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Subpart 237-5: NOx Allowance Allocations

(Statutory authority: Environmental Conservation Law, §§ 1-0101, 3-0301, 19-0103, 19-0105, 19-0301, 19-0303, 19-0305, 19-0311)

[Filed 4/6/10. Effective 30 days after filing.]

[This is page 1 of 1 of this Subpart. A complete list of Subparts in this regulation appears in the Chapter 3 contents page. A list of sections in this Subpart appears below.]

For administrative information about this posting, contact: Division of Air Resources. The Bureau of Air Quality Planning at (518) 402-8396 is the contact for technical questions pertaining to this rule.

Contents:

Sec.

§237-5.1 ADR NOx Trading Program Budget.

Except as may be modified in accordance with Subpart 237-9 of this Part, the ADR NOx Trading Program Budget allocated by the department is 39,908 tons for each control period.

§237-5.2 Timing requirements for NOx allowance allocations

(a) By September 1, 2004, the department will determine the NOx allowance allocations, in accordance with section 237-5.3 of this Subpart, for the control periods in 2004-05, 2005-06, and 2006-07.

(b) By September 1, 2004 and September 1st of each year thereafter until September 1, 2009, the department will allocate NOx allowances, in accordance with section 237-5.3 of this Subpart, for the control period that commences in the year that is three years after the applicable deadline for submission under this subdivision. If the department fails to allocate NOx allowances in accordance with this subdivision, the department will, for the applicable control period, repeat the NOx allowance allocations that were performed for the preceding control period. The department will not allocate NOx allowances after September 1, 2009.

§237-5.3 NOx allowance allocations

(a) For each instance that the department allocates NOx allowances, the department will determine the number of NOx allowances to be allocated to each NOx budget unit under section 237-1.4(a) of this Part which is not eligible to receive NOx allowances under subdivision (b) of this section, in accordance with the following procedures:

(1) First round calculation. Multiply the greatest heat input experienced by the unit for any single control period among the three most recent control periods, for which data is available, that precede the date by which the department must make the NOx allocations pursuant to section 237-5.2(b) of this Subpart by 0.15 lb/mmBtu.

(2) Second round calculation. Determine the allocation factor by dividing the number representing 92 percent of the ADR NOx Trading Program Budget by the sum of the first round calculation results for all the units.

(3) Third round calculation. Multiply the allocation factor by each unit's first round calculation result.

(4) Fourth round calculation. The number of NOx allowances to be allocated to each unit will be the lesser of:

(i) the number representing the unit's CPPTE; or

(ii) the third round calculation result for the unit plus the number representing the unit's proportional share of any unassigned NOx allowances remaining in the 92 percent portion of the ADR NOx Trading Program Budget as determined by dividing the unit's first round calculation result by the sum of the first round calculation results for all units.

Note: In this fourth round calculation NOx allowances may initially remain unassigned because the CPPTE limitation of subparagraph (a)(4)(i) of this section may affect some units sooner than others leaving some NOx allowances unallocated after the calculation is first performed. Thus, this fourth round calculation may be performed more than once in order to allocate all remaining unassigned NOx allowances.

(b) New NOx budget unit set-aside allocations. The new NOx budget unit set-aside allocation will consist of five percent of the ADR NOx Trading Program Budget set forth in section 237-5.1 of this Subpart. For each control period, the department will determine the number of NOx allowances to be distributed to each NOx budget unit under section 237-1.4(a) of this Subpart that commenced operation, or is projected to commence operation, in New York State on or after October 1, 2000, in accordance with the following procedures:

(1) The department will open and manage a general account for the new NOx budget unit set-aside allocation for each control period.

(2) Only NOx budget units under section 237-1.4(a) of this Part may receive NOx allowances from the new unit sector set-aside allocations established in paragraph (1) of this subdivision. No unit that becomes a NOx budget unit by opting-in under Subpart 237-9 of this Part may receive NOx allowances from the new NOx budget unit set-aside allocations.

(3) NOx allowances may be transferred to NOx budget units for no more than four control periods, starting with the control period during which the NOx budget unit commenced, or is projected to commence, operation and ending, at the latest, with the control period preceding the control period for which the NOx budget unit will receive an allocation pursuant to subdivision (a) of this section.

