authority, in
accordance with regulations established by the Administrator , that
the owner or operator-


(1)
has properly installed appropriate control equipment
designed to meet the applicableemission rate;


(2)
has properly operated such equipment for a period of
fifteen months (or such other periodof time as the Administrator
determines through the regulations), and provides operating and
monitoring data for such period demonstrating that the unit cannot
meet the applicable emission rate; and



(3)
has specified an emission rate that such unit can meet on
an annual average basis. Thepermitting authority shall issue an
operating permit for the unit in question, in accordance with
section 404 and title V-



(i)
that permits the unit during the demonstration period
referred to in subparagraph (2)above, to emit at a rate in excess
of the applicable emission rate;


(ii)
at the conclusion of the demonstration period to revise
the operating permit to reflect




the alternative emission rate demonstrated in paragraphs (2) and
(3) above. Units subject to subsection (b)(1) for which an
alternative emission limitation is established shall not be
required to install any additional control technology beyond low
NOx burners. Nothing in this section shall preclude an owner or
operator from installing and operating an alternative NOx control
technology capable of achieving the applicable emission limitation.
The Administrator shall implement this subsection under 40 CFR part
76 (2001), amended as appropriate by the Administrator.


(d)
Emissions Averaging.- In lieu of complying with the
applicable emission limitations under subsection


(b)
(1), (2), or (c), the owner or operator of two or more
units subject to one or more of the applicableemission limitations
set pursuant to these sections, may petition the permitting
authority for alternative contemporaneous annual emission
limitations for such units that ensure that (1) the actual annual
emission rate in pounds of nitrogen oxides per million Btu averaged
over the units in question is a rate that is less than or equal to
(2) the Btu-weighted average annual emission rate for the same
units if they had been operated, during the same period of time, in
compliance with limitations set in accordance with the applicable
emission rates set pursuant to subsections (b) (1) and
(2).


If the permitting authority determines, in accordance with
regulations issued by the Administrator that the conditions in the
paragraph above can be met, the permitting authority shall issue
operating permits for such units, in accordance with section 404
and title V, that allow alternative contemporaneous annual emission
limitations. Such emission limitations shall only remain in effect
while both units continue operation under the conditions specified
in their respective operating permits. The Administrator shall
implement this subsection under 40 CFR part 76 (2001), amended as
appropriate by the Administrator.


SEC. 442. TERMINATION.
Starting January 1, 2008, owner or operator of affected units
and affected facilities under section 441 shall no longer be
subject to the requirements of that section.
SUBPART 2. NITROGEN OXIDES ALLOWANCE PROGRAM.


SEC. 451. DEFINITIONS.
For purposes of this subpart-



(1)
The term "affected EGU" means:



(A)
for a unit serving a generator before the date of
enactment of the Clear Skies Act of2002, a unit in a State serving
a generator with a nameplate capacity of greater than 25 megawatts
that produced or produces electricity for sale during 2001 or any
year thereafter, except for a cogeneration unit that produced or
produces electricity for sale equal to less than one-third of the
potential electrical output of the generator that it served or
serves during 2001 and each year thereafter; and



(B)
for a unit commencing service of a generator on or after
the date of enactment ofthe Clear Skies Act of 2002, a unit in a
State serving a generator that produces electricity for sale during
any year starting with the year the unit commences service of a
generator, except for a gas-fired unit serving one or more
generators with total

nameplate capacity of 25 megawatts or less, or a cogeneration
unit that produces electricity for sale equal to less than
one-third of the potential electrical output of the generator that
it serves, during each year starting with the year the unit
commences service of a generator.


(C)
Notwithstanding paragraphs (A) and (B), the term
"affected EGU" does notinclude a solid waste incineration unit
subject to section 129 or a unit for the treatment, storage, or
disposal of hazardous waste subject to section 3005 of the Solid
Waste Disposal Act.




(2)
The term "Zone 1 State" means Alabama, Arkansas,
Connecticut, Delaware, the District ofColumbia, Florida, Georgia,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,
Maryland, Massachusetts, Michigan, Minnesota, Mississippi,
Missouri, New Hampshire, New Jersey, New York, North Carolina,
Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina,
Tennessee, Texas east of Interstate 35, Vermont, Virginia, West
Virginia, and Wisconsin.


(3)
The term "Zone 2 State" means Alaska, American Samoa,
Arizona, California, Colorado,the Commonwealth of Northern Mariana
Islands, the Commonwealth of Puerto Rico, Guam, Hawaii, Idaho,
Montana, Nebraska, North Dakota, New Mexico, Nevada, Oregon, South
Dakota, Texas west of Interstate 35, Utah, the Virgin Islands,
Washington, and Wyoming.




SEC. 452. APPLICABILITY.
(a)(1) Starting January 1, 2008, it shall be unlawful for the
affected EGUs at a facility in a Zone 1 State to emit a total
amount of nitrogen oxides during a year in excess of the number of
nitrogen oxides allowances held for such facility for that year by
the owner or operator of the facility.


(2)
Only nitrogen oxides allowances under section 453(a)
shall be held in order to meet therequirements of paragraph (1),
except as provided under section 465. (b)(1) Starting January 1,
2008, it shall be unlawful for the affected EGUs at a facility in a
Zone 2 State to emit a total amount of nitrogen oxides during a
year in excess of the number of nitrogen oxides allowances held for
such facility for that year by the owner or operator of the
facility.


(2)
Only nitrogen oxides allowances under section 453(b)
shall be held in order to meet therequirements of paragraph
(1).




SEC. 453. LIMITATIONS ON TOTAL EMISSIONS.
(a) For affected EGUs in the Zone 1 States for 2008 and each
year thereafter, the Administrator shallallocate nitrogen oxides
allowances under section 454(a), and conduct auctions of nitrogen
oxides allowances under section 409, in the amounts in Table A.
TABLE A.- TOTAL NOx ALLOWANCES ALLOCATED OR AUCTIONED FOR EGUS
IN ZONE 1
1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
26 27

28 29 (b) For affected EGUs in the Zone 2 States for 2008 and
each year thereafter, the Administrator shall 30 allocate nitrogen
oxides allowances under section 454(b), and conduct auctions of
nitrogen oxides 31 allowances under section 409, in the amounts in
Table B. 32 33 TABLE B.- TOTAL NOx ALLOWANCES ALLOCATED OR
AUCTIONED FOR EGUS IN 34 ZONE 2 35
1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
26 27

