section-by-section_summary.txt

SECTION-BY-SECTION SUMMARY OF THE CLEAR SKIES ACT OF 2002
The Clear Skies Act of 2002 extends and reorganizes Title IV of
the Clean Air Act to establish new cap-and-trade programs requiring
reductions of sulfur dioxide, nitrogen oxides, and mercury
emissions from electric generating facilities. The Clear Skies Act
retains existing Title IV requirements until the new requirements
take effect. Further, the Clear Skies Act amends certain provisions
of Title I of the Clean Air Act that currently apply to the
combustion units covered by the new Title IV emission caps.


Title IV of the Clean Air Act
As revised by the Clear Skies Act, Title IV has five Parts. Part
A contains provisions common to the control of all three
pollutants. Part B contains provisions specifically for sulfur
dioxide emission reductions. Part C contains provisions
specifically for nitrogen oxides emission reductions. Part D
contains provisions specifically for mercury emission reductions.
Part E contains performance standards for affected units and
provisions for research, environmental monitoring, and
assessment.
Part A. General Provisions
SECTION 401. Reserved.
SECTION 402. Definitions
Section 402 is based on the existing Section 402, modified to
include new terms used in Parts A through D and to move to Subpart
1 of Part B the defined terms that are unique to the Acid Rain
Program.
SECTION 403. Allowance System
Section 403 is the existing Section 403, modified to apply to
sulfur dioxide allowances, nitrogen oxides allowances, and mercury
allowances under the new trading programs essentially the same
allowance system provisions that apply to sulfur dioxide allowances
under the existing Acid Rain Program. Certain provisions unique to
the Acid Rain Program are moved to Subpart 1 of Part B. Further,
for the Acid Rain Program and the new trading programs, the
existing Section 403 is revised to provide that only the signature
of the party transferring allowances (not the signatures of both
parties to the transfer) is necessary for the transfer to be
effective. The Administrator has already issued regulations under
the existing Section 403 for sulfur dioxide allowances and must
issue regulations within 24 months of enactment governing the
issuance, transfer, recording, and tracking of the nitrogen oxides
allowances and mercury allowances. The allocations of these three
types of allowances, and the determination of the data used in
making the allocations, will not be subject to judicial review.
Like sulfur dioxide allowances, nitrogen oxides allowances and
mercury allowances are limited authorizations to emit and are not
property rights. Owners or operators of units or facilities must
hold sulfur dioxide allowances, nitrogen oxides allowances, or
mercury allowances at least equal to the emissions of sulfur
dioxide, nitrogen oxides, or mercury respectively. Under the Acid
Rain Program and the NOx SIP call, the owner or operator of each
affected unit must hold allowances at least equal to annual
emissions from the unit. Section 403 revises the existing Section
403 to provide for facility-level, rather than unit-level
compliance: beginning in 2008 for the sulfur dioxide and nitrogen
oxides and beginning in 2010 for mercury, the owner or operator of
each facility with affected units must hold allowances at least
equal to the total annual emissions of those units.
In order to meet the allowance holding requirements for nitrogen
oxides starting 2008 or for sulfur dioxide or mercury starting
2010, the owner or operator of a facility may use allowances
purchased in a direct sale from the Administrator at a fixed price,
i.e., $4,000 for a sulfur dioxide or nitrogen oxides allowance
(covering one ton) and $2,187.50 for a mercury allowance (covering
one ounce). These prices will be annually adjusted for inflation.
For the direct sales, the Administrator will use allowances from
future auctions. If this results in the removal of all allowances
from the relevant auction for three consecutive years, the
Administrator must conduct and submit to the Congress a study to
determine whether revisions to the relevant trading program are
necessary.
SECTION 404. Permits and Compliance Plans
Section 404 is the existing Section 408, modified to apply to
the new sulfur dioxide, nitrogen oxides, and mercury trading
programs essentially the same permit provisions that apply to the
existing Acid Rain Program. Certain permitting provisions unique to
the Acid Rain Program are moved to Subpart 1 of Part B or, if
expired, are deleted. The requirements of all the trading programs
must be reflected in permits issued to the affected facilities
under this section and Title V of the Clean Air Act. The permits
must prohibit (i) emissions in excess of the allowances held and
(ii) use of allowances before the period for which the allowances
were issued. Each permit application must include a statement that
the owner or operator will meet the applicable allowance holding
requirements, and such statement serves as the compliance plan
under Title V for these trading programs. The existing Section 408
is revised to provide that a permit application covering a unit in
a particular trading program must be submitted to the permitting
authority in accordance with the deadline established under Title
V, rather than the deadline (e.g., twenty-four months before a new
unit commences operation) under existing Section 408.
SECTION 405. Monitoring, Reporting, and Recordkeeping
Requirements
Section 405 is the existing Section 412, modified to apply to
the new sulfur dioxide, nitrogen oxides, and mercury trading
programs essentially the same monitoring, reporting and
recordkeeping requirements that apply to the existing Acid Rain
Program. Continuous emissions monitoring systems (CEMS) must be
installed and operated to monitor emissions from each affected
unit. All units under the new trading programs must monitor the
parameters required under the Acid Rain Program (i.e., sulfur
dioxide, nitrogen oxides, opacity, and volumetric flow), and those
units subject to the mercury trading program must monitor mercury
as well. The Administrator must specify requirements for any
alternative monitoring system shown to provide information with the
same precision, reliability, accessibility, and timeliness as that
provided by CEMS. Further, the Administrator may specify 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.
