[Federal Register Volume 84, Number 101 (Friday, May 24, 2019)]
[Proposed Rules]
[Pages 24064-24069]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10798]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 49
[EPA-R08-OAR-2019-0002; 9991-98-Region 8]
Federal Implementation Plan To Establish a Bank for Ozone
Precursor Emission Reduction Credits From Existing Sources on Indian
Country Lands Within the Uinta Basin Ozone Nonattainment Area
AGENCY: Environmental Protection Agency (EPA).
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The purpose of this Advance Notice of Proposed Rulemaking
(ANPRM) is to solicit broad feedback on different approaches to
establishing a voluntary emission reduction credit (ERC) bank for ozone
precursors, specifically volatile organic compounds (VOCs) and nitrogen
oxides (NOX), as part of a Clean Air Act (CAA) Federal
Implementation Plan (FIP) applicable to stationary sources on Indian
country lands within the Uintah and Ouray Indian Reservation (U&O
Reservation) that are part of the Uinta Basin Ozone Nonattainment Area.
The EPA designated portions of the ``Uinta Basin'' region nonattainment
for the 2015 Ozone NAAQS, effective August 3, 2018. The ERCs described
in this ANPRM could be generated and used for several air quality
planning purposes: assisting in achievement of the ozone National
Ambient Air Quality Standard (NAAQS), general conformity
demonstrations, and nonattainment new source review (NNSR) permitting
related to development of new VOC and NOX emissions sources
in Indian country portions of the Uinta Basin Ozone Nonattainment Area
in Utah. We are also inviting comment on the potential for the bank to
interact with sources that are outside the nonattainment area or the
U&O Reservation.
DATES: Comments must be received on or before July 8, 2019.
ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R08-
OAR-2019-0002, at http://www.regulations.gov. Follow the online
instructions for submitting comments. Once submitted, comments cannot
be edited or removed from www.regulations.gov. The EPA may publish any
comment received to its public docket. Do not submit electronically any
information you consider to be Confidential Business Information (CBI)
or other information whose disclosure is restricted by statute.
Multimedia submissions (audio, video, etc.) must be accompanied by a
written comment. The written comment is considered the official comment
and should include discussion of all points you wish to make. The EPA
will generally not consider comments or comment contents located
outside of the primary submission (i.e., on the web, cloud, or other
file sharing system). For additional submission methods, the full EPA
public comment policy, information about CBI or multimedia submissions,
and general guidance on making effective comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.
FOR FURTHER INFORMATION CONTACT: Chris Dresser, U.S. EPA, Region 8, Air
Program, Mail Code 8P-AR, 1595 Wynkoop Street, Denver, Colorado 80202-
1129, (303) 312-6385, [email protected].
SUPPLEMENTARY INFORMATION: Throughout this document, ``reviewing
authority,'' ``we,'' ``us'' and ``our'' refer to the EPA.
ANPRM: Advance Notice of Proposed Rulemaking.
APA: The Administrative Procedure Act.
Act or CAA: Clean Air Act, unless the context indicates otherwise.
CBI: Confidential Business Information.
EIP: Economic Incentive Programs.
EPA: The United States Environmental Protection Agency.
ERC: Emission Reduction Credit.
FIP: Federal Implementation Plan.
NAAQS: National Ambient Air Quality Standards.
NAICS: North American Industry Classification System.
NESHAP: National Emission Standards for Hazardous Air Pollutants.
NOX: Nitrogen oxides.
NPRM: Notice of Proposed Rulemaking.
NNSR: Nonattainment New Source Review.
NSR: New Source Review.
NTTAA: National Technology Transfer and Advancement Act.
OMB: Office of Management and Budget.
RACT: Reasonably Available Control Technology.
RFA: Regulatory Flexibility Act.
RFP: Reasonable Further Progress.
SIP: State Implementation Plan.
TAR: Tribal Authority Rule.
TAS: Treatment in the same manner as a state.
TIP: Tribal Implementation Plan.
TPY: Tons Per Year.
UDEQ: Utah Department of Environmental Quality's Division of Air
Quality.
U&O Reservation or the Reservation: Uintah & Ouray Indian
Reservation.
VOC: Volatile organic compound(s).
This preamble is organized as follows:
I. General Information
A. Would this potential action apply to me?
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B. What should I consider as I prepare my comments to the EPA?
C. Where can I get a copy of this document and other related
information?