28 29 SEC. 454. EGU ALLOCATIONS. 30 (a) EGU Allocations in the
Zone 1 States.- (1) By January 1, 2006, the Administrator shall
promulgate 31 regulations determining the allocation of nitrogen
oxides allowances for each year during 2008 through 32 2058 for
units at a facility in a Zone 1 State that are affected EGUs as of
December 31, 2004. The 33 regulations shall determine the
allocation for such units for each year by multiplying the
allocation 34 amount under section 453(a) by the ratio of the total
amount of baseline heat input of such units at the 35 facility to
the total amount of baseline heat input of all affected EGUs in the
Zone 1 States.
(2)(A) For each year 2008 through 2058, if the Administrator has
not promulgated the regulations determining allocations under
paragraph (a)(1), but has promulgated the regulations under section
403(b) providing for the transfer of nitrogen oxides allowances and
section 403(c) establishing the Allowance Tracking System for
nitrogen oxides allowances, by July 1 that is eighteen months
before January 1 of such year, then-



(i)
The Administrator shall:



(I)
allocate, for such year, to each unit in the Zone 1
States listed in theAdministrator's Emissions Scorecard 2000,
Appendix B, Table B1 an amount of nitrogen oxides allowances
determined by multiplying eighty percent of the allocation amount
under section 453(a) by the ratio of such unit's heat input in the
Emissions Scorecard 2000, Appendix B, Table B1 to the total of the
heat input in the Emissions Scorecard 2000, Appendix B, Table B1
for all units in the Zone 1 States;


(II)
record in each facility's account in the Allowance
Tracking System undersection 403(c) for such year the total of the
amounts of nitrogen oxides allowances for the units at such
facility determined under subclause (I); and


(III) auction an amount of nitrogen oxides allowances equal to
five percent ofthe allocation amount under section 453(a) and
conduct the auction on the first business day in October following
the respective promulgation deadline under subparagraph (A) and in
accordance with section 409.


(ii)
Notwithstanding any other provision of law to the
contrary, the determination of theamount of nitrogen oxides
allowances under subclause (i)(I) and the recording of nitrogen
oxides allowances under subclause (i)(II) shall not be subject to
judicial review.


(iii) Notwithstanding the provisions to the contrary in section
453, the Administratorshall not allocate or record fifteen percent
of the allocation amount under section 453(a) for such year.
(B) For each year 2008 through 2058, if the Administrator has
not promulgated the regulationsdetermining allocations under
paragraph (a)(1), and has not promulgated the regulations under
section 403(b) providing for the transfer of nitrogen oxides
allowances and section 403(c) establishing the Allowance Tracking
System for nitrogen oxides allowances, by July 1 that is eighteen
months before January 1 of such year, then it shall be unlawful for
any affected EGU in the Zone 1 States to emit nitrogen oxides
during such year in excess of 0.14 lb/mmBtu.
(b) EGU Allocations in the Zone 2 States.- (1) By January 1,
2006, the Administrator shall promulgateregulations determining the
allocation of nitrogen oxides allowances for each year during 2008
through 2058 for units at a facility in a Zone 2 State that are
affected EGUs as of December 31, 2004. The regulations shall
determine the allocation for such units for each year by
multiplying the allocation amount under section 453(b) by the ratio
of the total amount of baseline heat input of such units at the
facility to the total amount of baseline heat input of all affected
EGUs in the Zone 2 States.
(2)(A) For each year 2008 through 2058, if the Administrator has
not promulgated the regulations determining allocations under
paragraph (b)(1), but has promulgated the regulations under section
403(b) providing for the transfer of nitrogen oxides allowances and
section 403(c) establishing the Allowance Tracking System for
nitrogen oxides allowances, by July 1 that is eighteen months
before January 1 of such year, then-



(i)
The Administrator shall:



(I)
allocate, for such year, to each unit in the Zone 2
States listed in theAdministrator's Emissions Scorecard 2000,
Appendix B, Table B1 an amount of nitrogen oxides allowances
determined by multiplying eighty percent of the allocation amount
under section 453(b) by the ratio of such unit's heat input in the
Emissions Scorecard 2000, Appendix B, Table B1 to the total of the
heat input in the Emissions Scorecard 2000, Appendix B, Table B1
for all units in the Zone 2 States;


(II)
record in each facility's account in the Allowance
Tracking System undersection 403(c) for such year the total of the
amounts of nitrogen oxides allowances for the units at such
facility determined under subclause (I); and


(III) auction an amount of nitrogen oxides allowances equal to
five percent ofthe allocation amount under section 453(b) and
conduct the auction on the first business day in October following
the respective promulgation deadline under subparagraph (A) and in
accordance with section 409.


(ii)
Notwithstanding any other provision of law to the
contrary, the determination of theamount of nitrogen oxides
allowances under subclause (i)(I) and the recording of nitrogen
oxides allowances under subclause (i)(II) shall not be subject to
judicial review.


(iii) Notwithstanding the provisions to the contrary in section
453, the Administratorshall not allocate or record fifteen percent
of the allocation amount under section 453(b) for such year.
(B) For each year 2008 through 2058, if the Administrator has
not promulgated the regulationsdetermining allocations under
paragraph (b)(1), and has not promulgated the regulations under
section 403(b) providing for the transfer of nitrogen oxides
allowances and section 403(c) establishing the Allowance Tracking
System for nitrogen oxides allowances, by July 1 that is eighteen
months before January 1 of such year, then it shall be unlawful for
any affected EGU in the Zone 2 States to emit nitrogen oxides
during such year in excess of 0.25 lb/mmBtu.
SUBPART 3. OZONE SEASON NOx BUDGET PROGRAM.


SEC. 461. DEFINITIONS.
For purposes of this subpart-



(1)
The term "ozone season" means:



(A)
with regard to Connecticut, Delaware, the District of
Columbia, Maryland,Massachusetts, New Jersey, New York,
Pennsylvania, and Rhode Island, the period May 1 through September
30 for each year starting in 2003; and


(B)
with regard to all other States, the period May 30, 2004
through September 30,2004 and the period May 1 through September 30
for each year thereafter.





(2)
The term "State" means Connecticut, Delaware, the
District of Columbia, Illinois, Indiana,

Kentucky, Maryland, Massachusetts, New Jersey, New York, North
Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina,
Tennessee, Virginia, and West Virginia and the fine grid portions
of Alabama, Georgia, Michigan, and Missouri.


(3)
The term "fine grid portions of Alabama, Georgia,
Michigan, and Missouri" means the areasin Alabama, Georgia,
Michigan, and Missouri subject to 40 CFR §51.121 (2001), as it
would be amended in the notice of proposed rulemaking at 67 Federal
Register 8396 (February 22, 2002).