Existing Section 412 is revised to provide that, consistent with
the requirement of facility-level compliance in Section 403, the
Administrator will not require a separate CEMS for each unit where
two or more units utilize a single stack, unless data for
individual units are required under another provision of the Clean
Air Act.
Section 405 also sets deadlines for owners or operators of units
to install and operate continuous emissions monitoring systems to
monitor specified emissions or parameters under the new trading
programs. The deadlines are one year before the unit becomes
subject to the relevant trading program. The existing deadline for
a unit under the Acid Rain Program is retained. This section also
retains the requirements in the existing Section 412 concerning the
use of substitute data when emission data from a CEMS or an
approved alternative monitoring system are not available during any
period and the owner or operator cannot provide information,
satisfactory to the Administrator, on emissions during that period.
The Administrator already issued regulations implementing the
existing Section 412 and must issue new regulations by January 1,
2008 for monitoring of mercury.
SECTION 406. Excess Emissions Penalty; General Compliance With
Other Provisions; Enforcement
Section 406 is the existing Section 411, modified to address
excess emissions penalties with regard to emissions of sulfur
dioxide, nitrogen oxides, and mercury. The excess emissions
penalties reflect changes from the allowance holding requirements
from unit-level to facility-level compliance in Section 403. For
example, under the Acid Rain Program during 1995-2007, the owner or
operator of a unit that fails to hold allowances covering its
annual sulfur dioxide emissions is treated as having excess
emissions. Starting in 2008 for sulfur dioxide and nitrogen oxides
and in 2010 for mercury, the owner or operator of a facility that
fails to hold allowances covering the annual emissions of its
affected units is treated as having excess emissions.
The owner or operator of a facility with excess emissions must
both offset the excess emissions with an equal amount of allowances
and pay a financial penalty. In contrast with the existing Section
411, which imposes a full financial penalty starting immediately
after the deadline for holding allowances covering emissions,
Section 406 imposes a financial penalty that is graduated, with the
penalty increasing the longer the period before the excess
emissions are offset and the financial penalty is paid. If the
offset and penalty payment are made within 30 days after the
deadline for holding allowances, the penalty per ton or, for
mercury, per ounce of excess emissions equals the clearing price of
an allowance in the most recent auction. If the offset and penalty
payment are made 31 or more days after the deadline, the penalty is
three times the auction clearing price. For all the trading
programs and consistent with the existing Section 411, the excess
emissions penalty does not preclude imposition, in addition, of
civil penalties for violations.
Section 406 also includes the existing Section 413. As under the
existing provision, compliance with Title IV does not affect,
except as expressly provided, the application of other requirements
of the Clean Air Act. Section 406 also provides that no State or
political subdivision thereof shall restrict or interfere with the
transfer, sale, or purchase of allowances under this title.
Section 406 also includes the existing Section 414 and applies
to the new sulfur dioxide, nitrogen oxides, and mercury trading
programs essentially the same enforcement provisions that apply to
the Acid Rain Program. Like each excess ton of sulfur dioxide, each
ton of excess nitrogen oxides or each excess ounce of mercury is a
separate violation.
SECTION 407. Election For Additional Units
Section 407 provides the option for units that are not otherwise
subject to the new sulfur dioxide, nitrogen oxides, and mercury
trading programs to opt into the programs if certain conditions are
met. The units must vent all their sulfur dioxide, nitrogen oxides,
and mercury emissions only through a stack or duct and must meet
the monitoring and reporting requirements for those trading
programs, except that each unit must be separately monitored. Each
unit, to establish its baseline, must monitor and report its
emissions in accordance with the monitoring and reporting
requirements under Section 405 for one year before entering the
programs.
The Administrator will allocate to an opt-in unit an amount of
allowances equal to fifty percent of: the lesser of the unit's
baseline heat input or the unit's heat input for the year before
the year for which the Administrator is determining the allocation;
multiplied by the lesser of the unit's baseline emission rate, the
unit's 2002 emissions rate, or the unit's most stringent State or
federal emission limitation applicable to the year on which the
unit's baseline heat input is based. Moreover, the allocation is
subject to an increasing reduction each year (a 1 percent increase
each year for twenty years and a 2.5 percent reduction each year
thereafter), with a corresponding increase in the amounts of
allowances auctioned for each year. This is analogous to how
allowances and auctions are handled for affected electricity
generating units (EGUs) under the trading programs.
Once a unit opts into the trading programs, the unit will remain
an affected unit. The only circumstance under which a unit will be
withdrawn from the opt-in provisions is where the unit qualifies as
an affected EGU independently of the opt-in provisions. In that
circumstance, the unit remains subject to the trading programs but
is covered by the non-opt-in requirements that cover all affected
EGUs.
SECTION 408. Clean Coal Technology Regulatory Incentives
Section 408 is the existing Section 415, which addresses the
Department of Energy's Clean Coal Technology Program.
SECTION 409. Auctions
Section 409 requires the Administrator to issue regulations
within 36 months of enactment concerning auctions of sulfur dioxide
allowances, nitrogen oxide allowances, and mercury allowances. The
regulations must specify the procedures, frequency, and timing of
auctions. Allowances may be auctioned before or during the year for
which the allowances are issued, and auctions may be conducted one
or more times during a year. The auctions must be open to any
person, and there will not be any minimum price set for the
auctions. The Administrator may, by delegation or contract, provide
for conduct of an auction by another government agency or
non-governmental agency, group, or organization. The proceeds from
all auctions will be deposited in the U.S. Treasury.
