The US Environmental Protection Agency’s (EPA) final Good Neighbor Plan requires emissions reductions from power plants and industrial sources that pollute across state lines to align with the Clean Air Act deadlines for states to achieve the 2015 Ozone National Ambient Air Quality Standards (NAAQS).
The plan included new efficiency standards for new units and provided guidelines for existing plants which vary by type, size, expected remaining life, and baseload or back up power classifications, and allowed for states to use emissions trading. States containing existing plants were required to develop their own State Implementation Plans (SIP) that were at least as stringent as the EPA guidance suggested before submitting them to the EPA for approval.
Each time the EPA revises the NAAQS, states are required to reevaluate and address their “good neighbor” obligations by ensuring their SIPs adequately prohibit emissions that interfere with the maintenance or significantly contribute to nonattainment of NAAQS in another state. If the EPA disapproves a SIP submission, the EPA is required by the Clean Air Act to provide the state a Federal Implementation Plan (FIP) to adopt in its place.
On June 29, 2023, the EPA finalized an interim rule to address the judicial stay orders for several state’s interstate transport SIP disapprovals. The Interim Final Rule stays the FIP for the 2015 Ozone NAAQS for the states with stayed SIP disapprovals and revises existing regulations to maintain the current emissions trading programs in place.
Under the Interim Final Rule, Arkansas, Mississippi, Missouri, and Texas will retain their Group 2 emissions budgets, unit-level allowance provisions, and banked allowance holdings. Kentucky and Louisiana will be included in Group 3 with the same budgets, provisions, and holdings, but will fall under an “expanded Group 2” trading program rather than Group 3’s trading program. The EPA notes that allowances are not interchangeable between groups for compliance, closing a potential loophole.
The Interim Final Rule will take effect on August 4, 2023, coinciding with FIP implementation. Monitoring data from the first quarter for states in the Group 3 trading program will be September 30, 2023, with the reporting deadline one month later on October 20, 2023.