(4) The NOx authorized account representative of a NOx budget unit may submit a written request to the department to reserve for the NOx budget unit a number of NOx allowances in the relevant new NOx budget unit set-aside allocation general account in an amount no greater than the number representing the unit's CPPTE. The reservation request must be submitted prior to October 1st of the control period to which the reservation request pertains or prior to the date that the NOx budget unit commences operation, whichever is later. The department will not consider any request for the reservation of NOx allowances that is submitted prior to the issuance to the NOx budget unit of all permits and authorizations by the department that are necessary for operation of the NOx budget unit. The reservation request must include information detailing the CPPTE of the NOx budget unit.

(5) Following department approval of the request for reservation of NOx allowances, the department will reserve NOx allowances in the new NOx budget unit set-aside allocation general account for each control period preceding the control period for which the NOx budget unit will receive an allocation pursuant to subdivision (a) of this section in an amount no greater than the NOx budget unit's CPPTE.

(6) If more than one NOx budget unit requests the reservation of NOx allowances and the number of requested NOx allowances exceeds the allocation to the new NOx budget unit set-aside allocation general account, the department will reserve NOx allowances from the account for the units in the order in which the NOx budget units submitted approvable reservation requests. For the purposes of this paragraph, requests will be considered simultaneous if they are made in the same calendar quarter. Should approvable reservation requests in excess of the allocation to the new NOx budget unit set-aside allocation general account be submitted in the same calendar quarter by different NOx budget units, the department will reserve NOx allowances for those units on a basis proportional to the number of NOx allowances requested by each NOx budget unit.

(7) By April 30th of the year following the submission of an approvable reservation request, the department will transfer reserved NOx allowances to the compliance account of the relevant NOx budget unit in an amount no greater than the number representing the unit's CPPTE.

(8) Flowback of undistributed NOx allowances from the new NOx budget unit sector set-aside allocations. After making the deductions for compliance under section 237-6.5(b), (d), (e) and (f) of this Part for a control period, the department will determine whether any NOx allowances remain in the new NOx budget unit set-aside allocation general account for the control period. Subject to the condition that no NOx allowances will be transferred to a NOx budget unit's compliance account which are in excess of the unit's CPPTE, the department will transfer any such remaining NOx allowances from the new NOx budget unit set-aside allocation general account to the compliance account of each NOx budget unit that was allocated NOx allowances pursuant to subdivision (a) of this section using the methodology:

Existing NOx budget unit's share of NOx allowances remaining in the new NOx budget unit set-aside allocation general account = Total NOx allowances remaining in the new NOx budget unit set-aside allocation general account × (the individual NOx budget unit's NOx allowance allocation determined in accordance with subdivision [a] of this section ÷ the 92 percent portion of the ADR NOx Trading Program Budget)

Where:

Total NOx allowances remaining in new NOx budget unit set-aside allocation general account is the total number of NOx allowances remaining in the new NOx budget unit set-aside allocation general account (established under paragraph [1] of this subdivision) for the particular control period to which the new NOx budget unit set-aside allocation applies; and

the individual NOx budget unit's NOx allowance allocation is the number of NOx allowances allocated under subdivision (a) of this section to the individual NOx budget unit for the control period to which the new NOx budget unit set-aside allocation applies.

Note: In this flowback methodology NOx allowances may initially remain unassigned because the CPPTE limitation under this subdivision may affect some units sooner than others leaving some NOx allowances unallocated after the methodology is first performed. Thus, this methodology may be performed more than once in order to allocate all remaining unassigned NOx allowances.

The department will only transfer NOx allowances in whole ton increments. The department will continue to hold any fractional shares of NOx allowances in the name of the NOx budget unit as banked NOx allowances until they may be combined with other fractional shares of NOx allowances in future years and then transferred as whole ton increments.

(c) Energy efficiency and renewable energy set-aside allocation. The energy efficiency and renewable set-aside allocation will consist of three percent of the ADR NOx Trading Program Budget set forth in section 237-5.1 of this Part. For each control period, the department will determine the number of NOx allowances to be distributed to each sponsor of a qualifying energy efficiency and renewable energy project in accordance with the following procedures:

(1) The department will open and manage a general account for the energy efficiency and renewable energy set-aside allocation for each control period.