SEC. 462. GENERAL PROVISIONS.
The provisions of sections 402 through 406 and section 409 shall
not apply to this subpart.


SEC. 463. APPLICABLE IMPLEMENTATION PLAN.


(a)
Except as provided in subsection (b), the applicable
implementation plan for each State shall beconsistent with the
requirements, including the State's nitrogen oxides budget and
compliance supplement pool, in 40 CFR §§51.121 and 51.122 (2001),
as it would be amended in the notice of proposed rulemaking at 67
Federal Register 8396 (February 22, 2002).


(b)
Notwithstanding any provision to the contrary in 40 CFR
§51.121 (2001), the applicableimplementation plan for each State
shall require full implementation of the required emission control
measures starting no later than the first ozone season.




SEC. 464. TERMINATION OF FEDERAL ADMINISTRATION OF NOx TRADING
PROGRAM.


(a)
Starting January 1, 2008, the Administrator shall not
administer any nitrogen oxides trading program in any State's
applicable implementation plan under section 463.


(b)
Nothing in subsection (a) shall preclude a State from
administering any nitrogen oxides tradingprogram in the State's
applicable implementation plan under section 463.




SEC. 465. CARRYFORWARD OF PRE-2008 NITROGEN OXIDES
ALLOWANCES.
The Administrator shall promulgate regulations as necessary to
assure that the requirement to hold allowances under section
452(a)(1) may be met using nitrogen oxides allowances allocated for
an ozone season before 2008 under a nitrogen oxides trading program
that the Administrator administers in a State's applicable
implementation plan under section 463.
PART D. MERCURY EMISSIONS REDUCTIONS


SEC. 471. DEFINITIONS.
For purposes of this subpart-



(1)
The term "adjusted baseline heat input" with regard to a
unit means the unit's baseline heatinput multiplied by-



(A)
1.0, for the portion of the baseline heat input that is
the unit's average annualcombustion of bituminous during the years
on which the unit's baseline heat input is based;


(B)
3.0, for the portion of the baseline heat input that is
the unit's average annualcombustion of lignite during the years on
which the unit's baseline heat input is based;


(C)
1.25, for the portion of the baseline heat input that is
the unit's average annualcombustion of subbituminous during the
years on which the unit's baseline heat input is based;
and


(D)
1.0, for the portion of the baseline heat input that is
not covered by subparagraph(A), (B), or (C) or for the entire
baseline heat input if such baseline heat input is not based on the
unit's heat input in specified years.





(2)
The term "affected EGU" means:



(A)
for a unit serving a generator before the date of
enactment of the Clear Skies Act of2002, a coal-fired unit in a
State serving a generator with a nameplate capacity of greater than
25 megawatts that produced or produces electricity for sale during
2001 or any year thereafter, except for a cogeneration unit that
produced or produces electricity for sale equal to less than
one-third of the potential electrical output of the generator that
it served or serves during 2001 and each year thereafter;
and


(B)
for a unit commencing service of a generator on or after
the date of enactment ofthe Clear Skies Act of 2002, a coal-fired
unit in a State serving a generator that produces electricity for
sale during any year starting with the year the unit commences
service of a generator, except for a cogeneration unit that
produces electricity for sale equal to less than one-third of the
potential electrical output of the generator that it serves, during
each year starting with the year the unit commences service of a
generator.


(C)
Notwithstanding paragraphs (A) and (B), the term
"affected EGU" does notinclude a solid waste incineration unit
subject to section 129 or a unit for the treatment, storage, or
disposal of hazardous waste subject to section 3005 of the Solid
Waste Disposal Act.






SEC. 472. APPLICABILITY.
Starting January 1, 2010, it shall be unlawful for the affected
EGUs at a facility in a State to emit a total amount of mercury
during the year in excess of the number of mercury allowances held
for such facility for that year by the owner or operator of the
facility.


SEC. 473. LIMITATIONS ON TOTAL EMISSIONS.
For affected EGUs for 2010 and each year thereafter, the
Administrator shall allocate mercury allowances under section 474,
and conduct auctions of mercury allowances under section 409, in
the amounts in Table A.
TABLE A.- TOTAL MERCURY ALLOWANCES ALLOCATED OR AUCTIONED FOR
EGUS
1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
26 27

28 29 SEC. 474. EGU ALLOCATIONS. 30 (a) By January 1, 2007, the
Administrator shall promulgate regulations determining allocations
of 31 mercury allowances for each year during 2010 through 2060 for
units at a facility that are affected 32 EGUs as of December 31,
2004. The regulations shall provide that the Administrator shall
allocate 33 each year for such units an amount determined by
multiplying the allocation amount in section 473 by 34 the ratio of
the total amount of the adjusted baseline heat input of such units
at the facility to the total 35 amount of adjusted baseline heat
input of all affected EGUs.
(b)(1) For each year 2010 through 2060, if the Administrator has
not promulgated the regulations determining allocations under
paragraph (a), but has promulgated the regulations under section
403(b) providing for the transfer of mercury allowances and section
403(c) establishing the Allowance Tracking System for mercury
allowances, by July 1 that is eighteen months before January 1 of
such year, then-



(A)
The Administrator shall



(i)
allocate, for such year, to each unit with coal as its
primary or secondary fuel listed inthe Administrator's Emissions
Scorecard 2000, Appendix B, Table B1 an amount of mercury
allowances determined by multiplying eighty percent of the
allocation amount under section 473 by the ratio of such unit's
heat input in the Emissions Scorecard 2000, Appendix B, Table B1 to
the total of the heat input in the Emissions Scorecard 2000,
Appendix B, Table B1 for all units with coal as their primary or
secondary fuel;


(ii)
record in each facility's account in the Allowance
Tracking System under section403(c) for such year the total of the
amounts of mercury allowances for the units at such facility
determined under clause (i); and


(iii) auction an amount of mercury allowances equal to five
percent of the allocationamount under section 473 and conduct the
auction on the first business day in October following the
respective promulgation deadline under paragraph (1) and in
accordance with section 409.


(B)
Notwithstanding any other provision of law to the
contrary, the determination of the amountof mercury allowances
under subparagraph (1)(A) and the recording of mercury allowances
under subparagraph (1)(B) shall not be subject to judicial
review.


(C)
Notwithstanding the provisions to the contrary in section
473, the Administrator shall notallocate or record fifteen percent
of the allocation amount under section 473 for such
year.