II. Purpose of This Advance Notice of Proposed Rulemaking
III. What is an emission reduction credit bank?
IV. Background on the U&O Reservation
V. Areas Where the EPA Is Requesting Comment
A. Conceptual Support for an EPA-run U&O ERC Bank
B. Participation in the U&O ERC Bank
C. ERC Bank Format
D. Creditable Emission Reductions
E. Trading of ERCs
F. Use of ERCs
G. Withdrawal of ERCs From the Bank
H. Emissions Reductions Achieved Prior to the Effective Date of
Final U&O ERC Banking Rule
I. Geographic Considerations and Interaction With Utah State
Land CAA Planning Requirements
J. General Comments
VI. Statutory and Executive Order Reviews
I. General Information
A. Would this potential action apply to me?
Entities potentially affected by this upcoming proposed FIP consist
of existing sources of emissions of ozone precursors (VOC and
NOX) on Indian country lands that are both (1) within the
U&O Reservation \1\ and (2) part of the Uinta Basin Ozone Nonattainment
Area. All the Indian country lands within the Uinta Basin Ozone
Nonattainment Area of which the EPA is aware are within the U&O
Reservation. Further, all of the Ute Indian Tribe Indian country lands
of which the EPA is aware are located within the Reservation.\2\ To the
extent that there are Ute Indian Tribe dependent Indian communities
under 18 U.S.C. 1151(b) or allotted lands under 18 U.S.C. 1151(c) that
are located outside the exterior boundaries of the Reservation, those
lands would not be covered by this FIP unless the EPA or the Tribe
demonstrates that the Tribe has jurisdiction over the area. In
addition, there are parts of the Uinta Basin Ozone Nonattainment Area
that are not within Indian country. Any proposed FIP will not apply to
any sources on non-Indian-country lands, including any non-Indian-
country lands within the exterior boundaries of the Reservation. The
EPA expects that entities with operations in the oil and natural gas
production and natural gas processing segments of the oil and natural
gas sector would be the primary depositors of ERCs in a U&O ERC bank,
while new or modified major sources of VOC or NOX emissions
in various source categories would be the primary purchasers of banked
ERCs to support Nonattainment New Source Review (NNSR) permitting.
However, other source categories may choose to participate in either
depositing ERCs or purchasing banked ERCs to support NNSR permitting of
new or modified major or minor sources of VOC or NOX
emissions.
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\1\ See discussion at section IV below, for more information on
the establishment of the Reservation.
\2\ Under the CAA, lands held in trust for the use of an Indian
tribe are reservation lands within the definition at 18 U.S.C.
1151(a), regardless of whether the land is formally designated as a
reservation. See 63 FR 7254, 7258 (Feb. 12, 1998) (``Tribal
Authority Rule''); Arizona Pub. Serv. Co. v. EPA, 211 F.3d 1280,
1285-86 (D.C. Cir. 2000). EPA's references in this FIP to Indian
country lands within the exterior boundaries of the U&O Reservation
include any such tribal trust lands that may be acquired by the Ute
Indian Tribe.
In 2014, the U.S. Court of Appeals for the D.C. Circuit
addressed EPA's authority to promulgate a FIP establishing certain
CAA permitting programs in Indian country. Oklahoma Dept. of
Environmental Quality v. EPA, 740 F. 3d 185 (D.C. Cir. 2014). In
that case, the court recognized EPA's authority to promulgate a FIP
to directly administer CAA programs on Indian reservations but
invalidated the FIP at issue as applied to non-reservation areas of
Indian country in the absence of a demonstration of an Indian
tribe's jurisdiction over such non-reservation area. Because the
current proposed rule would apply only on Indian country lands that
are within the exterior boundaries of the U&O Reservation, i.e., on
reservation areas, the Oklahoma court decision is not implicated.
Table 1--Source Categories Affected by This Anticipated Action
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Examples of regulated
Industry category NAICS code entities/description of
industry category
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Oil and Gas Production/ 21111 Exploration for crude
Operations. petroleum and natural gas;
drilling, completing, and
equipping wells; operation
of separators, emulsion
breakers, desilting
equipment, and field
gathering lines for crude
petroleum and natural gas;
and all other activities
in the preparation of oil
and gas up to the point of
shipment from the
producing property.
Production of crude
petroleum, the mining and
extraction of oil from oil
shale and oil sands, the
production of natural gas,
sulfur recovery from
natural gas, and the
recovery of hydrocarbon
liquids from oil and gas
field gases.
Crude Petroleum and Natural 211111 Exploration, development
Gas Extraction. and/or the production of
petroleum or natural gas
from wells in which the
hydrocarbons will
initially flow or can be
produced using normal
pumping techniques or
production of crude
petroleum from surface
shales or tar sands or
from reservoirs in which
the hydrocarbons are
semisolids.