This section also establishes detailed default procedures for
auctions. The procedures will apply if the Administrator is
required to conduct an auction but has not yet issued regulations
establishing procedures. The default procedures provide for the
sale of all allowances at a single, clearing price. This contrasts
with the auction provisions in the existing Section 416 providing
for a declining price auction where winning bidders purchase
allowances at their bid prices.
SECTION 410. Evaluation of Limitations on Total Sulfur Dioxide,
Nitrogen Oxides, And Mercury Emissions That Start in 2018.
Section 410 establishes criteria and the process by which the
Administrator reviews and makes recommendations to Congress as to
whether the limitations on the total amounts of allowances
available starting in 2018 for sulfur dioxide, nitrogen oxides, and
mercury (whether through allocation or auction) should be adjusted.
The Administrator, in consultation with the Secretary of Energy,
must conduct a study that addresses a number of specific factors
regarding, among other things: the need for further reductions of
these pollutants from affected EGUs and other sources to attain or
maintain the national ambient air quality standards; whether
adjusting any of the limitations would have benefits that would
justify the costs of such adjustment; the relative marginal cost
effectiveness of the reductions from affected EGUs; and the
feasibility of attaining the limitations and any alternative
limitations. In addition, the study must address the most current
scientific information relating to emissions, transformation, and
deposition of these pollutants. Any documents considered in such a
study must be independently peer-reviewed no later than July 1,
2008. The results of the study itself must be independently
peer-reviewed no later than January 1, 2009. The Administrator must
make any recommendations to Congress no later than July 1, 2009 and
may submit separate recommendations addressing sulfur oxides,
nitrogen oxides, or mercury at any time after the study and the
peer review have been completed.
Part B. Sulfur Dioxide Emission Reductions
Subpart 1 of Part B retains the requirements of the existing
Acid Rain Program, with a few relatively minor changes, through
December 31, 2009. Subpart 2 establishes a new trading program with
a requirement to hold allowances covering emissions beginning
January 1, 2010. Subpart 3 establishes a back-stop trading program
for States in the Western Regional Air Partnership.


Subpart 1. Acid Rain Sulfur Dioxide Program
SECTION 411. Definitions
Section 411 contains the definitions unique to the Acid Rain
Program.
SECTION 412. Allowance Allocation
Section 412 includes, with no substantive changes, certain
provisions from existing Sections 403 and 408 that apply only to
the Acid Rain Program. The remaining provisions from existing
Sections 403 and 408, which apply, as modified, to Parts B, C, and
D, have been retained in Part A, Sections 403 and 404.
SECTION 413. Phase I Sulfur Dioxide Requirements
Section 413 is existing Section 404, containing without change
the Phase I sulfur dioxide allocations and modified to set a new
deadline for new applications for allowances from the Conservation
and Renewable Energy Reserve. The existing deadline (i.e., December
31, 1999) for completion of all actions for which allowances from
the Reserve may be earned has passed. The existing deadline for
entities to submit new applications based on those actions is moved
up from January 1, 2010 to one year after enactment. Any remaining
allowances in the Reserve at that time will be allocated to
existing units subject to the Acid Rain Program.
SECTION 414. Phase II Sulfur Dioxide Requirements
Section 414 is existing Section 405, which contains the Phase II
sulfur dioxide allocation formulas with no substantive changes,
except to take account of the fact that compliance starting in 2008
will be at the facility (not the unit) level.
SECTION 415. Allowances for States with Emissions Rates at or
Below 0.80 lbs/mmBtu Section 415 is existing Section 406, which
provides additional formulations for Phase II allocations with no
substantive changes.
SECTION 416. Election for Additional Sources
Section 416 is existing Section 410, modified to reduce the
allocations for opt-in units in the Acid Rain Program to 50 percent
for applications submitted to EPA after January 1, 2002. In
addition, the provisions requiring issuance of rules to allow
process sources to opt in and establishing the small diesel
refinery allowance allocation program (which ended in 1999) are
removed.
SECTION 417. Auctions, Reserve
Section 417 is existing Section 416, modified to remove direct
sales of allowances (which have already been terminated by rule)
and to terminate the private sales of allowances through the annual
sulfur dioxide allowance auction. Section 417 also reduces the
amount of allowances in the annual auction to account for the fact
that sulfur dioxide allowances for the year 2010 and beyond will no
longer be auctioned under this Subpart.
SECTION 418. Industrial SO2 Emissions
Section 418 is existing Section 406 of the Clean Air Act
Amendments of 1990, which was not previously incorporated into the
Clean Air Act and sets a cap on sulfur dioxide emissions from
certain industrial sources. There are no substantive changes to the
existing Section 406.
SECTION 419. Termination
Section 419 provides that owners or operators, starting January
1, 2010, are no longer subject to Sections 412 through 417 of this
part. Beginning January 1, 2010, the requirements of Subpart 2 of
this Part will apply.


Subpart 2. Sulfur Dioxide Allowance Program
SECTION 421. Definitions
Section 421 contains the definitions unique to the new sulfur
dioxide trading program. The definition of the term "affected EGU"
establishes which electricity generating units are covered by the
new trading program. The program covers units in the U.S. and its
territories. The program includes existing fossil fuel-fired
electricity generating boilers and turbines and integrated
gasification combined cycle plants with generators having a
nameplate capacity of greater than 25 MW. The program also includes
new fossil fuel-fired electricity generating boilers and turbines
and integrated gasification combined cycle plants regardless of
size, except for gas-fired units serving one or more generators
with total nameplate capacity of 25 MW or less. In addition,
certain existing and new cogeneration units are exempt, as well as
solid waste incineration units and units for treatment, storage, or
disposal of hazardous waste.