(2) Project sponsors of any of the following types of projects in New York State may be eligible for the receipt of NOx allowances from the energy efficiency and renewable energy set-aside allocation:

(i) end-use energy efficiency projects;

(ii) renewable energy projects;

(iii) in-plant energy efficiency projects; and

(iv) fossil fuel-fired electricity generating units which produce electricity more efficiently than the annual average heat rate attributable to all fossil fuel-fired electricity generated in New York State.

(3) The NOx authorized account representative of a project sponsor may submit a written request to the department to reserve a number of NOx allowances in the relevant energy efficiency and renewable energy set-aside allocation general account. The reservation request must be submitted by December 1st after the control period for which the request is being made and must include information to assure that projects demonstrate accreditable NOx emissions reductions or avoidances during the control period in accordance with department measurement and verification protocols.

(4) The department will give first priority in reserving NOx allowances in the relevant energy efficiency and renewable energy set-aside allocation general account to sponsors of eligible end-use energy efficiency projects and renewable energy projects. Project sponsors of in-plant energy efficiency projects or fossil fuel-fired electricity generating units which achieve an annual average heat rate that is more efficient than the annual average heat rate attributable to all fossil fuel-fired electricity generated in New York State shall only have reservation requests granted after the department has satisfied all approved NOx allowance reservation requests related to end-use energy efficiency projects and renewable energy projects.

(5) If more than one project sponsor of an end-use energy efficiency project or renewable energy project requests the reservation of NOx allowances and the number of NOx allowances that are subject to department approved requests exceeds the number of NOx allowances in the relevant energy efficiency and renewable energy set-aside allocation general account, the department will reserve NOx allowances from the account for the project sponsors in the order in which the project sponsors submitted approvable reservation requests. For the purposes of this paragraph, requests will be considered simultaneous if they are made in the same calendar quarter. Should approvable reservation requests in excess of the allocation to the relevant energy efficiency and renewable energy set-aside allocation general account be submitted in the same calendar quarter by different project sponsors, the department will reserve NOx allowances for those project sponsors on a basis proportional to the number of NOx allowances requested by each project sponsor.

(6) If after the department has satisfied all approvable NOx allowance reservation requests related to end-use energy efficiency projects and renewable energy projects, more than one in-plant energy efficiency project or unit which produces electricity more efficiently than the annual average heat rate attributable to all fossil fuel-fired electricity generated in New York State requests the reservation of NOx allowances and the number of NOx allowances that are subject to department approved reservation requests exceeds the number of NOx allowances remaining in the energy efficiency and renewable energy set-aside allocation general account, the department will reserve NOx allowances in the account for the project sponsors in the order in which the project sponsors submitted approvable reservation requests. For the purposes of this paragraph, requests will be considered simultaneous if they are made in the same calendar quarter. Should approvable reservation requests in excess of the remaining allocation to the relevant energy efficiency and renewable energy set-aside allocation general account be submitted in the same calendar quarter by different project sponsors, the department will reserve NOx allowances for those project sponsors on a basis proportional to the number of NOx allowances requested by each project sponsor.

(7) Project sponsors of end-use energy efficiency projects, renewable energy projects, and/or in-plant energy efficiency projects may request the reservation of NOx allowances for any control period, or portion thereof, that is within five years following project implementation.

(8) The department will distribute NOx allowances from the relevant energy efficiency and renewable energy set-aside allocation general account to the general account of a project sponsor within two years from the start of the control period for which the request was made.

(9) No NOx allowances will be reserved or distributed for the early implementation of projects. Project sponsors may receive NOx allowances only for projects achieving accreditable NOx emissions reductions or avoidances during control periods starting on or after October 1, 2004.