Natural Gas Liquid Extraction. 211112 Recovery of liquid
hydrocarbons from oil and
gas field gases; and
sulfur recovery from
natural gas.
Drilling Oil and Gas Wells.... 213111 Drilling oil and gas wells
for others on a contract
or fee basis, including
spudding in, drilling in,
redrilling, and
directional drilling.
Support Activities for Oil and 213112 Performing support
Gas Operations. activities on a contract
or fee basis for oil and
gas operations (except
site preparation and
related construction
activities) such as
exploration (except
geophysical surveying and
mapping); excavating slush
pits and cellars, well
surveying; running,
cutting, and pulling
casings, tubes, and rods;
cementing wells, shooting
wells; perforating well
casings; acidizing and
chemically treating wells;
and cleaning out, bailing,
and swabbing wells.
Engines (Spark Ignition and 2211 Provision of electric power
Compression Ignition) for to support oil and natural
Electric Power Generation. gas production where
access to the electric
grid is unavailable.
Fossil Fuel Electric Power 221112 Operating fossil fuel
Generation. powered electric power
generation facilities
using fossil fuels, such
as coal, oil, or gas, in
internal combustion or
combustion turbine
conventional steam process
to produce electric
energy. Electric energy
production is provided to
electric power
transmission systems or to
electric power
distribution systems.
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Petroleum Bulk Stations and 424710 Bulk liquid storage
Terminals. facilities primarily
engaged in the merchant
wholesale distribution of
crude petroleum and
petroleum products,
including liquefied
petroleum gas.
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This list is not intended to be exhaustive, but rather provides a
guide for readers regarding entities potentially affected by this
anticipated action. If you have any questions regarding the
applicability of this potential action to a particular entity, contact
the appropriate person listed in the FOR FURTHER INFORMATION CONTACT
section.
II. Purpose of This Advance Notice of Proposed Rulemaking
The EPA is issuing this ANPRM to solicit comment on how to best
design and implement an ERC banking and trading program for stationary
sources located on the Indian country portion of the Uinta Basin Ozone
Nonattainment Area.\3\ (As discussed previously, the Indian country
lands within the Uinta Basin Ozone Nonattainment Area to which a U&O
ERC bank would apply are on the U&O Reservation. There are, in
addition, portions of the nonattainment area that are outside of Indian
country; sources in those areas are subject to state law.\4\) Allowing
sources to use an EPA-run bank to credit eligible emissions reductions
would serve three purposes:
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\3\ Effective August 3, 2018, certain parts of the Uinta Basin
were classified as a Marginal nonattainment area for the 2015 ozone
NAAQS. 83 FR 25776, 25837 (June 4, 2018); see also information and
links posted at https://www.epa.gov/ozone-designations/additional-designations-2015-ozone-standards.
\4\ As noted previously, our expectation is that the bank will
apply only to stationary sources on Indian country lands within the
U&O Reservation that are part of the Uinta Basin Ozone Nonattainment
Area, but we are taking comment on the potential for the bank to
interact with sources that are outside the nonattainment area or the
U&O Reservation.
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1. The requirement to obtain offsets (as ERCs) for permitting new
or modified major sources would likely incentivize industry to
voluntarily implement controls on existing operations, which would lead
to emissions reductions sooner than would otherwise occur. We expect,
based on the existing emissions inventory, that the primary generators
of ERCs will be minor oil and natural gas production sources, while the
primary users of ERCs as compensating emissions reductions will be new
or modified major sources.
2. The ability to bank emissions credits would facilitate continued
economic development by providing a market for compensating emissions
reductions and offsets, such as those required to construct new and
modified major sources in the nonattainment area. The Uinta Basin Ozone
Nonattainment Area is classified as a Marginal nonattainment area for
the 2015 ozone NAAQS. At the Marginal level of nonattainment, offsets
for permitting new or modified major sources could be purchased and
used at a ratio of 1.1 ton of emissions reductions of an ozone
precursor to every 1 ton of new emissions added to the Basin.\5\ This
requirement for major source offsets ensures a declining emissions
trend, while still allowing new major source development.\6\ As
discussed below, other options exist to increase the effectiveness of
this program as a means of reducing emissions and improving air
quality.
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\5\ CAA section 182(a)(4), 42 U.S.C. 7511a(a)(4) (setting
general offset requirement for Marginal Areas).
\6\ Although minor sources are not subject to this major source
individual offset requirement, the EPA believes that 1:1
compensating emissions reductions could be the simplest way to show
that a new minor source does not ``cause or contribute'' to a NAAQS
violation. The EPA is open to ideas about other ways to make this
demonstration.