(2) For each year 2010 through 2060, if the Administrator has
not promulgated the regulationsdetermining allocations under
paragraph (a), and has not promulgated the regulations under
section 403(b) providing for the transfer of mercury allowances and
section 403(c) establishing the Allowance Tracking System for
mercury allowances, by July 1 that is eighteen months before
January 1 of such year, then it shall be unlawful for any affected
EGU to emit mercury during such year in excess of 30 percent of the
mercury content (in ounces per mmBtu) of the coal and coal-derived
fuel combusted by the unit.
PART E- NATIONAL EMISSION STANDARDS; RESEARCH; ENVIRONMENTAL
ACCOUNTABILITY; MAJOR SOURCE PRECONSTRUCTION REVIEW AND BEST
AVAILABLE RETROFIT CONTROL TECHNOLOGY REQUIREMENTS.
SECTION 481. NATIONAL EMISSION STANDARDS FOR AFFECTED UNITS


(a)
Definitions.- For purposes of this section:


(1)
The term "commenced," with regard to construction, means
that an owner or operator has either undertaken a continuous
program of construction or has entered into a contractual
obligation to undertake and complete, within a reasonable time, a
continuous program of construction. For boilers and integrated
gasification combined cycle plants, this term does not include
undertaking such a program or entering into such an obligation more
than 36 months prior to the date on which the unit


begins operation. For combustion turbines, this term does not
include undertaking such a program or entering into such an
obligation more than 18 months prior to the date on which the unit
begins operation.
(2) The term "construction" means fabrication, erection, or
installation of an affected unit.



(3)
The term "affected unit" means any unit that is subject
to emission limitations under subpart 2 of part B, subpart 2 of
part C, or part D.

(4) The term "existing affected unit" means any affected unit
that is not a new affected unit.


(5)
The term "new affected unit" means any affected unit, the
construction or reconstruction of which is commenced after the date
of enactment of the Clear Skies Act of 2002, except that for the
purpose of any revision of a standard pursuant to subsection (e),
"new affected unit" means any affected unit, the construction or
reconstruction of which is commenced after the publication of
regulations (or, if earlier, proposed regulations) prescribing a
standard under this section that will apply to such
unit.



(6)
The term "reconstruction" means the replacement of
components of a unit to such an extent that:



(A)
the fixed capital cost of the new components exceeds 50
percent of the fixedcapital cost that would be required to
construct a comparable entirely new unit; and


(B)
it is technologically and economically feasible to meet
the applicable standards setforth in this section.




(7)
The term "simple cycle combustion turbine" means a
stationary combustion turbine that does not extract heat from the
combustion turbine exhaust gases.



(b)
Emission Standards.- (1) In General.- No later than
twelve months after the date of enactment ofthe Clear Skies Act of
2002, the Administrator shall promulgate regulations prescribing
the standards in subsections (c) through (d) for the specified
affected units and establishing requirements to ensure compliance
with these standards, including monitoring, recordkeeping, and
reporting requirements.

(2) Monitoring. -


(A)
The owner or operator of any affected unit subject to the
standards for sulfurdioxide, nitrogen oxides, or mercury under this
section shall meet the requirements of section 405, except that,
where two or more units utilize a single stack, separate monitoring
shall be required for each affected unit for the pollutants for
which the unit is subject to such standards.



(B)
The Administrator shall, by regulation,
require-




(1)
the owner or operator of any affected unit subject to the
standards for sulfurdioxide, nitrogen oxides, or mercury under this
section to-



(i)
install and operate CEMS for monitoring output, including
electricityand useful thermal energy, on the affected unit and to
quality assure the data; and


(ii)
comply with recordkeeping and reporting requirements,
includingprovisions for reporting output data in megawatt
hours.





(2)
the owner or operator of any affected unit subject to the
standards forparticulate matter under this section to-



(i)
install and operate CEMS for monitoring particulate
matter on theaffected unit and to quality assure the
data;


(ii)
comply with recordkeeping and reporting requirements;
and






(iii) comply with alternative monitoring, quality
assurance,recordkeeping, and reporting requirements for any period
of time for which the Administrator determines that CEMS with
appropriate vendor guarantees are not commercially available for
particulate matter.


(3)
Compliance.- For boilers, integrated gasification
combined cycle plants, and combustionturbines that are gas-fired or
coal-fired, the Administrator shall require that the owner or
operator demonstrate compliance with the standards daily, using a
30-day rolling average, except that in the case of mercury, the
compliance period shall be the calendar year. For combustion
turbines that are not gas-fired or coal-fired, the Administrator
shall require that the owner or operator demonstrate compliance
with the standards hourly, using a 4-hour rolling
average.



(c)
Boilers and Integrated Gasification Combined Cycle
Plants. - (1) After the effective date ofstandards promulgated
under subsection (b), no owner or operator shall cause any boiler
or integrated gasification combined cycle plant that is a new
affected unit to discharge into the atmosphere any gases which
contain:



(A)
sulfur dioxide in excess of 2.0 lb/MWh;


(B)
nitrogen oxides in excess of 1.0 lb/MWh;


(C)
particulate matter in excess of 0.20 lb/MWh;
or



(D)
if the unit is coal-fired, mercury in excess of 0.015
lb/GWh, unless:



(i)
mercury emissions from the unit are reduced by
80%;


(ii)
flue gas desulfurization (FGD) and selective catalytic
reduction (SCR) areapplied to the unit and are operated so as to
optimize capture of mercury; or




(iii) a technology is applied to the unit and operated so as to
optimize capture ofmercury, and the permitting authority determines
that the technology is equivalent in terms of mercury capture to
the application of FGD and SCR.


(2)
Notwithstanding subparagraph (1)(D), integrated
gasification combined cycle plants with acombined capacity of less
than 5 GW are exempt from the mercury requirement under
subparagraph (1)(D) if they are constructed as part of a
demonstration project under the Secretary of Energy that will
include a demonstration of removal of significant amounts of
mercury as determined by the Secretary of Energy in conjunction
with the Administrator as part of the solicitation
process.


(3)
After the effective date of standards promulgated under
subsection (b), no owner oroperator shall cause any oil-fired
boiler that is an existing affected unit to discharge into the
atmosphere any gases which contain particulate matter in excess of
0.30 lb/MWh.



(d)
Combustion Turbines.- (1) After the effective date of
standards promulgated under subsection (b),no owner or operator
shall cause any gas-fired combustion turbine that is a new affected
unit to discharge into the atmosphere any gases which contain
nitrogen oxides in excess of:



(A)
0.56 lb/MWh (15 ppm at 15 percent oxygen), if the unit is
a simple cyclecombustion turbine;


(B)
0.084 lb/MWh (3.5 ppm at 15 percent oxygen), if the unit
is not a simple cyclecombustion turbine and either uses add-on
controls or is located within 50 km of a class I area;


(C)
0.21 lb/MWh (9 ppm at 15 percent oxygen), if the unit is
not a simple cycle turbineand neither uses add-on controls nor is
located within 50 km of a class I area.




