In response to the recent United States Court of Appeals for the District of Columbia Circuit’s (D.C. Circuit or Court) order, the United States Environmental Protection Agency (EPA) issued an interim final rule on November 21, 2014 (without prior notice or opportunity for public comment) to amend the Cross-State Air Pollution Rule (CSAPR) compliance deadlines in 40 CFR parts 51, 52, and 97, which will be effective upon publication of the notice in the Federal Register, and a Notice of Data Availability (NODA) concerning emission allowance allocations for certain electricity generating units (EGUs). (See Rulemaking to Amend Dates in Federal Implementation Plans Addressing Interstate Transport of Ozone and Fine Particulate Matter available here. Notice in the Federal Register is pending) ; and NODA available here. 

Both documents are designed to be consistent with the United States Court of Appeals for the District of Columbia Circuit’s (D.C. Circuit or Court) order on October 23, 2014 in EME Homer City Generation, L.P. v. EPA lifting the stay and tolling the compliance deadlines for three years of the heavily litigated CSAPR. However, CSAPR is still subject to on-going litigation, set for oral argument on February 25, 2015 before D.C. Circuit Judges Rogers, Griffith, and Kavanaugh. CSAPR was originally filed in 2011 and amended three times, by the Supplemental Rule, the First Revisions Rule, and the Second Revisions rule respectively. As amended, CSAPR requires 28 states to limit their state-wide emissions of sulfur dioxide (SO2) and/or nitrogen oxides (NOx) in order to reduce or eliminate the upwind states’ “significant” contribution to fine particulate matter (PM2.5) and/or ground-level ozone pollution in downwind states. CSAPR sets forth emissions limitations in terms of maximum state-wide “budgets” (there are two phases of implementation for these budgets) for emissions of annual SO2, annual NOx, and/or ozone-season NOx by each state’s EGUs that represent the maximum number of emission allowances that may be allocated to the affected EGUs in that state.

CSAPR also creates federal implementation plans (FIPs) requiring EGUs in the affected states to participate in emission(s) trading programs that supersede existing CAIR emissions trading programs. These emission trading programs require affected EGUs to have emission allowances sufficient to cover their emissions of NOx and/or SOx in each compliance period. After the first year, CSAPR gives states an opportunity to revise state implementation plans (SIPS) to modify or replace the FIPs and determine the allocation of allowances among the state’s EGUs consistent with the rule’s emission trading programs and emission limitations.

The interim final rule provides that compliance with CSAPR’s Phase 1 emissions budgets will now be required in 2015 and 2016 (instead of 2012 and 2013) and compliance with CSAPR’s Phase 2 emissions budgets and assurance provisions will now be required in 2017 and beyond (instead of 2014 and beyond). Other amendments toll specific deadlines for sources to certify monitoring systems and to start reporting emissions, for the EPA to allocate and record emission allowances, and for states to take optional steps to modify or replace their CSAPR FIPs through SIP revisions. The amendments toll the regulatory provisions that sunset the Clean Air Interstate Rule (CAIR) (CAIR was EPA’s prior attempt at a rule to regulate emissions of NOx and SOxunder the CAA’s Good Neighbor Provision, which was rejected by the DC Circuit but left in temporarily in place) upon its replacement by CSAPR, and establishes a new deadline for removal of CAIR NOx allowances from allowance tracking system accounts.

The NODA provides notice of allocations of emission allowances to certain units that commenced commercial operation before 2010 and only to the extent that states do not provide alternative allowance allocations following procedures set out in the rule for compliance with CSAPR. These allowance allocations, which supersede the allocations announced in a 2011 NODA, reflect the changes to CSAPR made in those subsequent rulemakings as well as what EPA calls “re-vintaging” of previously recorded allowances to account for the impact of tolling of the rule’s deadlines. An Excel spreadsheet titled “Unit Level Allocations Under the CSAPR FIPs After Tolling” identifies these allocations is available EPA’s website at http://www.epa.gov/crossstaterule/actions.html.

Further development of the rule and its associated litigation will be monitored for its effect on EGUs.