Approval and Promulgation of Implementation Plans: Kentucky: Nitrogen Oxides Budget and Allowance Trading Program

EPA is approving the State Implementation Plan (SIP) revision that was submitted by the Commonwealth of Kentucky (Kentucky) on January 31, 2002. This revision responds to EPA's regulation entitled, "Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment Group Region for Purposes of Reducing Regional Transport of Ozone," otherwise known as the "NO<INF>X</INF> SIP Call." This revision establishes and requires nitrogen oxides (NO<INF>X</INF>) reduction requirements and an allowance trading program for large electric generating and industrial units, beginning in 2004. It also establishes and requires NO<INF>X</INF> reduction requirements for cement kilns beginning in 2004. The revision includes a budget demonstration and initial source allocations that clearly demonstrate that Kentucky will achieve the required NO<INF>X</INF> emission reductions in accordance with the timelines set forth in EPA's NO<INF>X</INF> SIP Call. The intended effect of this SIP revision is to reduce emissions of NO<INF>X</INF> in order to help attain the national ambient air quality standard for ozone. EPA is approving Kentucky's NO<INF>X</INF> Reduction and Trading Program because it meets the requirements of the Phase I NO<INF>X</INF> SIP Call that will significantly reduce ozone transport in the eastern United States. As of May 31, 2004, Kentucky's plan will also provide reductions at units currently required to make reductions under the EPA's Clean Air Act (CAA) Section 126 rulemaking. EPA is approving this plan as a SIP revision fulfilling the NO<INF>X</INF> SIP Call "Phase I" requirements. On December 26, 2000, EPA determined that Commonwealth of Kentucky had failed to submit a SIP in response to the NO<INF>X</INF> SIP Call, thus starting a 18 month clock for the mandatory imposition of sanctions and the obligation for EPA to promulgate a Federal Implementation Plan (FIP) within 24 months. On January 31, 2002, Kentucky submitted a NO<INF>X</