(2)
After the effective date of standards promulgated under
subsection (b), no owner or operator shall cause any coal-fired
combustion turbine that is a new affected unit to discharge into
the atmosphere any gases which contain sulfur dioxide, nitrogen
oxides, particulate matter, or mercury in excess of the emission
limits under subparagraphs (c)(1)(A) through (D).



(3)
After the effective date of standards promulgated under
subsection (b), no owner oroperator shall cause any combustion
turbine that is not gas-fired or coal-fired and that is a new
affected unit to discharge into the atmosphere any gases which
contain:



(A)
sulfur dioxide in excess of 2.0 lb/MWh;



(B)
nitrogen oxides in excess of-



(i)
0.289 lb/MWh (12 ppm at 15 percent oxygen), if the unit
is not a simplecycle combustion turbine, is dual-fuel capable, and
uses add-on controls; or is not a simple cycle combustion turbine
and is located within 50 km of a class I area;


(ii)
1.01 lb/MWh (42 ppm at 15 percent oxygen), if the unit is
a simplecycle combustion turbine; is not a simple cycle combustion
turbine and is not dual-fuel capable; or is not a simple cycle
combustion turbine, is dual-fuel capable, and does not use add-on
controls.




(C)
particulate matter in excess of 0.20 lb/MWh.




(e)
Periodic Review and Revision.- (1) The Administrator
shall, at least every 8 years following the promulgation of
standards under subsection (b), review and, if appropriate, revise
such standards to reflect the degree of emission limitation
achievable through the application of the best system of emission
reduction which (taking into account the cost of achieving such
reduction and any nonair quality health and environmental impacts
and energy requirements) the Administrator determines has been
adequately demonstrated. When implementation and enforcement of any
requirement of this Act indicate that emission limitations and
percent reductions beyond those required by the standards
promulgated under this section are achieved in practice, the
Administrator shall, when revising standards promulgated under this
section, consider the emission limitations and percent reductions
achieved in practice.


(2)
Notwithstanding the requirements of paragraph (1) , the
Administrator need not review anystandard promulgated under
subsection (b) if the Administrator determines that such review is
not appropriate in light of readily available information on the
efficacy of such standard.


(f)
Effective Date.-Standards promulgated pursuant to this
section shall become effective upon promulgation.


(g)
Delegation. - (1) Each State may develop and submit to
the Administrator a procedure for implementing and enforcing
standards promulgated under this section for affected units located
in such State. If the Administrator finds the State procedure is
adequate, the Administrator shall delegate to such State any
authority the Administrator has under this Act to implement and
enforce such standards.


(2)
Nothing in this subsection shall prohibit the
Administrator from enforcing any applicable standard under this
section.


(h)
Violations.- After the effective date of standards
promulgated under this section, it shall be unlawfulfor any owner
or operator of any affected unit to operate such unit in violation
of any standard applicable to such unit.



(i)
Coordination With Other Authorities. -For purposes of
sections 111(e), 113, 114, 116, 120, 303,

304, 307 and other provisions for the enforcement of this Act,
each standard established pursuant to this section shall be treated
in the same manner as a standard of performance under section 111,
and each affected unit subject to standards under this section
shall be treated in the same manner as a stationary source under
section 111.


(j)
State Authority.- Nothing in this section shall preclude
or deny the right of any State or politicalsubdivision thereof to
adopt or enforce any regulations, requirement, limitation, or
standard relating to affected units that is more stringent than a
regulation, requirement, limitation or standard in effect under
this section or under any other provision of this Act.


(k)
Other Authority Under This Act.- Nothing in this section
shall diminish the authority of theAdministrator or a State to
establish any other requirements applicable to affected units under
any other authority of law, including the authority to establish
for any air pollutant a national ambient air quality standard,
except that no new affected unit subject to standards under this
section shall be subject to standards under section 111 of this
Act.


SECTION 482. RESEARCH, ENVIRONMENTAL MONITORING, AND
ASSESSMENT.



(a)
Purposes.- The Administrator, in collaboration with the
Secretary of Energy and the Secretary ofthe Interior, shall conduct
a comprehensive program of research and environmental monitoring
and assessment to enhance scientific understanding of the human
health and environmental effects of particulate matter and mercury
and to demonstrate the efficacy of emission reductions under this
title. The purposes of such a program are to:



(1)
expand current research and knowledge of the contribution
of emissions from electricitygeneration to exposure and health
effects associated with particulate matter and mercury;


(2)
enhance current research and development of promising
multi-pollutant control strategiesand CEMS for mercury;


(3)
produce peer-reviewed scientific and technology
information to inform the review ofemissions levels under section
410;


(4)
improve environmental monitoring and assessment of sulfur
dioxide, nitrogen oxides andmercury, and their transformation
products, to track changes in human health and the environment
attributable to emission reductions under this title;
and


(5)
periodically provide peer-reviewed reports on the costs,
benefits, and effectiveness ofemission reductions achieved under
this title.





(b)
Research.- The Administrator shall enhance planned and
ongoing laboratory and field research andmodeling analyses, and
conduct new research and analyses to produce peer-reviewed
information concerning the human health and environmental effects
of mercury and particulate matter and the contribution of U.S.
electrical generating units to those effects. Such information
shall be included in the report under subsection (d). In addition,
such research and analyses shall:



(1)
improve understanding of the rates and processes
governing chemical and physicaltransformations of mercury in the
atmosphere, including speciation of emissions from electricity
generation and the transport of these species;



(2)
improve understanding of the contribution of mercury
emissions from electricity generationto mercury in fish and other
biota, including:



(A)
the response of and contribution to mercury in the biota
owing to atmosphericdeposition of mercury from U.S. electricity
generation on both local and regional scales;


(B)
long-term contributions of mercury from U.S. electricity
generation on mercuryaccumulations in ecosystems, and the effects
of mercury reductions in that sector on the environment and public
health;


(C)
the role and contribution of mercury, from U.S.
electricity generating facilities andanthropogenic and natural
sources to fish contamination and to human exposure, particularly
with respect to sensitive populations; and


(D)
the contribution of U.S. electricity generation to
population exposure to mercury infreshwater fish and seafood and
quantification of linkages between U.S. mercury emissions and
domestic mercury exposure and its health effects; and


(E)
the contribution of mercury from U.S. electricity
generation in the context of otherdomestic and international
sources of mercury, including transport of global anthropogenic and
natural background levels.