SECTION 422. Applicability
Section 422 provides that the owner or operator must hold
allowances for all the affected EGUs at a facility at least equal
to the total sulfur dioxide emissions for those units during the
year. Compliance with the requirement to hold allowances covering
sulfur dioxide emissions will thus be determined on a facility-wide
basis. This is reflected in the monitoring and reporting
requirements, which provide that units sharing a common stack do
not need to be separately monitored and must collect sufficient
information to determine compliance.
SECTION 423. Limitations on Total Emissions
Section 423 establishes the annual caps on sulfur dioxide
emissions for affected EGUs: 4,500,000 tons starting in 2010 and
3,000,000 tons starting in 2018. During the first year of the new
trading program, 99% of the allowances will be allocated to
affected EGUs with an auction for the remaining 1%. Each subsequent
year, an additional 1% of the allowances for twenty years, and then
an additional 2.5% thereafter, will be auctioned until eventually
all the allowances are auctioned. Auction proceeds will go into the
U.S. Treasury.
SECTION 424. EGU Allocations
Section 424 requires the Administrator to determine individual
EGU allocations, which will set on a one-time basis and therefore
will remain the same each year. Ninety-five percent of the total
amount of sulfur dioxide allowances allocated each year under
Section 423 will be allocated based on the amount of sulfur dioxide
allowances allocated under the Acid Rain Program for 2010 and
thereafter and that are held in allowance accounts in the Allowance
Tracking System on the date 180 days after enactment. In
determining the amount of allowances in each unit account and
general account as of that deadline, the Administrator will
discount allowances allocated for 2011 or later at a rate of seven
percent per year to reflect the time value of allowances.
The remaining allowances are allocated to units that do not
receive allowances under the Acid Rain Program, whether because
they are subject to the program and have a zero allocation or
because they are simply not subject to the program. Three and
one-half percent of the total amount of sulfur dioxide allowances
allocated each year will be allocated to such units that are
affected EGUs under the new trading program as of December 31, 2004
and commenced operation before January 1, 2001. One and one-half
percent of the total amount of sulfur dioxide allowances will be
allocated to units that are affected EGUs as of December 31, 2004
and commence operation during the period January 1, 2001- December
31, 2004. Allowances will be allocated based on the units' baseline
heat input multiplied by standard emission rates that vary
depending on the fuel combusted by the units. Standard emission
rates are established for three categories of units: coal-fired
units; oil-fired units; and other units. For each of the above
three allowance pools, each facility's allocation will be adjusted
to ensure that the total amount of allowances allocated does not
exceed the applicable total of allowances available for allocation
for the year.
The Allowance Tracking System for sulfur dioxide allowances was
already established for the Acid Rain Program, and essentially the
same system will be used for the new sulfur dioxide trading
program. However, the Administrator must still promulgate
regulations determining the individual unit allocations for a given
year. In the event that the Administrator is unable, for any
reason, to promulgate allocation regulations on a timely basis,
Section 424 provides a default method for distributing the
allowances, without promulgation of regulations, in advance of the
year for which the allowances are necessary so that owners and
operators can plan for compliance. Under the default method, eighty
percent of the total amount of sulfur dioxide allowances available
for allocation each year will be allocated to Acid Rain Program
units with coal as their primary or secondary fuel or residual oil
as their primary fuel, listed in the Administrator's Emissions
Scorecard 2000, Appendix B (2000 Data for SO2, NOx, CO2, Heat
Input, and Other Parameters), Table B1 (All 2000 Data for All
Units). The allocations will be based on the heat input of those
units as set forth in the Emissions Scorecard 2000, which
summarizes the emissions data received by EPA for those units for
2000. In addition, five percent of the total amount of sulfur
dioxide allowances available for allocation each year will be
auctioned. The remaining fifteen percent of the allowances will not
be made available, whether through allocation or auction.
SECTION 425. Disposition of SO2 Allowances Allocated Under
Subpart 1
Under Section 425, after the Administrator allocates allowances
under the new trading program, the Administrator will remove from
the Allowance Tracking System accounts all sulfur dioxide
allowances for the year 2010 and later that were allocated under
Subpart 1 of this Part. The Administrator will promulgate
regulations to allow use of any banked pre-2009 sulfur dioxide
allowances in the new nationwide sulfur dioxide program.
SECTION 426. Incentives For Sulfur Dioxide Emission Control
Technology
Section 426 establishes a reserve of 250,000 allowances for
affected EGUs that combusted Eastern bituminous and that, before
2008, install and operate sulfur dioxide control technology and
continue to combust such coal. A procedure is established for
submission of applications by owners and operators and approval of
applications and award of allowances by the Administrator. The
procedure is designed to ensure that the Administrator will approve
those qualified projects that will result in the largest amount of
sulfur dioxide emission reductions achieved per allowance
awarded.
Subpart 3. Western Regional Air Partnership (WRAP)
This Subpart establishes a back-stop trading program that will
go into effect if the States in the WRAP (i.e., Arizona,
California, Colorado, Idaho, Nevada, New Mexico, Oregon, Utah, and
Wyoming) are unable to meet the sulfur dioxide emission level
(271,000 tons) that they established for 2018 for electricity
generating units emitting over 100 tons of sulfur dioxide per year.