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3. The ability to bank emissions credits for later use to satisfy
CAA general conformity requirements applicable to federal actions would
minimize delays in such actions.
To ensure the integrity of the program and its consistency with the
CAA, to qualify as ERCs, emissions reductions are required to be
quantifiable, enforceable, permanent, and surplus of CAA
requirements.\7\
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\7\ For detailed discussion of the meaning of these terms
(quantifiable, enforceable, permanent, and surplus) in this context,
see Improving Air Quality with Economic Incentive Programs, EPA-452/
R-01-001 (EPA Office of Air and Radiation, 2001) (``EIP Guidance,''
available at https://www.epa.gov/sites/production/files/2015-07/documents/eipfin.pdf), chapter 4 (describing these ``fundamental
principles'' of all banking and trading programs). For additional
authorities establishing that CAA emission reduction credits must be
quantifiable, enforceable, permanent, and surplus, see CAA section
173(c), 42 U.S.C. 7503(c) (requiring that emissions offsets in
nonattainment permitting be ``not otherwise required,'' ``in
effect'' by the time a source commences operation, and
``enforceable''); 40 CFR 51.165(a)(3)(ii)(C)(1)(i) (requiring that
SIPs and TIPs provide that emission reduction credits from shutdowns
or operational curtailments must be surplus, quantifiable,
enforceable, and permanent); 40 CFR part 51, subpart U (rules for
``mandatory'' economic incentive programs submitted as part of
satisfying SIP requirements under CAA sections 182 and 187) (stating
that programs must be ``state and federally enforceable,'' and that
``[p]rograms in nonattainment areas for which credit is taken in
attainment and RFP demonstrations shall be designed to ensure that
the effects of the program are quantifiable and permanent over the
entire duration of the program, and that the credit taken is limited
to that which is surplus.''); Emissions Trading Policy Statement, 51
FR 43814, 43831 (Dec. 4, 1986) (``To assure that emissions trades do
not contravene relevant requirements of the Clean Air Act, only
reductions which are surplus, enforceable, permanent, and
quantifiable can qualify as ERCs and be banked or used in an
emissions trade.''); Emissions Offset Interpretive Ruling, 44 FR
3274, 3274-76 (Jan. 16, 1979) (``Emissions reductions achieved by
shutting down an existing source or curtailing production or
operating hours may be generally credited for offsets if they . . .
are surplus, permanent, quantifiable, and federally enforceable. .
.'').
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The CAA allows the establishment of emissions banking and trading
systems to meet applicable requirements, and allows for flexibility and
tailoring of the program to specific geographic areas.\8\ As discussed
in detail in Section V of this ANPRM, the EPA is requesting comments on
a range of elements concerning whether and how an ERC banking rule
should be designed and implemented for the Indian country portion of
the Uinta Basin Ozone Nonattainment Area. We will take this feedback
into consideration in developing a notice of proposed rulemaking (NPRM)
for a FIP for crediting ozone precursor emissions reductions from
existing Indian country sources within the Uinta Basin Ozone
Nonattainment Area.
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\8\ See, e.g., CAA sections 110(a)(2)(A), 42 U.S.C
7410(a)(2)(A), and 172(c)(6) (state implementation plans must have
``control measures, means, or techniques (including economic
incentives such as fees, marketable permits, and auctions of
emissions rights)''; see also EIP Guidance.
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III. What is an emission reduction credit bank?
The following information is meant to give the reader a general
overview of ERC banks. Specifics may vary depending on the design of
the actual regulatory program.
Generally speaking, source owners or operators can generate
emissions reductions using a number of approaches, including curtailing
emissions or shutting down emissions units. These emissions reductions
can
[[Page 24067]]
then be certified as ERCs and deposited in a bank provided they meet
relevant requirements. ERCs can thus be viewed as financial incentives
that can be saved for later use as emissions offsets by the depositor
or sold or traded at the market price to other sources needing
emissions offsets.
ERCs are generated when owners or operators of a facility or source
reduce emissions of criteria pollutants \9\ or their precursors below
any applicable regulatory requirements, while complying with all other
applicable requirements of the CAA.\10\ ERCs can be generated from
permanent shutdown and removal of equipment; upgrade or retrofit to
more stringent emissions controls; or change of process, methods, or
operating guidelines that would affect emissions. These control methods
and technologies must result in real, quantifiable, enforceable, and
permanent reductions in emissions, and the reductions must be surplus
of CAA requirements.\11\
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\9\ While lead is a criteria pollutant, ERC banks should not
address lead emissions. See EIP Guidance.