(3)
improve understanding of the health effects of fine
particulate matter components related toelectricity generation
emissions (as distinct from other fine particle fractions and
indoor air exposures) and the contribution of U.S. electrical
generating units to those effects including:



(A)
the chronic effects of fine particulate matter from
electricity generation in sensitivepopulation groups;
and


(B)
personal exposure to fine particulate matter from
electricity generation.




(4)
improve understanding, by way of a review of the
literature, of methods for valuing humanhealth and environmental
benefits associated with fine particulate matter and
mercury.





(c)
Innovative Control Technologies.-The Administrator shall
collaborate with the Secretary of Energy to enhance research and
development, and conduct new research that facilitates research
into and development of innovative technologies to control sulfur
dioxide, nitrogen oxides, mercury, and particulate matter at a
lower cost than existing technologies. Such research and
development shall provide updated information on the cost and
feasibility of technologies. Such information shall be included in
the report under subsection (d). In addition, the research and
development shall:



(1)
upgrade cost and performance models to include results
from ongoing and future electricitygeneration and pollution control
demonstrations by the Administrator and the Secretary of
Energy;


(2)
evaluate the overall environmental implications of the
various technologies tested includingthe impact on the
characteristics of coal combustion residues;


(3)
evaluate the impact of the use of selective catalytic
reduction on mercury emissions from thecombustion of all coal
types;


(4)
evaluate the potential of integrated gasification
combined cycle to adequately controlmercury;


(5)
expand current programs by the Administrator to conduct
research and promote, lowercost CEMS capable of providing real-time
measurements of both speciated and total mercury and integrated
compact CEMS that provide cost-effective real-time measurements of
sulfur dioxide, nitrogen oxides, and mercury;


(6)
expand lab- and pilot-scale mercury and multi-pollutant
control programs by the Secretaryof Energy and the Administrator,
including development of enhanced sorbents and scrubbers for use on
all coal types;



(7)
characterize mercury emissions from low-rank coals, for a
range of traditional control

technologies, like scrubbers and selective catalytic reduction;
and


(8)
improve low cost combustion modifications and controls
for dry-bottom boilers.




(d)
Emissions Levels Evaluation Report.- Not later than
January 1, 2008, the Administrator, inconsultation with the
Secretary of Energy, shall prepare a peer reviewed report to inform
review of the emissions levels under section 410. The report shall
be based on the best available peer-reviewed scientific and
technology information. It shall address cost, feasibility, human
health and ecological effects, and net benefits associated with
emissions levels under this title.



(e)
Environmental Accountability.-(1) The Administrator shall
conduct a program of environmental monitoring and assessment to
track on a continuing basis, changes in human health and the
environment attributable to the emission reductions required under
this title. Such a program shall:




(A)
develop and employ methods to routinely monitor, collect,
and compile data on the status and trends of mercury and its
transformation products in emissions from affected facilities,
atmospheric deposition, surface water quality, and biological
systems. Emphasis shall be placed on those methods that
-



(i)
improve the ability to routinely measure mercury in dry
deposition processes;


(ii)
improve understanding of the spatial and temporal
distribution of mercury depositionin order to determine
source-receptor relationships and patterns of long-range, regional,
and local deposition;


(iii) improve understanding of aggregate exposures and additive
effects ofmethylmercury and other pollutants; and
(iv) improve understanding of the effectiveness and cost of
mercury emissions controls.


(B)
modernize and enhance the national air quality and
atmospheric deposition monitoringnetworks in order to
cost-effectively expand and integrate, where appropriate,
monitoring capabilities for sulfur, nitrogen, and mercury to meet
the assessment and reporting requirements of this
section.


(C)
perform and enhance long-term monitoring of sulfur,
nitrogen, and mercury, and parametersrelated to acidification,
nutrient enrichment, and mercury bioaccumulation in freshwater and
marine biota.


(D)
maintain and upgrade models that describe the
interactions of emissions with theatmosphere and resulting air
quality implications and models that describe the response of
ecosystems to atmospheric deposition.


(E)
assess indicators of ecosystem health related to sulfur,
nitrogen, and mercury, includingcharacterization of the causes and
effects of episodic exposure to air pollutants and evaluation of
recovery.





(2)
Reporting Requirements.-Not later than twenty-four months
after the date of enactment of the Clear Skies Act of 2002, and not
later than every four years thereafter, the Administrator shall
provide a peer reviewed report to the Congress on the costs,
benefits, and effectiveness of emission reduction programs under
this title. The report shall address the relative contribution of
emission reductions from U.S. electricity generation under this
title compared to the emission reductions achieved under other
titles of the Clean Air Act with respect to:



(A)
actual and projected emissions of sulfur dioxide,
nitrogen oxides, and mercury;


(B)
average ambient concentrations of sulfur dioxide and
nitrogen oxides transformationproducts, related air quality
parameters, and indicators of reductions in human
exposure;


(C)
status and trends in total atmospheric deposition of
sulfur, nitrogen, and mercury, includingregional estimates of total
atmospheric deposition;


(D)
status and trends in visibility;


(E)
status of terrestrial and aquatic ecosystems (including
forests and forested watersheds,streams, lakes, rivers, estuaries,
and near-coastal waters);


(F)
status of mercury and its transformation products in
fish;


(G)
causes and effects of atmospheric deposition, including
changes in surface water quality,forest and soil
conditions;


(H)
occurrence and effects of coastal eutrophication and
episodic acidification, particularly withrespect to high elevation
watersheds; and


(I)
reduction in atmospheric deposition rates that should be
achieved to prevent or reduceadverse ecological effects.






SEC. 483. EXEMPTION FROM MAJOR SOURCE RECONSTRUCTION REVIEW
REQUIREMENTS AND BEST AVAILABLE RETROFIT CONTROL TECHNOLOGY
REQUIREMENTS.


(a)
Major Source Exemption. - An affected unit may not be
considered a major emitting facility ormajor stationary source, or
a part of a major emitting facility or major stationary source, for
purposes of compliance with the requirements of part C and part D
of title I. This exemption only applies to units that are either
subject to the performance standards of section 481 or meet the
following requirements within three years after the date of
enactment of the Clear Skies Act of 2002:


(1)
The owner or operator of the affected unit properly
operates, maintains and repairspollution control equipment to limit
emissions of particulate matter, or the owner or operator of the
affected unit is subject to an enforceable permit issued pursuant
to title V or a permit program approved or promulgated as part of
an applicable implementation plan to limit the emissions of
particulate matter from the affected unit to 0.03 lb/mmBtu within
eight years after the date of enactment of the Clear Skies Act of
2002, and


(2)
The owner or operator of the affected unit uses good
combustion practices to minimizeemissions of carbon
monoxide.


