Title 42, The Public Health and WelfareRelease 119-110
§7651o Contingency Guarantee, Auctions, Reserve
Title 42 › CHAPTER 85 — AIR POLLUTION PREVENTION AND CONTROL › SUBCHAPTER IV–A — ACID DEPOSITION CONTROL › § 7651o
Summary
Creates a special pool of pollution allowances and sets rules for selling them by direct sale and auction. The agency must set up the pool within 36 months after November 15, 1990. It withholds 2.8 percent of annual allowance allocations for each year 1995–1999, and 2.8 percent of the basic Phase II allocation each year starting in 2000, and puts those withheld allowances into the Special Allowance Reserve. The Direct Sale Subaccount holds 50,000 tons per year starting in 2000 and offers certain allowances at $1,500 each (adjusted by the Consumer Price Index from 1990); some direct-sale amounts in 1993–1999 and 2000+ are set at 25,000 tons for spot and/or advance sales as shown in the law. The agency must let independent power producers who meet narrow conditions get a written guarantee to buy required allowances at the guaranteed $1,500 (CPI-adjusted) price; buyers pay 50 percent within 6 months and the rest before transfer. If too few direct-sale allowances sell (less than 20 percent in two straight years) those allowances move to the auction account. The Auction Subaccount holds 150,000 tons per year for 1995–1999 and 250,000 per year starting in 2000, with earlier yearly auction amounts set for 1993–1999 and 2000+ (spot and advance amounts are detailed in the law). Annual auctions start in 1993 with sealed bids and highest bids winning; no minimum reserve price is allowed. Auction and direct-sale proceeds must be transferred within 90 days, pro rata, to the owners or operators whose allowances were withheld, and may not be kept as U.S. government revenue. Unsold allowances are returned or moved as the law says. The agency must publish auction results, may reduce withheld amounts after certain years (advance after 1998, spot after 2005), and may stop auctions if purchases fall below 20 percent over any three consecutive years after 2002. Definitions: independent power producer = person who owns or runs one or more new independent power plants; new independent power production facility = a new plant that sells at least 80% wholesale, is project-financed, doesn’t sell to an affiliate, and must hold allowances; required allowances = allowances needed to operate the unit for its life after January 1, 2000.
Full Legal Text
Title 42, §7651o
The Public Health and Welfare, Source: USLM XML via OLRC
(a)Definitions
For purposes of this section
(1)
(2)The term “new independent power production facility” means a facility that—
(A)is used for the generation of electric energy, 80 percent or more of which is sold at wholesale;
(B)is nonrecourse project-financed (as such term is defined by the Secretary of Energy within 3 months of November 15, 1990);
(C)does not generate electric energy sold to any affiliate (as defined in section 79b(a)(11) of title 15) of the facility’s owner or operator unless the owner or operator of the facility demonstrates that it cannot obtain allowances from the affiliate; and
(D)is a new unit required to hold allowances under this subchapter.
(3)The term “required allowances” means the allowances required to operate such unit for so much of the unit’s useful life as occurs after January 1, 2000.
(b)Special reserve of allowances
Within 36 months after November 15, 1990, the Administrator shall promulgate regulations establishing a Special Allowance Reserve containing allowances to be sold under this section. For purposes of establishing the Special Allowance Reserve, the Administrator shall withhold—
(1)2.8 percent of the allocation of allowances for each year from 1995 through 1999 inclusive; and
(2)2.8 percent of the basic Phase II allowance allocation of allowances for each year beginning in the year 2000
which would (but for this subsection) be issued for each affected unit at an affected source. The Administrator shall record such withholding for purposes of transferring the proceeds of the allowance sales under this subsection. The allowances so withheld shall be deposited in the Reserve under this section.
(c)Direct sale at $1,500 per ton
(1)Subaccount for direct sales
In accordance with regulations under this section, the Administrator shall establish a Direct Sale Subaccount in the Special Allowance Reserve established under this section. The Direct Sale Subaccount shall contain allowances in the amount of 50,000 tons per year for each year beginning in the year 2000.