In general, if that emission level is exceeded in 2018 or later,
the trading program, which reflects the back-stop trading program
already developed by the WRAP and is modeled after the new
nationwide sulfur dioxide trading program, will require a separate
set of allowances for affected EGUs in the WRAP State to be held
covering emissions starting the third year after the level is
exceeded. The WRAP and nationwide programs are separate: sulfur
dioxide allowances in the WRAP program may not be used in the
nationwide program; and the sulfur dioxide allowances in the
nationwide program may not be used in the WRAP program.
SECTION 431. Definitions
Section 431 contains the definitions unique to the new WRAP
trading program. The definition of the term "affected EGU"
establishes which electricity generating units are covered by the
new WRAP trading program. The program covers those units covered by
the new nationwide sulfur dioxide trading program that are located
in the States in the WRAP and that, in any year starting in 2000,
emit more than 100 tons of sulfur dioxide and are used to produce
electricity for sale.
The definition of "covered year" establishes when the new WRAP
trading program will begin. Generally, the trading program and the
requirement to hold allowances will begin the third year after the
first year (starting 2018) in which the total emissions of affected
EGUs exceed 271,000 tons. However, the WRAP States may unanimously
petition the Administrator to determine that the total emissions of
affected EGUs are reasonably projected to exceed 271,000 tons in
2018 or a later year and to make affected EGUs subject to the
requirements of the new WRAP trading program. Based on such a
petition, the Administrator may by regulation make affected EGUs
subject to the requirement to hold allowances starting the third
year after the first year (starting 2013) when the Administrator
makes such a determination. The term "covered year" also includes
each year after the year in which the requirement to hold
allowances begins.
SECTION 432. Applicability
Section 432 provides that the owner or operator must hold
allowances for all the affected EGUs at a facility at least equal
to the total sulfur dioxide emissions for those units during each
covered year. As in the new nationwide sulfur dioxide trading
program, compliance with the requirement to hold allowances will
thus be determined on a facility-wide basis.
SECTION 433. Limitations on Total Emissions
Section 433 establishes the annual cap on sulfur dioxide
emissions for affected EGUs of
271,000 tons in each covered year.
SECTION 434. EGU Allocations
Section 434 establishes the procedures for determining
allocations for individual units that are affected EGUs as of
December 31 of the fourth year before the covered year. The
allocations will be set on a one-time basis and therefore will
remain the same each year. Allowances will be allocated based on
the units' baseline heat input multiplied by standard emission
rates that vary depending on the fuel combusted by the units.
Standard emission rates are set forth for three categories of
units: coal-fired units; oil-fired units; and other units. Each
facility's allocation will be adjusted to ensure that the total
amount of allowances allocated does not exceed 271,000 tons per
year.
The Allowance Tracking System for sulfur dioxide allowances was
already established for the Acid Rain Program, and essentially the
same system will be used for the new WRAP trading program. However,
the Administrator must still promulgate regulations determining the
individual unit allocations for a given year. In the event that the
Administrator is unable, for any reason, to promulgate allocation
regulations on a timely basis, Section 434 provides a default
methodology analogous to that for the new nationwide sulfur dioxide
trading program for distributing the allowances, without
promulgation of regulations, in advance of the year for which the
allowances are necessary. Eighty percent of the total amount of
allowances available for allocation for the year will be allocated
based on heat input in 2000 to affected EGUs that are Acid Rain
Program units with coal as their primary or secondary fuel or
residual oil as their primary fuel, listed in the Administrator's
Emissions Scorecard 2000. Five percent of the allowances available
for allocation will be auctioned. The remaining fifteen percent of
allowances will not be made available.
Part C. Nitrogen Oxides Allowance Program
Subpart 1 of Part C retains the requirements, until 2008, of the
existing Acid Rain Program for nitrogen oxides reduction. Subpart 2
establishes, beginning January 1, 2008, a new nitrogen oxides
trading program. Two trading zones are established, and, only
allowances allocated or auctioned for a given zone may be used by
facilities within that zone to meet the requirement to hold
allowances covering emissions. Subpart 3 codifies the budgets and
other requirements in EPA's rulemaking (known as the NOx SIP call)
concerning ozone transport in the Eastern U.S., which requires that
certain Eastern States revise their state implementation plans to
reduce NOx emissions.
Subpart 1. Nitrogen Oxides Emission Reduction Program
SECTION 441. Nitrogen Oxides Emission Rate Reduction Program
Section 441 is the existing Section 407, which includes the
emission rate limitations and other
requirements for nitrogen oxides under the Acid Rain Program.
The existing emission rate limitations for individual boilers,
which are based on boiler type, are not changed.
SECTION 442. Termination
Section 442 terminates the existing Acid Rain Program nitrogen
oxides provisions in Section 441 on January 1, 2008 when the new
nitrogen oxides trading program begins.


Subpart 2. Nitrogen Oxides Allowance Program
SECTION 451. Definitions
Section 451 contains the definitions unique to the new nitrogen
oxides trading program. The definition of the term "affected EGU"
establishes which electricity generating units are covered by the
new nitrogen oxides trading program, which are the same electricity
generating units as are covered in the U.S. and territories by the
new nationwide sulfur dioxide trading program.