(b)
Class I Area Protections. - Notwithstanding the exemption
in subsection (a),an affected unit located within 50 km of a Class
I area on which construction commences after the date of enactment
of the Clear Skies Act of 2002 is subject to those provisions under
part C of title I pertaining to the review of a new or modified
major stationary source's impact on a Class I area.


(c)
Preconstruction Requirements. - Each State shall include
in its plan under section 110, a program toprovide for the
regulation of the construction of an affected unit that ensures
that the following requirements are met prior to the commencement
of construction of an affected unit:


(1)
in an area designated as attainment or unclassifiable
under section 107(d), the owner oroperator of the affected unit
must demonstrate to the State that the emissions increase from the
construction or operation of such unit will not cause, or
contribute to, air pollution in excess of any national ambient air
quality standard.


(2)
in an area designated as nonattainment under section
107(d), the State must determine thatthe emissions increase from
the construction or operation of such unit will not interfere with
any program to assure that the national ambient air quality
standards are achieved.


(3)
for a modified unit, the unit must comply prior to
beginning operation with either theperformance standards of section
481 or best available control technology as defined in part C of
title I for the pollutants whose hourly emissions will increase at
the unit's maximum capacity.


(4)
the State must provide for an opportunity for interested
persons to comment on the Class Iarea protections and
preconstruction requirements as set forth in this
section.



(d)
Definitions. - For purposes of this section:



(1)
The term "affected unit" means any unit that is subject
to emission limitations under subpart2 of part B, subpart 2 of part
C, or part D.


(2)
The term "construction" includes the construction of a
new affected unit and themodification of any affected
unit.


(3)
The term "modification" means any physical change in, or
change in the method of operation of, an affected unit which
increases the hourly emissions of any air pollutant at the unit's
maximum capacity.".






SEC. 3. OTHER AMENDMENTS.
(a) Title I of the Clean Air Act is amended by-


(1)
removing from section 103 subparagraphs (j)(3)(E) and
(j)(3)(F); and



(2)
modifying section 107 by amending:




(A)
subparagraph (d)(1)(A) by



(i)
deleting the "or" at the end of clause (ii);


(ii)
replacing the period with ", or" at the end of clause
(iii);


(iii) adding clause (iv) to read as follows:"(iv)
notwithstanding clauses (i) - (iii), an area may be designated
transitional for the fine particles national primary ambient air
quality standard or the 8-hour ozone national primary ambient air
quality standard if the Administrator has performed air quality
modeling and, in the case of an area that needs additional local
control measures, the State has performed supplemental air quality
modeling, demonstrating that the area will attain that standard no
later than December 31, 2015, and such modeling demonstration and
all necessary local controls have been approved into the state
implementation plan no later than December 31, 2004."; and
(iv) adding to the flush language at the end a sentence to read
as follows:"...However, for purposes of the fine particles national
primary ambient air quality standard and the 8-hour ozone national
primary ambient air quality standard, the time period for the State
to submit the designations shall be extended to no later than
November 30, 2003."


(B)
clause (d)(1)(B)(i) by adding at the end a sentence to
read as follows:"...Provided, however, that the Administrator shall
not be required to designate areas for the revised fine particles
national primary ambient air quality standard and 8-hour ozone fine
particles national primary ambient air quality standard prior to
6-months after the States are required to submit recommendations
under section 107(d)(1)(A), but in no event shall the period for
designating such




areas be extended beyond November 30, 2004."
(3) modifying section 110 by:



(A)
amending clause (a)(2)(D)(i) to read as follows: "(D)
contain adequate provisions-




(i)
(I) except as provided in subclause (II), prohibiting,
consistent withthe provisions of this title, any source or other
type of emissions activity within the State from emitting any air
pollutant in amounts which will-



(A)
contribute significantly to nonattainment in, or
interfere withmaintenance by, any other State with respect to any
such national primary or secondary ambient air quality standard,
or


(B)
interfere with measures required to be included in
theapplicable implementation plan for any other State under part C
to prevent significant deterioration of air quality or to protect
visibility,





(II)
The Administrator, in reviewing, under subclause (I), any
plan withrespect to which emissions from affected units, within the
meaning of section 126(d)(1), are substantial--



(A)
shall consider, among other relevant factors,
emissionsreductions required to occur by the attainment date or
dates of any relevant non-attainment areas in the other State or
States; and



(B)
may not require submission of plan
provisions--



(i)
subjecting affected units, within the meaning ofsection
126(d)(1), to requirements with an effective date prior to January
1, 2012; or


(ii)
mandating an amount of emissions reductions basedon the
Administrator's determination that emissions reductions are
available from such affected units, unless the Administrator
determines that emissions from such units may be reduced at least
as cost-effectively as emissions from each other principal category
of sources of sulfur dioxide or nitrogen oxides, including
industrial boilers, on-road mobile sources, and off-road mobile
sources, and any other category of sources that the Administrator
may identify, and that reductions in such emissions will improve
air quality in the petitioning State's nonattainment area(s) at
least as cost-effectively as reductions in emissions from each
other principal category of sources of sulfur dioxide or nitrogen
oxides, to the maximum extent that a methodology is reasonably
available to make such a determination. The Administrator shall
develop an appropriate peer reviewed methodology for making such
determinations






by December 31, 2006. In making this determination, the
Administrator will use the best available peer reviewed models and
methodology that consider the proximity of the source or sources to
the petitioning State or political subdivision and incorporate
other source characteristics.
(III) Nothing in subclause (II) shall be interpreted torequire
revisions to the provisions of 40 CFR 51.121 and 51.122 (2001), as
would be amended in the notice of proposed rulemaking at 67 Federal
Register 8396 (February 22, 2002)."



(B)
adding a new subsection (q) to read as follows:"(q)
Transitional Areas.-




(1)
Maintenance.



(A)
By December 31, 2010, each area designated as
transitionalpursuant to section 107(d)(1) shall submit an updated
emission inventory and an analysis of whether growth in emissions,
including growth in vehicle miles traveled, will interfere with
attainment by December 31, 2015.