\10\ An ERC must not conflict with or override other CAA
requirements that may apply to an area or source(s) (e.g., part D
nonattainment NSR offset requirements or part C PSD requirements)
regardless of the attainment classification of an area. See EIP
Guidance at 15.
\11\ See n. 7, above.
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The overall purpose of an ERC bank is to apply market-based
strategies to encourage reductions in emissions for an area, which may
help meet shared air quality goals. An ERC bank promotes flexibility
and innovation in complying with state and federal air emissions
requirements established in a SIP/FIP/TIP and SIP/FIP/TIP-approved air
permitting programs. This flexibility should allow for the achievement
of air quality goals (e.g., SIP/FIP/TIP requirements) more quickly and
at a lower cost while still complying with all applicable requirements
of the CAA.
As mentioned in Section I, we expect that a principal use of
emission reduction credits will be to offset new and modified major
source emissions as part of NNSR permitting. Sections 172(c)(5) and 173
of Part D of title I of the CAA and EPA's implementing regulations at
40 CFR 51.165 contain the NSR requirements for areas designated
nonattainment for a NAAQS. NNSR only applies to pollutants or their
precursors for which the area is designated as nonattainment for a
NAAQS under the CAA. The NNSR program has specific emissions thresholds
for determining which new sources or modifications of existing sources
are ``major'' based on the nonattainment classification of the specific
pollutant.\12\ Once a stationary source is subject to the major NNSR
program, the source must meet several criteria to receive a
preconstruction permit. The most significant of these requirements are
the application of the Lowest Achievable Emissions Rate (LAER) to the
stationary source or project and the requirement to offset potential
emissions increases from the project with decreases in actual emissions
from the same or other stationary sources located in the same
nonattainment area or a nonattainment area of equal or higher
classification.
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\12\ The ``major stationary source'' threshold for a marginal
and moderate nonattainment areas is 100 tpy for a pollutant or
precursor. NNSR also applies to existing major stationary sources
that undertake a ``major modification,'' which occurs when the
change ultimately results in a ``significant net'' emissions
increase of the nonattainment pollutant (significance rates are
defined in 40 CFR 51.165(a)(1)(v)). The significance threshold is
lower in certain nonattainment areas with higher degrees of
nonattainment, with the specific level based on the area's
nonattainment classification.
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Under existing EPA regulations, source owners seeking permits for
construction of new or modified minor sources in a nonattainment area
of Indian country must demonstrate that the source will not cause or
contribute to a NAAQS violation. 40 CFR 49.155(a)(7)(ii). The EPA's
Indian Country Oil and Natural Gas True Minor Source FIP allowed
streamlined permitting of new and modified minor oil and natural gas
sources on Indian country lands within the U&O Reservation before the
designation of the Uinta Basin Ozone Nonattainment Area, but that FIP
does not currently provide for streamlined permitting of sources in the
nonattainment area.\13\ Instead, those sources must obtain source-
specific permits before beginning construction, under the rules at 40
CFR 49.151 through 49.165.\14\
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\13\ See 40 CFR 49.101(b)(1)(v).
\14\ On May 8, 2018, EPA proposed to amend the Indian Country
Oil and Natural Gas True Minor Source FIP to allow the FIP to apply
in the Uintah Basin Ozone Nonattainment Area. See 83 FR 20775.
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IV. Background on the U&O Reservation
The Ute Indian Tribe is a federally recognized Indian tribe
organized under the Indian Reorganization Act of 1934,\15\ with its
Constitution and By-Laws adopted by the Tribe on December 19, 1936, and
approved by the Secretary of the Interior on January 19, 1937.\16\ The
Uintah and Ouray Indian Reservation was formerly the Uintah Valley and
Uncompahgre Reservations, which were established in 1861 and 1882,
respectively.\17\ The Tribe's Constitution and By-Laws reorganized
three Ute Tribes into one, and clarified that tribal jurisdiction
within the U&O Reservation extends to the territory within the original
Uintah and Uncompahgre Reservations, which was later enlarged through
the Hill Creek Extension Act of 1948.\18\ The U&O Reservation currently
includes all Indian country lands within its exterior boundaries, as
defined by the 1861 and 1882 Executive Orders, the Act of May 5, 1864,
the Hill Creek Extension Act of 1948, and subsequent court
decisions.\19\
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\15\ See 83 FR 34863, 34866 (July 23, 2018) (list of federally
recognized tribes); 48 Stat. 984, 25 U.S.C. 5123 (Indian
Reorganization Act).
\16\ Constitution and By-Laws of the Ute Indian Tribe, available
at https://www.loc.gov/law/help/american-indian-consts/PDF/37026342.pdf.
