CSAPR and NOx Budget Non-EGUs

Nitrogen Oxides (NOx) State Implementation Plan (SIP) Call Rule

The Ozone Transport NOx SIP Call rule was promulgated by the United States Environmental Protection Agency (U.S. EPA) in 1998. The rulemaking, commonly referred to as the NOx SIP Call, required eastern states to submit SIPs that set statewide NOx budgets for the ozone season. NOx is a major precursor to the formation of ozone and the ozone season is the warm summer months in each year when ground-level ozone concentrations are highest. The NOx Budget Trading Program (NBP) was an allowance trading program the U.S. EPA provided in the rule as an option for States to use to meet NOx SIP Call obligations. A model rule was included in the NOx SIP Call rule and can be found in 40 CFR 96.

Indiana’s NBP was adopted in 2001 and can be found in the Indiana Administrative Code (IAC) at 326 IAC 10-4. The rulemaking generally applies to large electric generating units (EGUs), which includes, boilers, turbines, and combined cycle units used to generate electricity for sale. However, Indiana is one of the states that included large non-EGUs (non-EGU) as part of the Indiana NBP. These units were allowed to opt into the NBP. Examples of these units are boilers and turbines at heavy manufacturing facilities, such as aluminum smelters, petroleum refineries, and iron and steel production facilities. These units also include steam plants at institutional settings, such as large universities.

Clean Air Interstate Rule (CAIR)

In 2005, U.S. EPA issued the Clean Air Interstate Rule to address interstate transport of ozone and fine particulate matter pollution. CAIR required certain states to limit annual emissions of NOx and sulfur dioxide (SO2), which contribute to the formation of ozone and PM2.5. The rule also included limiting ozone season NOx emissions. In 2006, U.S. EPA published CAIR Federal Implementation Plans (FIPs) for states covered by CAIR to ensure the required emission reductions were achieved on schedule. As the control strategy for the FIPs, U.S. EPA adopted the model SO2 and NOx cap-and-trade programs for fossil-fuel-fired power plants. CAIR established three separate cap-and-trade programs that most States used to achieve required reductions in developing state SIPs.

CAIR consisted of three cap and trade programs: an annual SO2 trading rule that builds on the existing Acid Rain program; an ozone season NOx trading rule that builds on the existing NOx SIP Call program; and a new annual NOx trading program. Reductions were required to take place in two phases: 2009 and 2015 for NOx and 2010 and 2015 for SO2. The CAIR NOx annual trading program applied to EGUs used to generate electricity for sale but some states also included large industrial units that produce electricity or steam primarily for internal use and large affected units carried over from the NBP.

Indiana included non-EGUs from the NOx SIP Call in the CAIR ozone season trading program so that non-EGUs that were part of the NOx SIP Call trading rule (326 IAC 10-4) could continue to trade allowances. Indiana adopted its CAIR SO2 and NOx Annual Trading Programs and CAIR NOx Ozone Season Trading Program rules in 2007 at 326 IAC 24 in accordance with the requirements of the federal CAIR program.

In 2008, the U. S. Court of Appeals for the DC Circuit issued a ruling vacating CAIR in its entirety. After a hearing requested by U.S. EPA and other parties, the court revised its decision and remanded CAIR to U.S. EPA without vacatur. This ruling left CAIR and the CAIR FIPS, including the trading programs in place until U.S. EPA issued a new rule to replace it.

Cross State Air Pollution Rule (CSAPR)

In 2011, U.S. EPA finalized the CSAPR to replace CAIR and address power plant emissions that cross state lines and contribute to ozone and fine particle pollution in other states. In a separate, but related, regulatory action, U.S. EPA finalized a supplemental rulemaking on December 15, 2011 to require states to make summertime NOx reductions under the CSAPR ozone season control program. To speed implementation, U.S. EPA adopted FIPs for each of the states covered by CSAPR and encouraged State to submit SIPs. CSAPR includes several emissions trading programs that require affected EGUs to hold emission allowances sufficient to cover their emissions of NOx and/or SO2 for each compliance period.

As originally promulgated, compliance with CSAPR’s trading programs was scheduled to begin on January 1, 2012. However, on December 30, 2011, the D.C. Circuit stayed the rule. On October 23, 2014, the Court granted the U.S. EPA’s motion to lift the stay and toll the rule’s compliance deadlines by three years, allowing the first compliance period to begin on January 1, 2015. Due to tolling of compliance deadlines, U.S. EPA did not update the allocation spreadsheets provided with the original CSAPR rulemaking and retained the heat input years and historic emissions baseline provided in 2011.

CSAPR Annual SO2, Annual NOx and Ozone Season NOx Trading Programs Allowance Allocations for Electric Generating Units (EGUs)

The state of Indiana has developed a state implementation plan to administer the three trading programs under CSAPR and allocate allowances for affected electric generating units starting in 2021. The CSAPR Programs rulemaking revised Article 24 of the Indiana Administrative Code (IAC) to incorporate CSAPR requirements and repeal portions of CAIR. The final rule, 326 IAC 24 (LSA# 16-209), was adopted on November 24, 2017 and submitted to the U.S. EPA for SIP approval on November 27, 2017. IDEM is working with U.S. EPA on approval of the state CSAPR rules with plans to submit allowance allocations for 2020-2021 to U.S. EPA on June 1, 2018 for recordation in July.