(B)
No later than December 31, 2011, the Administrator shall
revieweach transitional area's maintenance analysis, and, if the
Administrator determines that growth in emissions will interfere
with attainment by December 31, 2015, the Administrator will
consult with the State and determine what action, if any, is
necessary to assure that attainment will be achieved by
2015.




(2)
Prevention of Significant Deterioration. Each area
designated as transitional pursuant to section 107(d)(1) shall be
treated as an attainment or unclassifiable area for purposes of the
prevention of significant deterioration provisions of part C of
this subchapter.


(3)
Consequences of failure to attain by 2015. No later than
June 30, 2016, EPA shall determine whether each area designated as
transitional for the 8-hour ozone standard or for the fine
particles standard has attained that standard. If EPA determines
that a transitional area has not attained the standard, the area
shall be redesignated as nonattainment within 1 year of the
determination and the State shall be required to submit a state
implementation plan revision satisfying the provisions of section
172 within 3 years of redesignation as nonattainment."






(4)
adding to section 111 a new subparagraph (b)(1)(C) to
read as follows:"(C) No standards of performance promulgated under
this section shall apply to units subject to regulations
promulgated pursuant to section 481.".



(5)
modifying section 112 by amending:

( A) paragraph (c)(1) to read as follows: "(c) List of Source
Categories.- (1) In General.-Not later than 12 months after
November 15, 1990, the Administrator shall publish, and shall
from time to time, but not less often than every 8 years, revise,
if appropriate, in response to public comment or new information, a
list of all categories and subcategories of major sources and area
sources (listed under paragraph (3)) of the air pollutants listed
pursuant to subsection (b). Provided, however, that electric
utility steam generating units not subject to Resource Conservation
and Recovery Act section 3005 shall not be included in any category
or subcategory listed under this subsection. The Administrator
shall have the authority to regulate the emission of hazardous air
pollutants listed under section 112(b), other than mercury
compounds, by electric utility steam generating units in accordance
with the regime set forth in section 112(f)(2) through (4). The
section 112(f)(2) determination shall be based on actual emissions
by electric utility steam generating units in 2010. Any such
regulations shall be promulgated within 8 years of 2010. To the
extent practicable, the categories and subcategories listed under
this subsection shall be consistent with the list of source
categories established pursuant to section 111 and part C. Nothing
is the preceding sentence limits the Administrator's authority to
establish subcategories under this section, as appropriate."
(B) subparagraph (n)(1)(A) to read as follows:"(n) Other
Provisions.


(1)
Electric Utility Steam Generating Units.-


(A)
The Administrator shall perform a study of the hazards to
public healthreasonably anticipated to occur as a result of
emissions by electric utility steam generating units of pollutants
listed under subsection (b) after imposition of the requirements of
this Act. The Administrator shall report the results of this study
to the Congress within 3 years after November 15, 1990."





(6)
modifying section 126 by:



(A)
revising subsection (b) by replacing "section
110(a)(2)(D)(ii) or this section" with"section
110(a)(2)(D)(i)";


(B)
revising subsection (c)(1) by replacing "this section and
the prohibition of section110(a)(2)(D)(ii)" with "the prohibition
of section 110(a)(2)(D)(i)";


(C)
revising subsection (c), flush language at end, by
replacing "section110(a)(2)(D)(ii)" with "section 110(a)(2)(D)(i)"
and deleting the last sentence; and


(D)
adding subsection (d) to read as follows:"(d) (1) For
purposes of this subsection, the term "affected unit" means any
unit that is subject to emission limitations under subpart 2 of
part B, subpart 2 of part C, or part D.




(2) To the extent that any petition submitted under subsection
(b) after thedate of enactment of the Clear Skies Act of 2002 seeks
a finding for any affected unit, then, notwithstanding any
provision in subsections (a) through (c) to the contrary --



(A)
In determining whether to make a finding under subsection
(b) forany affected unit, the Administrator shall consider, among
other relevant

factors, emissions reductions required to occur by the
attainment date or dates of any relevant nonattainment areas in the
petitioning State or political subdivision.



(B)
The Administrator may not determine that affected units
emit orwould emit any air pollutant in violation of the prohibition
of section 110(a)(2)(D)(i) unless the Administrator determines
that:



(i)
such emissions may be reduced at least as
cost-effectively asemissions from each other principal category of
sources of sulfur dioxide or nitrogen oxides, including industrial
boilers, onroad mobile sources, and off-road mobile sources, and
any other category of sources that the Administrator may identify;
and


(ii)
reductions in such emissions will improve air quality in
thepetitioning State's nonattainment area(s) at least as
costeffectively as reductions in emissions from each other
principal category of sources of sulfur dioxide or nitrogen oxides
to the maximum extent that a methodology is reasonably available to
make such a determination. In making this determination, the
Administrator will use the best available peer reviewed models and
methodology that consider the proximity of the source or sources to
the petitioning State or political subdivision and incorporate
other source characteristics.




(C)
The Administrator shall develop an appropriate peer
reviewedmethodology for making determinations under subparagraph
(B) by December 31, 2006.


(D)
The Administrator shall not make any findings with
respect to anaffected unit under this section prior to January 1,
2009. For any petition submitted prior to January 1, 2007, the
Administrator shall make a finding or deny the petition by January
31, 2009.


(E)
The Administrator, by rulemaking, shall extend the
compliance andimplementation deadlines in subsection (c) to the
extent necessary to assure that no affected unit shall be subject
to any such deadline prior to January 1, 2012."




(b)
Title III of the Clean Air Act is amended by modifying
section 307(d)(1)(G) to read as follows:"(G) the promulgation or
revision of any regulation under title IV,".


(c)
Title IV of the Clean Air Act (relating to noise
pollution) (42 U.S.C. 7641 et seq.) is-



(1)
amended by renumbering sections 401 through 403 as
sections 701 through 703,respectively; and

(2) renumbered as title VII.


(d)
Title VIII of the Clean Air Act Amendments of 1990
(miscellaneous provisions) is amended by


modifying section 821(a) to read as follows: "(a) MONITORING.-
The Administrator of the Environmental Protection Agency shall
promulgate regulations within 18 months after November 15, 1990 to
require that all affected sources subject to subpart 1 of part B of
title IV of the Clean Air Act shall also monitor carbon dioxide
emissions according to the same timetable as in section 405(b). The
regulations shall require that such data be reported to the
Administrator. The provisions of section 405(e) of title IV of the
Clean Air Act shall apply for purposes of this section in the same
manner and to the same extent as such provision applies to the
monitoring and data referred to in section 405. The Administrator
shall implement this subsection under 40 CFR part 75 (2001),
amended as appropriate by the Administrator."