(10) Flowback of undistributed NOx allowances from the energy efficiency and renewable energy set-aside allocations. After making both the deductions for compliance under section 237-6.5(b), (d), (e) and (f) of this Part for a control period and the distributions to project sponsors under this subdivision, and subject to the condition that no NOx allowances will be transferred to a NOx budget unit's compliance account which are in excess of the unit's CPPTE, the department will transfer any remaining NOx allowances from the relevant energy efficiency and renewable energy set-aside allocation general account to the compliance account of each NOx budget unit that was allocated NOx allowances pursuant to subdivision (a) of this section using the following methodology:

Existing NOx budget unit's share of NOx allowances remaining in the energy efficiency and renewable energy set-aside allocation general account = Total NOx allowances remaining in the energy efficiency and renewable energy set-aside allocation general account × (the individual NOx budget unit's NOx allowance allocation ÷ the 92 percent portion of the Acid Deposition Reduction NOx Trading Program Budget)

Where:

Total NOx allowances remaining in energy efficiency and renewable energy set-aside allocation general account is the total number of NOx allowances remaining in the energy efficiency and renewable energy set-aside allocation general account (established under paragraph [1] of this subdivision) for the particular control period which the set-aside allocation applies; and

The individual NOx budget unit's NOx allowance allocation is the number of NOx allowances allocated under subdivision (a) of this section to the individual NOx budget unit for the control period to which the energy efficiency and renewable energy set-aside allocation applies.

Note: In this flowback methodology NOx allowances may initially remain unassigned because the CPPTE limitation under this subdivision may affect some units sooner than others leaving some NOx allowances unallocated after the methodology is first performed. Thus, this methodology may be performed more than once in order to allocate all remaining unassigned NOx allowances.

The department will only transfer NOx allowances in whole ton increments. The department will continue to hold any fractional shares of NOx allowances in the name of the NOx budget unit as banked NOx allowances until they may be combined with other fractional shares of NOx allowances in future years and then transferred as whole ton increments.

(d) Supplemental NOx allowance award for NOx emissions reductions at upwind units. The department may award supplemental NOx allowances to NOx budget units subject to this Part for NOx emissions reductions achieved at an upwind unit subject to the following requirements:

(1) Application requirements.

(i) The NOx budget unit must submit by December 31st its application for an award of supplemental NOx allowances for NOx emissions reductions at the upwind unit during the immediately prior control period.

(ii) The application must designate the account to which the NOx budget unit seeks to have the supplemental NOx allowances allocated.

(iii) NOx emissions reductions must be quantified as the decrease (in tons) from the upwind unit's baseline NOx mass emissions to the upwind unit's actual NOx mass emissions. The baseline NOx mass emissions is the quantity of NOx mass emissions (in tons) that is the lowest of the following:

(a) The lowest quantity of NOx mass emissions that the upwind unit experienced during the control periods 1999-2000, 2000-01 and 2001-02.

(b) The upwind unit's lowest CPPTE during the control periods 1999-2000, 2000-01 and 2001-02. Each application for the award of supplemental NOx allowances must contain a written statement from the highest ranking official in the relevant air pollution control agency of the state in which the upwind unit resides confirming that the baseline NOx mass emissions figure submitted with the application is no greater than the upwind unit's lowest CPPTE during the control periods 1999-2000, 2000-01 and 2001-02. For purposes of this subdivision, the definition of CPPTE is revised to substitute the phrase "relevant air pollution control agency of the state in which the upwind unit resides" for the word department.

(iv) The NOx emissions reductions from the upwind unit must be quantified on a unit basis, separate from a larger source in which the unit may be encompassed.

(v) The upwind unit must be shown to have been subject to monitoring and reporting requirements substantially equivalent to those set forth in Subpart 237-8 of this Part since October 1, 2000.

(2) The upwind unit must be located in a state for which the administrator has finally approved revisions to that state's state implementation plan which were mandated pursuant to 40 CFR 51.121 and 51.122.

(3) The department will allocate awarded supplemental NOx allowances to the designated account by the March 31st following the December 31st application deadline established in subparagraph (1)(i) of this subdivision.

(4) The department will award one supplemental NOx allowance to the subject NOx budget unit for every three tons of NOx emissions reduced at the upwind unit as quantified pursuant to subparagraph (1)(iii) of this subdivision.