\17\ The U&O Reservation was established for the Ute Indian
Tribe under Executive Order in 1861, 1 Kapp. 900, as confirmed by
the Act of May 5, 1864, 13 Stat. 63, and under Executive Order of
January 5, 1882, then enlarged through the Hill Creek Extension Act
of 1948, 62 Stat. 72. The Reservation has been addressed in multiple
federal court decisions, including Ute Indian Tribe v. Utah, 521 F.
Supp. 1072, 1155 (D. Utah 1981); Ute Indian Tribe v. Utah, 716 F.2d
1298 (10th Cir. 1983); Ute Indian Tribe v. Utah, 773 F.2d 1087 (10th
Cir. 1985) (en banc), cert. denied, 479 U.S. 994 (1986); Hagen v.
Utah, 510 U.S. 399 (1994); Ute Indian Tribe v. Utah, 935 F. Supp.
1473 (D. Utah 1996); Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th
Cir. 1997), cert. denied, 522 U.S. 1107 (1998); Ute Indian Tribe v.
Utah, 790 F.3d 1000 (10th Cir. 2015), cert. denied, 136 S. Ct. 1451
(U.S. Mar. 21, 2016); and Ute Indian Tribe v. Myton, 835 F.3d 1255
(10th Cir. 2016), cert. dismissed, 137 S.Ct. 2328 (2017). As a
result of this line of cases, there are some non-Indian-country
lands within the exterior boundaries of the Uintah and Ouray Indian
Reservation.
\18\ 62 Stat. 72.
\19\ See n. 16, above.
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Pursuant to CAA section 301(d),\20\ the EPA is authorized to treat
eligible Indian tribes in the same manner as states (``treatment as
state'' or TAS) for purposes of implementing CAA provisions over their
entire reservations and over any other areas within their
jurisdiction.\21\ The Ute Indian Tribe has not applied for TAS for the
purpose of administering a TIP under the CAA. Thus, there is currently
no EPA-approved plan implementing the functions and provisions of the
CAA on Indian country lands within the U&O Reservation. We anticipate
that the U&O ERC banking rule for which the EPA is providing this
advance notice of proposed rulemaking and soliciting comment would
apply to the Indian country lands within the exterior boundaries of the
U&O Reservation that are part of the Uinta Basin Ozone Nonattainment
Area.
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\20\ See 42 U.S.C. 7601(d).
\21\ See 63 FR 7254-57 (Feb. 12, 1998) (explaining that CAA
section 301(d) includes a delegation of authority from Congress to
eligible Indian tribes to implement CAA programs over all air
resources within the exterior boundaries of their reservations).
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[[Page 24068]]
V. Areas Where the EPA Is Requesting Comment
For purposes of formulating a Reservation-specific ERC banking
rule, the EPA is seeking comment on the following issues:
A. Conceptual support for an EPA-run U&O ERC bank: Should the EPA
proceed with plans to propose a rule establishing such a voluntary ERC
bank? The EPA seeks comment on whether industry (and potentially
others) would use an ERC bank for the Indian country lands within the
U&O Reservation that are part of the Uinta Basin Ozone Nonattainment
Area. Are there any reasons not to create a U&O ERC bank, or are there
suggestions to handle surplus emission reduction crediting through
another approach? Finally, are there existing state-run ERC banking
systems that may serve as a good example for developing a U&O ERC bank?
B. Participation in the U&O ERC bank: The EPA expects that the
principal clients of a U&O ERC bank would be industrial sources within
the Indian country portions of the Uinta Basin Ozone Nonattainment Area
depositing emission reduction credits for sale or for later use to
support future development, as well as new and modified industrial
sources needing offsets necessary to obtain a major NNSR permit. We
seek comment on what other entities (besides companies implementing
voluntary emissions controls and/or companies needing offsets to
support new development) should be permitted to participate in a U&O
ERC bank. Such entities might include non-governmental organizations,
federal government agencies, local government, the Ute Indian Tribe and
others. Are there any reasons to preclude any entities from purchasing
ERC credits from such a bank?
C. ERC bank format: The EPA seeks comment on the format and
features of a U&O ERC bank. It is expected that (as with most ERC
banks) a database would be created to track and manage ERCs, through
their deposit, trading and use, that will be publicly available online.
The EPA solicits comment on this expectation. Additionally, should the
owner of an ERC be required to deposit the ERC into the bank before
using it as an offset, in order to centralize tracking? Or, if an
emissions reduction is created for a specific project, can it be
evaluated as part of the project and avoid the U&O ERC bank? The EPA
seeks comments on what information should be maintained in the database
for each banking action.