SECTION 452. Applicability
Section 452 provides that the owner or operator must hold
allowances for all the EGUs units at a facility at least equal to
the total nitrogen oxides emissions for those units during the
year. As in the new nationwide sulfur dioxide trading program,
compliance with the requirement to hold allowances will thus be
determined on a facility-wide basis.
SECTION 453. Limitations on total emissions
Section 453 establishes the annual caps on nitrogen oxides
emissions affected EGUs: 1.562 million tons starting in 2008 and
1.162 million tons starting in 2018 for Zone 1; and 538,000 tons
starting in 2008 for Zone 2. During the first year of the new
trading program, 99% of the allowances will be allocated to
affected units with an auction for the remaining 1%. Each
subsequent year, an additional 1% of the allowances for twenty
years, and then an additional 2.5% thereafter, will be auctioned
until eventually all the allowances are auctioned. Auction proceeds
will go into the U.S. Treasury.
SECTION 454. EGU Allocations
Section 454 establishes the procedures for determining
allocations for individual units that are affected EGUs as of
December 31, 2004. The allocations will be set on a one-time basis
and therefore will remain the same each year. Allowances will be
allocated to a facility in a given zone in proportion to the sum of
the baseline heat input values of affected EGUs at the facility as
compared to the total baseline heat input of all affected EGUs in
the respective zone. Thus, the two separate allowances pools for
the two zones are separately allocated. Each facility's allocation
will be adjusted to ensure that the total amount of allowances
allocated does not exceed the applicable total amount of allowances
available for allocation for the zone for the year involved.
While the Allowance Tracking System for sulfur dioxide
allowances was already established for the Acid Rain Program, the
Administrator must, under Section 403, establish by regulation the
Allowance Tracking System for nitrogen oxides allowances. Further,
the Administrator must also promulgate regulations determining the
individual unit allocations for a given year. In the event that the
Administrator is unable, for any reason, to promulgate allocation
regulations on a timely basis, Section 454 provides two default
methods for compliance, both of which are implemented separately
for the two zones. The first default method, which is analogous to
the default under the new sulfur dioxide trading program, applies
if the Allowance Tracking System regulations are timely promulgated
but not the allocation regulations. Eighty percent of the total
amount of nitrogen oxides allowances available for allocation each
year will be allocated to Acid Rain Program units with coal as
their primary or secondary fuel or residual oil as their primary
fuel, listed in the Administrator's Emissions Scorecard 2000. Five
percent of the total amount of allowances available for allocation
will be auctioned, and the remaining fifteen percent will not be
made available. However, if neither the Allowance Tracking System
regulations nor the allocation regulations are timely promulgated,
then the second default applies under which each affected EGU is
required for the year involved to meet an emission rate limit of
0.14 lb/mmBtu for units in Zone 1 or 0.25 lb/mmBtu for units in
Zone 2.


Subpart 3. Ozone Season NOx Budget Program
SECTION 461. Definitions
Section 461 contains definitions unique to the NOx SIP call.
SECTION 462. General Provisions
Section 462 provides that the general provisions in Sections 402
through 406 and Section 409 of Part A do not apply to this Subpart.
This is because the NOx SIP call itself, and the state
implementation plans approved under the NOx SIP call, already
include provisions concerning the matters addressed in these
general provisions in Part A, such as tracking and transferring of
allowances, permitting, monitoring and reporting, and
compliance.
SECTION 463. Applicable Implementation Plan
Section 463 requires implementation of the requirements of the
NOx SIP call beginning in 2004 including requirements contained in
a proposed rulemaking by EPA concerning: the amounts of the State
trading budgets; the criteria for classifying cogeneration units as
EGUs and non-EGUs; and the treatment of States that are only
partially in the NOx SIP call area.
SECTION 464. Termination of NOx Trading Program for Clear Skies
Units
Section 464 terminates the obligation of the Administrator to
administer the ozone season NOx budget trading program under the
NOx SIP call on January 1, 2008. The section allows States to
continue, and to administer, such a program in their state
implement plans under the NOx SIP call for 2008 and thereafter.
However, it is intended that affected units under the new nitrogen
oxides trading program will generally not be subject to the
requirements of the NOx SIP call starting January 1, 2008.
SECTION 465. Carryforward of Pre-2008 Nitrogen Oxides
Allowances
Section 465 requires the Administrator to promulgate regulations
allowing owners and operators to carry over, into the new nitrogen
oxides trading program under Subpart 2, any banked pre-2008
allowances under the NOx budget trading program administered by the
Administrator under the NOx SIP call.
Part D. Mercury Emissions Reductions
Part D establishes a new trading program for mercury, with a
requirement to hold allowances covering emissions beginning January
1, 2010.
SECTION 471. Definitions
Section 471 contains the definitions unique to the new mercury
trading program. The definition of the term "affected EGU"
establishes which electricity generating units are covered by the
new trading program. The new mercury trading program covers
coal-fired units that are covered by the new sulfur dioxide and
nitrogen oxides trading programs. The definition for "adjusted
baseline heat input" establishes a modified baseline heat input
value, which, for units with an operating history, is adjusted by a
standard factor to reflect the types of coal that were combusted.
Standard factors are set forth for several categories of coal: 3.0
for lignite; 1.25 for subbituminous; and 1.0 for bituminous or
other fuel.
SECTION 472. Applicability
Section 472 provides that the owner or operator must hold
allowances for all the affected EGUs at a facility at least equal
to the total mercury emissions for those units during the year. As
in the new sulfur dioxide and nitrogen oxides trading programs,
compliance with the requirement to hold allowances will thus be
determined on a facility-wide basis.