(5) For any control period, the department will award to all NOx budget units collectively a quantity of supplemental NOx allowances that does not exceed:

(i) 10 percent of the ADR NOx Trading Program Budget for control period 2004-05;

(ii) eight percent of the ADR NOx Trading Program Budget for control period 2005-06;

(iii) six percent of the ADR NOx Trading Program Budget for control period 2006-07;

(iv) five percent of the ADR NOx Trading Program Budget for control period 2007-08; and

(v) four percent of the ADR NOx Trading Program Budget for control period 2008-09 and subsequent control periods.

(6) If NOx budget units collectively apply for the award of more supplemental NOx allowances than permitted for a control period in paragraph (5) of this subdivision, the department will award the supplemental NOx allowances in the order in which the applicants submit complete and approvable applications. For the purposes of this paragraph, requests will be considered simultaneous if they are made in the same calendar quarter. Should approvable applications in excess of five percent of the ADR NOx Trading Program Budget be submitted in the same calendar quarter by different NOx budget units, the department will award NOx allowances for those units on a basis proportional to the number of supplemental NOx allowances requested by each NOx budget unit.

(7) Supplemental NOx allowances awarded under this subdivision may be deducted for compliance under section 237-6.5 of this Part for the two complete control periods following the department's allocation of such supplemental NOx allowances pursuant to paragraph (3) of this subdivision. The department or its agent will deduct as retired any supplemental NOx allowances that are not deducted for compliance under section 237-6.5 of this Part for the two control periods following the department's allocation of such supplemental NOx allowances.

(e) Early reduction NOx allowances. The department will award early reduction NOx allowances (ERAs) for reductions in NOx emissions that are the result of control of a NOx budget unit's NOx emission rate below allowable and past actual NOx emission rates. These reductions must be achieved by a NOx budget unit during the early reduction control periods of 2001-02, 2002-03 and 2003-04. The department may award ERAs, usable for compliance in control periods 2004-05 and 2005-06, subject to the following requirements:

(1) Application requirements. The NOx budget unit must submit its application for the award of ERAs by September 1, 2004.

(2) In determining the number of ERAs to be awarded, the department will determine the baseline NOx emission rate, BNER, (in pounds/mmBtu) as the lesser of:

(i) the allowable NOx emission rate, ALNER, (in pounds/mmBtu) for the NOx budget unit prorated on actual fuel use for the early reduction control period which is determined by the following:

ALNER = (BUER × BUFHI + PER × PFHI)/(BUFHI + PFHI)

where:

BUER is as determined in section 237-1.2(b)(13) of this Part.

BUFHI is the total heat input of the backup fuel utilized during the control period for which the application for early reduction allowances is being made.

PER is as determined in section 237-1.2(b)(13) of this Part.

PFHI is the total heat input of the primary fuel utilized during the control period for which the application for early reduction allowances is being made.

(ii) the actual average NOx emission rate (in pounds/mmBtu) for the 1999-2000 and 2000-01 control periods.

(3) In determining the number of ERAs to be awarded, the department will determine the capacity utilization, CU (in mmBtu), as the lesser of:

(i) the average capacity utilization (in mmBtu) of the NOx budget unit for the 1999-2000 and 2000-01 control periods; or,

(ii) the actual capacity utilization (in mmBtu) of the NOx budget unit for the early reduction control period(s) during which the early reductions were made.

(4) The department will calculate the number of ERAs to be awarded to a particular NOx budget unit for the early reduction control periods (2001-02, 2002-03 and 2003-04) by the following:

(i) if the NOx budget unit's actual NOx emission rate, ANER, for the early reduction control period is greater than 0.15 pounds/mmBtu, then the award of ERAs, shall be determined by the following:

ERA = [CU × (BNER - ANER) × 0.5 ] ÷ 2000

(ii) if the NOx budget unit's actual NOx emission rate, ANER, for the early reduction control period is less than 0.15 pounds/mmBtu, then the award of ERAs, shall be determined by the following:

ERA = CU × {[(BNER - 0.15 ) × 0.5] + (0.15 - ANER)} ÷ 2000

(5) Once the department confirms a NOx budget unit's early reductions of NOx emissions and awards ERAs, it will allocate the early reduction NOx allowances to the NOx budget unit's compliance account by October 1, 2004.

(6) NOx emissions reductions achieved for purposes of establishing ERAs cannot be used as the basis for establishing emission reduction credits under Subpart 231-2 of this Title.