D. Creditable emissions reductions: The EPA intends to propose a
rule that specifically outlines what emissions reductions qualify as
creditable for deposit in a U&O ERC bank. Generally, qualifying ERCs
are limited to emissions reductions that are real, quantifiable,
enforceable, permanent, and surplus of CAA requirements. Such ERCs are
typically generated by permanently shutting down equipment, modifying a
process (i.e., using a lower VOC/sulfur containing material), or by
adding emissions controls beyond those required by any applicable
regulation.
Some state-run ERC banks require that a certain percentage of
reductions be removed and made ineligible for future use to ensure an
environmental benefit to the banking system. For instance, if an
operator achieves a 10 tpy reduction by implementing an emissions
control on a given source, some percentage (such as 10%) may be retired
for environmental benefit, and only 9 tpy would be deposited in the ERC
bank for future offsets or compensating emissions reductions. This
ensures that more accelerated progress is made towards attainment. The
EPA seeks comment on whether this practice should be implemented for a
U&O ERC bank, and if so, at what percentage?
Given the seasonal nature of ozone generation in the Uinta Basin,
are there legally and technically supported approaches to allowing
seasonal emissions reductions to be credited? Should seasonal
limitations be placed on the program? For instance, should the rule
prevent summertime reductions from being used to support the addition
of wintertime emissions?
How should the ERC banking rule treat emissions reductions that
occur from emissions unit shutdowns? What requirements should apply to
shut-down equipment to ensure it meets the requirement to be a
permanent reduction? There are restrictions on the use of reductions
occurring from equipment shutdowns in 40 CFR 51.165(a)(3)(ii)(C)(1),
such as only being eligible for use if the shutdown occurred after the
last day of the baseline year for the plan. Additionally, use of
reductions from equipment shutdowns must be restricted to prohibit
operation of that unit elsewhere in the nonattainment area. Should the
use of reductions from shut-down equipment be restricted further, such
as disallowing operation in a broader area outside of the nonattainment
area, or requiring destruction of the unit?
E. Trading of ERCs: A principal use of an ERC bank would be to
allow companies in need of emissions offsets to construct new and
modified sources to purchase those credits from companies that have
permanently reduced emissions and deposited those ERCs in the bank. The
EPA expects that a U&O ERC bank would allow the purchase and exchange
of ERCs, and such exchanges would be publicly documented. The EPA
further anticipates that the price of ERCs would be determined by the
open market based on the demand for such ERCs. The EPA intends to
propose to require documentation from both the company selling a credit
and the company acquiring the credit in order to process that
transaction and would make publicly available such information--
including the number of ERCs purchased, the method of emissions
reduction, and the purchase price. The EPA seeks comment on this
expectation and any input on what additional information should be
provided to document transactions within the anticipated U&O ERC bank
database.
F. Use of ERCs: In addition to using banked ERCs as offsets for new
and modified major sources, these emissions reductions may also be used
to show that a new or modified minor source does not cause or
contribute to an ozone NAAQS violation, or to satisfy general
conformity requirements. If such reductions are not available within
the existing inventory of a company's emissions sources or are needed
by a federal agency to demonstrate general conformity for a specific
action, the U&O ERC bank could be used to facilitate the purchase of
available ERCs. In such a case, the necessary amount of ERCs would be
purchased from one (or more) entities in possession of ERCs.
Documentation of the transaction would be provided to the EPA, and
those credits would be withdrawn from the bank when used to support a
permit action. The EPA intends to propose a U&O ERC banking rule that
describes the specifics of this process, consistent with the principles
and requirements described in the EIP Guidance.\22\ However, the EPA
solicits comments on any additional considerations and flexibilities
that should be made to allow this process to function efficiently for
participants within the U&O Reservation. A primary goal of the program
is to allow eligible ERCs to be certified for eventual use as offsets
in accordance with major NNSR and general conformity requirements. Are
there any other uses of an ERC that EPA
[[Page 24069]]
should be evaluating, such as for discretionary use in minor NNSR?
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\22\ All offsets used for the purpose of satisfying general
conformity requirements must meet the regulatory requirements
relating to offsets in 40 CFR 93.158(a)(5)(iii).
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G. Withdrawal of ERCs from the bank: The EPA intends to evaluate
banked credits for compliance with the ``surplus of Clean Air Act''
requirement at the time of their use as compensating offsetting
emissions (e.g., upon issuance of a permit). In the event of future
promulgation of emissions controls as part of a federal or tribal
implementation plan, or to satisfy CAA requirements such as reasonably
available control technology (RACT) or RFP, the EPA does not expect
sources that have already provided offsets to need to pursue additional
offsetting emissions. The EPA seeks comment on this anticipated
expectation and on whether any other factors should be considered. We
also seek comment as to whether banked credits should be discounted or
expire after some period of time, even if they remain surplus of CAA
requirements.