SECTION 473. Limitations on Total Emissions Section 463
establishes the annual caps on mercury emissions for affected EGUs:
26 tons starting in 2010 and 15 tons starting in 2018. During the
first year of the new trading program, 99% of the allowances will
be allocated to affected units with an auction for the remaining
1%. Each subsequent year, an additional 1% of the allowances for
twenty years, and then an additional 2.5% thereafter, will be
auctioned until eventually all the allowances are auctioned.
Auction proceeds will go into the U.S. Treasury.
SECTION 474. EGU Allocations
Section 434 establishes the procedures for determining
allocations for individual units that are affected EGUs as of
December 31, 2004. The allocations will be set on a one-time basis
and therefore will remain the same each year. Allowances will be
allocated based on the units' baseline heat input, which, for units
with an operating history, is adjusted by a standard factor to
reflect the types of coal that were combusted. Each facility's
allocation will be adjusted to ensure that the total amount of
allowances allocated does not exceed the applicable amount of
allowances available for allocation for the year.
While the Allowance Tracking System for sulfur dioxide
allowances was already established for the Acid Rain Program, the
Administrator must, under section 403, establish by regulation the
Allowance Tracking System for mercury allowances. Further, the
Administrator must also promulgate regulations determining the
individual unit allocations for a given year. In the event that the
Administrator is unable, for any reason, to promulgate allocation
regulations on a timely basis, Section 474 provides two default
methods for compliance analogous to those under the new nitrogen
oxides trading program. Under the first default, eighty percent of
the total amount of mercury allowances allocated each year will be
allocated to Acid Rain Program coal-fired units listed in the
Administrator's Emissions Scorecard 2000. Five percent of the total
amount of allowances available for allocation will be auctioned,
and the remaining fifteen percent will not be made available.
However, if neither the Allowance Tracking System regulations nor
the allocation regulations are timely promulgated, then the second
default applies under which each affected EGU must comply with an
emission limit 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
SECTION 481. National Emission Standards for Affected Units
Section 481 establishes performance standards for all new
boilers, combustion turbines, and integrated gasification combined
cycle plants that are affected units under the new trading
programs. "New" units are those that commence construction or
reconstruction after enactment.
These statutory performance standards include emission limits
for four air pollutants: nitrogen oxides; sulfur dioxide; mercury;
and particulate matter. The mercury emission limits apply only to
coal-fired units. A particulate matter emission limit is
established for existing oil-fired boilers that will also reduce
emissions of nickel from such units. All units subject to a
performance standard are required to monitor emissions using
continuous emissions monitoring systems and to use averaging times
similar to those under the existing new source performance
standards.
Boilers and integrated gasification combined cycle plants are
subject to a sulfur dioxide emission limit of 2.0 lb/MWh, a
nitrogen oxides emission limit of 1.0 lb/MWh, and a particulate
matter emission limit of 0.20 lb/MWh. Coal-fired boilers and
integrated gasification combined cycle plants are also subject to a
mercury emission limit of 0.015 lb/GWh, but alternative standards
apply in some circumstances. Coal-fired combustion turbines are
subject to the same emission limits as coal-fired boilers and
integrated gasification combined cycle plants. (The term
"coal-fired" is defined to include units that burn any coal or
coal-derived fuel.) Gas-fired combustion turbines are subject to
nitrogen oxides emission limits ranging from 0.084 lb/MWh to 0.56
lb/MWh. Combustion turbines that are not coal- or gas-fired are
subject to nitrogen oxides emission limits ranging from 0.289
lb/MWh to 1.01 lb/MWh, a sulfur dioxide emission limit of 2.0
lb/MWh, and a particulate matter emission limit of 0.20 lb/MWh.
Existing oil-fired boilers are subject to a particulate matter
emission limit of 0.30 lb/MWh.
The Administrator is required, at least every eight years, to
review and, if appropriate revise, these performance standards to
reflect the degree of emission limitation achievable through
application of the best system of emission reduction which the
Administrator determines has been adequately demonstrated. However,
such review is not required if the Administrator determines that
review is not appropriate in light of readily available information
on the efficacy of the standard. New affected units subject to the
performance standards are not subject to standards under Section
111.
SECTION 482. Research, Environmental Monitoring, and
Assessment
Section 482 contains provisions for evaluating and reporting the
efficacy of the new sulfur dioxide, nitrogen oxides, and mercury
trading programs and conducting scientific and technical research
and development. One of the purposes of these provisions is
production of peerreviewed scientific and technology information in
time to inform the review of emissions levels as specified in
Section 410.
SECTION 483. Exemption from Major Source Reconstruction Review
Requirements and Best Available Retrofit Control Technology
Requirements
Section 483 exempts affected units under the new trading
programs from the requirements of new source review (NSR) and best
available retrofit technology (BART). Affected units under the
exemption are no longer considered "major emitting facilities" or
"major stationary sources" for purposes of Parts C and D of Title I
of the Clean Air Act. Permits issued in the past to comply with the
requirements of Part C and D of Title I, however, will remain in
effect.