(2)Sales
Allowances in the subaccount shall be offered for direct sale to any person at the times and in the amounts specified in table 1 at a price of $1,500 per allowance, adjusted by the Consumer Price Index in the same manner as provided in paragraph (3). Requests to purchase allowances from the Direct Sale Subaccount established under paragraph (1) shall be approved in the order of receipt until no allowances remain in such subaccount, except that an opportunity to purchase such allowances shall be provided to the independent power producers referred to in this subsection before such allowances are offered to any other person. Each applicant shall be required to pay 50 percent of the total purchase price of the allowances within 6 months after the approval of the request to purchase. The remainder shall be paid on or before the transfer of the allowances.
Table 1—Number of Allowances Available for Sale at $1,500 Per Ton
Year of Sale | Spot Sale (same year) | Advance Sale
Allowances sold in the spot sale in any year are allowances which may only be used in that year (unless banked for use in a later year). Allowances sold in the advance sale in any year are allowances which may only be used in the 7th year after the year in which they are first offered for sale (unless banked for use in a later year).
1993–1999 | | 25,000
2000 and after | 25,000 | 25,000
(3)Entitlement to written guarantee
Any independent power producer that submits an application to the Administrator establishing that such independent power producer—
(A)proposes to construct a new independent power production facility for which allowances are required under this subchapter;
(B)will apply for financing to construct such facility after January 1, 1990, and before the date of the first auction under this section;
(C)has submitted to each owner or operator of an affected unit listed in table A (in section 7651c of this title) a written offer to purchase the required allowances for $750 per ton; and
(D)has not received (within 180 days after submitting offers to purchase under subparagraph (C)) an acceptance of the offer to purchase the required allowances,
shall, within 30 days after submission of such application, be entitled to receive the Administrator’s written guarantee (subject to the eligibility requirements set forth in paragraph (4)) that such required allowances will be made available for purchase from the Direct Sale Subaccount established under this subsection and at a guaranteed price. The guaranteed price at which such allowances shall be made available for purchase shall be $1,500 per ton, adjusted by the percentage, if any, by which the Consumer Price Index (as determined under section 7661a(b)(3)(B)(v) of this title) for the year in which the allowance is purchased exceeds the Consumer Price Index for the calendar year 1990.
(4)Eligibility requirements
The guarantee issued by the Administrator under paragraph (3) shall be subject to a demonstration by the independent power producer, satisfactory to the Administrator, that—
(A)the independent power producer has—
(i)made good faith efforts to purchase the required allowances from the owners or operators of affected units to which allowances will be allocated, including efforts to purchase at annual auctions under this section, and from industrial sources that have elected to become affected units pursuant to section 7651i of this title; and
(ii)such bids and efforts were unsuccessful in obtaining the required allowances; and
(B)the independent power producer will continue to make good faith efforts to purchase the required allowances from the owners or operators of affected units and from industrial sources.
(5)Issuance of guaranteed allowances from Direct Sale Subaccount under this section (6) Proceeds
From the allowances available in the Direct Sale Subaccount established under this subsection, upon payment of the guaranteed price, the Administrator shall issue to any person exercising the right to purchase allowances pursuant to a guarantee under this subsection the allowances covered by such guarantee. Persons to which guarantees under this subsection have been issued shall have the opportunity to purchase allowances pursuant to such guarantee from such subaccount before the allowances in such reserve are offered for sale to any other person.
(7)Termination of subaccount
If the Administrator determines that, during any period of 2 consecutive calendar years, less than 20 percent of the allowances available in the subaccount for direct sales established under this subsection have been purchased under this paragraph, the Administrator shall terminate the subaccount and transfer such allowances to the Auction Subaccount under subsection (d).
(d)Auction sales
(1)Subaccount for auctions
The Administrator shall establish an Auction Subaccount in the Special Reserve established under this section. The Auction Subaccount shall contain allowances to be sold at auction under this section in the amount of 150,000 tons per year for each year from 1995 through 1999, inclusive and 250,000 tons per year for each year beginning in the calendar year 2000.