NOx Emissions From Large Affected Units and Repeal of NOx Budget Trading Program

The large non-EGUs included in Indiana’s NBP were moved as a group to the Indiana CAIR NOx Ozone Season Trading Program rules at 326 IAC 24-3. CAIR had included large non-EGU boilers and combustion turbines in the CAIR NOx Ozone Season Trading Program, however large non-EGU units were not be brought into the CSAPR trading program. While CSAPR applies only to EGUs, U.S. EPA has offered several options for States to show continued compliance with the NOx SIP Call requirements with regard to large non-EGUs. There are three acceptable approaches to address NOx SIP Call requirements for these units.

  • Option 1: Streamlined demonstration. Demonstrate that total ozone-season NOx emissions from large non-EGU boilers and combustion turbines in the State that were included in the NBP but will not be included on the Transport Rule ozone-season trading program could not exceed the large non-EGU budget imposed by the NOx SIP Call even if these units were to operate every hour of the ozone season.
  • Option 2: Demonstrate that the NOx SIP Call reduction obligations for these large non-EGU boilers and combustion turbines are being met through alternative limits on these non-EGUs, in accordance with 40 CFR 51.121(f)(2)(I).
  • Option 3: Demonstrate that additional ozone season NOx emission reductions from other sources covered by the NOx SIP Call have achieved extra reductions, over and above any required for those other sources by the NOx SIP Call, to the degree that overall reduction requirements of the NOx SIP Call have been achieved without any reductions from large non-EGUs.

Non-EGU Budget Demonstration

Indiana CAIR rule had included large non-EGU boilers and combustion turbines, referred to as large affected units, in the CAIR NOx Ozone Season Trading Program, however large non-EGU units were not brought into the CSAPR trading program FIP. Large non-EGUs remain subject to the federal Ozone Transport NOx SIP Call (commonly referred to as the NOx SIP Call) rule requirements at 40 CFR 51.121; therefore, IDEM proposes to adopt NOx monitoring requirements into state rules for these units at 326 IAC 10-2 (LSA #15-414).

U.S. EPA has offered several options for States to show continued compliance with the NOx SIP Call requirements with regard to large non-EGUs. IDEM has evaluated these options, and based on the emissions data of the large non-EGU sources in Indiana, IDEM has selected the streamlined demonstration option, which demonstrates that the total ozone-season NOx emissions from large non-EGUs could not exceed the large non-EGU budget imposed by the NOx SIP Call, even if these units were to operate every hour of the ozone season.

Quick Reference Timeline

  • October 23, 2014: The D.C. Circuit granted U.S. EPA’s request that the court lift the CSAPR stay and toll the CSAPR compliance deadlines by three years with Phase 1 implementation beginning in 2015 and Phase 2 in 2017.
  • April 29, 2014: The U.S. Supreme Court Issued an opinion reversing an August 21, 2012 D.C. Circuit decision that had vacated CSAPR. Following the remand of the case to the D.C. Circuit, U.S. EPA requested that the court lift the CSAPR stay and toll the CSAPR compliance deadlines by three years.
  • March 29, 2013: The U.S. Solicitor General petitioned the Supreme Court to review the D.C. Circuit Court's decision on CSAPR.
  • January 24, 2013: The U.S. Court of Appeals for the D.C. Circuit denied U.S. EPA's petition for rehearing of the Court's August 2012 decision to vacate CSAPR.
  • October 5, 2012: The United States filed a petition seeking rehearing of the U.S. Court of Appeals for the D.C. Circuit's August 21, 2012 decision regarding U.S. EPA's CSAPR.
  • August 21, 2012: The U.S. Court of Appeals for the D.C. Circuit issued its ruling on CSAPR – to vacate the rule. Therefore CSAPR is stayed and the 2005 CAIR rule remains in effect until a decision has been made.
  • July 6, 2011: U.S. EPA finalized a rule that protects the health of millions of Americans by helping states reduce air pollution and attain clean air standards.
  • December 23, 2008: The U.S. Court of Appeals for the D.C. Circuit issued its ruling on the petitions for rehearing of the court’s July 11 decision to vacate CAIR and the associated FIP. The Court denied the petitions for rehearing en banc. However, the panel granted the petition for rehearing to the extent that it remanded the rule without vacatur.
  • March 10, 2005: U.S. EPA signed CAIR.

Notices

  • CSAPR - 326 IAC 24 (LSA #16-209 [PDF]) was adopted on November 24, 2017
  • U.S. EPA granted full approval of the Indiana CAIR SIP on November 29, 2010, effective January 28, 2011. (75 FR 72956 [PDF])
  • U.S. EPA granted partial approval of Indiana CAIR SIP on October 22, 2007, effective December 21, 2007. (72 FR 59480 [PDF])
  • CAIR - 326 IAC 24-1, 326 IAC 24-2, and 326 IAC 24-3 (LSA #05-117) was effective on February 25, 2007