Alternatives to BART Rule

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Alternatives to BART Rule

• Kathy Kaufman
• Discussion with VISTAS
• September 6-7, 2006

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Overview Purpose of Alternatives to BART Rule

• Fix Regional Haze Rule (RHR) to enable use of
  alternatives to BART in light of CEED court
  ruling.
• Establish minimum elements of cap and trade
  programs under section 308(e)(2) of RHR.
• Enable western states/tribes to continue use of
  GCVTC/WRAP strategies
• -- Allow for Western states backstop SO2
  provisions -309(d) of RHR

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Historical Background

• Source-by Source BART
• 1999 RHR 308(e)(1)
• 2001 Guidelines proposed
• Incl. Trading section
• 2002 American Corn Growers
• 2004 Guidelines 308(e)(1) revisions
  (re)proposed
• 2005 Guidelines Final 6/15
• Detailed trading section omitted due to CEED.
  Instead, separate rule?
• Contained CAIR better than BART determination
• Contained test for acceptability of alternative
  program

• Trading/alternatives
• 1999 RHR 308(e)(2) 309
• 2000 WRAP submits Annex
• 2003 Annex Rule
• 2005 CEED nixes Annex Rule
• 2005 (8/1) Alternatives to BART Rule proposed
• 2006 (expected Sept.) Alternatives to BART
  rule final

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CEED v. EPAD.C. Circuit, Feb. 18, 2005

• Granted petition requesting that Annex Rule be
  vacated.
• Basis of decision BART methodology used in
  Annex was invalid under American Corn Growers
• Result
• Rule which governed the 6 309 SIPs vacated
• New deadlines and regulatory mechanism needed if
  GCVTC/WRAP strategies are to proceed
• Provisions governing how alternative trading
  programs are shown to be better than BART must
  be revised to comply with CEED decision.

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Source-by-source BART vs. Trading / Alternative
ID BART eligible sources
Determine sources subject to BART
source-by-source BART 308(e)(1)
trading or alternative to BART 308(e)(2)
Analyze Decide
Decide 309 or 308
BART determination
Demonstrate trading/alternative achieves greater
reasonable progress
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Alternative Programs

309 Trading Program Requirements 40 CFR
51.309(d)(4) for WRAP states
308(e)(2) Trading Program Requirements 40 CFR
51.308(e)(2)(vi) For any States
or
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RHR Revisions to allow continued use of
GCVTC/WRAP Strategies

• Annex provisions repealed due to vacature
• 309(f) (calling for Annex submittal)
• 309(h) (codifying WRAP Annex)
• Consequence milestones and all program details
  must be resubmitted
• E.g, new source tribal set asides, allocation
  methodology, etc.
• Basic requirements for backstop SO2 program SIP
  requirements provided in 309(d)(4)
• Timing 309 SIPs / TIPs now also due in
  December, 2007
• WRAP Annex process not repeated

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308 Proposed Rules

• Applies to all states
• States can choose trading/alternative measure to
  BART 40 CFR 51.308(e)(2)
• If alternative is cap trade program, rule
  identifies essential elements of the cap and
  trade program which must be met
• 40 CFR 51.308(e)(2)(vi)

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Approvability of Trading Program

• If states choose cap and trade program in lieu of
  BART, then program must
• Demonstrate trading program achieves greater
  reasonable progress than source-by-source BART
• Meet criteria in 40 CFR 51.308(e)(2)(vi)
  essential elements of cap and trade programs
• Trading program must include all necessary
  provisions to ensure emission reduction targets
  will be achieved
• Be enforceable clearly written, and if
  regional, then participating states must have
  essentially the same program to ensure program is
  practicably enforceable.

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Test for Greater Reasonable Progress i.e.
Better-than-BART

• 308(e)(2) satisfied if
• Emission reductions are greater under alternative
  and geographic distribution of emissions not
  substantially different
• OR
• If geographic distribution is different
• Visibility does not decline at any affected
  Class I area
• Alternative program produces greater overall
  improvement based on average across all areas.

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Test for Greater Reasonable Progress i.e.
Better-than-BART, cont.

• Where a requirement other than BART determines
  the level of emission reductions necessary, e.g.
• CAIR
• Reasonable progress
• The BART benchmark is not forcing invalid
  reductions
• Therefore, state may apply most-stringent BART
  assumptions in better than BART analysis

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Universe of Sources in Program

• Applicability
• Define sources subject to program
• BART and non-BART?
• All sources in a category?
• Facility cap?
• BART and non-BART units at a facility? Program
  must be in place and established in SIP submitted
  December 2007.
• Program must be in place and established in
  December, 2007 SIP submittal.

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Elements Necessary in Trading Program

• Allowances
• - Total tonnage value of allowances allocated do
  not exceed emissions cap
• Monitoring
• Consistent accurate emissions measurements (a
  ton is a ton)
• Those selling allowances
• Boilers, combustion turbines, cement kilns Part
  75
• Others source types Part 75 equivalent (same
  precision, reliability, accessibility, timeliness)

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Elements Necessary in Trading Program, cont.

• Recordkeeping
• Ensure enforceability
• Those selling allowances Meet Part 75
• Reporting
• Timely reporting with sufficient frequency to
  ensure enforceability, provide for audits
• Sources selling allowances comply with Part 75
  or submit to TSA if EPA is not TSA

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Elements Necessary in Trading Program, cont.

• Tracking System
• Publicly available, secure, centralized
• Tracking in consistent manner
• Authorized Account Representative
• - Designate one individual authorized to
  represent source
• Allowance Transfer
• - Uniform procedures for timely transfer
  recording of allowances

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Elements Necessary in Trading Program, cont.

• Compliance
• - Prohibit source from emitting more emissions
  than sources allowance holdings
• Penalty
• Mandatory allowance deduction for excess
  emissions
• Allowance deduction shall be at least 3 to 1

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Elements Necessary in Trading Program, cont.

• Banking
• - If banking is allowed, specify any restrictions
• Program Assessment
• - Periodic program assessment to determine if
  program is accomplishing goals, and determine if
  program modifications are needed