To qualify for the exemption from NSR and BART, an existing
affected unit must meet certain requirements concerning particulate
matter and carbon monoxide emissions. Where there is a modification
of the existing affected unit (which is defined as a change that
will result in an increase in the hourly emissions of a pollutant
at the unit's maximum capacity), the unit must comply with either
best available control technology (BACT) for that pollutant or the
performance standards for nitrogen oxides, sulfur dioxide, mercury,
and particulate matter under Section 481. In addition, new affected
units constructed after enactment will be required to meet the
performance standards under Section 481, and no additional,
case-by-case review of the appropriate control technology, such as
BACT or the lowest achievable emission rate (LAER), will be
required.
An affected unit located within 50 km of Class I areas will
remain subject to the requirements in Part C of Title I for the
protection of such areas. For example, emissions resulting from the
construction of such a new or modified unit may not cause or
contribute to the violation of a Class I increment unless the
federal land manager certifies that the emissions from the facility
will have no adverse impact on the air quality related values of
the Class I area. Further, as provided under Section 110(a)(2)(C),
States must still ensure that the construction of a new or modified
affected unit will not cause or contribute to a violation of the
national ambient air quality standards (NAAQS) or interfere with
the programs to assure that the NAAQS are met. States must provide
the public with an opportunity to comment on the impact of the new
or modified affected unit on the NAAQS or on any Class I areas
within 50 km of the unit.


Title I of the Clean Air Act
SECTION 107. Transitional Areas
The Clear Skies Act revises Section 107 of the Clean Air Act to
authorize the Administrator to designate as transitional an area
for which EPA-performed modeling demonstrates that the area will
attain the 8-hour ozone or fine particles NAAQS no later than
December 31, 2015 through the controls provided under the Clear
Skies Act and any other federal controls that have been
promulgated. In addition, an area may be classified as transitional
if the State performs EPAapproved modeling demonstrating that the
area will attain the 8-hour ozone or fine particles NAAQS by no
later than December 31, 2015 through a combination of reductions
achieved through controls established through the Clear Skies Act
and any other federal controls that have been promulgated, together
with any necessary local controls that the State adopts in its
state implementation plan no later than December 31, 2004.
Areas designated as transitional will not be subject to certain
local planning obligations that apply to areas designated
nonattainment, such as conformity and new source review. These
areas are subject to the new source program that applies in
attainment and maintenance areas. In addition, these areas need to
ensure that growth in emissions following the time of designation
does not negatively affect their ability to attain the standard.
Finally, if an area fails to attain the standard by December 31,
2015, the Administrator will be required to redesignate the area to
nonattainment and the area will then be subject to the
nonattainment planning requirements, including conformity and new
source review.
In addition, the time frames for States to recommend, and EPA to
promulgate, designations for the 8-hour ozone and fine particles
NAAQS are revised to align the time frames for EPA to designate
areas for these standards.
SECTIONS 110, 126. Ozone Transport Provisions
The Clear Skies Act restricts the applicability of petitions
under Section 126 of the Clean Air Act, and the requirements of the
state implementation plan (SIP) "good neighbor" provisions of
Section 110(a)(2)(D) of the Clean Air Act, to affected units under
the new trading programs.
In general, Section 126 authorizes downwind States or political
subdivisions to petition the Administrator to find that certain
upwind sources emit air pollutants in amounts that contribute
significantly to the petitioner's air pollution problems. If the
Administrator grants the finding, the sources must either shut down
or implement controls that the Administrator may mandate within a
specified period, but no later than three years from the date of
the finding. The Clear Skies Act revises Section 126 to provide
that if any State submits a Section 126 petition concerning
emissions from an affected unit, the Administrator may not grant
any finding prior to January 1, 2009, although the Administrator
must take final action during January, 2009 on any petition
submitted prior to January 1, 2007. Further, if the Administrator
grants a requested finding, then the Administrator must assure that
the compliance and implementation deadlines are extended beyond
December 31, 2011.
The Clear Skies Act further requires that, in addressing a
petition submitted after enactment that requests a finding for any
affected unit under the new trading programs, the Administrator
must consider, among other factors, any emissions reductions
required to occur by any applicable attainment dates for any
relevant nonattainment areas. In addition, as conditions for making
a finding concerning affected units, the Administrator must
determine that the required emissions reductions from the affected
units are at least as cost-effective, and will improve air quality
in the petitioners' nonattainment areas at least as
cost-effectively, as emissions reductions from each other principal
category of sources in areas upwind of the petitioner. The
Administrator must develop an appropriate peer-reviewed methodology
for making the necessary determinations by December 31, 2006.
Corresponding changes are made in the SIP requirements of Section
110(a)(2)(D). The Clear Skies Act makes clear that these changes do
not affect the NOx SIP call rulemaking concerning ozone transport
in the Eastern U.S., which requires that certain Eastern States
revise their SIPs to reduce NOx emissions.
Several corrections are also made to Section 126, including
correction of an erroneous crossreference.
SECTION 112. Maximum Achievable Control Technology
The Clear Skies Act revises Section 112 of the Clean Air Act to
preclude regulation through maximum achievable control technology
(MACT) standards of the emission of hazardous air pollutants by
electric utility steam generating units. The Administrator retains
the authority to address any non-mercury hazardous air pollutants
from electricity generating units in accordance with the regime set
forth under the existing residual risk authority provisions of
Section 112(f)(2) through (4).
Title VIII of the Clean Air Act Amendments of 1990
SECTION 821. Monitoring
The Clear Skies Act revises Section 821(a) of the Clean Air Act
Amendments of 1990 to retain the existing carbon dioxide monitoring
and reporting requirements for units subject to the existing Acid
Rain Program.