Western Emissions Budget (WEB) Trading Program: Model Rule, Model SIP/TIP, MOU Bob Lebens, WESTAR Council Air Managers Committee March 19, 2003

Working Group Charge Ensure Model Rule/MOU contain all necessary provisions – Incorporate ‘Supplement to the Annex’ – Incorporate EPA comments Ensure consistency with state and tribal regulatory structures

Working Group Corky Martinkovic, AZ Mary Hilbert, NM Colleen Delaney, Lenore Epstein, UT Tina Jenkins, WY Bob Gruenig, NTEC Lee Alter, WRAP Lily Wong, EPA Region 9 Laurel Dygowski, EPA Region 8 Kristin Gaston, Bob Lebens, WESTAR

Project Status: Draft Model Rule, MOU, SIP/TIP MTF Review Arizona Stakeholders Review Public Review

Next Steps: AMC Concurrence MTF Approval WRAP Board Approval Additional Refinement by Working Group

Working Group Recommendation: Original documents: Model Rule MOU Revised documents: Model Rule SIP/TIP Template MOU

Legal Issues of MOU U.S. Constitution Art I, § 10, cl. 3 “No State shall, without the Consent of Congress, enter into any Agreement or Compact with another State…” Clean Air Act § 102(c) “No such agreement or compact shall be binding or obligatory upon any State a party thereto unless and until it has been approved by Congress”  Based on these constraints, an MOU would not be enforceable without Congressional approval

Enforceability Resolution It is not necessary for the MOU to be enforceable, because the rule and the SIP become the enforceable mechanism. The SIP/TIP will ensure that the states and tribes meet their commitments, and The Rule will ensure that the sources and market traders meet their commitments

Why is an MOU necessary? The MOU is a demonstration of good faith by the states and tribes that sign the agreement – It provides additional support to show EPA that the states and tribes have worked together in the development of this program and, therefore, it is more likely to be successful on a regional level

Tribal Implementation Tribal Authority Rule “reasonably severable” elements Tribal set-side To be undertaken by Tribal Caucus

SO 2 Milestones 13% Reduction 52% Reduction

Tracking System Requirements (before Trading Program is triggered) Existing permits contain necessary provisions of the program Sources monitor emissions and report to the state (as usual) States track emissions and submit to regional organization (i.e., WRAP) to determine regional emissions and compare to regional milestones States and tribes make determination of whether milestone has been exceeded

Market Trading Program Requirements (after trading program is triggered) Accounts are created for sources States/Tribes arrange for a regional ‘bookkeeper’ to track allowance holdings and emissions Sources are accountable to State or Tribe through the Rule Each state is accountable to the regional program through its individual SIP commitments

Outstanding Issues: MTF 2018 Milestone Compliance Utility Allocation Monitoring Regulatory Text/Protocols Several Other Issues

Outstanding Issues: EPA Legal Authority Final Rule Promulgation 2018 Milestone Compliance Tracking System Administrator Monitoring

Outstanding Issues: EPA Legal Authority – Penalties – Statute of Limitations – Record Retention

Outstanding Issues: EPA Final Rule Promulgation WRAP commented on: – Periodic evaluation of trading program – Milestone changes due to enforcement actions Other Final Rule changes may require modifications to Rule and SIP/TIP

Outstanding Issues: WRAP Tracking System Specification – WRAP contract later this year Monitoring Regulatory Provisions and Protocols

Questions for AMC Do you Concur with Recommendations? Approval of Next Steps – Refer to WRAP Board – Working Group Continue Making Refinements