H. Emissions reductions achieved before the effective date of final
U&O ERC banking rule: The EPA expects that because the final 2015 Ozone
Implementation Rule \23\ defines a primary base year of 2017, that year
will likely be an appropriate base year for the Uinta Basin Ozone
Nonattainment Area banking and trading program. To allow for near-term
surplus emissions reductions that would benefit air quality, the EPA
intends to include as a component of the proposed rule that qualifying
emissions reductions achieved before the final rule's effective date,
but after the nonattainment baseline year, may be banked; effectively,
any emissions reduction achieved after January 1, 2018. The EPA seeks
comment on the inclusion of this flexibility.
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\23\ Implementation of the 2015 National Ambient Air Quality
Standards for Ozone: Nonattainment Area State Implementation Plan
Requirements. 83 FR 62998 (Dec. 6, 2018). https://www.govinfo.gov/content/pkg/FR-2018-12-06/pdf/2018-25424.pdf.
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I. Geographic considerations and interaction with Utah-managed CAA
planning requirements: As explained previously, we anticipate that any
proposed U&O ERC bank would only apply to sources on Indian country
lands within the U&O Reservation that are within the Uinta Basin Ozone
Nonattainment Area. There may, however, be situations where sources on
land managed by Utah have a need for ERCs and wish to purchase them
from a source in Indian country. Conversely, sources covered by the
EPA-run bank may wish to purchase ERCs from a source managed by Utah.
From a scientific standpoint, ozone precursor emissions are generally
uniformly mixed across jurisdictions beneath the inversion during high-
ozone events in the Uinta Basin Ozone Nonattainment Area; the original
location within the nonattainment area of emissions (and emissions
reductions) is irrelevant to the nonattainment area's overall ozone
design values. However, as a legal matter, the EPA is limited in the
scope of applying any potential U&O ERC bank rulemaking to sources in
Indian country. Accordingly, we seek comment on whether, and under what
criteria and constraints, an EPA-run bank for sources on the Indian
country portion of the Uinta Basin Ozone Nonattainment Area should
interact with any state-run bank that may be developed for sources on
land under Utah CAA regulatory jurisdiction. We also seek comment on
whether the EPA should pursue collaboration with Utah in allowing for
cross-jurisdictional exchange of ERCs. Finally, is there any
justification to allow the use, or banking of credits outside of the
Uinta Basin Nonattainment Area, but within the general geographic
extent of the Uinta Basin?
J. General comments: The EPA also invites the public's comment on
any other questions associated with developing an emissions banking and
trading program to address the goals described previously in the
``Purpose'' section of this ANPRM.
VI. Statutory and Executive Order Reviews
Under Executive Order 12866, entitled Regulatory Planning and
Review (58 FR 51735, Oct. 4, 1993), the OMB has determined that this is
a not a ``significant regulatory action.'' Because this ANPRM does not
propose or impose any requirements, and instead seeks comments and
suggestions for the Agency to consider in possibly developing a
subsequent proposed rule, the various statutes and Executive Orders
that normally apply to rulemaking do not apply in this case. Should the
EPA subsequently determine to pursue a rulemaking, the EPA will address
the statutes and Executive Orders as applicable to that rulemaking.
The EPA seeks any comments or information that would help the
Agency ultimately to assess the potential impact of a rule on small
entities pursuant to the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
et seq.); to consider voluntary consensus standards pursuant to section
12(d) of the National Technology Transfer and Advancement Act of 1995
(NTTAA) (15 U.S.C. 272 note); to consider environmental health or
safety effects on children pursuant to Executive Order 13045, entitled
``Protection of Children from Environmental Health Risks and Safety
Risks'' (62 FR 19885, April 23, 1997); or to consider human health or
environmental effects on minority or low-income populations pursuant to
Executive Order 12898, entitled ``Federal Actions to Address
Environmental Justice in Minority Populations and Low-Income
Populations'' (59 FR 7629, Feb. 16, 1994).
The Agency will consider such comments during the development of
any subsequent proposed rule.
List of Subjects in 40 CFR Part 49
Environmental protection, Administrative practices and procedures,
Air pollution control, Indians, Indians-law, Indians-tribal government,
Intergovernmental relations, reporting and recordkeeping requirements.
Dated: May 18, 2019.
Debra Thomas,
Acting Regional Administrator, EPA Region 8.
[FR Doc. 2019-10798 Filed 5-23-19; 8:45 am]
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