(2)Annual auctions
Commencing in 1993 and in each year thereafter, the Administrator shall conduct auctions at which the allowances referred to in paragraph (1) shall be offered for sale in accordance with regulations promulgated by the Administrator, in consultation with the Secretary of the Treasury, within 12 months of November 15, 1990. The allowances referred to in paragraph (1) shall be offered for sale at auction in the amounts specified in table 2. The auction shall be open to any person. A person wishing to bid for such allowances shall submit (by a date set by the Administrator) to the Administrator (on a sealed bid schedule provided by the Administrator) offers to purchase specified numbers of allowances at specified prices. Such regulations shall specify that the auctioned allowances shall be allocated and sold on the basis of bid price, starting with the highest-priced bid and continuing until all allowances for sale at such auction have been allocated. The regulations shall not permit that a minimum price be set for the purchase of withheld allowances. Allowances purchased at the auction may be used for any purpose and at any time after the auction, subject to the provisions of this subchapter.
Table 2—Number of Allowances Available for Auction
Year of Sale | Spot Auction (same year) | Advance Auction
Allowances sold in the spot sale in any year are allowances which may only be used in that year (unless banked for use in a later year), except as otherwise noted. Allowances sold in the advance auction in any year are allowances which may only be used in the 7th year after the year in which they are first offered for sale (unless banked for use in a later year).
*Available for use only in 1995 (unless banked for use in a later year).
1993 | 50,000* | 100,000
1994 | 50,000* | 100,000
1995 | 50,000* | 100,000
1996 | 150,000 | 100,000
1997 | 150,000 | 100,000
1998 | 150,000 | 100,000
1999 | 150,000 | 100,000
2000 and after | 100,000 | 100,000
(3)Proceeds
(A)Notwithstanding section 3302 of title 31 or any other provision of law, within 90 days of receipt, the Administrator shall transfer the proceeds from the auction under this section, on a pro rata basis, to the owners or operators of the affected units at an affected source from whom allowances were withheld under subsection (b). No funds transferred from a purchaser to a seller of allowances under this paragraph shall be held by any officer or employee of the United States or treated for any purpose as revenue to the United States or the Administrator.
(B)At the end of each year, any allowances offered for sale but not sold at the auction shall be returned without charge, on a pro rata basis, to the owner or operator of the affected units from whose allocation the allowances were withheld.
(4)Additional auction participants
Any person holding allowances or to whom allowances are allocated by the Administrator may submit those allowances to the Administrator to be offered for sale at auction under this subsection. The proceeds of any such sale shall be transferred at the time of sale by the purchaser to the person submitting such allowances for sale. The holder of allowances offered for sale under this paragraph may specify a minimum sale price. Any person may purchase allowances offered for auction under this paragraph. Such allowances shall be allocated and sold to purchasers on the basis of bid price after the auction under paragraph (2) is complete. No funds transferred from a purchaser to a seller of allowances under this paragraph shall be held by any officer or employee of the United States or treated for any purpose as revenue to the United States or the Administrator.
(5)Recording by EPA
The Administrator shall record and publicly report the nature, prices and results of each auction under this subsection, including the prices of successful bids, and shall record the transfers of allowances as a result of each auction in accordance with the requirements of this section. The transfer of allowances at such auction shall be recorded in accordance with the regulations promulgated by the Administrator under this subchapter.
(e)Changes in sales, auctions, and withholding
Pursuant to rulemaking after public notice and comment the Administrator may at any time after the year 1998 (in the case of advance sales or advance auctions) and 2005 (in the case of spot sales or spot auctions) decrease the number of allowances withheld and sold under this section.
(f)Termination of auctions
The Administrator may terminate the withholding of allowances and the auction sales under this section if the Administrator determines that, during any period of 3 consecutive calendar years after 2002, less than 20 percent of the allowances available in the auction subaccount have been purchased. Pursuant to regulations under this section, the Administrator may by delegation or contract provide for the conduct of sales or auctions under the Administrator’s supervision by other departments or agencies of the United States Government or by nongovernmental agencies, groups, or organizations.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
Section 79b of title 15, referred to in subsec. (a)(2)(C), was repealed by Pub. L. 109–58, title XII, § 1263, Aug. 8, 2005, 119 Stat. 974. See section 16451(1) of this title.
Reference
Citations & Metadata
Citation
42 U.S.C. § 7651o
Title 42, The Public Health and Welfare
Last Updated
Sep 23, 2026
Release point: 119-110